TABLE OF CASES REPORTED

Page

Agreement No 8200 Joint Agreement Between the Far East Conference

and the Pacific Westbound Conference and Modifications of Agree

ments Nos 8200 8200 1 and 8200

2

u u u 104

Agreement No 8660 Latin America Pacific Coast Steamship Conference

and Proposed Contract Rate System u u u u 149

Agreement 9597 Between Flota Mercante Gran Centroamericana S A

Continental Lines S A and Jan C Uiterwyk Co Inc 83

Agreement No DC 30 Between South Atlantic Caribbean Lines Inc and

TMT Trailer Ferry Inc uuu u u u u uu u u 25

Agreement No T 2138 Between the Port of Oakland and Japan Line Ltd

Kawasaki Kisen Kaisha Ltd Mitsui O S K Lines Ltd and Yamashita

Shinnihon S S Co Ltd u u u uu u 126

Agreements Nos T 2108 and T 2108 A Between the City of Los Angeles

and Japan Line Ltd Kawasaki Kisen Kaisha Ltd Mitsui O S K

Lines Ltd and Yamashita Shinnihon S S Co Ltd uu 110

American Export Isbrandtsen Lines Inc Minnesota Mining and Manu

facturing Co v u 11

American Stevedores Inc Henry Gillen s Lighterage Inc v u 325

Arthur Schwartz and Justamere Farms Inc v Grace Line Inc 253

Ballmill Lumber Sales Corp v Port of New York Authority 29

Board of Commissioners of the Port of New Orleans v Pacific Coast Aus

tralasian Tariff Bureau and Member Lines 184

Chr Salvesen Co Ltd v West Michigan Dock Market Corp 135

Columbia Stevedoring Co Henry Gillen s Sons Lighterage Inc

v

u 325

Crown Steel Sales Inc v Port of Chicago Marine Terminal Assn 353

Discounting Contract Noncontract Rates Pursuant to Provisions of Item

735 Note 2 of the India Pakistan Ceylon Burma Outward Freight

Conference Tariff No 10 u u u u u 20

Grace Line Inc Arthur Schwartz and Justamere Farms Inc

v

uu u 253

Ha vaiian Agricide Fertilizer Co Ltd v Micronesia Interocean Line

Inc 322

Henry Gillen s Sons Lighterage Inc v American Stevedores Inc 325

Henry Gillen s Sons Lighterage Inc v Columbia Stevedoring Co u u 325

Italsider Alti Forni e Acciaierie Riunite Ilva e Cornigliano S p A Genoa

Italy v Lykes Bros S S Co Incu u u u uu 233

Kimbrell Lawrence Transportation Inc General Increase in Rates in

Kodiak Island Alaska Peninsula and Aleutian Islands Area of Alaska 15

Lake Charles Harbor and Terminal District v Port of Beaumont Navi

gation District of Jefferson County Tex uuuu u uu u 244

Lykes Bros S S Co Inc Italsider Alti Forni e Acciaierie Riunite Ilva e

Cornigliano S p A Genoa Italy v u u u uu 233

Micronesia Interocean Line Inc Hawaiian Agricide Fertilizer Co

Ltd 322

v
VI 

OF CASES REPORTED

Minnesota Mining and Manufacturing Co v American Export Isbrandt

sen Lines Inc 

Minon G R Freight Forwarder License 

Ocean Freight Structures in the Trade Between United States North

Atlantic Ports and Ports in the United Kingdom and Eire 

O Neill Anthony G Freight Forwarder License u u u u 

Overland and OCP Rates and Absorptions u u 

Pacific Coast Australasian Tariff Bureau and Member Lines Board of

Commissioners of the Port of New Orleans v u u u 

Pacific Coast European Conference Increased Handling Chargesu u 

Pacific Coast European Conference States Marine Lines Inc v u u 

Port of Beaumont Navigation District of Jefferson County Tex Lake

Charles Harbor and Terminal District v 

Port of Chicago Marine Terminal Assn Crown Steel Sales Inc v u 

Port of New York Authority Ballmill Lumber Sales Corp Vuu 

Schwartz Arthur and Justamere Farms Inc v Grace Line Inc u 

South Atlantic and Caribbean Line Inc Order To Show Cause 

States Marine Lines Inc v Pacific Coast European Conference 

Time Limit on the Filing of Overcharge Claims 

Truck and Lighter Loading and Unloading Practices at New York Har

bor 

West Michigan Dock Market Corp ChI Salvesen Co Ltd v u u 
DOCKET NUMBERS OF CASES REPORTED

Page

2 1 Minnesota Mining and Manufacturing Co v American Export

Isbrandtsen Lines Incu u u u u u u u u u u u 11

403 Italsider Alti Forni e Acciaierie Riunite Ilva e Cornigliano S p A

Genoa Italy v Lykes Bros Steamship Co Incu u 233

404 Hawaiian Agricide Fertilizer Co Ltd v Micronesia Interocean

Line Inc 322

1092 Agreement No 8660 Latin America Pacific Coast Steamship Con

ference and Proposed Contract Rate System u u u 149

1118 Pacific Coast European Conference Increased Handling Charges 351

1153 Truck and Lighter Loading and Unloading Practices at New York

Harbor 166

65 5 Propo ed Rule Covering Time Limit on the Filing of Overcharge

Clain1s 298

65 12 Crown Steel Sales Inc v Port of Chicago Marine Terminal

Association 353

65 31 Investigation of Overland and OCP Rates and Absorptions u 184

65 34 In the Matter of Discounting Contract Non contract Rates

Pursuant to Provisions of Item 735 Note 2 of the India Paki

stan Ceylon Burma Outward Freight Conference Tariff No 10 20

65 45 Investigation of Ocean Rate Structures in the Trade Between

Unit d States North Atlantic Ports and Ports in the United

Kingdom and Eire North Atlantic United Kingdom Freight

Conference Agreement 7100 and North Atlantic Westbound

Freight Association Agreement 5850 uu u u 34

66 11 Arthur Schwartz and Justamere Farms Inc v Grace Line Inc 253

66 37 Kimbrell Lawrence Transportation Inc General Increase in

Rates in Kodiak Island Alaska Peninsula and Aleutian Islands

Area of Alaska 15

66 46 Henry Gillen s Sons Lighterl ge Inc v American Stevedores Inc 325

6647 Henry Gillen s Sons Lighterage Inc v Columbia Stevedoring Co 325

66 61 Board of Commissioners of the Port of New Orleans v Pacific

Coast Australasian Tariff Bureau and Member Lines 184

66 65 Ballmill Lumber Sales Corp v Port of New York Authority u 29

67 8 In the Matter of Agreement 9597 Between Flota Mercante Gran

Centroamericana S A Continental Lines S A and Jan C

Uiterwyk Co Inc u u u u u u u u 83

67 44 In the Matter of Agreement No DC 30 Between South Atlantic

Sub 1 Caribbean Lines Inc and TMT Trailer Ferry Inc C

Gordon Anderson Trustee Filed Pursuant to Section 15

Shipping Act 1916 u u u uu u 25

67 49 States Marine Lines Inc v Pacific Coast European Conference 1

67 54 ChI Salvesen Co Ltd v West Michigan Dock Market Corpu 135

68 3 Lake Charles Harbor and Terminal District v Port of Beaumont

Navigation District of Jefferson County Texu u uu u 244

VII

TABLE OF CASES CITED

Page

Adams v Mills 286 U S

397

345

Agreement No 134 21 GulfrMediterranean Ports Conference 8 FMC 703 206

Agreements Nos 6200 7 Etc U S At Gulf Australia New Zealand

Conference 10 FIVIC 240 225

Agreement 6210 2 USIVIC 166 99

Agreement 7700 Establishment of a Rate Structure 10 FMC 6L 212

Agreement No 7790 2 USMC

775

208 225

Agreement No 8905 Port of Seattle and Alaska S S Co 7 FMC 792 122

124 133

Agreement 9448 North Atlantic Outbound European Trade 10 FMC

299 231

Agreement T 4 Te minal Lease Agreement Long Beach Calif 8 FMC

521 123

Agreement No T 1768 Terminal Lease Agreement 9 FMC 202 123

Agreement No T 1870 Terminal Lease Agreement at Long Beach

CaliL 11 FMC 12 117

Agreements Nos T 19 53 and T 1953 A Terminal Lease Agreements

Between the City of Oakland and Matson Navigation Co 11 FMC

156 118 133

Agreements and Practices Re Brokerage 3 USMC 170 208

A H Bull S S Co Show Cause Order 7 FMC 133 239 240

Alaska Rate Investigation No 3 3 USMC

43

206

Alaska S S Co v FMC 356 F 2d 59 380

Alcoa S S Co Inc v Cia Anonima Venezolana 7 FMC 345 92 125 134

Ambler v Bloedel Donovan Lumber Mills 68 F 2d

268

218

American Airlines Exemption 27 CAB 112 102

American Export Isbrandtsen Lines v FMC 380 F 2d

609

315

American Export Isbrandtsen Lines v FMC 389 F 2d 962 167 331 338

American Export Isbrandtsen Lines v FMC and United States CA 2

1969 316

American Trucking Assn v Atchison Topeka Santa Fe Ry 387 US 397 230

Armement Deppe v United States 399 F 2d

794

319

Associated Banning Co v Matson Navigation Co 5 FMB 336 213

Baer Bros Mercantile Co v Denver R G R Co 233 U S 479 341

Ballmill Lumber Sales Corp v Port of New York Authority 11 FMC 494 29

Banana Distributors Inc v Grace Line Inc 5 FMB

278

258

Banana Distributors Inc v Grace Line Inc 5 FMB

615

255

258 295 296 297

Beaumont Port Comm v Seatrain Lines Inc 2 USMC 500 224

Beaumont Port Comm v Seatrain Lines Inc 2 USMC 699 223 224

Berwick v FCC 286 F 2d 97 331

Board of Commissioners v New York Porto Rico S S Co 1 USSB 154 206

Board of Commissioners v Pacific Coast Australasian Tariff Bureau and

Member Lines Dkt No 66 6L 107

IX



FEDERAL MARITIME COMMISSION

DOCKET No 6749

STATES MARINE LINES INC ET AL

v

PACIFIC COAST EUROPEAN CONFERENCE ET AL

Decided June 26 1968

A conference self policing system which does not contain specific guarantees

against unfairness is illegal and may not be used to adjudicate alleged

breaches and assess penalties unless and until appropriate amendments

to the self policing system are made and approved by the Commission

Conference ordered to cease and desist from further actions under said

illegal system

Changes in a conferences self policing system which subject self policing deter

minations to binding arbitration and establish procedures to be followed

in adjudicating alleged breaches are substantial modifications of the type

which require prior approval by the Commission under section 15 of the

Act before they maybe effectuated

The reasonableness of a readmission fee of 12 500 assessed against former

members seeking to rejoin the conference where the initial admission fee

is only 1 000 raises possible issues of material fact which require an

evidentiary type hearing Case remanded to the examiner for further

proceedings on thisquestion

George F Galland Amy SC1tpi and Robert N Levin for complainants

Leonard G James F Oonger Fawcett and John P Meade for respondents

REPORT

By THE COMMISSION John Harllee Ohairman George H Hearn

Vice Ohairman Ashton C Barrett James V Day James F

Fanseen OOlrllJnissioners

This proceeding wasinstituted upon the complaint ofStates Marine

Lines Inc and Global BulkTransport Inc againstthe Pacific Coast

European Conference the respondent and its member lines 1

The

complaint wasserved on September 18 1967 and alleges that the self

policing system of the Conference as well as the readmission fee it

1 The term respondent as used herein includes the Conference and its member lines

except States Marine Lines

1
2 FEDERAL MARITIME COMMISSION

assesses against former members seeking to iejoin are in violatio

the Shipping Act 1916 as amended The complaint requests 

Commission to adjudge the Conference s self policing system an

admission fee to be unlawful and to order the Conference to d

from any action against States l1arine underthe present self po

system It also seeks disapproval of the Conference agreelllent 

entirety if appropriate modifications are not made within a tim

be specified 2

THE FACTS

The respondent is a conference of common carriers by water se

the trade from U S Pacific Coast and Alaskan ports to ports in 

rope and its environs It operates uncleI an approved sectio

agreement No 5200 At the time the complaint was served S

Marine Lines Inc and Global Bulk Transport Inc operating 

joint service held a single membership in the Conference

The respondent s present self policing system consists of two 

graphs of the basic conference agreement which read as follows

ARTICLE 15

B reach of Agreement Except as otherwise provided in Article Fou

liquidated damages for nonobservance of this Agreement or of any o

rules regulations or tariffs of the Oonference shall be not less than 

Hundred Dollars 500 00 nor more than Ten Thousand Dollars 10 00

in the opinion of the Conference members failure to observe the Confe

Agreement or Conference rules regulations 01 tariffs in a particular ca

cumulatively jeopardizes the accomplishment of the basic purposes o

Agreement the offending party may be expelled from the Conference The 

mination as to nonobservance of this Agreement or of any rule regulaU

tariff of the Conference and whether the offending party shall pay liqu

damages or be expelled from the Conference shall be by agreement of the p

as provided inArticle Eight 8 Should an offending party fail to pay liqu

damages assessed hereunder to the Conference within five 5 days after w

demand therefor the said party shall be and become liable to civil action 

case shall the party complained against cast any vote on the matter unde

sideration No expulsion shall become effective until a detailed st l tement s

forth the reason 01 reasons therefor has bee n furnished to the expelled m

and a copy of such notification mailed to the governmental agency charged 

the administration ot Section 15 of the United States Shipping Act 19

amended

o

ARTICLE 8

Decisions Decisions at Duly called meetings are to be made by a three fo

vote of members present and entitled to vote otherwise they are to be 

by three fourths vote of all members entitled to vote Changes in this 

ment however shall be made only by unanimous vote of all members e

to vote

2 After States Marine tendered its resignation from the Conference it did not pre

issue further

12 F 1
STATES MARINE LINES INC V PAC COAST EUROPEAN CONF 3

The Conference agreement s provisions relating to admission and

readmission are contained in articles 11 and 4 which provide in

pertinent part

ARTICLE 11

Each person firm or corporation exclusive of present membership or associate

membership shall at the time of admission deposit with the Conference the

sum of One Thousand Dollars 1 000 00 as an admission fee no part of which

shall be returnable to the said member save and except on the complete

dissolution of the conference

ARTICLE 4

In the event any member should resign or shall have heretofore resigned

from tIle Conference as a former member and thereafter seeks reac1rnission

it shall not be readmitted nor shall any subsidiary or affiliated company be

admitted save and except upon payment to the Conference of the sum of

Twelve Thousand Five Hundred Dollars 12 500 00 except when readmitted

atter three 3 years from the effective date of such resignation becoming

effective after the approval hereof In the case of a member having been ex

pelled from the Conference heretofore or hereafter neither it nor its sub

sidiary affiliate or successor shall be readmitted without payment of the afore

said sum Any amounts due the Conference arising out of prior membership

and which are unpaid at the time readmission or admission is sought shall be

paid infull inaddition to the aforesaid sum

lie

Vithin a few days following the iarch 1967 decision in State8

jJ1 rine LittW8 Inc v Fedel alll1aTitime OOln n 376 F 2d 230 D C

Cir 1967 counsel for respondent wrote a letter to the Conference

Chairman advising that in his opinion the self policingsystem should

be amended to conform to the guidelines laid down by the court

Subsequently at a meeting of the Conference held in London in

June 1967 proposed modifications to the basic conference agreement

were voted upon and approved by aU members present

3

including the

present complainant States l

iarine Lines Almost immediately after

this meeting States Marine by telegram withdrew its approval and

aceeptance ofthe modifications on the ground that it wished to review

the matter with counsel Itpromised to furnish the Conference with

its position on the self policing amendments as soon as possible

On or about August 22 1967 the Conference instituted a seH

policing action against States Marine for alleged breaches of the Con

ference agreement seeking liquidated damages in the amount of

130 000

3

A modification to the basic agreement however requires unanimous approval and

Weyerhauser Line was absent and voted against the proposed revisions to the self

policing system by its letterdated July 7 1967

4

On Aug 29 1967 States larine did furnish the Conference with its r commended

modifications These proposals were similar to the system which had been voted on at the

London meeting but were considerabl r more detailed on the procedural safeguards to be

afforded the accused as well as thearbitration procedures

12 F M C
4 FEDERAL MARITIME COMMISSION

States Marine s reaction to the Conference s charges was to file 

complaint in this proceeding It also sought and obtained an inj

tion 5

against the Conference and its member lines in the U S 

trict Court for the Northern District ofCalifornia SoUthel11 Div

No 47855 forbidding any attempt to collect penalties from S

l1arine Lines untilthe completion ofthis case before the Commis

iStates l1arine s complaint alleges that the Conference s se

licing system is illegal in that it does not provide for fundame

fairness as defined in the States Marine case supra Two defi

cies are noted The first is the lack of any procedures guarante

the rights of the accused line to be furnished with all of the evid

to be relied upon and to rebu tor explain thisevidence The seco

the absence of any provision fora neutral tribunal to pass on 

questions of guilt and level of assessment of penalties The S

1arine complaint also charges that the readmission fee of 1

is unreasonably high and amounts to a penalty for withdraw

violation of section 15 and General Order No 7 The complain

quests us tD adjudge the self policingsystem as unlawful and v

under section 15 and todisapprove the readmission fee Italso 

an order requirlllg the Conference to desist from allY action ng

States l1arine under such unlawful system looking towards a d

mination of guilt or the imposition of fines penalties or o

sanctions

The Conference answer denies that the present self policing sy

violates the standards contained in the court s decision in the S

illarine case because it does not affirmatively require unfairness M

over it contends that States lIarine would in any conference proc

ing actually be accorded all ofthe procedural safeguaTds require

the court including binding arbitration even though the self pol

provisions of the conference agreement are silent on these subjec

A prehearing conference before the Examiner was held in V

ington on November 21 1967 at which counsel for the parties ag

that no evidentia ryhearing wasnecessary The authenticity of ce

documents was stipulUited and counsel agreed to stipulnte as tD 

authenticity of others by December 1 1967

By the time ofthe prehearing conference States Marine Lines 

tendered its resignationfrom the Conference and this resignation

effect on December 1 1967 The Examiner closed the record a

December 21 1967

5

This injunction was subsequently ddssolved but only after a stipulation had 

entered into by the parties whereby they agreed that no attempt to collect any pe

which might be assessed would be made until 10 da s

following a final determinat

the Commission in this proceeding

12 F l
STATES MARINE LINES INC V PAC COAST EUROPEAN CONF 5

Subsequently the ConferencE Chairman advised States n1arine that

a meeting of the Conference would be held on January 4 1968 to

consider the outstanding charges States 11arine was invited to be

present and to participate in its defense By letter dated January 3

1968 States n1arine declined to participate and suggested that the

matter be postponed until after the Commission reached its decision

in thisdocket

Nevertheless the meeting was held and States Thlarine was found

guilty and penalized by the membership in the amount of 130 000

In a letter signed by the Conference Chairman dated January 5 1968

States n1arine was advised of thisaction Inthis letter States 11arine

was also offered UJl opportunity to have the adverse determinations

reviewed by an impartia board of arbitrators

THE INITIAL DECISION

In his Initial Decision Examiner Charles E Morgan found that

the present self policing provisions of Agreelnent No 5200 are silent

as to procedural safeguards for ml accused member line and that

these provisions should contain a minimum of procedural sa feguards

which win guaTantee fair treatment of an accused member line He

concluded that these self policing provisions are unlawful and in

violation of section 15 of the Act He also concluded that the present

readmission provision is unreasol1tble on its face and constitutes a

pena lty for withdra al in violation of section 15 of theAct 11e rec

ommended that the Conference be ordered to desist from taking any

action under the existingself policingsystem

DISCUSSION

Ve generally agree with the Examiner s

findings and conclusions

ith respect to the illegality ofRespondent s self policing system Te

have determined to review his detenninations partly because ofevents

hieh occurred after the closing of the record and partly because of

the contentions ofthe parties expresseel in their exceptions llldreplies

On the readmission fee issue we have decided to remand the case to

the Examiner for an evidentiary hearing

Respondent s P1Bsent Self Policing Syste1n

As already noted the present self policing system contained in

Agreement No 5200 consists of only two para graphs a rticles 15 and

8 under which the Conference members upon a three fourths vote

may assess liquidated dcunages for breaches of the agreement or its

rules regulations or tariffs in amounts ranging between 500 to

12 1 1c
6 FEDERAL rfARITIME COMMISSION

10 000 per oflense 6These paragraphs are silent on the proced

to be followed There is no requirement that the accused lin

furnishe d with the evidence to be used against it or that it be allo

to rebut or explain such evidence and no provision for the final d

mination of guilt and assessment of penalties by a disinterested 

imparbal tribunal

The Conference in this cuse does not seriously contend that 

present self policing system com ports vith the requirements of 

court in the States 111 wine case Indeed counsel for the Confere

so advised its chairman within a few days after that decision I

myel the Conference argues that there is nothing in its agreem

hich 1

e1uil es the denial of fair procedures or forbids the us

arbitration Itattempts to distinguish this C3se from the States llfa

ease here it contends the procedures actually required the w

holding of eertain kinds of evidence from the accused and perm

a neutral body which had an affiliation with a

competitor of 

accused to sit in judgnlent The Conference sums up its position 

saying that its present self policing plan whatever its shortcom

cannot be held to be illegal unless or until it is actually used 

funclamentally unfair manner

Ve are of course unable to accept this argument Section 1

amendecl General Order 7 and the case la interpreting the l

requirements under the 1961 self policing amendment to section 

all indicate that a self policing systenl must contain a

specific pr

dural plan under which disputes will be adjudicated and that 

plan must contain guarantees of fundament l

fairness

Section 15 requires that we shall after notice and hearing di

prove any agreement on a

finding of inadequate policing of 

obligations under it 7

Pursuant to this mnendment and our general rulemaking autho

under the Act we promulgated General Order 7 onAugust 22 19

saying in part

SOl1lf eomlllents also ehallenged the Commission s authority to require 

inclusion of selfVolieing as a condition precedent to approval or conti

approYCll of an agreement uncleI section 15 As amended by section 2 of P

Law 87 346 75 Stat 7634 section 15 provides The Commission shal

approve any such agreement after notice and hearing on a finding of inadeq

policing of the obligations under it This provision in demanding 

adequate policing of the obligations under the agreement clearly presuppose

estahlishment of some procedure for that purpose And the estalJlishment o

elf policing procedure is necessarily predicated upon an agreement bet

6 The offending party may also be expelled from Conferencemembership

7

This language was added to section 1510 1961 by Public Law 87 346 sec 2 75 Sta

s 28 F R 9257

J2 IP M 
STATES MARINE LINES INC V PAC COAST EUROPEAN CONF 7 

the parties It h s been the consistent position of the Commission that such an

agreement is a llloclification which is within the purview of section 15 and this

is HOW expressly fortified by the statute itself Under section 15 a true and

complete copy or if oral a true and complete memorandum of all agreements

within the puniew of the section must be filed with and approved y the

Commission An Agreement wbich does notcontain the procedure forself policing

which has been adopted by the parties is an incomplete agreement within the

meaning of section 15 Conversely it would seem to be obvious that if the parties

make no provision for self policing they areignoring the statute In either case

their section 1 agreement would have to be disapproved unless the situation

were corrected

As early as 1962 we found that a system of self policing is

a

necessaTY part of a basic conference agreement since itvitally affects

the interrelationship of the members 9and as recently as last year

ye held Adequate zrroced ttres must be set forth in the basic confer

ence agreement whereby machinery for self policing is established 10

Italics in the original

On the subject of the adequacy of self policing systems the cOUli

in States il1arine Lines Inc v Federal l1fa itirne Oom n 376 F 2d

2HO D C Cir 1967 was evenmore explicit

the prindple becomes obvious that this ldnd of selfregulatory process must

provide specific realistic guarantees against arbitrary and injurious action

376 F 2d 236

That case was remanded to the Commission because under the self

policing plan being considered an accused line might be found guilty

on the basis of evidence which it did nat have an opportunity to see

and because the so called Neutral Body was permitted to have a con

nection ith one of the Conference members so long as this was

disclosed

By way of summary the court said

gi n the spNial characteristics of the shipping industry and the confer

ence system the broad discretion granted a Neutral Body must be subject to

somE form of continuing internal revie Y That review must provide l easonable

assurance that a memher will he l Ellalized only on the basis of evidence it has

Ill acleC nate opportullity to rehut or explain in other Yords that the accused

will ill fact be treated fairly 376 F 2d 242

re have already had occasion to pass on a self policing system

similar to the one uncleI consideration here In111odification of AgJee

nwnt 5700 1 Supplemental Heport 10 F n1C 179 1967 11 the

9 Stttes Marine Line Y Trans Pacific Freight Con 7 FlI C 257 1962 affirmed

Trams Pacific Frgt Conf of JalJan v Federal Maritime Com n314 F 2d 928 9th Cir 1963

10 Modification of A fjreement 5100 L 10 F i LC 261 272 1967

11 Thl supplemental report was issued after the matter had been reopened to reconsider

onr earlier report in the light of the guidelines contained in the snbsequent decision in the

States Marine case supra

12 F l1G
8 FEDERAL MARITIME COMMISSION

Conference members themselves sat in judgment on their acc

fellow member Appeal to arbitration vas provided for on the q

tion of guilt but not on the level of assessment of penalties vVe 

that

Since the conference members are clearly interested parties it is essen

provide a safeguard against arbitrary action both as to a

finding that a 

ber has violated the conference agreement as well as the penalty to be imp

Our conclusion is inescapable that Respondent s self policing 

tem as presently constituted is legally defective in that it contain

procedures guaranteeing fundamental fairness as defined by 

court in the States 1arine case Itmay not be used and the assess

against States Marine is void

This does not mean however that the Conference has lost its 

of action against States 1arine for alleged wrongdoing while a 

ference lnember Itcould well be that the Conference may still en

conference obligations incurred by States 1arine prior to its res

tion from the Conference

The Conference asserts that when it actually went ahead with 

self policing action against States 1arine it offered all of the p

dural safeguards called for by the court in the States Marine 

including appeal to arbitration if States Marine had chosen to 

ticipate and desired them States Marine however preferred n

have anything to do with the proceedings citing Tran 3Pacifio F

Oonf of Japan v Federal1l1aritime Oom n 314 F 2d 928 9th 

1963 for the proposition that it could not become involved wit

arrangement which required the effectuation of an unapproved m

fication to a conference agreement in violation of section 15 T

Respondents contend it is only because States Marine chose n

participate that all the criteria of fundamental fairness ver

met and notbecause ofthe policingsystem itself

It may be that the Conference fully intended to furnish S

l1arine with all of the evidence it relied on and to afford S

Marine an opportunity to make whatever defense it deemed ap

priate and to permitthe matter to be finally decided by a disintere

arbitrator and otherwise comply with the court s guidelines 

whatever may be said for this ad hoc procedural arrangeme

seems to us quite clear that any such offer by the Conference w

run directly counter to the requirements of section 15 becaus

conduct such a

proceeding would constitute a substantial chan

the basic conference agreement which requires both unanimous 

sent of the membership and Commission approval before bein

fectuated 1oreover any such ad hoc arrangement would place S

Marine at a decided disadvantage in that it would have no wa

12 F f
STATES MARINE LINES INC V PAC COAST EUROPEAN CONF 9

determining whether it had been dealt with in fundamental fair

ness until virtually the entire proceeding had been completed and

each procedural right had been protected By then of course irrep

arableharnl may have been done

Under such an arrangement we would inevitably be called upon

in each case to determine whether the particular procedures used were

fundamentally fair The court in the States jJlal ine case rejected a

similar proposal saying

C

This of course is not the responsibility assigned the Commission by

Section 15 Section 15 authorizes the Commission to disapprove cancel or

modify any agreement not to sit in judgment of the day to dayoperations

carried out under that agreement Moreover to place the Commission in the

role of an on going appellate panel intimately involving it in a case by case

review of the Conferences Neutral Body system would hardly be consistent

with Congress intent that the Conferences engage in self regulation 376 F 2d

at 242

The Readmission Fee Issue

In his Initial Decision the Examiner concluded that the present

readmission fee of 12 500 amounting to 12 5 times the regular ad

mission fee appears on its face to be unreasonably high and to impose

an unlawful penalty for withdrawal from the Conference The Con

ference strongly excepts to this conclusion and asserts that it is

prepared to come forward with factual reasons affirmatively show

ing why the provision is reasonable and necessary States Marine

on the other hand urges that the Conference waived an evidentiary

hearing when it agreed to the stipulation in this case The Conference

counters that it was misled as to the continuation of the fee as an

issue in the case

Thichever may be the case we are extremely hesitant to strike this

already approved provision from the agreement merely on the basis

of argument alone thus far presented No valid regulatory purpose

will be thwa rted if ve remand the proceeding to the Examiner

for the taking of such relevant evidence as the Conference may offer

in justification of its readmission fee Our remand here does not of

course indicate that we feel that the Examiner s conclusion vas in

correct Ve simply feel that the Conference should be afforded an

opportunity to fully justify its readmission fee

An appropriate order will be issued

By the Commission

Signed THOMAS LISI

Secreta1 Y

J2 F M C
FEDERAL MARITIl1E COMMISSION

Docket No 6749

STATES MARINE LINES INC ET AL

v

PACIFIC COAST EUROPEAN CONFERENCE ET AL

ORDER

The Commission has this day entered its Report in this procee

which is hereby made a party hereof by reference

Therefor e it is orde1ed That the approval pre iously give

Agreement No 5200 he and the same hereby is continued on 

condition that said agreement be nlodified by adding provisions es

lishing a self policing system in accordance with this Hepod 

Order except that such continued approval shan become null 

void unless the agreenlent so modified is filed with the Commis

not later than sixty 60 days from the date of service ofthis o

Itis further ordered That the respondent conference and its m

bers desist from any further action under its present self poli

system looking toward the final deterlnination of guilt or the imp

tion of fines penalties orother sanctions

Itis furthe1 ordered Th3 lt this proceeding be and the same he

is remanded to the presiding exalniner for evidentiary hearing

the readmission fee issue

By the Commission

Signed THOMAS LISI

Secreta

12 F M 

10
FEDERAL MARITIME COl1MISSION 

INFORlIAL DOCKET No 2 I

lINNESOTA 1INING AND lANUFACTURING COMPANY

V

AiIERICAN EXPORT ISBRANDTSEN LINES INC

Adopted June 26 1968

A conference rule providing that cla ims for adjustment of freight charges

if based on error in weight or measurment will not be considered unless

presented to the carrier before the shipment involved leaves the custody

of the carrier cannot bar recovery of an overcharge as reparation where

the complaint is filed under section 22 of the Shipping Act 1916 less

than two years after charges were paid Reparation awarded in the amount

of 551 55

J F Day for linnesota 1ining and wlanufacturing Company

complainant

BLtrton H lVhite and Frank Oiaccio for AmericanExport Isbrandt

sen Lines Inc respondent

DECISION OF IERBERT Ie GHl ER Pm SIDING EXAMINER 1

Complainant 1innesota wIining and Manufacturing Company of

St Paul Minnesota is a manufacturer of coated and related products

and is engaged in the foreign commerce of the United States tmerican

Export Isbrandtsen Lines Inc is a common carrier by water in the

foreign commerce of the United States and subject to the provisions

of the Shipping Act 1916 the Act Complainant alleges that the

carrier assessed and collected an overcharge on a

shipment of com

plainant s products from New York to Naples Italy The parties have

consented to have the claim determined without formal hearing and

upon documentary evidence pursuant to rule 19 of the Commission s

Rules of Practice and Procedure

1 Both parties having consented to the informal procedure under Rule 19 a 46 C F R

502 301 this decision shall be final unless the Commission elects to review the decision

within 15 days fl om the date of service thereof

12 F M O 11
12 FEDERAL MARITIME COMMISSION

Respondent assessed charges on the shipment and compla inant 

the sum of 588 76 on February 13 1967 This was the correct ch

by application of respondent s tariff to the goods as described in 

bin oflading On February 14 1967 complainant completed its a

of the goods involved in the shipment and detected an error in the 

scription of the goods on the bill of lading On September 6 

claimant advised the carrier of the error and requested a refund 

respondent carrier a member of the North Atlantic Mediterran

Freight Conference rejected the claim citing the Conference T

Rule No 22 which provides in pertinent part

Claims for adjustment of freight charges if based on alleged error in w

or measurement will not be considered unless presented to the carrie

writing before the shipment involved leaves the custody of the carrier

Complainant admitting that its claim was not presented to 

carrier while the shipment was in the carrier s custody challe

the validity of the rule contendingthat itis unreasonable and con

to the provisions of section 22 of the Shipping Act 1916 the A

which provides

That any person may file withthe board a sworn complaint setting forth 

violation of this Act by a common carrier by water or other person subje

this Act and asking reparation for the injury if any caused thereby 

board ifthe complaint is filed within two years after the cause of action ac

may direct the payment

The Commission s rule 19 conforms to the statutory 2

year limita

Section b thereof provides

Claims may be filed with the Commission within 2 years from the tim

cause of action accrues The cause of action shail for thepurpose of this se

be deemed to accrue a for over charges upon delivery of the property o

payment of the charges whichever is later

This compliaint wasfiledwithin 2 years of the date payment wasm

The question here presented is whether the conference rule 

complainant s

right to recover overcharges when the claim for rep

tion was filed within 2

years of the date of accrual The answ

found in United States of America v American Ewport sbrand

Lines no Docket No 67 30 the Initial Decision of Presiding Ex

inerPage adopted by theCommission February 1 1968 11 FMC 2

Itwasheld that a conferencerule providing thatclaims for adjust

of freight charges must be presented within 6 months after ship

date cannot bar recovery in a complaint case brought under sectio

oftheAct Respondent is ofthe opinion that that decisionshould n

binding upon it that the whole subject is currently under revie

Docket No 65 5 The question ofwhether a conference or carrier 

by a time limitation rule defeat the Commission s

jurisdiction u

12 F M 
MINNESOTA MINING AND MANUFACTURING COMPANY 13

the 2 year limitation in section 22 of theAct is not aIlissue in Docket

No 65 5 The Commission s decision in Docket No 67 30 is binding

precedent in any event until modified or reversed Moreover the con

ference rule does not concern a claimant s

right to present a claim to

the Commission under section 22 oftheAct or to pursue a claim by re

course to the courts The rule provides only that the carrier will not

consider a claim unless presented withinthe time specified Considera

tion has been givento respondent s proposition that

The Conference Rule applicable to the instant case does not bar a claimant

from initiating suit Ifthe claimant takes the simple step of complying with the

Tariff Rule 22 notice requirement it can press its claim under and in accordance

withSection22 of the Shipping Act

The argument is not consistent It proposes that suit is not barred

by the rule but in effect failure to comply with the rule would bar a

complainant from pressingits claim

Itis concluded that complainant s failure to comply with the confer

ence rule on presentation ofclaims does not bar recovery ofreparation

in a proceedingbrought pursuant to section 22 oftheAct The question

of the reasonableness or unreasonableness of the rule need not be

determined to resolve the issue of thecomplainant s right to reparation

Respondent contends that complainant has failed to carry its bur

den of proof with respect to the true weight and measurement of the

cargo Citing the Carriage of Goods by Sea Act 1936 46 U S C 1303

4 to support the evidentiary importance of the bill of lading and

that it is prima facie evidence of receipt by the carrier of the goods

described therein respondent argues

Itfollows that the burden of proving that the facts were otherwise than as

stated in the bill of lading must be on theclaimant in any proceeding wherein

weight or measurement is brought into question This burden remains con

stant and does notshift to thecarrier once a claim is filed

The burden ofproof is of course with complainant Its sworn claim

sets forth facts and documents to prove that the actual shipment was

not as described in the bill of lading Respondent s evidence to contra

vert this proof is the bill of lading The bill of lading may be prima

facie evidence of the contents of the shipment but itis not conclusive

9 Am Jur Carriers 417 Nor is it as respondent argues the best

evidence as the term may be applied in thisproceeding Complainant

is not barred from presenting evidence that the bill of lading was

erroneous The evidence consists of an interoffice memorandum show

ing the actual description of the goods sold to the consignee and

the packing list of the merchandise both demonstrating the error in

the bill oflading Ifrespondent s argument is addressed to the weight

12 F M O
ofthe evidence evaluation thereof arral1ts the conclusion that 

plainant has met the burden to prove that the bill of lading did not 

rectly describe the goods actually shipped and this evidence JUtS not

persuasively rebutted Claimant has shown that theapplicatio

respondent s tariff to the actual shipment was 55155 less than 

charge based on the erroneous description in the bill of lad

Respondent a common carrier hy water in foreign commerce rece

a greater compensation for actual servicesrendered than specified 

tariff in violation of section 18 3 ofthe Act

ULTllfATE CoNCLUSIONS

The conference rule providing that claims for adjustmen

freight charges if based on error in weight or measurement wil

be considered unless presented to the carrier before the shipmen

volvedleaves the custody of the carrier does not bar recovery o

overcharge as reparation where the complaint is filed under sectio

of theShipping Act 1916 within 2 years or the date of paymento

charges

The description of the goods shipped by complainant via resp

ent s vessel as stated in the bill of lading as erroneous and app

tion of respondent s tariff to the goods actually shipped results 

charge of 37 21

Respondent collected from complainant the sum of 588 76 for 

transportation ofcomplainant s goods 55155 more than wasprop

due for the services rendered and in violation of section 18 3 o

Shipping Act 1916

Complainant is entitled to and is hereby awarded as full repara

the amount of 55155 with interest at the rate of6 percent per an

to be added ifthe reparation is notpaid within30 days

HERBERT K GREER

Presiding EJamin

VASHINGTON D C

June 25 1968

12 F M 
FEDERAL l 1ARITIl tIE COMMISSION

DOCKET No 66 37

KIM RRLL LAWRENCE TRANSPORTATION INC GEN

jRAI

INCREASE IN

RATES IN ICODIAK ISLAND ALASKA PENINSULA AND ALEUTIAN

ISLANDS AREA o ALASKA

Decided July 8 1968

Rates of respondent Kimbrell Lawrence Transportation Inc KLT between

Seattle Bellingham Washington and the Alaslm PeninsulaAleutian Islands

area of Alaska foundnotunlawful

KLT required to adopt means for determining amount to be assigned to vessel

betterments and expenses other than arbitrarily derived percentages

KLT allowed contributions to profit sharing fund as expenses limited to

a total of 15 percent during any year

In estigation discontinued

Raynwnd J Petersen for respondent lCimbrell Lawrence Transpor

tation Inc

George L Benesch and Edgar Paul Boyko for intervener State

of Alaska

Fred Ii Tolan for intervener Northwest Fish Traffic Committee

E Duncan Ha1JMe and Donald J Bnl nTl er Ilearing Counsel

HEPORT

By THE COl1lIISSlON J ohn IJarl1ee Oha i1 JJw nj James V Day Vice

Ohai m

anj Ashton C Barrctt Gcorge II lIearn James

F Fanseen 001l1 mi8sioners

T his proceeding was instituted on the Commission s own motion by

order served June 6 1966 to investigate the justness and reasonable

ness lUlder the Sllipping Act 1916 andthe Intercoastal Shipping Act

1933 of selective increases in rates between Seattle Vash and Kodiak

Island Alaska Peninsula and Aleutian Islands ports published by

respondent lCimbrell Lawrence Transportation Inc KLT effective

June 8 1966 The State of Alaska Alaska intervened

After hearing and the filing of briefs but prior to the Examiner s

decision respondent filed a second increase of approxilnately 10 per

12 F M o 15
16 FEDERAL MARITIME COMMISSIOlll

cent on all commodities between Seattle and the named Al skan p

with the exception of the rate on frozen fish southbound and e

lished rates between Bellingham vVash and the named Alaskan p

for the first time All rates between Bellingham and the Alaska 

are identical to the Seattle rates with the exception of the rate

frozen fish and frozen crab southbound vhich are somewhat lo

On January 20 1967 the Commission expanded the investigatio

include the second increase Further hearings were held on the se

increase 1

On February 15 1968 Chief Examiner Gus O Basham issue

initialdecision in which hedetermined that neither setofrate incre

had been shown to be unlawfuL There was no oral argument

POSITION OF THE PARTIES ON EXCEPI IONS

I

Both Hearing Ooumel and Alaska except to the Examiner s 

sion Neither excepts to theExaminer s determination that the ra

return based upon the first set of increases involved herein was 

shown to be unlawful although Hearing Counsel maintain tha

rate of return should have been found to be 15 21 percent and Al

maintains that the rate of return should have been found to be 

percent The major objections of these parties are to the Examin

treatment ofcertain repair expenses as capitalized assets for inclu

in the rate base and his failure to consider the increased revenu

spondent may derive from its second setofrate increases

A The Repairs

At the hearings KLl capitalized as betterments 50 perce

its repairs expense for its single vessel for the years 195865 H

ever this capitalization is not reflected in KLTs General Orde

submissions to the Commission and Hearing Counsel and Alaska 

gue that neither the evidence of record in this proceeding nor K

General Order submission for 1966 indicates that any portion o

pairs for that year should be capitalized They maintain th8J

General Order 11 treatment of these expenses and the tre atmen

Federal income tax purposes indicate that the attempt it capit

the assets in this proceeding is an attempt to inflate LT s rate 

with the consequent reduction of rate of return They further ind

1 that LT itself admits that the 50 percent figure was en

an arbitrary selection not in accord with accepted accounting p

lrIhe Nor hwest Fish Traffic Committee intervened and took part inthe further he

but did not otherwise participate inthis proceed lng

12 F M
KIMBRELL LAWRENCE TRANS INC INCREASE IN RATES 17

tice 2 that to some extent the capitalization of 50 percent of the

repairs resulted in the capitalization of items which had already

been capitalized once and 3 that several of the repairs items were

inexact as to amount

B The Second Rate lnerease

Both Hearing Counsel and Alaska admit that it is impossible to

make any meaningful projection of annual revenues and expenses be

yond 1966 due to KLTs anticipated radical change in opera

tions with the addition of a second vessel They do maintain how

ever that some profits will be added to a rate of return which is al

ready at the upper limits of reasonableness and therefore the rate

in KLTs second round of increases should be declared unlawful

Alaska moreover indicates that assuming expenses remain constant

the rate of return including that provided by the second increase

would be 27 2 percent

2

II

LT maintains that the initial decision should be affirmed by the

Commission

DISCUSSION AND CONCLUSIONS

Since Hearing Counsel concede that a rate of retur nof 15 21 percent

is not unreasonable and Alaska concedes that a rate of return of 18 51

percent is not unreasonable KLTs rate of return with respect to the

first set of increases still faIls within limits which they acknowledge

are proper even ifall Of the inaccuracies claimed in the exceptions are

admitted

There is substantial evidence of record that the original rate in

creases are just and reasonable particularly in light of the high risk

of loss of life capsizing and loss of cargo involved in crossing the

Gulf ofAlaska and we so find

With respect to the January 1967 rate increase however there is

nothing in the record upon which the Commission could base a deter

mination in light ofthe change in nLT s operations occurring in the

latter half of 1967 as a result of the addition of the second vesseLs

I Alaska also excepts to the Examlner s failure to exclud eKur s contribution to an em

ployee profit sharing fund of 17 762 04 In 1966 as an expense In computing w

orklng

cSJpltal although adimlttlng that the elfect on the amOUll t of working capital W8J8 not

substantial in the case and h19 SJllowa nce of the contribution as an operating eXlpense

Alaska s objectLon i9 not to the legitimacy of such funds as an expense In principle but

because it alleges there 19 no elfeetlve yearly maximum orminimum requiredJ contribution

with respect to this p8lrticular fund and KIJI could contribute larg amounts to the fund

in 1 year Illan attempt to justify arate Increase

8We take otDcial noUce of tbe fact that this change in Kur s operatioDs has ilctiially

occurred

12 F ld a
18 FEDERAL MARITIME COMMISSION

Although it does appear as Hearing Cowlsel and Alaska indi

that sonle profits may be added to H LT s rate of return becaus

the January increases both the likelihood of these additional pr

and their extent are in considerable doubt As Hearing Counse

knowledge in their reply brief increased expenses for ICLT in 

form of wage increases increases in Master l1ates and Pilots U

Benefit and rising fuel oil costs totaling 20 724 are certainties 

also note that the ship which LT has added to its service the P

Pioneer is shown by the record to be more than three tinles la

than KLTs other vessel and was described at the hearings as re

ing a 35 man crew which factors may further greatly increase w

and fuel oil expenses

The change in operations did not in any vay figure as a basis fo

second rate increase and the expenses relating to that change 

have a determinative effect upon the reasonableness of LT s ra

return Should our ana lysis of LT s financial statements subm

to us pursuant to our General Orders indicate that after a

year 

perience with its expanded service LT s rate of return may be 

lawful we will at that time institute appropriate proceedings 4

the present however LT s rate increases have not been shown 

unlawfuI

While our disposition might be said to make it unnecessary st

speaking to rule on the exceptions with respect to the expense

repairs and the profit sharing fund we will do so because we be

such ruling is necessary if meaningful financial records are to be 

in the future Wetherefore hold that

1 vVith respect to the repairs expense KLTmust adopt amean

determining the extent to which items are properly assigned to 

category and the extent to which they should be assigned to the 

base as betterments other than the 50 percent allocation whi

admitted was arbitrary and not in accord with accepted accou

practice LT is also reminded that General Order 11 46 

512 7 b 1 requires that where the figures with respect to in

ment in vessels including betterments differ from those reporte

Federal income tax purposes the differences shall be set forth 

fully explained and

2 With respect to the profit sharing fund we do not agree 

Alaska that the expense item for this fund is illusory There 

maximum contribution limitation of 15 percent per year of w

paid or payable to eligible participants Although there is no gu

Cf Freight Rates and Practices FZorida Puerto Rico Trade 7 F M C 686 6

1964 Reduction in Rates Pac Ooast Hawaii 8 F M C 258 262 265 1964

12 F 
KIMBRELL LAWRENCE TRANS INC INCREASE IN RATES 19

teed minimum the only reason stated in the plan for allowing the

company not to contribute to the fund for any year is the judgment

and discretion of the Companis directors that it vould be detri

mental to the best interest and fmancial security of the Company

Contributions may be paidinto the fund in later years for those years

in which the company did not originally make contributions but

these payments are limited to making up deficiencies i e a 15 per

cent maximUlll for each year Ve cannot say as a Inatter or law that

I LT s

judgnlent and discretion will be exercised in an unreason

able or arbitrary manner Thus we will allow contributions to the

fund as legitimate expenses for ratemaking purposes provided how

ever that not more than 15 percent be allowed as a total for the profit

sharing fund expense during any year including amounts assigned

to the fund to make up deficiencies from prior years This limita

tion is necessary to avoid the situation pointed out by Alaska in its

exceptions whereby I LT could contribute large amounts to the fund

in a

singleyear in an attempt to justify a rate increase

This proceeding is discontinued

SEAL Signed FRANCIS C HURNEY

Assistant SeC1 eta1Y

12 F M G
FEDERAL MARITIME COMMISSION

DOCKET No 65 34

IN THE MATTER OF DISCOUNTING CONTRACT N ONCONTRACT R

PURSUANT TO PROVISIONS OF ITEM 735 NOTE 2 OF THE IN

JAKISTAN CEYLON BURMA OUTWARD FREIGHT CONFERE

TARIFF No 10

SUPPLEMENTAL REPORT ON RECONSIDERATION

Decided July 12 1968

By THE COMMISSION JOHN HARLLEE Ohairman JAMES V 

Vice Ohairman ASHTON C BARRETT JAMES F FANS

Oommissioners

This proceeding waS instituted by the Commission to deter

inter alia the propriety of the practice instituted by India Pak

Ceylon and Burma Outward Freight Conference Conference 

offering discount rates on iron and steel commodities with the 

counts being restricted as to certain ports of origin in the U

States Our decision on this matter was issued March 25 1968 

noted that the record disclosed many instances of port restr

discounts and that generally the Port of New York has not 

given discounts similar to those obtained by the ports of Baltim

Philadelphia New Orleans and Mobile

The Port of New York Authority Port Authority had interv

in the proceeding and strongly objected to the port restricted dis

rates and alleged that the Port of New York was being subject

unjust discrimination and undue prejudice and that the comp

ports ofBaltimore Philadelphia N ew Orleans and Mobile have 

unduly preferred by the use of such rates in violation of sectio

First and 17 of the Shipping Act 1916 The Port Authority a

that the reduced rates caused cargo to move through the out

instead of through New York to the detriment of the Port of 

York

The Conference and Hearing Counsel had contended that 

were other factors besides the ocean rates which attracted iron 

steel to the outports and that the cargo came first to the ou

and the reduced rates were induced to follow the cargo Factor

ell F M C 418

12 F M C

20
DISCOUNTING CONTRACT NONCONTRACT RATES 21

to h ve influenced shipments to move through the outports and to

justify the port restricted discounts were shipper preference for the

outports steel mill location near the outports character of cargo

iron and steel handling facilities at the outports higher loading eosts

at Port of New York and carrier competition at the outports

We did notreach a determination of the sections 16 and 17 issues in

relation to the port restricted discount practice We stated in our

report

While the factors of shipper preference steel mill location character of cargo

and port facilities tend to show that the iron and steel would have moved away

from New York even if there had been no discount they do notin any way Herve

to justify the conference member s rate disparities

Of all the factors considered by the Examiner only two comparative loading

costs and carrier competition can actually be justification for rate dispariticR

When the conference adopted its rate policy it chose to have uniform rates as to

commodities from all United States ports of loading in the trade area The confer

ence members continued this policy from its inception until they adopted the

subject port restricted rates on iron and steel The subject discounts on iron and

steel are the only portrestricted rates on any commodity that the conference

mpmbers have adopted

Having established a policy of uniform rates from all United States ports of

loading and continuingsuch policy foraconsiderable length of time the conferenc

members should be required to adequately explain any departure from such basic

policy This the conference haattempted to do However as mentioned above

the only factors offered inexplanation forsuch departure which are actually rele

vant to or can be offered insupport of such departure are that it was justified to

meet competition or that it was justified on the basis of comparative loading costs

at the various ports

We proceeded to find that the cost data in the record was insufficient

to conclusively support a finding that loading costs in New York are

higher or to show what sort of relationship exists between the cost

differences and the rate disparities

On the issue of carrier competition we found the record to belacking

in that while it showed the existence of nonconference carriers it did

not show any information as to specific rates of such carriers or whether

such rates might justify the conference s restricted discount rates

We then remanded the proceeding

for the purpose of obtaining evidence concerning cost differences incurred

by conference carriers at the various ports in question and for the purpose of

determining the actual existence of nonconference competition faced by the con

ference at the various ports inquestion including evidence as to the rates of both

conference and nonconference lines Finally we ask the Examiner on remand to

determine whether any of the information gained on remand will provide justi

fication of the rate disparities in question

We are now faced with petitions for reconsideration filed both by

the Port Authority and by the Conference

12 F M O
22 FEDERAL MARITIME COMMISSION

Both parties suggest that we erred in concluding that only 

parative loading costs and carrier competition are properly 

considered in arriving at adjustment of rates as between port

support of their position the parties quote from prior Commi

decisions which appear to hold to the contrary

The Conference cites Port of New York Authority v AB Sv

et al 4 F M B 202 209 1953 in vhich the Commission st

Even though we find that no unjust discrimination has been shown to 

cause of any injury to New York or Newark we may say that a rate diffe

against a port may not be justified for the sole reason that thecost of operat

that port is greater than at another competing port In Port Differentialln

tigation 1 U S S B 61 1925 the Shipping Board said at page 69

the board does notconcur in the theory that a carrier is justified in b

ing a port witha differential for the sole and only reason thatthe cost of ope

from that port is greater than from some other port It is obvious to the 

that many elements such as volume of traffic competition distance 

of location character of traffic frequency of service and others are prope

be considered in arriving at adjustment of rates as between ports

The Conference also points out that in Rates from Jacksonv

Puerto Rico 10 F 11 C 376 1967 the Commission recently s

that

volume of traffic competition distance advantage of location cha

of traffic frequency of service and others are properly to be considered in ar

at adjustment of rates between ports

The Conference concludes that the Commission decision in 

proceeding is directly contrary to its previous decisions and tha

holding should be reconsidered in light of the previous deci

The Port Authority also feels that our conclusion that differenc

loading costs can justify rate differentials is contrary to our 

clusion in Surcharge on Shipments f1 om Buffalo New York 7 F 

458 where it was held at page 462

There are also other elements which should be considered in determ

whether a rate differential at a particular port may be upheld such as volu

traffic competition distance advantages of loca ion character of traffic freq

of service and others Port Differential Investigation 1 U S S B 61 69 

The Conference made no attempt to present evidence on any element e

terminal costs

Hearing Counsel have expressed agreement with the petitio

reconsideration

We have considered the petitions of the Conference and of the 

Authority We recognize the prior Commission cases cited therein 

endorse their holding To the extent that our prior decision in 

docket regarding criteria to be considered in determining prop

12 F M C
DISCOUNTING CONTRACT NONCONTHACT RATES 23

of rate differentials is inconsistent with the holdings of the above

mentioned cases it is hereby rescinded

This does not 11ffeet our prior decision to remand sinec the same

inadeqlIaeies ill the record regarding eosts and competition Lill exist

As indicated ill the C 1ses cited to us these t o

faetor should be eOll

sidered along with the others mentioned in reaching a conclusion

regarding the Oonference s rate differentials

For these reasons we areseeking lllore evidence on remn nd At this

juncture we will not limit the evidence on remand to the areas of com

petition and costs Rather t1ny further evidence deemed necessary

concerning any of the other relevant factors will also be considered

There remains the question of how extensively the question of com

parative costs should be explored The Port Authority and Hearing

Oounsel suggest that if costs are to be considered all steamship oper

ating costs should be exposed on the record rather than to limit evi

dence to loading costs The Conference opposes this view and feels

that it is unnecessary to go into such detail to jlLstify the cha llenged

rates in a case such ItS this which is not it dornestie rate case

The question of costs is present in this proceeding only insofar as

the Conference has suggested that a difference in loading costs tLt the

various ports should be considered as jlIstifict1tion for the rate dispar

ities All we are saying 01 asking is that to the extent that the Con

ference would have us use the cost criteria as justification for the rate

disparity it must include in the record the requisite dn ta and infor

mation which would substantiate the conclusion asserted

An appropriate order will be entered

COMMISSIONER GEORGE H HEARN concurring and dissenting

I dissent from the supplemental report of the majority insof Ll itS

it denies the petition of the Port of New York Authority th Lt the

Commission reverse its decision to remand and find tIle rlltes in

question unlawful In all other respects I eonellr in thc majority s

supplemental report herein

The majority now opens the case on remand to all facets of the

question of violations of sections 16 and 17 of the Shipping Act

1916 and the entire range of issues are to be litigated anew The

respondents were given ample opportunity bu t were unable to rebut

the plain facts i e that neither higher costs nor itl1y other reasons

compelled the port restricted discounts Tr of Oral Argument p 36

Tr pp 533 534 565 576 Tr pp 24 25 502 503 627 Initial

Decision p

21 There is therefore no reason to give the respondents

an opportunity to present facts on remand which it was incumbent

upon them to present at the outset

12 F M C
24 FEDERAL MARITIME COMMISSION

I eonclude as Idid in my opinion on original consideration 

the present record plainly indicates evidence sufficient for a

fin

of violations of sections 16 and 7 I

incorporate herein by refer

my opinion in our prior report in this ease 11 MC 430 

respondents did not then offer any acceptable justification of 

clearly established facts of the detriment to the Port of N ew Y

and the port restricted discounts as the cause thereof No pur

will be served now by reopening this case for the gathering of ap

ently non existent evidence

Iwould reverse the prior decision to remand and find the rate

q

ues tion nnlawful under sections 16 and 17

8 FRANCIS C HURNEY

Assistant Secreta

DOCKET No 65 34

IN THE l1ATTER OF DISCOUNTING CONTRACT N ONCONTRACT RA

PURSUANT TO PROVISIONS OF ITEM 735 NOTE 2 OF THE IN

PAKISTAN CEYLON AND BURMA OUTWARD FREIGHT CONFERE

TARIFF No 10

ORDER

The Commission having this date made and entered of reco

supplemental report on reconsideration in this proceeding w

supplemental report is hereby referred to and made a part he

It is ordered That the remand in this case now pending before 

Examiner consider all of the relevant factors indicated by the su

mental report

By the Commission

8 FRANCIS C HURNEY

Assistant Secreta

12 F M C
FEDERAL MARITIME COMMISSION

No 6744 SUB 1

IN THE MAITER OF AGREEMENT No DC30 BETWEEN SOUTH

ATLANTIC CARIBBEAN LINES INC AND TMT ThA ILER FERRY

INC C GORDON ANDERSON TRUSTEE FILED PURSUANT TO SEC

TION 15 SHIPPING ACT 1916

Adopted July 124 1968

Agreement D0 3 between South Atlantic and Caribbean Lines Inc and TMT

Trailer Ferry Inc C Gordon Anderson Trustee fixing rate on refriger

ated cargo from Florida Ports to Ports in San Juan approved

John Alason for respondent South Atlantic and Caribbean Lines

Inc

Homer S Oarpenter for respondent TAfT Trailer Ferry Inc

R Stanley Harsh and Donald J B1wnner Hearing Counsel

INITIAL DECISION OF HERBERT Ie GREER PRESIDING

EXAMINER 1

The background for this investigation is found in South Atlantic

and Oa1 ibbean Lines Inc SAOL v TMT Trailer Ferry Inc 0

GordonAnderson Trustee TMT Docket No 6744 wherein SACL

alleged that a

freight tariff rate of 900 per 40 foot trailer on refrig

erated freight N O S filed by TMT was unreasonably low In that

proceeding after a motion to dismiss had been filed and a subpoena

duces tecum had been executed the parties being desirous of a

voiding

delay and expense of further litigation entered into astipulation and

agreement DOSO which provided

1 TMT wiN promptly publish in their Freight Tariff No 4 FMOE No 5

Item No 1208 a rate on Refrigerated Freight N O S of 975 00 per 40 foot

trailer including pickup and delivery at loading and discharging ports the rate

to become effective 30 days after publication in place of the presently effec

tive rate of 900 per 40 foot trailer dock to dock

1 This decision became thedecision of the Commission 011 July 24 1968

25

12 F 11C
26 FEDERAL MARITIME COMMISSION

2 TMT will also publish a trailer overload charge of not less than 

per 100 pounds to apply to that part of any shipment transported at the 

described inParagraph No 1 that exceeds 40 000 pounds Itis not the inte

of this paragraph to prejudice or interfere with any other measures by 

TMT limitsor controls the overloading of trailers by shippers

3 Nothing in this stipulation and agreement prejudices or limits the rig

either TMT or SACAL to make such future changes in their respective rat

refrigerated traffic as in their respective sole and separate judgment m

warranted in the future In the event of any future change by either of 

nothing in this stipulation and agreement shall prejudice or limit the 

of the other to exercise any available right or action in connection there

4 Upon the effectiveness of the actions described in paragraphs 1 and 2 a

SACLwill moveto dismiss the complaint herein withprejudice

5 This stipulation and agreement will become effective upon approval b

Federal Maritime Commission pursuant to section 15 of the Shipping Act 

or upon theirruling that such approval is notrequired

The Commission ordered this investigation to determine whethe

agreement should be approved disapproved or modified under se

15 of the Shipping Act 1916 the Act and whether the agree

would violate section 18 a of the Act with a view toward making 

findings and orders as facts and circumstances shall warrant

At the prehearing conference held in this proceeding on Jun

1968 counsel for respondents SAOL and TMT and Hearing Co

agreed that the basic issue presented was the compensatory natu

the freight rate of 975 per 40 foot trailer on refrigerated freigh

further agreed that after conferring they would come forth 

a stipulation of the cost figures relating to that rate The stipul

and motion to dimiss wasfiled on June 28 1968 The parties stipu

that if John J Gabel Assistant to the General 1anager of TMT 

called as a witness he would testify that the total trailer load ex

for the transportation of refrigerated cargo between Miami or J

sonville Fla on one hand and on the other San Juan P R 

cluding pickup and delivery amounts to 927 28 It was fu

stipulated that ifDeliaE McDermott staff accountant Federal M

time Commission vas called as a witness she would testify tha

spent eight 8 days in TMT s principal place of business revie

its records as they relate to the computations upon which Mr G

based his conclusion and that she believes the items set forth th

are generally accurate and that the resulting figure of 927 28 f

represents the total cost to TMT oftransporting refrigerated car

trailerloads between Miami or Jacksonville Fla and San Juan 

including pickup and delivery The computation upon which the 

ulation wasbased and which was included therein is appended h

andmade a parthereof

12 F 
AGREEMENT NO DC 3O SHIPPING ACT 1916 27

TMT is and has for some time been in the experimental stages of

reefer operations Its profit per trailer is 47 72 or approximately 5

percent based on the interinl costs presented Although the cost com

putations may vary when the experimental stage has passed avail

able figures warrant a conclusion that as of the present the rate

is compensatory butnot excessive

The fact that a rate is compensatory is not in all cases conclusive

of its compliance with the Act however the rate here at issue is

established by a section 15 agreement Section 15 oftheAct in pertinent

part provides

The Commission shall by order after notice and hearing disapprove can

cel or modify any agreement or any modification or cancellation thereof whether

or not previously approved by it that it finds to be unjustly discriminatory or

unfair as between carriers shippers exporters importers or ports or between

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

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

public interest or to be inviolation of thisAct and shall approve all other agree

ments modifications or cancellations

All parties have been afforded opportunity to present evidence

hearing counsel representing the public interest and no evidence has

been adduced that would warant a

finding that the agreement fixing

the rate at 975 00 per 40 foot trailer of refrigerated cargo is derti

mental to the commerce ofthe United States or otherwise in violation

of the Act Nor is there any basis for a required modification of the

agreement in any respect The p

ties have waived briefs or oral

argument

Itis concluded thatAgreement DC30 entered into by and between

SAOL and TMT onOctober 5 1967 should be and hereby is approved

and thisproceeding discontinued

HERBERr Ie GREER

Presiding Ewa1niner

TASIIINGTON D O July 2 1968

12 F M O
28

FEDERAL MARITIME COMMISSION

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FEDERAL MARITIME COMMISSION

DOCKET No 66 65

BALLMILL LUMBER SALES CORP

V

PORT o NEW YORK AUTHORITY Er AL

Decided August 14 1968

SUPPLEMENTAL REPORT ON RECONSIDERATION

By THE COMMISSION John Harllee 0hairman James V Day Vice

Ohairman Ashton C Barrett George H Hearn J unes F

Fanseen Oommissioners

This proooeding was instituted hy a complaint filed by BaHmiH

Lumher Sales Gorp Ballmill against the Port of New York Au

thority PortAuthority Veyerhaeuser Co Veyerhaeuser Atlan

tic Terminals Inc Atlantic and l1aher Lumber Terminal Corp

Maher The comploaint charged vioationsof sections 16 and 17 of

the Shipping Act 1916 and requested reparation

The CommissIon decision in this proceeding was served April 26

1968 11 Fil C 494 Ve now have before us a petition for reconsidera

tion fil d by Maher Ballmill has submitted a

reply to Maher s

petition

In our report in this proceeding we found that the Port Authority

has vioJoated sections 16 First and 17 of the Act in connection with ts

leasing arrangements at Port Newark with Veyerhaeuser and Ball

mill both wholesale dealers of lumber Ve found that vVeyerha euser

had been preferred and that Ballmi l and lother umb r dealer lessees

at Port Newark had been prejudiced as a result of the leasing

arrangements

The facts surrounding the pleferentialleasing arra ngements are as

follows

When the Port Authority took over the administration of Port

Newark in 1948 it made the decision that no new lease would issue

12 F MO 29
30 FEDERAL MARITIME COMMISSION

which gave the lessee the privilege of performing Ithe backhandl

lumber 1All lessees were to use the services of the Port Authori

agent or designated independent eontractor l1aher The leas

gotiated by BaUmill required BaHmiU to use Maher for all 

handlingof lumber

However when Veyerhaeuser negotiated a new lease with the 

Authority in 1958 it was successful in retaining the right to 

handle its own lumber IVeyerhaeuser pursuant to its earlier leas

been operating a public terminal at Port Newark through its w

owned subsidiary Atlantic Atlantic not only performed ter

services for its parent vVeyerhaeuser but for other receivers o

ber and 1701 water carriers Under its renewed lease in 1953 W

haeuser retained the right to operate its public terminal throug

lantic No othertenant or lessee of the Port Authority was succ

in acquiring a similar leaseprovision

IVe concluded that these leasing arrangements gave vVeyerha

an unreasonable preference over other lessees inasmuch as vV

haeuser waspermitted to perform its own backhandlingand to op

a public terminal whileall otherlessees were required to use the 

handling services of l1aher the Port Authority s indepe

contractor

Upon finding the labove described vi ola tions we ordered the 

Authority to cease and desist from engaging in the violations a

notify the Commission within 30 days of the manner in which 

cOlnplying with the Commission decision

On l

1ay 24 1968 the Port Authority advised the Secretary 

Commission that it was authorizing BallmiJl to do otherwise 

to employ l1a her for the backhandling and other hand ing of lu

at Port Newark The Port Authority further advised that as s

the necessary administrative authority can be secured they were 

ing to amend the lease with Ballmill so that section 3 thereof 

sets forth Ballmill s Rights of Use will not prevent the ope

by Ballmill on its premises of a public lumber terminal

In other words the Port Authority proposed to remove the u

sonable preference to vVeyerhaeuser by offering a similar prefe

to Ballmill

Upon learning of the PortAuthority s proposed method of co

ance with our order in this docket l1aher filed a petition for 

sideration and for modification of the Commission s report s

April 26 1968

1

Backhandling is the delivery of lumber from ship s tackle to a place of rest 

tenant s premises or to a place of rest on the public terminal in the case of non ten

of those tenants using the public terminal

112 F 
BALLMILL LUMBER SALES CORP V PORT OF N Y AUTHORITY 31

Maher suggests that the Port Authority s proposed method of re

moving the preference to Veyerhaeuser does not dispose ofthematter

M1aher feels that the problem cannot be solved by e

tendinga similar

preference to Ballmill but rather that it can only be sohred by remov

ing from Veyerhaeuser the right to uackhandJe its own lmnber and to

operate apublic terminal laher argues that ifgiving Veyerhaeuser

the right to perfonn their own backhandling preferred T

eyerhaeuser

over other tenants it similarly preferred Veyehaeuser over all users

of the port To give Ballmill the right to perform its own backhan

dling would not renlove the preference but would merely conlpound it

inasmuch as all other receivers of lumber at Port Newark are still

denied the right to pick up their own lumber until it has been back

handled to the transit area

Maher states Lhat it is impractical to allow every lmnber receiver

to pick up his own lumber at ship s tackle since to do so would result

in delay and congestion and therefore it is no solution to offer the

privilege to all Rather Wlaher suggests that the Port Authority ter

minate the special privileges accorded to vVeyerhaeuser This would

remove all preference and prejudice

Ballmill states in its reply that it has no objection to the petition

for reconsiderUition insofar as it urges the Commission to withdraw

the privileges granted Veyerhaeuser to operate a public terminal and

to backhandle lumber

Bal1mi 1l suggests that fue Port Authority s offer to give BaHmill

the right to operate a public terminal on its premises is an inconsistent

and illusory offer and does not remove the undue advantage to Weyer

haeuser BaHmill points out tJhUit while its facilities are right nex Uloor

to 1Veyerhaeuser Atlantic the berths of Teyerhaeuser Atlantic con

tinue to he unavai1able for use by Ballmill BallmiJJ suggests thrut

without a new Ieasollrubly comparalble long term lease without reason

ably similar cOlnpactness of facilities without reasonably comparable

adjacent berth facilities and without adequate adjacent transit areas

it is simply a meaningless gesture to tell Ballmill that they can have

the same rights as

T

eyerhaeuser by backhandling their own lumber

l nd operatinga public terminal ontheir premises

Ve are not asked upon reconsideration to change Ollr conclusion

that the POltAuthority has unduly preferred Vcyerhaeuser overBall

mill and other lmnber dealers in respect to its leasing arrangements

at Port Newark vVe are only concerned here with how the Port

Authority might best remove such preference

We do not suggest that this preference can only he removed by

denying Teyerhaeuser the above mentioned privileges As we previ

il2 F Mc
32 FEDERAL MARITIME COMMISSION

ously indicated we wish to permit the Port Authority to dete

how they would remove the illegal preference We will how

provide aframewtOrk within which the PoIt AUbhority can ma

decision

The Port Authority could choose to remove the privileges 

Weyerhaeuser and thereby remove the preference However s

thePortAuthority decide to continue to afford the privilegeto W

haeuser there remains the alternative of affording a similiar priv

Ito BallmiH and others simi1arly situated The PoIt Authority 

say that it has already indicated to Ballmill that it too can hav

priviliges of backhandling and operating a public terminal o

premises However we think Ballmill s objection to the PortAu

ity s offer is valid inasmuch as the Port Authority s offer is illu

Ballmill cannot practically operate a public terminal on its pr

premises inasmuch as it does not have the use of heIth facilitie

transit areas Therefore we feel that if the Port Authority choos

remove the preference by affording Ballmill the same privileg

Weyerhaeuser the Port uthority is required to do more th

permit Ballmill to perfotm such services under the confines 

present leasehold The Port Authority must place Ballmill in a 

tion cmparable to Weyerhaeuser in respect to the operation 

public lumber terminal and the backhandling of lumber

We are still faced wth Maher s objection that to affordBallmil

privileges merely compounds the preference inasmuch as other lu

dealers 3tt Port Newark are still denied the privileges

Space restrictions and the problems of delay and congestion w

would ensue do not make it feasible to permit all lumber deale

pick up their lumber at the Port Newark terminals Therefor

do not think it is unreasonable for the Port Authority to pro

nontenants from performing their own backhandling Similarly 

not unreasonable for the Port Authority to restrict the privile

backhandling of lumber by lessees to their own premises In 

words if Ballmill is allowed to operate a terminal it could not 

handle from Weyerhaeuser s terminal or vice versa By thesame t

nontenants could not expeot to go to Ballmill s vVeyerhaeuser 

Maher s terminals and perform their own backhandling

In ourApril 26 1968 report we also fund that the portion ofMa

lumber handling tariff which provided a volume discount fo

handling of lumber at Port Newark subjected Ballmill to undu

unreasoooble disadVlantage in violwtiQn of section 16 First a

be an unreasonahle praclice under section 17 of the Act This d

vantage to Ballmill was found to result from the fact that the 

12 F 
BALLMILL LUMBER SALES CORP V PORT OF N Y AUTHORITY 33

ume discoun ton hacJmandling was not aviaHable to BaiJImill This

came about by reason ofthe fact thwt the discount vwte provision ap

plied only to the complete package of truck loading wharfage and

backhandling Since Ballmill performed its own truck loading and

used its own premises for storage it did not qualify for the discount

Accordingly Ballmill received no discount on the single service of

backhandling and this was considered to prejudice BallOOll in its

efforts to compete for business Maher was ordered to cease its viola

tions and to modify its tariff provisions accordingly

In its petition for reconsideration Maher has suggested that if the

present order in this proceeding remains unchanged there will be

no need for Maher to provide public backhandling to leased areas

They requested that the order as to Maher be modified to permit them

to discontinue the publication of backhandling rates to leased areas

but instead to contract privately for such services while continuing

in force their present structure including volume discounts in respect

to thepublic lumber terminal

We could not approve Maher s proposal to contract privately for

any such services to leased areas We have previously held that to the

extent a terminal operator holds itself out to perfonn a particular

service it must publish a tariff describing the charges for such service

to insure equal treatment ofall users ofthe service Truck arul Lighter

Loading and Unloading 9 F M C 505 517 1966

However if the development of circumstances causesMaher to com

pletely discontinue backhandling services to leased areas there would

be no prohibtion against Maher discontinuing the publication ofback

handling rates to such areas while continuing in force their present

structure including volume disoounlts in respect to rtJhe public lumber

terminal

Therefore it is ordered That respondent Port of New York Au

thority is hereby required within 30 days after the date of service of

this order to notify the Commission of the manner in which it is

complying with our decision and order in this proceeding

It is further ordered That the date within which Maher Lumber

Terminal Corp must comply with our decision and order in this pro

ceeding is hereby set for 2 weeks subsequent to the date on which

respondent Port of New York Authority complies

SEAL Signed THOMAS LISI

Secretary

12 F

M

C
FEDERAL l1ARITIl1E COl1l1ISSION

DOCKET No 654

INVESTIGATION OF OCEAN RATE STRUCTURES IN THE TRADE BE

UNITED STATES NORTH ATLANTIC PORTS AND PORTS IN THE U

KINGDOM AND EIRE NoRTH ATLANTIC UNITED KINGDOM FR

CONFERENCE AGREEMENT 7100 AND NORTH ATLANTIC VEST

FREIGHT ASSOCIATION AGREEMENT 5850

Decided August 14 1968

The North Atlantic United Kingdom Conference NAUK has establishe

on General Cargo N O S Egg Albumen Meat Offal Onions Plastic S

Sleds and Toys which areso unreasonably high as to be iment8

commerce of the United States contrary to section 18 b 5 of theS

Act 1916

Section 18 b 5 contains two elements 1 Is the rate unreasonably 

low and 2 has the unreasonableness of the rate caused detrim

commerce

An unreasonable rate is one which does not conform to the ratemaking 

of cost value of service or other transportation conditions or a rat

cannot be justified by one or more of these factors

An adverse party may show prima facie unreasonableness by referen

lowerrate onasimilar commodity whichmoves ina reciprocal orcom

trade

A rate which is detrimental to commerce is one which causes some e

harm to a segment of our commerce

Certain rates of NAUK shall be disapproved to be effective 90 days from 

of the order herein Prior to that time NAUK shall file lowerrates o

items with a justification of the level of the new rate based upon cos

of service or other transportation conditions

Burton H White Elliot B Niwon and Elkan Turk Jr for re

ent North Atlantic United Kingdom Freight Conference

Ronald A Oapone and Robert HenriBinder for respondent 

Atlantic Westbound Freight Association

Peter J Oonnell for Treasury Department

Phillip F Zeidman Eugene J Davidson Robert B Webb

George IKaplan for Small Business Administration

Donald J Brunner Norman D Iline and E Duncan Hamn

Hearing Counsel

3
INV STIGATION OF OCEAN RATE STRUCTURES 35

REPORT

BYllHE COMMISSION John Harllee Chai1 11wn James V Day Vice

Ohairman Ashton C Barrett George H Hearn James F

Fanseen Commissione1 8

INTRODUCTION

The Commission instituted this proceeding on December 9 1965

under sections 15 18 b 5 and 22 of the Shipping Act 1916 and

section 212 e of the Merchant lVIarine Act 1936 to investigate the

ocean freight rates in the outbound and inbound trades between the

United States and the United Kingdom Examiner E Robert Seaver

served an Initial Decision on January 31 1968 The Commission heard

oral argument on May 17 1968

The order of investigation and hearing named as respondents 1

the North Atlantic United Kingdom Freight Conference NAUK

and its member lines who establish the conference rates and filetariffs

applicable to the eastbound outbound cargo and 2 the North

Atlantic Westbound Freight Association NAvVFA and its member

lines covering the westbound inbound cargo

The Commission s purpose in this proceeding is primarily to

investigate the following questions

1 Is the outbound tariff rate structure or any individual outbound

commodity rate effectively higher than the inbound rate structure or

any individual reciprocal inbound commodity rates

2 If such disparities exist are they detrimental to the commerce

of the United States contrary to the public interest or otherwise in

violation of theShipping Act and if so should the conference agree

ments be modified or disapproved under section 15 of the Shipping

Act

3 Are any outbound individual commodity rates so unreasonably

high as to be detrimental to the commerce of the United States within

the meaning of section 18 b 5 of the Shipping Act and if so

should the Commission disapprove such rates Are any specific rates

in these trades detrimental to the commerce of the United States

contrary to the public interest or otherwise in violation of theAct

4 Are any of respondents rates unjustly prejudicial to exporters

of the United States as compared with their foreign competitors in

violation of section 17 of the Act or do they give undue preferences

in violatJionof section 16 First

5 Ifthere is any discrimination caused by rate disparities in these

trades what recommendations should the Commission make to Con

il2 F M G
36 FEDERAL MARITIME COMMISSION

gress in carrying out the COlIimission s

responsibilities under s

212 e Merchant Marine Act

FACTS

The Oonferenoes

NAUK serves the trade outbound fr om

the North Atlantic po

the United States East Coast to the ports in the United King

NA VFAvessels serve thetrade from the ports in the United King

to both the North Atlantic and South Atlantic ports on the U

States East Coast Some ofthe conference members offer express 

service between the large ports or New York Liverpool and Lo

Others call at the smaller ports in the United Kingdom su

Glasgow and Manchesterand atBaltimore Philadelphia arid No

in the United States Still other lines customarily serve both 

ofports

Both conferences were formed after the serious financial diffic

experienced by ocean carriers in 1907 Thus these conference

among the world s oldest and most stable conferences Their mem

are for the most part very old well established steamship lines 2

NAUK member lines carry 98 percent ofthe eastbound liner c

This conference operates under a dual rate contract system and 

some 8 000 dual rate shippers signed to exclusive patronage cont

Practically all of the eastbound cargo is carried at contract 

which are 15 percent lower than noncontract rates in these tr

NA VFA has approxImately 7 000 contract shippers und

dual rate contract system and the members caTry 94 percent ofthe 

bound liner cargo About 5 100 of the contract shippers are loca

the Un ted Kingdom and some 1 800 in ithe United States The

also 203 signers to a special wine and spirits contract The N A 

tariff expresses rates in terms ofBritish currency

Both conferences have the unanimous voting rule in their c

ence agreements i e if one member opposes any proposal br

before the conference the proposal is not adopted

In bo h conferences proposed changes in the rates and all n

questions pertaining to rates are taken up by a special group 

up of one member from elto steamship 1ine These groups meet 

once a week Dhe lflate groups take many facoors into account 

Viague general land undocumented way in adopting or revising 

raJtes They do not go overthese factJors item by item as Ithey cons

1

Eight of the ten NAUK members are also members of NAWFA There are six mem

KAWFA out of a total of fifteen that are not members of NAUK Both conferences a

up of Britisp flag carriers U S flag carriers and third flag carriers

I For example Cunard Line has been inthis trade for 160 years

il2 F 
INVESTIGATION OF OCEAN AT STRUC lURES 37

particular rate request or proposal but the membe rs ofthe ratemaking

bodies rure expert in the field and in oasting the vote on behal of tJheir

company they take some account of some of these factors

Ratemaking fjrucrors 3re divided into three overall consiqeraitions

competition value of service and cost 9

service The conferences as

sign overriding importance to competition and the value of service

By the tel ll value of service the conferences means more thanany

thing else the value of the commodity being shipped

One factor aJ1leged nevel to be considered by either conference in

arriving at a rate is the rate on similar commodities moving i1the op

posite direction The NAWFA conference ohai rm1an confirmed the

fact that the conferences give no consideration to the rate in the op

posite direction when they are considering a proposed rate change

For some time the present NAvVFA chairman was an official of the

CunJaId Line and represented Cunard in the rate commitJtee for

N A VFA Wlhen lasked whether he oonferred witJh the Cunard man on

vhe raJte committee in the NAUK conference he staJted that he never

heard from theirmanin New York except vhat We used to exchange

Christmas cards

In both conferences the shippers desiring to take up rate matters

are permitted to meet withthe conference committee but they normally

present their applications for rate adjustments on a form prescribed

by the conference which calls for various pertinent information relat

ing to the cargo

In the application for P3Jte modifioation N AUK obtains the name

and description ofthe commodity whether it is hazludous the nature

size and weightOf each package tJhe vaLue and duty the point ofOrigin

and dischaI

ge the present rrute and l equested mte land the anticipated

volume ofmovement the competitive commodities including price nd

roasons for the requested modification The conference staff then

pre

pares an analysis of the application containing substantially this ame

information for the use of the rate committee The analysis illCludes

information ofrates from competitive sources o supply In voting on

a rate request or proposal the member representatives do not state

their reasonsOr the standrurds considered land the conf rence does not

record in its minutes the reasons for the action the standards employed

or notify the applicant of the reasons or standards if the request is

denied Neither conference publishes the standards or criteria that are

taken into account in establishing rates

The NAUK group of rate representatives ofthe member lines calls

regular and rather frequent meetings with large shippers The meet

ings may continue for a day or more and the mutual problems are

thrashed out at length These important shippers are able to exert sub

12 F M C
38 FEDERAL MARITIME COMMISSION

stalltially more economic pressure in obtaining the rates they de

than small shippers Both conferences deal with shipper groups suc

the tobacco industry the copper industry and the apple industry 

1966 NADIr received 174 requests for rate adjustments from shipp

and took favorable action on 140 NAWFA in 1965 received 165 

quests from shippers for a reduction in rates and took favorabIe ac

on 87 requests well over 50 percent The conferences are capable 

acting upon rate requests in a matter of hours although normally 

requests are acted upon within a few days time

The present ratemaking practices in NAUK which go back fo

years have as their goal a yield of maximum profit to the car

They seek to charge the highest rate on any particular commo

under which the cargo will move rhey freely concede that they cha

what the traffic will bea r

It is equally evident that the ship

who is vociferous and persistent in pressing rate requests to the c

ference is more likely to get a better rate than the shipper who d

not approach the conference As stated earlier the big shipper w

greater economic leverage gets better treatlnent than the occasio

shipper of cargo

Thus NAUI has established relatively favorable rates on he

moving commodities and has kept the rates on the items that move 

smaIl gross volume near and in some instances above the highgene

cargo rate of 70 75 Aconsiderable concentration ofrates on the he

moving items is found at the lower end of the rate scale Seventy e

of the 116 rates on the heavy movers fall below 40 per ton

Until 1965 the staffofthe NAUI conference hadno illforn1 atJion 

garding the volume of shipment of the various cargoes listed in 

tariff However since 1965 the member lines provide copies of 

manifests to the conference office and from these cargo statistics 

maintained Such stlrutistics aJre not submitted to tthe staff of 

N A VFA conference llhe members 3re very secretive about th

oarryings laooOrding to tlhe cnaiirman

In both conferences general increases in rates are subject to entir

different practices and are theresult ofentirely different consideratio

than those applioaible to changes in individual commodity rates Th

stem fronl a

comparison of overall revenue and overall costs They 

and do result from either normal gradual increases in carrier costs 

some special circumstances that suddenly increase costs such as 

cleased stevedoring charges

A

compa rison ofthe general increases of the two conferences sho

that through 1965 the westbound conference was increasing the le

of its overall rate structure at a greater rate of increase than the e

bound conference Then in 1967 the inbound conference adopted th

112 F M C
INVESTIGATION OF OCEAN RATE STRUCTURES 39

oeneralrate increasp swhich tatal 22 percent 01

slightly mare cansider

ing that the last twO percentage increases must be applied to the rates

as increased by the earlier 1961 increases The recard herein takes intO

accaunt the January 1 1961 increase but af caurse does nat take

intO accaunt the later six percent and eight percent increases which

were made after the record was closed

There aresome special factars that tend to keep the NAWFArates

down the existence af very active trade assaciations in the United

lCingdanl that negatiate with the conference campetitian fram manu

facturers an the Cantinent ability af shippers to transship via Can

tinental polits the rates fram the COThtmeTht to the United SiJates being

lawejr

tJham thase fram the United Kingdam nonoanference competi

tion fram the United Kingdanl and the Cantinent canference COln

petitian fram the Cantinent and carriers destined far the United

States Great Lakes and Gulf parts with cargO destined to midwest

paints NA YFA gives cansideratian to rate requests by individual

shippers in generally the sanle way that NAUK daes as described

abave Shippers in the United l

ingdam whO are discontented with

the conference rates can take the matter up with the Baard af Trade

af the British Gavernment While the Baard af Trade does nat have

jurisdictian to fix rates it can and daes an rare accasian take the

matter up with the conference

The Oharacteristics of the United States United Kingdom Trades

The eoanamies aftheUnited States and the United Kingdam depend

very heavily upon ane another as tvading partners In 1964 imparts

fram the Unilted Kingdam canstituted nine percent af auItotal imparts

and imports into tlhe United Kingdam fram the United SrtJates ac

ooull1ted far 12 percent af tile United IGngdom tatal Exparts fram

the United States to the Unitedl

ingdom were 1 565 000 000 in 1965

and imports from tlhe United Kingdam to the United States in that

y

ear were 1 405 300 000

United SbaJtes exparts to the United Kingdam have risen steadily

since 1950 and the ballance Df trade has heen faViarable to the United

States each year

Th census figures far 1965 shaw that 600 000 lang tans af cammer

oial liner cargO were transported in oceancammerre autbaund and

561 000 tons inbound Vhen the bulk type cargaes are eliminated from

these statistics thetonnage carried by the canference vessels is slightly

higher inbaund than outbaund

The cammodities transparted hy the canferences in 1963 had an

aggregate value just under half a billion danaI S Outbaund and a

J2 F M C
40 FEDERAL MARITL 1E COMMISSION

little over half a biHiion doUars inbound In that year the inbo

conference carried a total of 1 131 461 measur Il1el1ttons and 518 

weight tons of cargo The outbound conference carried 697 272 me

urement Wn1saJid 327 388 weight tons of general cargo and 239 

measurement tons and 191 632 weighttons of hulkcargo The aggreg

revenue of the conference carriers inbound in 1963 was 26 240 

The total olltbdund revenues of the conference carriers on gen

cargo in thatyear was 19 721 179 iand on hulk cargo 1 345 668 Th

figures have risen steadily witih the result that in 1966 the inho

oonference oarriers earned aggregate revenues of nearly 40 000 

and the outbound conferenee carriers nearly 34 000 000 011 gen

cargoes

3

In

the ensuing years since 1963 the inbound tOllnage has rernai

about the samewhiletheoutbound tonnage has increased substarirt1ru

In 1966 the outbound conference carriers transported 1 206 481 me

urement tons and 519 602 weight tons of general cargo

The nature ofthe general cargo moving in these JtI lades i such t

they are known as measurement trades hat is the great m

ajo

ofthe commodities shipped measure up 10 far more than 40 cubic 

per ton of weight The average long ron of cargo in the eastbo

trade is estimated at 80 cubic feet and in the westbound trade 90 cu

feet

The oonference carriers offer fast land f

requent service in hoth di

tions The outbound oonference vessels mrade 383 sailings in 1966 

the inbound conference vessels illade 411 sailings in that year

None Of the shippers who testified had any compl ints on this sc 

and in fact most of them expressed complete satisfaction wiltJh 

service For many years there has been an unusual degree of stab

in the rrates andluhe service of the conference oarriers in both directi

This stability is very irpportant to shippers because of their n

to quote and offer prices including the cost of transportJation for 

sideraible periods in adv1ance of the actual shipment Thus ther

an average of morethan one inbound and meoutbound sailing per 

theyear round While this frequency ofsailings is prdbably conven 

for shippers lat times it results in an extreme overtonnaging of t

tvades

The outbound conference vessels h ve sailed with an average unu

capacity of60percent inthe past six ye rs and the inbound confere

8The above figures for the inbound conference do not include bulk cargo either be

none was carried or the quantity was insignificant The figures for military cargo a

included in the outbound statistics for the reason as pointed out by the principal e

witness for respondents that the conference does not establish the rates on such 

For the same reason the inbound cSJryings to the South Atlantic ports are excluded 

the comparisons because the outbound conference covers only the North Atlantic 

I

12 F M 
INVESTIGATION OF OCEAN RATE STRUCTURES 41

vessels Ihave sailed wiith an average Of 66 pereeIllt unused capacity

llhe only expert witness who spoke of a comparison in this regard

testified that thisis thegreatestunused capacity tJhat hehaJS everfound

in ny trade

Another significant charaoteristic of the trades particularly the

outbound trade is the predominance of a few major moving com

modities There wereS01ne 1 650 items in the loutbound tariff in 1965

Three quarters ofthe Itonnage carried by the NAUK vessels that year

was transpoIited under just 116 of these tariff rates The heaviest

moving commodities outbound are industrial machinery unmanufac

turedtobacco copper apples and pears barrels road ib1li1lding equip

ment ibooks onimls fahrics synthetic resin and frozen meat produots

Inbound uhe quantity of whiskey exceeds by far thatOf any other

item moving in ItJhe trade both in terms oftonnage and revenue Then

come electricalmachinery wool confectionery items motor oars reoord

changers tractors andsteel wire Sometimes commoditi Of the same

description nTovein both directions

001npetition in these Trades

Nonconference competition in these trades is very limited in terms

of tIle extent of carryings of the lines that compete with the respond

ent oonference carriers In1966 the nonoonference share of liner oargo

was only two percent outbolmd and six percent inbound This absence

of oompetition is due in part 100 the f

requency amd the quality of the

conference service which is unexcelled and because the conferences

employ the dual rate exdusive paJtronage oontr3JCt system under sootion

14b of the Shipping Aot However there is potential competition in

these trades hath from liner and tramp operators and the conferences

rure very sensitive to the possibility that I3In increase in rates particu

larly on the heavy moving commodities or adecrease in the frequency

of their service could permit competition to make inroads in these

trades

The eastbound conference keeps the rates low on major moving

commodities in the fear that otherwise the shippers of say tobacco

might either use t

ramp operators Yr go to proprietary operations

VhiIe rthere is aiheavy movement ofbulk type commodities eastbound

various difficulties incident to the transport of liner type cargoes by

tra mp carriers limited the amount ofgeneral cargo carried by tramps

to less than 26 000 tons outbound and about 87 000 tons inbound in

1963 Equivalent figures were not shown for Other years The amount

of bulk cargo moving inbound in the aggregate is insignificant for

purposes ofthisproceeding

Five nonconference liner operators offer more or less spasmodic

J2 F M C
42 FEDERAL MARITIME COMMISSION

service in these trades American Expm lt Isbrandtsen Lines no

conference l11ember Belgian Car Express Line M archessini Lin

States 11arine Isthmian Agency Inc and Vaterman Steams

Corporation Belgian Car Express Line operates only estbo

lliarchessini has roughly one sailing amDnth from London Vaterm

will have three or four sailings a nlonth frOl11 Southampton 

States farine about the same The Belgian Car Express Line c

only for particular shipl11ents American Export Isbrandtsen L

calls irregularly at Southampton and has inaugurated a fortnigh

all container service with two speci Jized ships

The respondent conference carriers also see potential competi

from the conference and nonconference liner operators offering ser

from the Bordeaux Ilal11burg range on the European continen

the U 8 Norih Atlantic ports SOl11e 23 carriers aTe engaged in 

trade which is highly competitive There is a limited use Of th

carriers by way of transshipment at continental ports both in 

eastbound and westbound direction but not in any significant anlo

Respondents fear that this competition will increase with the use 

through shipl11ents in containers

oarrie1 0osts and Reven l

tes

There is no evidence Of the valuation of vessels respondent carr

devote to these trades and no data with respect to return on investm

The overall carrier costs are approximately the same eastbound 

westbound in these trades In a given locale the rate for stevedo

is the sanle whether loading or discha rging but a little more eargo 

be discharged per hour than loaded therefore discharging c

are slightly less per unit of cargo Stevedoring costs are highe

the United States than in the United IGngdOl11 thus the costs 

loading and discharging overall would be slightly less westbo

The cost of loading and discharging cargo amounts to approxima

40 percent on the average ofthe total carriercosts

001npa1 ison of Inbound and Outbound Rate St1 uctUles

There are about 2 730 cOll1l11odities listed in the NA rFA tariff 

1 650 in N

A

UK 8il11ilar descriptions in the two tariffs are infrequ

and coincidental

The tariffs cannot be compared by merely placing thenl side 

side and thunlbing through the 200 or so pages of closely spa

figures The detailed study and comparison of the inbound and 

bound rates and rate structures in these trades made by Danie

l

Iater Director Office of Transport Econonlics Federal ltIaritinle

COlnmission and his staff required a period of two years It was 

12 F M 
INVESTIGATION OF OCEAN RATE STRUCTURES 43

first time such a

complete analysis and comparison of tariffs had been

undertaken so to a degree Dr later devised techniques for the

comparison although he as guided by recognized statistical prin

ciples and methods

The purpose of Dr Mater s study was to ascertain whether there

was a

disparity in rates in the United States United IGngdom trades

and if so in what amount The analysis included three general

methods of comparison and charts vere prepared to depict the result

of each operation The first method compared the cUluulative per

centage of rates in the two tariffs within 160 one dollar rate blocks

On a

single chart a curve was plotted for each of the tariffs showing

the relationship between the number of rates in each block and the

percentage this bears to the total rates in each tariff Thus at any

point on the respective curves the percentage of rates below a cer

tain dollar level could be readily ascertained and the two tariffs com

pared One such chart vas prepared for weight lueasurement rates

another for weight rates and another for all rates in each tariff 4The

average rate westbound was 38 13 and the average rate eastbound

54 38 These figures were also described as the aritlmletic mean of the

twriff rrutes 5The final anwlysis after the January 1 1967 inorease in

the NA VF

A

tariff concluded that the outbound rates were 38 per

cent higher thanthe inbound rates

The inbound tariff contains a much more detailed breakdown of

cOlumodity descriptions than the outbound which accounts for the

greater nmnber of rates in the inbound tariff In order to test the

contention that this difference in breakdown distorted the results

Dr Mater eliminated the diplicate rates with respect to all commodi

ties in both ItThriffs land found that on this basis the disparity was 32

percent 6

On September 5 1967 NA VFA filed a general increase in the

inbound rates in the average amount of six percent to become effective

December 18 1967 A general increase of eight percent in the inbound

tariff as later filed on December 29 1967 to be effective January 13

1968 as a result of the devaluation of the pound sterling on Novem

ber 18 1967 from 2 80 to 240 The increase was put into effect on

4

Itshould be noted that the inbound and outbound tariff generally quote rates on a weight

ormeasurement basis whichever yields the greater revenue There is only one ratequoted on

ameasurement basis therefore no measurement rates were compared

6

This average isnot reached by simply adding all the rates together and dividing by the

total number but instead each tariff was divided in to twenty groups of rates each repre

senting five percent of the tariff the mean was then computed for each fire percent group

and the average then of all of the five percentgroups came to thirty eight percent

6 Dr Mater compared his study with certain actual results which seem to corroborate his

price list profiles

J 2 F M C
44 FEDERAL MARITIME COMMISSION

short notice 7

Taking into account the fact that the devaluation w

cause some decrease in payments and the fact that a general 

increase does not produce added revenue in the exact amount o

inorease because of hold downs resulting from shippers of sp

commodities insisting upon and obtaining exemptions from 

increase and based on the expert testimony on these subjeots in 

tion to previous increases it can fairly be estimated that the two re

NAWFA increases will result in a net increase in rates of at 

seven percent The disparity in the overall rate structures consid

as price lists has been narrowed to approximately 25 percent 

these recent rate changes

Rate D isparitie8 Favoring Jigh Volume Oommodities

The NAUK freight rates on commodities m10ving in large vo

are low compared to the r3Jtes on commodities moving in srnall vo

or on paper raJtes tihe rates under which no traffic mOves 3Jt pre

The ratemakinghistory and tJhe raJte statistics of tle conference de

strate that if a shipper has abig block of cargo that will move ste

in the trade he can negotiate amuch better rate with the confer

than the spov3Jdic shipper or the shipper of a small volume of carg

Dhe total revenue weight tOllS carried and average revenue 

weight ton ror the 25 major moving commoddties for each of the 

ferences estJ3Jblish that the average revenue per weight ton on tJho

the outbound conference was 29 36 while the average revenue 

weight ton on those in the inbound conference Wlas 63 20 8

The principal expert witness of the outbound oonference tes

that NAUK tends to set low Dates for heavy moving commod

while maintaining raJtes higher on nonmovingor lightlymoving ite

He contested Ithestatement of Dr Mater th3Jt every item in the t

was just as important as every dUher rate and pointed out that toh

for example is carried at a r3Jte which would be equivalent to 

per ton W1M 9

This commodity accounted foOl 20 622 tons outb

in 1965 The witness said Ithat the loss of this oargo would be a s

diswvantage vo the conference oarriers and that the tobacco indu

thererore l1alSa strong bargaining position since they could 0h

vessels or use nonconrerenoe carriers if the conference rates wer

high On the other hand he said the rate on fire extinguisher

which five weight tons were shipped outbound in 1965 is 88 

ton and rthe fore jn his judgment no one could seriously c

1

Tbe devaluation would witbo t a

ratecbange decrease tbe amount paid by Ship

tbe inbound trade

S In the inbound conference there is not the same rate disparity between tbe low m

and tbe heavy moving items The policy in tbe inbound conlferences is to treat bot

gories of cargo the same

S Tbis ratehas been increased since the time his study was made

tl2 F M 
INVESTIGATION OF OCEAN RATE STRUCTURES 45

that they had the same importance as tobacco lolacco rep

resents well over 1 million in revenue to the shipping lines fire

extinguishers 500 10

In 1965 the laVlemge revenue per weight ton for NAVK s members

on oommodities moving eastbound in quantities greater than 500 tons

was 45 65 as compared with an overall yield of 60 02 on the average

Ilhe rates on small and spasmodic shipments have been maintained at

or aJbove the gener oaTgo N O S mte 70 75 and maintain d low

for heavy moving commodities Of the 116 comlTIodities thlM moved

easltJoound in quantities over 500 tons in 1965 78 had a rate below

40 On tbhe QItlller h3Jnd 296 commoditi that mOved in small volume

had rateswbove 70

One oftheexpert witnesses calle9 by Hearing qounsel mad a study

of vh1s particular problem land reached the oonclusion that the Dut

hound tariff actually consists of two tariffs one having higher rates

for the cOm modities movi ng in sparse quantities and the other with

low rates charged to the commodities moving ip large volume His

analysis of the 116 heaviest movers shQwed th t

the average revenue

per weight Iton outbound was 45 65 in 19 5 bUtthe average revenue

per weight ton on the remai ing 1 q85 commodities was 102 96 per

weiglllt ton The overall average inbound was 55 85

A

study of the background ofthe rtemaking pl aotices and aoti dties

in the NA VIconference shows how this disparity came about In

practically every year for the last 20 years the conference has adopted

an Overall rate increase In one w1ay or another most of the he vy

moving oOJ llmodiJties have been exempted from tihese gener al rate

increases eaeh

year rhis means thwt year after year the small moving

or nonmoving oommDdities are subject to annual increases resulting

in a cumulative huildup Of ther level

N O S Rates

The general oargo N O S raite in the NAID tariff is 70 75 The

equivoalent raJte in the NAWFA inbound tariff i 53 70 447 6

11

Dr if the o3Jrgo Vlalue is very high 32 6 ad valorem Ihus the

general cargo rate outbound is appr ximately 32 percent higher than

the reciprocal inbound rate The outJOOund N O S tate is aJt least 30

percent higher than the average r3Jte outJbound

The generaTcargD rrute is fixed without regard to any of the recog

nized standards thwt are normally considered in the est ablishment

10 The conference witnesses acknowledged that tobacco coulq undoubtedly stand a

higher

rate The importduty alone is 27 OOO on

11 The NAWFA tariff expresses rates in terms of British currency For example the term

447 6 denotes 447 shillings and 6 pence Th British pound t is equivalent to 240 and

there are 8 4 or 8 33 shillings to the dollar

12 F M C
46 FEDERAL MARITIME COMMISSION

oftariff raJtes and it isnottheprod uotofamy negotiationor barga

between the shipper aJnd the carrier Dhis rate be3irs no relatioJl

to Ithe cost ofthe service or the yalue of the service because itis a

oable to ia widely aryingtype of cargo that is iany oargo for w

a specific comnlOdity rate cannot be found in the tariff The ge

cargo N O S rate in the outbound tariff is by no m 3Jns a p

rate In 1965 the N O S rate was used in the CaJse of 10 6 pe

ofthe shipmenrts In a staff study of manifests thBSe catch all 

were found to have applied to over one half of the 194 outbo

shipments These statistics include botlh the generail cargo N O S 

and the N O 8 rates for particular comnlodities The individual 

modity N O IS rates are not always the same bUltas to miany 

Inodjties the N O S roJte is 70 75

The N O S rates make up 10 6 percent in the outbound shipm

but only 2 percent in the inbound trade The NAWFAtariff con

substantially more commodity rates than the NAUK tariff becau

breaks down the commodity descriptions into greater detail and 

for this reasonthat the NAWFA t3 riff has fewer items subje

N O S rates The NAUK cOnference recently cancelled over 

inactive rates This will cause these commodities to take N O S 

ifthey are shipped

The high NAUI general cargo N O S rate places the onus 

prospective shipper whose commodity is not listed in the confer

tariff to demonstrate that the commodity rate should be lower 

the N O S rate The shipper is usually in an unfavorable posirti

justify a particular rate as compared to the conference becaus

lack ofeconomic pressure andlack ofexperience The expert testim

also demonstrated that it is psychologically forbiddingand distur

for ghipp rs particularly smaJlJl shippers to tryto oonvince a

ship

conference that the 70 75 N O S rate should be say a 40 comm

rate Rather than undertake this burden they often simply d

against exporting the commodity

The existence of the high N O S rate admittedly causes the ra

be higher on some commodities than itwould be if a specific comm

rate werein thetariff This high N O S rate is inhibiting themove

of cargo Conference witnesses gave examples of instances invo

the rates on lobster and on paper toweling where the high N 

rate was reduced by giving a lower specific commodity rate On 

items which then permitted these commodities to move in the t

or increased the volume oftraffic The export of sleds was compl

prohibited by the application of the high N O S rate although 

had ppeviously moved under a lower commodity rate

12 F M 
INVESTIGATION OF OCEAN RATE STRUCTURES 47

Apples ancl Peal 8

The outbound rate on apples and pears is 105 per box or carton

of 2 2 cu ft 95 cents when palletized or 44 25 N O S which has

since been cancelled The cartons stow at about 50 to the ton and

measure 2 2 cubic feet each The reefer rate is 155 pel box The rate

on apples in boxes in the inbound tariff is 262 6 per ton W1M or

about 32 the outbound rate being about 37 percent higher The

inbound reefer rate on fruit is 44716 per ton VV 111 or just under 54

while the outbound rate comes to 77 50 12

Apples and pears are the fourth largest comnrodity transported

by the outbound group in terms of carrier revenue Apples move in

by far the larger quantity but the rates on the two are the same The

United l

ingdom is the n10st important export marl tfor the Ameri

can shippers Out of 6 093 000 cartons of apples exported in 1965

1 655 000 or 27 percent went to the United IGngdom Vhile this is

a

slight increase overthe preceding four years at one time 193438

the United States shipped an average of 4 261 000 cartons per year

and earlier 1926 30 8 344 000 per year Now a lot of the decrease

must be attributed to increasing competition frOln France Italy

Canada and Australia The rate from France to the United l

ingdom

is 75 cents per carton and frOln Canada 90 cents unpa Iletized The

United States and Canada lost 4 000 tons to France in the first period

of the 1966 season In 1966 our exports ofapples to the United King

domweredown 20 to 25 percent

Apples have Ian F O B value of 8ibout 3 50 on the average per

bushel or carton The freight approaches one third of the value

a

comparatively high percentage The apple exporters testified that

they will not be able to continue to export at the present level unless

the rate is lowered that both they and the NAUK carriers will lose

revenue ifthe present rUite is maintained

The shipper requests for reduotions have been denied by the out

bound conference There is uncertainty in the record as to the exact

extent of the difference between the parties in dollars because of a

dispute as tothe definition concerning palletized fruit

c4 utomooiles

The outbound rate on unboxed automobiles is 32 50 per ton W1M

nd inbound it is 105 Or about 12 65 on the arger oars It costs

lbout 370 to ship Ithe average car 460 cubic feet from the United

States ifJo the United Kingdom via NAUK camiers The same car

12 The eight percent inbound Increase which is pending as this decision is in process of

IreparaUon has been taken into account in this and other comparisons described herein

a2 FMC
48 FEDERAL MARITIME COMMISSION

can be shipped from the United ICingdonl to the lJnited States 

just under 100 All cars are shipped unboxed today

The British manufacturers exported some 12 000 weight ton

automobiles to the United States in 1965 or about 10 000 veh

These exports are increasing The carriers earned 1 240 924 rev

on these cats These conlpete with autos manufactured in the Un

States and American cars compete in England with cars manufact

theTe and elsewhere albeit with little success Few American car

exported to Great Britain in 1965 there were 284 This is due in 

to British import duties the preference oftheEnglish for the sm

bars and other aotors But the high freight rate also contrib

to dwindling exports according to thetestimony ofthe represent

of the American Automobile Manufacturer s Association

Books

The outbound rate at which hardback books are transported i

rate on books N O S Or 70 75 per ton vV M The outbound rat

papelb3cks including comic magazines is 58 50 per ton vV 

inbound rate on books is based on a scale according to value

Value up to f 30 40 cu ft 2 3 6 W

Vlalue up to f 60 eu fL 291 6 w lvr

Valueover f 60 cu fL 372 6 71M or 32 6 ad V1a

The average rate inbound is about 35 50 about one half O

outbound books N O S rate

Shippers ofpaperb ck books and magazines testified at some le

in pr Otest against the tpen 70 per ton rate They were confi ent 

a r duction in the rate would cause an increase in exports There

N AUKreduced therate to the present 58 50

Books afl an item ofoargo flow in substJantial volume in both 

tions The United Kingdom imposes no import duty on books 

United St has a small tlOublesome duty ofthree percent on b

No other nation imposes a taJrlff on books

Egg Albumen

Dried egg aJlbumen is a by produotin the manufacture of cake m

Two exporters of this commodity testified at the heaTing in obje

to the l

a of the outbound conference Dhe value of egg album

about 100 per pound and the NA UIrate is approximately 

per pound or about five percent Of Jth value The exporters op

on a profit mwrgin ofless than five perqent The principail compe

of the Amerioan exporters in tille British market 31re exporters 

RedOhina The competition is so keen that just a fewcents diffe

in price means a loss of Ithe sale Orre shipper exports about 700 

yeaJr to tJhe United Kingdom and another somewhwt less than this

12 F 
INVESTIGATION OF OCEAN RATE STRUCTURES 49

The outbound rate on this commodity was 42 50 per ton W1M aJt

the time of the hearing NAUI increased this rate to 43 50 per ton

W1M effootive JiMlurury 30 1968 Dhe inbound rate is 332 per ton

W1M or approximately 40 There is a large disparity between the

outbound rate of the NAUK conference and the rate from North

Atlantic ports to the Continent The rate to Hamburg is 2112 cents per

pound The larger shipper does not like to use the nonconference lines

going to the Continent and then to England through transshipment

because the baCJterial regulations make this difficult Apparently egg

albumen does not move westward in this trade

The shipper testified that a lower rate comparable to that to the

Continent would dramatically increase his sales and that the higher

outbound rate as compared to the rate from a competing source is

impeding the export of this commodity

A eat Offal

The outbound tate on meat offal is 14 per ton W and the inbound

rate is 348 per ton W1M or about 42 This commodity stows at

40 to 60 cubic feet per ton so the W M rate translates to something

a lilttle under 53 per ton on aweight basis The rate on this comn10dity

to the United Kingdom from Australia is 54 14 and from New

Zealand 63 62 Suppliers from those countries compete with the

American exporters to the United Kingdom These same rates apply

to continental European ports from those countries From South

America the rate to the United Kingdom is 54 04 free in and stowed

and from South America to continental European ports the rate is

60 free in and stowed The rate from North Atlantic ports to Euro

pean continental ports is 5515 per long ton This product goes to

te Havre at 2 60 per 100 pounds on the same vessel that transports

t e commodity to London for 3 30 per 100 even though the vessel

stops first at London

ery large quantities of meat offal are exported to the United

King om each year but the relatively high outbound rate has pre

vented sales and a lower rate would increase the exports of this

commodity

The witness on behalf of Armour Company a major shipper of

this commodity to the United Kingdom testified as follows

In view of strong competition from Australia and New Zealand meat packers

who can produce the same products cheaper than U S packers and who also

enjoy lower rate of import duties we solemnly feel that the current ocean

freight rates from U S ports to the United Kingdom on frozen variety meats

should be reduced to the level of the rates to continental ports

The rates to U K are about three quarter cent per pound higher than to the

continent and our Sales Department has many times advised that they could

112 F MC
50 FEDERAL MARITIME COMMISSION

not sell in U K as our delivered price was one quarter cent or one half 

per pound higher than buyers were willing to pay This would indicate if 

rates were at the same level as continental rates our quotations would 

times result in sales that we cannot make under existing rates

The witness for International Packers Ltd testified that the 

to the United KingdOlll rrOlll NODbh Atlantic pOI tsShould not e

the rates to the Continent since the costs of the steamship oper

are comparable on a

voyage to the United lingdom as to the 

tinent fIe stated that the rates frOlll cOlllpeting market areas to 

United Kingdom are either the same or slightly lower than the 

on the same meat items from the United States to the Continen

exhibit attached to the testimony of the witness of Swift and 

pany another large exporter of this product states

The rates from South America New Zealand and Australia which ar

siderably greater distance from North Atlantic ports to United Kingdom c

indicate the unreasonableness of the present applicable rate of 74 from 

Atlantic U S ports to the United Kingdom

Then in another letter attached to the testimony of this witnes

states

We can say very definitely that a reduction in the ocean freight rate 

increase our tonnage to U K via North Atlantic ports inasmuch as this

make us somewhat competitive with other gateways

In these same cOlTIlllunications and in his testimony this wit

as well as other witnesses also raised the question ofthe reasonabl

of thisconference allowing only a five percent differential on cont

or trailer shipments whereas the rate to the Continent includ

differential of 10 percent for containers and trailers

Onions

The onion is an important commodity in our exports to the U

Kingdom in fact the United Kingclom is the chief consum

onions exported from the United States amounting to 500 000 

with a value of over 600 000 in 1965 Onions are exported princ

from New York State Their value fluctuates over a rather wide r

but generally the freight rate is about 20 percent of the value 

eastbound rate is presently 39 50 per weight ton not refrigera

The outbound rate is 24 percent higher than the inbound ra

267 per ton W

The complaint of the onion exporters was not so much based o

disparity between the outbound and the inbound rate althoug

inbound rate does furnish a useful basis of comparison even th

13 At the time of hearing th ratewas 32 50

12 F 
INVESTIGATION OF OCEAN RATE STRUCTURES 51

onions are not imported from the United Kingdom The basis of the

complaint was the fact that the export rate from American North

Atlantic ports is somewhat higher than the rate from Canada which

is the chief competitor of the United States exporters The rate from

Canada to the United Kingdom is 27 from Montreal and Quebec

and 31 from Toronto The Canadians also have the benefit ofpaying

the freight in Canadian dollars that have a value of 93 cents

American

Plastic Sheeting

The Valsen Consolidated 1ercantile Company exports to the

United l

ingdom two grades of plastic sheeting of the type used for

furniture upholstering One is a mylar vinyllaminwte of high quality

and a value of 90 cents per yard while the other not reinforced with

fabric is a plain vinyl having a value of 22 cents per yard NAUK

has a single freight rate on plastic sheeting of 59 75 per ton W1M

This comes to 20 percent of the value of the cheaper material The

NAWFAtariff has a sliding scale forthe rate on plastic sheetingbased

on the value Of tthe wurious grades he inbound rate on the plain

viny having a value such as that shipped by vValsen is 33 per ton

W1M Walsen established that this rate is seriously inhibiting the

export of this material In order for this commodity to conlpete in

the United Kingdom market the lowervalued vinyl must have alower

rate than those that have highe r

values

Rags

J Eisenbar and Son exports approximately one and one half million

dollars worth ofrags to theUnited Kingdom each year These are used

inthe manufacture of bank note paper The outbound rate on these rags

at the time of the hearing was 32 50 per ton V and it has subsequently

been increased to 35 50 The inbound rate is 23 70 as found in the

NAWFA tariff lundeI Cotton waste MT Eisenbar testified that his

company imports annually from the United Kingdom several hundred

tons oflinen rags which are different from those which his firm exports

The linen rags cannot be used for the making of currency and are

not compressed by the same means Thus from the point of view of

value stowage factors and use the two products are dissimilar Ve

conclude that no disparity should be found between the two products

because of this dissimilarity

Sleds

The S L Allen Company of Philadelphia lost a number Of sales

or its Flexible Flyer sleds in 1966 because the NAUK conrerence de

leted from its tariff the rate or 32 50 which due to confusion within

12 F M C
52 FEDERAL MARITIME COMMISSION 

the canference ranks caused the N O S rate of 70 75 to be 

Vhile the canference chairman testified that he intended tha

an tays 35 50 apply when he eliminated the sled rate 

ally didn thappen One af the canference carriers quated t

Itas t1e new rate

Th 

The manufaoturers af Ideal Structo Gilbert Playschaal a

well knawn toys testified at the request of Hearing Cau

American importer afthe Matchbax lineaf toys from United 

testified at the request of NAWFA

The autbound rate at which most toys move is 35 50 per ta

This averages about 331h percent afthe value afthe toys The 

Canada to UnitedKingdam is 20 and this disparity has lostA

exporters business in theBritish market Ithas alsO resulted i

cm1 firms licensing the manufacture of their designs in Ca

export to the United Ifingdam Market research conducte

Playschoal peaple resulted in their concluding that the freig

the United Iingdom was prohibitive Another manufacturer 

that he could get a foothold in the United Kingdom if the 

the same as that from Canada

The NAvVFA rate on the toys that exceed 200 in value pe

ton is 273 or about 32 40 whe l

the 1 13 68 increase of 8 p

added The United States toy m1anufaoturers expOrtabaut 

of a total of 1 billion manufacturedeach year British toy man

ers export about 60 percent af the toys they make

Itis true as respondents state that other factors such as Br

port duty high mark up in their stores the 10 percent Bri

charge on imports and otherfactors make it difficult for the A

tay exporter to compete Our costs are no higher than those in 

however except for the Cammanwealth preference in impo

Yet the Canad1ans successfully export Amerioan tays and sam

exporters ship aut of Cana da

Other 001nJmoclities

In addition to the foregoing commodities the record cont

deuce of the impaot af rates upon the movement af the other 

tions of cargo Far instance aquariums formerly moved u

general cargO N O S rate of 70 75 and this high rate was in

sales and exports A

shipper sought a reductian to 35 50 but 

ference granted a smaller decrease Citing an inability to m

and Japanese campetition theshipper returned to the canferen

for a rate of 35 50 in August 1966 The conference granted 

quest and the shipper s exports increased three fold

12 
INVESTIGATION OF OCEAN RATE STJ tUCTURES 53

Another product hog bristles nloves eastbound at the noncontJract

rate or 2 65 per cubic foot The westbound rate was 2 37 per cubic

foot Hog bristles are shipped in both directions from time to time

Exporters in this country experienced heavy competition in the UK

on hog bristles exported from Red China However the freight rate

does not appear to be impeding the flow of eastbound hog bristles be

cause ieyer Line a nonconrerence carrier to the Continent has a rate

of 165 per cubic root including transshipment to the U K The ship

per who testified uses this nonconference rate

The record contains data with respect to the export of scrap rubber

tire buffings to the UK Priorto June 1966 a

large amount or rub

ber buffings moved through North Atlantic ports to the UK This

amount gradually decreased in proportion to the increase in NAU

rates However while the rate has had an economic impact upon ex

port ofrubber buffings the NAUKrate is still lower than the NAUK

rate on ordinary scrap rubber Itis lower than a comparable NAWFA

rate and it has not been shown that it is higher than a rate from a

competing source Thus there is no disparity in r

ates The record also

contains some indication that shippers claimed that the NAUK rates

impeded exports These include balloons candy copper zinc lead

tireS hospital equipment and construction machinery The record does

not show in what IIianner shippers of these commodities have been

disadvantaged by the NAUK level ofrates The outbound rates on nuts

ELnd lobsters were reduced to satisfactory levels during the pendency

fthis proceeding

The only inbound rate that came under attack was the rate on lead

but NAWFA has now reduced that IaJte and t

is no longer being

1rotested

DISCUSSION

The Examiner made appropriate findings under section 18 b 5

lS dirooted in the Order of Investigation Generally he fOlmd that

he overall conference rate structure in the outbound North Atlantic

rade ws not so much higher thanthe conference rate structure in the

eciprocal trad or the inbound so low that these rate structures can

efound to violate any provision ofthe Shipping Act

The Examiner however noted generally that lowering the freight

ate will cause more cargo to move everything else being equal This

eing so theExaminer found that relatively highrates on low moving

11 nonmoving commodities in the outbound tariff are inhibiting the

novement of goods in this export trade This he found to be contrary

o section 18 b 5 under the test of the Iron and steel decision 14

1

Iron and SteeZ Rates Eaport Import 9 F l LC 180 1965

12 F lLC
54 FEDERAL MARITIME COMMISSION

because a disparity was shown to exist on lOW moving and no

commodities and this disparity has inhibited the movement 

outbound Consequently it became the duty of the carrier

plain or justify that s ch higher r3ltes were reasonable This 

ents failledto dO lihereTore tJhe Examiner required tmllit the o

rates On commodities that moved in la volume Of less than 

during the year 1965 31t a rate in excess of 55 per ton VV1

be reduced to that figure because any rates in excess of this fi

contrary to section 18 b 5

Next the Examiner considered the N O S rates in the o

tariff The Examiner found that the high NAUK N O S rat

an undue burden upon shippers He then stated that 

N D S rate were in an amount approximately equal to the 

rate in the entire tariff the instances ofthis inequitable burd

placed on the shipper would decrease substaJntJiany 

Examiner found that some of the N O S rates were contrar

tion 18 b 5 He ordered that these N O S rates be disa

and that NAUK promulgate new rates not to exceed 55 W1

Finany the E aminer round that the rates on certain spec

modities including Apples and Pears Automtdbiles BoOks 

bumen Meat Offal Onions PlastJic Sheeting Rags Sleds a

were contrary 00 section 18 ib 5 The EXaminer dO

outbound rRltes On these commodities and directed that 

be lowered to a level cOmparaJble wirth tihe rates in a

recip

competitivetrade

Both conferences begin their discussions with ooI taJin w

CJaveats and oompl ainif s conrerning the trial and developme

proceeding These reflootions set

the mood Of respondents 

For instance both respondents claim that their rates were 

cessfully attackeil hy any party Or awltness shipper economi

tician Or otJherwise

Secondly respondents emphasize fuat shippers generall

merit whatever in la oomparison Of eastbound land westbou

between the United StaJtes land tJhe UniJted Kingdom As N

says despite the extensive efforts Of the Ommission s

inve

stJaff to Obtain shipper testimony the overwhelming respon

resounding silence frOm the shipper community NAW

NAUK thus argue thwt tJhe scanty rep y

is strong testimon

ltbsence Of any widespread grievance of the shipping com

111 Most of the evidence to this effect was excluded by the presiding examine

under an offer of proof the Commission hus decided that this evidence is im

finding of a violation f

section 18 b 5 does not depend upon the quantum 

vehemence arecord contains

iL2 
INVESTIGATION OF OCEAN RATE STRUCTURES 55 

Likewise this lack of shipper response overshadows the meager

sprinkling of adverse shipper testimony

Dhe respondents all80 excepted to eaoh adverse findi1ng We will con

sider these in oonjunction with our discussion of tihe issues below

The Examiner af ter oarefully analyzing the price profiles evi

dence ooncluded that the outbound rate t

ruoture WI3 Snot effootively

higher than the inbound r3lte structure The EXamriner noted that

there was a 25 percent disparity bebween the overall rwte structures

after the most recent rete increases of NA VFA However consider

ing vhe aggregaJte 31IDounts paid by shippers the E aminer round

the dis rity to be less sjgnific nt As Hearing Counsel oonceded

lit appewrs to be true tthlalt if we conceDitrwte Ion yield per ron fur the major

moving commodiitJies outboWld ie over 500 rous oompared to yield per ton

inbound overall commodities there is no higher oUJtbound dispadty

vVe agree no effective or significant dieparity betJween the entire raJte

structures of the two conferen es has been proven wihi h is violative

of the Shipping Act 16 This is not to say thaJt Dr Mater s studies are

not pvobative evidence Indeed Dr faJter s anaJySes have served as

an eff hre springboard into the examinaJtjon of rates on low and

nonmovingoommodities N O S rates and specific oOlmnodities

The Examiner next measured certain NAUK rates against the

standards of seotion 18 b 5 After finding the raJtes on minor mov

ing commodities N O S rates and certain named commodities to be

so unreasonaibly high as to be detrimental to the commerce of the

United States contrary to section 18 h 5 the Examiner ordered

these r3ltes reduced to competitive levels These holdiIlgs have prompted

a rash of@xoeptions gener al and specific Most ofthese exceptions bring

into question the very meaning of sootion 18 b 5

Ve will first considerthe meaning of section 18 rb 5 which

provides

The Oommission shaiLl disapprove any raite or cha rge filed by a common lTie r

by water in the foreig n commerce of the Urui ted SItaltJes orconference of earners

which aifter hearing it finds to be so l1mei8SOll Rbly high or low as to Qe detri

mental to thecommerce of theUnited States

The section contams two elements

1 Is the rate unreasonably highorlow 1

2 Has the unreasonwbleness of the late caused detriment to com

merce In short these elements require the definiti On and applioatJion

of two words unreasonable and detriment

leCompliance with our decision with respect to NO S rates and the rates on certain

specific commodities willfurther reduce theoverall disparity between the two tariffs

12 F MJC
56 FEDERAL ARITIME COMMISSION 

Unreasonable is a conlmonr

gu1atory ternl

17 Ingeneral a

sonruble rate is one which does not conform to the ratemaking 

of cost Value of service or other transportwtian conditions 

words an unreasonable rate is one that cannot be j ustlifiecl b

m ore ot these faotors

In interpr

ting sect10 18 b 5 the Oom ission has follow

appro ch Iii Iron and Steel Rates E port Import 9 F I

19192 1965 the Commission measured an outbound rate 

inbound rate to see if one washighih relation to theother ie 

one app ared to be uneasonaJble Upon an Indication that a r

un nably highIand afiter a

showing of detriment to comme

carl ir

quoting the higher rate would be required to justify 

on the basis of bona fide raJtetnaking factors

Ill Outbound Rqtes Affecting Export High Pressure Bo

F MC 441 457 1966 the Commission restated the positio

whether a tte was reasonable with respect to accepted rate

factors In Inves gation of Rates in the Hong Kong United 

Atlantic and Gulf T1 ade Dd ket 1083 11 F MC 168 the C

sion agai foliowed this approach under section 18 b 5 

initial step was to Cletermine whether a rate was unreasonab

respect to out af pocket costs an aCceptable ratemaking stan

Respondents a

rgue thalt the Commissiqn by using the com

of rates teChnique announced in Iron and Steel supra has re

unreasbhable standard out of section 18 b 5 Responde

the legislative history oftheprovision

In summarizing Section 18 b 5 fot his colleagues prior 

Senwte vote n the bill Senator Engle paraphrased it as follow

The Commisslon must dl sapprOove any COommon caTrier Oor co

freight rate So irrationally hdgh or low as tOo be detrimental to our fore

merce Initeto Legiswtive I1isiory ot the Steamship Oonference Du

Law 87th Cong 2d S ss 1962

The law Senaitor Kefauver also gave guidance for the app

of Section 18 b 5 when he said in an exchange with S

Engle

Ifthe l 8tes are so e orbita ntly high that they aredetrimenta

COommerce Oof the United Staltes the Ooinmission will be aut horized tOo dis

therates

Senat rEngle

But tbJaraJtes hiave to be UJnreasonable to the point they a re detrimenta

COommerce of the United States

naitor Kefuuver

17 It mean s ordinarily a Not conformable to reason irrational also not gov

reason b Immoderate i exorbitant Websters New Oollegiate Dictionaru G C 

Co 1961

12 F 
INVESTIGATION OF OCEAN RATE STRUCTURES 57 

TbaJt is wbat

tbe amendment states

Senat or Engle

With that understanding and witlh that legislative record on the matlter I am

pe rfetly sati sfied to accept tbe amendmeIllt Legisiwtive History Index at

42526

Ve aooept rrmtiollrul and exorbitant as Synonyms of unrea

sonable e interpret these excerpts of the legislative history to

be explanations ofthe entire section i e so unreasonably high or low

as to be detrimental to the commerce of the United States not as

qualifications of the word unreasonable

However respondents argue that the Examiner never made find

ings of unreasonableness he simply found that one rate was higher

than another i e if a rate is higher it will be h ld to be unrea8on

ably high T

e do not interpret the Examiner s initialdecision in this

111anner The Examiner did make findings with respect to reasonable

ness of rates The Examiner first pointed out that ates on particular

commodities compared unfavorably with rates in other trades either

reciprocal or competitive 01

this comparison the Examiner noted

that such rates appeared to be unreasonable Following the procedure

outlined in l1 on and Steel and the Boiler case the Examiner then

granted the carriers an opportunity to come forward to show that

their apparently unreasopable rates were justified by cost value of

service or other transportation conditions Unfortunately respond

ents chose not to submit such proof even though these facts were solely

in the hands ofthe carriers and as the Commission has seen here not

rOOJdily avla ilable to Ithe Commission s staff or other parties

Both conferences argu that this improperly places the burden of

proof upon them The Examiner followed Oommission precedent in

which the Commission has further broken down the reasonable stand

ard unde r section 18 b 5 to describe the quantum and order of

proof required of adversaries As the Commission said in Iron and

Steel S ltlJrc

Wben a rate disparity in reciprocal trades on similar commodities appears

and when movement of goods under the higher rates has been impaired the

carrier quoting the rates must demonstrate tbat tbe disparate rates are reason

able All facts pertaining to the reasonableness of the rates are uniquely in

the posseSSion of the carriers Unless so interpreted section 18 b 5 becomes a

nullity and we will not impute to the Congress the enactment of a meaningless

statute The mere existence of a disparity does not necessarily mean that the

higher rate is detrimental to the commerce of the United States The Com

mission would still have the burden of proving that the rate has had a detri

mental effect on commerce e g that tonnage is handicapped in moving because

the rBJte is too high The cacnrier would be required tojustify the level of the

rate by showing that the attendant transportation circumstances require that

the rate be set at the level Subjects of justification may include myriad rate

il2 F M C
58 FEDERAL MARITIME COMMISSION

making factors which might differ between the inbound and outbou

These include competition volume of the movement stowage stevedor

and others 9 F M C at 191 92

The Commission reiterated this point in theBouer case sup

There is no evidence of record of the reasonableness of the rates as m

by the excess of revenue over costs of moving the cargo Thus the only p

measure of the reasonableness of the rates must be based upon a cons

of rate disparities either triangular or reciprocal As we said in IrOY a

Rates Export Import 8upra the existence of a disparity in and of it

no conclusive legal significance

III

Section 18 b 5 bas never been interpreted in thecontext of triang

parities Nevertheiess following the guidance of Iron and SteeZ Rates 

Import we believe triangular disparities should be measured ina simila

Consequently where a rate disparity is shown between a rate from th

States and a rate from a

foreign port to the same destination on sim

Ill Od itties Rind the movement of goods under thehigher lIaJte has been impa

carrier quoting the rate from the United States should demonstrate th

ableness of the rate by showing that the transportation conditions in 

trades arenotthesame inmaterial respects or that the attendant trans

circumstances require that the rate be set at that level 9 F M C at 

Most recently in the Hong Kong case supra the Conunissio

expressed its reading of section 18 b 5

Following these decisions we will attempt to establish criteria fo

under section 18 b 5 where one carrier or conference is alleging that 

of another carrier or conference are so unreasonably low as to be de

to the commerce of the United States The first principle which we w

is that a rate which fails to meet outof pocket costs of the carrier qu

rate is unreasonably low By out of pocket costs we mean cost of 

thecargo into and out of the vessel plus any directly assignable costs 

brokerage etc

III

Itwould then be incumbent upon the carrIer whose rate has been c

to rebut the presumption created by showing that his actual outof po

and other rate factors vary materially from those developed by the co

carrier Docket No 1083 11 F M C 168174 1968

In the context ofthis proceeding we believe that a party In

that a rate appears to be unreasonable by reference to a low

on a silnilar commodity which moves in a

reciprocal or cOl

trade Is This procedure properly apportions between the pa

burden Of provingcertain facts and is in conformity with the 

ments of the Adlllinistrative Procedure Act and the COllu

Rules of Practice and Procedure An adverse party has th

to show the raite to be unreasonahle A carrier must then come 

18 Aparty must also make out acase ofdetriment to ommerc

J2
INVESTIGATION OF OCEAN RATE STRUCTURES 59

amd prove that its rare is reasoDJabl This does nat misplace the burden

of proof Bothpa rties have proceeded in the proper order and each

has demonstrated those facts Of which ithas particular cognizance

As noted the Commission enunciated in the Iron and Steel case

and the Boile1 case the procedure to be followed in develaping a case

under sectron 18 b 5 Thus 1he Com mi Ssran stJated that the oppo

nents ofIa rate shrull show tilralt the r8lte appears

to be unreasonable i e

that the unreasonableness of the rate has caused some econamic C Oll

sequence to the shipper Inspite ofbhis statement Of the Conlmission s

pTevaHing inJterprooation of section 18 b 5 NA VICJhose nat to sub

milt any proof to rebut the prima racie showing that la rate was can

tIi3iry to section 18 b 5 ally of the findings in this case depend

upon tJhe absolute vefusal of NAUK to coopeI lrut in any respect in ac

corrdance with the Cammission s

prior ooses The record does establish

the prima facie showing expected of Opponents of a rate but there

is absalutely no showing whatsoever in rebuttal

The Cammission cannat extract the true picture fram a case when

much relevant evidence is absent Ifpropanents Of an attacked Tate

cause the dearth Of such evidence by withholding it the Cammission

cannat fail to take that nanfeasance intO account in its deliberatians

in the case where there is a prima facie shawing Of an 18 b 5

violatian

Since the carriers refused to sublnit apprapriate data the Examiner

ruled that r3ltes which appeal to be unreasanable by virtue of their

comparison with ather rates were in fact unreasonable because of

lack Of proof ta the cantrary The Cammissian has previously ruled

that a person contesting rates Inay show them ta be prima facie

unreasonable by reference to a lOwer rate on a similar commadity

which maves in a recipr Oal trade Outbound Rate8 Affecting Export

Jigh Pressu1 eBoilers 9 F IC 441 457 1966 The obvious reason

far this camparison is the assumptian that comparable considerations

of cost value of service and transportatian circumstances prevail in

cOnlp itive tnvdes As ItJhe Tecord shaws here the trades which have

been cOlnpared are silnilar For example the inbound outbound trades

are served by the same carriers at about the same costs No distinctive

dissinlilarities have been shown Likewise the outb Ond trades from

the United States to Europe and from Canada tO the U I have a

logical as well as factual sinlilarity tO the NA UEtrade in the carriers

plying these trades cost and types of cargoes carried Indeed there

is sufficient similarity to assume that the trades are the same As the

SupI eme Court said in U S v NO1othe1n Pacific By 288 U S 490

1933

12 F lLG
60 FEDERAL MARITIME COMMISSION

Thus both the appellees and the Commission recognized what has lo

settled that existing rates for similar service to other destinations may 

for comparison as one test though not a controlling one upon the qu

the reasonableness of the rates in issue The Commission s

reports do no

the averments of the petition that the question of reasonableness was dis

and the order based solely upon a comparison with rates which were und

unreasonably low 288 U S at 500

I

A perSQn attacking a carrier s rates may rely UPQn a cQmpar

rat s in cQmpetitive trades to shQW unreasQnableness And it 

after a

shQwing afdetriment to CQmmerce to require carriers t

fQrward to shQW that attendant transpartatiQn circumstances 

that the rate be set at the level Iron and Steel Rates Export I

s

ul ra at 191 92

The carrier whO is in possessiQn af such data may then CQme fQ

to shaw that based Qn differences between the trades campa

Qther tests Qf reasQnableness a rate which appears to be unreas

is in fact reasQnable judged by acknQwledged ratemaking factQ

nQt detrimental to cQmmerce

We cQnsider nQW detriment to cQmmerce The cQnference

that the Examiner s

findings are errQneQUS as a matter Qf la

initial attack is against the Examiner s premise that all ather 

being equal mare cargO will mQve at lawer rates ResPQndents 

that a rate is nQt detrimental to CQmmerce simply because 111ar

WQuld mQve under a lawer rate ResPQndents argue that the 

test Qf detriment to cammerce is whether the Qcean rate preve

cargO frQm mQving citing Edmond Weil v Italian Line 

1 U S S B B 395 1935 and Pacific Ooast River Plate Brazi

2 U S M C 28 1939 In turn resPQndents argue thaJt the leg

histQry Qf sectiQn 18 b 5 shQWS an intent to CQdify these ca

Imposition of S1trcharge by the Far East Oonference 9 F M

1965 the CammissiQn fQllQwed this IQst sales appraach S

the S1trcharge at U S Atlantic and Gulf Ports 10 FJLC 13 

in which the CammissiQn fQund nO vialatiQn af sectiQn 18 

because a surcharge did not cause lQSS of sales 01

prevent the 

11lent Qf cargQ In reaching a different cQnclusiQn respandents 

that the Examiner fell intO errar by fQllQwing the CQmmissian 

in Iron and Steel Rates Export Import 81tpra which stated

When a rate disparity in reciprocal trades on similar commodities 

and when movement of goods under the higher rate has been impa

carrier quoting the rates must demonstrate that the disparate rates are 

able The Commission still bas the burden of proving tbat the 

had a detrimental effect on commerce e g

that tonnage is bandica

moving because the rate is too bigh 9 F M C at 91 192

112 
INVESTIGATION OF OCEAN RATE STRUCTURES 61

the Commission s decision in Outbound Rates Affeoting EWP01 t

High P1 esure Boilers supra at 4567 which by dictum prescribed

a limit3Jti On on net profit test ofdetriment 100 commerce is according

to respondents bad law 19 So too is the Examiner s similar definiition

of detriinent to commerce i e rates which inhibit the movement of

cargo

Detriment according to Webster means injury or damage orthat

which causes it mischief hurt Inthe context ofthe Shipping Act

the Commision has had opportunity to consider economic factors to

determine whether such factors were detrimental to the commerce of

the United States Inthe Iron and Steel case the Commission defines

detriment to mean that tonnage is handicapped in moving because

the rate is too high 9 F M C at 191 Similarly in theBoiler case the

Commission referred to detriment in ithese terms movement ofgoods

under the higher rate has been impaired 9 F M C at 458

In the Hong Kong investigation the Commission stated as follows

A complaining carrier in order to make out a case under section 18 b 5 must

also establish a prima facie sho ving of detriment to commerce Ifthe complain

ing carrier can demonstrate an adverse economic impact upon itself the carrier

has made out a prima facie case of detriment to commerce Again such proof

would be subject to rebuttal by the carrier whose rates have been complained of

Docket No 10S3 11 b M C 168174 l96S

Respondents argue that this concept of tonnage handicapped in

nloving is far too vague to serve as a

regulatory standard Despite

these cases respondents hold out for a more rigid definition that is

cargo was prevented from moving Certainly the cases respondents

cite are valid a rate which prevents cargo from moving certainly is

detrimental to commerce But what of a more intangible economic

impact the watering down of profits or the inability of a merchant to

enter in a market at all An unreasonable rate which causes either

of these results is detrimental to US commerce 1any situations may

arise in which some economic harm other than lost sales is worked

by a rate upon some aspect of our commerce Thus we will not restrict

the definition of detriment to commerce to those rates which prevent

a commodity from moving Rather we will define detriment as some

thing harmful not limit it to lost sales or other rigid formulas

The Examiner considered the detrimental effect of rates upon com

merce both generally andspecifically Generally he stated theproposi

tion tJllat aH other things being equal more cargo will move at lower

rates This being generally true the Examiner felt that rates which

19 The Commission stated in the Baile1 case Proof of this detriment might run from a

showing of loss of amarket or a particular sale to some intangible limita ion of the ability

to participate profitably in a market 9F M C at 456

12 F M C
62 FEDERAL MARITIME COMMISSION

were unreasonably high may be presumed to have a detrimenta

on commerce

The Examiner had found that in the outbound trade lowe

would increase movement and that relatively high rates on c

takil g

an N O S rate on low moving or nonmoving commoditie

inhibiting the movement of these cargoes Factually the confe

argue that this analysis is faulty because it fails to consider 

factors surrounding the movement ofthe cargo that this analys

not undertaken and thus the Examiner indulged in sheer specu

Furthermore respondents cite the record to the effect that a 

rate is either acceptable to a shipper or forms a beginning po

negotiations for a lower rate and shippers are aware of their 

bargaining position Shippers do seek and are allowed rate a

ments whether the shippers are large or small

The Examiner bolstered his general statement with the fac

1110vement of the high rated commodities was either nonexisten

minimum volume less than 100 tOIlS per year He found it 

to assume that in many instances the high freight rate has had 

impact upon the ability of the exporter to develop any nlovem

these cOll1modities and furthermore the lowering of these rat

have no harmful effect upon the carriers because they are now 

erating little if any revenue under these rates

Ve grant that any traffic which would result from a lower

these rates would inure to the benefit of the carriers as well 

exporting public The Examiner stated a valid economic concep

he aid that all things being equal more cargo will move at 

rates Ve disagree however with dIeExaminer s application 

concept This economic truism standing along does not legall

stitute detriment to commerce as contemplated by section 18 

niuch argument is directed toward the question ofthe Commi

authority under section 18 b 5 The conferences support an em

lated version that the Commission can disapprove a rate only 

Hearing Counsel urge that section 18 b 5 permits not on

approval but a statement of the level at which a rate will nort

section 18 b 5

Itis unnecessary to decide this question here Rather we wil

NADI to bring in a new rate which satisfies our objections 

demonstration that the new rate is reasonable as measured 

ratemaking standards of cost value ofservice or othertranspo

conditions Failing this we will take further action

Low lIloving and LVonmoving Oommodities

The Examiner considered rate disparities which favor high v

commodiities and found that the evidence set forth above esta

12 F 
INVESTIGATION OF OCEAN RATE STRUCTURES 63

as a general economic fact that in the outbound trade to the United

Kingdom lowering the freight rate on lower moving or nonmoving

commodities will increase the tonnage moving Of course the record

doeS not establish the precise elasticity of demand for every commod

ity Neither does the record support the copql sipn in this cae that

the relatively high rates on these commodities have inhibited the

movement of goods Many faotors may have contributed to the inhibi

tion of the movement and the freight rate was not shown to be more

than a relevant factor and certainly not the controlling factor

The only facts established on this point are that the rates are

disparate on certain commodities and that the commodities move in

low volume or not at all There 13 no evidence as there is with specific

tariff items of an adverse impact on our commerce beyond th gen

erality that a lower price tends to 81ttract more pUfiness Itis com

pletely arbitrary to order the rate set at a specific level for various

unrelated items moving at less than a certain level of tonnage per

year We therefore overrule the Examiner as to such rates

The record shows a

contil1uo s policy on behalf of NAUK to weed

out paper rates This is comlnendable and we urge both conferences

to continue to simplify their tariffs by the elimination of unneeded

items Furthermore we urge NAUKto commence a program to lower

the rates on commodities which move in very small volume perhaps

100 tons or less per year High rates on these low moving items may

contribute to the inability of exporters to develop significant move

ment ofthese oommodities and it is possible that lower rates m y

de

velop some overseas markets for exporters in this country and in turn

generate needed additional revenue for the carriers We believe that

both policies would contribute to the well being of our commerce and

be inthe public interest

N O S Rates

Next the Examiner considered the general cargo N O S rate which

is 70 75 This is about 32 percent higher than the inbound rate and is

established by the conference without regard to any recognized stand

ards normally applied in rate fixing Certainly it is not the product

of any negotiation or bargaining between shipper and calrier The

rate bear no relationship to cost or value of service The N O S rate

is by no means a paper rate The Examiner found thatthe N O S rate

is higher on many c0l111nodities than the rate would be if a specific

description applied Accordingly the Examiner concluded that the

outbound N O S rate should be no higher than the inbound equivalent

and that the rate is contrary to section 18 b 5 We agree that the

general cargo N O S rate is contrary to section 18 b 5 The rate is

112 F MJC
64 FEDERA L

MA ITIME COMMISSION

sighiflcantlyhigh as compared with theinbound rate N UI w

exception of some general statements offered no justification 

level ofthis rate The rate is so high that it has a tendency to i

exports sleds are a cogeJJJt example Aocordingly the general 

N D S rate is disapproved as contrary to section 18 b 5

Apples and Pea1 S

The Examiner found that NAUK s rate on apples and pea

105 per carton The Examiner stated that there are about 50 c

stowed to the toIi or 2 2 cubic feet each The inbound rate is 262 

ton W 1 or about 32 per ton W1M Using the Examiner s st

faotors the NAUK rate works outto 19 11 per ton as freighted 

urement basis as c6mp red with a 32 T Minbound rate Thus 

is l

O inbound o tbound disparity here

Likewise the 95i palletized tate does not appear to be disp

The NAUK rate for apples N O S of 44 25 per toil V M ha

dropped from rtJhe rbariff thus no disparity remains here 2Q

1he outbound Ireefer lIate is 155 per carton whioh according 

Examiner works out to 77 50 per ton The inbound rate is 447 

ton W M or 54 Actually the NAUK rete works out to 27 

ton as freighted versus 54 inbound Consequently we rever

Examiner s holding with respect to this item

Automobiles

The Examiner directed thatthe NAUI rate on automobiles of 

per ton V 1 be reduced to 27 50 W M therate from eastern Ca

The rate of the Canada U K Conference from Eastern Canad

according to respondent NAUI been increased since the conc

ofthe hearings to 32 50 V 1 Thus utilizing the most recent r

the Canada UK Conference any disparity between the N AU

and the Canada rate disappears We therefore reverse the Exam

finding with respect to automobiles

Books

The Examiner found that the rate of 70 75 on books hardbac

contrary to the statute and ordered that it be reduced to 4525 

The Examiner compared this NAUK rate with the NAUI un

book rate in order to arrive at a disparity In our opinion bound 

and unbound sheets are not comparable commodities We will co

disparities only on comparable commodities We therefore s

the exceptions and overrule the Examiner

20 The apples NO S rate was a paper rate

12 r
INVESTIGATION OF OCEAN RATE STRUCTURES 65

Egg Albuljwn

The Examiner found the outbound rate on this commodity to be

42 50 per ton V1M This wasincreased to 43 50 effective January 30

1968 The inbound rate is 332 shillings pe ton W1M or about 40

NAuKargues that this commodity is shipped in 50 pound cartons

measuring about 16 cubic feet There are 1 250 pounds or 25 cartons

to a measurement ton of 40 cubic feet Since the goods are freighted on

a measurement rather than a weight basts the effective rate is 3 5 per

pound 43 50 divided by 1 250 pounds The Examiner however used

a rate of 0485 per pound Nevertheless the rate to the Continent is

2 5t

per pound Thus it would appear that a disparity still exists 1e

tween the NAUK rate and the COl tinental J

ate The higher rate has

had an adverse economic impact on th movement of this item Thus

theNADIC rate is disapproved AUK shall fil a newrate aiong with

its transportation justification for our consideration

frleat Offal

The Examiner noted thatthe outbound rate was 74 per ton WThis

washigh compared with the inboUnd rate which worked out to be 53

per ton Secondly the rate of tJhe NOfthAtlantic Continental Foreight

Conference Vas 55 75 l1he Examiner found that the higher rake i11

hibited exports ofmeat offlal The Examiner ifequired the NAUK rate

to be lowered to Ithis 13Jtter lev lNAUK now sta tn3Jt rtJhe Continen

tal rate has been inoreased las of Decemb r 18 1967 to 64 50 W

Nevertheless this disp3Jr ty StiIJI exists between the inbound d out

bound l ates las well as between the NAUIC and Continental 31tes

Oonsequently we disapprovethe NAUK r3Jte f 74 and direct NAUK

to fi1ea new ratewithasuitable justifi1cation

Onion s

The Examiner found that the NAUIC freight rate on onions is a

contributing factor to our dwindlingexports ofonions The Examiner

measured the outbound rate of 39 50 with therate from Canada to the

UJof 27 per ton This disparity wjth the te timony ofthe economic

detriment to shippers of onions from the United StJltes which was not

justified by NAUI is contrary to section 18 b 5 We agree The

NAillC rate is hereby disapproved and NAUIC is ordered to file a new

justifiable rate

Plastic Sheeting

The NAUK rate on plastic sheeting is 59 75 per ton W1M The

NAWFA inbound rate has a sliding scale ba ed on value As applied

to the type of plastic sheeting which was examined here a NAWFA

rate of 33 per tonW1M applies This disparity was not justified and

J 2 F M C
66 FEDERAL MARITIME COMMISSION

the failure to provide a lower rate for cheaper grades of plastic s

ing ha increased theexporter s cost inthe marketplace without re

Accordingly we approve the Examiner s ruling that the r

te 

be disapproved as contrary to section 18 b 5 NA VIshall ad

new rate based on the relative value of the various grades of p

sheeting as is done in the inbound tariff

Rags

The Examiner found that acomparison of outbound with inb

rates on rags

reflected a dispa rty and that the outbound rate s

be reduced to 23 70 the inbound rate However the record de

strates that the rags imported and those exp0 l

tedare significantly 

ferent Rags which are exported are compressed and used for ma

currency Linen as rags is impoJted into the United States but 

not used for currency and is not compressed by machinery Thu

bound and outbound rags are not used for the same purposes are 

compressed in the manner and are really two different produots T

no disparity actually exists We agree and sustain the exceptions t

Examiner s decision with respect to rags

Sleds

The Examiner comp3lred the rake 3ppl cable on sleds the ge

cargo N O S rate of 70 75 with the inbound toys rate of 33 W 

He accepted the testimony ofthe serious impact ofthis high rate 

the ttvanspooOOition of sleds Acoordirigly he found the rate to be 

trary to section 18 b 5 and ordered it reduced to the inbound 

rate e agree that a disparity has been shown that it has not 

justified by NAUK and that the rate should be disapproved NA

shall file a new rate along with a justification

Toys

The Examiner compa red the outbound rate on toys of 35 50

to the rate applicable from Canada to the U K of 20 The re

shows thatthisdisparlIty has not been justified and has caused econ

harm to American exporters in the British market The Exam

therefore disapproved the rate We agree that his findings are co

and order th3lt NAUK filea new rate along with a justification the

CONCLUSION

The foregoing commodity rates we have found to be contra

section 18 b 5 as so unreasonably high as to be detrimental to 

merce e will direct that such rates shall be disapproved to be 

tive 90 days from the date of this order Prior to that time NA

shall file lower rates on those items upon which the rates have 

2 F M 
INVESTIGATION OF OCEAN RATE STRUCTURES 67

disapproved with a justification of the level of the new rate based

upo co t value of service or othertrallsportation conditions Failing

this the Commission will invoke other lawful sanctions authodzed by

sections 15 16 17 and 18 b 5 oftheShipping Act 1916

An appropriate order will be entered

SEAL Signed THOMAS LISI

SeC7 etary

112 F M C

ORDER

This proceeding having been instituted by the Federal Maritime

Commission and the Commission having fully considered the matter

and havingthis day made and entered ofrecord a

report containing its

findings and conclusions thereon which report is hereby referred to

and made a part hereof and the Commission having found that the

N ovth Atlantic Kingdom Freight Conference has established rates

on general cargo N O S egg albumen meat offal onions plastic sheet

ing sleds and toys which rates are so unreasonably high as to be

detrimental to the commerce of the United States contrary to section

18 h 5 ofthe Shipping Act 1916

Therefore itis ordered That pursuant tothe Commission s author

ity under section 18 b 5 of the Shipping Act 1916 to be effective

90 days from the date ofthisorder respondent North Atlantic United

KUlgdom Freight Conference shall cancel such rates and shall file

lower rates on these aforementioned items Respondent North Atlantic

United Kingdom Freight Conference shall also file awritten justifica

tion of the level of the new rates based upon cost value of service or

other transportation conditions as outlined in the attached report

By the Commission

THOlIAS LISI

Secretary

112 F M C
FEDERAL MARITIME COl1MISSION

DOCKET No 68 16

ANTHONY G O NEILL FREIGHT FORWARDER LICENSE

Decided October 10 1968 

Applicant not qualified for licensing as an independent ocean freight forwa

inasmuch as the hearing has demonstrated he lacks sufficient knowledg

or experience with the complexities and formalities of exporting proced

Applicant not qualified to act in the fiduciary relationship required of a fr

forwarder because of his inability to understand and communicate i

English language

Anthony G O Neill for himself

Donald J Bmnne1 and Robert H Tell as Hearing Counsel

REPORT

By THE COMMISSION John Harllee Ohairrnanj Ashton C Bar

George H Hearn James F Fansoon Oommissione1 8

The Commission instituted this proceeding on March 27 196

determine whether Mr AnthOliy G O Neill applicant possesses 

necessary qualifications to he issued an independent ocean fre

forwarder license

Applicant had requested a hearing to show thalt the intended d

ofhis application wasnot warranted Applicant s

request followed 

notices of intended denial dated January 25 1968 and Februar

1968 Hearing was duly held ak which applicant was not represe

by counsel Applicant did not file a brief

Examiner C W Robinson served an initialdecision on July 5 

to which Hearing Counselhave filed exceptions

FACTS

Applicant was born in Uruguay in 1910 He has lived in va

countries including Franoe and Spain He came to the United S

from Venezuela in 1955 and becameaU S citizenin 1959

Applicant obtained a Federal Maritime Board Certificate of R

68 12 F M 
ANTHONY G O NEILLFREIGHT FORWARDER LICENSE 69

tlation No 2371 in 1958 1

By Federal Register noticeofSepteinber 9

1960 the Board ordered applicant among others named to show

cause why his registration should not be cailceled because of failure to

furnish certain informationconcerning hisoperations When the Board

received no response to the order to show cause the registration was

canceled by Federal Register notice of Ocrober 22 1960 Applicant

claims that he never received the two notices respecting the cancella

tion of the certificate It was not until 1967 that applicant learned of

the invalidity of the certificate

Although applicant received assurances ofassistance from friends in

foreign countries when he received his certificate in 1958 he took no

steps to engage in the business of freight forwarding until 1967 inas

much as he had too much other work to do In 1967 acquaintances in

in the import export house of Casa Moneo in New York indicated to

him that he would be given some of their business if his certificate was

still in effect He was advised by them to check the matter because the

rules and regulations for this type ofbusiness had been changed Upon

caning at the New York office of the Commission he was told that the

certificate had been canceled The present application was filed after

applicant leRrned thUlt his certificate had been canceled

The only steady occupation applicant has had in thisconntry is that

of an elevator operator at tyO locations in fi1anhattan New York City

fIehas been so employed for the last 12 years

Thile living in Europe applicant was a

representative of a French

exporting concern and of a Spanish exporting house each of which

shipped to the other cow1try As part of his duties he prepared all of

the usual cOlumercial documents and made the arrangements for ocean

transportation During his residence in the different foreign countries

he became familiar with documents connected with export shipments

Applicant has had no experience in the United States as a freight

forwarder or with any business related to ocean exporting Althoughhe

has read both the law governing freight forwarders and the Com

mission s liles and regulations on the subject he has demonstrated a

very limited knowledge of ocean freight forwarding as performed and

regulated in the lTnited States or ofexport control laws ofthe United

States

Because of his connections with the French and the Spanish con

sulates applicant feels that he will receive suppOrt from them in his

quest for clients Furthermore he believes that some business will come

from Casa Moneo even though that company might do its own for

1

Prior to the 1961 passage of Public Law 87 254 General Order 72 of the Federal

Maritime Board required each person wbo engaged in buSiness as 8

freight forwarder to

register with the Board before engaging insuch business

12 F M C
70 FEDERAL MARITIME COMMISSION

warding orutilize the services ofothers His general knowledge of t

activities ofthe Casa Moneo is grounded upon its reputation in Spa

Applicant has aminimum ofoffice equipment all located in hishom

in the Borough of Queens but he would open an office if the applic

tion is successful Although hehas taken no steps to ascertain wheth

he can secure a surety bond as required by law and by the Commissio

General Order 4 applicant has sufficient funds to pay the premium f

such a bond

Applicant s stated reasons for entering the forwarding business a

thatsince he owns ahouse he wants to make more money for his fam

and to improve his standard of living He also wants to cease t

operation of elevators since the work connected therewith is too hea

for him

The Examiner noted that applicant s accent is difficult to und

stand and it is hard for him to converse freely in English or to be s

of his interpretation of some English words Heis attending school 

order to inlprove his English Ifa license is issued applicant wou

elnploy an English speaking secretary to assist in obtaining clients

In his F 1C application form No 18 applicant gave four co

pletely unresponsive answers to questions posed In response to t

question of how long applicant has been in ocean freight forwardin

applicant replied From Septenlber 58 to July 59 Applicant in fa

has never operated as a

freight forwarder Applicant s reply to 

inquiry about the number of shipments dispatched by applicant in t

last year was 25 Applicant in fact dispatched no shipments To t

question concerning number ofshipper clients during the same perio

the answer was 20 In fact no shipper clients were served by app

cant In response to the question concerning yearly gross revenue 

rived from freight forwarding fees and compensation by carrie

applicant answered 25 000 for each category In fact applica

received nothingsince he did not operate as a freight forwarder

Applicant admits that these answers are erroneous He attribu

the error to his unfamiliarity with the English language Applica

stated that he construed the questions regarding unmber ofshipme

and number of shipper clients to refer to his operations in Europe 

explained that he understood the question regarding forwarding f

and compensation to refer to the amount ofmoney he waswilling 

invest orput up for his fQrwardingbusiness

The answers to the application questions initially were put 

paper by I3pplioanrt himself They then were givento his nephew w

typed then On One of two copies of the appl caJtion received from 

Commission s New York office The draft copy wasthen turned Ove

l2 F M C
ANTHONY G O NEILL FREIGHT FORWARDER LICENSE 71

someone else s secretary who typed up the second copy which was

filed with the Commission

DISCUSSION

The Examiner found the applicant to be fit willing and able prop

erly to carryon the business of forwa rding and to qualify for a

license contingent upon the association with him for a period of 2

years of someone with current experience in the business of ocean

freightforwarding We do not agree with the Examiner s conclusions

Inrecomnlending approval of the license the Examiner stresses the

faot that applicant is an honorable person educated experienced gen

erally in international trade and has the will and deterln nation to

make a successful career for himself TIlese facts are true Nevertheless

we feel more is required to qualify for a license as an independent

ocean freight forwarder

Inour letter ofintent to deny we stated that the specific ground for

denial wasthatapplicant did not possess sufficient experience to qualify

for licensing The Examiner glossed overthe problem of experience by

indicating that lack of extended experience should not be the sole

criterion as to whether a license should be granted The Examiner

stated that if it develops after a reasonable time that applicant is not

capable of or fit for the performance of his functions in alawful and

satisfactory manner he will morethanlikely drop by the wayside as do

other businessmen under similar circumstances or complaints prob

ably will be made to the Commission about him and in the latter case

the Conlffiission has ample authority to take the necessary steps to

correct the situUition

We agree that experience is not the sole criterion as to whether a

license may be granted This however does not change the fact that

experience is an important criterion We also recognize that an appli

cant may qualify without actual extended experience as a freightfor

warder or in the employ of a

freight forwarder Itis conceivable that

an applicant could gain sufficient knowledge of forwarder functions

duties and activities whileworking in related areas ofthe oceanexport

field However in this case we are not atisfied that applicant in fact

possesses the required knowledge ofthe mechanics of freightforward

ing Applicant has had no actual experience as a freight forwarder

Furthermore the record in this proceeding demonstrates that appli

cant s experience in international trade has not provided him with the

requisite knowledge of ocean freightforwarder activities as performed

i theUnited States export commerce Applicant has also demonstrated

12 F M C
72 FEDERAL MARITIME COMMISSION

an insufficient knawledge afunderstanding afthis Cammission s ru

and regulatians gaverning activities of freight forwarders

Specifically Hearing Counsel have demonstrated that applicant 

unfamiliar with shipper declaratioil issuance and filing procedure 

unfamiliar with export cantrallaws and schedule B commodity list

a

nd is unfamiliar with the Commissian s pay overrule

When questianed about a forwarder s function in regard to exp

decl rations appli nt demopstrated that he wascanfused about whe

or with hom they are required to be filed Applicallt also stated 

was nat famili rwith schedule B a statistical classification of co

madities expor d fram the United States Schedule B prepared 

the Department af Cammerce classifies commodities and assigns 

commadity number to ench classification of export items U S exp

laws require th schedule B

commodity number to appear on the sh

per s expart declaratian lhe export declaration is required to be fil

with a U S Oollector of Custams at the port of exit It is a

freig

forwarder function to prepare and file shipper s export declaratio

Applicant has demonstrated his inability to perform this functio

lVhen questianed abaut the Cammission s pay over rule which 

quires a forwarder within 7 days to turn over to the carrier lnon

entrusted to him by the shipper applicant indic3ted thnt he thaug

the time limit wassomething like a month 01 2 months

These examples sufficiently indicate that applicant does nat poss

a suitable knawledge of the duties functions and obligations of 

ocean freight farwarder

Additianally the facts surrounding applicant s preparation of t

FMC application form and the Examiner s

finding cancerning app

cant s difficulty in interpreting the English language indic3te th

applicant is nat sufficiently versed in Englishto enable him to prope

carry aut the duties af a freight farwarder Applicant has admit

thatthe incorrect answers on his application form resulted from 

inability to understand relatively simple questions posed by the app

cation How then can we be sure that applicant will be able to und

stand the rather technical language of expart declar3Jtians bills 

lading cansular invaices 01 the Cammission s rules and regulation

The freight forwarding industry is an important segment of 

ecanomy afthe United States in that it makes possible participation

the export cammerce ofthe United States There aremany complexit

and farmalities involved in exportingprocedures Congress in pass

the licensing tatute recognized these complexities and indicated 

impartance of having anly qualified persons acting as freig

forwarders

i2 F M C
ANTHONY G O NEILLFREIGHT FORWARDER LICENSE 73

The intention of the bill therefore under the licensing provision is to have

every person firm or corporation who holdshimself outas afreight forwarder

to be fully competent and qualified to act in the fiduciary relationship which

such business necessitates ll

We conclude that the hearing which has been afforded applicant has

demonstr3lted thathe isnot familiar with the complexities and formali

tles of exporting procedures Because of this and because of his in

ability to understand and communciate in theEnglish language he is

not qualified to act in the fiduciary relationship which is required of

the freight forwarding business

We do notagree withthe Examiner s reasoning thatapplicant should

be licensed and if itdevelops later that applicant is not capable or fit

for the performance of his functions necessary steps can be taken to

correct the situation Such an appraach would reversethe proper arder

of pracedure outlined by the licensing statute vVe feel that the whole

purpase afthe licensing statute is to insure 3Jt the outset that licensees

are well qualified Only then can we be reasonably certain that the

forwarder s duties will be performed in the regula rmaImer

Accordingly the a

pplicatian for afreight forwarder s license will

be denied This denial will be without prejudice to any future

applicatian

VICE CHAIRMAN J UIES V DAY dissenting

Ic mcur with the opinion ofthe Examiner in this m3Jtter in that I

find the applicant to be fit willing and able praperly to carryon the

business of forwarding and to qualify far a

license contingent upon

the association with him for a period of 2 years of someone with cur

rent experience inthe business of ocea Jl freightforwarding

2 House Committee on Merchant Marine and Fisberies H RCllt No 1096 87th Cong

hjt ess 3 1961

12 F M O
FEDERAL MARITIME COMMISSION

DOCKET No 68 16

ANTHONY G O NEILLFREIGHT FORWARDER LICENSE

ORDER

The Commission having fully considered the above matter a

having this date made an entered of record areport containing 

conclusion and decision thereon which report is hereby referred to a

made a part hereof

Itis ordered That the application for license ofAnthony G O N

is denied pursuant to section 44 of the Shipping Act 1916 with

prejudice to any future application

By the Commission

Signed THOMAS LISI

Secretary

74 lL2 F M 
FEDERAL MARITIl1E COMl1ISSION

DOCKET No 68 19

G R MINON FREIGHT FORWAHDER LICENSJ

Decided October 10 1968

Applicant found not to possess the personal responsibility required to qualify

for an independent ocean freight forwarder s license because of his coopera

tion in the fraudulent diversion of drug shipments and because of his

insistence to continue to permit the illegal use of his forwarder number

after having been informed of the impropriety of such practice

Jack Lassa1 for applicant

Donald J Brunner Robe1 t M Sielaty and Robert H Tell as

Hearing Counsel

REPORT

By THE COllMISSION John Harllee Ohairnwn James V Day Yice

Ohairman Ashton C Barrett George 11 Hearn James F

Fanseen Oommission e18

The Commission instituted this proceeding on April 16 1968 to

determine whether 1r G R 1inon applicil nt possesses the neces

sary qualifications to be licensed as an independent ocean freight

forwarder

Applicant had requested a hearing to show that the intended denial

of his application was not warranted Applicant s

request followed

our notice of intended denial dated October 5 1967 Hearing wasduly

held Applicant was not represented by counsel at the hearing but was

represented on brief

Examiner C W Robinson 1

served an initial decision on July 26

1968 to which Hearing Counsel have filed exceptions

FACTS

In lay of 1961 applicant was issued a Certificate of Registration

No 2834 to operate as an ocean freight forwarder In January of

1

The Examiner who presided at the hearing left the employ of the Commission shortly

thereafter and the present Examiner was designated to issue an Initial decision See sec

5 c of the Administrative Procedure Act 5 U S C A 554 d Rule 10 e of the Com

missions Rules of Practice and Procedure 46 CFR 502 145

2

Prior to the 1961 passage of Public Law 87 254 General Order 72 of the Federal

Maritime Board required each person who engaged in business as a freight forwarder to

register with the Board before engaging in such business

12 F M Q

75
76 FEDERAL MARITIME COMMISSION

1962 after the passage of the present licensing statute Public La

87 254 applicant applied to the Commission for a license as 

independent ocean freight forwarder Applicant was permitted 

continue operations as a freightforwarder under grandfather righ

conveyed by the statute to registrants who Inade timely applicatio

for a license

Prior to his registration as a freight forwarder applicant w

employed hy L Aguinaldo Co Inc Aguinaldo an exporter 

department store merchandise Aguinaldo is located at 79 Walk

Street Borough of Manhattan New York City During the yea

1926 to 1937 applicant worked with Aguinaldo as a packing m

and performed other duties incidental to the preparation of m

chandise for shipment t

pplicant also worked on and off f

Aguinaldo from 1937 to 1947 and again part time from 1947 to 19

In 1947 applicant became employed as a postal clerk in Brookly

He has been employed there since that time Applicant s worki

hours at the post office runfrom 6 p

m to 2 30 am

Applicant s hours at the post office have enabled him to usethe da

time hours for his freight forwarding activities Applicant does n

keep regular hours for his freight forwarding business He wor

only when there are shipments which average about one per mon

Applicant s

freight forwarding office consists of space located 

a large warehouse rented from Aguinaldo for 25 per month T

warehouse is located on the second floor of Aguinaldo s 79 Walk

Street location The warehouse is shared principally by Aguinald

and Perez Co an exporter of general merchandise to South Am

ica Applicant utilizes only a small area of the warehouse His equ

lllent there consists of a desk typewriter facilities for making o

and filing papers and documents and the usual tools and relat

articles for packing merchandise for export A large scale and 

teIepholle are available to him The telephone is not listed under 

name but the number does appear on his business card

Applicant s

forwarding business is confined to personal and hous

hold goods belonging to friends who want them sent to the Phili

pines He has forwarded autom biles and refrigerators on occasio

Applicant advises his customers to have their purchases deliver

directly to his premises as this saves additional trucking fees T

goods are placed on applicant s rented space and packed when he h

the time Over the years the shipments have averaged at least one 

month usually consisting of several cases to a shipment Applica

makes out all the usual shipping papers and documents and has t

packages delivered to the ship in time for loading

12 F M O
G R MINON FREIGHT FORWARDER LICENSE 77

Certain facts relating to applicant s past conduct in his operations

as an ocean freight forwarder reflect on 11 is personal responsibility

and qualification for a forwarder license

Applicant became acqHlinted with tTose Hnenaventura in 1961

Buenaventura was active in handling export merchandise but the

record is not clear whether Bnenaventura was acting as a forwarder

or a shipper

The record does show that Buenaventura had either applied for

or was considering applying for a FMB forwarder registration num

ber and that before he had obtained the number applicant offered to

handle Buenaventura s shipluents Buenaventura refused this offer

However applicant did permit Buenaventura to use his registration

number on one or more occasions in 1961 and 1962 untilBuenaventura

obtained his own registration number Under this arrangeluent in

return for permitting the use of his number applicant received the

2lh percent brokerage commission paid by the carrier Applicant was

informed that the practice of allowing the use of a

freight forwarder

number by one not entitled thereto wasprohibited 3

Applicant did not

thereafter allow Buenaventura to use his number

However it wasdisclosed at the hearing that application is presently

permittinghis lessor Aguinaldo to use his freight forwarder number

when shipping export merchandise Under this arrangement appli

cant performs no forwarding service other than to clear with Customs

documents prepared by Aguinaldo As with his previous arrangement

with Buenaventura applicant receives the 2 percent brokerage

commission from the carrier

Applicant was introduced to Ralph Sarfati Sarfati by Buena

ventura some time in 1962 Sarfati vas referred to by Buenaventura

as a purchasing agent for a drug company in the Philippines It de

veloped that Sarfati was looking for a

freight forwarder to handle

his business In July 1963 Sarfati showed applicant a

copy of a letter

from Sarfati to Roche International Inc Roche dated July 23

1963 The letter amounted to an order for a shipment of Lihrium

capsules for loading on the MS President Roxas of United Philippine

Lines on August 5 The letter instructed Roche to deliver the order

to applicant s warehouse not later than August 1 Applicant wasdesig

nated in the letter as Sarfati s freight forwarder Sarfati informed

applicant that he wanted him to ship themerchandise for him Sarfati

asked applicant to be on hand at applicant s premises early on the

Saturday following July 23 for some merchandise that would he de

8

This practice was forbidden at the time by FMB Generai Order 72 which applied to

registrants The practice Is also now forbIdden by Fl IC General Order 4 whIch applies to

licensees or grandfathers

12 F M O
78 FEDERAL MARITIME COMMISSION

livered there to Sarfati Applicant did as requested and assisted 

the unloading of the merchandise and placing it in an elevator wh

took it upstairs Rather than holding the merchandise there for sub

quent forwarding to the ship the merchandise was brought ba

downstairs with applicant s assistance and loaded into a stat

wagon Sarfati was present during the entire transaction which to

about an hour Sarfati originally told applicant that the shipment w

going to the Philippines Sarfati changed his mind but applica

states he does not know why

In September 1963 Sarfati showed applicant a

copy of anoth

letter from Sarfati to Roche dated September 17 This letter w

similar in tenor to the letter of July 23 instructing Roche to deliv

a shipment of Librium and Librax capsules to applicant s premis

not later than September 27 for October 2 loading on the 11S Preside

Garcia of United Philippine Lines AppFcant asked Sarfati to ma

delivery to his place of business on a particular day when he was n

working at the post office On the day of delivery Sarfati and 

brother arrived at 79 Valker Street in a taxi The two brothers a

applicant unloaded the shipnlent from a small truck onto the sidew

and subsequently into a Cadillac limousine and a station wagon Tw

unidentified men accompanied the limousine and assisted in the loa

ing operation The shipment was accepted by a firm called by app

cant Barwein located on lower Broadway somewhere

Applicant told an agent of the Federal Bureau of Investigati

FBI on May 11 1964 that he knew at the time that Sarfati act

fraudulently in diverting the two shipments from the Philippin

and disposing of them in the domestic market prdbably at a pr

advantage 4

Oopies of two unsigned hills of lading covering the two shipme

were obtained from Roche by an investigator from the Commission 

New York office The name of the consignee and the name of the p

son to receive the arrival notice in Manila are deleted from each co

There is of record a

copy of a letter from applicant to Roche dat

August 15 1963 stating Please find your copy ofthe bill of ladi

substantiating a recent shipment made to the Philippines throu

our facilities The letter relates to bill of lading No 86 dated A

gust 6 1963 for the first shipment Bill of lading No 48 dated O

tober 10 1963 covered the second shipment but no letter fro

applicant to Roche respecting this bill was produced United Phil

pines Lines has no record ofeither shipment

4

The FBI was investigating the pattern of Sarfati s operations in connection with 

interstate transportatioDJ of stolen property the two shipments here in question were 

involved

12 F M C
G R MINON FREIGHT FORWARDER LICENSE 79

Certain faots concerning these two diverted shipments are disputed

The FBI agent who questioned applicant in Buenaventura s office on

ltlay 11 1964 testified that applicant told hin1 that the first shipment

was loaded on a small truck that a Spanish speaking man gave Sar

fati a check that applicant accompanied Sarfati to a bank that Sar

fati cashed the check and paid hiln 50 and that applicant turned over

to Sarfati a bill of lading The agent does not recall whether he was

told that applicant prepared the bill Applicant did say however that

he did not consider the preparation of the bill would be a violation

of the rules governing freight forwarders because the bill had not

been validated and had not been turned into Customs Applicant also

told the agent that on the day following the delivery of the second

shipment Sarfa ti received a check gave him 100 and applicant

turned over to Sarfati the covering bill of lading The agent does not

remember whether applicant said he prepared the bill

Applicant now denies that he prepared the two bills of lading and

insists that he received only 10 from Sarfati for each shipment since

he performed no forwarding services Furthermore he maintains that

Sarfati merely showed his copies of the two letters from Sarfati to

Roche and that he could not have prepared the bills of lading as he

did not have copies ofany papers from which to draw the information

to be placed thereon Hepoints out that anyone can obtain blank bills

of lading from ocean carriers In addition to his general denial about

the bills applicant testified that he never saw No 86 He cannot ex

plain how his name his Certificate of Registration number and his

Commission number appear on the two bills but Sarfati could have

known the numbers since he had applicant s card on which the num

bers appear An employee of Roche when interviewed by aCommission

investigator stated that the bills had been presented to his company

by Sarfati to enable him to pick up the shipments

Applicant contends that his signature on the letter of August 15

1963 to Roche is a

forgery but admits that the letterhead is his He

does not know how the letterhead was obtained but realizes that Sar

fati could have secured some of his stationery because he came to his

place of business on occasion To the untrained eye the signature on

the letter is not the same as applicant s signature on his application

for a license or his letter of October 16 1967 requesting a hearing

DISCUSSION

The Examiner concluded that applicant is fit willing and able

properly to carryon the business of forwarding and qualifies as an

independent ocean freight forwarder The Examiner cautioned how

112 F M C
80 FEDERAL MARITIME COMMISSION

ever that applicant should be warned that any future violation 

the Act or of the Commission s rules and regulations pertaining 

ocean freight forwarders would warrant revocation of his gran

father operating rights and that applicant should cease immediate

permitting anyone to use his name and or license number whe

applicant performs no services connected therewith We do not agr

with the Examiner s conclusion that applicant qualifies for a licen

This proceeding was instituted to determine whether applicant po

sesses the necessary qualification to be licensed The order indicat

we were specifically concerned with applicant s lack of personal 

sponsibility as evidenced by his past involvement in the preparati

ofbogus bills oflading on drugshipnlents

The drug shipments in question were those described above invo

ing Sarfati and Roche The record establishes that Sarfati fraudule

ly diverted the drug shipments scheduled to go to the Philippine

for sale in the domestic market This was accomplished through t

use of bogus bills of lading and with the cooperation of applica

The record does not conclusively establish that applioant prepared t

bogus bills of lading or even that he knew of their existence Nev

theless there is testimony to the effect that applicant did know 

the bills of lading and that applicant was paid by Sarfati f

producing them

Regardless of wheher applicant prepared the bills of lading 

whether he knew of them orwhether he received money for produc

them the fact is firmly established that applicant knew what w

being done hy Sarfati Applicant knew that the drug shipments w

being fraudulently diverted for domestic sale l

nowing this

cant still cooperated with Sarfati in diverting the shipments a

accepted at least a token amount of compensation for his cooperatio

While these facts do not reflect favorably on applicant s charact

taken alone they might not consititute sufficient evidence of lack 

personal responsibility to warrant denial of applicant s license Ho

ever the hearing produced other evidence regarding activities 

applicant which reflect further on applicant s personal responsibi

and which prompts us to find applicant unqualified to operate as 

freight forwarder

As indicaJted above applicant wasinvolved in an arrangement w

Buenaventura whereby Buenaventura waspermitted to use applican

FMB registration number and in return applicant received 2 p

cent brqkerage commission paid by the carrier for the shipme

Applicant was informed that this praotice was contrary to Comm

sion rules relating to practices offreight forwarders Nevertheless 

12 F M C
G R MINON FREIGHr FORWARDER LICENSE 81

now appears that applicant is again involved in a similar scheme

This time the arrangement is with Aguinaldo As with Buenaventura

applicant receives the 2Y2 percent compensation from the carrier while

permittiug Aguinaldo to use his license nmuber Applicant does not

perform the required functions which would entitle him to receive

the compensation Aguinaldo as seller of merchandise in foreign

commerce is not prohibited from dispatching such merchandise with

out a license However he is not permitted to accept compensation

from the carrier on such shipments The entire arrangement between

applicant and Aguinaldo is a scheme whereby applicant fraudulently

obtains the compensation from the carrier which compensation the

carrier is not obligated to pay

and which other than for tIllS scheme

would neverbe paid

Applicant s arrangement with Aguinaldo closely resembles the

several cases reviewed by the House Committee on Merchant Marine

and Fisheries in 1956 Upon review of these cases that committee con

cluded that the practices of collection of unearned brokerage fees

was widespread and recommended than an appropriate bill should be

introduced to provide for the licensing of freight forwarders and that

the Federal Maritime Board should formulate reasonable rules with

particular emphasis uopn the elimination of the automatic payment

of unearned brokerage 5

The licensing statute followed in 1961 and it provided that carrier

compensation could only be paid upon certification by the forwarder

that it had performed certain essential functions in regard to the

shipment To further ensure compliance with this requirement we

adopted a rule which stated that No licensee shall permit his license

or nanle to be used by any person not emp oyed by him for the per

formance of any freight forwarding services 46 CFR 510 23 a

Applicant has been shown to be operating in violation of this rule

and in so doing is collecting unearned compensation

Applicant s insistence to renew this type of conduct after having

been previously informed of its impropriety coupled vith his activi

ties in connection with the diverted dnlg shipments causes us to con

clude that applicant does not possess the personal responsibility

required to qualify as fit willing and able properly to carry

on the business of forwarding and to conform to the provisions

of this act and the requirements rules and regulations of the

Commission 6

15 House Committee Oil Merchant Marine and Fisheries H Rept No 2939 1st BesS 56

1956

6 Sec 44 Shipping Act 916 46 D S C 841 b

12 F M c
82 FEDERAL MARITIME COMMISSION

vVe cannot agree with the Examiner s recommendation that ap

cant should merely be scolded for his past indiscretions and war

about the consequences of any similar future activities Consider

that applicant had previously been informed of the impropriety 

permitting someone to use his name or license and considering t

applicant knowingly cooperated in the diversion of the drug sh

ments we conclude that it would be unduly stretching any conc

of fairness to afford applicant still another chance Accordingly 

application for license will be denied and applicant s grandfat

operatingrights will be revoked

12 F M 

ORnER

DOCKET No 68 19

G R MINON FREIGHT FORWARDER LICENSE

The Commission having fully considered the above matter and h

ing this date made and entered of recod a

report containing its c

clusions and decision thereon which report is hereby referred to a

made a

part hereof

It is ordered That the application for license of G R Minon 

denied and his grandfather operating rights are revoked pursuan

section 44 of the Shipping Act 1916

By the Commission

SEAL Signed THOMAS LISI

8eCJ etwy

12 F M C
FEDERAL NIARITIME COMMISSION

DOCKET No 67 8

IN THE MATTER OF AGREEMENT 9597 BETWEEN FLOTA MERCANTE

GRAN CENTROAMERICANA S A CONTINENTAL LINES S A AND

JAN C UITERWYK CO INC

ORDER ADOPTING INITIAL DECISION

October 10 1968

By THE COMMISSION JOHN HARLLEE Chairman JAMES V DAY

Vice Ohairman ASHTON C BARRETT GEORGE H HEARN JAMES

F FANSEEN Oommissioners

This proceeding is before us on exceptions to the initial decision of

Hearing Examiner John Marshall Respondents exceptions merely

constitute a reargumentgf the same issues allegations and contentions

considered by the examiner in his initial decision

Mter a careful review and consideration of the record in this

proceeding as well as the exceptions replies and argument of counsel

we conclude that the examiner s

findings and conclusions were well

founded and proper Accordingly we hereby adopt the examiner s

decision as set forth below

By the Commission

S THOMAS LISI

Secretary

ORDER

This proceeding having been initiated by the Federal Maritime

Commission pursuant to sections 15 18 b and 22 of the Shipping

Act 1916 and the Commission having this day adopted ftS its own

and entered of record the initial decision of the hearing examiner

which decision is hereby referred to and made a part hereof

It is ordered That respondents Flota Mercante Gran Centro

americana S A Continental Lines S A and Jan C Uiterwyk Co

Inc either directly or indirectly through any affiliated corporation

or person or by any other device cease and desist from all acts and

practices herein found to be in violation of the Shipping Act 1916

By the Commission

S THOMAS LIS1

Secretary

12 F M C

83
84 FEDERAL MARITIME COMMISSION

No 67 8

IN THE MATTER OF AGREEMENT 9597 BETWEEN FLOTA MERCAN

GRAN CENTROAMERICANA S A CONTINENTAL LINES S A A

JAN C UITERWYK CO INC

Respondents are common carriers by water amenable to the p

scriptions of the Shipping Act 1916

Respondents entered into and carried out continuing agreements 

are presently carrYing out an agreement without Commiss

approval in violation of section 15 of the Shipping Act 19

Respondents have charged different rates than those specified 

tariffs on file with the Commission in violation of section 18 

3 of the Shipping Act 1916

Edwin Longcope for respondent Flota Mercante Gran Centroam

cana S A

Thomas K Roche and William Faison for respondents Contine

Lines S A and Jan C Uiterwyk Co Inc

Alan F Wohlstetter Ernest Land and Daniel Reiss Jr for in

vener United Fruit Co

R Stanley Harsh and Donald J Brunner Hearing Counsel

INITIAL DECISION OF JOHN MARSHALL

PRESIDING EXAMINER 1

By Order of Investigation and Hearing served February 1 19

the Commission initiated this proceeding pursuant to sections 

18 b and 22 of the Shipping Act 19162 the Act to determi

1 Whether Jan C Uiterwyk Co Inc and Continental Lin

S A are common carriers by water subject to the Comm

sion s jurisdiction

2 Whether any agreement between the parties may have b

carried out without Commission approval in violation 

section 15 of the Act

3 Whether the parties to Agreement No 9597 or any of th

have transported cargo between U S Gulf ports and Gua

mala in violation of section 18 b of the Act

Thisdecision became the decision of theCommission October 10 1968

46 U S C 814 817 and 821

12 F M 
AGREEMENT 9 597 85

THE FACTS

1 The agreements here concerned 3

relate to several Guatemalan

decrees On September 22 1959 the Congress of this Central American

Republic enacted Decree No 1317 known as Ley de Fomento Indus

trial or the Industrial Development Law for the purpose of strength

ening the national economy and stimulating domestic industries

Under this law certain industries were exempted from paYing import

duties on specified cargoes during a 10 year period and the Head of

Government was granted certain powers to restrict such imports

By Decree 5757 issued November 8 1961 certain imports were des

ignated as controlled cargo Itwas provided that in order for these

cargoes to be exempted under Ley de Fomento they must be carried

by the vessels of Flota Mercante Gran Centroamericana or by any

steamship linewith whom Flota has an agreement On April 12 1966

Decree 444 was issued and on May 4 1966 Decree 468 was issued

These supplanted Decree 5757 and restricted additional commodities

to carriage by state transportation companies therein defined as

companies owned by the government or in which the government

has an interest 4In 1966 32 326 short tons of cargo excluding bulk

wheat moved in the Gulf Guatemala trade 25 302 short tons or 78

percent of the total was controlled cargo

2 In July 1963 Flota Mercante Gran Centroamericana S A

hereinafter Flomerca entered into an agreement with Continental

Lines S A hereinafter Continental whereby Continental was au

thorized to carry controlled cargo in the trade between the gulf ports

and the east coast of Guatemala in return for payment of royalties

to Flomerca Jan C Uiterwyk Co Inc hereinafter sometimes

Uiterwyk having been appointed U S general agent for Continental

and general gulf agent for Flomerca issued a solicitation circular con

taining the statement that This is the only Guatemalan operation

service from 1iami and gulf ports to Guatemala and should there

fore be used for Ley de Fomento cargo

3 The original tariff issued July 19 1963 designated the carrier

as Flomerca Continental Line Following advice from Uiterwyk

that we might run into a controversy with the FMC with regard to

the filing o a joint service operation under section 15 a revised

3 There is no issue of approvability as no agreement is on file

4 99 8 percent of thestock of Flpta Mercante Gran Centroamericana is held by theGuatemalan Govern

ment The remaining 0 2 percent Is privately held The company has three operating sections ordivisions

described by its general manager as 1 the US GulfCentral America 2 the Europe Central America

and 3 theUS North Atlantic CentralAmerica Its two owned essels are used in theU S North Atlantic

Central America service New York to Guatemala and Honduras

12 F M C
86 FEDERAL MARITIME COMMISSION

title page was issued August 6 1963 changing the carrier designat

to Flomerca Line The Daily Shipping Guide ofAugust 13 1963 

vertised the operation of the same vessel by Flomerca and Continen

to the same ports on the same voyage and an article in the Tim

Picayune of August 23 1963 announced the new service inaugura

by Flomerca Line and Continental Line By letter dated August 

1963 to agents at Miami New Orleans Houston and New Yo

regarding Disbursement Accounts Continental Flomerca Servic

Uiterwyk advised that disbursements and collections are all for 

account of Continental Lines S A in Antwerp and that all o

bound freight should go on a pre paid basis and all inbound frei

from the East Coast of Central America on a collect basis so that 

funds can be collected here in dollars

4 In January 1964 Uiterwyk became a full partner with C

tinental in the Gulf Guatemala service which Mr Uiterwyk in a c

firming letter to Continental referred to as ajoint venture Und

the provisions of the letter agreement tJiterwyk paid Continen

7 500 to cover one half of certain previous losses and deposited 7 

in Continentals account as Uiterwyk s share of the working cap

of the venture Uiterwyk and Continental then began splitting pro

and losses 50 50 and Uiterwyk agreed that in the future it would 

charge a general agency commission By letters to shippe

Uiterwyk continued to urge that they must route their cargo 

Flomerca if their receivers were to realize the privileges un

Ley de Fomento

5 An agreement dated September 9 1964 retroactive to July 

1964 wasentered into between Flomerca on one side and Continen

Uiterwyk on the other In substance it was agreed 1 that Con

entaliUiterwyk thereinafter named Operators would maintai

regular service with regular sailings between gulf ports and Gua

mala under the name Flota Mercante Gran Centroamericana 2 t

the service would be entitled to benefits enjoyed by Flomerca un

Guatemalan laws 3 that for this privilege Operators would p

royalties to Flomerca based upon a formula which after deduct

5 percent from total export and import manifests to cover admin

trative expenses and general agency fees would provide from 

percent of annual profits not in excess of 10 000 to 12 5 percen

such profits exceeding 40 000 4 that financial and operatio

responsibility for the service would be for the account of Operat

and therefore that Flomerca would not have to contribute capital 

that Operators would appoint Flomerca as their general agents 

this service in Guatemala and would pay 2 5 percent on southbou

12 F M C
AGREEMENT 9597 87

manifests and 5 percent on northbound manifests 6 that Uiterwyk

would operate the service as general agents and managers in the

United States 7 that Flomerca would do its utmost to solicit

export and import cargo and would devote every possible effort to

obtain for this service cargo covered by the Guatemalan Ley de

Fomento 8 that Flomerca would not make any agreement with

other lines or services which could directly or indirectly affect the

gulf service without first consulting with Operators and 9 that

Flomerca would be allowed to have one or more of its own vessels

in the gulf service as long as both parties agreed on the terms of

said service On March 19 1965 a letter to shippers by Uiterwyk s

sub agent Lone Star Shipping Inc circulated a translation of

Decree 5757 indicating that controlled cargoes must be carried by

Flomerca or any steamship line with which Flomerca has an agree

ment with the admonishment trust you will be guided accordingly

6 Until June 1964 Continental operated regularly in the gulf Hon

duras trade under its own name It filed tariffs solicited cargo and

advertised sailings Honduras cargo and Guatemala cargo were car

ried on the same vessel the former under Continental bills of

lading and the latter under Flomerca bills of lading In June 1964

Continental s tariff was redesignated as that of Flomerca Line

7 InAugust 1964 a carrier called Contramar S A started a com

mon carrier service from ports in continental Europe to U S North

Atlantic ports This service operates as the Capital to Capital Line

The following l1ay Contramar also started serving the trade from

these same European ports to U S South Atlantic and gulf ports

Continental Lines was and is the general agent for Capital to Capital

in Antwerp and Uiterwyk is U S general agent Capital to Capital s

U S North Atlantic agen t who was appointed by Continental issued

public announcements that this service was to be initiated by Con

tinental with Continental chartered vessels Two and one half years

later this agent testified that it might be difficult to state whether

he was agent for Continental Contramar or Capital to Capital Con

tinental and Contramar operate from the same office in Antwerp

they have the same owners and officials the same people work for

both companies and the same people sign correspondence Letter

heads indicate that they are associated companies However it is

contended that Continental acts merely as agent for Contrama r Con

tramar does not operate in any trades outside of the U S trades

while Continental operates common carrier services in its own name

only in non U S trades e g

between Europe and Central America

This is actually a joint service with Flomerca For years Continental

12 F M C
88 FEDERAL MARITIME COMMISSION

has openly served the Europe Guatemala trade under an agreem

providing access privileges in return for the paYment of royalties 

Flomerca 

8 On October 28 1964 Uiterwyk filed its common carrier ta

No 1 covering inbound and outbound service between U S Atlan

and gulf ports and Puerto Rico and named ports in the Caribbe

east and west coast of Central America South America and ot

otherports of the world This was virtufllly a worldwide tariff To 

best of Mr Uiterwyk s recollection it was never utilized by Jan 

Uiterwyk Co Inc However onFebruary 12 1965 it was adopted a

thereafter utilized in various U S trad by Uiterwyk Shipping L

another Uiterwyk family owned company Operating as Gulf Lin

it expanded into a liner service from U S gulf ports to the Europe

continent Thereafter the name was changed to and the tariffs w

adopted by Gulf Lines Ltd and then GulfExpress Lines Ltd Dur

this same period still another such company Uiterwyk Shippi

Inc was carrying explosives the principal item covered by 

tariff from gulf ports to Central America Jan C Uiterwyk is presid

of each of the above companies and all of the officers and directors 

each are either members of his immediate family or employees 

Jan C Uiterwyk Co Inc

9 An agreement dated July 2 1965 retroactive to July 1 19

was next entered into by Flomerca and Continental Uiterwyk 

included the substance of the previous agreement with certain ad

tions and revisions 1 The Operators guaranteed Flomerca minim

royalties of 2 000 Quetzal 2 000 per year 2 the profit sha

formula was changed to provide that Flomerca would receive 1

percent of amounts from 20 000 to 30 000 15 percent of amou

from 30 000 to 40 000 and 17 5 percent of amounts in excess 

40 000 3 responsibility for the financial operation and legal act

ties of the service was to be for the account of and risk ofOperato

and Flomerca was to assume no responsibility resulting from the 

of its name on documents such as bills of lading and manifests 

claims of all types against the service were to be handled and pa

by Uiterwyk 5 permanent increases or reductions in the frei

tariffs to the gulf will only be issued by mutual agreement betw

general agents and Operators should always try to adjust t

tariffs to Flomerca s N ew York tariff 6 emergency rate red

tions would be made by Operators according to heir judgme

but not by general agents unless with the approval of Operat

7 only the Operators would be allowed to submit tariffs to 

Federal Maritime Commission and 8 Flomerca would submit 

12 F M 
AGREEMENT 95197 89

Operators cargo solicitation reports and estimates of expenses for

newspaper advertising and for printing sailing itineraries It was

further provided that the agreement would remain in effect for 1

year

On March 9 1966 this agreement was expanded by an addition

entitled Annex A which provided for Gulf Honduras service It was

made retroactive to July 1 1965

10 On November 9 1966 during the course of an informal investi

gation by this Commission respondents tendered a

copy of the July 2

1965 agreement to the Commission and asked confirmation of their

position which was that no filing and approval under section 15 was

required 5

If however the Commission should consider the agreement

subject to section 15 approval such approval was requested The

agreement wasgiven FMC No 9597 Protests and requests for hearing

were thereafter filed by Grace Line Inc a common carrier serving

Guatemala and Honduras from U S ports the American Steamship

TrafficExecutives Committee some of whose member carriers provide

common carrier services between U S Atlantic and or gulf ports and

Guatemala and Honduras and United Fruit Co which then offered a

common carrier service between U S Atlantic and gulf ports and

Guatemala and Honduras By letter dated January 24 1967 respond

ents advised that they understood that it was the initial view of the

Commission that the agreement was subject to approval under section

15 and that they had therefore decided to withdraw the submission

11 An agreement dated January 25 1967 was then entered into

by respondents Flomerca was designated Owners and Uiterwyk

and Continental Agents It was provided 1 that the previous

agreement would be terminated as of that date 2 that Flomerca

would take over the chartering of the three vessels then in use and

start a new service for its own risk and account in direct continuation

of the service previously operated for the account ofContinentaljUiter

wyk 3 that Uiterwyk in accordance with prior authorization by

Flomerca would charter replacement vessels for the account of Flo

merca at rates equal to the rate charged by the vessel owner plus

75 per day 4 that Uiterwyk was appointed general agent and

6 Section 15 provides in pertinent part

Every common carrier by water shall file immediately with the Commission atrue copy

of every agreement with another such carrier or other person subject to this chapter to

which it may be aparty or conform in whole or in part fixing orregulating transportation rates or fares

giuing or receiving special rates accommodations or other special privileges oradvantages controUing

regulating preventing or destroying competition pooling or apportioning earnings losses or traffic

alloting ports or restricting orotherwise regulating the number and characterof sailings between ports

limiting or regulating in any way the volume or character of freight or passenger traffic to be carried

or in any manner providing for an exclusive preferential or cooperative working arrangement The term

agreement in this section includes understandings conferences and other arrangements IItalic

supplied

12 F M C
90 FEDERAL MARITIME COMMISSION

manager for the new service at stated commissions and fees bu

the reservation that Flomerca must first realize a minimum a

net profit of 68 300 or Uiterwyk s commissions and fees wou

reduced as required to produce that result 5 that Uiterwyk 

a name the port and booking agents in the United States who 

receive stated commissions and fees b maintain a separate 

account and bookkeeping records and make them available for in

tion by Flomerca c submit to Flomerca voyage finalization re

and monthly financial statements d provide for tariff filings 

the Federal Maritime Commission e collect freights and p

disbursements j appoint stevedores and arrange and pay for 

terer s liability insurance g

handle and pay claims and 

charterhires and h assume the responsibility to satisfy the 

requirements this contract creates in the United States Uite

was to be reimbursed for all communications travelling adver

promotion and Federal Maritime Commission tariff filing exp

but under the presumption that these expenses would not e

those of the previous year This agreement was to continue 

period of 3 months but it was subsequently extended for 1ye

has not been submitted to the Commission for approval

12 Effective the same date January 25 1967 Flomerca cha

the three vessels then in this service The charters were from 

gation Ltd 6

a Bahamian corporation which had been forme

Uiterwyk to take over certain common carrier operations from 

wyk Shipping Ltd in the Central American trade Itis owned 

by Mr Uiterwyk and his immediate family and the owners of 

tinental Jan C Uiterwyk Co Inc executed the charter for

brokers for Navigation Ltd Navigation Ltd had previously ob

the vessels by charter from Uiterwyk Shipping Ltd A rider 

was added to the January 25 1967 Flomerca charters to p

that so long as Uiterwyk continued as general agent for Flo

gulf service Uiterwyk would guarantee the charter paYments

13 Thereafter on April 5 1967 and again on May 4 1967 

merca chartered from Navigation Ltd the Maria A a 

owned by Jan C Uiterwyk Co Inc These charters also con

the above rider The charter forms were executed by Jan C Uite

Co Inc as broker for Navigation Ltd and as agent for Flom

14 In 1965 Asiatic Petroleum Corp in New York invited 

tations from three water carriers for the shipment of one empt

pane storage tank from Houston Tex to Matias de Galvez G

e These were actually subcharters as thevessels wereheld by Navigation Ltd under charters a

owner

12 F 
4GREEMENfl 915r97 91

mala Flomerca througl1 Uiterwyk submitted the low bid of 2 650

the next lowest bid was aro un d 5 000 The shipment was mov d

August 26 196on Flomerca s vessel The Eny Hoejsgaard

Voyage 3 under Houston Matias B L 23 Had the rates then on fil

with the Commission been aljplied as they should have been the

charge would have been 6 7f3 02 or 4 103 02 more than the flat

rat of 2 650

15 During the periods lay 15 1965 to June 29 1965 and Janu

ary 30 1966 to July 29 1966 Flomerca had two separate and dif

ferent tariffs on file for the gulf ports to Guatemala trade During the

period May 15 1965 to April 14 1967 it also had two tariffs on file

for the Guatemala tp gulf ports trade Tariffs were filed by Uiterwyk

in the name of Flom 3rca Line Gulf Service and by Flomerca in the

name of Flomerca Line each with9ut knowledge of the other Each

tariff contained some rates that were higher and some that were lower

than those contained ilthe other A review of the shipments in the

outbound trade during a 35 day period May 15 1965 to June 20

1965 revealed that in 10 instances Flomerca had charged the higher

of the two applicable rates During this same period there were 29

instances of improper ratings not attributable to having two tariffs

on file 7 The number of overcharges and undercharges wer abqut

even

DISCUSSION

The Guatemala shipping decrees as such are not here in issue

However knowledge of their provisions is necessary to an under

standing of the various agreements and the operations thereunder

which occasioned this investigation Intervener United Fr it main

tains that if Flomerca conducted its operations in the gulf trade in

the same lawful manner in which it operates in the New York trade 8

i e for its own risk and account United Fruit would not have asked

the Commission to undertake this action 9

Alcoa SS Inc v Oia Anonima Venezolana 7 F M C 345 1962

affirmed by Alcoa SS 00 v FM O 321 F 2d 756 1963 concerned

an agreernent between CAVN a Venezuelan government owned car

rier and Grace Line a privately owned American carrier whereby

Grace became the associated service of the Venezuelan national

flag line and thus authorized to carry classifications of commodities

7 Three of these were located and disclosed by respondents

8 Both trades are subject to thesame Guatemalan decrees

i

BeCf use of decllnlnJt revenuesUnited Fruit found it necessary to discontinue Its New York Guatem lla

service as of Aug 23 1967

12 F M C
92 FEDERAL MARITIME COMMISSION

exempted or exonerated by Venezuelan decree from payment 

import duties The Commission found it to be a section 15 agreem

and approved it as being in accordance with the prescribed statut

standards

The very purpose of Flomerca s initial agreement with Contine

and thereafter with UiterwykjContinental has been in the languag

section 15 to give special privileges and advantages to control c

petition to apportion earnings to regulate the number of sail

and to provide for an exclusive preferential and cooperative work

arrangement Most of these agreements have included specific p

visions for fixing and regulating rates The special privilege 

advantage which respondents obtained is the exclusive access to 

percent of the Gulf Guatemala cargo

lO On brief they do not re

attempt to contend that the pre 1967 arrangements did not c

within the subject areas embraced by section 151 In substance t

position is 1 that the current agreement i e the agreement da

January 25 1967 is essentially an agency agreement the subject ma

of which does not bri g

it within the ambit of section 15 and 2 t

neither Uiterwyk nor Continental has ever operated in this trad

a common carrier Major emphasis is placed on the noncommon ca

defense

As to point 1 Hearing Counsel urge a that the current ag

ment in reality is a continuation qf past agreements and b t

UiterwykjContinental conduct tha current operation for their o

risk and account United Fruit argues a that the current ag

ment is merely a change in form drafted for the purpose of pr

uating the section 15 rel tionship between the parties which exis

under the prior agreements that on its face it provides for 

division of profits and c that it cannot be read outsid its fac

environment

The current agreement begins by giving Flomerca the new 

tion of Owners changes the designation of UiterwykjContine

from Operators to Agents terminates the previol1s cont

dated July 1965 nd then provides

The Owners will start a new service for their own risk and account betw

the gulf ports and the ports of the east coast of Central America indirect con

tO The record contains considerable evidence and argument bearing on theeconomic impact of the 

ments onUnited Fruit and Oran Colombiana Respondents counter with thecontention that the ind

decreases in carryings were due to Flomercas more eIJective cargo solicitation and superior service 

than its exclusive right to carry controlled cargoes While this anticompetltlve special privilege and a

tage istheobvious crux of this operation detailed analysis ot its Impact is neither withtn the general 

of the order of in vestigation or any specific issue stated therein

11 Flomerca chose notto file abriefTherefore unless otherwise stated theterm respondents as here

used refers to Uiterwyk and Continental only

12 F M 
AGREEMENT 9 597 93

ation of the service previously operated for the account of Agents Uiterwykf

Continental

Mr Uiterwyk affjrmed the self evident f ct that the objective

in drafting the current agreement was to free the operation

from Commission jurisdiction and to immunize it from protests

by competing carriers They felt that this cOlld best be done

by puttitlg it purely in the name of Flomerca As earlier found

there were other indicated clanges such as granting Flomerca the

right to inspect books of account and to be furnished with voyage

finalizations and monthly financial statements However as of the

time of hearing 3 months after the curreI t agreement became

effective Flomerca had m ade no inspection of the books and there

had been no change in the reports or accountings actually submitted

Although questioned at length in an effort to determine specific

functions previously performed by respondents that are now performed

by Fl merca and vice versa the record is bare of substance From an

operating point of view the change in designations of the parties

and in accounting and reporting provisions are superficial The present

agreement is indeed a continuation of past agreements without

material change

Respondents contend that the present agreement cannot be con

sidered a continuation of past agreements for the further reason

that the operative parties are not the same It is alleged that Con

tinental is now completely out of the picture except that it is being

paid a finder s fee by Uiterwyk or bringing Uiterwyk In as general

agent for the Flomerca Gulf s rvice 12 The fact that Continental

is named in and signed the current agreement is said to be because

this served as kind of a notice of the continuation of the service

and because of the provision terminating the previous agreement to

which Continental was a

party

Flomerca s general manager testified that Continental must hj1ve

something to do with the contract obviously but Idon tknow what

is the role of the party 10reover it appears that in addition to the

so called finder s fees paid to Continental the earlier noted 75 per

day which is added to replacement charter rates and which was also

included in the rates for the three charters taken over on January 25

1967 is actually received by Navigation Ltd the Bahamian corpo

ration jointly owned by the immediate family of Jan C Uiterwyk

and the owners of ContinentaJ 13 This record is inconclusive with

12 No one suggests that thepayment of afinder fee isa section 15 matter

13 Flomerca has paid itsAtlantic general agent nothing for thesame act of chartering some li vessels over

the past 3 years The vesse16wnet normaily payS a 2 percent fee to theagent broker

12 F M O
94 FEDERAL MARITIME COMMISSION

regard to the detail of Continentals present participation Howev

it clearly establishes that this respondent was one of the operators 

the past and it vill not stipporta finding to overcome at the v

least the presumption that it continues to be 14 In any event 

departure of one of the parties would not per se constitute a disc

tinuance of the arrangement Flomerca would continue to serve 

general agent in Guatemala and collect royalties while Uiterw

would continue to conduct the operation

Hearing Counsel contend that despite the self serving cont

representation that the new service would be for the risk and acco

of Owners the actual operation demonstrates that it is being c

ducted for the risk and account of UiterwykjContinental The sig

cance of the potential risk is indicated by the following testimony 

Mr Chester president of Chester Blackburn Roder Inc s

brokers managing agents aild agents in the shipping field 15

I was offered a participation inthis line which Iturned down for a very g

reason

At that time sometime in 1964 it was very very clear that the deal was t

very similar to the one inEurope whereby which it was entirely runand oper

by Continental Lines and Mr Uiterwyk and that Flomerca Line would 

receive some sort of a royalty In this Ididn t choose to participate

The act al starting of the line took practically very little money I mea

you need for chartering of a ship all you need is a month s in advance It w

question of underwriting thelosses while sharing inthe profits

Hearing Counsel urge that substantial risks to respondents 

inherent in the present operation as a consequence of 1 the guaran

of a minimum annual net profit to Flomerca of 68 300 and 2 

guarantee of charter paYments 16

The minimum net profit provision contained in the current ag

ment provides

The commissions and fees cited above are based 011 the premise that the Ow

will earn a minimum net profit in the Gulf Service of 300 for the 12 mo

period of 25 January 1967 to 24 January 1968 or a proportionate amount f

period less than 1 year and the same amount for each equal period during w

this contract is in force If the results of the vessels balance sheets during 

period of 12 months do not total a minimum profit of 68 300 for the Ow

Jan C Uiterwyk Co Inc will reduce their commissions and fees to the p

14 Although requested to do so by Hoaring Counsel Continental didilOt produce awitness

U This company has beengeneral agent for Flomerca sAtlantic service since July 1 1964 and fora

was soliciting agent in New York for Flomerca sgulf service

16 While Uiterwyk is thesingle guarantor of recorc iin both instances thebUJden insofar as i wou

reflected on funds channeled through Navigation Ltd would fall onContinental as well

12 F M 
AGREEMENT 9519 7 95

necessary 80 that the Owners will recognize a minimum net profit as stipulated

above 

This means that whenever the service earns less than 68 300

Uiterwyk will have to forego commissions and fees to make up the

difference Should the difference equal or exceed accrued commissions

and fees Uiterwyk will receive nothing and will be out of pod et the

cost of time organiz ation and facilities devoted to the service

Uiterwyk contends that the converse of Hearing Counsels position

should also be recognized i e that Clif the service does well the

agent is going to collect commissions at a

very high ate anq a nice

management fee that if the service were to be an utter disaster Flo

mercawould have to bear all the losses with the agent merely foregoing

its commissions and fees and that Mr Uiterwyk a successful business

man did not assume an undue risk in negotiating the 68 300 figure

United Fruit urges that the change of expre sion of profit gu r

antee to Flomerca from a percentage of profits as in the past agree

ments to the present fixed amount is without significance as the

amount may quite conceivably have been selected to equal the roy l

ties received under the earlier agreements If this be 8017 the change

is one of expression only and the net effect reinains unchanged

There is no evidence that what respondents now caii ammimurri

profit is anything more or less than a minimum royalty Ffomerca

received in the past and is receiving at present a

guaranteed minhimip

annual amount plus additional amounts based upon the profits of

the venture

Bearing Counsel contends that it is an unacceptable euphemism to

term a

negotiated guaranteed sum a Clprofit and likewise to terrp

respondents compensation which has all the earmarks of nOrrbal

profit taking a Clcommission or Clfee The technique employed by

respondents in accomplishing the conversion of profits into commis

sions and fees is to set the commissions and f es

18

so high that after

payment of the guara tee to Flomerca respondents ieGe ve all of the

profits until an exceedingly high figure is reached Mr Uit rwyk

tes tified

the magnitude of the commissions ta d fees provided in this contract is

such th t the coin ission and fees is exceedingly high as compared with the

normal standards and as such the amount according to your commercial calcula

tion and our commercial experience and our knowledge of this service inthe line

I While Mr UiterwYk refused to relate the amounts of Flomerea s past l Qyalties to current proHts gr

even to statewhether thero isarelationship he did testify thatthe service lias beeu profitable

19 Commissions are sot at 5 percent of manifests and fees at 2 percent of anifests pIUs 1 500 permonth

plus 7fi per vessel pllr day on charters

12 F MC
96 FEDERAL MARITIME COMMISSION

is such that we still will come outwell oursel yes if we have to reduce part of 

profit italics supplied

Again it is clear that the changes are more apparent than r

Despite rewording the current agreement continues profit sharing 

in the past and regardless of the profit shown thus far and 

Uiterwyk s confidence in the future the minimum guarantee 

Flomerca does con titute a potential risk to respondents

The earlier noted charter rider clause by which Uiterwyk guarant

payment provides that

The financial performance under this charter party is hereby guaranteed 

Jan C Uiterwyk Co Inc Tampa Fla Itis understood that Jan C Uiterwyk 

Inc will maintain thisguarantee only for as long as they are general agents 

the Flomerca Gulf Service therefore whenever Jan C Uiterwy Co 

ceases to be general agents for this service the charter party will termip

simultaneously and vessel will revert to its owner

Flomerca alleges that this clause was put in to make the ag

work more and get more freight and that it was only for the i 

stages of the new service Be that as it may it clearly conf

with the agreement provision that Flomerca is tQ start a new ser

for its own risk and account and that in doing so it will t ke o

the chartering of vessels This contrary arrangement uJlquestionably

constitutes a

very substantial risk to respondents If the agency c

tinues and charter payments are not met from operating reven

Uiterwyk will be liable If the agency terminates at he wil

Flomerca or because of failure orfor any otherreason the vessels 

revert to Navigation Ltd from whom Flomerca chartered t 

Navigation Ltd which as found is owned 50 50 by the Jan 

Uiterwyk family and the owners of Continental will then rem

bound by whatever contract it had with the partyfrom whom it c

tered In the case of the previously mentioned Maria A this wo

have been Jan C Uiterwyk Co Inc the owner or the vessel

The ris s borne by Flomerca are not readily apparent Its gen

manager testified that it had no investment in the previous opera

and that he was unaware of any in the present Mr Uiterwyk th

after testified that the initial working capital for the new service 

furnished by Flomerca Thi was done he said by the trapsfe

royalty funds due Vlomerca for the period July 1 1966 December 

1966 from Uiterwyk s account to Flomerca s account There is 

wr tten evidence of this transaction authorization having heen 

tained by Mr Uiterwyk by telephone on or after January 31 19

There is no testimony or other evidence indicating 1 the amoun

the funds thus advanced 2 the normal working capital requireme

12 F M 
AGREEMENT 9 519 7 97

ofthe operation 3 whether tbjswas anything more than a temporary

advance pending periodic accounting 4 from what source future

working1capital requirements would be met or 5 whether respond

ents were to remain liable to Floinerca for these accrued royalties

The lack of a written understanding detailing the commitment of

necessary funds both present and future is particularly difficult to

rationalize in view of the fact that Uiterwyk s income and there fter

Continental s income is directly contingent upon the net profit ie

gross revenues less aU costs including the cost of working capital It

is clear that the o

peration has been conducted andis being conducted

by respondents for their own risk and account

Hearing Counsel urge that comparison ofthe role of Flomerca in

the present gulf service to it role in the Atlantic service shows that

respondents continue to direct and control the gulf service and that

their powers and functions are notmerely those of a managing agent

When asked whether as general agent for Flomerca s Atlantic service

it was necessary to secure permission from Guatemala before char ter

ing a vessel Mr Chester said

Oh yes They are very sensitive about our authority in practic lly every area

and particularly on an important matter like a charter we have to Oidinarily prove

to them on telephone and cable that we believe it s necessary and profitable

to so do

If a charter within the scope of a particular authorization is notavail

able then ofcourse we have to go back Copies ofthese charters are

furnished Flomerca in Guatemala and are also made available to its

auditors in New York

In the Atlantic service Flomet ca requires a mortthly statement

within 5 days after the end ofeach month and a voya e accountin

with vouchers attached within 45 days The latter includes freight

income commissions stevedoring charges portcharges cargo charges

crew wages crew expense ship s supplies and fuel This service is

also audited about every 6 months sometimes by surprise Flo

merca applies constant pressure for transferals of funds to its

account and within each month there are funds transferred More

over Flomercanegotiates the stevedoring contracts approves requests

forrate changeS controls voyage itineraries and port calls reviews

all expenses and in general exercises strict direction and control of

the Atlantic operatio n

In contrast the record indicates that Flomerca exercises littIe

if any direction or control overthe gulf service Although the current

agreement provides that replacement vessels will be charterf3d iD

12 F M C
98 FEDERAL MARITIME COMMISSION

accordarree with prior authorization by Flomerca and at rates to 

agreed upon byFlomerca at the time prior authorization has not be

obtained nor has there been prior agreelnent as to charter rates 

fact Flomerca s general manager stated that he had no knowledge 

any replacement charters They were not signed by Flomerca offic

authorized t9 sign charters and copies were not furnished Flomer

Respondents decide what vessels to charter when and at what rat

The dded fee of 15 per vessel day is obviously for something m

than services rendered in arranging charters as it ranges from appro

mately five to

six times the normal 2X percent brokerage fee whi

of course varies with the gross value of the charter 19

While under the previous agreement 60 percent of the benef

due Flomerca were to be paid quarterly and the balance after 

finalization of accounts as of July 1 each year it is said that un

thecurrent agreement they have a theoretical right to withdr

proceeds due them at any time Nonetheless at the time of the heari

no withdrawals had been requested or made nor as earlier found h

there been any inspection of respondents books or changes in 

reports or accountings submitted to Flomerca Jt is evident that in 

Atlantic trade Flqmerca operates as a true principal while in 

gulf traqe itmerely collects a guaranteed profit or royalty in exchan

for respondents exclusive right to carry government controlled ca

via a service they continue to direct and control

Th re ls 110 questioning the fact hat a common carriage serv

is being cQnduct d The qu stlon is whether respondents are comm

carriers The basic arguments offered in support of their content

that they are not common carriers and therefore that they are 

subject to the Commission s

jurisdiction are 1 that Uiterwyk 

and at all times has been purely a general agent 2 that a

matter of iaw the party in whose name the service is held out to 

general pubiic is the co mon carrier and 3 that there cannot log

ally b tYo cornmon carrier parties to the arrangement

Tle record shows th tUiterwyk is retained as agent by a num

of non related companies including Azta Shipping Co OostAtlan

Lijn alue Rihhon Line aid Contramar Mr Uiterwyk testified th

We are pu ely genfHal ageQts and age nts in Jan G Uiterwyk Co Inc It is 

image we com ercially want to protect by all means because only by doing 

can we acquire eventual adctitioriaJ lines So we always have kept this company 

a

pur ly g neral agency operation

The ts e however is rtot what image Mr Uiterwyk wishes to ma

ttiin but whether hi functions have been and are those of a CO

lon

19 See page93 footnote 13

12 F M C
AGREEMENT 9 5197 99

carrier rather than an agent The prior agreements on their face leaye

little doubt Respondents as Operators engaged in a joint ven

ture were required to maintain a steamship service under the

name of Flomerca Flomerca was not the operator of the service

Complete operating authority and all financial and legal respon

sibility was vested in respondents Flomerca s general manager testi

fied that Flomerca had no investment in the service and no function

except that of general agent in Guatemala for which it was paid a

commission He further testified that the only occasion for royalties

was because we allowed the use of our bills of lading and our mani

fests with the Flomerca heading but that Flomerca did not assume

any responsibility for the use of its name

As earlier found the pre January 25 1967 service is being con

tinued without interruption and with no apparent differences in the

physical operation The present common carriage operation has not

been materially altered The redesignations of Flomerca as Owners

and respondents as Agents are clearly superficial Although it may

be conceded that virtually any function may be performed by an

agent the degree of control and ultimate responsibility assumed by

respondents in this instance is not in keeping with such status They

are owner operators rather than agents

In Agreement 6210 2 U S l1 C 166 168 1939 the Commission

approved a section 15 agreement but suggested the change of the

designation of a party both in a contract form and related bills of

lading from agent to a

proper characterization of common carrier

Thereafter in Transportation by Southeastern Terminal SS Co

2 U S M C 795 798 1946 when respondents contended that they

were merely agents for the owners the Commission held

There are at least six different organizations here combined in one form or

another to engage in the shipping business The purpose of the formation of the

four corporate shipowners was to limit liability to each ship separately Whether

there was a further intention to create devices to evade the regulatory provisions

of the shipping acts does notappear of record Suffice it to say that the purpose of

such legislation cannot be nullified in that manner

Again in Waterman v Stockholms Rederiaktiebolag Svea 3 U S l1 C

131 132 1949 the Commission held that the designation of aperson as

agent is not conclusive if in his actual course of business he assumes the

responsibilities and performs the duties of the carrier Directly in point

is Union Stock Yard Transit Co v United States 308 U S 213 220

1939 wherein the Supreme Court held that common carrier status

cannot be avoided by the device of acting as agent for a common

carrier More recently in Tariff Filing Practices oj Containerships

12 F M C
100 FEDERAL MARITIME COMMISSION

Inc 9 F M C 56 69 1965 the Commission citing several Supre

Court and lower court decisions held that the term common carrie

as employed in the shipping acts must be interpreted to effectu

the remedial and evident purposes of the statutes and must resul

fairness to competing carriers In operating under both prior 

present agreements Uiterwyk assumed the responsibilities and p

formed the duties of a common carrier

Turning to Continental s status in the prior arrangement respo

ents agree that it certainly involved a situation in which some

was a corqmon carrier Flomerca they say held itself out to 

general public used its name in manifests bills of lading advertis

solicitations and tariffs and therfore Flomerca was the common c

rier The argument is then advanced that

If Flomerca was the common carrier then Continental was not and 

versa no matter how one chooses there cannot logically be two common car

who were parties to the arrangement

The assumption that there can be only one common carrie

siJllply incorrect There is no such exclusivity in logic or law 

Puget Sound Tug Barge v Foss Launch Tug 00 7 F M C 

1962 the Commission held that where two companies entered i

a cooperative working arrangement whereby one held out to 

public the other provided and operated the vessels and the reven

were divided between them they were both common carriers and 

agreement had to befiled for approval under section 15 20 The comp

holding out to the public in this instance Flomerca is terme

nonvessel owning common carrier and the other which provid

and operates the vessels in this instance UiterwykjContinental 

termed the underlying common carrier These agreements are 

tween common carriers by water all operating in the foreign comme

of the United States and all subject to section 15 of the Act

In disassociating itself from operations in other U S trad

Uiterwyk continues to rely on the theory that only the comp

in whose name a service is held out is a common carrier subjec

regulation 21 Thus Uiterwyk Shipping Ltd Gulf Line Ltd G

Express Lines Ltd or Uiterwyk Shipping Inc would bethe comm

carrier in any service conducted in any of these names and the stat

if any of Uiterwyk would be that of agent 22 Hearing Counsel a

20 AsHearing Counsel pointout there isno denial thatContinental wasoperating as acommoncarr

other US trades at the timethe earlier agreements were made

21 No cases are cited or found in support of this proposition

22 Uitenvyk contends that the Bahamian companies are intended to be shipowners and operator

well as to acquire real estate and that the primary reason for theirbeing established in Nassau is so 

they can utilize foreign flag ownership

12 FM O
AGREEMENT 9 5197 101

United Fruit contend that these related corporations are mere paper

shells without employees physical assets or even places of business

that they are all owned and supported by Mr Jan C Uiterwyk and

his immediate family who create and abandon them at will that the

whole show is run by Uiterwyk ostensibly as agent but actually as

owner operator and that the Act was not designed to regulate puppet

carriers while the manipulator remains free of common carrier burdens

and responsibilities

Uiterwyk s

reply to this is that

In any event even if the paper shell theory were adopted the result would

not be to convert Jan C Uiterwyk Co Inc into a common carrier That

agency company does not own the Bahamian companies which are alleged to

be common carriersjthose companies are owned by individuals just as

is Jan C Uiterwyk Co Inc itself so that even if the paper shell theory

were valid the logical conclusion would have to be that the common carrier

in any instance where one of the companies actually is a common car ier would

be its individual stockholders not Jan C Uiterwyk Co Inc In other words

no matter how Hearing Counsel chooses to argue the point his attempted dis

regard of valid and existing corporations cannot logically or legally be the con

clusion that Jan C Uiterwyk Co Inc is a common carrier

Jan C Uiterwyk Co Inc does not own or have a financial interest

in any other of the companies with which various members of the Uiterwyk

family are connected

Navigation Ltd which is owned by the same individual owners

of Uiterwyk and Continental and is used to channel revenues from

the present operation to them is also said to be a

separate and inde

pendent legal entity shielded by its corporate veil

In Transportation by Southeastern Terminal SS 00 supra at 798

the Commission held that when we look through the corporate

fiction we find that at least as far as Eastern and the four corporate

shipowners are concerned those organizations are responsiv to the

same general policy and subserve the same general investment The

Supreme Court held in Oounty oj Marin v United States 356 U S

412 418 1958 that a mere corporate shell without property or func

tion can by no stretch of the imagination be deemed a carrier

Where a corporation is so organized and controlled and its affairs

are so conducted as to make it a mere sham agent or adjunct of

another its separate existence as a distinct corporate entity will be

ignored and the two corporations will be regarded in legal contem

plation as one unit Southeast Airlines Agency Oompliance Proceeding

25 C A B 89 99 1957 It is settled law that the corporate entity

may be disregarded if failure to do so would aid in the perpetration

12 F M C
102 FEDERAL MARITIME COMMISSION

of a fraud or the circumvention of an applicable statute Americ

Airlines Exemption 27 C AB 1112 13 October 1958 Corpor

entities may be disregarded where they are made the implement 

avoiding a clear legislative purpose Schenley Gorp v United Sta

326 U S 432 437 1945 It is concluded that insofar as section 

is concerned Uiterwyk and its related companies are all one and 

same as are Continental Contramar and Capital to Capital T

same is also true of UiterwykjContinental and Navigation Ltd

Findings number 14 and 15 above concern misratings under sect

18 b 3 of the Act 23 Respondents admit the propane storage ta

undercharge and state that it was merely an inadvertent mistake 

July 27 1966 Uiterwyk wrote Asiatic Petroleum requesting paym

of the undercharge but this was refused

The double tariff filings are also conceded as is the finding th

under the rule that in such situations the lower rate is the leg

applicable rate 24 there were 10 overcharges during the 35 day samp

period Respondents do not deny that during the same period th

were an additional 29 misratings unrelated to the double tariff filin

Correction notices were sent out on 22 of these but it vas later fou

that there were errors in rates or weights in four of the correctio

On brief respondents state that corrections covering repaym

of the 10 overcharges have been sent out and that this has been ma

known to the Commission s staff by the provision of copies No cop

have been received indicating that any of these repayments have 

fact been made 25 On the contrary the record herein does show t

corrections issued on three other shipments further violate the Act 

applying the higher rather than the lower rates 26

With respect to all of these tariff violations respondents conti

to urge the agency defense that the statute applies to the car

Flomerca and not to its agents As earlier found UiterwykjCo

nental is the underlying common carrier in this trade They ope

the service as ownerjoperators rather than agents and they as wel

Flomerca are clearly liable for the above tariff violations Puget So

23 Section 18 b 3 provides in pertinent part

No commoncarrier by water in foreign commerce shall charge greater or less ordiff

I

compensation for the transportation of property than the rates and Charges which are spe

in its tariffs on file with the Commission and duly published and in effect at the time

2 Where two tariffsare equallyappropriate theshipper isentitled to haveapplied the one specifyin

lower rate United States Borax Chemical Corp v Pacific Coast European Conference et al 1968 D

No 6663 11 F M C 451

2 Official notice is taken of files Nos 1854 and 2056 located in the Commission s Office of Tariffs a

formal Complaints Foreign Commerce Bureau of Compliance

26 Hearing Counsel urge that in view of the serious pattern of charging improper rates the Comm

direct an audit of the records in this trade and require respondents to submit a report of overcharg

funded or steps taken to colllct undArlharges and theresults of such attempts to collect

12 F M C
AGREEMENT 95 97 103

Tug Barge v Foss Launch Tug 00 supra also Oommon

Oarriers by Water Status oj Express Oompanies Truck Lines and

Other Nonvessel Oarriers 6 F M B 245 1961

ULTIMATE CONCLUSIONS

On the basis of the foregoing and the entire record it is found and

concluded that

1 Respondents Flomerca and Continental entered into and carried

out an agreement without Commission approval from or about July

1963 to January 1964 in violation of section 15 Shipping Act 1916

2 Respondents Flomerca Continental and Uiterwyk entered into

and carried out continuing agreements since January 1964 and are

presently carrying out an agreement without Commission approval

in violation of section 15 Shipping Act 1916

3 Respondents Flomerca Continental and Uiterwyk have charged

or demanded a greater or less or different compensation for the trans

portation of property than the rates and charges specified in tariffs on

file with the Commission in violation of section 18 b 3 Shipping

Act 1916

S JOHN MARSHALL

Presiding Examiner

1 M lJ
FEDERAL MARITIME COMMISSION

DOCKET No 68 24

AGREEMENT No 8200 JOINT AGREEMENT BETWEEN THE FAR E

CONFERENCE AND THE PACIFIC WESTBOUND CONFERENCE A

MODIFICATIONS OF AGREEMENTS Nos 8200 8200 1 AND 820

NOTICE ADOPTING INITIAL DECISION AND ORDER

APPROVING AGREEMENTS

Adopted October 15 1968

No exceptions having been filed to the Initial Decision of the Exa

iner in this proceeding and the Commission having determined no

review same notice is hereby given that the decision of the Exami

became the decision of the Commission on October 15 1968

NOW therefore it is ordered

1 That Agreement No 8200 be and hereby is granted contin

approval pursuant to section 15 of theShipping Act 1916 as amend

for the period of 1

year from and after the date of this order

2 That Agreements Nos 82001 and 8200 2 be approved pursu

to section 15 of the Shipping Act 1916 as amended and that s

approval shall continue for the period of 1 year from and after 

date of this order

3 That any application on behalf of the parties to the aforem

tioned agreelJlents for extension of the period of the approval of s

agreements hall be filed with the Commission with service upon 

of the parties to this proceeding not later than the 60th day p

to the expiration or the approvals grantedherein and

4 That this proceeding be discontinued without prejudice to 

rights of any of the parties to protest lpon any grounds the appro

or continued approval of Agreements Nos 8200 82001 and or 82

2 in any new proceeding reiating to those agreements includ

the extension of the apPf val thereof as stated above

By the Commission

Signed THOMAS LISI

Secretary

12 F MC

104
AGREEMENT NO 8200 105 

FEDERAL MARITIME COMMISSION

No 68 24

FAR EAST CONFERENCE AND PACIFIC WESTBOUND CONFERENCE

AGREEMENT No 8200 ET AL

Continued approval of Agreement No 8200 for 1

year and approval of Agree

ments Nos 8200 1 and 8200 2 for the same period of time granted

Proceeding discontinued without prejudice to the rights of any party h reto

without waiver or estoppel to protest or justify upon any grounds the

continued approval of the agreements inany new proceeding relating to the

agreements including extension of theapprovals here given

Any application for extension of the period of approval shall be filed with the

Commission with a certificate of service upon all parties hereto not later

than the 60th day prior to expiration of the approvals here given

Elkan Turk Jr for respondent Far East Conference

Edward D Ransom for respondent Pacific Westbound Conference

Mark P Schlefer and Leslie Srager for Board of Commissioners of

the Port of New Orleans Louis A Schwartz for New Orleans Traffic

and Transportation Bureau James M Henderson and Douglas W

Binns for The Port of New York Authority and Richard D Ford

for Pacific Coast Association of Port Authorities petitioners

J Kerwin Rooney for Port of Oakland Alex G Gocke for New

Orleans Board of Trade Ltd and Gharles H Lombard for Alabama

State Docks Department interveners

Donald J Brunner andE Duncan Hamner as Hearing Counsel

INITIAL DECISION OF C W ROBINSON

PRESIDING EXAMINER 1

By order served May 1 1968 the Commission instituted this inves

tigation to determine whether Agref3ments Nos 8200 1 and 8200 2

should be approved disapproved or modified and whether or not

continued approval of Agreement N0 8200 is warranted and if not

whether it should be canceled or modified The following organi

zations were named Petitioners by the order Board of Commis

sioners of the Port of New Orleans 1h Port of Ne york Authority

Pacific Coast Association ofPort Authorities and New Orlea s Tr c

and Transportation Bureau Port of Oakland New Orleans Board of

Trade Ltd and Alabama State Docks Departm nt int rve el

A prehearing conference was held on May 27 1968 at which it

was agreed that certain procedural steps would be ta n

by the

1 This decISion became the decision of the Oommission on October 15 1968

12 FJM O
106 FEDERAL MARITIME COMMISSION

parties the hearing date was to be scheduled thereafter In Ju

counsel for the two conferences and the ports of New York and N

Orleans requested the Examiner to forego the time schedule agr

upon to see if they could work out some plan whereby the agreeme

could be approved without the necessity of a long and costly hear

As it was his clear responsibility to do so the Examiner approved 

suggestion On August 23 a joint motion was filed by counsel for 

conferences seeking an order of approval of the agreements and 

discontinuance of the proceeding without prejudice more det

herein Changes in the suggested order attached to the motion the

after were proposed directly to conference counsel by counsel for N

York and New Orleans interests The changes having been accep

by the conferences the New York and New Orleans interests 

Hearing Counsel endorsed the motion as modified Itwould seem 

visable to dispose of the proceeding by means of an initial decis

rather than by motion

THE FACTS

1 Agreement No 8200 No 8200 approved December 29 19

is a

joint effort by the conferences FEC and PWC 

assure to the parties hereto s well as to the manufacturers mercha

farmers and labo r whose prod cts are exported from the Uni

Stat s to the Far East destinations which may from time to ti

be common to the scop of the individual agreements 

the two conferences stability of ocean rates and frequen

regularity and dependability of service which is essen ial to t

continued prosperity

2 Agreem ent No 8200 1 No 8200 1 filed on May 13 19

modifies Article FOURTH of No 8200 by providing that all new m

bers of either of the two conferences shall become parties to 

supplementary agreements as well as to No 8200

3 Agreement No 82002 No 8200 2 filed March 15 1

and a far as here pertinent provides for the cooperation between 

two conferences in the establishment and maintenance of ra

rules and regulations to be observed by each of them Art

IX 1 permits rate adjustments by either conference without 

concurrence of the other but the two may agree on changes vo

tarily and 2 the one not making the first adjustment can make 

own except where the purpose is to bring the rate relationship wit

the lin1its specified in the article Article X 1 establishes the m

mum and minimum amounts by which FEC rates should exceed 

local rates of PWC the maximum being 6 per revenue ton o

equivalent and the minimum being the amount of accessorial char

12

r

MiOi
AGREEMENT NO 8200 107

assessed against cargo under the PWC tariff and 2 the agreement

does not apply to the relationship between PWC overland rates and

FEC rates or between PWC overland rates and PWC local rates

and Article XIII subordinates No 8200 2 to Article SECOND of

No 8200 the latter enabling the conferences to take independent

action under the procedure therein provided

4 No 8200 was the subject of investigation in Joint Agreement

Far East Oonj and Pac WB Oonj 8 FM C 553 1965 wherein it

was held among other things that the conferences had been carrying

out unfiled supplementary agreements Appeals were taken therefrom

to the United States Court of Appeals for the Fifth Circuit where it

was argued in April 1967 no decision has been rendered The lawful

ness of overland rates is involved in two other proceedings before the

Commission docket No 65 31 Investigation of Overland and OOP

Rates and Absorptions and docket No 66 61 Board of Oommissioners

of the Port of New Orleans v Pacific Ooast Australasian Tariff BUrea l

l

and Member Lines 12 F M C 184 sustaining the proprietyof the

rates

DISCUSSION AND CONClUSIONS

The Gulf and New York parties the conferences and Hearing

Counsel believe that it would be wasteful to examine again the over

land situation that is involved in the appeals before the Fifth Circuit

Court ofAppeals and the proceedings before the Commission in dock

ets Nos 65 31 and 6661 referred to in the paragraph next above

and they request continued approval of No 8200 for 1

year and

approval of Nos 8200 1 and 8200 2 for the same period Any appli

cation for extension of the period of approval would be filed with the

Commission with a certificate of service upon all parties to the

present proceeding not later than the 60th day prior to expiration of

the approval here sought Concomitantly discontinuance of the

present proceeding is requested if approval is given to the agreements

without prejudice to the rights of any of the parties without waiver

or without estoppel to protest or justify upon any grounds the

approval or continued approval of Agreements Nos 8200 8200 1

and or 8200 2 in any new proceeding relating to those agreements

including the extension of the approval thereof No objections

to the motion as modified have been received

In Joint AgrMment supra the Commission stated that there was

insufficient evidence to disapprove No 8200 There being no evidence

in the present proceeding which would negate that finding and there

being no opposition to the motion for continued approval of No 8200

for 1 year as mentioned no reason appears why the motion for con

12 F M O
108 FEDERAL MARITIME COMMISSION

tinued approval thereof should not be granted especially in view 

the builtin safeguards attached to any application which may be f

for extension of such continued approval

No basic legal objection is observable at this juncture to 

8200 1 and none has been advanced by any party Accordin

approval thereof for 1year under the same terms and conditions a

the case of No 8200 should be received

The parties realize and the Examiner agrees that from a

p

tical point of view it is lnore desirable to survey for 1

year the res

which would flow from No 8200 2 rather than to proceed at once 

hearing thereon Furthermore issues as to overland rates and 

maximum and minimum limits on the differential between PWC lo

rates and FEC rates might well be affected by the decision of 

Fifth Circuit Court of Appeals and the decision of the Commis

in Dockets Nos 65 31 and 66 61 The moving parties agree that 

effect of rapidly changing transportation conditions in and the c

acteristics of the transpacific trade of which the Examiner is 

wholly without knowledge cannot be assessed at the present time 

the conferences hope that No 8200 2 may prevent uncoordina

rate adjustments from damaging the competitive position of merch

on the various coasts and consequently of the ports and carriers ser

them The conferences predict furthermore that a consta

fluctuating relationship between PWC local rates and the correspo

ing rates of FEC would create commercial chaos and seriously inter

with the marketing ofAmerican products in the FarEast by merch

on the various coasts of the United States All in all approva

No 8200 2 for 1

year under the same terms and conditions as 

8200 and 8200 1 is justified

ULTIMATE CONCLUSIONS

Itis found and concluded that the three agreements under consid

tion will not for a period of 1

year after approval or contin

approval thereof be unjustly discriminatory or unfair as betw

carriers shippers exporters ilnporters or ports or between expo

from the United States and their foreign competitors or operat

the detriment of the commerce of the United States or be contrar

the public interest or be in violation of the Shipping Act 1916 

amended the Act Furthermore it is found and concluded that 

three agreements for the same period of time will satisfy the 

quirements of subdivision 1 of the second paragraph of section 1

the Act as amended

Continued approval of No 8200 for a period of 1

yeftr and appr

of Nos 82001 and 8200 2 for the same period of time is he

12 F MC
AGREEMENT NO 8200 109 

granted The proceeding is hereby discontinued without prejudice to

the rights of any party to thisproceeding without waiver or estoppel

to protest or justify upon any grounds the continued approval of

the agreements in any new proceeding relating to the agreements

including extension of th approvals here given Any application for

extension of the period ofapproval shall be filed with the Commission

with a certificate of service upon all parties to the present proceeding

not later than the 60th day prior to expiration of the approvals here

gIven

Signed C W ROBINSON

Presiding Examiner
FEDERAL 11ARITIME COMlVIISSION

DOCKET No 68 26

IN THE l1ATTER OF AGREEMENTS Nos T 2108 AND T 2108 A 

TWEEN THE CITY OF Los ANGELES AND JAPAN LINE LTD 

WASAKI KISEN KAISHA LTD MITSUI O S K LINES LTD 

YAMASHITA SHINNIHON STEAMSHIP CO LTD

NOTICE OF ADOPTION OF INITIAL DECISION AND ORDER

Adopted October 15 1968

No exceptions having been filed to the Initial Decision of 

Examiner in this proceeding and the Commission having determ

not to review same notice is hereby given that the decision bec

the decision of the Commission on October 15 1968

It is ordered That Agreement No T 2108 shall be modified 

to delete a clause requjring a lessee or preferential user of term

facilities to utilize such facilities so as to substantially exclude o

terminals from securing its patronage 2 to delete the retroa

provision and 3 to increase the minimum payment provisio

a compensatory level Agreement T 2108 shall be approved 

receipt of appropriate modifications Agreement T 2108 Ais appr

subject to modification of Agreement T 2108

By the Commission

Signed THOMAS LISI

Secreta

IN THE MATTER OF AGREEMENTS Nos T 2108 AND T 210

BETWEEN THE CITY OF Los ANGELES AND JAPAN LINE L

KAWASAKI KISEN KAISHA LTD MITSUI O S K LINES L

AND YAMASHITA SHINNIHON STEAMSHIP CO LTD

Agreement No T 2108 whereby the City of Los Angeles grants the prefer

use of terminal facility to four Japanese carriers approved subject t

deletion of a routing clause and a retroactive effect provision and su

to an increase in the minimum payment to be made by the lines d

any year the agreement is effective

12 F M 

110
AGREEMENTS NOS T 2 1 08 AND T 2l08 A III 

Agreement No T 2108 A whereby the City of Los Angeles grants the preferential

use of a gantry crane to four Japanese lines approved subject to required

modification of Agreement No T 2108

Roger Arnebergh Edward D Farrell and Walter O Foster for

respondent city of Los Angeles

Reed M Williams and Francis L Tetreault for respondent Japanese

lines

Leonard Putnam and Leslie E Still Jr for petitioner city of

Long Beach

Albert E Cronin Jr for petitioner Stockton Port District

vVilliam R Daly for San Diego Unified Port District intervener

J Kerwin Rooney for Port of Oakland intervener

Donald J Brunner and G Edward Borst Hearing Counsel

INITIAL DECISION OF HERBERT K GREER

PRESIDING EXAMINERl

The City of Los Angeles by its Board of Harbor Commissioners

Los Angeles entered into an agreement with Japan Line Ltd

lawasaki Kisen Kaisha Ltd Mitsui O S K Lines Ltd and Yama

shita Shinnihon Steamship Co Ltd all common carriers by water

herein referred to collectively as the Lines filed with the Commis

sion and designated by it as Agreement No T 2108 granting to the

Lines the preferential use of a container cargo handling terminal The

pm ties further executed and filed Agreement No 2108 A whereby

Los Angeles grants to the Lines the preferential use of a crane for

handling containers The Commission ordered this investigation to

determine whetherthe agreements should be approved disapproved or

modified pursuant to section 15 of the Shipping Act 1916 the Act

The city ofLong Beach and Stockton Port District were designated

as petitioners herein The city of Oakland and the San Diego Unified

Port District intervened

THE AGREEMENTS

On November 7 1967 the respondents entered into a Permit

and Agreement whereby for a

period of 3 years with option to assign

ees to renew for 2

years Los Angeles granted to the Lines afacility

consisting of 10 54 acres with improvements to be constructed thereon

to be used for the docking and mooring of vessels the receipt handling

loading unloading storage transporting and delivery of containerized

cargo and for uses incidental thereto The Lines agree to handle and

I This decision became the decision of the Commission onOctober 15 1968

12 F M C
112 FEDERAL MARITIME COMMISSION

raute thraugh the Part af Los Angeles the Part all of their cant

erized carga vessel business the shipment af which originates ar te

nates in Japan ar the United States and which ariginates at is dest

to or transits through metropolitan Los Angeles and the surraund

area tributary to the Part As an exception to this routing provis

the Lines are permitted to load and discharge cantainer cargo at 

ather sauthern California port if carried an conventianal break 

vessels and semicontainerized vessels if such cargo can be loade

discharged at a conventianal break bulk facility

As campensatian to the Part the Lines agree to pay all cha

which accrue underthe Part tariff for dockage wharfage wharf stor

wharf demurrage and all ather tariff charges applicable If the t

amaunts af such paYments within 1

year are leSs than 63 420 

Lines will pay the Part the sum necessary to reach that required m

mum If haever payments to the Part within a year shall e

235 000 no further paYments will be made to the Part The m

mum paYment is based an an estimate af the cast of extra facil

to be provided by the Part that is only costs over and above 

canstruction of an ordiIary facility Maximum campensation is ba

an the tatal cost of the facility assigned

The Port reserves the right to assign to athers than the Lines 

right to use the premises and facilities as lang as such use will 

interfere with ar delay the conduct af assignees business The reve

received by the Part far secondary use is to be credited to the m

mum maximum compensatian the secondary use described far 

purpase being containerized cargo and general break bulk cargo H

ever the minimum maximum is not to be creditedwith use by ves

awned ar aperated by a steamship line which as of the date af 

agreement calls at the Part ar is a tenant af the Port

The Lines may cancel the agreement after the first year In 

event af cancellation or in the event the agreement s nat renewe

extended far a cambined total af 10 years the Lines shall reimb

the Part in the amaunt af the unamartized balance af thase e

casts expended by the Part in providing special facilities which 

ardinarily nat required far the aperation af a break bulk termina

estimate af such costs being attached tQ the agreement

Itis pravided that if the facility is used by the Lines befare C

missian approval the agreement shall become effective far all purp

retroactively as af the first day af the manth during which such 

cammenced

The Preferential Assignment for Use af Crane entered int

the time the above agreement was executed pravides far paymen

the Part for such use in accordance with Part tariff pravided th

12 F lf
AGREEMENTS NOS T 21 O 8 AND T 2 10 8 A 113

during a

year the payments shall be in excess Qf 89 000 no further

compensation to thePort shall be paid during that year for use of the

crane by the Lines The Port retains the right to allow other persons

to use the crane when its use is not required by the Lines and the

revenue from such use is to be retained by the Port

Only those provisions of the agreement here at issue are above

described

POSITIONS OF THE P RTIES

Petitioner Long Beach resists approval contending that the rout

ing clause and the retroactive provision are in violation of section

15 of theAct that the agreement is unjustly discrimi Qatory orunfair

operates to the detriment of the commerce of the United States is

contrary to the public interest and otherwise violates sections 15 16

and 17 of theAct Itis argued that the routing clause is a monopolistic

practice in restraint of trade and is therefore in violation of the anti

trust laws and that unlike dual rate contracts the use of such a

practice does not have specific statutory approval The retroactive

provision is alleged to violate section 15 of theAct in that it permits

operation of the agreement prior to Commission approval Obj ection

is made to the free use by the Lines of the facility after the maxi

mum payment has been reached as violfl tive of sections 16 and 17 of

of the Act in that otherlines using thePort are subj ected to unreason

able prejudice or disadvantage when they are required to pay full

tariff It is argued that the agreement is noncompensatory because

Los Angeles will not receive sufficient guaranteed revenue to cover its

out of pocket costs such as bond costs direct operating costs and

prorated port costs Further contention is that Los Angeles is in viola

tion of the Act by operating under the agreement prior to its approval

Long Beach reasons that the commencement of construction of facili

ties provided for in the agreement is in effect carrying out the agree

ment Long Beach contests approval of the crane agreement on the

roundthat it is noncompensatory

San Diego would not contest approval of the agreements if the

routing clause is removed and argues that the clause unlawfully

restricts shippers and consignees from selecting the port through

which their goods should move and is otherwise unlawfully restric

Give Cited is section 250 Merchant Marine Act 1936 which declares

t unlawful for a common carrier by water by means of an agree

nent to prevent any other carrier from serving any port designed

or the accommodation of ocean going vessels located on any

mprovement project authorized by Congress at the same rates

hich it charges at the nearest port already regularly served by it

12 F M C
114 FEDERAL MARITIME COMMISSION

It is San Diego s position that the routing clause is an attem

overrule the intent of Congress expressed in that statute

Stockton resists approval of the routing clause and con

minimum maximum compensation provisions in any agreemen

provable only if no prejudice against any terminal results ther

or if no other port is in any way injured Stockton takes the po

that the agreement should be disapproved in its entirety

Los Angeles takes the position that the agreement is compensa 

that the basis used for determining the minimum compensat

reasonable and permits the port to recover its investment in 

costs here involved as compared to the cost of a general carg

minal The routing clause is defended as the only means by 

the port can protect its investment of 1 million Los An

arguing that without the clause the Lines would be able to 

the use of the facility for a term of years and still divert their 

to other ports and that such diversion might render this agre

noncompensatory The motive of Long Beach in attempting to 

the clause disapproved is seen by Los Angeles to be retention 

ability to lure cargo from Los Angeles Los Angeles argues t

is difficult to conceive of anything more detrimental tocom

than to have a port such as Los Angeles be contractually obl

to set aside a valuable marine terminal for the use of a tenant 

number of years and then permit another port to bein a posit

entice away the business of that tenant to the economic detr

of the port investing in the facility

Respondent Lines contend that there is no evidence to sup

finding of unjust discrimination detriment to commerce violat

the Act or detriment to the public interest They take the p

that the agreement contemplates a fair and equitable operatio

shippers and users being assessed charges based upon identical 

Significance is attributed to the fact that shippers do not oppo

agreement therefore it is argued none have considered the 

ment to be discriminatory to them No advantage to the Line

other carriers is found in the fact that they retain part of th

revenue after the maximum is paid and reference is made to 

agreements with a similar provision which have Commission app

No evidence is seen by the Line to show inj ury to any other te

r port the testimony to that effect being said to be mere conj

The Lines contend that the agreement is compensatory

Hearing Counsel see no necessity for the routingclause and co

it constitutes ambiguous restrictions with regard to the amo

containerized cargo which can be handled at other ports The 

12 F 
AGREEMENTS NOS T 21 08 AND T 2 10 8 A 115

active provision is not contested However the minimurri compen

sation provided is considered to be unapprovable in that it does not

reflect all direct and prorated costs plus depreciation involved in the

entire facility and it is argued that segregating the cost of the extra

improvements as a compensation base is improper and results in a

noncompensatory minimum

Oakland did not file a brief

DISCUSSION AND CONCLUSIONS

All parties to the agreements are subject to the Act and the agree

nents are subject to the provisions of section 15 thereof Other facts

ertinent to the issues raised are hereinafter set forth

The Routing Olause

The clause which the parties protesting approval have designated

i S an exclusive routing or exclusive patronage provision is as

ollows

It is further understood and agreed that the Lines shall handle at and route

hrough the Port of Los Angeles all of their containerized cargo vessel business

ihe shipment of which originates at is destined to or transits through metro

olitanLos Angeles and the surrounding area tributary to the Port of Los Angeles

However any of said four lines may load and discharge container cargo at

my other Port in Southern California on conventional break bulk vessels and

emi containerized vessels only if such cargo can be loaded or discharged at a

onventional break bulk facility provided however that in the event such a

ressel is shifted to a berth equipped with container handling equipment for the

mrpose of loading ordischarging containerized cargo such cargo shall be handled

t

the Port of Los Angeles unless the General Manager specifically consents in

vriting to the contrary

he provision is within the purview of section 15 of the Act which

equires the filing of agreements

controlling regulating preventing or destroying competition allotting

lorts or restricting or otherwise regulating the number and character of sailings

letween ports limiting or regulating in any way the volume or character of freight

r passenger traffic to be carried or in any manner providing for an exclusive

referential or cooperative working arrangement

Section 15 further provides

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

Clodify any agreement that it finds to be unjustly discriminatory or unfair

s between carriers shippers exporters importers orports or to operate to

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

1terest or to be in violation of this Act and shall approve all other agree

len t

12 F M C
116 FEDERAL MARITIME COMMISSION

Agreements approved by the commission under section 15

shall be excepted from the provisions of the Act approved July 2 

entitled An Act to protect trade and commerce against unlawful restra

monopolies and amendments and Acts supplementary thereto

The Commission must consider the antitrust implications 

agreement which limits free competition and has adopted the pr

that restraints which contravene the antitrust policies of the 

States will be approved only if facts appear which demonstrat

the restraints imposed are required by a serious transportation 

are necessary to secure important public benefits or are in fu

ance of a valid regulatory purpose of the Act The Supreme Co

a recent decision Federal Maritime Commis3ion et al v Aktieb

Svenska Amerika Linien et al 390 U S 238 1968 commented 

Commission s policy

Congress has it is true decided to confer antitrust immunity unless the agre

is found to violate certain statutory standards but as already indicated th

trust concepts are intimately involved in the standards Congress chos

Commission s approach does not make the promise of antitrust immunity 

ingless because a restraint that would violate the antitrust laws will still 

proved whenever a sufficient justification exists Nor does the Commission 

by requiring the conference to come forward with a

justification for the re

improperly shift the burden of proof The Commission mustof course addu

stantial evidence to support a finding under one of the four standards of sect

but once an antitrust violation is established this alone willnormally co

substantial evidence that the agreement is contrary to the public int

unless other evidence in the record fairly detracts from theweight of this 

We therefore hold that the antitrust test formulated by theCommis

an appropriate refinement of the statutory public interest standard

The routing clause restricts free competition and presumptivel

counter to the public interest Mediterranean Pools Investiga

F 1lC 264 1966 The Commission does not consider that all 

ments restricting competition are necessarily and inevitably 

and unreasonable practices which must be prohibited at any 

But free competition is the rule and a restraint on competition 

not be a pproved unless sufficient justification therefor appears 

record The Commission recognized that the burden of sust

such practices is a heavy one California Stevedore Ballast Co 

v Stockton Port District et al 7 F M C 75 1962 at page 84 Th

of Los Angeles justifies the clause as a means of protecting its i

ment in the facility and assuring a fairreturn on the lap

d and imp

ments assigned to the Lines for preferential use The port se

require the Lines to move sufficient cargo through the facil

accomplish that purpose Itis evident that if the clause is disapp

the Lines are free to use the facilities at competing ports capa

12 F M 
AGREEMENTS NOS 1 2108 AND 1 210 8 A 117

handling containerized cargo However the agreement must be read

in its entirety to determine whether the clause is necessary to

accomplish the purpose for which it has been included that is the

protection of the port sinvestment If the minimum payment is

amended as hereinafter required the port will have the assurance

that the facility will not be operated by the Lines in a mannerto pro

duce revenue to the port of less than the port s cost of furnishing the

land and improvements thereon Each of the Lines has under con

struction a

containership and intends insofar as possible to carryall

containerized traffic on such vessels The facility assigned is designed

to serve containerships Under the maximum feature of the com

pensation clause there is a

strong economic inducement for the Lines

to make fulluse of the facility in order to benefit by the free use during

any year the maximum is exceeded Moreover the Lines are co owners

of a

company formed to operate the facility which adds to the induce

ment for full use The port in its brief states

In view of the fact the Japanese Lines have planned a weekly containership

service at thePort of Los Angeles themaximum compentlation provided by Agree

ment No T 2108 probably will be achieved during the first year of the term of the

Agreement

The record supports that statement

Applying the test of necessity to the routing clause it cannot be

found that it is required to protect the port s investment and the

record falls short of demonstrating justification for exemption from

antitrust policies

Other contentions made by the protesting parties to the routing

clause have been considered but not deemed necessary for detailed

discussion because of the finding above made It is recognized the

development of facilities contributing to the economical and efficient

movement of containers should be encouraged as in the public inter

est In the Matter oj Agreement No T 1870 Terminal Lease Agree

ment at Long Beach California docket No 66 9 11 FM 0 12 It is not

here found that a routing clause that is a requirement for a lessee

or preferential user under a minimum maximum compensation ar

rangement to use the facility assigned to the substantial exclusion

of other ports is unlawful under all ircuIDstances But it is held

that restrictions on free competition which are con rary to the

antitrust policies must be fully justified and found a necessary

means to further a transportation need Los Angeles in providing

transportation improvements is enhancing COIDlTIerce but its invest

ment is so well protected by other requirements in the agreement

that deviation from antitrust policies is unnecessary to provide

further assurance against a

noncompensatory operation

12 F M C
118 FEDERAL MARITIME COMMISSION

Consideration has been given to the fact that in this agreement

and in the Oakland agreement with the Lines presented in docket No

6827 12 FMC 126 the routing clauses encompass territory tributary

to the ports The record discloses that Overland Common Point OCP

origins and destinations are common to both ports thus the Lines and

the ports would find difficulty in interpreting the routing clauses with

the possibility of future litigation should the parties to the agree

ments take diverse views as to the cargo covered by the individual

agreements

Oompensation

The ports appearing in this proceeding are competitive In a com

petitive situation it is not uncommon for carriers to change from one

port to another for various reasons including inducements offered

But if an inducement is the providing ofservices at less than the cost to

the port it is to be disapproved Investigation of Free Time Practice8

Port of San Diego 9 F M C 525 1966 The reason for disapproval

is evident Approval of such a

concept would result in requiring other

usersof the port to bear a portion of the cost of the use by the preferred

customers if the port is to remain financially sound Further if aprec

edent is established which permits a

port to obtain business in a

competitive situation by offering services at less than cost the ulti

mate result would be the necessity for all ports to adopt this method

in order to remain competitive The consequences are readily forsee

able

Long Beach contends that Los Angeles has not included all appli

cable factors in the compensation base These contentions have been

considered but not found persuasive of a conclusion that the max

imum payment by the Lines to the Port is less than compensatory

Methods of computing compensation are to be considered but there

is no inflexible rule to bind port officials in determining compensa

tion Agreements Nos T 1953 and T 1953 A Terminal Lease Agree

ments Between the Oity of Oakland and Matson Navigation 00 FMC

docket No 66 68 11 FMC 156 1967 The test to be applied is the

ultimate result of the computations Los Angeles in arriving at the

maximum payment has considered land and water values the cost

of the improvements to be constructed on the property the support

to the facility from nonrevenue producing facilities of the port main

tenance and overhead servicing the bonds issued to finance a portion

of the improvements as well as other incidental expenses The

maximum payment provided in the agreement willproduce a 7 percent

return on land and water property and a 6 percent return on the

improvements to be provided Although Los Angeles has not included

12 F MO
AGREEMENTS NOS T 2 108 AND T2108 A 119

in the compensation base the cost of removal of the old wharf from the

premises to be improved and excavation costs of material excavated

in the vicinity of the wharf such exclusions have been reasonably

justified and there is no sound basis for a dispute of management

judgment in computing the maximum payment The minimum pay

ment however causes concern

The minimum compensation is related to a return on the invest

ment in extra facilities required to handle containers and not on the

entire cost of the wharf facility Los Angeles has determined the cost

of providing a

general cargo terminal and has used as a minimum

compensation base only the investment in this facility over and

above that amount Applying 4 percent to this base Los Angeles

finds the return sufficient to cover the cost of the bonds issued to fi

nance that portion of the improvements This method is considered

by the port a matter of business judgment properly exercised by port

officials and acceptable as the port does not require other users

of general cargo terminals to guarantee a minimum payment Hearing

Counsel takes the position that the minimum fails to consider all

direct and prorated costs plus depreciation of the entire facility

and that if such factors were included in the base the minimum

payment should be increased by approximately 30 000

In the Port s view the Lines should be required to guarantee

payment sufficient only to cover the cost of the special equipment

furnished for the handling of containers The fallacy of this con

cept is that the lines have been granted preferential use of the entIre

facility The agreement provides

Assignee shall use the premises and the facilities situated thereon for the

docking and mooring of vessels thereceipt7 handling loading unloading storage

transporting and delivery of containerized cargo and for uses incidental then to

The benefit to the Lines emanating from this agreement is that they

have the preferred use of a complete facility constructed to meet

their needs in transporting containers on vessels designed to handle

that type of cargo Los Angeles in its brief although in relation to

another issue points ont that it is setting aside a valuable harbor

asset to the Lines and that it must have some assurance that the use

will provide adequate compensation

An increased minimum payment is necessary to assure that the

Port will not furnish services here the preferential use of an entire

facility oat less than cost In view of the fact as above found that

there are strong inducements for the Lines to make full se of the

facility the question of the amount of the minimum payment may

lose significance in relation to this agreement Nevertheless as a

matter of principle compensation whether minimum or maximum

12 F MC
120 FEDERAL MARITIME COMMISSION

mutbe related to the cost of the entire facility assigned or in o

words to the full extent of the services rendered by a port to 

assignee The minimum payment which is computed on only par

the cost of the facilities is noncompensatory in that it is less than 

cost to the port Negotiations between the Port and the Lines 

establish a modified minimum should not cause undue delay in view 

the fact that the full use of the facility is probable by reason of 

nomic inducements If using the base upon which the maxim

compensation was computed a minimum is established sufficien

asure that the port will not furnish the facilities at less than 

during any year of the pendency of the agreement such minim

will be approved

It is noted that the Lines may cancel the agreement at the en

the first year and in event of cancellation within that time or if 

agreement is not renewed for a total of 10 years the Lines m

reimburse the Port for only the cost of the extra facilities less de

ciation This provision does not disturb the above finding as it 

not relate to the minimum payment If the agreement is cance

me by the port of the facility is not limited by a preferential 

The Retroactive Operation Clause

Itis provided in section 3 of the agreement

In the event the Federal Maritime Commission shall approve this Permit 

Agreement prior to the time Assignee commences to engage in those activ

permitted by Section 4 hereof then the term of this Permit and Agreement 

commence on the first day of the calendar month during which Assignee 

commence Ruch activities

The next paragraph which is referred to herein as the retroac

operation orretroactive effect clause is as follows

In the event howev r that theFederal Maritime Commission shall notappr

this Permit and Agreement until after the Assignee has commenced to eng

in such activities then this Permit and Agreement shall become effective for 

purposes as of the first day of the calendar month following such approval P

vteled h wever That this Permit and Agreement shall become effective for all purpo

retroactzvely to the first day of the calendar month during which Assignee shall c

mence to engage in such activities if such is approved by the Federal Maritime C

mission Italic supplied

The italicized portion of the clause is contested as in violation 

section 15 of the Act which provides in pertinent part

Any agreement not approved by the Commission shall be 

lawf l before apProval or after disapproval it shall be unlawful to ca

outIn whole orIn part1 directly orindirectly any such agreement

12 F MC
AGREEMENTS NOS T 210 g AND T 2 to g A 121

In Mediterranean Pools Investigation supra it was stated

Behind these proposed amendments is the dispute over our authority

to approve section 15 agreements retroactively or as respondent and the Ex

aminer would have it agreements bearing earlier effective dates Whatever

nomenclature is employed Hearing Counsel and the Examiner are talking about

the same thing the authority of the Commission to approve an agreement for

a

period prior to the effective date of that approval

Section 15 actually renders unapproved agreements unlawful in two situations

First section 15 required that agreements when reached must be immediately

filed with the Commission Thus an agreement which is made but not filed for

approval is unlawful even though no action is taken by the parties under it

Secondly section 15 makes it unlawful to carry out in whole or in part

directly or indirectly an unapproved agreement Thus where as here an agree

ment has been filed and is pending approval it is only unlawful for the parties to

carry out the agreement and the agreement itself is not unlawful All the parties

and the Exarpiner agr e th t

the Commission may not approve an agreement in

such away as to render lawflll that vhich the statute explicitly declares unlawful

and therefore the Commission may not approve an agreement so as to validate

conduct under the agreement prior to its approval

The Lines contend that the clause here at issue and in the com

panion case docket No 68 27 supra is not barred by reason of tbat

decision because

The retroactive effect section is merely a provision calling for special ap

proval by the Federal Maritime Commi sion which is an element in the overall

lompensation formula lessening the risk to the Port and to the respondent lines

hat a substantial deviation from their negotiated intention could result from an

tdministrative or judicial processing delay beyond their control In each of

jhese r

spects the situation here present differs from that considered by the

Jommission indocket No 1212 Mediterranean Pools Investigation

Hearing Counsel recommends approval of the clause because as

jhe Commission has accepted the principle of minimum maximum

ompensation it would be reasonable to permit payments made by

ihe Lines prior to approval of the Agreement to apply towards a

ninitnum charge that is ultimately accepted by the Commission It

s argued that no special advantage will accrue to the Lines or Los

ngeles with such an arrangement and that since the Lines will not be

eceiving preferential treatment during the interim period when

here is no approved agreement there will be less advantage than if

he agreement had been approved

As contended by the Lines and Hearing Counsel the use of the

acility prior to approval would not be unlawful if no preferential

lse was accorded the Lines and if they paid in accordance with the

o t

s tariff But the clause is not limited to applying revenue thus

laid to the minimum It provides that the agreement shall become

12 F M C
122 FEDERAL MARITIME COMMISSION

effective for all purposes Approval of the clause would give 

active effect to an unapproved agreement in its entirety The 

hibitions of section 15 are broad and parties to an agreement fil

approval may not carry out in whole or in part directly or indi

any such agreement The distinction between carry out 

give effect to is not evident Any action taken by the parties 

agreement prior to approval if governed by the agreement is ca

out the agreement The delay encountered by parties in obta

adminstrative approval of section 15 agreements is recognized 

may at times present problems But the remedy would be m

cation of the statute which in its present form prohibits sectio

agreements from being carried out directly or indirectly prio

Commission approval

It is concluded that the underscored portion of the clause s

be deleted as a prerequisite to approval of the agreement Thi

approval should not result in appreciable additional cost to the L

The facility is not at this time ready for occupancy The Lines 

ipate that the first vessel will be served during November 

The Minimum Maximum Oompensation Provisions

Stockton argues that such provisions are lawful only if respon

have demonstrated that they will not result in discrimination or p

dice against any terminal that no port will be in any way inj

and that cargo will not be diverted from any port or terminal 

argument ignores the provisions of the Shipping Act Discrimin

and prejudice are not per se unlawful Philadelphia Ocean T

Bureau v Export S S Gorp 1 D S S B B 438 531 1935 

statute prohibits only unjust and unreasonable practices Long B

objects to these provisions in that after the maximum is paid 

Lines will have free use of the facility during the remainder of the

This will result according to its argument in violation of sec

16 and 17 of the Act by giving the Lines undue and unreaso

preference or advantage over users of the Port s facilities wh

required to pay tariff rates for all use

These arguments have appeared in other proceedings in whic

Commission has approved minimum maximum compensation 

visions It has been held that an agreement is not unlawful m

because it does not follow the terminals tariff charges but that 

arrangements must be scrutinized to determine whether illega

crimination or prejudice may result Agreement No 8905 Po

Seattle and Alaska 8S 00 7 F M C 792 1966 In this procee

there is no evidence that any shipper or carrier will suffer undu

unreasonable prej udice or discrimination by virtue of the provis

12 F M 
AGREEMENTS NOS T 2 108 AND T 2108 A 123 

If discrimination or prejudice exists it is related solely to ports In

Agreement No T 1768 Terminal Lease Agreement 9 F M C 202

1966 a minilnUIn maximum compensation provision was approved

however the Commission found that no cargo would be diverted

from one port to another This finding was related to the discrimina

tory aspects of an agreement but does not constitute a precedent that

an agreement may not cause diversion of cargo The loss of a potential

customer was not considered as constituting unjust discrimination in

Agreement T 4 Terminal Lease Agreement Long Beach California

8 F M C 521 1965 In any competitive situation there is diversion

of cargo from one port to another Los Angeles has in the past lost

cargo to Long Beach If all diversion was prohibited competition

would be severely crippled Any diversion will result in injury to the

port losing the cargo and here certain ports may be deprived of some

cargo now handled for the Lines however with the disapproval of

the routing clause loss may be mitigated There is no evidence to

warrant the conclusion that any port will lose cargo to the extent

that its future profitable operation is threatened While destructive

practices are prohibited as held by the Commission in Intercoastal

Investigation 1935 1 D S S B B at 430 1935 no destructive result

is envisioned here The fact that some cargo may be diverted to Los

Angeles from other ports is not alone sufficient to show an unjust or

unreasonable practice

The Crane Agreement

Agreement No T 2108 A is a grant to the Lines by the Port of the

preferential use of a crane to be used in connection with the premises

assigned by Agreement No T 2108 The Lines are to pay the Port in

accordance with the Port s tariff of 70 per hour until a maximum of

89 000 is reached within anyone year Thereafter there is no charge

to the Lines for use of the crane during that year The Port s tariff

provides that use of the crane shall be under the user s

super ision

and control and the operation of the crane is the responsibility of the

Lines or any other user The Port anticipates that the crane will be

used by others than the Lines and that the additional compensation

thus obtained will be sufficient to cover the otherport costs applicable

to the crane The Port has had no prior experience in offering a crane

of this type to the public and if it finds that the tariff is not compen

satory it will increase the rate The agreement provides that the

Lines will pay any charge included in an amendment to the tariff

Long Beach finds the rate of 70 per hour unreasonably low and

noncompensatory This contention is based on the fact that Long

Beach has a rate of 70 per hour for a crane costing far less than the

12 F M C
124 FEDERAL MARITIME COMMISSION

Los Angeles crane It is also argued that the maximum of 

will produce a

gross return of only 6 32 percent which will not 

bond and prorated port costs Long Beach furnished computat

indicate that only 55 580 would be received by Los Angeles 

one year which would reduce the gross return to 3 95 percent It 

that therewill be no opportunity for Los Angeles to receive add

revenue from secondary use of the crane sufficient to cover cos

to realize a net profit

As Hearing Counsel points out the argument by Long Beac

sec0ndary use cannot be contemplated is contrary to the fa

rec0rd The wharf assigned to the Lines is only a

portion of th

wharf being constructed by Los Angeles and the crane will ser

entire wharf The crane will be equipped to handle heavy lift 

dry bulk and other special cargoes as well as general cargo Seco

use is to be reasonably anticipated Itwasheld in Reduction in R

Pacific Coast Hawaii 8 F M C 258 that rates need not necessa

compensatory during the preliminary period of an operation an

the person furnishing a new service should have the opportun

attract use of the service That principleis here applicable Los A

has stated its intent to increase the rate for use of the crane if 

ence shows the present rate is noncompensatory Ifit should fa

so and if it is shown that the agreement has an unlawful imp

effect on any interested person in the future the Commission h

authority and duty under section 15 of the Act to a ain rev

al1d take action found necessary See Agreement No 8905 P

Seattle and Alaska S S Co 7 F M C 792 801 1964

lIt is concluded that Agreement No T 2108 A should be app

Hbwever as the agreements here presented for approval are re

llBproval of this agreement is subject to the prescribed modif

ofAgreement No T 2108 and approval of that agreement as mo

Hearing Counsel and Long Beach refer to a letter to theComm

fr0ID four U S carriers which expres es conc n thatregulations 

Japanese Government ay prevent them from obtaining te

facilities and rights at Japanese ports similar to the rights and 

ileges granted to the Japanese lines in these agreements Wh

letter expresses concern there is no evidence on this record t

port a conclusion that such rights and privileges have been den

that negotiations with the Japanese Government for similar righ

privileges will fail If lat r developments result in prejudice t

lines or show adverse affect on the commerce of the United Stat

Commission will no doubt reconsider these agreements but the 

mission does not disapprove agreements because of concern 

12 F 
AGREEMENTS NOS T 2108 AND T 2108 A 125

without evidence to support disapproval Alcoa S S 00 Inc v Cia

Anonima Venezolana 7 F M C 345 361 1962

The additional issue raised by Long Beach that the agreement is

being carried out prior to Commission approval because Los Angeles

is constructing the facility in preparation for the use by the Lines

merits little attention If a port is prohibited from improving its

facilities in contemplation of entering into and obtaining Commission

approval of an agreement providing for a return to the port on its

investment progress would be unnecessarily and severely limited The

construction of improvements is not carrying out the agreement It

is the commencing of the preferential use that causes the agreement to

be in effect

ULTIMATE CONCLUSIONS

1 A clause requiring a lessee or preferential user or terminal

facilities to utilize such facilities so as to substantially exclude other

terminals from securing its patronage restricts free competition in

violation of antitrust policies and must be justified in order for the

Commission to approve it under section 15 of the Shipping Act 1916

The record not demonstrating that such a IIrouting clause in Agree

ment No T 2108 is required by a serious transportation need is

necessary to secure important public benefit or is in furtherance of

a valid regulatory purpose it is disapproved

2 The retroactive provision of Agreement No T 2108 cannot be

approved as such approval would sanction carrying out the agreement

prior to Commission approval in violation ofsection 15 of the Shipping

Act 1916 and it is therefore disapproved The specific language dis

approved is underscored in the clause heretofore quoted

3 The minimum payment provided in Agreement No T 2108 is

noncompensatory and would either shift the cost of providing service

to nonusers in violation of section 16 IIFirst of the Shipping Act 1916

or unjustifi bly jeopardize the soundness of the terminal s operations

in violation of section 17 of the Act and it is therefore disapproved

4 Agreement No T 2108 will be approved subject to the deletion

of the IIrouting and IIretroactive clauses and its amendment so as to

provide for minimum compensation which the Conlmission shall deter

mine ex parte or after further hearing if appropriate to be not less

than the cost to the port of providing the service

5 Agreement No T 2108 A is approved subject to modi4caton

of Agreement No T 2108 as herein required

Signed HERBERT K GREER

Presiding Examiner
FEDERAL MARITIME COMMISSION

DOCKET No 68 27

IN THE MATTER OF AGREEMENT No T 2138 BETWEEN THE POR

OAKLAND AND JAPAN LINE LTD KAWASAKI KISEN KAISHA L

MITSUI O S K LINES LIMITED AND YAMASHITA SHINN

STEAMSHIP CO LTD

NOTICE OFADOPTION OF INITIAL DECISION AND ORD

Adopted October 15 1968

Noexceptions having been filed to the Initial Decision of the Ex

iner in this proceeding and the Commission having determined 

to review same notice is hereby given that the decision becam

dezcisi nodf thde CTommission on OctTober 15 1968b t l8 01 ere hat Agreement 2138 shall e modified to d

the routing clause and the retroactive operation provision excep

first sentence thereof Agreement T 2138 as amended by Agreem

T 2138 1 shall be approved uponreceipt ofappropriate modificat

By the Commission

SEAL S THOMAS LISI

Secreta

Agreement No T 2138 as amended whereby the City of Oakland grants the

erential use of a terminal facility to four Japanese carriers approved su

to thedeletion of a routing clause and a retroactive effect provision

J Kerwin Rooney for respondent Port of Oakland

Francis L Tetrault and Reed M Williams for respondents Ja

Line Ltd Kawasaki Kisen Kaisha Ltd Mitsui O S K L

Limited Yamashita Shinnihon Steamship Co Ltd

Miriam E Wolff for petitioner Port of San Francisco

Leslie E Still Jr for petitioner City of Long Beach

Albert E Cronin Jr for petitioner Stockton Port District

William R Daly for San Diego Unified Port District interven

Edward G Farrell and Walter G Foster for City of Los

intervener 

Donald J Brunner and G Edward Borst Jr Hearing Counsel

12 F M 

126
AGREEMENT NO T 2138 127

NITIAL DECISION OF HERBERT K GREER PRESIDING

EXAMINER 1

Respondent Port of Oakland entered into an agreenlent with Japan

Line Ltd Eawasaki Kisen Kaisha Ltd Mitsui O S K Lines Lim

ited and Yamashita Shinnihon Steamship Co Ltd hereinafter

collectively referred to as the Lines which provides for the prefer

ential assignment of marine terminal facilities at the Port of Oakland

to be used primarily for handling containerized cargo The agreement

was filed with the Commission and assigned No T 2138 This investi

gation was ordered to determine whether the agreemen t should be

approved modified or disapproved pursuant to section 15 of the

Shipping Act 1916 the Act On flay 31 1968 a supplemental

agreement enlarging the assigned a rea and adjusting the maximum

compensation was filed assigned No T 2138 1 This proceeding was

expanded to include the supplemental agreement

THE AGREEMENT

Parties to the agreement are subj ect to the Act and the agreement

is within the purview of section 15 of the Act

On January 17 1968 respondents entered into a Containership

Preferential Assignnlent Agreement which was modified on l1ay 31

1968 whereby the Port of Oakland grants to the Lines a nonexclusive

preferential assignment of 8463 acres to be used for the docking and

Inooring of containership vessels or semicontainer vessels for the re

ceipt assembling distributing llloving loading and unloading of

goods in containers into and fronl such vessels and uses incidental

thereto over through and upon the premises

The primary use of the premises is described as the containership

operations of the assignee the container operations of semi container

vessels and the handling of containers not less than twenty 20 feet

nor nlore than forty 40 feet in length carried on break bulk vessels

Other operations such as handling automobiles and break bulk cargo

and other container operations are described as secondary use The

agreement further provides that the Lines shall handle at and route

through Oakland all of their containerized cargo vessel business which

originates or terminates in Japan or the United States and which

transits through the San Francisco Bay Area and surrounding territory

tributary to Oakland

The facility will be operated by a

company to be organized by the

Lines and their agents Oakland reserves the right to use all or any

part of the premises provided such use does not interfere with use by

I This decision became the decision of theCommission on October 15 1968

12 F M C
128 FEDERAL MARITIME COMMISSION

the Lines Revenue received from such secondary use is retaine

Oakland and not applied to the minimum maximum compens

set forth in the agreement

Compensation to be paid by the Lines is based on Oakland s t

and revenue to the Port must be a minimum of 162 000 per ann

However if during the first or any subsequent year the revenue to 

Port reaches 178 070 the Lines thereafter will pay no more du

that year for the primary use of the premises Minimum maxim

payments are subje t to the following conditions

In the event that the total tariff revenues derived from theprimary use o

premises by the Assignee during any year of this Agreement shall be 

than the minimum annual payment specified inParagraph 6 a hereof then 

hundred per cent 100 of the revenues derived from secondary use o

premises by 3 of the Lines for special auto carriers and sixty five per cent 

of the revenue derived from all other secondary use of the premises by 

Lines shall be applied against the minimum annual payment until said mini

is reached or until the end of that year In theevent such revenue derived 

such secondary use shall be less than said minimum annual payment during 

year of this Agreement then Assignee shall within thirty 30 days after th

of such year pay to thePort an additional sum equal to the difference

Tariff revenues during each year of theAgreement shall be applied agains

maximum annual payment specified in Paragraph 6 a hereof as follows 1 

revenues from primary use shall be applied against said maximumannual pay

during any year of this Agreement and 2 inthe event that the revenues 

primary use shall be less than said maximum annual payment one hundred 

cent 100 of the revenue derived from secondary use of the premises by 

Lines for special auto carriers and thirty five per cent 35 of the reve

from all other secondary use by 3 of the Lines shall be applied against 

maximum annual payment until said maximum is reached or until the e

that year It is understood and agreed that all tariff revenues derived from 

primary and secondary use of the premises by the Assignee shall accrue to 

belong to the Port until the total of the revenues from primary use plus 

hundred per cent 100 of the revenues derived from secondary use by 

Lines forthespecial auto carriers plus thirty five per cent 35 of thereve

from all other secondary use by 3 of theLines during any year of this Agree

shall equal said maximum annual payment

I

t is further provided that after the total tariff revenue from 

above described primary and secondary use

is equal to said maximum annual payment all tariff revenues for the balan

said year shall be divided between the parties hereto as follows 1 All t

revenues from primary use shall accrue to and belong to the Assignee and 

sixty five per cent 65 of therevenues from secondary use shall accrue to 

belong to the Port and thirty five per cent 35 thereof shall accrue to 

belong to the Assignee The Port s share of such revenues shall be in additi

said maximum annual payment specified inParagraph 6 a hereof

The parties agree that if the Lines use the assigned facility prio

the effective date of the agreement compensation for such use 

12 F M 
AGREEMENT NO T 2138 129

be as stated in the agreement if the Commission approves the retro

active operation clause which is set out in full hereinafter

The minimum maximum compensation is to be adjusted when

l1ctUal cost to the Port of constructing improvements on the premises

is determined

The effective date of the agreement is the date of approval by the

Commission and approval by the Japanese Government but not later

than January 1 1969 The termination date is December 31 1973

Provisions not involved in the issues presented are not described or

set forth herein

FACTS

Bay Area ports and Southern California ports appearing in this pro

ceeding now handle cargo for the Lines During 1967 Stockton handled

approximately 750 containers for three of the Lines and this volume

increased proportionately during the first half of 1968 San Francisco

handled approximately 360 000 tons of cargo for the Lines and re

ceived revenue therefrom of 400 000 during 1967 Long Beach handled

344 846 revenue tons and received 389 243 during 1968 and during

thefirst half of 1968 handled 154 811 revenue tons receiving 187 616

Ports competing with Oakland now have or will have facilities capable

of handling containers

Each of the Lines has under construction a containership which will

be approximately 620 feet in length with an 83 foot beam and a

capacity of from 708 to 720 containers of 8x8x20 feet They presently

operate five semi container vessels in their various trades The Lines

intend to the fullest extent possible to move all container traffic on

containerships but during the early period of the agreement

containers may be moved on other vessels

The agreement with or without the routing clause hereinafter

discussed will cause diversion of cargo from Stockton and San

Francisco

POSITIONS OF THE PARTIES

Stockton contests the lawfulness of the agreement in its entirety

arguing that the Commission in approving previous agreements

between terminals and carriers did not foresee the dire monopolistic

consequences emanating therefrom Particular objection is made to

the routing clause which Stockton deems to be an exclusive patronage

provision prohibited except in dual rate agreements which have been

thesubject of a

statutory provision The minimum maximum compen

sation arrangement is considered unlawful for the reason that dis

crimination against and prejudice to other ports will result therefrom

and that cargo will be diverted from other ports because after the

12 F M C
130 FEDERAL MARITIME COMMISSION

maximum payment has been made the Lines will participate 

further revenue constituting an unlawful rebate and a powe

inducement to the Lines to route all of their traffic through Oakla

Long Beach would not object to approval of the agreement provid

the Commission requires deletion of the routing clause and the Re

active Operation provision The routing clause is contested as con

tuting a restraint on trade repugnant to the anti trust laws 

detrimental to the commerce to the United States The Retroac

Operation clause is considered unlawful because it permits the ag

ment to become effective prior to Commission approval

San Francisco supports the position that the routing clause 

unlawful as contrary to the anti trust laws in that it unreasona

stifles competition and constitutes violations ofSections 16 and 1

the Act Further it takes the position that this agreement canno

approved until the Commission has considered a crane rental ag

ment which the parties intend to execute

San Diego objects to approval of the agreement only because of 

routing clause The clause is deemed to restrict the right of consign

and shippers to select the carrier and the port through which carg

moved and also to restrict their choice of inland transportation Ad

tional objection is found because such a clause permits a port to dict

to the carrier which ports it may serve Itis contended that the rec

shows that Oakland could operate successfully without the clau

thus it is not justified In general San Diego supports the conc

that the routing clause is contrary to the antitrust policies of 

United States

Hearing Counsel supports San Francisco s position that the cr

agreement between the respondents should have been included in 

proceeding but does not agree that approval should be delayed u

the Commission considers such supplementary agreement Altho

not contesting approval of the agreement Hearing Counsel f

existing standards of costing defective prinlarily because Oakland 

based its computations on out of pocket costs and because the cos

construction of improvements does not reflect the full value of 

facilities

Oakland contends that the routing clause is not an exclu

patronage feature and that it provides assurance to the port that 

facility will handle sufficient cargo to yield a fair return on its inv

ment It points out that the minimum annual compensation is 

amount required to service the Port of Oakland Revenue Bonds iss

to finance construction of improvenlents to be used by the Lines 

that additional revenue is necessary to yield a fair and reason

12 F M 
AGREEMENT NO T 213 8 131 

return to the port This agreement is said to be consistent with other

agreements approved by the Commission

The respondent Lines argue that the compensation provided is com

pensatory to Oakland The Retroactive Operation clause is defended

by the argument that it will not make legal earlier conduct which was

otherwise illegal but simply permit a future adjustment in the ac

counts after approval lawfully measured by past events and past

legal conduct It points out that payments prior to approval will be

in accordance with Port tariffs

DISCUSSION AND CONCLUSIONS

The issues here involved are in many respects identical to the issues

raised in Docket No 68 26 12 F M C 1l0 which involves a preferential

assignmen t of a terminal facility by the City of Los Angeles to the

same carriers here involved Had itnot been for objections by Oakland

based on certain differences in the two agreements the proceedings

would have been consolidated Itis here unnecessary to discuss in de

tail the issues raised concerning the retroactive effect provision and

the routing provision of this agreement as reference to the Initial De

cision issued in Docket No 68 26 which is incorporated herein by

reference will suffice

The routing clause in Agreement No T 2138 as amended by

Agreement No T 2138 1 is as follmvs

It is further understood and agreed that the Assignee shall handle at and route

through thePort of Oakland all of its containerized cargo vessel business the ship

ment of which orginates or terminates in Japan or the United States and which

originates at is destined to or transits through the San Francisco Bay Area and

thesurrounding area tributary to the Port of Oakland and this covenant shall be

binding upon each of the four Japanese steamship lines comprising the Assignee

and upon any successors in interest or assigns of any of said lines in the event of

their sale merger Or consolidation with any other company or companies unless

the Executive Director of the Port shall give his prior written consent to the con

trary with the exception that semi containerships and containers on conventional

break bulk ships may be handled at any other facility

As found in the Initial Decision in Docket No 68 26 restrictions on

free competition are presumptively contrary to the public interest

and will not be approved by the Commission unless justification for

approval appears on the record Oakland has not demonstrated the

necessity for the routing clause According to its witness the clause

was included in this agreement prima rily because Los Angeles in a

similar agreement with the Lines made such provision and Oakland

used the clause to protect its competitive position in relation to Los

Angeles Inasmuch as the routing clause has been found not approvable

in the Initial Decision issued in Docket No 68 26 Oakland s basic

12 F lfC
132 FEDERAL MARITIME COMMISSION

reason for including it in this agreement no longer exists Oakland d

not deem the clause as required and its witness testified only tha

helps to assure that the facility assigned to the Lines would be used 

such an extent that thePort s investment will be protected As in t

Los Angeles agreement the compensation provisions above set fo

provide a strong incentive for the Lines to make full use of the facili

They must meet a minimum payment by usage or by payment o

penalty for non use After the maximum is reached their further p

mary use is without cost and a credit is received for secondary u

Also the Lines are stockholders in the company organized to mana

the facility an additional incentive to make full use of it

It is concluded that Oakland has not demonstrated a necessity 

the routing clause as a means of protecting its investment and in t

absence of such justification the clause must be deleted as a

p

requisite for approval

The agreement further provides

48 Retroactive Operation In the event that the facilities covered by this Agr

ment are ready and are occupied and used by the Assignee prior to theeffect

date of this Agreement such occupancy and useshall be pursuant to theapplica

tariff of thePort If and when this Agreement is approved by the Federal Mariti

Commission the compensation payable to the Port by Assignee for occupan

and LIse of the premises shall be as prescribed by this Agreement In the ev

that the Federal Maritime Commission approves such retroactive effect 

compensatory provisions of this Agreement shall be retroactive to and effect

from the first day of the calendar month during which the first of the Assigne

containerships berths at thepremises

The lav rfulness of a retroactive effect provision was discussed in t

Initial Decision served in Docket No 68 26 and that portion there

relating to this clause is incorporated herein by reference Itis true 

the Lines contend that use prior to approval will be in accordan

with the Port s tariff which is not unlawful However crediting su

payments to the minimum maximum provisions constitutes givi

effect to the provisions of an unapproved agreement As stated in t

referenced Initial Decision giving effect to and carrying out a

terms not readily distinguishable The clause must be deleted as 

prerequisite for approval of the agreement Use prior to approv

must be subject to the Port s tariff

The compensatory nature of the agreement is not contested ho

ever Hearing Counsel question the method used by Oakland 

establishing the base upon which the minimum maximum compens

tion was computed Itis suggested that a set of standards be provid 

for future terminal agreements which relate to terminals furnishi

facilities for containerized cargo Establishing a set of accounti

s tandards might be beneficial however this proceeding is not t

12 F M C
AGREEMENT NO T21138 133

vehicle for such action and any attempt to do so herein would consti

tute rule making without the required notice to all interested parties

The methods used by ports in arriving at rentals or compensation for

preferential use are of Commission concern however the test here

applicable is whether the ultimate result provides adequate compen

sation to the port Agreements No T 1953 and T 1953 A Terminal

Lease Agreements Between the Oity of Oakland and Matson Navigation

00 F M C Docket No 66 68 11 F M C 156 1967 Here Oakland has

demonstrated a rate ofreturn of 6 on its investment from the mini

mum compensation and 7 from the maximum compensation which

may be increased if secondary use develops to a sufficient extent

While the methods adopted by Oakland in computing compensation

may not be proper under all circumstances there is no basis for

criticizing the judgment of port management in computing a fair

return to the port which return has been shown to be compensatory

Stockton presents the argument that as the agreement provides for

an allocation of the terminal charges after the maximum has been

reached there is an unlawful rebate which operates unlawfully to

limit competition The fact that the Lines will derive monetary benefit

under the compensation provisions of the agreement is not a sufficient

basis to support a

finding of undue or unreasonable competitive dis

advantage to another port An agreement is not unlawful or unreason

able merely because it does not follow the terminal s tariff charges

Agreement No 8905 Port of Seattle andAlaska S S 00 7 F M C 792

1964 The monetary benefits to the Lines after the maximum is

reached are not unlawful refunds merely because thereafter no pay

ments are made or that the tariff earned is apportioned between the

parties Adoption of Stockton s concept would be contrary to the

Commission s approval of other agreements providing for financial

benefits to an assignee or lessee after payment of a maximum compen

sation It is not the level of the rates which is of concern here It is

the overall compensatory nature of the agreement

Stockton s

argument that agreements between terminals and ship

ping lines having enough traffic to economically force a port to accede

to a lower than tariff rate or lose the business is not supported by

any fact of record Nor can the dire consequences such as the ultimate

prohibition of smaller carriers and ports from remaining competitive

be assumed or reasonably foreseen This agreement may not be disap

proved on such fragile grounds Oakland has developed and improved

its port This development enhances the movement of containerized

traffic and is thus beneficial to commerce Such progress is to be encour

aged Stockton or any other port may not be protected from lawful

competitive methods and insulated against all loss of cargo Stockton s

12 F MO
134 FEDERAL MARITIME COMMISSION

position as to competition and loss of cargo has been discussed a

refuted in the Initial Decision in Docket No 68 26 to which referen

is made See Alcoa S S Co Inc v Cia Anonima Venezuolana 

Navegacion 7 F M C 345 361 1962

San Francisco contends that tIlls agreement cannot be approv

until the Commission considers an agreement which is to be enter

into between Oakland and theLines for the preferential use of a cra

This agreement is not dependent on the crane agreement and will b

come effective if approved as modified as required herein The Lin

and Oakland are bound by the agreement upon approval by t

Commission and the Japanese Government whether a crane agreeme

is or is not approved

ULTIMA l E CONCLUSIONS

Justification for exemption from the antitrust policies of the Unit

States and for approval of the routing clause does not appear on t

record

The retroactive effect provision is unlawful and in violation 

section 15 of theAct in that it permits the provisions of the agreeme

to be carried out prior to approval

The agreement is compensatory

Subject to deletion of the routing clause and the retroactive ope

tion provision except the first sentence thereof agreement T 213

as amended by agreement T 2138 1 is approved

HERBERT K GREER

Presiding Examiner

12 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 67 54

CHR SALVESEN COMPANY LTD

v

WEST MICHIGAN DOCK MARKET CORPORATION

Decided December 11 1968

A person who furnishes wharfage dock warehouse or other terminal facilities

in connection witha common carrier by water is subject to the Shipping Act

1916 even though the tariff provides only for stevedoring services

West Michigan Dock Market Corporation found to have violated section 16

First of the Shipping Act 1916 by unreasonably refusing to serve com

plainant s vessel inorder of time of arrival and by granting undue preference

to another vessel because such other vessel was owned by a

regular customer

West Michigan Dock Market Corporation found not to have violated section

16 First of the Shipping Act 1916 in the assignment of available shore

labor to stevedore the vessel

Nicholas J Healy and Bruce A McAllister for complainant

Robert J Ables and Neal M Mayer for respondent

DonaldJ Brunner G Edward Borst Jr and Robert H Tell Hearing

Counsel

REPORT

By THE COMMISSION JOHN HARLLEE Chairman JAMES V DAY

Vice Chairman GEORGE H HEARN JAMES F FANSEEN Com

missioners

This proceeding was instituted upon the complaint of Chr Salvesen

Co served October 30 1967 After a hearing and briefs Examiner

Herbert K Greer issued an initial decision on June 26 1968 The Com

mission heard oral argument on exceptions on October 23 1968

Complainant Salvesen manager of the vessel SALDURA seeros to

recover damages in the amount of 109 268 01 together with interest

and costs on its own behalf and on behalf of South Georgia Co Ltd

ownerof the vessel against respondent WestMichigan Dock Market

Corporation operators of a terminal and storagefacility at Muskegon

Michigan 1

Salvesen alleges that West Michigan violated section 16 First of

the Shipping Act 1916 46 U S C 815 by refusing to unload the

SALDURA in its regular turn and that contrary to agreement and

Commissioner Ashton C Barrett did not participate

1 The parties agreed that adetermination should first be made on theissue of respondent s alleged vio

lations oftheAct and consequentinjuryto complainant and the question of theamount ofreparation would

be determined by furtber bearing or if tbeparties so agree pursuant to Rule 15 b of the Commission s

Rules of Practice and Procedure

12 F M C

135
136 FEDERAL MARITIME COMMISSION

custom respondent deliberately permitted another vessel which a

rived after the SALDURA to have priority and further that whe

the SALDURA was permitted to dock and discharge respondent di

not equally apportion its working force between the SALDURA an

other vessels being serviced at the same time The claim for damage

is based on the delays caused by the alleged unlawful acts of respond

ent which prevented the SALDURA from carrying out a contract o

affreightment because she was required to bypass another port of ca

due to the imminent closing of the St Lawrence Seaway

FACTS

Salvesen is a corporation engaged in the business of operatin

vessels for the carriage of merchandise for hire between ports in th

United States on the Great Lakes and foreign ports with its principa

place of business located at Leith Scotland During the period o

record South Georgia Co Ltd a holding company was the owne

of the vessel SALDURA Complainant was the manager and operato

of the vessel and was authorized by the owner to conduct all busines

relating to the vessel including the prosecution of claims arising ou

of the vessel s operation

West Michigan is a corporation owning and operating a ware

house and terminal facility at Muskegon Michigan West Michiga

printed a Stevedoring Services Tariff distributed it to customers o

potential customers upon request and solicited business by adve

tising The tariff set forth a stevedoring rate on wood pulp of 2 20 pe

net ton not subject to charge for overtime The rate included com

pensation to West Michigan for use of its berths wharfs labor an

equipment The tariff required that copies of inward foreign manifest

stowage plans and letters of instruction for import cargo should b

received by the stevedore at least 36 hours prior to vessel arriva

During 1965 West Michigan negotiated agreements with custome

and potential customers With one exception agreements were ev

denced only by the customer s acceptance of respondent s tariff 

The tariff did not set fortI a provision that respondent would hand

vessels in order of time of arrival and as a general rule responden

did not advise customers or potential customers that it would hand

vessels on a first come first served basis It maintained a bulleti

board showing estimated times of arrival for vessels it had agreed t

handle and if a conflict occurred it was resolved by negotiation wit

the agents involved In these negotiations respondent gave weigh

2

The one written contract in effect during 1965 was with Great Lakes Overseas Inc which provided 

part

If the contractor cannot furnish asatisfactory berth upon vessel s s arrival the Owner Agent 

Cbarter r bas theright without prejudice to this agreement to make other agreements for thehandli

of the vessel s

12 F M C
CHR SALVESEN CO LTD V WEST MICH DOCK MARKET CORP 137

to the factor that one of the vessels involved was a regular customer

But it was customary in the Great Lakes to handle vessels in their

order of arrival

During 1965 Nedlloyd Line Inc was complainant s agent for

North America and Phelps Steamship Agency Inc under N edlloyd

was complainant s sub agent for the Great Lakes area Phelps had

been furnished a copy of respondent s tariff

During early October 1965 Phelps was advised by Nedlloyd of a

booking of approximately 2 000 tons of wood pulp loading on the

SALDURA at Antwerp for discharge at Chicago Phelps having

knowledge that Chicago stevedores were not equipped for handling

wood pulp advised N edlloyd that such a commodity coming into

Lake Michigan was generally discharged at other ports The agents

and brokers involved agreed that the wood pulp would be diverted

from Chicago to Muskegon

On or about October 14 1965 Phelps contacted West Michigan s

office at Muskegon to discuss the discharge of the SALDURA s wood

pulp Phelps was advised that respondent could handle the cargo but

that more information was needed Subsequently respondent received

a telephone call from Castle and Overton brokers requesting that

the wood pulp be handled at Muskegon At the time WestMichigan s

warehouses were congested and for the purpose of determining

whether the cargo could be handled the broker permitted respondent

to contact KVP Sutherland a consignee of some of the wood pulp

KVP Sutherland agreed that a portion of the consignment could be

loaded direct from ship to railcars the exact amount to be later

determined On November 10 respondent was advised that approx

imately one half or 900 tons could be loaded direct from ship to cars

Some time before October 29 the SALDURA was posted on re

spondent s bulletin board for arrival during early November

On October 28 Phelps mailed to respondent two copies of a bill of

lading showing the weight and number of bales of wood pulp to be

discharged the covering letter advising that acopy of the manifest

was not available Respondent promptly acknowledged Phelps letter

stating that it had been in touch with Castle Overton that the

tentative shipping schedule on the wood pulp made it possible from a

space standpoint to discharge the SALDURA but that its schedule of

liner vessels was such that it would be unable to provide a berth for

the ship until after November 8 Further If you can conform to this

situation we will handle the ship and cargo at our tariff rates

On or about November 1 West Michigan learned that conditions in

the Welland Canal had prevented vessels from getting through and

that its arrival schedule would be affected Accordingly the time of

the SALDURA s arrival at Muskegon was uncertain On November 8

12 F M C
138 FEDERAL MARITIME COMMISSION

Phelps notified respondent that the vessel would arrive on Novembe

11 

On November 11 the SALDURA arrived at Muskegon anchore

on 1uskegon Lake and was presented for discharge At that tim

the berths at West Michigan s

facility capable of handling the sh

were occupied by the VIBYHOLM and the HARPEFJELL Phelp

and WestMichigan agreed that the SALDURA would be handled 

berth No 3

Phelps understood that the SALDURA would follow the HAR

PEFJELL when berth No 3 was vacated Respondent did flo

conform to this understanding and during the evening of Novemb

14 Phelps learned that the RUSS would follow the HARPEFJEL

into berth No 3

The RUSS was originally scheduled to arrive at Muskegon on N 

vember 8 but on or about November 10 respondent learned that s

would not arrive until the morning of November 15

On November 1 respondent s warehouses were approximately 9

percent full Because vessels scheduled for arrival were delayed b

difficulties in the WeIland Canal the warehouses remained full fro

November 4 through November 8 Prior to the arrival of the RUSS o

November 15 respondent loaded 186 tons of cargo on the RHEIN

STEIN 936 tons on the TROMSTAD an undetermined amount 

cargo on the CLARITA SCHROEDER and 639 tons on the HARP

EFJELL The ERATO had loaded a portion of its 999 tons of carg

The VIBYHOLM discharged 784 tons of wood pulp Space for 90

tons of wood pulp was required for the discharge of the SALDURA

A like amount of wood pulp was to be loaded direct from ship 

railcars

During November 11 12 and 14 respondent moved cargo for th

RUSS into space in warehouse No 2 vacated by cargo beingloaded o

the HARPEFJELL

The HARPEFJELL completed loading 385 tons on November 1

and vacated berth No 3 Respondent granted the RUSS immedia

occupancy of berthNo 3 and the SALDURA although it had arrive

at 11uskegon three days before the RUSS remained at ancho

The RUSS occupied berth No 3 until the morning of November 1

her departure from the berth being delayed approximately one d

by reason of bad weather

On November 17 the SALDURA moved from her anchorage 

berth No 3 and commenced discharging cargo at 1245 hours two a

one half days later than if she had been handled on a first come firs

served basis

At the time the SALDURA was berthed the ERATO was occup

ing berth No 8 unloading wire and loading 857 tons of canned ch

12 F M C
CHR SALVESEN CO LTD V WEST MICH DOCK MARKET COR P 139

ries The wire was loaded out on cars and trucks and did not occupy

space in respondent s warehouses The canned cherries were packed

in boxes weighing 46 pounds and palletized The pallets were lowered

through the hatches and the cargo manually stored in the hold by

longshoremen On November 17 when the SALDURA began discharg

ing wood pulp respondent assigned 41 stevedores to work the ERATO

on November 18 40 ste yedores worked the ERATO and on November

19 for part of the day 37 worked the vessel

The ERATO finished loading on November 19 and the RHEIN

STEIN came onto berth No 7 while the SALDURA was still being

discharged For the remainder on November 19 respondent assigned

17 men to the RHEINSTEIN on the 20th 41 men on the 21st 2

men and on the 22nd 27 men not including part time workers On

November 20 15 men from the RHEINSTEIN s crew augmented the

men assigned by respondent and on the 21st 20 crewmen augmented

respondent s working force

The SALDURA commenced discharging on November 17 and re

spondent assigned to that ship two high lift operators a crane oper

ator and a signal man On the 18th the same men were assigned with

two teenage boys added to unhook the bales of wood pulp on the dock

On the 21st six men 7ere assigned and on the 22nd seven men By

arrangement with the ship s captain 20 crew members worked as long

shoremen

Concerned by the delay in the SALDURA s schedule its captain

offered to respondent the services of two ship s officers capable of

handlingfork lifts Respondent originally agreed to furnish additional

fork lifts but did not do so because of union restrictions Attempts to

obtain labor from nearby areas were unsuccessful Phelps offered to

pay an increased stevedoring rate provided respondent would assign

additional labor to the SALDURA The offer was not accepted

The SALDURA completed discharging wood pulp at 1430 llOurst

November 22

The SALDURA was scheduled to take on cargo at Chicago and

Milwaukee after discharging the wood pulp The officially announced

closing date for the Seaway being imminent the SALDURA was re

quired to forego its Chicago commitment The SALDURA cleared the

Saint Lambert Lock early morning December 3 the official closing

date

The RUSS the vessel preferred over the SALDURA was outbound

with no port calls before passing through the Seaway

DISCUSSION

Respondent initially contends that the Commission had no juris

diction because respondent provided only stevedoring service to the

12 lM C
140 FEDERAL MARITIME COMMISSION

SALDURA The Examiner overruled this contention by finding th

respondent furnished not only stevedoring services but also provide

wharfage dock and warehouse facilities for the vessel and its carg

We agree with the Examiner s

ruling Respondent s contention th

the only activities with respect to the SALDURA was to provid

stevedoring services and that stevedores are not subject to the Ac

ignores the fact that respondent furnished not only stevedoring ser

ices but also provided wharfage dock and warehouse facilities f

the S DURA and its cargo clearly establishing respondent with

the purview of section 1 of the Act which in pertinen part provide

The term other persons subject to this act means any person not included 

the term common carrier by water carrying on the business of forwarding 

furnishing wharfage dock warehouse or other terminal facilities in llnectio

with a common carrier by water

It is not disputed that respondent served common calTiers b

water or that tbe SALDURA was such a common carrier Althoug

the tariff or agreements with carriers set forth only a rate f

stevedoring services and respondent absorbed other costs in i

warehouse rates or gave the service away gratis the rate for stev

doring included compensation to respondent for use of its dock

thus in effect imposing a

charge for the use of those facilities Thu

respondent is subject to the Shipping Act 1916

The Examiner also found that the Commission not only had juris

diction over the persons in this controversy but that the Commissio

also had jurisdiction over the subject matter a claim that th

respondent violated section 16 First

The complaint alleges two separate causes which resulted in injur

to complainant The first is the delay caused by failure to furnis

berth and dock facilities The second delay alleged to have resulte

in injury to complainant is the failure ofrespondent fairly to apportio

its available shore labor Section 22 provides in pertinent part

That any person may file with the board a sworn complaint setting forth an

violation of this Act by a common carrier by water or other person subject 

this Act and asking reparation for the injury if any caused thereby

The board may direct the payment of full reparation to th

complainant for theinjury caused by such violation

Thus the award of reparation must be related to a violation of th

Act and if preference and prej udice in respondent s

stevedorin

services are not forbidden by section 16 First reparation canno

be awarded for injury related to those services

The Examinernext considered a troublesome jurisdictional questio

in thatrespondent argues that complainant waswithout authority t

bring thisaction Complainant was manager of the vessel SALDURA

not the owner However the Examiner was persuaded by complain

12 F M C
CRR SALVESEN CO LTD V WEST MICH DOCK MARKET CORP 141 

ant s evidence that it managed all of the owner s South Georgia

affairs Therefore the Examiner found the authority necessary to

institute suit

West Michigan argues that the Examiner erred in finding that

Salvesen had standing to bring this action

Complainant managed all of the owner s South Georgia affairs

the owner being a holding company Although South Georgia did not

own the SALDURA at the time this proceeding was instituted the

terms of the vessel s sale did not transfer existing claims arising out

of the vessel s operation to the purchaser Such claims remained with

South Georgia and complainant as manager of South Georgia s

affairs had the responsibility and authority to take such action as was

required in connection therewith This claim is founded on the opera

tion of the vessel to be distinguished from an action in rem The sale

of the vessel did not affect the relationship between South Georgia

and complainant

With respect to the merits of the controversy the first question is

whether a terminal operator must serve its patrons in turn In general

the Commission has held that a terminal operator who offers a service

to common carriers by water and to the shipping public is required to

serve them on eq al terms In investigation of Free Time Practices

Port of San Diego 9 F M C 529 1966 the Commission said

In a very real sense of the term terminals are public utilities While not always

specifically franchised they nevertheless are engaged in thebusiness of regularly

supplying the public with a

service which is of public consequence and need

and which carries with it theduty to serve thepublic and treat all persons alike

This is the essence of the public utility concept 9 F M C at 547

The record established that the RUSS although she reached

Muskegon after the SALDURA was permitted to occupy a berth

before the SALDURA which remained at anchor an additional two

and one half days Inarguing that this was unreasonable complainant

proved that it was customary in the Great Lakes for terminals to

serve vessels in order of their arrival that generally respondent

served vessels in this manner and the SALDURA was the only vessel

not served in order of arrival principally because it was not a regular

customer

The Examiner found that respondent holds itself out as a public

terminal Its agreements with vessels wereinformal and consisted only

of the carriers acceptance of the terms of respondent s tariff The

tariff was silent on the question of order in which vessels would be

worked The Examiner found that there was no other contract pro

viding for any other method of handling the SALDURA Complains nt

had no reason to expect that its vessel would be treated differently

Respondent admits that the RUSS although she reached Muskegon

12 F M C
142 FEDERAL MARITIME COMMISSION

after the SALDURA was given preference and permitted tq occup

a berth upon arrival while the SALDURA was required to remain 

anchor in Muskegon Lake for an additional two and one half day

But respondent argues that this was not unlawful Thus the issue 

whether this preference was undue or unreasonable in violation 

section 16 First which provides that it shall be unlawful for an

person subject to the Act

To make or give any undue or unreasonable preference or advantage to an

particular person locality or description of traffic in any respect whatsoever 

to subject any particular person locality ordescription of traffic to any undue 

unreasonable prejudice or disadvantage in any respect whatsoever

Respondent argues that it was justified in acting as it did becaus

the condition of its warehouse prevented it from accepting the SAL

DURA until the RUSS had taken on cargo The Examiner howeve

found that as of the day respondent granted preference to the RUSS

the warehouses were sufficiently vacant to permit the handling of th

SALDURA s

cargo Thus the Examiner holds that respondent s pre

erence to the RUSS over the SALDURA was a violation of sectio

16 First

On exception West Michigan reargues that it handled the SAL

DURA in the aforementioned manner because it was unable t

handle the wood pulp in its warehouse pursuant to any other tim

schedule Thus West Michigan claims that it was necessary to loa

the RUSS to make room in the storage area for the wood pulp bein

discharged from the SALDURA 3

Furthermore West Michigan con

tends that at the time it made its decision as to the priority of vessel

it did not know how much space would be needed because it did no

know how much wood pulp would be loaded directly to rail cars

under the circumstances West l

1ichigan acted as if it would b

required to warehouse the entire 1 800 tons of wood pulp

West Michigan working with its regular customers has alway

attempted to minimize delays of loading or unloading cargo How

ever West Michigan contends that it served the SALDURA in th

first place as an accommodation to the SALDURA The busines

arrangement between the vessel and the terminal was not routine

the SALDURA was not a regular customer Under all the circum

stances therefore West Michigan urges the Commission to recogniz

that a terminal should serve its customers on a first come first serve

basis but that thisgeneral rule should be tempered Yith a

recognition

that regularity of scheduled services should be maintained and de

mands upon the capacity of a warehouse should be considered

aWest Michigan attacks the tonnage figures of the Examiner because it feels that he failed to consid

tonnage which moved in and out of theterminal by rail and truckand because the tonnages are not relate

to cubic capacity uponwhich the availability of terminal space must be based

12 F M C
CHR SALVESEN CO LTD V WEST MICH DOCK MARKET CORP 143

Respondent next seeks to mitigate the Examiner s

finding by point

ing out that even if the SALDURA had been handled before the

RUSS the warehouse would have been unable to accept the wood

pulp until the loadings of two other vessels at berth 7 provided

sufficient space to store the SALDURA s wood pulp Thus the

SALDURA might have been delayed the same number of days

Complainant proved that it was customary in the Great Lakes

area for terminals to serve vessels in order of their arrival that

generally respondent served vessels in that manner and that the

SALDURA was the only vessel not served in order of arrival princi

pally because it was not aregular customer Furthermore respond

ent followed a practice of preferring regular customers An official

of West Michigan stated

Well I suppose if we had a situation just like was developed here withthe SAL

DURA and the RUSS and it would come up that is a not normal situation

because the RUSS was a regular customer We had been doing business with

them for years they had been calling in there regularly

Further

Well I think it is pretty generally true that if you are doing business with a

customer that is your regular customer all the time that you probably will

show preferential treatment to that customer

Respondent s general manager testified

We never contemplated work on the SALDURA until after the schedule of

liners that terminated with the RHEINHART RUSS was completed

By letter dated December 6 1965 relating to the incident here

involved respondent advised Phelps

We do not operate under the jurisdiction of the Federal Maritime Commission

and do not hold ourselves out to provide public marine terminal services We

limit ourselves to negotiated stevedoring agreements with liner services

Respondent s argument is based upon the theory that it lIlay

legally operate in the above described way Respondent contends

It is not Respondent s duty to justify defend or explain its way of doing busi

ness It served its customers inaccordance with agreements made The SALDU

RA was served thus

Such agreements have their background in respondent s adver

tisements which are in evidence and constitute what it holds out

It is only necessary to look at them to realize that by circulating

them respondent very clearly held itself out to tbe public to provide

marine terminal services which the Act requires to be performed

for all upon like terms and conditions and respondent cannot escape

this duty by stating its compensation in terms of a stevedoring

tariff or by the terms of agreements with its customers In any

event respondent s agreements with vessel operators were with one

12 F M C
144 FEDERAL MARITIME COMISSION

exception informal and consisted only of the carrier sacceptanc

of respondent s tariff There was no provision in the tariff regardin

the order in which vessels would be served

Respondent s contention that it served the SALDURA in accor

ance with a negotiated agreement between the parties is dimmed b

sharply conflicting testimony regarding the terms agreed upon Com

plainant s witnesses testified tpat respondent agreed to handle th

SALDURA on a first come first served basis Respondent s witnes

denied such an arrangement and testified that they agree to hand

the SALD URA only after handling vessels previously booke

There is nothing in the documentary evidence and uncontradicte

testimony the most reliable guides to indicate that there was a

agreement that the SALDURA must wait for service until after late

arriving regular customers were served Respondent s commitme

to complainant for the handling of the SALDURA appears in i

letter of October 29 addressed to complainant s agent statin

We have been intouch with Castle and Overton Inc and have a tentative shi

ping schedule on this pulp that makes it possible from our space standpoint 

discharge the ship However our schedule of liner vessels is such that we will b

unable to provide a berth for this ship until after November 8 If you can confor

to this situation we will handle the ship at ourtariff rates

The commitment imposes no condition upon handling the SALDUR

after November 8

Complainant s agent had no reason to expect that the SALDUR

would be treated differently from any other vessel Especially in vie

of the testimony elicited from respondent s witness that vessels we

ordinarily handled in order of arrival it is difficult to assume that no

tice of any prospective departure from this practice would have bee

omittedfrom the letter had such been respondent s intent Itwas no

until three days after the SALDURA had been offered for discharg

that respondent stated to Phelps that the RUSS although schedule

for later arrival would be serviced before the SALDURA No test

mony herein warrants a finding that respondent during prelimina

negotiations conditioned its handling of the SALDURA in any ma

ner if presented for discharge after November 8

Although respondent s letter states only that It is possible from

our space standpoint to discharge the ship it now argues that th

condition of its warehouses prevented it from accepting the SALDUR

until the RUSS had taken on cargo On November 1 the warehouse

were approximately 90 percent full Vessels scheduled for arriva

were delayed by difficulty in the Welland Canal the same situatio

which delayed the SALDURA From November 4 to November 

no vessel was loaded or unloaded Oommodities in the warehous

12 F M C
eHR SALVESEN CO LTD V WEST MICH DOCK MARKET CORP 145 

included according to respondent s witness merchandise that was to

be loaded aboard the various vessels in November

Computation of space occupied on Nov mber 1 and cargo moved

into and out of the warehouses would not support respondent s

position Citing respondent stestimony

The first ship in November was the TROMSTAD and it loaded

885 gross tons of cherries and 51 gross tons of engines for a total

of 936 tons

The next ship was the CLARITA SCHROEDER and Ido not

have with me the tonnage loaded on that particular ship

Q The next ship

A Was the RHEINSTEIN motor vessel RHEINSTEIN

loaded on November 9 it loaded 186 tons of cherries 4

Q The next ship

A Was the VIBYHOLM and we unloaded 784 tons of wood

pulp

Q

The next ship

A Was the HARPEFJELL and we loaded 575 tons of cherries

16 tons of refrigerators 33 tons of hides and 15 tons of sweep

ers for 639 tons

As of November 14 the day respondent granted preference to the

RUSS the space vacated by vessel loadings substantially exceeded

cargo received and warehoused Also to be noted is the fact that the

ERATO had partially loaded its cargo Even considering the different

storage characteristics of the various commodities involved we can

not find that respondent was unable to warehouse 900 tons of wood

pulp until 385 tons were loaded on the RUSS Itis significant that

on November 11 12 and 14 respondent moved cargo destined for the

RUSS into space made available by outloading the HARPEFJELL

This fact emphflsizes the testimony of respondent s general manager

that at no time did he intend to serve the SALDURA until regular

customers including the RUSS had been handled

Respondent refers to the fact that the situation changed subsequent

to its letter of October 29 Difficulty in the Welland Canal upset

respondent s schedule of vessel arrivals but this fact does not justify

the preference granted the RUSS The RUSS was originally scheduled

to arrive on November 8 andrespondent learned on about November 10

that the arrival date would not be until November 15 On Novem

ber 8 Phelps advised respondent that the SALDURA would arrive

on November 11 Respondent knew or should have known that the

SALDURAwould precede theRUSS in arriving at Muskegon Respond

ent was advised that the RUSS was outbound and had no calls to

The RHEINSTEIN returned on November 19 to take on additional carpo

12 F M C
146 FEDERAL MARITIME COMMISSION

make hefore clearing the Seaway while the SALDURA had comm

ments at Chicago and Milwaukee Evaluation of the record leads 

the conclusion that respondent agreed to handle the SALDURA 

the same manner it handled other vessels but that when circum

stances caused a conflict with the RUSS respondent decided that th

regular customer would be given preference

Respondent further argues that the SALDURA was in a distresse

situation and that she was given the best service possible This pos

tion infers that the best possible service available to the SALDUR

was that the vessel be handled only after regular customers had bee

served The record does not warrant a conclusion that respondent 

agreements with other customers bound it to a preferential arrang

ment Indeed respondent s general manager testified we have n

preferential agreements Therefore we conclude that the predom

nant reason for respondent s preference to the RUSS and the d

advantage to the SALDURA was respondent s desire to prefer regub

customers

It is unreasonable for a terminal operator charged with the du

to treat all persons alike within the bounds ofreasonableness to gra

preferential treatment to one common carrier over another on e

basis that the preferred carrier is a

regular customer This is not 

say that a failure to serve vessels in order of arrival standing alon

is a violation of section 16 First Here the preference to the RUS

and prejudice to the SALDURA was undue and unjust and 

in violation of section 16 First 

Respondent argues that a failure to show a competitive relationsh

between the SALDURA and the ERATO or the RHEINSTEI

precludes a finding of unlawful prejudice or discrimination The Com

mission has held that under certain circumstances a competitive rel

tionship must be demonstrated In Investigation of Free Time Pra

tices Port of San Diego supra the Commission departed from th

general principle and held that a competitive situation need not 

shown when the issue involved free time Respondent s

interpretatio

of that case that only in proceedings involving free time is competitio

waived is unduly restrictive The test to be applied under the c

cumstances here appearing is whether t VO interests are seeking th

same or substantially the same service See The Boston Shipping Assoc

Inc v PortofBoston 10 F M C 409 1967 The San Diego proceedin

made clear that operators ofpublic terminals must afford all custome

seeking the same service fair and reasonable treatment Here th

SALDURA and the preferred vessels were seeking the same servic

Therefore the competition required by section 16 was present

The next major exception is made to the Examiner s

finding tha

West Michigan violated section lP First by unfairly allocating th

12 F M C
CRR SALVESEN CO LTD V WEST MICH DOCK MARKET CORP 147

available work force West Michigan agrees with the Examiner s

findings regarding the various labor assignments but West Michigan

urges that the Examiner s analysis does not tell the entire story

According to West Michigan the record will support the Examiner s

facts but not his conclusion that the allocation of labor was unlawful

The record shows the scarcity of labor at the time involved it also

shows the practice of West Michigan of discharging wood pulp with

the gantry crane at berth 3 finally the record shows that this is the

only practical method of discharging wood pulp at the West Mich

igan facility Therefore West Michigan urges that the SALDURA was

handled in the same way at the same speed as other ships with the

same cargo The record shows that only one hold was worked because

it was the most efficient method of discharging the vessel not because

West Michigan unfairly allocated labor to the vessel Furthermore

the rate of discharge of the SALDURA was faster per ton than other

vessels being handled at the same time In conclusion West Michigan

states that it simply cannot be argued that terminals must work out

equal allocation of labor between ships

Respondent s allocation of its work force during the period N ovem

her 11 22 was as follows

Date At Berth No 3 Men At Berth No 7 Men

11 CLARITA SCHROEDER 29

VIBYHOLM 36

12

HARPEFJELL

34 VIBYHOLlL 33

13 HARPEFJELL 50

ERATOu

19

14 not shown

15 RUSS 25 ERATOu 36

16

RUSS

1 ERATO uu 22

17

SALDURA

4 ERATO 41

18

SALDURA

4 ERATO 40

19 SALDURA 64

ERATO

37 part day

RHEINSTEIN 17 part day

20 SALDURA 28 RHEINSTEIN 41

21 SALDURA 37 RHEINSTEIN 26

22 SALDURA 7 RHEINSTEIN 27

I Had completed loading delayed by weather

2 Includes4 part time workers

a Includescrane repairman

Because of the shortage of labor respondent began using ship s crew

to augment its work force as of November 15 The record does not

disclose that ERATO s crewmen were used The RUSS utilized 19

creWDlen to augment labor furnished by respondent The RHEIN

STEIN furnished 15 men on the 20th and 20 men on the 21st The

12 lM C
148 FEDERAL MARITIME COMMISSION

SALDURA furnished 20 crewmen each day to assist in discharg

its cargo

The inquiry is whether had more men and equipment been m

available the operation would have been expedited Discharging 

SALDURA could not have been expedited by the furnishing 

more men because as a

practical matter only one hold at a t

could have been handled Testimony was offered to show t

tracks for the crane and for rail cars extended along the dock at be

No 3 making the surface uneven and hazardous for the operation 

fork lift trucks It was shown that had ship s gear been utilized 

wood pulp would have been placed on the dock and that to transp

thecargo to the platform from which the baleswere carried to the wa

house or to rail cars it would have been necessary to use fork 

trucks and that crossing the tracks might result in spilling the b

with a possibility of damage to personnel or to the cargo Althou

palletized cargo could be carried over the tracks the instability 

bales of wood pulp when loaded on trucks created a hazard Th

respondent s allocation of labor was not an undue or unjust prefere

unlawful under section 16 First Therefore we overrule the Exami

with respect to his finding that the respondent unfairly allocated 

v ilable work force

ULTIMATE CONCLUSIONS

Respondent at all material times wassubject to the Shipping A

1916 and the jurisdiction of the Federal Maritime Comm ssion

Complainant as manager of the affairs of South Georgia Compa

has authority to prosecute a claim under section 22 of the Act on 

own behalf and on behalf of the vessel owner

Respondent gave undue and unreasonable preference to the ve

RUSS by granting it a berth before the SALDURA although 

SALDURA had arrived in port three days ahead of the RUSS 

violation of section 16 First

Respondent did not subject the vessel SALDURA to undue a

unreasonable prejudice and disadvantage by failing to allocate 

fair proportion of available shore labor to discharge the vessel 

violation of section 16 First

Respondent s violations of section 16 First of the Act resulted 

injury to complainant

The amount of reparation to which complainant may be entit

will be the subject of further hearing or in the alternativet the part

may utilize the procedure set forth in Rule 15 of the Commissio

Rules of Practice and Procedure The proceeding therefore is 

manded to the Examiner for this purpose

S Thomas Lisi

Secretar
FEDERAL MARITIME COMMISSION

DOCKET No 1092

AGREEMENT No 8660LATlN AMERICA PACIFIC COAST STEAMSHIP

CONFERENOE AND PRoPOSED CONTRACT RATE SYSTEM

D aided J anlUlry 3 1969

The Latin America Pacific Coast Steamship Conference dual rate contract sys

tem requiring signatory shippers to commit exclusive patronage to the

ctnference in aU three outbound trade areas and signatory receivers to

l

ive their exclusive patronage to the Conference in both inbound trade

areas found contrary to public interest and accordingly not permitted

approvalpursuaIlt to section 14b of theShipping Act 1916

The Conference il

required by rule to impose a Rn

amendment to clause 2 of

its dual rat contFfwts th requiLemeilt that such coiltracts be offered sepa

rately ill each trade nrea which theConference serves

Robert L Harmon and William J Ziegler Jr for Respondents

Latin America Pacific Coast Steamship Conference

E Duncan Hammer Jr and Donald J Brutnner Hearing Counsel

REPORT

By THE COMlIISSION John HarBee Ohairman Ashton C Barrett

George H Hearn James F Fanseen Oommu8ioners

This proceeding is before us again as a result ofthe remand by the

Ninth C rouit Court ofAppe ls in Pacific Ooast European Oonference

v Dnited States 350 F 2d 197 C A 9 1965 Itnow concerns only the

validity under the Shipping Act 1916 46 U S C 8Q1 et seq ofthe

dual rate contract currently employed by the Latin America Pacific

Coast Steamship Conference Some background is necessary before

pJoceedi gtothe issue i volved herein

The Latin America Pacific Coast Steamship Conference came into

beh g

as the result of our approval under section 15 of the Shipping

Act 46 U S C 814 of Agreement 8660 Under this agreem nt 19

previously independent conferenc s wereamalgamated ormerged into

149

12 FMC
150 FEDERAL MARITIME COMMISSION

one super conference 1

This Conference now serves the overall tr

both inbound and outbound between ports on the West Coast o

United States and Oanada and the West Coast of South Ame

Agreement 8660 divides this trade into five trade areas

2

Only c

i

actively serving a given trade area may participate in the estah

mentofrates andother matters pertainingto that tradearea

At the same time we approved Agreement 8660 we also gran

under section 14b of the Act permission to the Conference to u

dual rate contract in the trade areas covered by the agreement 

originally submitted the contract would have bound shippers ofgo

in anyone outbeund trade area to the exe lusive nseof cenference v 

in all three outbound trade areas Conversely shippers FeGejv

either one of the inbound trade areas had to obligate themsel ves to 

exclusiveuse of conference vessels in both inbound trade areas

In DCcket 1111 the D tal Rate cases 8 F MC 16 1964 we 

ditioled ollrapproval oi Agreement 8660 on tl1e r uirement that 

Conference offer the dual rate contract in each one of the five tr

areas thereby giving shippers the choice of committihg the shipm

1

The 10 predecessor conferences nnd the npproyed ngfeemellts under which 

t

llcra ted were

CanJexco Freight ConferenceAgreement 6670

Cnnal ntral Ameri ca N orUri ollnd F reigh t Conferenee Agreement6070

Capaca F l eight ConferenceAgreement 6170

ari bbfan Pacific Northboun l Freight ConferenceAgreement 81 9o

Colpac Freight ConferenceAgreement 7270

Pacific Const Carlbbean Sea PortsConferenceAgreement 4294

Pacific Coast Mexico Freight ConferenceAgreement 7570

Pacific Coast Panama Canal Freight ConferenceAgreement 7170

Pacific West Coast South America ConferenceAgreement 463 0

West Coast South America North Pacific Coast Conference Agreement 627 0

2 There are three outbound trade areas and two inbound

l

l d

4rea A Fl 9m Pacific Coast ports in the United States and Canada to 

on the Pacific Coast of Mexico Guatemala El Salvador Honduras Nicaragua Costa 

and Puer oArmuelles RP

Tra de 4rea B From Pacific Coast ports in the United States and Canada to 

And PAnama City RP Balboa Cristobal C Z

ports in Barbados Briti sh Gu iana B

Honduras Atlantic Coast of Colombia and Costa Rica Cuba Dominican Republic F

Guiana French West Indies Atlantic COAst of Gl ltemala Hlliti and Ure Hond

Jamaicll Leeward and Windward Islands Netherlnnds Antilles Atlantic Coast of 

rama and the Republic of Panama Surinnm Trinidad and Venezuela

Tmde Ania C From Padfic Coast ports in the United States and Canada to po

Colombia Ecuador Peru and Chile

Trule Area D To Pacific Coast ports of the United States and Ca nada from P

Coast ports of Chile andPeru

Trade Area E To Pacific Coast ports in the Un fted States and Canada from Carib

ports of Cuba Jamaica Haiti Dominican Republic Trinidad Windward and Lee

Islands Barbados French and British Gufanas Surinam French West Indies Vene

Netherlands Antilles and Colombia Colon aM Panama City RP BalBoa and Cris

C Z ports on the Pacific Coast of Mexico Guatemala El Salvador Honduras Niear

and Costa Rica

12 F M O
AGREEMENT NO 861610 LATIN AMERICA PACIFIC COAST S S CONF 151

to conference vessels exclusively in one several or all of the trade

are encompassed by the agreement We said

The use C1f a dual rate contract by the new conference presents a special prob

lem however As discussed wbove the conference memibersthemselves have recog

nized that five sepaTate trade areas are involved and thllJt a carrier who doe s

not serve a particular trade should not be permitted to control the rates and

practices in that trade Yet if the conference is permitted to offer a sing dual

rate contractwhich incl udes all five of thetrade areas merehants wiil be foreeel

to obligate themselves to exclusive conference patronage in trade areas not

desire in order to obtain cOllltract rates in a trade area where they feel the

dual rate contract meets their needs This seems to us neither necessal y nor

fair

Ve haveapptoved the new agreement on tpe ground that it is iaTgely con

cerned with providing a means of central administrllJtion for a numbet of con

ferenceS In keeping withthis we ate approving the use of a dual r te contraCt

in each of these five trade areas and merchants must be offered the priVilege

of executing a contract for aollY or all of the trade areas as they desire We

find that it would be both contrary to the public interest and detrime lto

commerce for the conferenc to require that a merchant obligate hiD1self to

exclusive patronage in an of these trade areas in order to obtain coiitract rates

in a

ingle trade Any su h requirement would of neeessity bring into serious

question the newconference rraugement itself 8 F M C 50

Inthe Pacific Doast Oonfere1UJe case supra the Court set aside this

requirement Itis solely with this issue that the present proceeding is

concern The case is in its preseht posture by virtue of our order of

Novemhar 16 1966 wherein we instituted this rulemaking proceeding

to determine wh the rthe one trade one contract requirement should

be reimposed 3

By a motion for discontinualice Respondents chal

lenged the lawfulness of the rulemaking technique called for in the

order Respondents urged that adjudication not tulemaking was the

ttpprQpriate procedure foroonsidering the contract and that section 15

Hot 140 was the proper section oftheAct under which to proceed We

denied Respondents motion noting however

that even though the

technique chosen was rlllemaking We would upon an appropriate

proffer by RespOlldentsJof the subjects they believed required an evi

dentiary hearing grant them one to ihsure that they wereafforded all

the procednra1 safeguards to whicl they were entitled Respondents

3 Much bas been said by both 8 des about our order of Feb 16 1966 wherein subsequent

to the remand by t e Court we approved the contract presently in use by the Conference

Thdispute Is overwhether weIntended at that time to reimpose the onetradeone contract

requirement Hearing Counsel maintains that such was our intent and that the present

proceeding Is solely concerned with correetlng that erroneous approval Respondents on

the other hand argue that we could not have reimposed the requirement at that time

without flying in the face of the Court s opinion on remand Resl ondents llrguments then

were very much the same as those they now make to challenge the propriety of the present

proce ding QUI disposltlon of this plOceeding makes It unnecessary to resolve fbls dlgpute

For the purposes of this proceedingweare a8SUming that the present contra ct walil approved

and that Its usewas lawful

12 F M C
152 FEDERAL MARITIME COMMISSION

answered that they desired an evidentiary hearing in order to prod

gs witnesses the Conference Chairman and Secretary and a sman 

resentative number of shipper witnesses to demonstrate that ther

not only no obj tion to hut actual support on the part of the shipp

public for the present two contract operation Accordingly we 

dereda hearing befo an Examiner ofthe Office of Hearing Ex

ipe rs The h aring was h ld ndEx miner Edward C Johnson iss

ap Initial Decision Ex eptions were taken to that decision Stn d 

he r4 or rgUment For the reasons set forth below our conclus

differ frOID those oftheExaminer

Before proceeding to theevidence ofTecord it is necessary todis

of a thresholq issue Respondents charge us with an end run to 

cPvent th lecision ofthe Court ofAppeals in remanding thec 

us It is es9nden ts positi9n that since we originally imposed 

one4rade one contract requirement under section 15 oftheAct we 

not now permitted to seek its imposition under section 14b sp

ents point to no lack ot procedutal or substantive due pr 

s lt OUJ pJc ed lg und r e

tion 14b Rather heir charg

gtop p

d

up n the fear that the procedure we have chosen will l

us somehow or other free to ignore the record in this proceeding 

COUl Se had no such intent in choosing section 14b Our choic

s

li d from he Courfs remand s

In setting aside the one trade 

cQntract requirement the Court ade no t tement onthe ground

its tion CQnsideration of t

leCourt s op nion led us to believe 

tl e Court viewed the requirement as improperly imposed unde

tiqn 15 such requir ent being properly a part of the dua

contract and therefqre 8 subject fQr c nsideration under section 

Accordingly we instituted the plie t

proceeding Moreover 

e xtr ely diffi9ult to lerstand how nder any circumstanCes 

particllla ly when We OMrselves ordereq the hearing jn this cas

houidfeei ourselves fr to igporethe record compiled in that 

ing 6

In aIi faimess to Resp911dents tl irteans may have been r

by Hearing GQ1msels cont nt1on that as matter of law we 

i he ntpower tQdiJnpose the requirement aipparently relying s

lte pondeJit8 argument challerigesboth the section of the Act and the rule

technique For the purposes of discus81on we deal with each separately

II Actually t Oollrt originallY set aBide our order approving IAgieement 8660 

entirety The pnference in 8

petitlon for reconslderattbn pointed out that tbe 

acUol1 left t wl o ut a confex ence In asecond ordel the Court said slmpIY

i As to Pe t1o e Latin Ame rfca H acifie Coast Steamship Conference our atten

caUe4 to th

t t

t sslont order in is ootlrety was not haileriged but o

of Ismod 6 catton s

Accordingly a to this petition itis ordered that tbe order under review fa se

onlyJA th re8iect peclft ed inJbepetl Uon for review

8

TheJl x m1AAr Ql ult blllve shared 8ome of Re8pond ntR apprehf Dsl ons because 

it n ces ry P llltout that we eounhnot look bey011 l th recoro

12 F lIC
AGREEMENT NO 8616 0 LATIN AMERICA PACIFIC COAST S S CONF 153

on some unspecified expertise While it should not he necessary we

will nevertheless say that the record was before us was considered

and that our decision in this proceeding is firmly grounded thereon

Respondents would also appear to feel that Our decision to proceed

under section 14b was due to some notion on our part that the one

trade one contract requirement would be easier to impose on the Con

ference under that section than it would be under section 15 for they

spend a good deal of time pointing out that whichever section we use

the same findings must be made before we impose the requirement

Since we conclude herein that without the one trade one contract re

quirement Respondents dual rate contract would be contrary to the

public interest we will agree with Respondents that on this issue in

the context of this proceeding that the statutory phrase contrary to

the public interest as it appears in section 14b has the same meaning

as it does in section 15 Thus in terms of due process to Respondents

it matters little under which section their contract is considered We

rem in of the view that the appropriate section for consideration of

Respondents contract is section 14b

There remains the question of whether rulemaking is the appro

priate prqcedure for this case The parties arguments and the Exam

iner s discussion on this issue are primarily concerned with how the

choice of procedure affects the burden of proof But before dealing

with this question one other argument against the use of rulemaking

may be easily djsposed of Respondents contend that since this proceed

ing will result in a rule dir cted to the activities of one individual

conference and not to broad policy consideration relatingto the en

tire maritime industry the procedure is djudication under sections

7 and 8 of the Administrative Procedure Act and not rulemaking un

der section 4 of that Act 7

That it is not necessary to encompass an

entire industry within a rule for it to be valid is clear from the Ad

ministrative Procedure Act s definition of a rule which irl section 2 c

defines a rule as being either of general or particular applicabHity

that a rule inay be directed to particular named persons see D vis

Adulinistrative L w Treatise section 5 02 and cases cited therein

Apassage from the Initial Decision of the Examiner best illustrates

the dispute which has arisen overthe burden of proof in thisproceed

ing Atp

7 theExaminer states

Seetion 10 e of the Admiilistrative Procedure Act 5 tJ S CA par 706

1967 provides that in matters such as we have before us a reviewing court

must set aside any agency action findings or conclusions not supported bOy sub

Tbe Examlner states at p1 of his Ii11tful Declslon The presenl proceeding Is not

rulemaldIlig pursuant to Bee b lbut on the cOntrary Is i artthula In scOPe hn Iii

resDondents alone and does not Involve policIes regulating an enttre Indust y

I

12 F M C
154 FEDERAL MARITIME COMMISSION

stantial evidence Inasmuch as it is nota Rule which is proposfd to be mad

the Cmmission but an Order directed at Respondent Conference alone 

agency namely the Federal Maritime Commission cannot look beyond the h

ing record compiled in this proceeding as it might in their sic mere p

determinations for the use of the present approved dual rate contract is 

ported by substantial evidence The present proceeding must be governed by 

entire record namely the record made in 1963 and in particular by the re

compiled as a result of the hearings in San rancisco inAugust of last 

at which time substantially all of the testimony was in justification of 

use of the present dual rate contract formerly approved by this Commiss

Hearing Counsel argues that the Commission should insist that the Confer

offer a dual rate contract in each of the five trading areas rather than in 

two trade area covered in sJ1ipments to Latin America and shipments f

Latin America Apparently this contention flows from the DlIal Rate c

supra which gave no indication that any fact existed which would support 

Commission s view that this Conferences dual rate system was contrar

the public interest and detrimental to commerce Thus under any due pro

standards it must be presumed in this proceeding that the Commission does 

have sufficient evidence to make any finding of fact which specifically pert

to thi l Conference s rate system

From the foregoing it is clear that the crux of the burden 

proof issue is the substantial evidence test and its applicability he

Our disposition of this case renders the burden of proof issue m

since we have applied the substantial evidence test and we concl

herein that such evidence of record establishes that the present d

rate contract is contrary to the public interest within the meaning 

section 14b

Recently the Supreme Court in F MO v Sven8ka A1nerika Lin

390 U S 238 1968 affirmed ourattempts to add meaningful con

to the statutory phrase contrary to the public interest The deci

ofthe Court in Svemka wasthe fullexpression ofthe theory that 

first espoused in sbrandtsen 00 v United States 211 F 2d 

C A D C 1954 where the Court in discussing our authority to g

antitrust exemptions to cartels of steamship lines under section 

offeredthe caveat that

Tbe condition upon which such authority is granted is that the agency 

trusted with the duty to protect the public interest Iscrutinize the agreeme

make sure that the conduct thus legalized does not invade the prohibition

the antitrust laws any more than is necessary to serve the purposes of 

regulatory statute

In IrlVestigation of Passenger Travel Agents 10 F MC 27 19

the appeal of which culminated in the Supreme Court s Svemka 

cision we aid

8

Since we instituted this proceeding we are in the sense of the Administrative 

4ure Act the proponent Qf the order to impose the one trad ilone contract require

upon JlespOnd ilntB ThUB the Commission bears the burden of proof

12 F M O
AGREEMENT NO 866O LATIN AMERICA PACIFIC COAST S S CONF 155

conference restraints which interfere with the policies of the antitrust

laws will be approved only if the conferences can bring forth such facts as

would demonstrate that tbe restraint was required by a serious transportation

need necessary to secure important public benefits or in the furtherance of

some valic lregulatory purpose of the Shipping Act

On appeal our reliance on antitrust policies as a basis ror disap

proving a conference agreement was challenged on the ground that

such a test was not a permissible elaboration or the statutory stand

ards or section 15

The Supreme Court in finding this argument not even superfieially

persuasive concluded

By its very nature an illegal restraint of trade is in some ways contrary to

the public intere t and the Commission s antitrust standard involving al1 as

sessment of the l eCess ty for this restraint in terms of legitimate C011111ll rcial

objectives simply gives understandable content to the broad statutory conept

of the public interest

Tbe Commission must of course adduce substantial evidence to support a find

ing nnder one of the four standads of ection 15 but once an antitrust violation

is established thi alone will normally constitute substantial evidence that the

agreement is contlnry to the ptlblic interest unless other evidence in the record

fairly detracts from the weight of tbis factor II We therefore bold that the

antitrust test formulated by the CommissicUl is an appropriate refinement of

the statutory public interest standard 390 U S 24446

No one would seriously contend that without the protection or sec

tion 14b an exclusive patronage tying arrangement offered by a con

ference which itself would be subject to the antitrust laws were it

not ror section 15 would not violate the antitrust laws Therefore

unless there are to be diametric 111y opposed meanings attached to the

public interest standards as they appear in sections 14b and 15 there

is without more substantial evidence that Respondents contract

is contrary to the public interest9

Therefore it is incumbent upon

RespOllclents to put other evidel ce in the record which rairly de

tr cts from the weight of this factor evidence which demonstra te

the necessity for this restraint in terms or legitimate commercial

objectives Justice Black said in Svenska

It is not unreasonable to require that a conference adopting a particular rule

to govern its own affairs for reasons tbat are known to the conference itself

illQst come forward and expla41 to the Commission what those reasons are

It would appear that the Conrenmce had this in mind when it

requested a hearing to produce as witnesses the Conrerenee Chairman

9 It 8ho lhl be kept in mind that the 11sue here is not whether Responden ts re to be

pmmitted the use of a dual rate contract but whether there are to be placed certain

restrictions on that use

12 F MO
156 FEDERAL MARITIME COMMISS ON

Secretary and a small representative number of shippers in supp

ofthe present contract The Examiner s continual allusions ofHear

Counsel s failure to produce a

single witness in opposition to the e

tract were unwarranted and the emphasis he apparently placed 

this was undue 10 For it is apparent from the foregoing that the po

in issue is not so much who or how many are opposed to the contr

as it is a question of the legitimate commercial objectives to be achiev

by the present contract of Respondents It is up to Respondents 

show that the two contract system is required by a serious transpo

tion need necessary to secure important public benefits or in 

furtherance of some valid regulatory purpose of the Shipping Ac

Tith this in mind we will review the testimony of record

Itwould unduly lengthen this report to set forth all the testimo

quoted by the Examiner in his Initial Decision arepresentative sa

pling will suffice The witnesses fall into two categories 1 C

ference officials or officials of the member steamship lines or age

of those lines and 2 shippers all of whom appeared 

the 1963 hearings and whose testimony the Examiner for one rea

or another finds less than persuasive An example of the testimony 

an official of a member line which the Examiner quotes in th

different places in his Initial Decision is that of Mr Gottshall Tra

Manager for Sea Land Mr Gottshall is first quoted by the Exami

without reference to the question which elicited the testimony 

stating

It makes no difference whether you have a collection of conferences o

single conference There is a high to which a carrier can go and still achieve 

business and there is also a rate at which the shipper can no longer do 

business and this is the prime thing in ratemaki ng This is the area where 

both live

The question which elicited this testimony is furnished by 

Examiner later in his decision when he quotes the identical statem

of Mr Gottshall again Itwas Would you say in your opinion t

the lines under the single contract system have more bargaining po

in setting rates for shippers than they might otherwise have un

a multiple contract system The question is whether shipp

should have to obligate themselves in more than one trade area 

10 For a more realistic approach to the absence of shipper witnesses see tlre In

Decision of Examiner E Robert Seaver In Investigation of Ocean Rat Structures Bet 

U S North Atlantic Ports and Ports in the United Kingdom an d Ei1 e FMC DoCket 

654 And 12 FMC 34

11 The fact that ResPondents have been operating under the twocontract

some 2 year is of COurse a factor to be con8id red but iti8 certainly not dispositive o

issue nor is it of

overwhelming importance The restraint removed under the socalled

antitrust test in Svenska had been in effect for over25 years

12 F M Q
AGRE MENT NO 8 6 6O LATIN AMERICPACIFIC COAST S S CONF 157

this testimony bears little relevance to that question Witness Gottshall

continues

Q Sea Land operates within other Conferences

A Yes

Q You spoke about capital cost and I assume from what you said that in

the containerized service that you are offering in this trade there had been

tremendous orlet s say more substantial capital costs than might be necessary

fora normal operation

A That s correct

Q In justifying the capital costs of Sea Land would you say that the single

Conference in this area with the single contract system is essential to the jus

tification of those capital expenditures

A That is true because withthe single contract system we get a

stability of

rates We don tlook into a situation where there is a rate war where the rates

are running up and down and we don t know what the return in our investment

isgoing to be

For now we note only that the witness offers no explanation here or

anywhere else in therecord ofhow thesingle contract system prevents

rate wars

Another witness quoted at length by the Examiner is Mr Raymond

F Burley Chairman of the respondent conference In Mr Burley s

view the present contract system

has permitted us to maintain stability in our rates and in our offerings

to the public We are better able to assure the shipping public that their com

petitor is getting the same rate freight rate as he is so they have greater

surety in the selling in Latin American markets

Here again the witness leaves unexplained the question ofjust how

the single contract system achieves stahility rates The rather obvious

difficulty with the proposition of witnesses Burley and Gottshall is

that it is the carrier s ability to fix rates in concert under the agree

ment and its obiigation to charge only those rates which hring about

that stability which assures the shipper that his competitor is getting

the same freight rate that he is The contract system as such does not

prevent discrimination in rates The contract system is a

tying device

it does nothing more nor less than obligate a

shipper in exchange for

a lower rate to the exclusive use of conference vessels We find no

persuasive evidence in the testimony of record which demonstrates

that there would be any more or less stability under a one contract

one trade system than thereis under the present single contract system

Increased service is also suggested as a benefit flowing from the

single contract system The Examiner quotes the followingtestimony

of Mr Robert B Swenson Pacific Coast Manager for Balfour

Guthrie Co and Westfal Larsen as supporting thisproposition

12 F MC
158 FEDERAL MARITIME COMMISSION

Q Now with respect to service as a single contract system have your 

experienced a greater service or greater number of sailings to the ship

public sic

A Vith the adoption of 8660 and I don t think this has been brough

previous testimony yet but I believe everyone would agree that it has certa

increased competition within the Conference very definitely I can see s

examples which are happening today particularly in the northbound tr

1

Since the adoption of 8660 these lines now being members of the la

Conference loading into these ports load anything available and come no

It has probably at least doubled the service available to them maybe tri

the service for all I know and this is happening today This is happening e

week We see thishappening we were members of both Conferences inthose d

Now of course we have more competition in that area than we did then 

same thing happened in Mexico in Salina Cruz one port the identical situa

It is quite obvious that here the witness is talking about the 

of the Conference The testimony contains not a

single reference 

the contract system Despite this the Examiner follows this testim

with the conclusion that from this testimony and the testimony 

other witnesses unspecifi d that the Conference over the pas

years of operation in the use of the single dual rate contract sys

has provided a service which is beneficial in general to all par

concerned including the public interest which has been well serve

Other testinlony on this proposition vhile slightly more respon

is no less general The witnesses content themselves with flat assert

of benefits which ostensibly flow from the single contract system w

out ever offering an explanation of hO7 the benefits relate to 

system One more example should suffice Mr Burley treated 

betterservice question as follows

Q Well with respect to service to the shipping public what effect if 

has the single contract system had on the service

A Veil the single contract system and the consolidation of our Confere

has given a greater opportunity of service by the steamship lines for the ship

public Rather than having to be a member of so many individual Conferen

a line that may have a primary interest of handling simply coffee from L

America to the Pacific Coast on its way from Europe out here can if it wi

stop and take other commodities than coffee or it can put a vessel on b

for a Latin America destination en route to Europe vithout having to 

another Conference We have had that happen it has worked out exa

as we forecast it would work out in our original testimony that the ship

public would have more lines available for use in servicing the Latin Amer

trade and that has happened

Once again it is the increased scope of the Conference trade 

which seems to have brought about such increased service as ther

12 The Examiner does not say just how the public interest has been well served If it 

increased competition then this would seem on the basis of the quoted testimony to 

from our approval of Agreement 8660 not from the single contract s stem and no w

has as yet shown that the one is dependent upon the other

12 F M c
AGREEMENT NO 861610 LATIN AMERICA PACIFIC COAST 8 S CONF 159

and once again the single contract system receives mention only in

passIng

Ve should make it clear that our refusal to find the testimony relied

on by the Examiner to conclude that thepresent contract system should

be continued in use is in no way based upon an assessment of the

demeanor of the witnesses Ve do not question their veracity it is

only the content of their answers that fails to convince The testilnony

consists only of either flat assertions unsupported by any concrete ex

amples or of amrbiguous references to benefits which can be 111ore

readily attributed to causes other than the present contract system

In fact the only concrete exanlple ofthespecific impact ofthe present

contract system is that offeredby Dow Chemical Co

Briefly Dow requested a lower rate on caustic soda to a port in

Trade Area Aand the lines serving the area refused to grant it There

was really little incentive for the lines to grant the request since

Dow wasa contract signator and pursuant to theterms ofthecontract

any shipnlent to that area would have to be made on conference vessels

In any event Dow which made most ofits shipments in Trade Areas

Band 0 was unable to obtain the reduction Dow was of course not

free to ship nonconference in Area A because of its obligation under

the contract Itwas only when Dow well aware that it would lose the

lower contract rate on its shipments in Areas Band C announced its

intention to terminate its contract that the Conference responded by

offering to publish only a noncontract rate at the contractrate level

on caustic sodaY

In choosing an organizational structure for theiramalgamated Con

ference the Respondents decided to divide it into five trade areas and

to restrict participation in matters relating to those trade areas to

those member lines actively engaged in them Presumably these trade

areas are based upon some geographic and operational logic Thus

wi1thin the Conference Respondents have insured the autonomy ofthe

groups of lines operating in agiven trade area Should another line

wish to have a

say in matters concerning that area it must institute

a service in the area Hates are geared to the operational circumstances

and presumably to the needs ofthe shippers in a

given trade Itis only

when it seeks to obtain a

shipper s exclusive patronage that the Con

ference adopts an all or nothing approach Thereas before approval of

Agreement 8660 a

shipper could have signed a dual rate contract with

one several or all of ten conferences assuming they would all have

obtained approval oI contracts under 14b now a shipper must

131 his action by the Conference may explain Dow s withdrawal at an earlier stage of

this proceeding

12 F M C
160 FEDERAL MARITIME COMMISSION

obligate himself in all three outbound trades and a receiver in b

inbound trades Thus a shipper who ships the vast majority of 

goods in say

Trade Area A and only rarely has shipments in Tra

Area B must nevertheless commit those rare shipments in B to c

ference vessels in order to obtain the lower contract rate in A B

what are the legitimatecommercial objectives achieved by the pres

contract system which objectives fairly detract from the weigh

the lossof freedom ofchoice by the shipper What transportation n

is served by the present system What important public bene

are secured by it Is the present system imposed in furtherance of so

valid regulatory purpose oftheShippingAct

It has been suggested that the present contract system affords 

creased stability ofrates But theevidence ofrecord much more read

supports the inference that such stability as exists is due to the c

certed ratemaking activity under the conference agreement rat

than the contract system Indeed the record establishes no real c

nection between the present contract system and rate stability or 

prevention ofrate wars

14

It has also been suggested that the single contract system has p

vided increased service to conference shippers But here again 

testimony of record convinCes us that any increase in service has 

sulted from the new tradingscope ofthe Conference underAgreem

8660 not from the operation of the present contract system

A good deal of time and testimony was devoted to demonstrat

that the present system has not permitted the member lines of 

Conference to increase rates through monopolistic strength This s

ply is not relevant to the question at hand To the extent that it sho

anything such testimony simply shows that even with a single c

tract system the Conference falls somewhere short of a

comp

monopoly Itdoes not go to any legitimatecommercial objective of

system

Absent the protection of section 14b the exclusive patronage ty

arrangement embodied in a dual rate contract would clearly run co

ter to the antitrust laws Itis therefore contrary to the public inter

unless neDessary to pursue some legitimate commercial objective 

14 Rate wars are almost exclusively due to the ratecutting practices of nonconfere

lines yet the record is devoid of any meaningful r eferences to nonconference compet

Indeed the stability alluded to in the testimony is really the absence of discrimina

among shippers apparently as would have been practiced by the member lhies th

selves See testimony of Gottshall qufted Supra at p 156 But such discriminatio

prevented by the fact that once the rates are fixed by the members in concert they 

required to be published and filed with the Commission under sec 18 b of the Ship

Act and the members are then obligated to Charge only those rates Whether there 

single contJact system or a system which embodies the one trade one contract rellu

ment issimply irrelevantto such stability of rates

12 F M C
AGREEMENT NO 866 O LATIN AMERICAPACIFIC COA8T 8 8 CONF 161

the normal run of things that legitimate commercial objective will be

a conference s need to protect itself from the inroads ofnonconference

rompetition Here Respondents have been granted permission to use a

dual rate system We will continue that permission The only change

we will require is that the contract be offered separately in each ofthe

five trade areas and insofar as the record shows such a contract system

will still afford sufficient protection against nonconference competi

tion We remain unconvinced for the reason set forth above that the

present so called single contract system is required by some serious

transportation need necessary to secure important public benefits or

in furtherance of any valid regulatory purpose of the Shipping Act

Accordingly we will not sanction the present system s unwarranted

inroads upon the Nation s antitrust policies An appropriate order

will be issued

Vice Ohairman Ja111es V Day dissenting

I do not find substantial evidence proving that this dual rate

eontract system is contrary to the public interest The record of this

eonference s operations rather shows tJhat the subject system is re

quired bya transportation need is necessary to secure public benefits

or is in furtherance of a valid regulatory purpose of tle Act

It is sufficient to refer to the following example of evidence as

noted by the Examiner 15

Sea Land testified through Mr Gottshall

Q Once having an advantage of a greater number of shipPN who are hound

by agreement to ship on Conference vessels WQuld you say that it is an incentive

to the line involved to extend its service inorder to carry more cargo

A I would think very definitely so yes

Sea Land testified through Mr Gottshall

Q Woud you say then that the employment by a single Conference of a

single contract system was encouraging to your extension of service in Latin

America

A Yes it was

Grace Line s executive irtValker stated

Q Well with respect to the service that Grace and the other members of

the Conference provide in this shipping area what eftect if any has the single

ontI act system had on service as such or on the service in your view

that is being offered to the public Has it increased or decreased or affected it

in any way

A Oh I would say notonly the Grace Line but there isn t any question that

the ship pin public ets a much better the service has increased

U Who also concluded that respondents should recelv contln1ed approval regarding

theSubJ tdual rate ystem

12 F MO
162 FEDERAL MARITIME COMMISSION

Q In other words there are more sailings or areas covered by more vess

since thesingle contract syste

A Yes sir

The Chairman or the respondent Conrerence testified that the su

j

ect contract system

I has permitted us to maintain stability in our rates and in our offerin

to the public We are better ruble to assure the shipping public that their co

petitor is getting the same rate freight rate as he is so they have greater sur

inthe seLling inLatinAmerican markets 18

Iwould rather think that the present contract system in view 

such testimony as exemplified above has provided increased serv

to conrerence shippers and has tended to increase the stability ofrat

I m more particularly pursuaded to this interpretation or the eviden

in view or the unrebutted nature or the statements made hy those w

testified who were open to cross examination as well and in view 

the ract that aitera number or years or operation there wasno shipp

testimony here complaining against the restraint on shipper flexibil

to ship nonconrerence occasioned by the broad nature or the subje

dual rate contract It is thus reasonable to believe that there ha

been countervailing benefitsror shippers as ror example those not

above

On the other hand it would seem far less ceJ tall1 in protection 

the public interest to ignore sworn testimony of earl ier manageme

as to the benefits flowing rrom actual operational experience mer

because or the lack or concrete examples or becallse such benefits po

sibly could be more readily attributed to elluses other than the pre

ent contract fystenl This is pal

ticularly so here the s yorn tes

mony was 1open to the testing of cross examination 2 rema

unrebutted and 3 pertains to actual operating experience ove

number ofyears

Iwould further emphasize that actual experience must be gi v

proper weight The factor of actual experience tends to insure the p

bative value or testimony pointing out the particular benefits attr

utable to the sllbject system Iconsequently could not here and n

find that the conference s mere choice of having an organization

structure of five trade areas which insures that lines operating in 

area have the say in such area

17 makes the subject system contrary 

18 This could be so If two competing shippers were both obligated to ship conference 

the discounted conference ratein several marlret areas rather than if one were bound 

ship conference at conferelce rates In sever l market areas by virtue of havi sig

several contracts while the other shipper was only bound to ship conference lt contere 

rates in one market area 1J virtue uf s gui IIg onlone COtract Thus if both shippero w

bound to ship conference at its discount rate in all areas uncertainty as to camer c

ference or n conference to be used and consequent ralte juggling would be avoided

17 A slglllficant number of the conference carriers operate in several areal

12 F M CL
AGREEMENT NO 8616iO LATIN AMERICA PACIFIC COAST S S CONF 163

the public interest or detrimental to commerce There area number of

other conferences cited in the record which offer approved dual rate

contracts covering a geographical area greater than the areas covered

by respondent s contract and which thus bind shippers to ship only

conference in such far greater area regardless ofthe routing oftheir

current business Broadness of coverage cannot per se be equated with

badness in viewing the history of respondent conference Iwould

deplore any such proclivity in regard to the actual operations of any

dual rate system

SEAL THOMAS LISI

Secretary

12 F M O
FEDERAL MARITIME COMMISSION

DOCKET No 1092

AGREEMENT No 8660LATIN AMERICA PACIFIC COAST STEAMS

CONFERENCE AND PROPOSED CONTRACT RATE SYSTEM

ORDER

This proceeding wasinitiated by the Federal Maritime Commiss

to determine whether the Commission should by rule require theLa

America Pacific Coast Steamship Conference and its Inember li

Respondents to offer its dual rate contracts in each of the five tra

areas covered by the Conference ageement and the Commission 

fully considered the matter and has this date made and entered 

record a Report containing its findings and conclusions thereon wh

report is hereby referred to and made a part hereof The Commiss

found in said report inter alia that the existing conference dual r

system requiringsignatory shippers to commit their exclusive patr

age to the Conference in all three outbound trade areas and signat

receivers to give their exclusive patronage to the Conference in b

inbound trade areas is contrary to the public interest and cannot 

permitted approval pursuant to section 14b ofthe Shipping Act 19

Now Therefore ItIs Ordered That Clause 2 of Respondents d

rate contract be amended to read as follows

2 Trades covered by thi8 Agreement

This Agreement covers the transportation by water of gOOds from Pa

Coast ports of the United States and Canada and the ports in Latin Ame

as set forth in the five trade areas described inthis clause Merchants execu

this contract may do so for any or all of the trade areas as they desire 

notation of the trade areas covered by this contract shall be made at the 

thereof 1 From Pacific Coast Ports of the United States and Canada to

Trade Area A Ports on thePacific Coast of Mexico Guatemala El Salva

Honduras Nicaragua Costa Rica and Puerto Armuelles RP

T1 ade Area B Colon and Panama City RP Balboa and Cristobal C 

ports inBarbados BritishGuiana British Honduras Atlantic Coast of Colom

Atlantic Coast of Costa Rica Cuba Dominican Republic French Guiana Fre

West Indies Atlantic Coast of Guatemala Haiti Atlantic Coast of Hondu

12 F M C

164
AGREEMENT NO 866iO LATIN AMERICAPACIFIC COAST 8 S CONF 165 

Jamaica Leeward and Windward Islands Netherlands Antilles Atlantic Coast

of Nicaragua Atlantic Coast of the Republic of Panama Surinam Trinidad

and Venezuela

Trade Area C Pacific Coast ports in Colombia Ecuador Peru and Ohile

2 to Pacific Coast Ports of the United States and Canada from

Trade Area D Padfic Coast ports of Chile and Peru

Trade Area E Caribbean ports of Cuba Jamaica Haiti Dominican Republic

Trinidad Vindward and Leeward Islands Barbados French and British

Guianas Surinam French West Indies Venezuela Netherlands Antilles and

Colombia Colon and Panama City RJ Balboa and Cristobal C Z ports on the

Pacific Coast of Mexico Guatemala EI Salvador Honduras Nicaragua and

Costa Rica

ItIs Further Ordered That effective 30 days from the date of this

order Respondents dual rate contracts amended in accordance with

thisorder shall be used by Respondents to the exclusion of any other

terms and provisions for the purpose ofaccording merchants shippers

and consignees contract rates

By the Commission

SEAL Signed THOMAS LISI

Secretary

12 F M O
FEDERAL MARITIME COMMISSION

DOCKET No 1153

TRUCK AND LIGHTER LOADING AND UNLOADING PRACTICES

AT NEW YORK HARBOR

Decided Februa ry O 1969

Commission is empowered under section 17 of the Shipping Act 1916 to rej

terminal operator s tariff rule filing which would interfere with or tend 

nullify the Commission s authority to prescribe a rule pursuant to t

section

A reasonable truck detention rule must require terminal operators to be resp

sible for availability of labor to perform tariff services of truck loading 

unloading

A reasonable truck detention rule must take into consideration size of shipme

and characteristics of cargo at piers on which rule is to apply

Joseph A Byrne Mark P Schlefer John Ounningha1n Richard 

Gage Robert J Nolan and St tart O Law for respondents

Herbert Burstein Samuel B Zinder and A1th tr Libe1 stein 

intervener Empire State Highway Transportation Association I

Arthur Liberstein and Oha1 les Landesman for intervener V

Spencer Son Corp

Ohristopher E Heckman for interveners Harbor Carriers of 

Port of New York James Hughes Inc Henry Gillen Sons Light

age Inc 1cAllister Lighterage Line Inc and Petterson Lightera

Towing Corp

Thomas M Knebel for intervener 1iddle Atlantic Conference

Ja1nes M Henderson Douglas W Binn J and Jacob P Billig 

interveners Port of New York Authority and Export Packers Asso

ation ofNew York Inc

D J Speert for intervener Brooklyn Chamber of Commerce

Leo A Larkin and Samuel Mandell for intervener the city of N

York

J VV arren Mangan for intervener Local 807 International Broth

hood ofTeamsters

Donald J Brunner and Robert H Tell as Hearing Counsel

Supplemental orders served April 4 andApril 7 1969

166
TRUCK AND LIGHTER LOADING AND UNLOADING PRACTICES 167

REPORT

By THE COMMISSION John Harllee Ohairn7Jan James V Day Vice

Ohairman Ashton C Barrett George H Hearn James F Fan

seen Oommissioners

This proceeding is presently before us as a result ofour show cause

order issued to the New York Terminal Conference Conference on

September 27 1968 The present show cause proce ding was precip

itated by the Conference s failure to comply with a portion of our

previous orderin this docket 1

In our previous report we found after investigation that unusual

delays to trucks occurred at the piers operated hy the Conference

memher terminal operators The Conference had disclaimed liability

for any surih delays Ve concluded that the Conference s failure to

develop a TIlle which would recognize the Conference s responsibility

in this area and which would provide a system Of compensating

truckers for such unusual delays was an unreasoilable practice under

section 17 of the Shipping Act 1916 Ve then directed the Conference

to file an appropriate tariff amendment establishing a reasonable rule

which would compensate truckers for any unusual delays caused by or

undel the control oftheterminal operators

Soon after the Court upheld this decision the staff of the Commis

sion met with representatives of the Conference and the trucking

representatives Empire State Highway Trucking Association

Empire in an attempt to reach agreement on a reasonaible truck

detention rule Periodic meetings were held until August 21 1968 The

parties were unable to agree on a rule that all would consider reason

1 ble and the Commission representatives informed them that a

memorandlilll would be forwarded to the Commission recommending

that the Commission prescribe a reasonable truck detention rule

Thereafter the Conference published a truck detention rule to

become effective October 1 1968 2Ve determined that the provisions

of the conference rule were not reasonable within the terms of our

prior order andOf the decision ofthe Court ofAppeals vVe thereupon

instituted the instant show cause proceeding rejecting the rule pro

posed by the Conference and directing tille Conference to adopt the

truck detention rule set forth in our order or in the alternative show

cause why therule should nothe prescribed

Our rejection of the Conference s rule wasbased On our determina

tiQn that two provisions ofthat rule were incompatible with our pre

1

See T1 uck and Lighter LoacUng and UnloacUng 9 F M C 505 1966 upheld in Ameri

canExport Isbrandtsen v

Federal Maritime 001n1n 389 F 2d 962 DC Cir 1968

2

The Conference s

proposed rule was designated as Item 17 of the Conference s Truck

Ioading and Unloading Tariff No 7 FliC T No S

If M C
168 FEDERAL MARITIME COMMISSION

vious order requiringthe Conference to adopt a reasonaJble deten

rule

The Conference rule would providethat detention payments wo

not be allowed where the delay is caused by inadequate or insuffic

m

anpower

8 We found this provision unacceptable because 

did not deem it reasonable t1hat a terminal operator should be excu

from responsrbility for delays occasioned by its failure or inabilit

obtain laJbor

We also determined as unreasonaible the Conference s provi

which would preclude payment oftruck detention on even the sma

shipments until 4hours after the truck arrives at the terminal and 

terminal has cleared and stamped the shipping documents This 

vision would allow all shipments of 24 000 pounds or less 4 hours 

handling before detention accrues We stated that a reasonable 

must recognize tihat less time is required to handle a

shipment of 2 

pounds for example than one of24 000 pounds

In our order to show cause we proposed a rule which provided 

work slowdowns due to insufficient laJbor would not excuse the term

operator from its responsibility to pay detention charges We 

provided time limitswithinwhich handling oftrucks should be acc

plished wth a breakdown for shipments from 2 000 pounds to 40 

pounds

We have received comments from the Conference Empire 

Middle Atlantic Conference All three parties and Hearing Cou

have filed replies

The Conference in its response to our order to show cause seeks 

to show that we were not empowered to reject its rule and seoon

show that the above mentioned provisions of our proposed rule 

contrary to our earlier order interpreted and affirmed by the Cou

Appeals and conversely that their rule conforms with that order

The comments ofthe truckers show that t1hey are generally in ag

ment with the major provisions of our proposed rule while ha

certain obj actions to variousotherprovisions

Hearing Counsel faVor our proposed rule but suggest clarifica

of oneminor provision

8 Item 17 G provides in pertinent part No truck detention will be allowed for d

orshutouts resulting from any of thefollowing

inadequate or insufficient manpower occasioned by the failure refusal o

of registered pier personnel in the area to fill work orders duly issued by thePartic

ing Member in accordance with regulations established by the Waterfront Comm

of New York Harbor In this connection the official records of the Waterfront 

missionwill be conclusive on theissue of said avallab1l1ty of manpower

12 F M C
TRUCK AND LIGHTER LOADING AND UNLOADING PRACTICES 169

DISCUSSION

The Conference has petJitioned us to reconsider our order rejecting

its detention rule on the ground that such action exceeds ourstatutory

power

The Conference maintains that we have only those powers expressly

conrerred upon us and that while we are authorized by the shipping

acts to reject tariffs ofcarriers in either 11he foreign trade or the domes

tic offshore trade we are not authorized to reject tariffs of terminal

operators The Conference argues further that even if the power to

reject can be applied to terminal tariffs the Shipping Act rejection

provisions relate to rejections for failure to comply with procedural

requirements regarding form and timeliness of filing whereas our

rejection ofthe Conference s detention rule was based on a determina

tion that the substantive provisions ofthe rule wereunreasonruble and

thus our rejection wasineffective and is a nullity

The Conference misconoeives the nature of the action taken here

Perhaps thismisconception is partly due to our USeoftheword reject

in the show cause Qrder We recognize that the only Shipping Act pro

visions which specifically authori the rejection of tariff filings are

section 2 of the Intercoastal Shipping Act 1933 and section 18 b 4

of the Shipping Act 1916 and that these provisions do not apply

to terminal operators However our action here was undertaken not

under a

specific s1AtJtutJory power to reject but pursuant to the autho6ty

contained in section 17 4

of the Shipping Act as a necessary step to

implement and enforce our prior report and order in thisproceeding

We previously determined that it was an unreasonaJble practice for the

Conference to fail to adopt a reasonable tariff rule which would pro

vide for compensUition to truckers for delays incurred at the Confer

ence members piers Having found the practice unreasonable we have

now undertaken to determine prescribe and order enforced a reason

able tariff rule governing truck detention Inherent in our authority

to prescribe a reasonable rule orpractice s the authority to set aside

any rule orpractice which would interfere with this authority To con

clude otherwise would give the Conference an aJbsolute right to fileand

make effective any rule and thereby nullify our power to prescribe

reasonruble provisions Suchan interpretation of section 17 would

abrogate an express grant of statutory authority and therefore would

be plainly untenable

4

Sec 17 provides in pertinent part

Every such carrier and every other person subject to this act shall establish observe

and enforce just and reasonable regulations and practices relating to or connected with

the receiving handling storing or delivering of property Whenever the Commission

finds that any such regulation or practice is unjust or unreasonable it may determine

prescribe and order enforced ajustand reasonable regulation orpractice

12 F M O
170 FEDERAL MARITIME COMMISSION

Our predecessors in Storage Oharge8 Under Agreement8 6 05 a

6 15 2 US MC 48 1939 addressed themselves to the question 

the Commission s section 17 authority to prescribe a reasonable rule 

practice They said

We not only have the authority under section 17 to prescribe just and rea

able regulations and practices but also thepower to order them enforced Clea

therefore any means or device tending to nullify or interfere with the enfo

ment of such regulations and practices must be subject to our condemna

P 53

We conclude that we were empowered to reject the Conferenc

rule and we are therefore denying the Conference s petition 

reconsideration

Re8ponsibility forlabor availability

The Conference feels that the portion of our proposed rule wh

would hold the terminal operators responsible for availability ofla

is contrary to our previous order in this proceeding In our previo

order we concluded that the Conference should adopt a detention r

which will compensate the truckers for unusual truck del

caused by or underthe control ofthe terminals Italic added Re

ing on this language the Conference argues that our proposed pro

sion is contrary to theprevious order since it would impose liability 

delay even where the labor shortage arises from causes wholly beyo

the terminals power to control 5

The Conference has goneto some length to show thatthere aredel

at their terminals caused by insufficiency oflabor and that the ins

ficiency of labor is often caused by factors beyond the control of 

terminal operators According to the Conference the shortage ofla

at their terminals usually results from the fact that the amount 

labor available at theport ofNew York is restricted by the Vaterfr

Commission compact and by the port widecollective bargaining agr

ment neither factor being under the control ofthe ConferenCe

The New York Waterfront Commission regulates longshoremen a

those employing longshoremen throughout the port ofNew York T

Waterfront Commission ilnposes a longshoremen s register and forb

the use in the port of New York of any longshoremen not included 

the register Since 1965 the register has been virtually closed an

sharp decline in availablelabor has occurred

The collective bargaining agreement between the New York S

ping Association NYSA and the International Longshorenle

Association ILA controls the manner in which the men are hi

15 The Conference recognizes of course that the proposed rule would not hold the term

operators responsible for labor in all instances The rule recognizes that no detention 

ments will be allowed fordelays or shutouts resulting from strikes or work stoppages

12 F lIC
TRUCK AND LIGHTER LOADING AND UNLOADING PRACTICES 171

and the availability ofparticular classifications of workers While the

NYSA represents terminal operators as well as steamship companies

in bargaining the terminals have no effective voice in determining

provisions of the collective bargaining agreement They are merely

associate members of the NYSA and as such have no vote on any

decision

It is the Conference s position that the VVaterfront Commission

Compact and the Collective Bargaining Agreement together prevent

the terminals from obtaining the menthey seek The Conference feels

this is not only true for longshore labor generally but in particular

with respect to checkers whose unavailability immediately and drasti

cally slows down the truck line at piers Thus says the Conference

to the extent the terminals inability to obtain labor is caused by either

the regulations of the 7aterfront Commission or by the port wide

collective bargaining agreement it is out of the power of the termi

nals either individually OJ as a

group to control

The Conference concludes therefore that our proposed rule which

purports to hold terminal operators responsible for labor in such in

stances is contrary to the language of our earlier order which requires

only that terminal operators accept responsibility for delays caused

by factors which are withinthe control of theterminal operators

The Conference misunderstands the intent and meaning of our pre

vious order In that proceeding we recognized that there were many

factors causing delays at the Conference s terminals some of which

the terminal operators could not control We stated that terminal

operators are to be responsible only for delays which are within their

control Our use ofthe word control was for the purpose of indicat

ing that the Conference would not be responsible either for delays

caused by factors such as strikes inclement weather or other acts of

God or for delays brought on through the fault of the truck operator

vVe did not mean to suggest that terminal operators would be relieved

ofresponsibilityfor delays caused by their failure or inability to obtain

labor In fact insufficient labor and inadequate control of labor were

among the causes of delay attributed to the terminal operators in the

prior proceedings

vVhile we do not dispute the Conference s evidence concerning its

ability to control labor availability we do not think such evidence

affects their duty as public terminal operators to provide the ways

and means ofperforming a

regular service vVe believe that as terminal

operators with tariffs on file providing truck loading and unloading

services the conference members obtain the status of a public utility 6

6 See Investigation of Free Time Practices Port of San Diego 9 F l l C 525 547

1966

12 F M C
172 FEDERAL MARITIME COMMISSION

and in extending these services the Conference assumes the respo

bility of procuring sufficient labor for the efficient discharge of 

duties The procuring of the necessary labor while at times conc

ably beyond the control ofthe Conference is nevertheless its respo

bility directly incident to obligations it has voluntarily assumed

We have on previous occasions held responsible for a

particu

function the party on whom commonsense would impute respo

bility Our determination in those cases did not always depend 

whether a particular condition was beyond the control of the pa

held responsible This principle is best exemplified in Penna Mo

Truck Ass n v Phila Piers Inc 4 F MB 192 1953 In this c

it was found that delays by terminal operators in handling tr

oargo wereoccasioned by physical shortcomings of the terminal op

ator s piers and increased density of traffic Itwas determined tha

2 day free time period for truck cargo wasunreasonable The respo

bility of providing reasonable pier facilities was placed on the ter

nal operators and they wereobligated to extend free time This 

true even though the terminal operators could not control the amo

ofavailable space onthe pier

In Free Time and Dewurrage Oharges N ew York 3 U S MC 

1948 a carrier s assessment ofcompensatory demurrage was uph

as la ful in a situation where a strike by truckers made it imposs

for the party responsible consignee to remove goods It was rec

nized that the consignee s

inability to remove the goods was cau

by forces beyond his control Nevertheless the Commission held t

because removal from the pier was the consignee s responsibility 

assessment of compensatory demurrage was proper

The principle ofthese cases applies here Itis the terminalopera

who holds himself out by tariff to perform truck loading and 

loading who is responsible for completing the service withina reas

able time Failure to do so is not excused by an inability to ob

laibor

The Conference claims that it cannot obtain labor because theWa

front Commission register is closed and the number of worker

thereby limited It is an undisputed fact that the NYSA the C

ference s designated collective bargaining representative recently 

posed an attempt to reopen the register to add more employees 

Waterfront Commission did however on March8 1968 decide to o

the regjsterand that decision was affirmed by the Court by the Co

NYSA v Waterfront Oonvmission 290 N Y S 2d 707

The Conference has also suggested that we erred in rejecting t

rule Without affording opportunity for hearing and accordingly t

have now submitted factual evidence in the form of affidavits 

12 F M 
TRUCK AND LIGHTER LOADING AND UNLOADING PRACTICES 173

Conference feels that this evidence which refers toinstances oftruck

detention whi h result from the terminal operator s

inability to ob

tain labor is relevant toa determination of the issues here and such

evidence wasnot hefore us when we rejected theConference rule With

respect to thisevidence theConference has stated that an oral eviden

tiary hearing is not requested unless a some party desires to con

trovert this evidence h the Commission is not willing to receive

thismaterial in evidence and accord fullcredit thereto Hearing Coun

sel state they do not dispute the facts presented and are willing to take

them as true Neither do the truckers dispute any ofthe facts but while

accepting their truth arguendo maintain that they are not material

here We agree that this evidence is not material here in view of our

decision thatthe conference members are responsible for availability of

labor even though technically certain factors concerning labor avail

ability are beyond their control Accordingly therewill be no need for

further evidentiary proceedings

The Conference also claims that ourrejection oftheir rule provisions

regarding responsibility for labor and the imposition of our own was

notbased on any evidence before us in the prior proceedings in this doc

ket The simple answer to this is that in the prior proceedings we de

cided to hold the Conference responsible for delays only after hearing

evidence of the various causes of delay at the Conference s terminals

The evidence established that among the causes of delay attributed to

the terminal operators were insufficient labor and or equipment and

inadequate control overlabor

8chedAile of Free Time

Our proposed rule contains the following provision regarding time

within which loading or unloading should be accomplished before

detentionaccrues

a When vehicles are loaded or unloaded within the time periods

set forth below therewill be no detention charges paid Vehicles

nated will he entitled desigo to detention charges if not completely serviced

withinthe designated time periods on thefollowingbasis

1 NonAppointmoot Trucks

2 000 pounds or less Notapplicable I

2001 to 5 000 pounds 165 minutes

5001 to 10 000

pounds

195 minutes

10001 to 15 000 pounds 225 minutes

15001 to 20 000 pounds 255 minutes

20001 to 25 000 pounds 285 minutes

25 001 to O OOO pounds aoo minutes

30001 to 35000 pound 330 minutes

35 001 to 40 000 pounds 360 minutes

Over 40000 pounds 390 minutes

Nonappointment vehicles with shipments of 2000 pounds or less shall not be entitled to

deten tion charges

12 F M C
174 FEDERAL MARITIME COMMISSION

2 Appoitntment Trucks

2 000 pounds or less 120 minutes

2 001 to 5 OOO pounds 135 inutes

5001 to 10 000 pounds 165 minutes

10 001 to 15 000 pounds 195 minutes

15 001 to 20 000 pounds 225 minutes

20 001 to 25 000 pounds 255 minutes

25 001 to 30 000 pounds 270 minutes

30 001 to 35 000 pounds 300 minutes

35 001 to 40 000 pounds 330 minutes

Over 40 000 pounds 360 minutes

This pravision was proposed by us after we determined that 

Conference s proposed rule was unreasonable because it failed ta p

vide for a breakdown of shipments under 24 000 pounds The Con

ence ruleread

D Truck free time willbe as folJlows

Free 

Vohtme in mi

Less than 24 000 lbs 

24 000 lbs and less than 36000 lbs 

36 000 lbs and more 

The Canference objects to our decisian to attempt to impose 

provision The Conference feels that we have no evidence of recor

which to base a conclusion that their Own proposal as unreasona

The time limits of the Conference rule are borrowed from a rule o

Middle Atlruntic Conference which was approved by the Inters

Commerce Camlnisison in Detention of Motor Vehicles jJ iddle 

New England 318 1C C 593 611 1962 The time schedule 

proved in that case applied to tilne periods during which motor v

cles could be detlained by consignors and consignees without b

entitled to detention payments The Conference feels that since 

determination of amount of free time involves a certain amoun

arbitraDiness it is reasonable to adopt a provision which has pr

ously gainedapprov3Jl

The Conference offers further support for its own provisian by a

ing that while general ly l

ighter loads are more easily handled itb

means foUows that240 minutes is unreasonable far loads Of less t

24 000 pounds inrusmuch as some light loads may well take 4 hou

handle

The Conference states that the figure of 24 000 pounds represe

in general the weight of the cargo which a

fully loaded truck car

and evenwhere the oargo is such that a load under 24 000 pounds c

be unloaded more quickly than the 4 hours provided this does 

mean that such a load should haveru shorter free time The Confere

adds that the overall aim and purpose of the detention rule is to a

12 F M C
TRUCK AND LIGHTER LOADING AND UNLOADING PRACfICES 175

in reducing the delay of cargo interchange in New York Harbor and

the free time schedule of 240 minutes was designed to discourage

driblet ized lOads

We recognize that the determination ofamount offree time involves

a certain amaunt of arbitrariness as suggested by the Conference

However we feel that our a vn proposed rule is less arbitrary than the

Conference s proposal inasmuch as our rule more realistically allots

free time in accordance with the size of the shipment and in accord

ancewith conditions existing at the port ofNew York Itis mQre reail

istic because it contains twa separate rules for apPQintment and

nonappointment cargo and considers vlanous cargo charaicteristics

The fact that the Comnlission rule more accurately reftects factors

existJing at the New York pier is evidenced by One ofthe Conference s

affidavits which shows thUit a recent survey sponsored by the Port Of

New YQrk Authority established that more than 50 percent of the

trucks bringing export cargo to the pier carried less than 2 000 PQunds

per visit

Itis true thUit the Interstate Commerce Commission approved a free

time provision identical to the One lin the Conference s prQPosed rule

However that same Commission subsequently determined UPQn fur

ther hearing in Detention of jJ otor Vehicles jJ iddle Atl New

England 325 IC C 336 1965 that those same free time limits

should not be applied to the shart haul t

rritory in and about New

York Oity

vVe conclude thatthe provision as proposed in our show cause Order

is entirely realSOnable and should be adQpted by the Conference

TRUCKERS OBJECTIONS

As mentioned above the truckers have voiced certain objectiQns to

various provisions Of our proposed rule

Weather Oonditions

Middle Atlantic Oonference feels that the pr Ovision which WQuld

relieve terminal operators of resPQnsibiJity for delays resulting from

severe or unusual weather conditions is fine in purpose but as word

is vague and subject to arbitrary interpretation since weather condi

tions are aI matter of degree We are adopting their suggestion to pro

vide for a board of arbitration to resolve disputes concerning whether

conditions on a particular day will or will not excuse detention The

board Of arbitration will cQnsist Of a representative of the truckers a

representative of the terminal conference and either a representative

of the New York vVaterfront Commission or a third party to be

selected by the two above mentioned parties

12 F lfC
176 FEDERAL MARITIME COMMISSION

Documentation

The truckers object to the provision of our proposed rule wh

requires documentation to be completed before detention time beg

to run and which allows the individual terminal operator to spe

what documentation is necessary and whether it is adequate i

particular case The truckers contend that this provision would per

the terminal operators to defeat the purpose of the detention rule 

taking excessive time to completedocumentation or byarbitrarily de

mining that documentation is not sufficient in a particular case

iVe believe that if the termiilal operator is to be responsible for 

orderly handling oftrucks at its facility it will establish procedu

which it considers necessary to properly effectuate the documenta

rule and in the event thes e procedures of the individual term

operator are found to be unreasonable we can always review them 

a later date Also the trucker s argument assumes that the term

operators will show bad faith in administering the rules concern

documentation There is no basis for such an assumption Accordin

we are adopting the provision as proposed

Unloading by Truck Operatm

The truckers also object to the provision of our proposed rule wh

provides that detention charges will not apply to vehicles unloa

by the operator if they are spotted at a place convenient for unlo

ing within 120 minutes after proper documentation The objec

here is much the same as to the previous provision viz that 

terminaloperator will be able to take excessive time for documenta

and thereby defeat the purpose of the rule As above we see no b

for such an assumption and are adopting the provision as propos

Sorting of Oargo

Our proposed rule provides that no detention will be paid w

sorting or selection is requested or required The truckers and Hea

Counsel agree that this provision should be clarified to provide t

detention will not be paid where the sorting or selection is requ

or requested by the motor carrier and to provide that where sor

or selection is done for the convenience of the terminal operato

should not be absolved from liability We are lnaking this clarif

tion since it embodies our original intention in the proposed rule

oontainers

Our proposed rule provides that containers handled as a si

unit will be allowed 120 minutes regardless of weight before de

tion charges accrue

12 F M C
TRUCK AND LIGHTER LOADING AND UNLOADING PRACTICES 177

The truckers feel that the 120 minutes of free time allowed for

handling of containers is excessive and will nullify the advantages of

fficiency and ease of handling inherent in container traffic

vVe believe the 120 minute free time limit is reasonable considering

the number oftrucks and the physical capacity of the piers and con

sidering that the terminal operator is responsible only for unusual

delays

The Conference maintains that a detention rule on handling of

containers is inappropriate since certain containers are handled by

terminal operators free of charge to the truckers with no tariff pro

vision covering such services They state that in those instances the

entire arrangement is between the steamship lines on the one hand

and the shippers consignees forwarders and truckers on the other

with the terminal operator acting only as agent for the steamship

company The terminals are said in these instances to have no control

over the number of containers they must handle nor over the steam

ship companies supply of equipment necessary to handle containers

Ve recognize that in certain instances Conference member terminal

operators do perform a handlingservice on containers as agent for the

steamship companies and that in such cases no charge is provided

therefor in the Conference tariff We agree that in these instances

the proposed tariff detention rule would not be applicable This is

not to say that the truckers in such a case would be precluded from

looking to the steamship lines for compensation for unusual delays

The Conference melnbers do however in some instances handle

containers for truckers and do in fact provide in their tariff for a

charge on handling containers This rate appears in part IIof the

Rates section p

16 of the Conference tariff and it applies a charge

varying from 2 90 to 42 51 per unit for handling of various sizes

of containers which are lnoving to or from open flatbed trucks To the

extent that the terminal operators perform a service on containers

under this tariff it is appropriate to provide for compensation for

delays in handling and we are requiring such a provision

CONCLUSION

Ve conclude that the Conference has failed to show cause why the

rule proposed in our order of September 27 1968 should not be pre

scribed Accordingly an appropriate order will be issued prescribing

the rule as proposed with the modifications discussed in this report

The Conference will be ordered to include the prescribed rule in its

tariff

SEAL THOMAS LISI

SeC1etary

12 F M O
FEDERAL MARITIME COMMISSION

DOCKET No 1153

TRUCK AND LIGHTER LoADING AND UNLOADING PRACTICES

AT NEW YORK HARBOR

ORDER

This proceeding was instituted by order to show cause issued 

tember 27 1968 by the Federal Maritime Commission The New Y

Terminal Conference was ordered to show cause why a truck d

tion rule set forth in the Commission order should not be presc

pursuant to section 17 of the Shipping Act 1916 The show c

order was issued because ofthe Conference s failure to comply w

portion ofthe Commission s previous order in this docket in which 

Conference s failure to adopt a reasonable detention rule was adjud

to be an tmreasonable practice under section 17 of the act The 

ence s

response to the order to show cause and comments of all o

interested parties have been considered The Commission has this

issued its report in this proceeding which is hereby incorpor

herein by reference in which it determined that the Conference 

failed to show oause why the truck detention rule should no

prescribed

The refore itis o1 de1 ed pursuant to section 17 oftheShipping 

1916 That the New York Terminal Conference include in its T

Loading and Unloading Tariff No 7 F 1C T No 8 a Truck De

tion rule reading as follows

VEHICLE DETENTION RULES

Section i General Provisions

Motor vehicles loading or unloading waterborne freight at p

or marine terminals ofmembers ofthe New YorkTerminal Confere

shall be entitled to receive detention charges 1for delays occasione

1Detention charge as used in this rule means compensation to be paid by marine term

operators to motor truck companies for delays of motor vehicles at marine term

facilities

178

12 F M C
TRUCK AND LIGHTER LOADING AND UNLOADING PRACTICES 179

piers beyond the time set forth in section 4 Detention charges shall

accrue in instances where the delays result through no disability fault

ornegligence onthe partofthe motorvehicle

No detention will be allowed for delays or shut outs resulting from

strikes orwork stoppages Insuch oases it is expected that theterminal

operator will attempt to inform all potential users ofthe pier by tele

phone or advertisement Formal notification shall be made to the Fed

eral Maritime Commission of all strikes or work stoppages resulting

in delays or shut outs

No detention will be allm ved for delays resulting from severe or un

usual weather conditions A board of arbitration will resolve disputes

concerning whether conditions on a

particular day will or will not

excuse detention The board ofarbitration shall consist of a repre

sentative of the terminal conference a

representative of the truckers

and either a

representative of the New York vVaterfront Commission

oria third party to be selected by the above mentioned parties

Vork slow downs due to insufficient labor shall not excuse the re

sponsibility ofthe terminal operator underthis rule

Section B Documentation

Detention time does not begin to run until shipping documents 2

required by the terminal operator for release ordelivery of cargo are

found to be complete The terminal operator will time stamp an ap

propriate document once documentation is completed which will

begin the nmningoftime for detention purposes Each terminal opera

tor shall specify the documentation neeessa ry to receive ordischarge

cargo The terminal operator shall determine whether documentation

is adequate and may refuse to handle motor vehicles without full and

proper documentation The terminal operator may in its discretion

waive the full documentation requirements in which case time shall

comnlence upon granting such vaiver

Section 3 00mlY1ttation of Ti1ne

Time for detention purposes shall conlmence when the vehicle has

completed documentation as provided in section 2

Terminal operators shall establish an appropriate procedure for re

cording the time the vehicle has completed loading or unloading

Detention will accrue during the regular business hours of the ter

nlinal oradditional hours if established by the terminal operator 01

steamship operator provided the vehicle obtains a

pass and has com

pleted docmnentation as required by section 2 prior to 3 p

m

2

Shipping documents as used in this rule generally include but are not necessarily

limited to the carriers release dock delivery order dock receipt weighing receipt carrier

certificate container survey form and other documents and or notations required by

Government authority port customs ortrade association

12 F M C
180 FEDERAL MARITIME CO ISSION

The lunch period as set forth in thelabor contract butnot exceedin

1 hour shallnot be included in calculatingtime or detention

Seotion 4 Time

a When vehicles are loaded or unloaded within the time period

set forth below there will be no detention charges paid Vehicle

designated will be entitled to detention charges ifnot completely serv

iced withinthedesignUited time periods onthe followingbasis

1 Non Appointment Truok8

2 000 pounds or less Not applicable

2001 to 5000 pounds 165 minutes

5 001 to 10 000 pounds 195 minutes

10 OOi to 15000 pounds 225 minutes

15 001 to 20000 pounds 255 minutes

20 001 to 25000 pounds 285 minutes

25 001 to 30000 pounds 300 minutes

30 001 to 35 000 pounds 330 minutes

35001 to 49 000 pounds 360 minutes

Over 40 000 pounds 390 minutes

2 Appomtment Trucks

2000 pounds or less 120 minutes

2001 to 5 000 pounds 135 minutes

5 001 to 10000 poundil 165 minutes

10 001 to 15000 pounds 195 minutes

15 001 to 20 000 pounds 225 minutes

20 001 to 25 000 pounds 255 minutes

25 001 to 30000 pounds 270 minutes

30 001 to 35 000 pounds 300 minutes

35001 to 40 000 pounds 330 minutes

Over 40 000 pounds 360 minutes

Nonappointment vehicles with shipments of 2 000 poundS or less shall not be entitled

to detention charges

b Containers handled as a single unit will beallowed 120 minutes

regardless of weight before detention charges accrue

c Motor vehicles unloaded by the operator of such vehicles wil

be entitled to detention charges ifnot spotted at a place convenient fo

unloading within 120 minutes after proper documentation No de

tention will be allowed once such vehicles are spotted convenient fo

unloading

d No detention will be paid when sortingor seleotion is requested

or required by the motor carrier The terminal operator is not absolved

from liability under this rule when sorting or selection is done for his

convenIence

Section 5 0ha l

ges

When the loading or unloading of freight is delayed beyond the

time allowed in section 4 the vehicle shall apply to the termina

12 F M C
TRUCK AND LIGHTER LOADING AND UNLOADING PRACTICES 181

ope vator for detention charges and shall be entitled to 3 for each 15

minute period beyond thetime designated in section 4

It is fwrther ordered That this order become effective March 31

1969

By the Commission

SEAL THOMAS LISI

Secretary

12 F M C
FEDERAL MARITIME COl1MISSION 

DOCKET No 1153

TRUCK AND LIGHTER LoADING AND UNLOADING PRACTICES

AT NEW YORK HARBOR

ORDER

By Order served February 25 1969 New York Terminal Confere

was directed to include in its Truck Loading and Unloading Ta

No 7 FMC T No 8 a truck detention rule as set forth in the Ord

Subsequently the effective date of the Order was postponed at 

request of the U S Court of Appeals for the District of Colum

Circuit in order to hear argument on a motion to stay

The Court has this date denied the motion for stay Alnerican E

port Isbrandtsen Lines Inc et at v Fede1allllaritime Commiss

and United States of America No 22 820 and has set the effec

dateof the Order at April 7 1969 Accordingly

It is ordered That the Order of February 25 1969 as modified 

the Court shall become effective April 7 1969

By the Commission

SEAL THOMAS LISI

Se ore tary

182
FEDERAL MARITIME COMMISSION

DOCKET No 1153

TRUCK AND LIGHTER LOADING AND UNLOADING PRACTICES

AT NEW YORK HARBOR

ORDER OF CLARIFICATION

On February 25 1969 the Order in this proceeding was issued by the

Federal Maritime Commission The New York Terminal Confer

ence was ordered pursuant to section 17 of the Shipping Act 1916

to include in its Truck Loading and Unloading Tariff No 7 FMC T

Xo 8 theTruck Detentionrule set forth in that Order

Footnote 1 of the rule defines detention charges as follows

1

Detention charges as used in this rule means compensation to be paid by

marine terminal operators to motor truckoompanics fordelays of motor vehicles

at marine terminal facilities Italic added

During the course of the proceeding there was in no instance a

differentiation made between motor vehicles operated by motor

truck companies and those operated by individuals or other types

ofcompanies Itis not the intent ofthe Commission to limit detention

paynlents to motortruck companies the rule is intended to compensate

any type of motor vehicle operators for delays of their vehicles at

marine terminal facilities

Therefo1 e it is ordered That footnote 1 of the Vehicle Detention

Rules be clarified by omitting the words motor truck companies

and substituting therefore the words motor vehicle operators Foot

note 1 will now read as follows

1

Detention charge as used in this rule means compensation to be paid by marine

terminal operators to motor vehicle operators for delays of motor vehicles at

marine terminal facilities

It is further ordered That since this order merely constitutes a

clarification of the Commission s original order its effectiveness shall

correspond with the effective date of the original order March 31

1969

Bythe Commission

SEAL

12 F M Q

THOlfAS LISI

8ecretary

183
FEDERAL MARITIME COMMISSION

No 65 31

INVESTIGATION OF OVERLAND AND OCP RATES AND ABsORPTIO

No 661

BOARD OF COMMISSIONERS OF THE PORT OF NEW ORLEANS

V

PAOIFIC CoAST AUSTRALASIAN TARIFF BUREAU AND MEMBER LIN

Decided February O 1969

Since about 1870 competition among the Atlantic Gulf and Pacific Gatew

has been an economic force in the making of ocean rates on overland O

cargo moving between the Far East and the central United States as dis

guished from local or port toport cargo moving between the Far East 

the Pacific Coast area and not SUbject to such interseaboard ro

competition

The approved conference agreements permitting respondent conference memb

to set oceanfreight rates inthetrades they serve authorize them to estab

such rates as normal economic forces require and upon the facts her

such respondents overland OCP rates and absorptions are withinthe sc

of that authority

Although overland OCP rates were authorized by section 15 clarity requires t

ithe agreements be updated for the future to include specific reference 

the intent of the parties to establish di1ferent rates to inland areas an

set up rates and absorptions inimplementation thereof

No agreement is found to exist respecting respondents overland OCP rates 

absorptions which should be disapproved canceled or modified or wh

requires approval other than existing approval pursuant to section 1

theAct

Respondents current overland OCP rates and absorptions arefound notto 

any undue or unreasonable preference or advantage to any particularper

locality or description of traffic or to subject any particular person loca

or description of traffic to any undue or unreasonable prejudice or 

advantage in violation of section 16 First of the Act to be unjustly 

12 F M 

184
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 185

criminatory between shippers and ports in violation of section 17 of theAct

or to allow any person to obtain transportation of property at less than the

regular rates or charges in violation of section 16 Second of the Act

ApPEARANCES IN DOCRE NO 65 31 UNLESS OTHERWISE NOTED

Edward D Ransom Gordon L Poole and R F1 ederic Fi her for

respondents Pacific Indonesian Conference Pacific Straits Confer

ence Pacific Westbound Conference Australia New Zealand and

South Sea Islands Pacific Coast Conference Philippines North Amer

ica Conference Trans Pacific Freight Conference Hong Kong

Trans Pacific Freight Conference ofJapan Pacific CoastAustralasian

Tariff Bureau in Docket No 6661 only American MailLine Ltd

American President Lines Ltd American Export Isbrandtsen Lines

Inc Barber vYilhelmsen Line JointService The Ben Line Steamers

Ltd Chinese Maritime Trust Ltd Orient Overseas Line Fern

Line Joint Service Fern Ville Lines Hamburg Suedamerikanische

Dampsfchifffahrts Gesellschaft Columbus Line Isthmian Lines

Japan Line Ltd Kawasaki Kisen Kaisha Ltd K Line Klaveness

LineJoint Service Knutsen LineJoint Service Maritime Co of

the Philippines A P Moller Maersk Lines Joint Service Nedlloyd

Fioegh Line Joint Service Nippon Yusen Kaisha Ltd Oceanic

Steamship Co Orient Steam Navigation Co Ltd P 0 Orient

Lines Joint Service Pacific Far East Line Inc Showa Shipping

Co Ltd Splosna Plovba United Yugoslav Lines States l1arine

Lines Joint Service States Steamship Co Transatlantic Steamship

Co Ltd Union Steamship Co of New Zealand Ltd United Philip

pine Lines Inc United States Lines Co American Pioneer Line

Waterman Steamship corp Vilh Wilhelmsen InterestsJoint Serv

ice Yamashita Shinnihon Steamship Co Inc and Mitsui O S K

Lines Ltd

Alan F Wohlstetter for respondent Taiwan Navigation Co Ltd

Ronald A Oapone for respondent United States Lines Co other

than as conference member

Richard W Kurrus for respondent American Export Isbrandtsen

Lines Inc other than as conference member

O D Haig Jr for intervenor Alabama State Docks Department

Oharles A Washer for intervenor American Retail Feqeration

F G Pfrowmer for intervenor The Atchison TOPeka Santa Fe

Railway Co

Mark p Schlefer Edward E Wright and Leslie Srager for the

Board of Commissioners of the Port of New Orleans in rvenor in

Docket No 65 31 and complainant in Docket No 66 61

12 F M C
186 FEDERAL MARITIME COMMISSION

Oarl S Parker J1 for intervenor Board ofTrustees of the Galv

ton vVharves

Robert F Mwnsell for intervenor Chicago Milwaukee St Paul

Pacific Railroad Co

Leslie E Still Jr for intervenor City of Long Beach

Arthur W Nordst1 om for intervenor City ofLos Angeles

N Marshall Meyers for intervenor The Flying Tiger Line Inc

Thomas D Wilcox for intervenor Great Lakes Terminal Associati

Ourtis H Berg for intervenor Great Northern Railway Co

W E Fincher for intervenor Houston Port Bureau Inc

Ed10Vn F Avery for intervenor International Association of Gre

Lakes Ports

Alex O Oocke for intervenor New Orleans Board ofTrade Ltd 

Docket Nos 65 31 and 66 61

Lmds A Sch1oa1 tz for intervenor New Orleans Traffic and Tra

portation Bureau in Docket Nos 65 31 and 66 61

Louis A Harris for intervenor Northern Pacific Railway Co

William W Sch1oarzer lIfa1 k O Kasanitn and William H Ar

strong for intervenor Pacific Coast Association of Port Authorit

in Docket Nos 65 31 and 66 61

James M Henderson Douglas W Binns Sidlney Goldstein F 

Mulhern Arthur L Winn Jr S H Moerman and J Raymond Ola

for intervenor port ofNew York Authority in Docket Nos 65 31 a

66 61 and NorthAtlantic PortsAssociation

Joseph P Adams forintervenor thePortofSeattle

Aaron W Reese for intervenor San Diego Unified Pori District

Oharles O Mille and James M Oooper for intervenor San Fra

cisco ChamberofCommerce

Miriam E Wolff for mtervenor San Francisco Port Authority

Hollis F a1Well for intervenor Seattle TrafficAssociation and Sea

Chamber ofCommerce

Robert W Smith for intervenor Seaway PortAuthority of Dulu

Manon S Moore Jr for intervenor South Atlantic Ports As

ciation

A T Suter for intervenor Southern Pacific Co

R B Batchelder for intervenor Union Pacific Railroad Co

Oharles R Seal Arthur W Jacocks and Blair P Wakefield 

intervenor Virginia State Ports Authority in Docket Nos 65 31 a

66 61

Julian H Singman for intervenor Washington Public ports As

ciation

W G Treanor for intervenor The Western Pacific Railroad Co

12 F M C
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 187

Donald J Brunner Samuel B Nemiro o Arthur A Park J1 and

Thomas Ohnstemen Hearing Counsel in Docket Nos 65 31 and

6661

REPORT

By THE COMMISSION John Harllee Ohairman James V Day Vice

Ohairman Ashton C Barrett James F Fanseen 001 l11nissione1 s

INTRODUCTION

The Commission instituted upon the informal protests of several

interested groups the investigation in Docket No 65 31 onAugust 13

1965 to determine whether ovedand OCP rates and absorptions and

agreements were compatible with the Shipping Act 1916 On Octo

ber 7 1966 the Board of Commissioners of the Port of New Orleans

filed with the Commission a

complaint Docket No 66 61 against the

Pacific Coast Australasian Tariff Bureau PCATB whichaUeged

that the PCATB overland rates and absorptions were contrary to the

Shi pping Act The proceedings were consolidated for hearing and

decision After extensive hearings and voluminous briefs Examiner

Valter T Southworth issued an initial decision on August 22 1968

Exceptions were filed on October 211968 by Atlantic Gulf and

Great Lakes Ports and replies to executions were filed on December 5

1968 Oral argument washeld on January 7 1969

Conferences of ocean carriers in the tradesbetween the Pacific Coast

and the Far East Australia and New Zealand have for many years

maintained separate tariffs called overland or OCP overland com

mon point tariffs appli caJble under certain conditions to cargo which

originates in or is destined for a point in overland orOCP territory

which territory may be described roughly as that part of the United

States east of the Rocky Mountains All other cargo including all

cargo originating in or finally destined for local territory points

west of the Rockies is carried under local tariffs Rates applicable

to overland Or OCP cargo are usually lower than corresponding local

rates and in addition certain Pacific Coast terminal charges which

are assessed against local cargo are assumed by the ocean carrie rand

the inland carrier and in certain circumstances by the inland carrier

alone pursuit to agreement between the ocean and inland carriers

Overland OCP tariffs are designed to meet the competition of ocean

carriers operating out of Gulf and Atlantic Coast ports to and from

the same foreign ports with respect to cargo originating in or destined

for the Central or 1idwest United States For such cargo the effect

of overland OCP tariffs is to make the aggregate freight charge for

inland rail plus ocean transportation via the Pacific Coast gateway

12 F VLC
188 FEDERAL MARITIME COMMISSION

competitive with suoh aggregate charge via the Atlantic or the G

gateway No attempt is made to meet the aggregate freight charge 

Great Lakesports

Generally overland rates are outbound ocean rates while OCP ra

are inbound Ocean rates although there is no substantial difference 

their nature or purpose and the distinction in terminology is 

always observed Overland OCP will he used herein to refer 

either or both

During 1965 several ports and associations ofports on theAtlan

and Gulf Coasts protested to the Commission alleging that ov

land OCP rates and absorptions result from unfiled and unapprov

agreements are per se unlawfully discriminatory and unfairly pre

dice Atlantic and Gulf Coast ports and certain shippers The Co

mission thereafter initiated Docket No 65 31 to determine whet

overland OCP rates and albsorptions and related agreements 

unlawful under the Shipping Act The Commission ordered that 

investigation determine

Whether any agreements between the carriers or conferences 

carriers named as respondents regarding overland or OCP ra

and absorptions have not heen filed and approved by the Comm

sion as required by section 15 whether there exist any agreeme

between respondents to execute agreements with inland carrie

freight forwarderS or shipper associations concerning overla

or OCP rates and rubsorptions which have not been filed a

approved by the Commission as required by section 15 a

whether every agreement respecting overland and OCP rates a

absorptions whether or not previously approved should for 

future be approved disapproved canceled or modified pursu

to the standards of section 15

Whether all provisions for the granting of overland or O

rates and rubsorptions have been filed with the Commission and 

forth in public tariffs as required by section 18 b 1 of the A

and adhered to as required by section 18 b 3 ofthe Act

Whether the collection of any overland or OCP rates or 

absorption of any terminal charge gives any undue or unreas

able preference or advantage to any particular person loca

or description oftraffic or subjects any particular person loca

or description of traffic to any undue or unreasonable prejud

or disadvantage in violation of section 16 First whether the 

lection of such charges is unjustly discriminatory between s

pers and poris in violation of section 17 or whetherthe collec

of such charges allows any person to obtain transportation 

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 189

property at less than the regular rates or charges then established

by an unjust or unfair device or means in violation of section 16

Second

The order of investigation named as respondents eight conferences

and 46 carriers Most of the respondent carriers are or were members

of one ormore of the respondent conferences

In November 1966 several months after hearings had commenced

the Board of Commissioners of the Port of New Orleans initiated a

complaint proceeding Docket No 66 61 against PCATB alleging

that the conference had established overland OCP rates to ports in

Australia and New Zealand which diverted substantial but unknown

amounts of cargo from complainant to Pacific Coast ports The over

land OCP tariff was alleged to be unlawful as a rate fixing agreement

a system of special rates a port equalization agreement and a system

to regulate other than intraconference competition not approved by

the Commission under section 15 of the Act Complainant sought an

order striking theoverlandtariff anddirectingrespondents to cease and

desist from implementing agreements providing for overland rates and

absorptions

THE FACTS

The Pacific Coast began to compete with the Atlantic and Gulf

seaboards for traffic moving between the central United States andthe

Far East immediately after the completion in 1869 of the first trans

continental railroad Such competition made commercially practi

cable by competitive rail and ocean rates applied to that traffic has

existed almostcontinuously ever since

In 1868 the first regular steamer service between the Pacific Coast

and the Far East had been established with the aid of amail contract

by Pacific Mail Steamship Co which also operated from San Fran

cisco to Panama and thence with a connection via the Panama rail

road which had been completed in 1855 from the Atlantic side ofthe

isthmus to New York Until the first transcontinental railroad was

built only local cargo originating at or destined for the Pacific

Coast and adjacent areas was loaded or discharged at the Pacific

Coast Although as a matter of geography the ports of the Far East

were thousands of miles closer to the central United States via the

Pacific Coast than via any other route the lack of an adequate over

land link prior to 1870 caused all but local Pacific Coast traffic to move

through Atlantic and Gulf ports via the Suez Canal the Cape ofGood

Hope or the Isthmus of Panama The transcontinental railroads made

possible a new competitive route which they proceeded promptly to

12 F M C
190 FEDERAL MARITIME COMMISSION

develop since the relatively sparse population and economic develo

ment on the Pacific Coast was not sufficient to generate the tra

needed to justify the cost of building the railroads and provide 

their successful operation The situation of trans Pacific Ocean c

riers was quite similar Economic necessity required a cooperat

effortbetween the two nlodesof transportation

The first railroads worked initially with the Pacific Mail Line ot

trans Pacific lines followed largely under railroad ownership or c

trol as the number of transcontinental railroads increased In ord

to obtain any part of the traffic then lllOving via the Suez Canal 

Cape of Good Hope and the Isthmus of Panama it was necessary 

offer through rates which were luuch less than the sum of the the

existing local ocean rates to the Pacific Coast and domestic rail ra

to Chicago and New York By agreement withthe railroads the stea

ship companies quoted through rates from oriental portsviathe Pac

seaboard to central and eastern destinations in the United States 

whatever figure they found necessary to obtain business in conlpetit

with the otherroutes similarly through westbound ates wereneg

ated with shippers by the railroads The railroads and steamship lin

divided whatever through rate vas obtained according to an agre

percentage The steamship lines share varied from 25 to 50 percent 

the through rate sometimes subject to a

per pound minimUll1 to 

railroad The proportion of the through rate received by the oc

carrier was less than the port to port or local rate and the proport

received by the railroad wasless than its domestic rate for transpor

tion between the same points The combined or through rate fr

oriental ports to Chicago and New Yark was sometimes lower th

the local steamship rates currently in effect to San Francisco

In connection with through rates a

through bill of lading was u

which offered several advantages to the shipper and consignee incl

ing the absorption by the carriers ofterminal charges at the poin

transfer between ocean carrier and inland carrier

The Interstate Commerce Act became law and the Interstate Co

merce Commission was created in 1887 Soon thereafter upon 

complaint of organizations dedicated to promulgating the trade 

certain port cities the ICC had occasion to consider the practice 

the railroads which was not confined to the transcontinental roa

of accepting for transportation of imported articles between a p

city and an inland point a proportion of a through rail ocean r

which was less than the domestic rate of transportation between 

same points The ICC thought it was not permitted to cons

the circumstances and conditions of foreign traffic in determin

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 191

whether under the Commerce Act it was an act ofunjust discrimina

tion to take such a

pro rata share of athrough rate and that it was

required to consider foreign and domestic traffic in the movement

thereof between any two points in the United States as like kinds

of traffic both of which must be carried under the inland tariff The

Supreme Court held to the contrary in the bnport Rate case Texas

Pacific Ry v Interstate Oommerce Oommission 162 US 197 1896

and advised the Commission p

233 that it was empowered to fully

consider all the circumstances and conditions that reasonably apply to

the situation including competition that affects rates in the case of

traffic originating in foreign ports as well as the competition that

affects rates inthe case of dOlnestic traffic Inorder to meet competition

affecting export import traffic therefore a carrier subject to ICC

jurisdiction might lawfully make export and import rates which are

in essence divisions of through rates between a port and an interior

point less than its domestic rates between the same points

Following the decision in the ImlJ01 t Rate case it remained the

general practice to quote through charges for export and import ship

ments by agreement with shippers as might be required to meet the

competition of carriers serving Atlanticports and transporting Asiatic

traffic via the Suez Canal route In 1906 however the Hepburn Act

arnended the Commerce Act so as to compel adherence to filed and pub

lished rates which could be changed only upon due notice The rail

roads thereupon filed through rail ocean rates but the ICC ruled that

international through tariffs to and from nonadjacent foreign coun

tries were unlawful where all parties thereto were not subject to its

jurisdiction and that the rail carriers must publish and adhere to pro

portional rail rate factors to and from the ports Under the circum

stances with ocean rates frequently changing without regulatory

restriction the railroads deen1ed it necessary or expedient to cancel

their overland trans Pacific tariffs in 1908 and for a time exports to

Asia and Australia were charged the regular domestic rail rates to

San Francisco and the current ocean rates across the Pacific

According to testimony before the Alexander Committee early in

1913 this made a

prohibitive aggregate rate as against the all water

route via Suez Pacific 1ail Line said its business out ofSan Francisco

was chopped right off In an effort to regain some of the overland

traffic Pacific 1ail worked through a New York freight forwarder

who was authorized to solicit oriental business on the basis of an

ocean rate proportion as low as 2 per ton Although this rate was un

remunerative the ocean carrier believed that the railroads would

eventually publish proportional rates and that if it was out of the

12 F M C
192 FEDERAL MARITIME COMMISSION

overland business entirely it would lose all contact with shippers a

consignees and it would be very hard to get in contact with them aga

if the railroads did open that gateway Toyo Kisen Kaishen join

Pacific rvlail in this plan under an agreement whereby overla

freight upon arrival in San Francisco would go to any steamer 

the twocompanies which might be on the berth

As Pacific Mail anticipated the American railroads did begin 

publish proportional import export rates this apparently beca

general during 1913 having been started some years earlier by Can

dian Pacific in conjunction with its own steamship line operating out 

Vancouver The railroads tariffs showed in addition to the impo

export rail rates through rail ocean rates for information only 

1916 appa ently because of wide swings in ocean rates produced 

VVorld Tar I the ocean rates were dropped and thereafter only t

rail rates wereshown

Mean vhile at least two inbound conferences the Trans Pacific Ta

iff Bureau Hong J ong and China Branch and the Trans Pac

Tariff Bureau Japan branch predecessors of the Inbound Ho

J ong Conference and the Inbound Japan Conference were publis

ing OCP rates applicable only to shipments destined for overla

points The Japan Branch also issued a local port to port tariff t

Hong Kong and China Branch had no jurisdiction over local rat

which were left to the individua l carriers to determine for themselv

The two inbound OCP tariffs were published at least as early as 19

World War Ibroke out in August 1914 Although the North P

cific was not a combat zone the trans Pacific fleets were quickly 

duced by the withdra val of British and American vessels The Su

Canal was closed The Panama Canal was opened in 1915 but its eff

wasnot fully felt until after the war when itprovided a newall wa

route between Atlantic and Gulf ports and Pacific ports highly co

petitive with the Suez route and the overland Pacific Coast route 

wasalso during the period of the 19141918 World War that the Sh

ping Act as well as the Commission s earliest predecessor came in

being

The Shipping Act 1916 became effective September 7 1916 T

U S Shipping Board created to administer the Act was organiz

early in 1917 and in May 1917 it set up a Division of Regulation 

enforce the regulatory provisions of the Act By that time the Unite

States had entered 7orld tVar Iby declaration of war against G

many the Board s efforts were thereafter concentrated upon t

building and operation of vessels and for the time being its regulato

12 F M C
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 193

activities weresubmerged The Division nevertheless proceeded to de

termine the status ofcarriers under the regulatory sections ofthe Act

and directed carriers in domestic and foreign commerce and other

persons subject to the Act to file the agreements mentioned in section

15 Itwas 1919 apparently before the Board was able to take stock

of the regulatory situation In its Fourth Annual Report issued De

cember 1 1920 the Board noted that the carriers contracts which

were filed prior to and during the war and which lay practically dor

mant in the files untilthe beg ng of last year have all been brought

up to date

In its Fifth Annual Report issued December 1 1921 the Board

described the greater attention given by the Division of Regulation

during the year ended June 30 1921 to agreements between water car

riersrequired to be flIed undersection 15

In or about 1923 aStanding Committee on Conference Agreements

was created and under date of June 16 1923 counsel in charge of the

Division of Regulation transmitted to the Chairman of the Standing

Committee a list with a brief outline of such agreements as have

been filed in this office nnder section 15 of theShipping Act brought

up to date for presentation to the Committee Under date of June 26

1923 the Standing Committee indicated its approval of all the agree

ments in accordance vith counsel s recommendation by endorsing the

memorandum of transmittal The list of agreements so approved in

cluded the agreement ofthe Inbound Hong I

ong Conference Agree

ment No 14 which had been transmitted to the Board for approval

under date of August 20 1917 Also listed and approved were the

agreements of the Outbound Australia Conference Agreement No

50 which had been transmitted to the Board August 23 1921 the In

bound Japan Conference Agreement No 55 transmitted to the

Board December 23 1921 and PWC Agreement No 57 which had

been signed January 8 1923 This approval by the Standing Com

mittee appears to have been an internal matter only merely bringing

up to date the approval already indicated by the Board s acceptance

for filing without comment after examination when the conference

papers were submitted

What ever its earlier knowledge concerning overland OCP rates

the U S Shipping Board was by this time fully familiar with them

through the activities of its own Division of Operations in connection

with the restoration of conference ratemaking following World Tar 1

On MaTch 1 1920 in connection with new arrangements for the op

eration of Shipping Board vessels the U S Shipping Board ceased to

issue tariffs of rates directly through its rate division and caused rates

12 F M C
194 FEDERAL MARITIME COMMISSION

to be made by conferences ofShipping Board managing agents org

nized under the supervision of its Division of Operations The rul

of the conferences required thenl to submit their recommendations 

the Board for approval before Inaking any drastic rate changes A

questions not unanimously agreed upon were likewise to be submitt

to the Board In its Fourth Annual Report the Board reported tha

relationship in rates and practices among the different districts i 

North and South Atlantic Gulf and Pacific had been brought abo

by suggestions or instructions from the rates division The Tran

Pacific Outward Conference of U S Shipping Board Operators a

the U S Shipping Board Transportation Conference Homeward D

vision were the outbound and inbound trans Pacific conferences org

nized pursuant to this arrangement

At an early meeting of the outbound group a rule was adopt

defining overland cargo as applying only on traffic enjoying railroa

line haul received direct from rail carriers originating at poin

named in Transcontinental Bureau Export Tariff No 29 F supp

Inents thereto or reissues thereof the idea of the foregoing was 

designate from what territory freight nlust originate to be entitled 

the overland rates also to prevent shipments placed in warehouse 

port of loading from receiving the benefit of overland rates Co

ference action was taken with respect to rates on both overland a

local cargo

InApril 1920 the IIomeward Division was cOlnpiling data showi

comparative rates in effect at the present time to Pacific Coast Ov

land Points and Atlantic Coast ports and members wereasked to fu

nish data showing point of origin destination and rates on 16 co

modities nloving from Shanghai An inbound tariff from HongI

o

shows an ocean proportion overland rate on tea

About this time the transition from conferences of Shipping Boa

operators to conferences of general menlbership was in progress T

Yokohama Committee of the Homeward Division recommended reco

nizing the Trans Pacific Freight Bureau of Japan and giving it 

opportunity to maintain a tariff The latter s schedule ofrates adopt

August 30 1920 produced from Shipping Board files is in the reco

it shows Pacific Coast rates for 65 commodities with overland ra

in a separate column for most ofthose items In each case the overla

rate is substantially less than the local or Pacific Coast rate for t

same commodity

In 1921 the Pacific Coast Australasian Tariff Bureau the Outbou

Australia Conference the respondent in Docket No 66 61 was form

under Shipping Board auspices with the Conference Secretary oft

12 F lfC
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 195 

U S Shipping Board as its secretary The Conference s

jurisdiction

as in the case of several ofrespondent conferences expressly included

merchandise shipped viaPacific Coast ports from any overland points

and its first tariff set forth rates less than local tariff rates for certain

commodities constituting through traffic originating overland points

covered by through bill of lading

In the outbound oriental trade there had existed until 1920 the

Pacific Coast Oriental TariffBureau with sections at Seattle and San

Francisco In 1920 it was reorganized to include the Shipping Board

lines and was called the Pacific Westbound Conference Changes in

railroad export import rates in August 1920 the depression which

began late that year and diversity of interests between the Pacific

Northwest and California groups led to disruption ofthe Conference

largely overthe inability of the parties to agree on and maintain rates

on overland cargo The California group maintained local rates fairly

well and achieved some unity on overland rates but the northern lines

reduced rates on overland traffic and the California lines retaliated

by opening their overland rates which were already so low that the

act was morea feint than a blow

The Shipping Board exerted pressure on the trans Pacific lines to

rehabilitate the Pacific Vestbound Conference The Board threatened

to open rates and tendered its good offices to induce the warring

factions to make peace After weeks of preliminary negotiations

meetJings of the California and Northwest sections were held in the

fall of 1922 with representatives of the Shipping Board and the

Canadian Government Merchant ifarine present Tariffs of local and

overland rates were published the former issued and effective No

vember 6 1922 and the latter issued November 4 1922 effective

January 1 1923 A new conference agreement was prepared and dis

trbuted but was not signed until January 8 1923 This agreement

was designated No 57 by the Shipping Board as amended to date

it is still thebasic agreement ofrespondent PVC

During the meetings which led to promulgation of the new tariffs

and agreement overland rates as distinguished from local rates were

necessarily among the major topics and the agreement was described

in a letter set forth in the minutes as the proposed agFeement gov

erning westbound local and overland oriental rates Nevertheless the

only reference to overland traffic in the basic agreement itself was in

the jurisdictional clause As in the usual conference agreement this

clause set forth the commerce with respect to which rates were to be

agreed upon and added it being understood that such commerce

shall include all merchandise that may be shipped westbound via the

12 If M C
196 FEDERAL MARITIME COMM rSSION

Pacific Ocean from or via the said Pacific POlts to the said countr

or from any overland points in the United States or Canada

vVith the reorganization of PVVC under Shipping Board auspic

in 192223 the fact and theory of overland OCP ratemaking 

substantially present day form and purpose wasreaffirmed

Each ofthe respondent conferences publishes a tariff duly filedw

the Commission providing for the application of overland OCP ra

and the assumption of terminal charges in connection with overla

OOP cargo under terms and conditions specified in the respect

tariffs

In the case of the outbound conferences the overland OCP ta

provisions are applicable if

1 The shipment originates in overland territory defined as No

Dakota South Dakota Nebraska Colorado New Mexico and Sta

east thereof and

2 The shipment moves directly from place of origin on athrou

rail export bill oflading subject only to transit privileges permitt

under the export rail tariff

In the case of the inbound conferences other than the Inbou

Australia Conference 1

the overland OCP tariff provisions 

applicUible if 

1 The shipment is released directly orwithin a

specified peri

usually 14 days to one of the approved carriers named in the c

ference tariff the approved carriers include certain motor carrie

airlines and freight forwarders as well as Railway Express Agen

and any rail carrier and

2 The ocean carrier is furnished a

copy ofthe inland carrier s 

of lading or waybill showing forwarding to a destination in O

territory the definition of which is the same as thedefinition ofov

land territory in the tariffs of the outbound conferences Cargo 

promptly forwarded to an OCP destination is charged the local ra

but upon proof of actual forwarding within 12 months it can rece

the OCP rate and refund is made accordingly In such event howev

terminal charges will be refunded only to the extent provided in 

rail tariff i e no terminal charges will be assumed by the oc

carrIer

All the tariffs specify that terminal charges at Pacific Coast po

consisting of wharfage handling and carloading or unloading w

1

In the case f the Irubound Australia Co nference OCP territory is defined as poin

named in the rai lroads Trans Continental Freight Bureau eastbound import tariIY t

include all States in the contiguous United States except California Oregon and Nev

This conference s OCP tariIY provisions are applicable only upon cargo delivered to 

carriers in continuous movement destined to points in OCP territory as defined 

present separate OCP rates are published only for wool of various descriptions

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 197

in the case of cargo received from or delivered to rail carriers be

assumed jointly by the ocean and rail carriers vVhere inland trans

portation is by approved inland cart iers other than rail inbound

conferences only the tariffs provide that all terminal and loading

charges will be absorbed by the inland carrier This absorption is pro

vided for by agreement with the inland carrier as one ofthe conditions

oflisting it as an approved carrier 2

When overland OCP tariffs do not provide specific commodity

rates the general rule is that the overland cargo N O S rate or the

local commodity rate whichever produces the lesser revenue will be

applied Thus the overland OCP rate will always be at least as

low as the local commodity rate and in addition will have the benefit

ofthe 3Jbsorption of terminal charges Where as in the case of PWC

the Conference has a dual rate exclusive patronage contract system

applicable to local cargo but not to overland OCP cargo overland

OCP cargo will take the local cargo contract rate if it is lower than

the overlandjOCP N O S rate and there is no overland OGP com

modity rate even though the shipper has not entered into an exclu

sive patronage contract with the ocean carrier

In their rate deliberations respondent conferences give attention to

the usual rate making factors In connection with oveI landjOCP

rates however a particular factor is competition with the Atlantic

and Gulf gateways The objective is to establish a rate via the Pacific

Coast such that the aggregate charges for transportation between

foreign ports and the Central United States will be competitive with

such charges viatheAtlantic or Gulf Coast For that purpose an effort

i made to approach parity in the matter of inland plus ocean trans

portation to or from the predominant overland OCP point of origin

ordestination so far as such point is determinable of the particular

commodity movement

In acting upon a

shipper s

request for the establishment or adjust

ment of an overland rate PVC works from its Application for

Rate Adjustment forin or questionnaire filled out and submitted

by the shipper The form which is not confined to overland rate appli

cations elicits information as to value physical characteristics and

uses of the commodity estimated annual tonnage reasons for re

quested reduction including specified particulars as to foreign compe

tition if any and competitive commodities Point of origin and

ports of destination are requested ifthe point of origin is in overland

2

It may be noted that in the case of motor and air carriers etc the services of loading

and unloading are covered by the carrier s tariff rates for transportation and that such

carriers do not provide export or import rates lower than their domestic trades as do the

rallrollds

12 F M C
198 FEDERAL MARITIME COMMISSION

territory i e east of the nine Testern States the shipper is as

to advise whether shiplllents will move under through export bills 

lading Carload rail rates per 100 pounds and minimmll carl

weights are requested from point of origin to Pacific Atlantic 

Gulf ports if the commodity also originates at other inland po

competitive with the above named points or origin rail rates fr

such points to Pacific Atlantic and Gulf ports are requested Inf

mation supplied is checked or if not supplied is obtained to 

extent possible from various sources

The rate necessary to achieve parity with the Atlantic or G

gateway is obtained by subtracting the rail charges covering a rep

sentative shipment via the Pacific Coast from the sum of the rail 

ocean charges for the same shipnlent via the most likely competi

route The figures are presented to the conference rate comnlit

together with the shipper s rate application and a staff recommen

tion The rate or adjustment finally adopted if any is determined 

vote of the Conference after consideration of the information de

oped it mayor may not be that recommended by the staff or 

committee The rate adopted is ordinarily higher than a rate wh

would equalize ocean rail charges Or produce parity

In making comparisons with charges via the Atlantic and G

terminal charges are not considered since competitive rates u

for comparisons via the Atlantic and Gulf are invariably on a s

side basis under which as in the case ofoverland OCP cargo term

charges are not made as such against the cargo Competitive 

plus ocean rates may therefore be compared directly with rail p

overland OCP rates

There is no necessary relation between Pacific Coast local rates 

overland OCP rates for the same commodities no formula or dif

ential of general application exists or could be established since lo

and overland OCP rates are developed independently using 

factor of competitive gateways only in the case ofroverland O

rates because that is the only case in which it is of any importan

Respondent conferences are approved conferences authorize

fix and regulate transportation rates in their respective trades 

reason of Commission approval pur mant to section 15 of t

agreements to fix and adhere to such rates Section 15 authority 

ordinary collective ratemaking procedures by the members ofrespo

ent conferences is found in their basic organic agreements

None of respondents basic conference agreements provides 

pressly for the promulgation of different rates or tariffs for 

and overland traffic There are express references to overland tr

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 199

in some of respondents current or superseded agreements but they

seem to have evolved from a desire to make it perfectly clear that the

participants were undertaking to be bound by conference rate aking

in the matter of both local and overland cargo not because It was

thought necessary to spell this out as a matter of ratemaking author

ity but rather because in the past certain conferences had made only

overland rates or had special difficulty in maintaining overland rates

because of internal conflict of interests

The earliest approved agreement of a

respondent conference still

bearing the original FMC nunlber is that of the Inbound Hong Jeong

Conference Agreement No 14 whose agreement was entered into

August 24 1916 a month before the Shipping Act 1916 became law

and many months before the Shipping Board was organized and operw

ating This agreement which wassubmitted to the Board for approval

August 20 1917 is most explicit in defining through rates to overland

points and local rates to Pacific Coast points and in making it clear

that the agreement applies to both but this obviously had nothing

to do with any desire or need to obtain authority for such ratemaking

under the Shipping Act which was not in existence when the agree

ment was drawn Prior to the making of this agreement however this

conference had been concerned only with the portion ofthe members

traffic which was competitive with the Suez route as the Alexander

Committee was told its members were working together against the

other conference crowd to swing the business across the Pacific and

through the Pacific Coast gateways into the interior cities of the

United States it did not publish port to port rates The 1916 agree

ment evidently represents a change in this respect and goes to consider

able lengths to emphasize that it is intended to govern the conveyance

of all merchandise from conference origins to the Pacific Coast

including that shipped to the said Pacific Coast and Hawaiian

Islands or via the Pacific Coast to any Overland Points in the United

States

The frequent use of such expressions as to or via or from or via

Pacific Coast ports in the agreements of trans Pacific conferences

apparently derived from this early Inbound Hong J

ong Conference

agreement ora similar agreement Inthe 1923 PVC agreement which

came into being while the parties were resolving difficulties particu

larly centered about overland rates as distinguished from local rates

the jurisdictional referenceto commerce from or viathe Pacific Coast

ports of North America was redundantly reinforced by adding in

parentheses it being understood that such commerce shall include all

merchandise that may be shipped westbound from or via the said

12 F M C
200 FEDERAL MARITIME COMMISSION

Pacific ports or from any overland points in the United Sta

or Canada

Some conferences have continued to use the to or from and v

language and as in the case of PvVC to add that the inclusion 

cargo from any overland points in the United States is und

stood others do not employ such expressions butrely on their auth

ity with respect to all cargo carried by their vessels between Pac

Coast and foreign parts

Each of the respondent conferences has entered into a so ca

rail water agreement in substantially identical form with the tra

continental railroads providing for the absorption of port termi

charges an overland OCP traffic at Pacific Coast parts The pres

agreement wasentered into effective February 5 1957 and by its ter

continues in effect untilterminated Itprovides that the steamship lin

will pay the total cost ofloading unloading handling and wharfa

an overland OCP traffic and will then bill the rail lines for 50 perc

thereof It supersedes an agreement entered into in 1950 which w

intended to accomplish substantially the same result by having 

steamshiplines bill the railroads at specified rates per ton of tra

handled the rates werecalculated to divide the aggregate expenses 

an approximately even basis instead of the mathematically ex

division provided at present PVC submitted the 1950 agreenlen

the Commission and received the following ruling fronl the Ch

Regulation Office letter dated November 17 1950

We note that the agreement is between the member lines of the Pacific W

bound Conference on the one hand and the members of the Trans Contine

Freight Bureau on the other hand The rail carriers are subject to the jurisdic

of the Interstate Commerce Commission and not the lfederal Maritime Bo

and serious confusion could arise were the Federal Maritime Board to ac

section 15 approval to such an agreement but only in so far as it constituted 

agreement between water carriers subject to its jurisdiction

The conference members are now operating under their approved confere

agreement which permits them to cobperate and promote commerce by regula

rates tariffs and matters directly relating thereto It would appear theref

that the conference inreaching this agreement forabsorption outof theirfre

rates of a portion of terminal charges at Pacific Coast ports was acting purs

to their agreement in which event no further approval by the Federal Marit

Board would be required

OverlandjOCP cargo originates or terminates primarily in the M

west where Atlantic and Gulf ports have an advantage aver Pa

Coast ports in the matter of inland transportation rates On the o

hand Pacific Coast ports are closer by more than 4 000 miles to ma

ports in the Far East and by more than 2 000 miles to Australia 

New Zealand

12 F M 
INVES l

IGATION OF OVERLAND OCP RATES AND ABSORPTIONS 201

As a general rule in the case of any overland OCP rate the aggre

gate ofthe corresponding local ocean rate and the inland rail rate to or

from the predominant Midwest point of origin or destination of the

particular commodity is greater than the aggregate ofthe ocean rate

viaeither theGulforAtlanticCoast andthe inland rail rate to or from

such Coast andthat the overland OCP rate including the assumption

ofterminal charges is less thanthe local rate

As between the Pacific Coast ports and Atlantic and Gulf ports the

latter have the natural advantage of lower inland mileage and lower

rail rates to the industrial concentrations of Midwest America The

Pacific Coast ports counter this natural advantage with their own not

inconsiderable natural advantage of being 2 000 to 4500 miles closer

to the relevant foreign ports with an overall time saving of 10 to 14

days To obtain the benefit of this advantage and overcome their dis

advantage in the matter of inland rates they find it necessary because

of the relative economic advantages and disadvantages of land and

water transportation to offer rates for this common territory traffic

lower than they charge for noncompetitive local traffic

Overland OCP rates have been in effect for so many years and the

Far East trade of all relevant ports has expanded so greatly during

that period that no adverse effect of such rates upon any port can be

detected One can only speculate that theAtlantic Gulf ports increase

might have been slightly greater had such rates not existed

The Far East trade from all relevant ports has expanded greatly

during the period of record At New York Far East exports have

increased threefold from 1958 to 1964 and amounted to 25 5 percent

of general cargo exports throughthe port in 1964 New Orleans which

is second only to New York in the value of its trade increased its

imports wi h Japan by 39 percent in 1964 over 1963 while Asian ex

ports increased 6 percent

Atthe same time the amounts of carrying ofoverland OCP cargoes

of the Pacific based conferences represents a small to medium percent

nge of total conference tonnage While in the case of the Inbound

Hong Kong Conference OCP cargoes amount to 43 percent of the

revenue tons carried by that conference overall the amount of over

land OCP cargo is a small percentage of the total volume of cargo

moving between the Orient and the United States The record shows

that in the case of PWC its overland cargoes amount only to 7 95

percent Ifall of the overland OCP cargo were diverted to Atlantic

and Gulf ports it would benefit thes ports only in some small un

measurable degree or amount

Some 25 representatives of exporters or importers testified and

12 F M C
202 FEDERAL MARITIME COMMISSION

with the exception of the exporters of bentonite clay all ofthem f

overlandjOCP rates ofbenefit to their business Nlany of them stres

the desirability of the alternative Pacific Coast route provid

greater speed and flexibility in meeting sales and production deadli

at competitive cost Faster service enables them to carry reduced 

ventories and save financing cost The through rail export bill of lad

accelerates payment for export goods where letter ofcredit terms p

mit payment against such bills oflading without awaiting the issua

of a separate onboard bill of lading by the ocean carrier Some 

porters have builtwarehousing and national distribution centers on 

Pacific Coast to service parts of the country other than those be

served by the Atlantic and Gulf ports The availability of an altern

route at comparable cost is important in the event of strikes and ot

contingencies Systems ofmerchandising distribution and market

have been based upon Vest Coast movement and depend upon 

present rate structure Various businesses have special situations wh

would be affected adversely by the elimination ofoverlandjOCP rat

the present rate structure helps meet foreign competition in price a

service some movements would be diverted to other ports includ

Canadian ports possibly from surface to airtransportation and s

movements would be lostentirely as noncompetitive ifthe rates w

eliminated

The overlandjOCP and export import rate structures origina

arose out ofthe need to attract sufficient traffic to support the const

tion and operation of railroads to relatively undeveloped regions 

well as the operation of trans Pacific water carriers today they 

important producers ofrevenue for the rail as well as the water carr

The movement of overlandjOCP traffic has continued throughou

period of almost 100 years under export import rail rates and arran

ments for the absorption of terminal charges of which the ICC 

indicated its approval The movement of traffic through Pacific C

ports under overlandjOCP and export import rates has become 

integral part of the Nation s economy and has been and is a control

factor in the growth and development oftrade with the Far East

Freight forwarders and consolidators handling shipments betw

the Pacific Coast and 1idwest favored overlandjOCP rates s

a large proportion of their business moves under such rates Their

timony was to the effect that the elimination of overlandjOCP r

would adversely affect their business and that of shippers particula

small shippers several felt that the rates produce export or imp

traffic which otherwise would not move at all Ashippers associa

operating under an ICC piggyback plan believed OCP rates w

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 203

necessary to make its operation financialoly feasible One freight for

warder located in New York City but with most Of his business moving

through South Atlanticand Gulf ports wasopposed to overlandjOCP

rates Inexplanation hesaid

Ifan account of mine in the Middle West can ship from the Middle West to

a Far East country and can obtain a much lower ocean rate via the Pacific

Coast both rail and ocean than he would receive ifhe shipped through the Port

of New York he certainly would choose the West Coast movement

This seems reasonable except that the hypothesis is not supported by

the record The witness further testified that a letter ofcredit payable

against a

through rail ocean bill of lading under which the shipper

can get his money within 24 hours after cargo is loaded aboard the

vessel gives a distinct advantage over a port like New York It was

his opinion however that the cost of transportation reflected in the

laid down cost at destination is most important a fact as to which

there was quite general agreement notwithstanding the service advan

tages of the Pacific Coast route

Two over the road trucklines a shippers association and an air

eargo carrier particularly favor OCP rates because they reduce an

imbalance in the transcontinental movement ofdomestic cargo which

is predominantly westbound Without such rates more equipment

would move empty eastbound The traffic imbalance has been a prob

lem with truckers for years because of it OCP cargo is most impor

tant The air cargo carrier in the absence of OCP rates under which

about 25 percent of its eastbound cargo moves would likewise stand

to lose a substantial volume of back haul cargo which would exag

gerate its imbalance problem and perhaps result in increased rates on

othertraffic to give a round trip break even factor

The opposing ports employed a

transportation consultant and a

consulting economist to present testimony to the effect that overland

OCP rates are not economically justified because they encourage a

traffic movement at a higher aggregate cost to the rail and water

carriers than the carrier cost via the competitive Atlantic and Gulf

routes This proposition has nothing to do with charges to the shipper

andis not related to rates

The method showed greater costs per ton for the longer rail hauls

to San Francisco compared to Atlantic and Gulf gateways

The consultant also undertook to determine an average fully dis

tributed cost per revenue ton of all general cargo regardless of de

scription for Lykes United States Lines and APL for the respective

routes between the Far East and the Atlantic Gulf and Pacific

Coasts

12 F M C
204 FEDER AL MARITIME COMMISSION

Notwithstanding thevastly greater distances covered by theAtlan

and Gulf carriers and the observed fact that average days at sea 

voyage were 72 9 for Lykes 57 for United States Lines and 37 5 

APL the transportation consultant found a higher vessel expense 

revenue ton of cargo for APL via San Francisco than for Uni

States Lines viaNew York His fully distributed average cost 

revenue ton which included adjustments for overhead and profit w

43 82 for APL 44 83 for Lykes and 42 79 for United States Lin

These costs were offered as representative of the three routes

The outbound conferences apply overland OCP rates only to 

carried from ov rland territory under a through rail export bill 

lading The inbound conferences apply such rates to cargo delive

by them to approved inland carriers listed in their tariffs trucklin

airlines and freight forwarders in addition to rail carriers desti

for overland OCP territory

No shipper inland carrier or other witness complained of this 

pect of overland OCP tariffs although applications from inla

carriers had been declined by some conferences and eventuaI ly gran

only by certain inbound conferences

DISCUSSION

The Examiner in a well reasoned decision found that o

land OCP rates were not unlawful under section 15 of the Shipp

Act The Examiner ruled that overland OCP rates were the prod

of routine activities within the cover of authority conferred by 

conference agreements therefore there wasno need for separate C

mission approval ofoverland OCP rates or ratemaking practices 

Examiner also found that overland OCP rates do not violate 

antidiscriminatory provisions of sections 16 and 17 of the Shipp

Act

The Atlantic Gulf and Great Lakes polis excepted to the Ex

lner s initial decision We will consider these exceptions hereafter

We consider first the issue by the order of investigation whe

any agreements between respondents regarding overland OCP r

have not been filed and approved under section 15 The opposing p

argue that no agreements authorizingoverland OCP rates have b

filed or approved that such a scheme must be separately appro

under section 15 and that accordingly all overland OCP rates ar

violation of section 15

Respondents conference agreements are approved conferences a

orized to fix and regulate transportation rates pursuant to section 

Their agreements contain specific section 15 authorization to fix r

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 205

collectively Respondents contend that this ratemaking power is ade

quate authority for the establishment of an overland OCP system of

rates

None of the conference agreements expressly provides for the pro

mulgation of different rates for local and overland tariffs Some ofthe

agreements refer to overland traffic but these references have evolved

from a desire to make it clear that the participants wish to be bound

by conference ratemaking for hoth local and overland OCP cargo

The references do not specifically state that there may be different

rates for cargo originating in or destined to overland territory

The question beIore the Commission is therefore whetherthe ordi

lary ratemakingauthority sanctions the establishment of an ove r

land OCP system of rates which is different than the local system

Since Section 15 Inquiry 1 DS S B 121 1927 the Commission

and its predecessors have uniformly held that the issuance of tariffs

including rules and regulations covering their application is a routine

matter authorized by an approved basic conference agreement not

requiring separate approval under section 15 Empire State H wy

Transp Ass n v American Export Lines 5 F M B 56 585 1959

afl d sub nom Empire State Higlvway TraMp Ass n v Federal Man

time Ed 291 F 2d 336 D C Cir 1961 In 1961 section 15 of the

Act was amended to reflect this principle and now specifically excepts

tariff rates fares and charges and classifications rules and regu

lations explanatory thereof from the requirement fprior approval

where agreed upon by approved conferences such as respondents

concededly are and filed and published in accordance with section

18 b the tariff filingsection oftheAct Respondents overland OCP

rates and absorptions and all rules and regulations explanatory

thereof are set forth in duly filed tariffs although the issue is raised

by the order of investigation there is no evidence and no claim is

made that any respondent has failed to file publish and adhere to

subh tariffs

Overland OCP rates and absorptions which are simply provi

sions for the inclusion under tariff rates of certain transportation

services which by custom are not in the case of local traffic covered

by the tariff rates of Pacific Coast carriers are purely ocean rates in

the trades served by respondents and respondents basic approved

agreements permit the setting of ocean rates It is well established

however that authority under general rate setting agreements is lim

ited to the adjustment of rates as the normal economic forces which

govern the establishment of such r3lOOs may require Oontinental Nut

00 v Pacific Ooast River Plate 9 F MC 563 570 1966 Itremains

12 F M C
206 FEDERAL MARITIME COMMISSION

to be determined therefore whether overland OCP tariffs are set 

adjusted pursuant to normal recognized ratemaking factors so a

be includible in published tariffs as routine matter or whether as 

opposing ports contend they constitute 3 device having some ulte

purpose or effect such as stifling competition outside the confere

or discriminating unduly against persons entitled to the protection 

the Act that is to say whether t

hey depart from the routine estab

ment or adjustment ofrates

The record establishes and the opposing ports concede thatthe p

pose and effect of overland OCP rates is to make the Pacific C

carriers competitive with Atlantic and Gulf ocean carries for tra

originating at or estined for paints in the central part of 

United States so called overland traffic Far from stifling competit

as the opposing ports allege overland OCP rates complemented 

railroad export import rates as are theAtlantic and Gulf ocean ra

not only enhance route competition for suoh traffic but to a substan

though imponderruble degree provide acompetition which otherw

would not exist There is no evidence whatever of any purpose 

discriminate against anyone Vhether discrimination neverthe

results and if so whether it is undue will be considered in ano

onnection for the moment we are concerned only with primary 

nomic purpose and effect

It is a cardinal regulatory principle that a common carrier 

compete for traffic Agreement Gulf llfediterranean Ports Oon

ence 8 F M C 703 709 1965 Rate differentials between diffe

types of traffic may be based upon competition applicable to one t

and not the other Ala3ka Rate Investigation No 3 3 U S MC 43 

1948 There is manifestly no provision of the Shipping Act w

can be construed to forbid a carrier to meet competition or to enla

the scope of its patronage and its volume of business if it can d

without unfairnes s to those whom it serves Board of Oom1nl

New York Porto Rico 88 00 1 U S S B 154 156 1929 Re

tions to meet competition are proper if they do not result in 

remunerative or unlawful rates or go beyond the limits of compet

which rest withinthe managerial discretion of the carrier West Bot

Alcoholic Liquor Oatrload Rates 2 U S 1 C 198 204 1939

Competition therefore is one of the fundamental factors in o

ratemaking and competition is the basic distinguishing factor in 

establishment of overland OCP rates There is no contention tha

evel of overland OCP rates is so low as to be noncompensa

detrimental to commerce or otherwise unfair orunlawfuI Te th

fore conclude that the rates were set pursuant to normal compet

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 207

to approach parity with aggregate rates through competitive gateways

Ve are swayed by the fact that th predecessors of the Commission

knew ofthe existence ofoverland OCP tariffs at the time the variou

organic agreements ere considered and approved Not only did these

early agencies know of such ratem aking practices but they kne y full

well that these conferences had every

intention of continuing their

long standing practice of setting rates in this mann rFor insta lCe

the earliest approved agreeme nt still bearing the 9riginal nnmber is

that ofthe Inbound I

Iong Kong Conference AgrEement No 14 whos

agreement was entered into in 1916 TI is agreement was sllbm itted to

the Board for approval in 1917 and is most explicit in definingthrough

rates to overland points and local rates to Pacific CQast poipts anc1 in

making it clear that the agreem nt applies to both In fact prior to

this agreement the conference had only been concerned with overla ld

traffic

1any other agreements followed this early lead in making it clear

that their jurisdiction wasto include not only local cargo but overland

traffic as well In the 1923 p TC agreement the parties made it abso

1 utely clear that transportation of cargo from overland points was to

be included These early conferences also openly established separate

tariffs containing different rates for local and overland territory and

the predecessors of the Commission were fully aware of these rates

through the filing of tariffs and minutes and otherwise Today all of

the agreements contain jurisdictional language which is broad enough

to encompass all cargo moving to or from overl and points as well as

local traffic Today these conferences file these rates as required by

section 18 b These numerous references c1nd the knowledge of the

predecessors of the Commission regai ding overland rates emphasize

the fact that the Commission and its predecessors have at all times

been awareofthe distinction behyeen the two different classes of traffic

observed by the trans Pacific conferences and that the Commission

intended to sanction this activity when the agreements were approyed

In 1913 the Alexander Committee was told that an inbound con

ference from Japan issued separate tariffs of local and overland rates

while another conference from Honk Kong and China set only over

land ra s in an effort to meet East Coast competition leaving local

rates to be determined by the members individually s

Likewise out

bound carriers were found to set extremely low rates on overland lrgo

to meet Suez competition The Alexander Repol tdoC not indicate tlu t

the Committee regarded overland rltes as other thapnormal competi

tive rate setting procedures

I HDoc No 805 63d Cong second sess i914

12 F M C
208 FEDERAL MARITIME COMMISSION

After World War I the US Shipping Board closely supervis

the functions of certain steamship conferences These conferenc

published separate rates for qverland OCP traffic as a matter 

course And when the present PWC was reorganized under Boa

surveillance overland OCP rates were a matter of concern as an i

portant aspect ofthe ratemaking function ofthe conference

In1946 the Commission took formal noticeofPWC s overland OC

rates describing their use to compete for common territory traffi

Agree llUJnt No 7790 2 U S M C 775 1946 Other Commission de

sions concerning overland OCP rates are Agreements and Practic

Be Brokerage 3 U S M C 170 1949 Encinal Terminals v Pac

WestbO lll1Ui Oonference 5 F M B 316 1957 and Docket No 8

JointAgreementFar East Oonf and Pac W B Oonf 8 F MC 5

1965 The validity of OCP rates was not in issue in these p

ceedings However Commission recognitionofthis type ofratemaki

system over more than 40 years emphasizes the fact that when t

organic agreements were approved approval of such systems was co

templated and emphasizes the routine ratemaking nature of tarif

establishing overland OCP rates

We have decided that respondent conferences have general ra

making authority under approved section 15 agreements wllich a

thority extends to the issuance of tariff rates rules and regulatio

provided that such tariffs are agreed upon pursuant to normal reco

nized ratemaking factors The overland OCP tariffs have been esta

lished pursuant to normal recognized ratemaking factors and the

fore they constitute routine ratemaking duly authorized by the respe

tive conference agreements

However we feel that there is anot her

remaining problem vVhile 

consider the organic agreements to permit overland GCP rates t

basic agreements do not conform to the rules of clarity regarding t

contents of section 15 agreements As the heated arguments of th

proceeding rea ily suggest a reading of the basic conference agre

ments does not show the scope and operation of the overland OC

system of rates without reference to other documents An interest

party would be required to refer to many other documents to unde

stand the system fully We have found that the organic agreeme

permitted the OCP rates as routine ratemaking Our holding is bas

largely upon the history and development of the system and the f

knowledge of the Commission and its predecessors The overlan

OCP system was old and est8Jblished at the commencement of gove

mental regulation of waterborne eommerce Nevertheless we no

vish to require that agreements become more explicit in order to avo

12 F M C
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 209

tny confusion and to avoid lengthy litigation ih the future as in this

case Thus we will require the conferences to update their basic agree

ments to reflect the full structure of its ratemaking and the absorp

tions practiced pursuant thereto Accordingly the conferences shall

add language to their section 15 agreements to indicate that the

general ratemaking authority includes the power to fix rates to or

from interior points at levels different from those applicable other

wise to absorb certain terminal costs to enter into arrangements

regarding such movements to or from interior points with inland car

riers and to conduct other functions incidental thereto This will bet

ter allow third parties to determine from the conference agreements

the existence of different rates from overland OCP territory and the

possibility of the absorption of terminal charges The Commission

wishes to make it clear that the tariff rules and regulationsof respond

ent conferences which relate to overland and OCP rates shall remain

in full force and effect and are lawful under the Shipping Act

We have held that the establishment of overland OCP rates was

explicitly sanctioned by the ratemaking authority of the conferences

Thus those cases

4

dealing with tacit approval aTe distinguished The

predecessors of the Commission did not tacitly approve overland

OCP rates expressly approved ratemaking in its various forms in

e1 uding overland OCP rates

The protesting ports rely upon the Supreme Court decision in

Follcs1 oagenwerk v FA O 390 U S 261 1968 in support of their

position that there was no underlying authority for the promulgation

of overland OCP rates In Volkswagen the Pacific Maritime Asso

ciation a collective barga ining association of employers entered into

a

greements with l bor unions to establish a Modernization and

1echanization Fund to permit containerization and labor improve

ments No agreement of any kind was filed with the Commission

The question was whether such agreement was required to befiled with

and approved by the Commission The Supreme Court determined

that section 15 should be construed to require the filing of this type of

agreement although not previously considered to be subject to the

Aot because the agreement fit literally within the broad language of

section 15 and because that section required the scrutiny by the Com

mission ofagreements between ocean carriers

Unlike the Volkswagen case which dealt with the types of agree

ments required to be filed we are here attempting to delineate the

4 RiverPlate and Brazil Confer v Pre88ed Steel Car Co 124 F Supp 88 S DNY 1954

llfd 227 F 2d 60 Kempner v Federal Maritime Commi8 um 313 F 2d 586 DC Ctr

1963

12 F M C
210 FEDERAL MARITIME COMMISSION

scope of an approved agreement All agreements in which the par

oblige themseives to set rates collectively must be filed anc1approv

Iere respondents have obtained general ratemaking authorirty 

conferences have established overlandjOCP rates pursuant to 

authority Thus the conferences have satisfied section 15 they h

filed their ratemaking agreements Furthernlore this implementa

of underlying a

uthority is published in conference tariffs The con

ences have never avoided stuveilIance or regulation undel the S

ping Act ofthis or othm ratemaking activity

1Ve do wish to emphasi ze that we do not find any violn ti of 

tion 15 even though we require that henceforth agreements S

clearly express that genentl rateniaking power includes as it does 

plicitly the setting of rates to interior points at levels different t

the rates to local territory

The opposing ports do not undertake to discuss overland O

rates as ratemakingat all Their entire case rests upon the assump

that overlandjOCP rates comprise a system completely out

the scope of ratemaking as such of prima facie discriminatory 

cial rates which have as their objective the regulation and contro

competition This premise is based principally upon analogy betw

the overlandjOCP system and other systems which have b

found to have the characteristics and objectives so assumed and 

fore to require specific approval separate from ordinary ratema

approval 5

Thus they identify overlandjOCP rates with the exclusive pat

age contractjnoncorrtract system which was the subject matter 

Isbrandtsen v United States 211 F 2d 51 1954 cert denied 

U S 990 and Ai a1 iti1 e Board v Isbntndt en Co 345 IT S 481 19

Tn the first 18b1 andt8en case the exclusive patronage contract 

tem was sometimes referred to briefly as a dual rate system 

opposing ports say that overlandjOCP rates together with local ra

are also a dual rate system and thereupon their argument depe

The scheme of dual rates in lsbrandtsen was not a matter of r

making at all but the imposition of a fixed spread of U percent 

tween the established rate charged a shipper who signed an exclu

patronage contract with the conference and a shipper who did 

The cargo wasthe same thetransportation selvice and conditions w

5

The pposing ports also suggest that further inquiry is ade unnec ssary by the 

mission s reference in the order of inrvestigation to overland OCP rates as special r

on cargo destined to or received from inland points Obviously tlH Commil lsion did 

tiH reby intend at the outset to put overland OCP into the completely inilpproiHiate se

category of giving 01 receiving apecial rates accommodations orothe pecilll privlleg

advantages i e favored treatment or privilege not available to all others sim

situated

12 j

L
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 211 

the same everything wasthe same except that there was a substantial

fixed differential which a shipper could avoid only by agreeing to

make all his shipments by vessels of the canference with liquidated

damages in the farm af a 50 percent dead freight charge payable far

each breach afthe contract The purpose afthis dual rate system was

of course to tie shippers to the conference and thereby to curtail 01

stifle independent nonconference campetition as the Supreme Caurt

found in the second Jsb1 andt8en case The Caun held that it cauld

hardly he classi fied as an interstitial sort of adjustment since it intra

duced an entirely new scheme afrate cambinatian and discriminatian

not embadied in the basic conference rate agreement

Naw respandents do in a sense have dual pertain to tworates

for certain cammadities ane rate applicable to averland traffic and

anather applicable to lacal tra ffic bath available to any shipper de

pendent upan the campetitive transpartatian canditians surraunding

his shipment nat upan whether 01 nat he agrees nat to patranize

the can ference s campetitars Except far the false nexus pravided by

the ambiguaus use af the ward dual there is no relatian whatever

between averland OCP rates and the exclusive patranage cantract

nancantract arrangements frequently referred to in the well under

staad idiam af the industry as dual rate systems and the many

caurt and Cammissian decisians and dicta invalving the latter are

nat in paint The juxtapasitian of similar wards daes nat demanstrate

the identity af unlike cancepts

The same fallacy but based upan the wards part equalizatian is

faund in the analagy between averland OCP rates and the Pacifio

Ooa8t P01 t Eq1talization Rule 7 F M C 623 1963 aff d sub nam

Pacifio Ooast European Oonfe1 ence v United States 350 F 2d 197

9th Cir 1965 cert denied 382 U S 958 1965 In the case af

averland OCP rates raute equalizatian 01 equalizatian af charges

via competitive gateways is recagnized as a

ratemaking factaI and

rates are established in contemplatian af that and ather factars Of

caurse a caast as faT as acean transpartatian is cancerned is made

up af parts sa raute 01 gateway equalizatian invalves in a braad

sense part equalizatian But the part equalizatian at issue in Pacific

OOa8t Port Equalization Rule was again nat really a matter af can

ference ratemaking it was simply an intracanference rule which

yauld permit any canference member to draw cargo fram the can

ference port nearest to the carga s paint af arigin to anather canfer

ence part in the same range by in effect reducing the agreed canference

rate applicable to bath parts by an amaunt equal to the excess af the

cost in inland transportatian to the latter part That kind of part

12 F lIC
212 FEDERAL MARITIME COMMISSION

equalization makes it possible for a conference member in order 

suit its own convenience or economy of operation to make t

equivalent of an ad hoc rate reduction the amount of which go

to the inland carrier not the shipper to draw cargo from one po

to another on the same ocean route It is not conventional or routin

ratemaking among carriers in fact it is an exception to the rat

making process which gives the individual conference member a di

cretionary power to divert cargo from a

port which is served by t

same conference on the same trade route at the same rates as t

port to which the cargo is diverted Under certain circumstances th

Commission has found the device justified in others not but und

no circumstances does it have more than the most superficial rese

blance to overland OCP rates Futhermore in the Pacific Ooast Po

Equalization Ru e the Commission concerned itself with the instit

tion of a new arrangement to restrict competition between port

overland OCP rates aTe neither new nor restrictive of competitio

Itis true that overland OCP rates may affect third party interes

such as ports but everything a conference does in the way of ra

fixing necessarily affects some third party interest in a greater 

less degree There must be a line drawing to make the Commission 

words meaningful and the Commission obviously did not intend 

distinguish otherwise routine ratemaking so as to require spec

section 15 approval in any instance where as a result of the applic

ton or recognized economic ratemaking ractors a third party po

shipper or competitive carrier is in any degree affected thereb

The opposing ports also rely upon Agreement 7700 Establishme

of a Rate Structure 10 F MC 61 1966 aff d sub nom Persian Gu

Outward Freight Oonf v FederalMar OOmn 375 F 2d 335 D C C

1967 in support of its argument that overland OCP rates requi

separate section 15 approval In that case the conference filed a tar

establishing different rates for the same commodities depending 

whether they were carried in US flag or foreign flag vessels Th

purpose was claimed to be to enable the foreign flag members of t

conference to compete successfully with other roreign flag carriers f

the carriage or commercial cargo apparently leaving American fla

carriers completely out or the running except as to cargo for whi

they might enjoy a legal prererence as American flag carriers a

providing higher rates for such cargo This singular method of fixin

rates or course bears no resemblance to overland OCP rates thoug

the opposing ports suggest that it is essentially the same thingbecaus

they say both are two level systems or to any recognized ratemakin

method That the Commission found it to require separate approv

12 F M C
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 213

as an entirely new scheme of rate combination and discrimination is

no more pertinent than the similar finding in the case ofthe exclusive

patronage dual rate system

The opposing ports also rely upon Oontinental Nut 00 v Pacific

Ooast River Plate 9 F M C 563 570 1966 In that case the con

ference imposed a surcharge upon a commodity to finance a shipper s

association advertising campaign The Commission found that this

was contrary to the conference s section 15 agreement which permitted

ratemaking because the surcharge was establisled outside the normal

economic forces which govern the establishment of such rates

The requirement that one be able to determine the manner and

nature of effectuation of an agreement from merely reading the basic

agreement was set forth in Docket 872 Joint Agreement Far East

Conf and Pac W B Oonf 8 F MC 553 558 following Associated

Banning 00 v llfatson Nav 00 5 F M B 336 1957 The Comniis

sion pointed out in Docket 872 that it did not thereby limit the scope

of routine actions which need not be the subject of section 15 filings

It is evident that the application of the requirement will vary with

the nature of the basic agreement in question IIthe case of an ordi

nary conference agreement the matters shown in its tariffs including

rules and regulations as well as the rates themselves are the result of

the implementation of the agreement the rules and regulations show

how the tariff works not how the agreement itself operates Inother

types of agreement the distinction is not always so easy InAssociated

Banning it was found that a complicated series of transactions in

volving the acquisition of other operators businesses and facilities

was not a normal consequence of an approved agreement evidencing

little more than a general intention to enter the stevedoring and

terminal business as partners In Docket 872 the agreement was one

between two conferences in different competitive trades although

they were authorized to meet and agree upon the establishment or

change of rates itwas found that such authority did not cover a

sys

tem of concurrences and initiative items under which one confer

ence in effect surrendered its right even to initiate consideration of

certain rate changes without the prior concurrence of the other This

was hardly within the contemplation of ordinary ratemaking pro

cedure A Vest Coast shipper for example could not know from an

examination of the agreement between the two conferences or oftheir

tariffs that his rate application to the Pacific Coast Conference for a

local rate adjustment lnight be futile because under an unfiled agree

ment relating to the method in which the interconference agreem nt

operated the East Coast Conference could arbitrarily prohibit con

12 F lIC
214 FEDERAL MARITIME COMMISSION

sideration of the adjustment in order to serve its own interests 

those ofEast Coast shippers

In the case of the ordinary conference agreement the way the ag

ment operates with respect to rates may be satisfied by setting fo

in the agreement such matters as the conference organization and 

voting powers and privileges of the members Inthe case of P VC 

example standing committees may be appointed to consider and 

ommend tariff rates and changes and the members will be bound 

the agreement of two thirds of the members as to any tariff frei

rate change brokerage traffic regulation and or any other ma

within the scope of this agreement except as otherwise provided 

the Rilles and Regulations which are attached to and made a par

the agreement That is all there is to the manner in which the ag

ment works as far as ratemaking is concerned what comes out of

agreement in the form oflocal and overland tariffs and rates chan

and regulations is set forth in filed tariffs The way the agreem

works is the same with respect to overland OCP rates as to local ra

The opposing ports undertake to list six elements which t

say must he covered in the basic conference agreement to meet requ

mentsof completeness andspecificity These are

1 The spreads between local and overland rates or if no defi

spreads are indicated the method for establishing them and their ou

limits

2 The definition of territory in which the overland OCP ra

apply

3 The commodities covered by the rates or the principles 

selection

4 Whether absorptions apply and if so their limits

5 The terminal ports through which the rates apply or the princ

of their selection

6 The procedures by which decisions are reached in the shifting

lationships engendered by the overland OCP system

This list quite ignores the fact that overland OCP rates are es

lished as such by the application of relevant ratemaking factors 

not by a system or formula imposed upon local rates The record 

tablishes that there are no spreads between local and overland ra

other than random differences such as may exist between any byo ra

as a result of the application ofdifferent ratemaking factors Ther

no method or reason to establish or limit such differences or sprea

The definition of territory to which the rates apply is properly a ta

matter in the nature of a

regulation explanatory of tariff ra

charges and classifications the tariff i the normal place for any

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 215

to laak far the applicatian af rates cammodities listed terminal

charges cavered i e absarptions and terminal parts thraugh which

rates apply 6Nane af these things requires different treatInent be

cause afthe pramulgation afaverland OCP rates fram that pravided

under any canference agreement Neither do the pracedures by which

decisians are reached which praperlY relate anly to the administra

tive pracedures spelled aut in every basic agreenlent far the regulatian

af the internal affairs Of the canference Thus if a canfeTence agree

ment penuits the setting af Ocean freight rates in the trade it serves

these rates may be adjusted fram time to time as the narmal ecanamic

farces vhich gavern the establishment af such rates may require

Oontinental Nut eo v Pacific Ooast River Plate 9 F 1C 563 570

1966

The pratesting parts also argue that the pracedures used by the

agency to apprave basic canference agreements priar to 1949 were

whally deficient in according any pratectian to the interest Of third

parties pravided no appartunity far pratest and ahearing and re

quired no specific agency findings to safeguard the public interest

Thus the pratesting ports urge that these irregularly can ferred

agency appravals cannat serve as a valid exemptian far averland OCP

rates fram theantitrust statutes

The recard shaws that the canference argeements were appraved

pursuant to the then prevailing agency practice Changing adminis

trative regulatians and procedures which have been develaped aver

the years cannat revake the substantive rights which were canferred

at that time in accard with the terms af sectian 15 Cf Section 15 In

q tiry 1 D S S B 121 124 1927 Cansequently we averrule the

argument af the pratesting parts that the basic agreements were

neverpraperly approved under sectian 15

Supplernent try Ag1 ee1nents Relating to Ove1 lm tdjOOP Rates

Each af the respandent canferences has entered into a rail water

agreement in substantially identical farm with the transcantinental

railraads praviding far the absarptian af part termina Icharges an

averland OCP traffic at Pacific Caast parts The present argeement

was entered into effective February 5 1957 and by its terms cantinues

in effect until terminated It pravides that the steamship lines will

pay the tatal cast af laading unlaading handling and wharfage an

averland OCP traffic and will then bill the rail lines far 50 percent

thereaf It supersedes an agreement entered into in 1950 which was

6 With respect to the selection of terminal ports no additional section 15 authority is

necessary Conferences customarily pursuant to their section 15 authority designate

terminal ports

12 F l1C
216 FEDERAL MARITIME COMMISSION

intended to accomplish substantially the same result by having t

steamshiplines bill the railroads at specified rates per ton of traf

handled the rates calculated to divide the aggregate expenses on 

approximately even basis instead ofthe mathematically exact divisio

provided

Under the

at present

contemplated revision the rails would pay for all carloa

ing and unloading and the steamship lines for the otheritems expe

ence having shown that this would work out to an approximately ev

split ofthe aggregate andsave a great deal ofpaperwork

In addition to the formal rail water agreement the record ind

cated transactions among representatives of the respondent confe

ences and of the transcontinental railroads which might conceivab

be considered understandings concerning the setting of rail 

overland ocean rates and since the two are interdependent in settin

overland OCP rates any understanding concerning one might affe

the other There were no binding agreements and the personnel a

thorized to confer had no ratemaking authority yet the purpose w

quite clearly to bring about action necessary to achieve an effectiv

aggregate of rail and ocean rates

Since the agreement affects ocean rates they may be subject to se

tion 15 The agreement is somewhat analogous to a multiemploy

agreement with a labor union concerning wages The signatories 

a collective bargaining agreement are frequently by the very act 

signing agreeing with their own competitors on matters such as labo

costs certain nonlabor costs service to be provided to the public an

indirectly price increases Volkswagenwerk v FMO 390 U 

261 284 1968 concurring opinion of Mr Justice Harlan So th

respondent conferences in coUectively agreeing with the railroads o

the allocation of terminal costs absorptions or reaching an unde

standing as to the proportion of a through overland charge which it 

desirable to have covered by the rail or ocean rate 7

are by the act o

entering into such agreement or understanding agreeing with eac

other as conference members on matters more or less directly relate

to theirown rates and charges 8

7

This is putting it as strongly as possible ssentially the relevllJnrt transactions betwe

onferences and railroads involved only the exchange of information Any direct reques

for rallroad rateaction were made only by individual ocean carriers in the same way th

shippers and individualrail carriers made such requests

8 There is no need to consider any agreement among the ocean carriers to enter into 

joint agreement with thirdparties as an agreement separate from the joint agreement itse

any more than it is appropriate to consider the arrival at an agreement to enter in to 

agreement among themselves in either case the ultimate agreement is normally the o

requiring sec 15 consideration The existen ce of parties thereto not subject to the Act do

not affect Commission jurisdiction of the agreement as one among parties who are subje

to the Act

12 F M C
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 217

The respondent conference members are authorized by their ap

proved agreements however to agree upon rates The impact upon

ocean rates of the rail water agreement and of any other conference

understandings with the railroads which may possibly be found from

the facts of record is incidental to approved ratemaking based upon

such normal economic factors as cost and competition Itis possible of

course for a third party agreement to affect rates in such a way as not

to be within the approved ratemaking authority as for example the

agreement in Oontinental Nut 00 v Pcwific Ooast River Plate 9

F M C 563 1966 to pay over to a trade association an advertising

assessment which was reflected directly in a substantial rate increase

There is no such problem here where the relation to rates is not

extraneous to normal ratemaking particularly in the historical setting

of the relevant trades

It is concluded that in entering into the rail water agreement to

absorb a portion of the terminal charges at Pacific Coast ports the

members ofPWC acted pursuant to their approved conference agree

ment The ame principle also applies to any joint action of record

among conferences and railroads toward the establishment of rail

or ocean rates which would produce a competitive ocean rail combina

tion The latter activity is analogous to the familiar conference activ

ity of negotiating with a shipper in an effort to determine a rate which

will produce traffic

The opposing ports criticize transactions among the respondent

conferences having to do with the general adoption of a uniform

definition of overland OCP territory to take the place of the early

method of incorporating by reference definitions contained in rail

tariffs It appears that PWC recommended that other conferences

adopt changes in the definition in 1927 and again in 1935 although

the recommendations were not immediately followed eventually all

the conferences except the Inbound Australia Conference adopted

the same definition However the changes made by the various con

ferences tend to show that unanimity ofaction wastheexception rather

than the rule But there was undoubtedly an effort to bring about the

unanimity which eventually developed This activity among non

competing conferences would come within section 15 if it constituted

an agreement or understanding fixing or regulating transportation

rates or fares While a

change in substance of the definition of over

landOCP territory could have some effect upon rates ofthe respective

conferences it does not appear that any changes discuSsed among the

respondent conferences had any substantial effect in that regard as

12 F MC
218 FEDERAL MARITIME COMMISSION

rate fixing understandings they were de minimis 9

particularly in vi

of the desirable result of uniformity and clarity which was their e 

dent purpose and the lack of any competition among the conferenc

The Section 18 Issues

The order of investigation directs an inquiry as to the filing 

tariffs setting forth all the provisions for the granting of ov

land OOP rates and absorptions as required by section 18 b 

of the Act and as to adherence to filed tariffs as required by sect

18 b 3 oftheAct

The Examiner found that there is no evidence of any failure to 

adequately complete tariffs or to adhere to filed tariffs in connect

with overland OCP rates or absorptions No exceptions were made 

this finding and we agree Neither wasevidence adduced nor argum

made that any of the rates were so unreasonably high or low as to 

detrimental to the commerce of the United States contrary to sect

18 b 5 Therefore no findings can be made under this provision

The Sections 16 and 17 Issues

The order of investigation raises questions as to possible violat

of sections 16 First 16 Second and 17 oftheAct

Section 16 Second can be disposed of summarily That section f

bids a carrier to allow any person to obtain transportation at less th

the regular rates or charges then established and enforced on its l

by any unjust or unfair means or device such as false billing fa

classification or false weighing Itis thus concerned with surreptitio

methods of obtaining transportation at less cost than one s compet it

Prince Line v Ame1 ican Pape1 Exports 55 F 2dl053 1055 2d C

1932 Ambler v Bloedel DonovarlJ L1lmber lIlills 68 F 2d 268 

9th Cir 1933 110henberg Brothers Omnpany v Federalll1ariti

Oom n 316 F 2d 381 385 D C Oil 1963 The Examiner found t

overland OOP rates are regular rates prescribed in published tar

for the traffic to which they are applied in accordance with the ter

thereof He therefore found section 16 Second not to be pertine

No party excepted to this conclusion

The opposing ports do claim however that overland OCP rates 

unduly prejudicial and preferential in violatoin of section 16 F

and discriminatory against ports in violation of section 17 and c

stitute an agreement unjustly discriminatory as between shippers a

ports under section 15 of theAct The Examiner found such allegatio

to be unfounded The opposing ports excepted For the follow

reasons we agree with the Examiner

9

See Volkswagenwerk v FMC 390 U S 261 276 1968

12 F Wl C
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 219

All of the contentions of the opposing ports rest ultimately upon

the fact that respondents overland OCP rates are different from and

by reason of lower specific commodity rates or because of absorptions

of tel luinal charges or both lower than local rntes applicable to

corresponding commodities Their clailuof discrimination against and

prejudice to Atlantic and Gulf ports is based upon the theory that

respondents by establishing rateswhich discriminate in favor oftraffic

originating in 01 destined for overland territory as against Pacific

Coast local traffic draw avcay fr0111 Atlantic and Gulf ports traffic

inherently andgeographically belonging to those ports

Respondents do not serve the Atlantic and Gulf ports themselves

orby a

through route established with domestic rail carriers the most

that can be said is that in conjunction with inland carriers they serve

an inland territory which is also served likewise in conjunction with

inland carriers by theAtlantic and Gulf ports Notwithstanding the

definition of overland OCP territory in respondents tariffs as com

prising substantially all of the United States east of the Rockies the

aggregate of respondents ocean rates and inland transportation costs

between the Atlantic Gulf Coasts and the Pacific does not approach

parity with ocean rates to and from the Atlantic and Gulf ports

themselves

In a

proper case rates may be established for the carriage of goods

originating in or destined for overland OCP territory which are less

than rates for transportation of identical goods originating in or

destined for local territory over the same ocean route That question

wassettled in principle by the Supreme Court in the Import Rate case

TexCl8 Pac Ry v 1 0 0 162 U S 197 1896 which has been fol

lowed by many other court and agency decisions As early as 1908 the

ICC stated in Pittsbu1 gh Plate Glass 00 v Pittsburgs 0 O St L

Ry 00 13 IC C 87 100

There is a long line of decisions of the court to the effect that it is neither

required by law nor just that the rates of a carrier on traffic subject to intense

competition shall mark the limit or measure of its rates on traffic notsubject to

such competition

Transportation from a seaport of the United States I I I to an interior

American destination in completion of a through movement of freight from a

port of a

foreign I I I country whether upon a joint through rate or upon a

separately established or proportional inland rate applicable only to imports

moving through is nota like service to that of the transportatian independent

and complete within itself of traffic starting at such domestic port though bound

forthe same destination

The protesting ports say that the Commission distinguished ICC

precedents from maritime regulatory treatment of port relationships

12 F lfC
220 FEDERAL MARITIME COMMISSION

in Oity of Mobile v Baltimore IJ18ular Line Inc 2 U S l1 C 474 

1941 There the Commissioner denied a motion to dismiss a co

plaint on the alleged ground that ports are not susceptible to und

preference orprejudice under Texas Pacific RR 00 v United Sta

289 US 627 644 1933 Noone makes any such contention in t

proceeding The 1933 Texas Pacific case insofar as itheld that po

as such were not susceptible to undue preference or prejudice was 

effect reversed by a 1935 amendment to the Commerce Act wh

added ports port districts gateways and transit points to the loc

ities protected hy the Commerce Act he purpose ofthis amendm

was only to restore to the Interstate Commerce Commission a

pow

which it has previously exercised but which the Supreme Court 

held the Commission did not have Boston Main RR v Uni

States 202 F Supp 830 836 1962 aff d per curiam 373 U S 3

Boston Maine recognized that railroad export import rates have 

impact upon ports as such just as the Comm ission held with respec

port to port rates in Oity of Mobile The decision in Oity of Mob

does not affect the pertinence ofany ICC precedents referred to her

Recent Commission decisions have expressly recognized that 

principle established in the Import Rate case is applicable under 

Act In Disposition of Oontainer Marine Lines etc 11 F MC 

1968 the Commission said

The Interstate Oommerce Commission has long held that rates between inl

points published inconjunction withwater transportation inour exportor im

trade need not be the same as local rates between the same inland points 

lawfulness of Such a difference in rates the ICC holds must be determined 

considering whether the circumstances and conditions controlling theimport 

export rates are the same as or different from those surrounding the dome

rates including the ckcuq1stances affecting the movement of foreign comm

before reaching the United States Tea Pac Railway v Interstate Oom O

162 U S 197 1896 Teaas Pacific Ry Co v U S 289 U S 627 1933 L

wise the question of whether the ocean portion ofa through rate is unju

discriminatory or unreasonably prejudicial because it differs from a confere

port toport rate is a question of fact to be determined after a thorough consid

tion of all the circumstances and conditions including the circumstances aff

ing the inland traansportation p 492

In North Atlantic Mediterranean Freight Oonference Rates 

Household Goods 11 F MC 202 1967 the Commission said

All this however is not to say that a case of undue prejudice is m

Out Iby a mere showing of lower rates between competing shippers Other fac

may work to make a preference or prejudice reasonable or due For insta

competition from another carrier at the allegedly preferred point of destina

or of origin may justify the difference in rates Teaas Pac Railway v 10

162 U S 197 1896 East Tenn c Ry Co v 1 0 0 181 U S 1 1901 p2

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 221

The Import Rate case recognizes that the fact of competition affect

ing traffic having a different ultimate destination ororigin is as much

a fact to be considered as geographical orother advantages incident to

the shipper s or receiver s location Thus the local shipper located on

the Pacific Coast has the advantage of being closer to a Pacific Coast

port and closer to the Far East market than the shipper located at

iChicago hut the latter has the advantage of a competitive route via

the Atlal tic and Gulf By establishing lower rates applicable to ship

pers who ha the benefit of Atlantic and Gulf port competition

which under the existing rail rate structure is effectiveas far west

as the Rockies the respondent ocean carriers offering the Pacific

Coast route are enabled to obtain traffic for themselves and provide

the Chicago shipper with the benefit to which his location on a com

petitive route entitles him and inasmuch as competition undoubtedly

tends to diminution of charges the competition so offered through

overland OCP rates necessarily tends to maintain lower rate levels for

all shippers via the Atlantic and Gulf This rate competition ulti

mately benefits the Atlantic and Gulf ports of course even ifit causes

them to lose the immediate benefit of additional traffic which the

elimination of competitive overland OCP rates would presumahly

provide

The Atlantic Gulf route competition and consequent lower over

land OCP rates necessarily reduce the geographical advantage of the

shipper located in local territory who has the geographical disadvan

tage on the other hand ofnot having practical access to the competi

tive Aotlantic Gulf route but again for geographical reasons he also

never loses completely his overall freight rate advantage over his

inland competitor Notwithstanding Hearing Counsels efforts to

obtain shipper testimony reflecting all viewpoints not a

single shipper

witness located on or near the Pacific Coast voiced any objection to

overland OCP rates by reason of their being lower than local rates

The reason appears to he that overall costs of transportation inland

plus ocean remain lower for such shippers whose lower inland trans

portation costs outweigh any differences between local and over

land OCP rates

10

10 The only objections came from two Shippers of bentonite Clay whose mines and shipping

oints are located in Wyoming at the eastern extremity of local territory They have com

petitors who also mine in Wyoming but transport the clay to South Dakota for processing

and have overland OCP rates available from that point The evidence indicates however

that the complaining witnesses have not in fact been substantially disadvantaged by the

ocean ratesituation PWC has given them the same nominal local rate as the overland rate

although the latter remains lower by reason of the absorption of terminal charges The

Outbound Australla Conference actually included this area within overland territory to

satisfy these shippers Nevertheless they ship to Australia via Atlantic and Gulf ports

Neither has any evidence of prejudice been shown to the PWC range

12 F M C
222 FEDERAL MARITIME COMMISSION

In the bnport Rate case the ICC was advised that when present

with a charge of unjust discrimination it is to

take into consideration all thefacts of the given case among which 

to be considered the welfare and advantage of the common carrier and of 

great body of the citizens of the United States T he Commission is 

only to consider the wishes and interests of the shippers and merchants of la

cities but to consider also the desire and advantage of the carriers in secur

special forms of traffic and the interest of the public that the carriers sho

secure that traffic rather than abandon it or not attempt to secure it Tex

Pac Ry v Ia d 162 U S 197 218 1896

The Olaim that Overland OOP Traffic Inherently Belongs to Atla

tic Gulf Ports

Itis undisputed that overland OCP cargo originates or terminat

primarily in the Midwest where Atlantic and Gulf ports have 

advantage overPacific Coast ports in the matter of inland transport

tion rates On the other hand Pacific Coast ports are closer by mo

than 4 000 miles to major ports in the Far East and by more than 2 0

lniles to Australia and New Zealand

In the case of any overland OCP rate the aggregate of the corr

spondent local ocean rate and the inland rail rate to 01 from the p

dominant 1idwest point of origin or destination of the particul

commodity is greater than the aggregate of the ocean rate via eith

the Gulf or Atlantic Coast and the inland rail rate to or from su

Coast and that the overland OCP rate including the assumpti

of terminal charges is less than the local rate Otherwise the

would not normally be an overland OCP rate Hence it is argued th

there is in the case of overland OCP rates an effective absorptio

vis a vis the local rates of some part of the inland transportatio

differential notwithstanding that the overland OCP rate is dete

mined in the light of the competitive aggregate ocean plus inlan

rate and not by subtracting the inland rate differential from the loc

rate as was done in effect in all the so called port differential cas

Sea Land Se1 vices Inc v Smdh Atlantic Oa1 ibbean Line In

9 F J1 C 338 345 1966

The opposing ports contend that by reason of such absorption 

the inland differential or some portion thereof overland OCP rat

violate section 16 of the Act by the drawing away of traffic inheren

and geographically belonging to Atlantic and Gulfports citing su

cases as Oity of Alobile v Baltimore bt81tla Line Inc 2 U S N1

474 1941 Oity of Portland v Pacific lVestbound Oonferenc

4 F 1 B 664 1955 Stockton P01 t District v Pacific 1Vestbou

Oon 9 F J1 C 12 1965 Sea La1ul SeTvices v S Atlantic ill Oai

bean Line Inc 9 F JtI C 338 1966 and Reduced Rates on 111ach

12 F M C
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 223

e1 y

and T1 actors to Pue1 to Rico 9 F M C 465 1966 As stated in

the last case Recl1wed Rates to Puerto Rico 9 F MC supra at 476

the right of a port or carrier serving that port to cargo from

naturally tributary areas is fundamental and must be recognized

The Commission has determined that section 8 oftheMerchant Marine

Act 1920 established such a policy which should be followed

wherever possible In Oity of Portland supra the Commission s

predecessor said

That section 8 of the 1920 Act requires all other factors being sub

stantially equal that a given geographical area and its ports should receive the

benefits of or be subject to the burdens naturally incident to its proximity or

lack of proximity to another geographical area To the extent therefore that

the ports of a given geographical area give or can give adequate transportation

services we look with disfavor on equalization rules or practices which divert

traffic away from the natural direction of the flow of traffic 4 F M B 679

Except for Reduced Rates to Puerto Rico the cases cited above

involved the equalization of inland transportation costs to or from

ports in the same range coming within the definition of port equal

ization in Sea Land Service Ithe allowance or absorption by

the ocean carrier or such amount as will make the shipper s cost of

overland transportation identical or substantially so from his in la nd

point of origin to anyone of two or more ports 9 F M C at 344

There was no question in any of the cases of meeting a competitive

combination of inland rates plus ocean rates via a

competitive coast

Reduced Rates to Puerto Rico was concerned with differences in

ocean rates in domestic commerce between Puerto Rico and ports in

the North and South Atlantic and the Commission recognized that

a carrier should be able to utilize its natural advantage of a closer

location to port of discharge to charge lower rates than more distantly

situated carriers 9 F ll1 C at 477

Ho vever even if overland OCP rates be considered the equivalent

of port equalization as defined in Sea Land Services the rule in

voked by the opposing ports contemplates that the point of origin or

destination is naturally tributary to the port from which the

traffic is diverted by equalization and not tributary to the port to

which it is so diverted Sea Land Services supra at 344 Stockton

P01 t Dist1ict 8Upnt at 2224 BeJwnont Port Oommission v Sea

t1 ain Lines Inc 2 U S 1 C 699 703 1943 The opposing ports

claim virtually all of the United States east of the Rockies that is

to say the overland territory as naturally tributary to Atlantic and

Gulf ports in terms of rail and truck rate structures comparative

rail cost normal channels of export import Inovement and geo

graphic proximity Respondents reply that mileage and inland rates

12 F M C
224 FEDE AL MARITIME COMMISSION

alone do not determine a port s

tributary territory and that oth

factors include the natural and historical flo v of traffic the value 

the service to the shipper financial and economic ties the proximi

of ports to the port of discharge and the public interest as a who

not merely that of the particular ports involved citing Stockto

Port District 9 F MC 12 21 23 1965 aff d 369 F 2d 380 9

Cir 1966 cert den 386 U S 1031 1967 Rates frmn Jacksonvi

to Puerto Rico 10 F M C 376 383 1967 City of Portland 4 F M

664 667 aff d sub nom Pacific Far East Lines v United States 2

F 2d 711 D C Cir 1957 and Reduced Rates to Puerto Ric

9 F MC 465 477 1966

Allthe factors mentioned by both sides are properly to be consider

in determining whether any particular zone or territory is natura

tributary to aport Itis also a matter of comnlon sense The natura

tributary concept based upon section 8 of the 1920 Act has to do w

the territory locally tributary to a particular port not with the ge

eral territory which an entire range of ports or more than one ran

or seaboard may serve competitively InBeaumont supra at 703 t

Commission said Our decision in the previous report rBeaumo

PortCommission v Seatrain Lines 2 U S M C 500 condemned pra

tices which permit a carrier to attract to its linetraffic which is notna

urally tributary to the port it serves thus depriving other ports ofth

local tributary traffic Emphasis added vVhile it was recogniz

in the same case that an area could be tributary to more thanone port

in that case the Galveston Bay group ofports the tributary area w

that centrally economically and naturally served by the group 

ports all ofwhich were in a closely related limited geographical are

cOlnparable to the San Francisco Bay area in Stockton Port Distr

When the concept is expanded to include the entire central portion 

the United States as naturally tributary to all the ports situated 

the Atlantic and Gulf Coasts and the Great Lakes as opposed to t

Pacific Coast it loses all significance for that territory is genera

tributary to all four ranges of ports and locally tributary to no

except in part to the Great Lakes From the local Chicago area f

instance Great Lakes ports would have a great advantage overAtlan

and Gulf ports in the cost ofinland transportation but a disaclvanta

by reason of a longer and slower ocean route and less

seasonal service

As between the Pacific Coast ports and Atlantic and Gulfports t

latter have the natural advantage of lower inland mileage and low

rail rates to the industrial concentrations of Mic1west America T

Pacific Coast ports counter this natural advantage with their own 

12 F M Q
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 225

inconsiderable natural advantage of being 2 000 to 4 500 miles closer

to the relevant foreign ports with an overall time saving of 10 to 14

days To obtain the benefit of this advantage and overcome their dis

advantage in the matter of inland rates they find it necessary because

of the relative economic advantages and disadvantages of land and

water transportation to offer rates for this common territory traffic

lower than they charge for noncompetitive local traffic Cf Agreement

No 7790 2 US MC 775 777 1946

In the Dual Rate cases 8 F M C 16 35 1964 the Commission

defined a natural transportation route as a traffic path reasonably

warranted by economic criteria such as costs time available facilities

the nature oftheshipment and any other economic criteria appropriate

in the circumstances Under that definition the central United States

is served by four natural tran portation routes respectively via the

Atlantic Pacific Gulf and Great Lakes gateways Each of these

offers its own economic attractions the relative importance of which

will vary with the nature of the cargo Cargo to and from this comnlon

territory is diverted from one range to another in response to competi

tive factors Cf Agreenunts U S Atlatntio Gull 10 F MC 240

246 247 1966 Ever since the transcontinental railroads were built

the Pacific Coast has offered the shortest route in time and miles be

tween this territory and the Orient Itcannot be inhibited from com

peting effectively for thiscargo on the theory that such traffic inherently

belongs to theAtlantic Gulf and Great Lakes ranges or of anyone

ofthem To apply the prinCiple ofthe so called port equalization cases

in these circumstances is to reduce the tributary territory concept

to the absurd ll

Finally the protesting ports argue that the Examiner erred in

refusing to grant subpenas duces tecum to develop proof of the eco

nomic justification if any for overland OCP rates Thus the pro

testing ports argue that fairness requires that the Commission delay

its decision until proof can be developed on these matters

The protesting ports sought subpenas duces tecum to develop addi

tional proof of the impact of OCP rates Upon motion ofrespondents

the Examiner quashed the subpenas reciting that the hearing had

already been completed and that the infQrmation sought to be obtained

in no way contradicted or disproved the evidence already submitted

U

Based upon the cost study which purports to show lower average cost per revenue ton

for the Atlantic and Gulf carriers the protesting ports argue that there is no economic

justification for overland OCP rates and in fact that such rates are economically wasteful

The argument is not persuasive It fails to take into consideration the ultimate destinaUon

Forinstance it i8 4 500 to 5000 miles farther to Yokohama and Manila from New Orleans

and New York than from San Francisco The failure to take these distances into considera

tion renders these data valueless

12 F M C
226 FEDERAL MARITIME COMMISSION

in the case T e

agree The information which the protesting ports s

vould be directed to the proposition that overland OCP rates w

unlawfully prejudicial or discriminatory in some manner iTe h

already held that such rates simply comprise lawful competition 

the midwestern part of the United States which area is open 

competition between all the various ranges The Commission has 

cided that regardless of the magnitude of cargo carried at overla

OCP rates rates set as they are at present are lawful under 

Shipping Act vVe therefore uphold the decision of the Exam

with respect to the protesting ports

CO MMISSIONER GEORGE H HEARN DISSENTING

I

disagree with the conclusions of the majority report In addit

Ibelieve that one very important issue in fact the heart ofthe ma

vas overlooked in this caSe from its inception Consequently I

the record inadequate as a basis for the sanctioning of a continua

of the overland OCP system under the conditions set forth in 

majority report

The overland OCP systelnis theproduct of an age whentranspo

tion conditions were very dissimilar to those prevailing today Rad

changes have occurred in the 100 years since the completion of 

first transcontinental railroad Recent advances in transporta

technology reveal the extent of the evolution in the industry 

basic service prerequisites have come to be economy of time and 

rectness of route Today the movement of goods is thought of in 

terll1S as intermodalisnl containerization and the land brid

The overland OCP systeln although of a different generation 

those concepts ia closely related to them and it might be consid

the granddaddy of intermodalisln as we know it today

iThen the United States became traversable by rail the pronlo

of Vest Coast interests realized the value to developing Pacific C

ports of a transcontinental cargo movement They were aware 

that in order to obtain such cargo attractive and promotional 

would have to be offered which would in turn sharpen compe

with the East and GulfCoasts Thus the development oftheoverl

OCP system was also the genesis of the internlodalisnl which un

pins many nlodern transportation services iTe nlust not there

jettison the overland OCP system because of its age Although 

old its justification need not be tradition bound and viewed on

terms ofthe motivations ofyesteryear

1odern transportation has increased theneed to seek the nlost d

route and offer shippers the shortest transit time To accomplish 

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 227

equalizations and absorptions have become essential transportation in

gredients in one fornl or another This does not mean however that

equalizations and absorptions should be employeq without need and

justification Equalizations and absorptions should not be used to the

detrinlent of any segment of the shipping industry or to compel SOIne

segments to subsidize others or to artifically support systems which

are self sustaining on their own merits In other words each member

of the transportation community should pay its own way its own

fair share

This reasoning applies to the instant case which involves a national

equalization or absorption which was not fully tested in the develop

ment of the record There is insufficient support for the conclusion

that the overland OCP systeul does not violate section 15 The record

is almost devoid of evidence as to whether the overland GCP rates

may be unreasonable or detrinlental to the commerce of the Unitecl

States under section 18 b 5 I

agree with the premise of the major

ity that cOlllpetition can be used as a basis for establishing rate dif

ferentials but I contend that differentials however otherwise

acceptable or supportable may not be set at unreasonable levels As

the majority report states no evidence was adduced or argument

made that any of the overland OCP rates violate section 18 b 5

and therefore no conclusions can be drawn on that issue It is my

contention that the issue of the rate levels was never considered al

though it is crucial to the outcome ofthis case and despite the fact that

section 18 b was included in the Order of Investigation in Docket

No 65 31 Accordingly Iconclude that no final determination can

be made as to the entire section 15 issue until the level of the differen

tials is fully examined

Ifthe rates are reasonable there is no reason to further doubt the

validity of the overland OCP system If the rates are unreasonable

the question arises vhether the overland OCP system as currently

structured can survive economically with rates set at reasonable levels

Ifthe overland GCP systenl can continue to operate only on the basis

of rates detrimental to our commerce it Inust be found violative of

section 15

Itis stated that the overland OCP system is well entrenched in our

commerce and highly beneficial to shippers Ifthat is so it may be

argued that rate differentials now being maintained and apparently

inherentin the system may be unreasonable

One differential is that between the overland OCP rates and the

rates through the Atlantic and Gulf Coasts The length of the move

ment via the Pacific Coast is shorter than through the Atlantic and

12 F IVLC
228 FEDERAL MARITIME COMMISSION

Gulf CoastS Nonetheless the rail and water carriers have offered 

duced rates in an effort to give overland OCP shippers a third co

petitive route This action is not in question and itmay be desira

and necessary in view ofthe new transportation techniques in use a

those yet to be devised The question remains however whether 

level of the overland OCP rates is commensurate with the curr

ability ofthe OCP carriers to attract cargo This question gains ad

importance when one considers recent innovations in transportat

which render shorter more direct and intermodal movements so 

sirable Shippers or users should pay their fair share of the costs 

service benefits they receive

An unreasonable differential may

exist also between the local W

Coast rates and the ocean portion of the overland rates Ido not f

on this record that the overland OCP system involves any inla

absorptiol1s which discriminate against local shippers There exi

nevertheless the question as to whether that differential results 

local shippers subsidizing overland OCP shippers That no ship

compl aints were received in this regard is not dispositive of the iss

The FederalMflIlitime Commission as custodian of the public inter

is empowered indeed requ red to act on its own motion when ther

Teason to believe thatthereis a course of conduct being pursued wh

may violate the Shipping Act

Ido not contend that the overland OCP rates are so unreason

as to be detrimental to our comroerce or otherwise in violation of 

Shipping Act I

say only that this case cannot be brought to a pro

conclusion until the questions as to rates are angwered The leve

therwtes was not examined in thiscase and Ican make no final de

mination as to whether the overland OCP system fuUy comports w

the requirements of section 15

The majority conclude that the overland OCP tariffs consti

Toutine ratemaking pursuant to general ratemaking authority gran

when the conference agreements at issue were approved Iconsider 

overla nd OCP system to be subject to section 15 approval and it m

be set forth in general in thebasic agreements The majority seem 

Teach a similar conclusion but they require oUlly that the con

ences shall add language to their section 15 agreements to indicate 

the generall ratemaking authority includes the outlines of the fu

tioning of the overland OCP system Thus it appears thaJt the ma

ity will permit the conferences to modify their section 15 agreem

without receiving the Federal Maritime Commission approval 

quiredunder section 15 and will accept whatever language the 

ferences present Section 15 states that conferences must file with 

12 F M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 229

Commission a true oopy of every agreement or modifi

ation thereof The term agreement in this seotion in

eludes understandings conferences and other arrangements

Any wgreement and any modification of any agreement not

approved by the Commission shall be unlawful before

approval it shall be unlawful to carry out in whole or inpart

directly or indirectly any such agreemnt or modification It

is unclear to me what status the added language will have under the

procedure requ red by the majority The basic structure of the over

landjOCP system must e1ther be general ratemaking or section 15 sub

ject InUltter Itcalillot be both

In my opinion J would require the conferences to submit the struc

ture ofthe overlandjOCP system in the form ofmodifications to their

agreements Those modifications would then require section 15 ap

proval and therein lies my difficulty Icould not pass on the merits of

the modifications on the basis of the record so far developed This is

because the record does not include sufficient evidence as to the level of

the overlandjOCP rates in light of section 18 b 5 despite the in

dusion ofthe entire section 18 b in the Order of Investigation dated

August 13 1965

A conference regardless of the scope of the section 15 authority

granted in the basic agreement is not authorized to violate other

provisions of the Shipping Act nor the general standards of section

15 Rates on U S G01Jernment Oargo F M C Docket No 65 13

11 F MC 263 282 Ifthe differentials which are ingredients of the

verlandjOCP system are so unreasonable as to be detrimental to the

commerce of the United States and if the conferences offering over

landjOCP service can continue t0 do so only with rates which are

unreasonable the overlandjOCP system must be disapproved under

section 15

The Commission has repeatedly stated that it may disapprove or

modify a conference agreement under section 15 if the rates set by

the conferenee are so unreasonably high 01 low as to be detrimental to

the Commerce of the United States Iron andSteel Rate8 EOJport Im

JJ01t

9 F M C 180 193 See also Edmond Weuv Italian Line Italia

1 U S S B B 395 Pacific Ooast Ril er Plate Brazil Rates 2 U S MC

28

Absent a

thorough examination ofthe overlandjOCP rate structure

no final determination can be made in the case before us The Commis

sion is obligated under its Congressionally delegated authority to con

sider whether the rate structure offends the provisions of section 15

If as Ihave said the overland OCP system can operate only by the

12 F M C
230 FEDERAL MARITIME COMMISSION

offering of rates detrimental to our commerce the conference membe

could then agree only to provide a

transportation service based up

rates which the Commission has found to violate the Shipping A

This is not permissible In Rates on U S GoVe i1Unent Om goes 8uJ

the Commission found that the conference members were chargi

rates which they knew to be in violation of section 18 b 5 T

Commission concluded that because the rates were detrimental to o

commerce and contrary to the public interest the conference agr

ment was operating in violation of section 15 This reasoning appl

equally to thecase under consideration

There is insufficient evidence in the record before us to make a 

termination on this vital issue Despite the broad scope of thef

ordering paragraph of the Order ofInvestigation in Doch et No 65 

section 18 b 5 was not pursued in this case and therefore a co

plete record was not compiled Consequently Iwould remand t

case to the Examiner for the taking of evidence which would perm

proper resolution of the crucial section 15 issue Until such time 

the matter is finally resolved Iwould continue the existing approval 

the overland OCP system as granted under the original approval 

the conference agreements at issue

Although I can make no final determination of the issues in t

ca se Iconsider it necessary to comment 011 certain conclusions of 

majority with which Ido not agree

Idisagree with the conclusion of the majority that the overlan

OCP tariffs constitute routine ratemaking That the Federal 1ariti

Commission s predecessors may have viewed it as such is not nec

sarily binding u

1

lon this Commission Ibelieve that the overland O

system must be viewed within the context of the current theory of r

ulation Regulatory agencies are not supposed to regulate the pres

and the futur within the inflexible limits of yesterday Americ

T1 ucking Assoc v Atchison T01Jeka ill Santa Fe Ry 387 U S 3

416 Vhether or not overland OCP rates were originally establish

lmder routine ratemaking authority they do not now fall wit

that sphere Under current regulatory principles embodied in 

1961 amendments to the Shipping Act and espoused in recent CO

decisions the overland OCP system falls within the purview of 

tion 15

The scope of a conference agreement nlust include in fullthe man

and nature in which the agreenlent will be effectuated Joint Ag1 

ment Far East Oon and Pac W E Oon 8 F NI C 553 The ag

Inentnlust reveal how the agreement operates This is not accornplis

by granting a conference carte blanche authority as the majority 

12 i M 
INVESTIGATION OF OVERLAND OCP RATES AND ABSORPTIONS 231

to extend its tariff provisions in any direction it JTIay desire subsequent

to the granting ofgeneral ratemaking authority or to indiscriminately

assert competition as the sole justification for otherwise unsupported

differentials il atson Navigation Co v F il C and U S A 405 F 2d

796 1968 9th Cir No 22 604 Dec 18 1968 So in the instant case a

reading of the basic conference agreements will not enlighten the

reader as to the manner of effectuating the agreements with regard

to overland OCP rates The overland OCP system is not established

in the ordinary course of ratemaking as we have come to accept that

principle

In V olks1 Oagen oe1k v Fill0 390 U S 261 1968 the Supreme

Court found an agreement subject to section 15 contrary to the Com

mission s decision The Court in commenting on the scope of section

15 said The Commission thus took an extremely narrow view of a

statute that uses expansive language A court of appeals decision

sheds nlore light on the Commission s

responsibility in this case In

J atson Navigation 00 v FillO supra the court vacated an order of

the Commission approving an agreement of merger Itwas contended

before the court that the agreement approved was incomplete and did

no constitute the entire agreement among the parties The court said

The Commission thus cast its official approval and the mantle of antitrust

immunity over whatever arrangements the lines might come up with ll this

is not consistent with the intent of 15

In exercising its responsibilities under section 15 the Commission

cannot therefore leave it to the parties to include within the scope of

their agreement whatever they might come up with under the guise

of routine ratemaking It is true that the overlandjOCP system is

nothing new The system has been operative for about 100 years This

however neither excuses the parties thereto from complying with the

intent of the Shipping Act nor the Commission from exercising its

fullresponsibility thereunder The Commission must know what itis

approving and must insure that approved agreements contain in

sufficient detail to apprise the public just what activities will be

undertaken Agree11U3nt 9448 North Atlantic OutboundjEuropean

Trade 10 F l1C 299 307

Idisagree also with the majority s discussion concerningport equal

ization and the naturally tributary concept

The majority report sets forth various distinctions between the over

IandjOCP system and port equalization There are minor differences

but fundamentally the two methods of ratemaking are founded on

the same principle Both involve absorption No matter how we may

12 F MC
232 FEDERAL MARITIME COMMISSION

denominate the rate system at issue it remains in essence a system 

equalization in this case national equalization 

In regard to the naturally tributary concept the majority corre

rebuts the contention that most ofthe United States east ofthe Ro

Mountains is naturally tributary to the East and Gulf Coasts 

argument should however be carried further vVe are now ente

an era in transportation when concepts such as naturally tributa

may no longer suit the needs oftransportation The Commission sho

make it clear that these concepts cannot prevail if they prevent 

stantial benefits from inurring to the shipping public or obst

innovative action in transportation

For the aforestated reasons I would remand this case to 

Examiner for taking ofevidence in accordance with the Commissi

Notice of Investigation nd Hearing served August 13 1965

SEAL THOMAS LISI Secretar

12 F M 
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 403

ITALSIDER ALTI FORNI E ACCIAIERIE RIUNITE ILVA E

CORNIGLIANO S pA GENOA ITALY

v

LYKES BROS STEAMSHIP CO INC

onCEOFADOPTION OF INITIALDECISIONAND ORDERGRANTING REFUND

Decision adopted March 5 1969

No exceptions having been taken to the initial decision of theEx

aminer in this proceeding and the Commission having determined not

to review same notice is her by given that the initisl decision became

the decision ofthe Commission on March 25 1969

It is ordered That Lykes Bros Steamship Co refund to Italsider

Alti Forni e Acciaierie Riunite Ilva e Cornigliano the amount of

7 270 93

Itis further ordered Fhat Lykes Bros Steamship Co publish in its

appropriatetariff the followingnotice

Notice is her by given as required by the decision of the Federal Maritime

Commission in Special Docket No 403 served March 26 1969 that effective

November 3 1968 the rate stated herein under PROJECT RATES STEEL

MILLS ITALY is applicable to Brindisi Italy subject to all other applica ble

rules regulations terms and conditions of the said rate and of this tariff

It i8 further o rdered That Lykes Bros Steamship Co notify the

Commission on or before April 25 1969 of the date and manner in

Vhich therefund herein ordered wasmade

By the Commission

SEAL S THOMAS LISI

8 eCretary

12 F M C

233
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 403

ITALSIDER ALTI FORNI E ACCIAIERIE RWNITE ILVA E

CORNIGLIANO S pA GENOA ITALY

v

LYKES BROS STEAMSHIP CO INC

Decision adopted MaJ ch 5 HJ6 9

Respondent is permitted to refund to complainant the sum of 7 270 

as part of the freight charges assessed and collected for the tran

portation of steel mill components from Tilmington N C 

Brindisi Italy in November 1968

T S B whanan Jr for respondent

INITIAL DECISION OF C T RonINsoN PRESIDIKG EXAMINER 1

This is an application filed by Lykes Bros Steamship Co I

Lykes concurred in by Gulf Mediterranean Ports Conference t

conference ofwhich Lykes is a member and by complainant for p

mission to refund to complainant the sum of 7 270 93 as part of t

charges assessed and collected by Lykes for the transportation of t

cargo referred to hereinafter The application is the first submitt

lUlder Public Law 90298 90th Congress 75 Stat 764 approved Ap

29 1968 which provides in part as follows

the jederal Maritime Commission may in its discretion and for g

ca use shown pennit a common carrier by YUtel ill foreign commerce 01 oll

ence of such carriers to refund a portion of freight charges collected from 

shipper where it appears that there is an error in a tariff of 11 cler

or administrative nature and that such refund will not result 

discrimination among shippers Provided further That the common car

or conference of such carriers has prior to applying forauthority to m

refund filed a new tariff with the Federal Maritime Commission which s

forth the rate on which such refund would be based

1

This decision became the decision of the CO l1mission March 25 1969

12 F M C

234
ITALSIDER ALTI FORNI ET AL 1 LYKES BROS S S CO INC 235

Pursnant to hill of lading number 1 dated at New York N Y No

vember 3 1968 complainant delivered to Lykes at vVilmington N C

a

shipment of steel mill components for transportation on Lykes ves

sel Genevie10e Lylces to Brindisi Italy consigned to order ofshipper

eighing 271 86 pounds and rneasllring 19 215 cubic feet the ship

ment was delivered at destination on November 14 1968 Freight

charges of 16 89101 were assessed in accordance with the applicable

rate under the description PROJECT RATES STEEL MILLS

ITALY contained in 8th revised page 170 of Gulf South Atlantic

Mediterranean excluding Spain tariff No 10 F 1C No 5 of the

conference effective August 29 1968 2

In addition arbitrary charges

of 7 270 93 were assessed in accordance with the applicable rate and

terms contained in original page IG8 A effective January 5 1967 and

lth revised page 29 effective July If 196B published in the same

tariff 3Total charges of 24 1 194 were paid by complainant to Lykes

on November 12 1968

At the time of shipment the base rate was applicable to named

Italian base ports and named outposts all of which were exempt from

arbitrary charges It had been the intention of the conference to ex

empt from arbitrary charges all the base ports and outports to which

steel mills were to be shipped and when the rate was published the

eonference believed on information then current that there would be

only three such outports At the time the shipment was booked by

Lykes it was not noted that Brindisi was not one of the exempt out

ports Effective Novcmbcl 18 1968 15 days ufter the issuance of the

bill of lading 9th revisecl page 170 was published to amend the tariff

to include Brindisi as an arbitrary exempt outport

Clearly the application involves a situation within the purview of

Public Law 90298 namely an error in a tariff of a clerical or ad

ministrative nature Goocl cause tppearing Lykes hereby is permitted

to refund to complainant the sum of 7 270 93 as requested hut sub

ject to agreement by Lykes that it will comply with that part ofthe

statute which says

Provided turther That the carrier or conference agrees that if permission is

granted by the Federal Maritime Commission an appropriate notice will be

publiShed in the tariff or such other steps taken as the Federal Maritime Com

A rate of 34 50 pel ton W 11

a

Sixth revised p 29 TO OTHER PORTS Unless otherwise specified rates to other

IIOftS 011 direct or transhipment shall be constructed by adding arbitrary stipulated for the

lllrtienJar outP01 t to the nearest Base Port rate

Original p IliS A RATE BASIS EXCEPT ON COTTON PITCH PINE LUMBER

AND OR TIMBER AS SHOWN ARBITRARIES APPLY PER TON WM AND RATE

YIELDING VESSEL THE GREAflER REVENUE MUST BE CHARGED The arbitrary

in this instance was 5 per ton

12 11 M C
236 FEDERAL MARITIME COMMISsioN

mission may require which give notice of the rate on which such refund

would be based and additional refunds shall be made with re Pect to o

shipments inthe manner prescribed by the Commission in itorder approving 

application I

Since the application states that there are no speciaJ docket appli

tions or decided or pending formal proceedings involving the sa

rate situation and that there are no shipments other than that 

eomplainant of the same or similar commodity which moved via 

spondent orany other memberof theConference duringapproximat

tJle same period of time at the rate applicrub with an arbitrary 

the time of the shipment 5no steps need be taken by Lyk

other than publication in the tariff of the appropriate notice refer

to in that part of the statute just quoted The refund shall be eff

tuated within 30 days after publication of the notice in the tariff a

within 5 days thereafter Lykes shall notify the Commission of 

date of the refund and the manner in which payment was made

C T HOBINSON

Presiding Exa1nineT

WASHINGTON D C March 3 1969

See also rule 6 b of the Commission s Rules of Practice and Procedure to the s

general effect Federal Register of Sept 25 1968 p 14412 46 CFR 502 92

II These statements are in substantial cODliPliance with the prescribed form of l p

docket application set forth in rule 6 b

12 l lIC
FEDERAL MARITIME COM 1ISSION

DOvKET No 69 U

SOUTH ATLANTIC AND CARIBBEAN LINE INC ORDER To SHOW CAUSE

DecidedApril 4 1969

Attempted embargo of South Atlantic and Caribbean Line Iuc unlawful because

Dot due to an inability to carry Order to cease and desist issued

John Mason for respondent South Atlanticand Caribbean Line Inc

Herbert B1Jl stein for int Tvenors Transconex Inc and United

FreightwaysCorp

Robert N Kara8ch for intervenor Puelio Rican Forwarding Co

Inc

Richard s Harsh aud Donald J B1 Unne1 as Hearing Counsel

REPORT

By THE COMMISSION JOHN HARLLEE Ohai oJWn JAMES V DAY Vice

Ohairman ASHTON C BARRETT GEORGE H HEARN aJld JAMES F

FANSEEN Oommissioners

This proceeding concerns the validity under section 2 of the Inter

coastal Shipping Act 1933 46 U S C 844 of an emba rgo imposed

by South Atlantic aud Caribbean Line Inc SAOL

SACL is a common carrier hy water serving among others the trade

between Miami Florida and San Juan P R As required by section 2

ofthe Intercoastal Act SAlCL files its rates fares and charges for this

service with the Commission These tariffs provide a so called freight

all kinds FAI rate Under this rate SACL spots an empty highway

trailer also known as a container at a

shipper s premises within the

limits of greater Miami 1After the shipper loads the trailer SACL

picks it up and hauls it to the marine terminal for loading aboard a

vessel for carriage to San Juan SACL s rates for this service are 700

for a 35 foot trailer and 800 for a40 foot trailer

1

The limits are set forth in SAeL s tarIffs

237

12 F M C
238 FEDERAL MARITIME COMMISSION

Intervenors Tlltnsconex Inc United Freightw LYs Corp 

Puerto Rican Forwarding Co Inc are nonvessel operating comm

carriers NVO by water within the meaning ofthe decision is doc

815 Dete1mination of Oommon Oa i

rier Statrus 6 F M B 245 

1961 As such they hold themsel ves outto the general public to tra

port general commodities in Mia mi San tJuan trade by tariffs filed w

the Commission Under these tariffs intervenors consolidate less th

trailerload shipments into full trailerloads and tender them to SA

for transportation at theF AIrates

On February 19 1969 the International Longshoremen s Asso

tion ILA and the employers of longshoremen at the Port of Mi

entered into a Deepsea Longshore Agreement the provisions 

whioh were made retroactive to October 1 1968 Olause 19 of 

agreement provides in part

oontainerization

a Containers oWlled or leased by emvloyer members including contai

011 wheels containing LTL loads Or consolid ated full container loads which 

destined for or come from any person including a consolidator who stuffs

tainers of outbound cargo or a distliobutor who strips Containers finbo

cargo who is notthe heneficial owner of the cargo and which either comes f

ur is destined to a1ny point within a 50 mile radius from the center of any p

covered by this agreement shall be stuffed and stripped by ILA hlbor at l

shore rates on a waterfront facility

Clause 19 also contains a series of rules which like the quoted por

above are designed to protect and preserve the work jurisdiction 

longshoremen and all otherILAcrafts at deepsea piers and termina

Under these rules any container which meets the criteria of claus

may upon its arrival at SAOL s terminal facilitie be unloa

stripped anc1reIOlded stuffed by ILA labor flowever if for 

reason a container is no longer at the waterfront fa ility wher

hould la ve been stuffed 01 stripped uy ILA laJbor then the ste

ship carrier shall P LY to the joint welfare fundliqnic1atec1 danlages 

250 per container which should have heen stuffed or stripped

SACL does not itself employ longshore labor at Miami a nd is n

party to the Februa ry 19 agreement SAOL s stevedoring at 1iam

performed by Eagle Inc an unrelated company who presumably 

party to the agreement Inany event SAOL views clause 19 as a 

fullimitation upon the transportation service which SAOL as a c

lllon carrier by water can perform at the port ofMiami

On March 6 1969 SAOL published ts Embargo Notice w

stated that effective immediately SAOL would no longer book o

cept for loading aboard ordischarge fronl its ships at Miami any 

tainer which a Oontains LTL loads or consolidated full conta

12 F M 
SOUTH ATLANTIC AND CARIBBEAN LINES INC 239

loads and b comes frOlll or is destined to any point withina 50 mile

radius from the center of Miami As originally published the notice

contained a proviso under which SAOL yould transport such cargo

if a The ILAagreed tohandle the container without unloading and

reloading and b the shipper would sign a statement agreeing to

indemnify SAOL in the amount of 250 per container in the event the

ILA invoked the liquidated dmnages provision of clause 19 The

proviso wasdeleted after the Commission s Burean ofDomestic Hegu

lation expressed concern over the validity of the indemnification re

quirenlent 2

As it now stands SACL s Embargo Notice constitutes

an absolute refusal to carry clause 19 cargo The intervenor s con

tainers are among those embargoed by SAOL No NVO containers

would be accepted under the present Embargo Notice

SAOL itself candidly admits that if the ILA does not insist upon

its right to unload and reload NVO containers at the SACL terminal

it is physically capable of handling the traffic Intervenors just as

readily admit that ifthe ILA does insist upon unloadingand reloading

their containers SAOL s facilities would not be adequate In other

words congestion is not a

problem unless the ILA insists upon un

loading and reloading the NVO trailers As yet the ILA has not

invoked clause 19 and SAOL has carried some NVO containers since

the longshore agreement became effective

DISCUSSION AND OONCLUSIONS

The only question presented is whether SAOL s Emba rgo Notice

imposed a true embargo If it did the filing and notice requirements

of section 2 of the Intercoastal Act do not apply and the notice is

valid

A common carrier by water subject to the provisions of the Inter

coastal Act has a duty and obligation to accept and carryall cargo

tendered to it in accordance with the terms and conditions of its pub

lished and filed tariffs 01 de1 That A H B tll BB 00 fthmv Omtse

7 F MO 133 1962 Itis equally clear that any alterations in those

2 The indemnity provision would presumnbly hn ve consti tu ted 11 condition of carriage

not set forth in SAeL s tariffs

3The relevant partof sec 2 provides

No change shall be made in the rates fares or charges or classifications rules 01

regulations which have been filed and posted as required by this section except by the

publication filing and posting as aforesaid of a new schedule or schedUles which shall

become effective not earloier than 30 days after date of postponing and filing thereof

with the Board and such schedule or schedules shall plainly show the changes pro

posed to be made in theschedule orschedules then in force and the time when the rates

fares charges classifications rules 01 regulations as changed are to become effective

Provi lecl That the Board may in its discretion and for good cause allow changes

upon less than the period of 30 days herein specified

12 F M C
240 FEDERAL MARITIME COMMISSION

terms and conditions must be published and filed to be effective 30 d

rrom the date or filing and publication or the subject or a

special p

mission granted under section 2 or the Intercoastal Shipping A

Historically however certain occurrences such as the intervention 

acts of God or the common enemy or congestion at a carrier s term

facilities such that it is physically incapable of handling the tra

have relieved the carrier from the obligation to carry for all ind

criminately Galveston Truck Line Oorp v Ada Motor Lines I

73 M C C 617 1957 Boston Wool TJade Assoc v Merchants 

Mirners Transp 00 1 D S S B 32 1921 Financial loss on the c

riage does not normally without more constitute sufficient just ifica

tion ror the imposition or an embargo Ali Bull supra

4

There m

be a physical disability to carry

SACL by its own admission is under no existingphysical disab

to carry the cargo in question and unless there is some other good 

sufficient reason for imposing the embargo it is unlawful and a ce

anddesist order shouldbeissued

SACL contends that any such cease and desist order would rat

than remove a violation of section 2 or the Intercoastal Act crea

new violation because SACL would then be compelled to perrorm 

substantial additionalterminal service for which there is no provis

in its tariff This it is contended would be in violation ofthat par

secton 2 which provides thattariffs

shall also state separately each terminal or other charge privilege 

facility granted or allowed and any rules or regulations which in any

change affect or determine any part of the aggregate of such aforesaid rates 

the value of theservice rendered

InSACL s view since its tariffs do not provide for the unloading 

reloading of NVO trailers it would be unlawrul ror them to perfo

this service under its existing tariff Thus should we order SAC

lift its embargo we would in effect be directing a violation or sec

2 There is in this contention of basic flaw which inheres in virtu

every argument made by SACL in support of its Embargo Noti

As SACL itself says it does not want to perrOIm this additio

terminal service Itis not something offered by SACL to the shipp

public as an aid to efficient transportation or goods Ifit can be c

acterized as anything from SACL s point of view it is a penalty 

handling NVO trailers It is the result of a labor dispute and ar

At one point SACL offers an unrecoverable financial loss as justification Itatte

to distinguish the BuZZ case on the grounds that in that case there was involved a fina

loss incurred in providing an already existing service while here the loss would be inc

in providing a new service Le unloading and reloading NVO trailers We find this 

tinction irrelevant and without merit

12 F M 
SOUTH ATLANTIC AND CARIBBEAN LINES INC 241

from a collective bargaining agreement to which SACL is not a party

Vhile it may be true that ultimately SACL might have to alter the

terms and conditions under which it will hold itself out to transport

NVO trailers it may do so only in the mannerprescribed by law the

lUanneI clearly prescribed by section 2 of the Intercoastal Shipping

Act Until this is done SAOL must accept and carryall cargo tendered

to it under the terms and conditions of its existing tariffs iVe are not

here concerned with the ultimate validity of clause 19 Such a deter

mination is beyond our jurisdiction and is within the province of the

National Labor Relations Board But whatever its validity ve cannot

permit the mere execution of a collective bargaining agreement to

override the clear requirements of a statute we are charged to

administer Statutes controlling the activities of common carriers and

the obligations ofthose carriers are not subordinateto the requirements

of labor contracts Galveston Truck Line 001 pv Ada Motor Lines

Inc supra at 627

Ve are not without sympathy for the position in which SACL finds

itself but it is of course not an excuse for the imposition of an unlawful

embargo Other avenues were oPen not the least of which was the

application for special permission for a short notice filing to amend

SACL s tariffs Thus until SACL s tariffs are properly amended it

nmst accept the NVO trailers under the existing terms and conditions

Sl tforth therein 5

This disposes of yet another argument of SACL s

that the shipper has failed in his duty to tender the merchandise in

good order and condition for shipment thereby relieving SACL of

the obligation to transport it It is sufficien here to say that SACL s

tariff has no provision that it will accept only trailers stuffed or

tripPed by ILA labor therefore any such condition is inval idly

imposed 6

Finally and in yet another attempt to distinguish the Bull case

supra SACL argues that our decision in that case rested upon insuffi

cient authority Itis SACL s position that our decision in that case

necessarily rested upon the authority to compel a carrier subject to our

jurisdiction to continue providing service Without resort to a full dis

cussion of the flaws involved in SACL s reasoning we think it sllffi

6

This conclusion does not of course compel SACL to provide service in the certificate

of convenience and necessity sense We are merely requiring that SACL fulfill its common

carrier Obligation in accordance with its own tariffs Our decision here doEs not go to an

amendments to those tariffs which SACL may file In the future

6 The principle thatSACL must transport cargo in accordance wth its present tariffs and

what we have said concerning SACLs obligations visa

vis the demands of the ILA also

disposes of the arguments of SACL that to handle the NVO contaJruers would be t grant

them an undue advantage over other traffic carried by SACL Moreover it is an extremely

Ilubious advantage to unload an already properly loaded trailer and reload it In fact it

is moreIn the nature of adisadvantage

12 Jj M C
242 FEDERAL MARITIME COMMISSION

cieut to point out that in our decision in the Btll case we expre

denied resort to that authority an authority which we admittedly 

not have

If we have not dealt at length with each and every argument p

erred by SACL it is not because we have not considered them Rat

they are aU disposed of by the overriding principle that SAC

bOllnd to perfornl the service it holds itself out to perform in 

published tariff unless and until those tariffs are amended in 

manner prescribed by section 2 of the Intercoastal Act

In summary SACL by its own admission is capable of carrying 

cargo here at issue as circumstances now stand Since there is no ph

cal disability to carry the embargo is unlawfully imposed and a c

and desist order will issue Our decision here does not reach eithe

yalidity

of the collective bargaining agreement and clause 19 o

question of what actions by SACL would be proper should the 

insist on invoking clause 19 iVe think it worth repeating howe

that SACL has open to it the filing of an application for special 

mission uncleI Rule 14 of Tariff Circular No 3 and that any 

application yould of course receive prompt consideration By thi

do not mean to be instructing SACL orany otherparty in a partic

ourse of a chon Parties on both sides ofthe issue stated at oral a

ment that they thought this dispute should have been settled by 

parties without resort to this Commission Ve agree and we lea

to the parties to devise a mutually agreeable settlement

The Commission is well aWHre that many problems have sudd

11SI11 and more are like1l to emerge for various shipping interes

a result ofthe new longshore contract Although the Commission 

not deal with the new labor contract which is the immediate sourc

this condition we can deal with those persons affected by it and w

onrjurisdiction In that posture we do notintend to permit disrupt

of our waterborne foreign or domestic offshore commerce Again 

will not impose solutions on the parties herein but we will be re

tive to solutions presented to us which are lawful and consistent 

just consideration ofall interests uld the public weal

T e would have accepted on application for short notice filing 

indemni fication provision as originally utilized by SAeL Now 

would accept any appropriate tariff filing on short notice the resu

vhich would be to make the carrier whole in the event clause 

invoked and which would enable thecargo to move

SEAL Signed THO AS LISI

Secreta

12 F M 
FEDERAL MARITIME COl1l1ISSION

DOCKET No 69 9

SOuTH AJI NTJC ND CAHIBBE N Lu E JNC wTn

SHOW CAUSg

ORDER

The Federal Maritime Commission institutBd this proceeding to

determine the validity under section 2 of the Intercoastal Shipping

Act 1933 46 DS C 844 of an embargo imposed by South Atlantic

and Caribooan Line Inc and the Commission having this date made

and entered its report stating its findings and conclusions which i CF i t

is made H

pa rthereof hy reference

Theref01 e it is ordered That South Atlantic and Caribbean Line

Inc cease and desist from enforcing its Embargo Notice dated

March 6 1969

By the Commission

SEAL Signed THOMAS LISI

S eCJetary

243
FEDERAL MARITIME COMMISSION

DOCKET No 683

LAKE CHARLES HARBOR AND TERMINAL DISTRICT

v

Powr OF BEAUMONT NAVIGATION DISTRICT

0 JEFFERSON COUNTY TEx

Decided April 3 1969

Respondent s w

g q4 Q J ding tariff which assesses a 10weJ rate on 

ments of bagged rice from Arkansas origins than on shipments of the 

commodity from other origins not shown to constitute an undue or u

preference or prejudi e in violation of section 16 iNr st of the Shipping 

1916 and notshoWn to conStitute an unreasonable regulation under secti

9f that act

Apparent prejudicial tehWiJal peiator rate disparity not unduly or unj

prejudicial 01 unreasonable when only user of the higher rate is show

benefit thereby and thelowerrate is notshown to be less than compensa

Apparent prejudicial terminal operator rate disparity not unduly or unj

prejudicial or unreasonable to competing terminal when there is no sho

of related injury to competing terminal

D O Davis for complainant Lake Charles Harbor and Tenn

District

Donald MacLeay and PeterA Greene for respondent Port ofBe

montNavigation District ofJefferson County Tex

Alew C Oocke for New Orleans Board of Trade Ltd intervene

Louis A Schwartz and L F Daspit for New Orleans Traffic 

Transportation Bureau intervener

Oyrus O Guidry for Board of Commissioners of Port of N

Orleans intervener

W E Fitncher for Houston PortBureau intervener

OarlS Parker Jr for Portof Galveston Tex

Donald J Bru fllMr and G Edward Borst Jr Hearing Counsel

12 F M

244
LAKE CHARLES HARBOR AND TERM DIST V PORT OF BEAUMONT 245

REPORT

By THE CoMMISSION John Harllee Ohai lmfl njJames V Day Viae

Ohairmarnj Ashton C Barrett George H Hearn James F

Fanseen OYlTllJnis8ioners

This proceeding arises out of a complaint filed January 11 1968 by

Lake Charles Harbor and Terminal District complainant The com

plaint alleges that Port of BeaumontNavigation District of Jefferson

County Tex respondent in violation of sections 16 and 17 of th

Shipping Act 1916 applies lower wharfage and unloading charg on

bagged rice originating in Arkansas and Tennessee than it assesses on

thesame commodity originating at otherlocations

New Orleans Board of Trade Ltd New Orleans Traffic and Trans

portation Bureau Board ofCommissioners ofthePortofNew Orleans

Houston Port Bureau Inc Port of Galveston and Hearing Counsel

intervened Ofthe interveners only Hearing Counsel have filed a brief

Hearings were held before Examiner Gus O Basham Because of

his subsequent unavailability due to retirement the proceeding was

assigned to Examiner Herbert K Greer for initialdecision The initial

decision was issued on August 15 1968 Complainant excepted to this

decision Due to illness of counsel oral argument was postponed to

February 26 1969

FACTS

Complainant is a political subdivision oftheState ofLouisiana and

owns and operates thePort of Lake Charles La Respondent operates

the Portof Beaumont Tex Complainant and respondent are competi

tors for the handlingofexport bagged rice originating from Arkansas

locations Mobile Ala and various other Louisiana and Texas ports

alsocompete forthe same traffic

While complainant handles som rice from Arkansas origins its

main source of export rice is from Louisiana origins Respondent s

sources of export rice are the Beaumont Rice Mills Inc Beaumont

Mill located at Beaumont Tex and rice from Arkansas origins

Respondent is not competitive with complainant for rice from

Louisiana origins because ofthe higher overland rates which would be

incurred in moving Louisiana rice to Beaumont Nor is respondent

competitive with otherTexas ports for the handlingofrice from Texas

origins as all Texas millers smpthrough ports located near their mills

Rail rates on bagged rice from Arkansas origins have been equalized

and are the same to all the above mentioned ports Therefore any

difference in costs for bringing bagged rice from Arkansas origins to

shipside are reflected in the wharfage and unloading costs at the

various ports

12 F M C
246 FEDERAL MARITIME COM1 4ISSION

Comparative rail and port costs Arkansas origins to shipside 

multi and single movements ofrice per 100 pounds are Through M

bile 32 9 cents and 35 4 cents through Beaumo t 34 cents and 3

cents through Orange 34 35 cents and 36 85 cents through New O

leans 35 cents and 37 5 cents through Lake Ch 1rles 35 cents and 3

cents and through Houston Tex 38 5 cents and41 cents Since the r

rates are equaiized these figures reflect the difference in wharfage a

unloading charges applicable on bagged rice at thevarious Gulf po

Mobile Ala and Orange Tex publish wharfage and unload

charges and the railroads serving these ports also publish an unloadi

charge A shipper may elect to have the railroad or the port perfo

unloading services generally selecting the port because of a lower ra

Complainant and New Orleans La publish a wharfage charge b

unloading charges at these ports are contained in a tariff published 

the railroads serving them The railroads perforlnthe unloading se

ices through a contractor and the rate is determined by negotiatio

between the contractor and the railroads Complainant does not p

ticipate in negotiations for unloading charges at its facility

As of the date of the complaint the Texas Port Terminal Tar

set forth separate wharfage and unloading charges applicable to b

ged rice The tariff shows rates on bagged rice at respondent s port 

13J t

cents per 100 Ibs for wharfage and of 101J tper 100 Ibs for unloa

ing This amounts to a rate of 12 cents per 100 Ibs for the combin

services Respondent applied this tariff to bagged rice from m

origins but published a tariff which provided for comhined wharfa

and unloading charges of8 cents per 100 lhs on shipments originat

at stations in Arkansas also Memphis Capleville or Forsythe Ten

and certain LOUIsiana stations Afterthe complaint wasfiled respo

ent amended this tariff to delete the references to Louisiana statio

which had been included by mistake At the time this proceeding w

heard respondent applied a lower wharfage and unloading rate on r

originating in Arkansas and Tennessee than on rice from otherorigi

Beaumont Th1ill respondent s only Texas sourCe of rice thereby pa

a higher wharfa ge and unloading charge at respondent s

facility th

paid by Arkansas or Tennessee shippers By reason of its locat

Beaumont 1ill pays only a switching charge to reach respondent s 

cility whereas Arkansas rice shippers incur a line haul rate Althou

the Beaumont Th1ill is the only shipper utilizing respondent s port p

ing higher unloading and wharfage charges it strongly supports 

1 This tariff designated ICC 1041 was filed by the Texas Louisiana Freight Bureau 

shows the wharfage loading unloading switching and other terminal charges at the T

ports of Beaumont Brownsville Corpus Christi Freeport Galveston louston Cli

Docks Orange PortArthur Port Isabel and Texas City

12 F M C
LAKE CHARLES HARBOR AND TERM DIST V PORT OF BEAUMONT 247

differential This mill is heavily dependent upon the export rice busi

ness and the maj orportion ofits production is sold to export merchan

disers who frequently combine the Beaumont 1ill production with

rice from other origins in order to accumulate the volume necessary to

fiU orders The Beaumont Mill production is generally insufficient for

that purpose If Arkansas rice is not shipped through Beaumont that

mill would be limited in its ability to deal with export merchandisers

In September 1964 respondent published special rates on Arkansas

rice totaling 6 85 cents per 100 Ibs for wharfage and unloading This

equalled the rates then applicable at complainant s port In October

1965 the unloading rate at complainant s port was increased 2 cents

per 100 Ibs for a combined rate of8 85 cents per 100 Ibs This increase

coincided with the railroad s decision to eliminate an absorption of 125

cents per 100 lbs at complainant s port Respondent amonthlater in

creased its combined rate to the level of complainant s From Novem

bel 1965 to July 1967 complainant and respondent both applied rates

of 8 85 cents per 100 lbs for wharfage and unloading of Arkansas rice

In July 1967 complainant s rate was increased to 9 85 cents per 100

lbs In January 1968 complainant and respondent both reduced their

rates 0 85 cents per 100 Ibs giving complainant a rate of 9 cents per

100 Ibs and respondent a rate of 8 cents per 100 lbs at the time of

hearing

Prior to October 15 1965 complainant handledthe major portion of

Arkansas export rice whereas currently between complainant and re

spondent the greater portion of Arkansas export rice now passes

through respondent s facility

Testimony was produced to show that complainant s facility has

recently been too congested to handle Arkansas rice in addition to

Louisiana rice Certain Arkansas rice exporters indicated that they

have been confronted with rail car demurrage and lack ofpier space at

complainanfs facility Additionally complainant s official magazine

contained a statement that during 1967 the Portof Lake Charles put

far more tonnage through its transit sheds than the national average

but still could nothandle all the cargo offered

Complainant s witness countered with testimony that Lake Charles

has the facilities to handle the Arkansas rice that it will take any rice

that is offered and that although itis an instrumentality ofthe State

ofLouisiana it has no duty to prefer Louisiana grainers and millers

DISCUSSION

The question in this proceeding is whetherrespondent s practice of

assessing a lower wharfage and unloading rate on bagged rice originat

12 F M C
248 FEDERAL MARITIME COMMISSION

ing in Arkansas 2

than it assesses onthe same commodity originating 

otherlocations results in any illegal preference prejudice or unreas

able practice prohibited by sections 16 or 17oftheact

The Examiner found nothing objectional about respondent s r

practice He reasoned that no person is inj ured by the practice a

accordingly any preference orprejudiceresultingtherefrom is neit

unjust nor unreasonable The Examiner found that upon consider

the interest of complainant the interest of respondent the interes

shippers the effect ofthe rates on commerce and all relevant transp

tation conditions respondent srate disparity is justified

We agree that no violation is shown in this case However furth

elaboration is appropriate in view of the somewhat unique circu

stances ofthis case

It is an undisputed fact that respondent assesses a 12 cents per 

lbs wharfage and unloading charge on bagged rice originating 

Texas while assessing an 8 cents per 100 Ibs rate for the same serv

on bagged rice originating in Arkansas Complainant correctly vie

this as aprima facie case ofpreference to Arkansas millers and pre

dice to the single Texas miller BeaumontMill who uses responde

facility The questionto be resolved then is whetherthis preference a

prejudice is undue or unjust within the meaning of the Shipping A

provisions S

Complainant feels an unjust preference or prejudice results beca

the rate practice in question forces the Beaumont Mill to pay an 

reasonable rate or a greater amount than is justly due responde

Complainant argues thatrespondent is taking advantage ofBeaum

Mill s proximity to the Port of Beaumont which renders its ca

captive to that port This proximity to respondent s portis saidto m

itpossible for Beaumont Mill to pay a higher wharfage and unload

rate since it incurs no line haul charge to ship from that port a

since the alternative of shipping to another port would be even m

costly because of the line haul involved Complainant believes t

Beaumont Mill s proximity to theportis being exploited by respond

for the purpose ofgaining additional revenue which would suppo

lower rate on Arkansas rice to attract that cargo to respondent s p

Complainant s position is simply that this preference is not justifie

that as a matter of law Beaumont Mill should not have to pay m

than any other shipper that Beaumont Mill s representation of sa

II Whlle respondenJt s lower r8Jte applies to certain rrennessee sh1ipments as well 

evidence in this proceeding was limited to the effect of the rate on ArklUlSlLS rice

8

This Commission and its predecessors have long recognized that secs 16 and 17 are 

absolute prohibl tions of preference or prejudice and that a showing of undue or un

preference or prejudlce must be demonstrated by substantial proof See Philo Ocean T

Bureau v JiDport 8S Oorp 1 U S S B B 538 1936 and Port 01 New York Authorit

A B Sven8ko 4 F M B 202 1953

12 F M C
FEDERAL MARITIME COMISSION 249

factiOn

with the arrangement has nO bearing Onthe lawfulness Ofthe

arrangement andthat itis improper to try to justify t4e arrangement

by comparing the respective combined line haul and terminal costs

incurred by the twO lOcalities ofsmppers

NO rmally as cOmplainant suggests if a terminal Operator charges a

different rate to different users fOran identical service an easy case Of

undue preferenceorprejudice Can be developed Itis clear thatunder

such circumstances some fO rm of preference O r

prejudice results It

would be an uncommOn situatiOn in which such a patent preference or

prejudice would not be constTIled to beunjust Orunreasonable in viOla

tiOn Ofthe Shipping Act We think however that the circumstances

attending this case cause it to be included in that uncommOn number

ofcases

This case is unusual in that the only shipper BeaumOntMill whO

is ostensibly prejudiced by the cOntestedrate scheme strongly supports

the differential and has demonstrated that itin fact derives an indirect

benefit from it Beaumant Mill is heavily dependent uPOn the expOrt

rice business The majOrPOrtian Ofits prOductian is sold to eXPOrt

merchandisers whO frequently find it necessary to cOmbine Beaumant

Mill s productiOnwith rice frOm O ther arigins in O rder to accumulate

the required valume to fill export orders Beaumont Mill s production

generally is insufficient for that purpose and it favors the lawer rate

ofArkansas rice since without theArkansas riceBeaumont Millwould

belimited in its ability to aeal with export merchandisers

While our decision here is based to some extent on the fact that the

only user af the apparently prejudicial rate supports and benefits

fram the rate disparity this fact alone might not justify the disparity

Mare is invalved here

Respondent s rate practice would still be cansidered unjustly prefer

ential and unreasonable if Beaumant Mill s nonprotested payment of

the higher rate in fact subsidizes a

noncompensatory rate anArkansas

rice NO evidence has been submitted to shaw that such aresult accurs

here However complainant suggests that it is apparent fram the very

nature of respondent s rate practice that the Texas shipper is paying

a higher rate than necessary and thereby is subsidizing Arkansas

shippers Complainant seems to argue that an its face respondent s

rate practice is unreasonable inasmuch as either the Texas rate is

unreasonably high or the Arkansas rate is sa law as to be noncom

pensatory and to require subsidization by the Texas rate As mentioned

above complainant has submitted nO evidence on the question of

reasonableness ar compensatoriness of the respective rate levels Com

plainant apparently is willing to rely on its theory that the rate dif

12 F MC
250 FEDERAL MARITIME COMMISSION

ferential indicates on its face that either one or the Other rate le

is unreasonable

Our analysis of respondent s rate schedules does not lead to the 

quested conclusion Both rate levels might well fall within a range 

reasonableness and absent any evidence to the contrary complainan

position cannot be upheld

Since there has been no showing of specific injury to Beaumont M

and since the specific rate levels are not shown to beunreasonably hi

or low and since it is not apparent from the terms of th tariff that t

lower rate is being subsidized by the higher we conclude that respon

ent s rate practice with respect to bagged rice is not shown to be undu

or unjustly prejudicial or preferential to any user of respondent s u

loading and wharfage services

Complainant has also characterized respondent s rate scheme as u

duly prejudicial to the Port of Lake Charles and therefore unreaso

able The alleged injury to Lake Charles is said to result frOln t

fact that respondent s rate differential supports a Jower rate at Bea

mont on Arkansas rice causing such shipments to be diverted fro

complainantIS port at Lake Charles to respondent s port at Beaumo

The Examiner concludes that complainant has not adducede

dence to support a finding that its competitive position has been su

jected to undue or unreasonable prejudice or disadvantage Af

reviewing the evidence on this point the Examiner concludes that 

though at times complainant may be able to handle some rice fro

Arkansas origins its ability to do so is limited and that although co

plainant has lost much of its former volume of Arkansas rice the 

versionof thatcommodity has not been shown to have caused compla

ant significant loss of overall revenue or profit These conclusions a

based on his findings that complainant s facility is congested duri

rice movement periods that complainant as an instrumentality oft

State of Louisiana must give primary consideration to the needs 

Louisiana rice growers and millers that Arkansas rice growers ha

enc untered difficulties in connection vith shipping through compla

ants

facility and that complainant s official magazine stated that 

1967 the port put far more tonnage through its transit sheds than t

national average but still could not handle all the traffic offered

4

This case dHfers from Inve8tigation of Free Time Practice8 Port of San Diego 

F M C 525 1966 where we found an excessive free time practice to constitute an o

of storage at a 1ree or non0Q1 1pen8atory rate We disapproved the practice even tho

no specIfic showing of injury to any user wagi produced Itwas Qbvious from the nat

of the particular service that certain shippers whose commercial practices did not pe

them to use thefree storage offer wereSllpporting the useof it by others

12 F M C
LAKE CHARLES HARBOR ANn TERM DIS V PORT OF BEAUMONT 251

Complainant takes specific exception to various matte s regarding

the Examiner s conclusions on this point A discussiQn of the specific

exceptions will serve to develop aur reasoning in suppprt of the Ex

aminer s conclusions

Complainant excepts to the Examiner s

finding that

complainant as

an instrumentality ofthe State ofLouisiana must give primary CQnsid

eration to the needs of Louisiana rice growers Complainant charac

terizes this as absolutely incorrect Whether or not complainant is

required to prefer Louisianamillers overothers is immaterial The fact

is that the weight of the evidence in this proceeding indicates that

complainant either wasnot particularly interested in handling Arkan

sas rice or simply wasunable to handle it because of congestion result

ing from the large Louisiana rice movement In either event complain

ant would not appear to be injured by the diversion of Arkansas rice

from its facility

Complainant also excepts to the findings that the large number of

rail cars on hand at given periods of time indicate that complainant s

terminal was frequently congested and that complainant s ability to

handle additional Arkansas rice was highly doubtfuL Complainant

states that the record contains no details about what specific number of

such cars might have contained rice Vhile this is tnle the fact is that

the described congestion ofrail cars occurred duringrice moving peri

ods If we add to this the testimony of Arkansas rice shippers con

cerning the difficulties experienced at complainant sfacility and the

statement of the PortofLake Charles that during 1967 that portcould

not handle all the cargo offered it would be fair to conclude that con

gestion existed and that complainant s ability to handle Arkansas

rice vas limited

The Examiner however gave only casual treatment to what we con

sider to be the real crux of the question of injury to complainant vVe

feel that complainant has failed to demonstrate that it is respondent s

rate practice which has caused the diversion of Arkansas rice from

complainanfs port There is some evidence that rice has been diverted

from Lake Charles There is no concrete evidence showing a connec

tion between this fact and respondent s rate practice Complainant has

only inferred such a connection

vVe find the evidence supports other equally plausible explanations

Respondent has offered a lower wharfage and unloading rate on Ar

kansas rice than on Texas rice continuous ysince September 1964 It

is only since sometime in 1965 that complainant has experienced diver

sion ofrice from its facility In October 1965 unloading charges were

increased at complainant s port when the railroad there eliminate

12 F M C
252 FEDERAL MARITIME COMMISSION

the absorption of a portion of that charge Increased unloading ra

might well cause Arkansas rice shippers to look elsewhere In J

1967 complainant increased its wharfage charge at Lake Char

Prior to this increase the combined wharfage and unloading rates 

bagged rice from Arkansas had been identical at Lake Charles 

Beaumont Increased wharfage rates might well have caused Arkan

rice shippers to look elsewhere

In short this record will not permit a conclusion that the divers

of Arkansas rice from complainant s port has caused an injury 

complainant and in any event wecannot conclude that any such div

sion ofriceis caused by respondent s rate practices

Complainant objects to theExaminer s failure to find that nowh

in theGulf or continental United States is adifferent charge made 

an identical service on the same commodity except at Beaumont T

The record neither supports nor refutes complainant s requested f

ing Assuming that complainant s position is correct it would 

change our concluSions in this proceeding The fact that a rate sche

is unique may cause us to take a close look at it but does not in it

ay anythingabout its reasonableness

Upon reviewing all evidence the Examiner concluded that the 

terest of Texas shippers would not be enhanced by removing the 

ferential Arkansas rice producers and shippers benefit by reason 

lower overall transportation costs Complainant now handles s

stantially all of the rice cargo it is able to efficiently handle C

plainant has not demonstrated the manner in which its compet

position would be improved by eliminating respondent s differen

Competition for the handling ofrice is not only between complain

and respondent but includes the port at Mobile where overall tra

portation costs are less than at otherports To all this addthe fact t

commerce is benefited by the facilitated movement of both Arkan

and Texas rice at Beaumont and the sum of all these factors supp

our conclusion that nothinghas been brought forth in this proceed

to show thatrespondent s rate practice is other than just orreasona

CONCLUSION

Complainant has proven no violation of the Shipping Act w

respect to respondent s wharfage and unloading schedules applica

to bagged rice Accordingly the requested cease and desist orde

not warranted andthe complaint is hereby dismissed

SEAL THOMAS LISI

Secretary

12 F M 
FEDERAL l1ARITIME COMMISSION

DOCKET No 66 11

ARTHUR SCHWARTZ AND JUSTAlVIERE F ARlfS INC

v

GRACE LINE INC

Initial DecisionAdopted ilfay 1Z1 1969

Cancellation by respondent of 2 year banana freighting agreement entered into

with complainant Justamere Farms Inc pursuant to Federal Maritime

Board s order of May 4 1959 for failure to meet its obligations In accord

ance wIthconditionsof the agreement found not in violation of said order

or any provision of the Shipping Act 1916

OmIssIon or refusaI of respondent to offer refrigerated space to either com

plainant for 2 year period following that covered by canceled agreement be

cause complainants lacked financial responsibility to qualify for agree

ments and were not bon l

fide banana shIppers found not in violation of

order of May 4 1959 or any provision of the Shipping Act 1916

Complaint dismissed

lit iltonL 0obert for complainants

Paul W lVilliams Arthur Mermin Ii Richard Sc humaoher and

Burton V Wides for respondent

REPORT

By THE COMMISSION John Harllee Ohairman James V Day Vice

Ohairman Ashton C Barrett George H Hearn James F Fan

seen Oommissioner8

This proceeding is before us on exceptions of complainant to the

initial decision of Examiner vValter T Southworth There was no

oral argument These exceptions relate both to the conclusions reached

by the examiner and thema nner in which he conducted the procood

ings As for the latter examination of the record in this proceeding

reveals that the examiner s conduot of the proceeding was entirely

proper and the complainants exceptions are without merit

The exceptions urging that thee aminer erred in his conclusions

are nothing more than rearguments of positions fully briefed and ex

haustively treated by the examiner Again after a careful review of

the record we find that the initial decision in this proceeding is in all

respects proper and well founded and we hereby adopt it as our own

and mlake itpart hereof

The complaintis dismissed

SEAL Signed THOMAS LISI

S eOletary

12 F M C

253
FEDERAL MARITIME COl1MISSION

No 66 11

ARTHUR SCHWAR rZ AND

J USTA ERE FARMS INc

V

GRACE LINE INC

Cancellation by respondent of 2 year banana freighting agreement entered i

with complainant Justamere Farms Inc pursuant to the CommiSsio

order of May 4 1959 5 F M B 615 627 found to have been for good ca

and inaccordance with conditions of the agreement and not in violation 

the said order or of any provision of the Shipping Act 1916

Respondent found notto have violated the said order of lIay 4 1959 orany p

vision of the Shipping Act 1916 by omitting or refusing to offer refrigera

space to either complainant for the 2 year periOd foIlOving that covered 

the canceled agreement

Complaint dismissed

JJfiltonL Cobert for complainants

Paul W lVilZia1ns Arthur l1fe7 min and H Richard Schumac

for respondent

INITIAL DECISION OF VTALTER T SOUTHvVORTH

PRESIDING EXAMINER 1

This proceeding was commenced by the filing of the complaint 

Arthur Schwartz and Justamere Farms Inc seeking reparation in 

amount not less than 500 000 for damages allegedly sustained by r

son of unfair and discriminatory acts of respondent in connection v

banana freighting agreements employed by respondent pursuant to 

order of the Commission issued J1ay 4 1959 Following service o

bill of particulars and a prehearing conference complainants serv

an amended complaint hereinafter referred to as the complaint unle

the contextotherwise indicates which contained additionalallegatio

relating to the same general subject matter and increased the alleg

damages and claim for reparation to at least 750 000

1 This decision became the decision of theCommissIonMay 21 1969

12 F MC

254
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 255

The complaint alleges that complainant Schwartz individually

and in joint venture with others and as general manager of complain

ant Justamere contracted with respondent Grace Line for the car

rjage of bananas from Ecuador to New York under banana freight

ing agreements prepared pursuant to and subject to the terms and

conditions of an order of the Commission s predecessor and subject to

the continuing jurisdiction and supervision ofthe Commission 2

The

order referred to hereinafter the Order was entered in the proceed

ings entitled Banana Distributors Inc v Grace Line Inc and Arthur

Schwartz v Grace Line Inc 5 F M B 615 627 1959 hereinafter

referred to as dockets 771 and 775 The Order provides among other

things hereinafter set forth that Grace Line shall offer refrigerated

space upon a fair and reasonable basis and upon reasonable notice to

all qualified shippers of bananas for successive forward booking pe

riods of not to exceed 2 years The complaint sets forth seven causeH

of action following the introductory allegations summarized above

five of them were dismissed on respondent s motion prior to hearing

three because they accrued if at all more than 2

years prior to the

commencenlent of the proceeding and therefore vere not within the

Commission s

jurisdiction under the 2

year limitation of section 22

of the act and two because they did not state causes of action against

respondent under the act The examiner s ruling on the motion to dis

miss was served November 29 1967 and was not appealed

The two remaining causes ofaction designated the Fifth and Sixth

in the complaint as to which respondent s motion to dismiss was

denied and upon which hearing was held have to do with respond

ent s cancellation of Justamere s banana freighting agreement for the

2

yearperiod ending in February 1966 and respondent s failure to

offer a banana freighting agreement to either complainant for the

subsequent 2

year period beginning in March 1966 The allegations

of these causes of action as amplified by bills of particulars are

briefly as follows

Fifth Cause of Aotion on behalf of complainant Justamere Farms Inc only

On November 10 1965 respondent canceled complainant Justamel e s then exist

ing banana freighting agreement covering the 2 year period ending in February

1966 in claimed reliance on a clause thereof which permitted cancellation if

Justamere failedto make payments due under the contract or to furnish a new

bond hen such defaulted payments exceeded 50 percent of the face valnE of

the performance bond which Justamere had supplied pursuant to the contract

Respondenlt had built up charges in snch an amount by 1 refusing to recog

nize the relief from its contract obligations to which Justamerewas entitled

under the Strikes and Act of God clauses in the contract Justamere s ba

2

Commission hereinafter refers to the Federal Maritime Commission or its predecessor

agency the FederalMaritime Board

12 F MC
256 FEDERAL MARITIME COMMISSION

nana supply having been reduced by catastrophic weather and its carg

severely or totally damaged as the result of strikes and 2 arbitrarily 

fairly and discriminatorily rejecting Justamere s just claims for cargo dam

while giving fair and equitable consideration to the claims of other sim

shippers Respondent was aware that by refusal to honor Justamere s 

claims and 00 recognize the relief to which it was entitled by reason of 

Strikes and Act of God clauses Justamere would be deprived of reve

and working capital thus affording respondent an opportunity to cancel 

banana freightillgagreement in violation of the Order and section 16 S of 

act Repal ia tion is sought in the amount of approximately 19 000

Sixth Cause of Action lon behalf of both complainants Schwartz and J

amere In or about February 1966 respondent offered banana freigh

agreements for the 2 year period ending in February 1968 Although o

ptainant is and was an experienced and qualified banana importer protec

by the Order and entitled to notice and offer of space respondent failed 

offer space or make it available to complainant for the said period in viola

of the Order and section 16 of the act Because of said refusal complain

has been deprived of the opportunity to import bananas during the 2 year 

riod Reparation is sought in the amount of approximately 342 000

Respondent says that it canceled Justamere s 196466 bana

freighting agreement because Justamere breached the agreement 

failing to pay freight and stevedoring bills due and payable the

under on 14 voyages from June to November 1965 in an aggreg

amount exceeding 50 000 It concedes that it did not solicit bana

freighting agreements from complainants for the 1966 68 period 

says that it was not required to do so under the Commission s Ord

and denies that complainants or either of them made any request 

space for this period until after allocation thereof had been co

pleted despite their knowledge ofwhen the new booking period wo

begin Respondent denies the other material allegations of the co

plaint Certain affirmative defenses are pleaded These include a

gations that Justamere did not act as a principal in using the sp

allocated to it by Grace under the 196466 contract as it had r

resented it would do that Justamere was not in fact a qualified 

nana shipper within the meaning of the Commission s Order a

that neither Schwartz nor Justamere was or would have been qu

fied as a

financially responsible shipper or otherwise to receive a

sp

allocation for the 196668 period

At a prehearing conference it wasdetermined that the parties wo

be given an opportunity to present evidence with respect to 

amount of any reparation following determination ofthe question 

respondent s

liability ifany

346 U S C A 815 This section is specIfied in complainants brief the complaint alle

wioIation of the Orderand the act In general terms

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 257

THE FACTS

Complainant Schwartz a resident ofCalif OIl N J is vice president

general manager and as he says chief cook and bottle washer of

complainant Justamere Fanns Inc a New Jersey corporation in

corporated in 1953 which operates a cattle farm at Califon engages

in securities transactions on a rather large scale and since 1953 has

from time to time engaged in various transactions related to the

importation of bananas and other fruit from Latin America Justa

mere is a

family corporation all ofwhose stock is owned by Schwartz s

immediate family in 1964 he owned 50 percent according to a license

application to the Department of Agriculture but he owns none at

present For most purposes in connection with this proceeding Justa

mere and Schwartz can be considered one and the same person al

though the transactions with which we are directly concerned were

in form between Grace and the corporation Justamere

Complainant Schwartz engaged in transactions related to the im

portation ofbananas or other fruit at various times during the period

from 1928 to 1953 For several years after 1053 he did not engage in

any business activity connected with the banana business In that year

he went to work for a Vall Street brokerage firm as a customer s man

or registered representative He acted as such for six brokerage firms

successively from 1953 until 1963 while still operating the farm

which operation apparently included security trading through a

margin account in the name of Justamere

In orabout 1962 while working for a brokerage firm he also par

ticipated as a

partner or managing agent in a banana importing ven

ture with or on behalf of the firm of Prevor NIayrsohn a fruit im

porter which had not previously dealt in bananas

In March 1963 in the middle of a 2

year forward booking period

Schwartz applied to respondent for an allocation of space in con

nection with a

space reallocation made in April of that year but he

did not perfect his application allegedly because he could not do so

within the time allowed for the completion thereof

Under date of February 13 1964 Justamere by Schwartz as its

general manager applied to respondent for a minimum of 12 000 cu

ft and maximum of25 000 cu ft ofrefrigerated space for the carriage

of bananas on respondent s weekly Ecuador New York service for

the 2 year forward booking period beginning March 1 1964 Justa

mere was allocated two bins aggregating 4 334 cu ft for which it

entered into a banana freighting agreement on February 27 1964 In

March 1965 the agreement was amended uncleI circumstances set

forth hereinafter to increase Justamere s

space to 26 574 cu ft It is

12 F M C
258 FEDERAL MARITIME COMMISSION

thisagreementand the cancellation thereof in November 1965 w

which the first ofthetwo remaining causes of action the Fifth Cau

ofAction ofthe complaint is concerned

Grace Line Inc has carried bananas from Ecuador to the Atlan

Coast of the United States in connection with its regularly schedul

liner service since the 1930 s Prior to the Commission s decision 

dockets 771 and 775 which as supplemented May 4 1959 was s

tained by the Court of Appeals for the Second Circuit Grace Line 

Federal M aritim e Board 280 F 2d 790 2d Cir 1960 cert denie

364 U S 933 1961 Grace carried bananas only under private

negotiated contracts

The Order issued upon the Commission s supplemental decision 

1ay 4 1959 5 F M B 615 627 was substantially the same as 

order issued August 19 1957 upon the COlmnission s original decisi

in the same proeeedings 5 F 1B 278 287 which had been revers

and remanded by the court of appeals Grace Line Inc v Fede 

111a1 itime Board 263 F 2d 709 2d Cir 1958 Both orders requir

Grace to discontinue the carriage of bananas under the contrac

formerly used and directed that Grace offer to its present shippe

and all qualified shippers including complainants and their suppo

ing intervenors upon a fail and reasonable basis and upon reasona

notice refrigerated space for the carriage of bananas on responden

vessels from Ecuador to U S Atlantic ports for a period not to exce

2 years said period to begin not later than July 1 1959 October 

1957 in the earlier order and thereafter offer for periods n

to exceed 2 years refrigerated space available for such carriage

Further provisions of the Order are set forth in the margin 4

T

4

It 1S further ordered That respondent shall employ uniform fair and reasona

standards in determining the qualifications of applicant shippers and in exercising 

judgment in this regard respondent shall take into consideration applicant s 1 finan

capacity to engage in the banana business on asCllle proportionate to the refrigerated sp

req sted 2 ability to arrange for the purchase loading and stowage of the bana

to be shipped and 3 ability to arrange for the discharge of bananas to this e

respondent may require applicant shippers to provide verified information sufficient 

enable respondent to makethe necessary determinations

It is furthe1 ordered That respondent be and it is hereby notified and required 

establish observe and enforce just and reasonable regulations and practices relating 

or connected with the receiving handling stowing transporting carrying and discharg

of bananas on orfrom its vessels which regulations and practices may include the follow

requirements n Each shipper shall furnish and maintain as security for the performa

of all its obligations under the 2 year forward booking a deposit in cash negoti

securities or abond satisfactory to respondent equal to 12112 percent of the total minim

freight charges due under said forward booking b no shipper shall be permitted w

out the approval of respondent to assign the forward booking or otherwise transfer 

right secured by him under said forward booking 0

the payment by the shippe

dead freight of up to 90 percent of complete utilization of space assigned d load

stowing and unloading shall be at the expense and risk of the shipper and respond

shall haye the right to designate the stevedore or itself perform the necessary stevedo

at the port of discharge e during the Chilean fruit season respondent may proport

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 259

Order is still in full force and effect Grace has at all times undertaken

to comply with the Order and complied with the earlier order pending

its appeal therefrom

Although Schwartz had been the complainant in docket 775 the

second of the two proceedings initiated in 1955 which led to the issu

ance of the Order he did not attempt to secure space for a full forward

booking period pursuant to either order until February 1964 when

the application described above was made in the name of Justamere

resulting in the agreement dated February 27 1964 At that time

Grace entered into contracts similar except as to the amount of space

reserved with 15 applicants including Justamere each for the 2

year

forward booking period beginning March 1 1964 and conc luding

with the last vessel to depart Guayaquil in February 1966 All the

contracts generally called banana freighting agreements followed

a form which had been filed with the Commission

The banana freighting agreement entered into between Grace and

Justamere referred to therein as the Shipper recited that it cov

ered the transportation of bananas from Ecuador to NewYork in

suitable refrigerated space consisting of specified bins aggregating

4334 cu ft in each of Grace s weekly passenger vessels Freight was

payable at the rate of 80 cents per box of bananas with a minimum

charge of 28 7 cents per cu ft used or not used equal to 1 250

for each sailing This guaranteed payment represented 90 percent of

full freight for complete utilization of the space allocated at21h

cu ft per box and 80 cents per box On up to 12 sailings in each

12 month period the Shipper upon 5 days notice prior to sailing

might elect to guarantee a 75 percent minimum payment or 24 cents

per cu ft of space used or not used on each such voyage the mini

mum freight would be 1 050

Bananas were to be loaded by the Shipper or his agent without

expenseto the vessel

Bills of lading were to refer to the freighting agreement and show

quantity stated by Shipper

At the Port ofNew York bananas were to be unloaded and stowed

atelv reduce the rffrigerated space assigned to banana shippers without discrimination

upon rea onable notice to permit the carriage of ChIlean fruit j

the treatment as a

single hipper of tllose individuals partnerships or corporations who are affiltated with

each other to the extent of 10 percent or more common ownership

1t i further order l That respondent Rha1J file with the Board a copies of the

2 ptlr forward bookings flDtered Into hereunder b the regulations and practices adopted

hY rrspondent rrlating to the receiving handling stowIng transporting carrying and

dlfrllfllging of banana s and 0 the criteria used by respondent in determining what

applicant shippers are quaHfie l

Tt isfurther ordered That these proceedings be held open for further proceedings on the

claims of complainants forreparation If any

12 F 1VLC

388 560 0 70 18
260 FEDERAL MARITIME COl 1 MISSION

in trucks or other vehicles provided by Shipper by stevedores nam

in the contract subject to change by Grace all such work to be do

on behalf ofthe cargo Stevedoring rates per ton were specified 

the contract subject to adjustments geared to any changes in lab

contracts

It was expressly provided that Grace would not be liable for a

loss or damage resulting from delay in discharging by reason 

strike conditionsorlabor disturbances authorized or unauthorized 

by any reason beyond thecontrol of Grace

Grace agreed to maintain refrigeration temperatures within 

plus or minus of the temperature specified by Shipper in writi

for each voyage and otherwise would not be responsible except 

willful neglect

Neither party was to be responsible for default due to strikes a

of God government regulations or restrictions etc provided that 

the Shipper s bananas had been loaded ona vessel and Grace was 

able to deliver them into an Atlantic port for any of the reas

specified the minimum freight provided for would nevertheless 

payable

The agreement recited that the Shipper had deposited 15 625 

securities equal to 121j2 percent of theagg regate minimum freig

guaranteed for 2 years based on 90 percent use of space as a

guaran

of prompt payment of all eharges due Grace under the contract

The Shipper agreed not to assign the agreement or other ise tra

fer any rights secured thereby without the written approval of Gra

Justamere did not use the space covered by its agreement v

Grace for the transportation of bananas which it owned or h

were consigned to it as purchaser It did not in fact purchase a

bananas at any time or ship bananas for its own account Upon 

execution of its agreement with Grace Justamere entered into 

agreement with a grower which was superseded from time to ti

by successive similar agreements with one or more other growe

under which it agreed to assign refrigerated space that they lla

in the Cia Grace Line for the transportation of bananas to 

United States for a specific quantity of bananas The grower agre

to ship weekly enough bananas to fil the space so assigned and 

recognize Justamere as the exclusive agent for the sale npon c

mission ofthe fruit Justamere agreed to arrange for advances aga

bills of lading in amounts substantially less than the market va

fo b Guayaquil of the growers shipments but if the proeeec1

sale after deduction of Justameres commission freight charged 

Grace Line stevedoring and otherexpenses were not sufficient to co

the advance Justamere was to charge the deficiency against the gro

12 F f
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 261

er s account to be recovered from the proceeds of other shipments

The agreement further provided that 50 percent of the net proceeds

of sale were to be paid to Schwartz personally as guarantor of

J ustamere Farms Inc until a fund of 5 000 was established asa

guarantee against default by the grower In addition to its commis

sions of 7 percent to 9 percent depending on sale price charged to

the grower Justamere collected fi om the purchaser of each shipment

wharfage or pier charges of 10 cents per box or 171j2 cents per

hundred weight on stems which it retained

From time to time Justamere notified Grace of the names of its

suppliers sometimes instructing Grace to permit them to utilize

particular space or any other space that we may have in the event

of the inability on the part of our other suppliers to make delivery

at any time The facts set forth in the foregoing paragraph were not

known to Grace until it learned of them in connection with the present

proceeding The Order pursuant to which the banana freighting agree

ment with Justamere was entered into required Grace to take into

consideration in determining the qualifications of applicants their

ability to arrange for the purchase of the bananas to be shipped 5

In

Justamere s application upon which Grace had relied Justamere had

named persons from whom it intended to secure bananas at market

prices and had stated that Schwartzandjor Justamere had previ

ously purchased bananas from growers in Ecuador for resale in the

United States

As between Justamere and Grace performance of the banana

freighting agreement appeared to progress quite uneventfully almost

to the end of 1964 On November 30 1964 Grace advised Justamere

and all other contract holders that in view of the strong representa

tions made to Grace Line by shippers of bananas under similar con

tracts as to the market conditions presently prevailing it would

amend the contracts temporarily to change the basis for freight

charges to 24 cents per cu ft allocated regardless of the quantity of

bananas shipped This concession reduced Justamere s guaranteed

minimum and maximum freight to 1 050 per voyage The change

was to be effective from December 1 1964 to January 15 1965 but in

January it wasextended 2 months to March 15 1965 inasmuch as the

circumstances prompting our offer have remained unchanged

In March 1965 when the temporary concession expired Grace offered

to establish the rate at 26 cents per cu ft allocated used ornot effec

tive until the end of the contract period Justamere and all other con

6 In his complaint against Grace in docket775 Schwartz had alleged that he had been and

still was i a position to purchase bananas from growers in Ecuador and to sell such

bananas at a profit in markets in the United States

12 F M C
262 FEDERAL MARITIME COMMISSION

tract holders executed formal amendments providing for this chan

which would have made Justamere s minimum maximum freight 

1 117 per voyage had it maintained the same space allocation

At about the same time Grace informed all contract holders a

other interested parties or record that about 22 000 cu ft or ban

space might become available two contractors Cia Exportad

Tropical Americana S A and Frutera Granja S A having sou

to relinquish their space and contracts if others could be found to t

their places Justamere which had protested that its original allo

tion was inadequate was the only applicant for this space and 

contract was amended 1arch 25 1965 to reflect the assumption of 

additional space effective with sailings subsequent to Iarch 30 19

As amended Justamere s contract allocated to it 11 specified b

aggregating 26 754 cu ft on each weekly voyage of Grace s passen

vessels for which Justamere undertook to pay 6 910 per voya

space used or not Justamere s security deposit was increased 

49 915 in lieu of this deposit Justamere later provided a 50 

surety bond written by a bonding company The agreement provid

for a transitional allocation of 14 348 cu ft with guaranteed frei

of 3 730 for the 1arch 30 1965 sailing ofSanta Mercedes howe

when Justamere was unable to fill this space on the Iarch 30 voya

Grace forgave the difference about 1 462 between the guarant

freight and outturn freight on bananas actually shipped

Meanwhile Justamere had failed to pay guaranteed freight on t

volages Santa Ifagdalena V56 which had sailed December 21 19

and Santa Ifaria V38 which had sailed on or about December 29 19

Grace had waived minimum freight on the voyage preceding th

two sailings Santa 111ariana V46 because of the threat of a st

by the International Longshoremen s Association ILA By telegr

dated December 16 1964 however it had advised all contract hold

including Justamere that ILA negotiations had been successf

settled that there would be no work stoppage and that theref

the Santa Magdalena will load bananas at Guayaquil on Decembe

and 21 as scheduled and succeeding ships will load as scheduled tT

amere loaded no bananas on either Santa 111agdalena or the next ves

Santa II aria On December 17 1964 Schwartz wrote that Grace s t

gram of the 16th gave it very little tinle and that it wasdoing its b

to obtain loading for the 11 agdalena sailing but that it vould assu

no responsibility in the event we are unable to obtain fruit There w

no contemporary explanation of Justamere s failure to load 

bananas on the 1I1aria On January 16 1965 however Schwartz wr

12 F M 
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 263

that we refrained from loading the above two vessels Magdalena

and Maria in view of your inability to guarantee us that our fruit

would be unloaded in view of the yet unsettled maritime strike Of

course Grace was not obliged to guarantee against a strike further

this explanation was not offered until after the ILA had gone on

strike on January 11 1965 following rejection by the union member

ship of the settlenlent which had been agreed to by union negotiators

Prior to January 8 1965 neither Schwartz nor anyone else had

expressed any concern about the possibility of a strike after the settle

ment of December 16 and it had been generally assumed that there

would be no strike Cf In the 111atter of Free Time etc at Ne l v York

BarbO l 11 F Th1 C 238 docket No 65 14 Justamere s failure to ship

any bananas on these two vessels was actually due to a dispute with its

then supplier Cia Agricola Th1achala the actual shipper against

Justamere s space which was thereafter replaced by Toledo Saenz

according to a notice given by Justan1ere to Grace under date of De

cember 29 1964 Th1achala and Schwartz had had a dispute about cocoa

beans which had some connection not clearly defined with Machala s

failure to ship bananas and the switch to Toledo Saenz Justamere was

obliged by the terms of its agreement to pay guaranteed freight of

1 050 for each of these voyages which were not affected by the ILA

strike

InJune 1965 Justamere finally paidthe 2 100 minimum freight due

since January under protest after a conference at which Grace told

Schwartz that it would review certain claims which Justamere had

advanced Justamere s counsel transmitted the payment with a letter

stating Payment is being made only because you have agreed to

consider claimsarising out of the same labor dispute on other voyages

and because you hold security fund out of which payment will be

taken unless made now

Grace s insistence upon the foregoing payment is described in com

plainant s brief as a documented episode where harsh and preju

dicial treatment meted out to Justamere can be directly compared yith

an unwarranted advantage awarded to a favored shipper In pre

hearing discovery proceedings complainant learned that while 13 of

the 14 other contract holders had paid full guaranteed freight aggre

gating 166 050 for these two voyages the 14th J B Joselow had

paid only 8 563 66 against guaranteed freighthilled of 8 900 4 450

per voyage Joselow had held out 336 34 against his billing on the

Magdalena V56 because a truck carrying bananas for the vessel had

12 F M C
264 FEDERAL MARITIME COMMISSION

been unexpectedly delayed in reaching the port of loading he the

fore paid on outturn instead of the full amount ofguaranteed freig

m the theory that he hadbeen prevented from fully utilizing his sp

by a circumstance within the force majeure clause of the freight

agreement Grace abandoned efforts to collect this bill in Septem

1965 it did not charge it against Joselow s posted security but 

effect accepted Joselow s explanation after ascertaining that it w

factually correct and canceled the billing There was no connection 

similarity of circumstances between Justamere s refusal to pay a

freight for these two voyages and Joselow s succesful avoidance 

336 in freight payable and Grace insistence upon payment by Jus

mere notwithstanding the J oselow incident was no more an act 

discrimination than was its collection of 166 050 guaranteed freig

from the other shippers on the same voyages It was not as co

plainants argue a case of two shippers receiving different treatm

under identical circumstances Joselow paidfullguaranteed freight 

one of the voyages and apparently would have done the same on 

other but for an accident which prevented utilization of a

portion of

allocated space and Joselow paid 96 percent ofthe guaranteed freig

on the two voyages Justamere did not load on either voyage and ma

no claim of accident or other condition beyond its control other th

the plea now rubandoned of short notice with respect to the f

voyage Justamere paid nothing at all for the space reserved for 

use on these voyages until prodded into action after 6 months It 

not necessary to find that Joselow s conduct was proper under his c

tract or that Grace waswithout fault in ultimately accepting Joselo

argument The Joselow incident was in no sense a discrimination 

1ected against Justarnere such as to require or justify a waiver 

Grace of all or any part of the freight payable under Justame

contract on two voyages In fact Justamere could not even claim c

temporary knowledge of the Joselow incident as an excuse for 

refusal to make the payments when due

Justamere s payment on June 12 1965 of the 2 100 due since Ja

ary 1965 was immediately offset by its failure to pay stevedor

charges in the amount of 2 28106 due under its contract for discha

ing its bananas from Santa lJ anana V58 which had arrived in 

PortofNew YorkJune 10 1965 For every voyage from that time uJ

Grace finally canceled its contract in November Justamere failed 

pay all or a portion of stevedoring charges or freight charges or bo

Details ofthe unpaid charges are as follows

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 265

Ve88el name and voyage number

Santa omitted

Arri al date

Port of NY

Unpaid charges

Stevedoring Freight

Mariana V58 June 10 1965

Magdalena V68 June 17 196 5

Maria V50 June 24 1965

Mercedes V3Z July 1 1965

Service suspended between July 1 and September

MEBA strike

Mariana V60 Sept 17 1965

Maria

V58 Sept 23 1965

Magdalena V70 Sept 30 1965

Mercedes V40 Oct 7 1965

Mariana V68 Oct 14 1965

Maria

V60

Oct 21 1965

Magdalena 178 Oct 28 1965

Mercedes V42 Nov 4 196f

Mariana V70 Nov 11 1965

Maria V62 u Nov 18 1965

2 281 06 u

59 81

1 603 64 waived

2 525 66 4 971 46

17 Marine Engineers

1 715 27

1 721 82

895 61

1 541 17

2 267 73

2 078 78

2 301 21

1 495 55

2 350 85

2 730 58

2 659 42

4 747 63

3 309 73

6 9iO 00

14 879 04 35 822 94

Total unpaid charges u u 50 701 98

The first item of unpaid freight 4 97146 is the full amount of

freight billed based upon outturn or fruit delivered guaranteed

freight having been waived in advance because of a strike threat

as lhereinafter described The last item of unpaid freight 6 910 was

the full amount of freight billed and payable under Justamere s con

tract Justamere paid no freight on this voyage from which it took

delivery ofbananas which it sold for 13 386 32 All the other items of

unpaid freight represent the difference between the guaranteed freight

billed and payable under Justamere s contract and the amount it paid

The first two voyages on which Justamere defaulted IIm iana V58

and Alagdalena V68 had been normal voyages although Grace had

waived guaranteed freight on IIagdalena V68 because of the possi

bility of strike caused delay which did not materialize Unloading of

IImw V50 and 111e1 cedes V32 was delayed however as a result ofthe

strike of seagoing personnel represented by the 1arine Engineers

Beneficial Association 1EBA All bananas aboard Maria V50 were

lost Grace waived all freight and charged only for stevedore services

in dumping the fruit This waiver was pursuant to telegraphic notice

sent to all shippers before the vessel loaded setting forth the possibil

ity of a work stoppage waiving guaranteed freight and leaving it

up to the shippers whether they shipped any bananas or not subject

only to their being eharged for stevedoring services and freight on

12 F lC
266 FEDERAL MARITIME COMMISSION

fruit not lost outturn if they undertook to ship any bananas 

these voyages On 11 ercedes V32 the delay did not cause the loss of 

bananas and Grace billed freight on outturn pursuant to a sim

prior telegrapillic notice

Arter the arrival or Mercedes V32 service wassuspended because 

the strike and did not resume until jJ ariana V60 which arrived S

tember 17 1965 Justamere not only failed to pay stevedoring charg

and freight billed on 1 aria V50 and Mercedes V32 but also asser

claims against Grace for cargolost notwithstanding express provisio

ofthe banana freighting agreement and bills oflading relieving Gra

of liability for such losses and notwithstandinOb e the teleOrams d

patched by Grace before the ships were loaded Further details 

the claims are set forth hereinafter

When service was suspended because ofthe 1EBA strike Justam

owed Grace 13 976 against bills for all stevedoring on the four v

ages next preceding the suspension and freight billed of 4 971 

bananas delivered upon the last of these voyages which Justam

had accepted and sold for 9 428 unpaid stevedoring and freight 

this voyage whose unloading was delayed by the MEBA stri

totaled 7 496

September 9 1965 Grace sent a telegram to Justamere request

payment of these bills The same day Justamere s attorney wr

Grace s attorney asking for an appointment at which all matters 

dispute can be aired and adj usted The letter referred to a conferen

apparently one held June 10 1965 just before Justamere began 

default on stevedoring and freight charges at which it was agre

that my client s claims would be examined and determined witho

delay The record does not show whether or not there wasany relat

between thisletter and Grace s letter of the same date demanding p

ment of outstanding bills At an

y

rate Justamere made no payme

and on September 15 1965 Grace wrote Justamere s surety Peerle

Insurance Co Peerless asking payment of 13 976 63 under 

terms of Justamere s bond Acopy of this letter was sent to Justame

The next day September 16 Schwartz and his attorney conferr

with a Grace attorney Schwartz took the position that Justamere h

not defaulted on bills due Grace because Justamere had claims of o

50 000 against Grace which it wascontended Grace had promised 

give prompt and sympathetic consideration but had not done 

Grace had in fact told Schwartz in June that it would review a nu

ber of claims which Justamere had made prior to that time laggreg

ing about 12 000 since then Justamere had increased the amount 

some 41 000 Schwartz insisted that Grace give him a formal ruling 

all the claims none ofwhich hadbeen honored

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 267

At or about the same time Justamere instructed Peerless not to make

any payment to Grace on its bond asserting that Grace was remiss in

its obligation to Justamere and that Justamere s attorneys were

planning their course of action to recover approximately 49 000 in

valid daims clue us from Grace Line and agreeing to hold the bond

ing company harmless against lOss The bond which was in the

amount of 50 000 and signed by Justamere as principal and Peerless

as surety provided that Grace might draw upon the bond for pay

ment of any charges incurred under the banana freighting agreement

upon written notification by Grace that Justamere had failed to pay

them promptly when due andfurther provided

4 Notwithstanding that the Shipper JUSTAMERE FARMS INC may have

a

claim against GRACE LINE INC whether or not arising by through or out

of the aforementioned Banana Freighting Agreement it is understood and

agreed that GRACE LINE INC shall nevertheless have the right to draw on

this bond as is heretofore provided for herein but the said Shipper and the

Surety Company shall retain any rights which they may have by virtue of the

said contract or by virtue of subrogation thereunder against GRADE LINE

INC

Presumably because of Justamere s insistence that it make no pay

ment Peerless refused and continues to refuse to pay on its bond not

withstanding the foregoing provision

On October 1 1965 Grace s

freight claim agent sent Justamere five

letters each referring to one or more claims variously dated from

March 29 1965 to September 1 1965 which Grace had not allowed

Justamere had asserted these as its reason for not paying stevedore

and freight bills and Grace had agreed at Justamere s request to have

its claim agent examine them The claims which are discussed in detail

hereinafter aggregRited over 53 000 The claim agent rejected all of

them by letters in substantially the same form stating Our investi

gation has developed no liability for the account of Grace Line Inc

and tVe must therefore respectfully decline your claim s

with fullreservation Of all defenses contained in the bill s oflading

and or otherwise

J1eanwhile service had resumed following the MEBAstrike with the

sailing ofSanta jJlariana V60 on or about September 9 arriving Sep

tember 17 1965 Justamere was unable to fill its space on this voyage

and began before the vessel arrived to importune Grace to waive

guaranteed freight Grace refused to do so Under date of Septem

ber 20 1965 Justamere by Sehwartz wroteGraceas follows

We reply to your letter of September 13 1965 and we note that you refuse to

give us and our growers consideration for their inability to fill our allocated

banana space due to the after affects sic of the strike

12 F M C
268 FEDERAL MARITIME COMMISSION

Your statement that you cannot make any special provisions applicable to 

shipper and notto all others is irrelevant as we made no such request Ou

quest in oohalf of our growers should certainly apply to all of the shippers 

particularly to us The other shippers with whom you have contracted s

have been able to continue to ship on foreign flag vessels during the strike w

your assistance and in discharging at your pier in Port Newark6

As indica

in our letter to you of September 9 1965 our group of small independent g

ers relied entirely on the Grace Line and therefore they were particularly h

hit financially

We attach a letter from one of our associate growers Sr AntonioAjoy who 

plains his ill bility to suddenly resume operations on a normal basis Our o

growers suffered severe crop damage All of them need a few week s tim

l e establish normal operations You are aware that this is a situation of fo

majeure Surely Grace Line can offer its cooperation to small growers to w

it has repeatedly given assurances of such cooperation

We enclose our check covering ocean freight on the Santa Mariana 

based upon the formula applied to the slhipment on the Santa Mercedes y

invoice of July 21 1965 to wit 2 3 cubic feet per box at 26st per cUlbic foo

a total of 4 642 27

We are prepared to bring this matter before the Federal Maritime Board 

albitration and we assure you that we would be willing to abide by their decis

We trust however that you will accept this letter and our check as paymen

full forfreight charges on the Santa Mariana V60

Since Justamel c s guaranteed freight was 6 910 per vayage un

its cantract its payment based upon autturn left Justamere nea

2 300Shart an freight payable against Santa Alariana V60 The rea

given in its letter far its growers alleged inability ta fill its allaca

spac the grawers need af a few week s time ta reestablish nar

aperatians follawing the strik is quite different from the rea

subsequently advanced by Schwartz and alleged in the campla

that Justamere s supply af bananas was reduced because the eff

af flaads which had accurred back in April af 1965 were at lastbe

felt l1are impartant the letter af J usta lllere S assaciate graw

Ajay attached ta Justamere s letter reveals that Ajay s

inability 

suddenly resume aperatians an a narmal basis resulted fram neit

trike nar flaad damage Ajay had duringthestrike period cantrac

ta sell his entire praductian ta two arge exporting campanies u

the end af the year The recaTd daes not shaw either that this 

6 Justamere also had a contract for pace on the foreign flag Chilean Line but ce

to use the space in August 1965 right in the middle of the MEBA strike when G

service was suspended because Schwartz testified of a controversy concerning the 

larity of Chilean s service In a suhsequent letterto Chilean about the controversy Ch

apparently charged breach of contract and Schwartz was claiming over 26 000 dama

he quoted Toll do Saenz as having said that he and the other growers would unde

circumstances make shipments on the Chilean Line until they were assured that 

would guarantee your service and said thatAjoy had repeatedly offered to Ship if ce

claims were settled assnrances gh en etc It was 11 strange time to have refused to 

for such reasons As appears below Ajoy had in fact contracted to sell his entire prOdu

elsewherl

12 F M 
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 269

been done with Justamere s concurrence or that J ustamere charged

Ajoy wthbreach oftheir agreement Ajoy had apparently counted on

purchasing bananas in the open market to ship in Graces vessels but

an inorease n demand had raised the price so that it wasnot profitable

to do so at least under the kind ofdeal hehad with Justamere Neither

he nor Justamere Wished to buy hananasat the prevailing market in

fact there is no evidence that Justamere ever considered doing so

not withstanding its Istatement to Gra ce in its original space applica

tion that it contemplated doing just that Instead both Schwartz and

Ajoy tried to induce Grace to absorb the consequences of Ajoys ac

tion by waiving freight on any unused portion of the space held

under contract by Justamere Grace refused there was no evidence

of a general supply problem and all its other contract holders were

consistently complying with their contract obligations Ajoy was at

least frank in giving the real reason for his failure oo ship although

he hIamed his indiscretion on Graces Ecuador office for having cate

gorically informed him as well it may have that the strike could

last few days few months or a year and that they could not venture

to indicate when the strike could terminate

Justamere s letter speaks of severe crop damage suffered by other

growers which damage according to Schwartz s

testimony resulted

from failure to cut bananas duringthe MEBAstrike There were only

two other growers immediately prior to the strike and one of them

never shipped to Justamere after the strike his disappearance wasnot

explained The other Toledo Saenz who had represented about 20

percent of Justamere s supply continued to ship about normally on

the first poststrike voyage and in generally decreasing volume

thereafter The greater part of Justamere s supply after the

strike came from growers w ho had not hipped to Justamere

prior thereto One of them Ranchi had entered into a contract to

begin shipments June 22 1965 but the strike had intervened another

Ayala was to start September 7 1965 the contracts ofthe othertwo

Cevellos and Seminari o are undated but their shipments did not start

until October 8 1965 and November 12 1965 respectively Except

in the case of the major shipper Aj oy and the earlier case ofMachala

who had had a dispute with Schwartz about cocoa beans the reasons

for the numerous changes in Justamere s suppliers are not revealed

There is no credible evidence that Justamere s failure or inability

to utilize its contract space adequately resulted from cr op damage re

lated in any way to the MEBA strike Its failure following the

MEBA strike period to pay guaranteed freight pursuant to its con

12 F M C
270 FEDERAL MARITIME COMMISSION

tract cannot be justified or excused under any theory of force 

jeure underthe strike clause ofthe contract or otherwise

Justamere continued throughout the fall of 1965 to pay fre

on outturn in lieu of the amounts billed pursuant to its contract 

October it began to default on stevedoring charges also The amo

due and unpaid on each voyage are shown in the tabulation ab

Grace notified the bonding company and requested payment from 

as each default occurred Finally Grace gave notice of cancella

of Justamere s

freighting agreement effective November 15 1968 

of that date freight due and unpaid under the agreement tota

28 912 94 stevedoring charges due andunpaid totaled 14 879 04 

unpaid billings thus aggregated 43 79198 not far fronl the 50 

limit of Justamere s

surety bond Justamere promptly exceeded 

limit by failing to pay any freight at all onSanta Maria V62 w

arrived November 18 1965 This increased its default to 50 70

It appears that it did pay stevedoring charges on the latter voy

Santa Maria V62 It took delivery of 6634 boxes and 470 stem

bananas from this vessel and sold them for 13 386 32 plus wharfag

vVholly apart from any consideration of ordinary contract law 

freighting agreement between Grace and Justamere and all Gra

banana freighting agreements in effect at thetime provided expre

that the agreement might be canceled forthwith by Grace in the e

ofany material breach thereof by the Shipper and further provi

as did Justamere s surety bond that the freighting agreement m

be canceled if a new surety bond in the amount ofthe original b

wasnot furnished within10 days after Gracehad drawn upon theb

in amounts totalling more than 50 percent of its face amount Ju

mere s unpaid indebtedness exceeded 50 percent of its 50 000 b

when it defaulted on guaranteed freight and stevedoringcharges ap

cable to Santa Maria V60 which arrived October 21 1965

There is no dispute as to the amounts of unpaid freight and st

doring charges shown in the above tabulation or as to their b

owed to Grace under the terms of Justamere s contract Furthe

appears that Justamere collected all or a great part of the amo

so owed to Grace from its growers by charges against the proceed

the sales oftheir bananas under its agency agreements with the gr

ers Schwartz testified that he charged the growers freight for 

number cubic feet of space they had contracted for with Justamere 

the basis of what Justamere was obligated to pay under its cont

with Grace but he paid Grace only for the actual space used a

12 F M 
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 271

calculated it and asked Grace to waive the difference allegedly

with the idea not expressed in his accountings with the growers

that if he succeeded in getting a waiver from Grace he would return

to the growers pro rata the amount waived by Grace As for steve

doring which he also charged to the growers and deducted from the

proceeds of sale of their bananas the only excuse offered for failure to

pay Grace was that Grace had refused to pay certain alleged cargo

damage and shortage claims which Justamere asserted Schwartz tes

tified Iwill gladly allow Grace Line the full amount ofthestevedor

ing they charge upon settlement with me for claims that they owed

me prior to this litigation Inthe same category presumably is the

full amount 6 910 of freight onSanta Maria V62 arriving Novem

ber 18 1965 no part of which has been paid and the outturn freight

4 971 billed against fruit delivered and sold on Santa Mercedes

V32 which arrived July 1 1965

Before discussing the claims which Justamere would set off against

unpaid freight and stevedoring brief mention should be made of cer

tain events immediately following the cancellation which waseffective

November 15 1965 On November 16 1965 Justamere informed Grace

by telegram that its cable of November 11 telling its growers of the

imminent cancellation was apparently not received in time to prevent

cutting bananas and that 8 000 boxes were ready for shipment on

the voyage then about to load Santa Magdalena V80 The telegram

concluded We remind you of Mr McNeils promise to protect our

growers against loss Grace thereupon p

rmitted the growers to load

the bananas which were consigned to Justamere vVhen Grace billed

Justamere prior to arrival ofthe vessel for estimated outturn freight

and stevedoring charges on these bananas in the amount of 5 744

Justamere refused to have anythingto do with the shipment and wrote

Grace Acceptance of this shipment was on your own volition as you

had already canceled our contract We accept no responsibility for

this shipment Grace then induced Justamere to endorse the bills of

lading over to it so that the bananas might be sold and Grace itself

arranged for their sale for 10 871 The problems resulting from this

shipment werenot resolved until January 25 1966 when Grace Justa

mere and Bank of North America entered into a letter agreement

with respect thereto Pursuant to this agreement Grace remitted the

proceeds of sale after deduction of costs of sale and stevedoring to

the Bank to be applied by theBank to claims against it arising from

letters ofcredit which ithad issued Justamere s growers had evidently

obtained their usual advances from banks in Ecuador under theletters

12 F M C
of credit which Justamere was obligated to establish under its ag

ments with them against the bills oflading consigning the banana

Justamere but J ustamere had disassociated itself from the en

transaction and failed to reimburse the issuing Bank Two Ecuado

banks looked to the Bank and the Bank looked to Grace to whom 

bills of lading had been endorsed for reimbursement of the payme

made to the growers One Ecuadorian bank had agreed to settle 

of the claims amounting to 7 500 for 6 585 Grace waived fre

on the shipment and the Bank agreed to pay the Ecuadorian cla

as compromised and to look to Justamere for any deficiency w

could not exceed about 320 The record does not show whether or 

Justamere made any payment under this agreement

Justarnere s cargo damage claims

The claims relied upon by Justamere to excuse its defaults in p

ment of freight and stevedoring charges and which are alleged 

have been arbitrarily and discriminatorily rejected by Grace 

into four categories 

1 ILA strike claims aggregating 7 877 based upon depre

tion in market value allegedly resulting from strike caused dela

unloading four vessels in January andFebruary 1965 

2 MEBA strike claims aggregating 41 731 based upon 

ordepreciation of bananas by reason of strike caused delay in unlo

ing two vessels in June andJuly 1965

3 A claim of 1 953 for alleged faulty refrigeration said 

have caused damage to a portion of a

cargo which arrived June 

1965

4 So called shortage claims aggregating 2 241 based upon alle

delivery of fewer bananas than were loaded in Justamere s spac

Guayaquil onseven voyages in thespring of1965

1 The ILA Strike Olai ln8

The ILA claims for damages which allegedly arose in Janu

and February were all presented to Grace under date of May 

1965 Each is stated to be for losses suffered on damaged bana

due to longshoreman s strike They were in substance as follows

12 F M
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 273

Voyage Arrived Unloaded Amount of claim

l lercedes

V20

Jan 14 1965 Jan 24 1965 1 917 75 1 700 boxes @

3 30 per box 5 610

less 3 692 25 received

upon sale

Maria

V40

Feb 4 1965 Feb 14 1965 2 308 50 1 720 boxes @

3 30 per box 5 676

less 3 367 50 received

upon sale

Mercedes V22 Feb 12 1965 Feb 17 1965 2 209 40 1755 boxes @

3 30 per box 5 79150

less 3 582 10 received

upon sale

Mariana V

50

Feb 20 1965 Feb 20 1965 1 441 40 1 658 boxes @

3 30 per box 5 471G

less 4 030 received

upon sale

The banana freighting agreement between Justamere and Grace

provided

10 In the event that the discharge of bananas from any of Grace s vessels

is delayed by reason of strike conditions or labor disturbances authorized or

unauthorized or by any reason beyond the control of Grace Grace shall not be

liable forany lossor damages rEsuHing therefrom

Inaddition Grace s bill of lading incorporated the provisions of the

Carriage of Goods by Sea Act with certain modifications not per

tinent here Section 4 2 j

ofthe said Act 46 U S C A 1304 2 j

provides

Neither the carrier nor the ship shall be responsible forloss or damage arising

or resultingfrom

j

strikes or lockouts or stoppage or restraint of labor from whatever cause

whether partial or general Provided that nothing herein contained shall be

construed to relieve a

carrier from responsibility for the carrier s own acts

It is undisputed that any delay in unloading these vessels there

wasactually no delay in unloading Mariana V50 was caused by the

ILA strike which as described hereinabove began January 11 1965

following the unexpected rejection by the union membership of the

settlement agreed to by their bargaining representatives The claims

themselves impute the damage alleged in all four cases to the long

shoremen s strike The banana freighting agreoment between Justa

mere and Grace and Grace s bill of lading bar all such claims and

Grace s

rejection of them cannot be deemed arbitrary or discrimina

tory since no such claims wereallowed in the case of any other shipper

Certain claims of a different nature were allowed other shippers

however in connection with the first three of these ILA voyages

Mercedes V20 Maria V40 and Mercedes V22 Vhile none of these

12 F M C
274 FEDERAL MARITIME COMMISSION

other shippers had the temerity to ask for damages to cargo resu

from strike caused delay they did contend that Grace should w

guaranteed freight to the eAtent that it exceeded outturn of bana

delivered and accepted because each of these vessels had been affe

by a strike and in such cases Grace had in the past when it was aw

of a strike threat prior to loading waived guaranteed freight in 

vance of loading Grace had done so in the case of Mariana V46 

riving December 22 1964 when the possibility of an ILA strike 

a

recognized possibility at the time she sailed Grace had also wai

by telegram in advance of loading guaranteed freight on lJfar

V48 arrivingJanuary 22 1965 and Magdalena V58 arriving Ja

ary 30 1965 the next two vessels to sail fronl Guayaquil after 

strike began and on 111a1iana V50 which sailed February 12 1

and arrived February 20 1965 after the strike had ended in 

York and was in fact not affected although Justamere filed a dam

claim with respect to her For reasons not clear in the record h

ever Grace did not waive minimum freight on two intervening 

ages 111a1 ia V40 arri ving Febiuary 4 1965 and 111e1 cedes V22 arriv

February 12 1965 and it had not Vai ved on the earlier 111ercedes V

because when she sailed on or about January 6 1965 there wa

prospect ofa strike

Thus while Mercedes V20 Maria V40 and lJfercedes V22 were 

affected by the strike to the extent of the unloading delays set fo

in the above summary of Justamere s ILA claims guaranteed m

nlum freight had not been waived as to any of them Eleven of 

15 contract holders all of them except Justamere Standard Fr

Frutera Granja and Compania Exportadora Tropical American

although billed the full amount of guaranteed freight remitted o

on outturn arguing that historically whenever the Port ofNew Y

was faced with strike conditions minimum freight charges had b

waived and actual loadings left to the discretion of shippers w

freight charges assessed only on outturn basis consistent with co

tion of the fruit They demanded that these voyages which wer

fact affected by strike conditions be treated the same as those voya

on which Grace foreseeing the possibility of strike damage 

waived dead freight 7

in advance

Grace did not accede to these demands for several months Fin

on June 16 1965 following a May 18 recommendation by its ex

tive responsible for operations under the banana agreements G

7 Dead freight ordinarily means freight charges for space contracted for but not 

When Grace charged only on outturn however it did not charge for fruit shipped 

abandoned at the pier because of its condition and the waiver of freight charges for 

fruitwas technically a waiver of more than dead freight In the present proceeding 

dead freight in the technical sense and freight on abandoned fruit are frequ

included in so called dead freight or false freight

12 F M 
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 275

decide l

to waive dead freightin the cases of Mercedes V20 and Maria

V40 in light of previous circumstances and established policy This

involved the cancellation of outstanding billings of 18 157 18 on

AIercedes V20 and 14 39150 onMaria V40 These shippers paida total

of 95 000 freight on the two voyages

Grace considered AIercedes V22 to be in a different category appar

ently because she arrived when the strike was officially over although

she was delayed in unloading by strike related causes a shortage of

labor and the need to unload theMaria V40 which had arrived a week

earlier The Me1 cedes V22 billings remained in dispute until February

1 1966 when management decided to cancel the outstanding differ

ences as in the case ofj1ercedes V20 and Maria V40 This involved the

cancellation of 12 468 30 in billings to seven contract holders

As a

logical proposition there was some merit to the argument of

the shippers and there was no reason why Grace could not in its

discretion waive its contract right to minimum freight under the cir

cumstances although it almost certainly could not have been com

pelled to do so simply because of prior prospective as opposed to

retroactive waivers When it did waive strict performance how

ever it should have done o across the board not

merely

for the

complaining majority of co ntract holders Its failure to do so ohsti

tuted on its face an unjust discrimination But it was i1ot as Jltst

amere would have it evidence of unflagging efforts to accomodate

and propitiate favored shippers while simultaneously engaged in

hounding Justamere to its doom Justamere which was making a

nluch larger claim relatively on a different theory in connection with

the same voyages was not the only shipper discriminated against

there were three other such shippers two of whom were adversely

affected to a

considerably greater degree than Justamere although

they are cited in Justamere s brief as special recipients of benevo

lence understanding cooperation and forgiveness unhesitatingly ex

tended by Grace to its shippers other than Justamere Had all four

been given the same treatment as those whose unpaid billings were

canceled they would respectively have benefitted to the following

extent

Justamere 96 00

Cia Exportadora Tropical Americana Extra 84 799 88

Sbandard Fruit S S Co

Frutera Granja 1 125 00

S The failure to include Extra may have been due to the fact that the latter was

asking Grace to waive 4 975 its full guaranteed freight on Santa Mercedes V22 because

as Grace confirmed a labor dispute had prevented it from getting fruit to the ship

Grace eventually granted the waiver had it not done so this shipper would bave been

entitled to a similar waiver because of Grace s waiver of other shippers guaranteed

fleigh t on this vo rage

12 F M Q
276 FEDERAL MARITIME COl1MISSION

In Justamere s case the benefit would have been very small s

Jlistamere had apparently loaded quite full and had had a relati

high outturn on which freight was almost equivalent to its g

anteed minimum as it was in the case of Standard Fruit and ex

tor Mercedes V22 Extra The discrimination therefore was 

atively trifling But Justamere should be given the benefit how

small of the policy followed by Grace with respect to other ship

similarly situated to the extent of an appropriate credit agains

unpaid obligations to Grace Nevertheless the incident does not 

cuse nonperformance by Justamere in unrelated circumstances 

it lends no weight to Justamere s

legally insupportable cargo dam

claimsof some 6 400 on thesame voyages

Neither does the incident demonstrate as complainants alle

discrimination against Justamere in Grace s insistence that J

amere pay the 2 100 in contract freight which Justamere was 

withholding on the two December 1964 voyages Santa Magda

V56 and Santa 111aria V38 discussed above In the case of those 

voyages as well as the January February voyages Grace did 

waive minimum freight in advance since it did not anticipate s

conditions The vital difference is that the December voyages w

not in fact affected by strike conditions as were the others In a

tion though not determinative it is quite evident as set forth abo

that Justamere s failure to load on the December voyages resu

from a dispute with its grower not from any strike connected rea

In order to maintain some perspective it may be noted that 

dead freight waived on the three January Fehruary voyages ag

gating 30 625 48 is about 21 Percent ofthe freight bIlled to the 

vant shippers onthe same Voyages they paid an aggregate of 143 

The amount claimed by Justamere in connection with the same 

ages by way of cargo damages is about 6 400 or more than 

percent of the 3 150 freight billed to and paid by Justamere 

those voyages The 96 which Justamere would have received ha

been forgiven dead freight as were the others is about 3 percen

the freight billed to Justamere on the three voyages

The 11EBA Strike Olaims

These claims aggregating 41 731 including freight and steve

ing charges billed but not paid in the amount of 8 638 for w

Justamere takes credit in its claim represent about 77 percent o

total amount of Justamere s cargo claims They arebased upon dam

to cargo resulting from delays in unloading two vessels because 

strike called by theMarine Engineers Beneficial Association ME

12 F M 
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 277

against Grace and other American flag carriers The vessels were

Santa ilfaria V50 scheduled to load at Guayaquil June 15 16 and

arrive at Port Newark June 24 1965 and Santa Mercedes V32 sched

uled to load June 23 24 and arrive July 1

June 11 1965 4 days before the Ifaria V50 was scheduled to start

loading Grace sent a telegram to Justamere and all other shippers

stating that despite the likelihood that a strike deadline of June 15

would be extended it could express no opinion as to the possibilities

of a work stoppage Therefore it stated it was waiving the guarantee

offull freight on the Maria and said

We are leaving business risk with shippers as to whether you ship full or limited

quantity or no bananas depending solely upon your own business judgment and

evaluation of circumstances For shipments per SANTA MARIA V 50 freight on

boxed or stem bananas will be computed on the basis of your allocated space

which you utilize pro rata in relation to full freight otherwise payable under

current contract as amended In event shippers load bananas on SANTA MARIA

V 50 and vessel subsequently affected by strike condiotions and bananas lost due

to deteriorated condition the disposition of such bananas and costs involved will

be forthe account of thecargo with Grace Line waiving the corresponding ocean

freight charges

The Maria V50 arrived at Port Newark June 24 1965 but due to the

strike was not unloaded until July 13 1965 All bananas aboard were

destroyed including 6 999 boxes consigned to Justamere Pursuant to

the telegram just quoted Grace waived all freight charges for the

voyage and billed shippers for costs involved in disposition of the

spoiled bananas in Justamere s case stevedoring charges of 1 603 64

which Justamere has not paid All other shippers paid such charges

and none made any claim for loss of cargo Justamere presented a

claim under date ofSeptember 1 1965 for Loss occasioned by reason

ofyour failure to discharge bananas asper our letters and telegrams 9

in the amount of 17 070 05 after certain deductions for freight which

wasin fact waived by Grace for all shippers and stevedoring charges

On June 21 1965 two days before the Mercedes V32 was scheduled

to start loading Gracesent another telegram Itstated that whilethere

was encouraging evidence of progress in the seagoing labor contract

negotiations and a likelihood that an agreement would be reached it

could express no opinion as to the possibilities of a work stoppage

although the Santa lf agdalena V68 worked in Port Newark June 17

9 One of the telegrams is in evidence In it Schwartz charged Grace with having told

him that either the strikers would permit unloading or that you already had

ready for signature an application for immediate relief under the TaftHartley Act

We request you to ask President Lyndon Johnson for immediate relief under the Taft

Hartley Act and will hold ou responsible for all damages attributable to your failure to

have done so

12 F MC
278 FEDERAL MARITIME COMMISSION

without incident The balance or the telegram was the same as t

above quoted portion orthe earlier telegrrum with respect to the Mar

The III ecedes V32 arrived on schedule July 1 1965 but was n

unloaded until July 12 Justamere had permitted its suppliers to sh

a substantial cargo arouncllOO percent of their allotted capacity 

this voyage although all other shippers had heeded the strike warnin

and r duced their shipments by 50 percent or more three of the fo

largest shippers did not ship at a1110 On September 1 1965 Justame

filed a claim ror 16 023 This wasbased upon the alleged market val

on arrival of 8 809 boxes at 3 20 per box and 952 stems at 5 

32 948 less ocean freight charges of 4971 and stevedoring charg

of 2 525 less moneys collected from customers of 9 428 Justame

has not paid any part of the freight which was billed only on rru

delivered or outturn in accordance wiith Grace s

telegram or stev

doring charges Only seven other contract holders accepted delivery 

fruitrrom this voyage those that did paid in rull the outturn rreig

All shippers other than Justamere paid their stevedoring harges 

rull No one except Justamere made any attempt to charge Grace r

lost or damaged cargo

By the terms of Justamere s contract and the bills or lading a

claim ror damage to cargo resulting rrom thel1EBAstrike wasclea

barred as werethe ILAstrike claims Furthermore Grace s

telegram

to Justamere with respect to the MEBA voyages including San

11 agdalena V68 the voyage prior to Santa 11 aria V50 which arriv

June 17 and was promptly unloaded without damage to cargo spell

out the risk involved waived rreight except upon saleable banan

actually delivered i e not lost due to deteriorated condition a

left it to the shippers judgment as to whether they should load at a

provided that if bananas were shipped the shipper would be respo

sible ror stevedoring charges and rreight on rruit not lost Under the

circumstances Justamere has no shadow of a claim ror loss or dama

to cargo resulting from the strike caused unloading delay and 

excuse ror nonpayment of the rreight and stevedoring charges bill

to it on these vessels

Schwartz testified to a telephone conversation with a Grace Li

official in which the latter allegedly told Schwartz that he wascerta

that in the first place there would be no strike there would be 

picket lines and in the second place irby some chance that there wou

be a

slip up that the Taft HartleyAct would be immediately invoked

10 Similarly on Santa Magdalena V68 the first of the MEBA voyages on which Gr

waived guaranteed freight In advance because of the strike danger most shippers 

their shipments by more than 50 percent but Justamere s growers Shipped almost f

On that occasion Justamere won the gamble since there was no delay in unloading 

the next two voyages it lost More precisely the growers lost Justamere charged th

commissions as well as the amount of its advances on bananas which were dumped

12 F lfC
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 279

On the strength of that Schwartz said we ordered loading on the

t vo vessels Such a conversation even if it took place exactly as

alleged would hardly vary the terms ofthe written contract between

Grace and Justamere However Schwartz finally placed the time of

the alleged telephone conversation as a week or so before Grace s tele

gram of June 11 1965 in which Grace put the risk of loading on the

111a1ia squarely up to the shipper It is not necessary to determine

whether the telephone conversation took place as alleged or what the

effect thereof might have been for the telegrams of June 11 1I mia

and June 21 1IIeroedes superseded any commitment that could con

ceivably be spelled out ofit

Complainants suggest no finding or conclusion with respect to t

MEBA claims and their briefs refer to them only peripherally

No discrilnination against Justamere can be found in Grace s refusal

to allow any part of the 41730 MEBA claims Santa 111aria V50 and

Santa 11 eroedes V32 On the other hand Grace would be susceptible

to charges of preference had it not insisted upon payment by Justa

mere of freight upon saleable fruit accepted and stevedoring charges

in ruccordance with the terms announced in its telegrams and adhered

to by other sillppers

3 The Faulty Ref1 igeration Olaim

In June 1965 Justamere filed a 1 953 claim for bananas damaged

and lost due faulty refrigeration discharged June 11 1965 from

Santa 111ariana V58 which arrived June 10 1965 The claim was for

407 boxes lost completely at 3 per box and 732 boxes of damaged

fruit sold at 2 per box or 1 less than the market price

Grace obtained a

report on this claim from T D Baker Co cargo

surveyors who at its request inspected the shipment aboard the vessel

on June 11 The surveyors found that cartons containing normal green

fruit were among and adjacent to cartons containing the fully ripe or

turning bananas They discussed this condition with the importer s

representative who did not offer any explanation They concluded

that the condition complained of resulted from packing mature fruit

Vhile the record does not contain all the correspondence between

the parties concerning this claim it appears that Grace told Schwartz

it found no negligence on its part thatSchwartz threatened to sue and

that Grace reiterated its stand stating vVe feel certain after you

review the facts again that you will agree that the position taken by

us was just Schwartz insisted that Grace s own surveyors and em

ployees were in agreement with him that the vessel or its machinery

was at fault in this particular hold The surveyor s report rendered

immediately after the incident is quite to the contrary

12 F M C
280 FEDERAL MARITIME COMMISSION

This proceeding is not concerned with the adjudication of Jus

mere s cargo claims against Grace but incidentally with allegatio

that Grace unfairly and arbitrarily rejected Justamere s cargo claim

and unfairly and unjustly discriminated again t Justamere in 

treatment thereof The record with respect to the refrigeration cla

does not support any such allegations Rather itindicates that Gra

went to some trouble and expense to discover whether Justamer

claim had any merit and wasadvised by an independent surveyorth

it had none There is nothingto suggest that it might have acted diffe

ently had any other shipper presented this or any similar claim

Itis noted that although Justamere credited each ofits three sh

pers on this voyage at the a ierage selling price per box of the ent

Justamere consignm nt it charged most of the boxes lost to one sh

per Ajoy as overripe fruit Of 507 boxes stated to have been lo

repacking 480 were charged to Ajoy 15 to Loayza and 12 to Tole

Saenz As percentages of the respective growers shipments the

charges amounted to about 7 8 percent for Ajoy one fifth of 1 perce

for Toledo Saenz and seven tenths of 1 percent for Loayza This 

consistent with the surveyor s observation that most of the carto

containing ripe fruit bore the number 583 a number used by Ajoy

with a

very small amount Of cartons bearing two other numbers 

is also consistent with Schwartz s

testimony as to his method 

handling losses due to ripe or defective fruit where several growe

shipped on a particular voyage he creditedthem at the average selli

price per box but charged boxes lost through repacking in accordan

with his observation as to the percentage of ripe or defective fru

in each grower s shipment Evidently Schwartz was quite aware th

Ajoy had shipped a

large percentage of ripe fruit on this voyage

The Shortage Olaims

Complainant Justamere introduced seven claims for specified nu

bers of boxes or stems ofbananas stated to be short or not del

ered which Grace had refused to pay

Claim dated

1966

Mar 29

Apr 13 u

Apr 17

May 12

1ay 13

May 15

June 2L

Voyage Arrival date

1966

Magdalena V62 Mar 25

Mercedes V26 Apr

Mariana 8

V54 Apr15 Magdalena

V64uApr 22

Maria

V46

u Apr 29

Mercedes V28 May 6 u

Magdalena V68 June 17 u

Amoun

45 

191 

186 

182 

918 

177 

540 

TotaL 2 240 

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 281

Each claim is supported by a

copy of a Grace bill of lading showing

the number of boxes or stems which shipper states to have been

loaded in a specified location on the ship such as Hatch No 4Deck

D Each such bill of lading bears a statement to the effect that it is

issued under and pursuant to a

freighting agreement dated Feb

ruary 27 1964 between Grace and Justamere Farms Inc Also at

tached to each claim is what appears to be a

copy of a statement of

quantity shipped to Justalnere signed by the grower as submitted to

a Guayaquil bank in connection with the collection of the grower s

advance under its letter of credit arrangement with Justamere There

are no othersupporting documents

Schwartz testified that a shortage claim is one for failure to deliver

boxes placed aJboard at time of shipment and not delivered at discharge

of a vessel and that can be due to missing boxes or it can be due

to boxes breaking by defective conveyors breaking them which very

often takes place Grace conceded that claims werepaid from time to

time for boxes damaged in unloading when properly verified In such

cases it was the practice for a Grace Line representative and the ship

per s representative to sign in duplicate a damage report recording the

incident a

copy of the report was kept by each representative Justa

mere did not produce any such damage reports in SUPPOfit ofthe claims

in questron and Schwartz denied knowledge of the existence of the

practice however a former part time employee of Justamere called

on its hehalf confirmed the practice A report signed by this employee

and a Grace representative in connection with a claim submitted by

Justamere December 10 1965 was produced by Grace Mariana V70

Nov 11 1965 claim dated Dec 10 1965 The claim had been allowed

to the extent supported by the sigDed report

No claims have been allowed any banana shipper based as were the

seven Justamere claims in issue solely upon alleged differences be

tween shipper s count bills of lading and outturn amounts i e

quantity delivered to and accepted by the consignee One shipper other

than Justamere was shown to have made one such claim but it was

rejected

The banana freighting agreement between Justamere and Grace

called for loading to be done hy the shipper or his agent in specified

bins land for the issuance of a bill oflading showingquantity stated by

the shipper The agreement originally provided for freight to be com

puted on outturn if the vessel or cargo was lost so that certified out

turn weight certificates were not available freight was to be paid

neverthel not on input but on the basis of the certified outturn

weight certificate of the last banana shipment of the shipper

12 F MC
282 FEDERAL MARITIME COMMISSION

preceding such loss of vessel or cargo or on the basis of the minimu

freight payment required herein whichever is greater The agreeme

was anlended to provide for payment of agreed guaranteed freigh

regardless of outturn Either way there was no occasion for Grace 

check loading quantities unless to protect itself against claims of u

eXplained disappearance during the voyage a theoretical possibili

which the freighting agreement does not cover Grace did not 

fact check inputs But even ifit be assluued that the shipper s coun

bill of lading and manifest amounts were correct as they probab

were barring mistakes since the shippers paid Ecuadorian taxes a

obtained export licenses on the basis of their own declared count

Justamere did not establish that the missing boxes were in fact m

sing on arrival Banana consignees rework the cargo on the doc

they eliminate spoiled or damaged fruit and repack containers wi

Inarketable fruitonly This is done by their selectors who inspect t

fruit for ripes or injury before itis counted and placed on trucks f

delivery to customers The record does not show that the shortag

alleged in these claims werecalled to Graces attention before banan

were turned over to Justamere s selectors Justamere s claim

showed at the most shipper s count per hill of lading less boxes lo

in repacking the difference between the resultant figure and the num

ber loaded on trucks per outturn weights was called boxes not r

ceived Sometimes outturn count or outturn per checkers w

used instead of outturnweights Some claims merely listed a numb

of boxes short Justamere never established the accuracy of its fi

ures as to quantities lost in repacking or that the difference betwee

bill oflading count and outturn resulted from anything other than th

elimination throughrepacking ofripe diseased or damaged fruit 

the case of one ofthe claimsfor 95 boxes short delivered onSan

111agdalena V68 Grace was able to show from Justamere s record

that the only boxes missing were lost in repacking In his accountin

to the growers Schwartz showed that all but 121 boxes had been sold

as to these he stated This cargo had a lot ofripe fruit Note 121 total

lost in repacking The claim against Grace amounting to 28

wasobviously spurious in this instance

Justamere argues that Grace must have discriminated against 

because concededly bananas were quite often damaged in discharg

other shippers collected for such claims and no such claims oth

than the one of November 11 1965 were allowed Justamere But e

cept for the latter claim there was no evidence that Justamere eve

submitted a claim for boxes damaged or destroyed in unloading Ju

tamere s brief to the contrary the seven shortage claims purport t

12 F MC
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 283

be only for missing boxes Either Justamere wasextremely lax in its

unloading and claims procedures or it practically never lost any

bananas in unloading mishaps In this connection it seems strange

that six ofthe seven shortage claims which are all dated more than

a

year after Justamere s shipments began cover almost consecutive

voyages starting March 25 1965 The last claim related to 111agdalena

V68 one of the voyages with respect to which Grace vaived guaran

teed freight and charged only upon outturn because of the strike of

MEBA Justamere was accordingly billed and paid only upon out

turn which did not include the fruit allegedly missing

From the records of a

company which sold bananas and submitted

claims on behalf of several of Grace s banana shippers it was shown

that over the period from January 1965 to 1arch 1966 81 percent of

claims presented had been paid by Grace Justamere would contrast

this with the rejection of all its seven shortage claims There is no

basis for comparison or contrast however The claims allowed were

all for destroyed boxes or as to two claims danlage from inlproper

temperature The only claim comparable with Justamere s shortage

claims one for nlissing boxes wasnot allowed The company offi

cial who presented the evidence confirmed the practice ofsetting aside

boxes damaged by the unloading conveyors going over them with a

Grace representative on the spot with whom they battle back and

forth as to the number of boxes damaged and signing an agreed

statement to support each claim for damaged boxes Justamere pro

duced no evidence of its ever having submitted any such claims al

though Grace produced the claim on Justamere s behalf which had

been allowed in November 1965 for destroyed boxes

Discrimination is not proved by showing only that claims of other

shippers were allowed The record does not establish any discrimina

tion or preference as between Grace s handling of comparable cargo

claims ofJustamere andthose submitted by others Upon such evidence

as there is as to the nature and substance ofJustamere s claims and the

way they were presented to Grace it cannot be concluded that Grace s

action with respect thereto was unjust unfair or arbitrary

The unauth01ized dumping claim

The parties briefs refer to a claim submitted by Justamere in Octo

ber 1965 which was not specified in complainants bill of particulars

as an instance of discrimination but was among papers later sup

plied by Grace to Justamere pursuant to arrangements for discovery

The claim is for the market value of 95 stems shipped onSanta Aler

cedes V40 and allegedly left on the dock by Justamere and destroyed

without its authorization A letter accompanying the cIainl says they

12 F M C
284 FEDERAL MARITIME COMMISSION

were set aside late Friday night October 8 1965 inasmuch as it w

impossible to secure a truck at that hour with instructions th

they would be picked up early Mondary morning Monday morni

they were found to have been removed from the dock Justame

says it was inrormed that they had been dumped wherefore Just

mere requested Grace to pay it promptly the market value of 5 cen

per pound Grace rejected the claim Justamere points to it as a cla

unpaid even though it is seriously contended a Grace employee h

acknowledged its validity by endorsing it with the word liability

followed by his initials since a sheet of paper attached to the cla

contains the following writing

Liability

Nil

The contention that liability was thus conceded by someone who

initials were Nil is frivolous Further the freighting agreeme

provides

Ifthe Shipper fails to furnish trucks lighters carfloatsand or rail caTS on do

promptly upon arrival of the vessel or otherwise refuse to take delivery 

bananas discharged from the vessel whether ornotduring overtime hours Sa

days Sundays and holidays Grace may discharge the bananas to dock and 

lighters and shall notbe liable forany loss or damages resulting therefrom I

Grace s rejection ofthis claim does not furnish any support to co

plainant s allegations ofdiscrimination

The claim to relief under the acts of God provision of the bana

freighting agreement

The complaint alleges that commencing in December 1964 a

continuing until June 1965 there was sustained and unusual rainf

in the vicinity of Guayaquil causing unprecedented flooding of b

nana plantations and destruction or roads and bridges that th

catastrophe was widely publicized and known to respondent th

the floods and consequent devastation constituted an act of Go

which seriously damaged the plantations supplying Justamere d

rectly andthrough inability ofthegrowers to deliver fruitto the po

and that the disruption and devastation continued until Septemb

1965 and still causes loss of production and interferes with norm

transportation among Justamere sgrowers

By reason of this act of God it is alleged complainant was pr

vented from obtaining an adequate supply ofbananas to fill the mi

mum space set forth in its banana f

reighting agreement but Gra

did insist upon and assert its claim for discharge and differenc

in freight refusing to recognize the relief to which complainant w

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 285

entitled under the acts of God as well as the strikes clause in

the agreement

This story wassomewhat modified by Schwartz s

testimony Regard

less of the allegations of the verified complaint he said the rainy

season in Ecuador started in April there was no weather problem

when he contracted with Grace for additional space late in March

1965 and he first became aware of the extraordinary rainfall when

he received newspaper articles dated April 11 and April 12 1965

which told of severe floods affecting certain towns not including

Quevedo where Justamere s growers were located in the province

of Los Rios The articles said that plantations of cocoa coffee ba

nanas and corn had been destroyed and that overland traffic between

certain towns had been paralyzed There is no evidence however that

the plantations of any of Justamele s growers suffered any damage

temporary or permanent or that his growers had any transportation

trouble Onthe contrary Justamere shipped fullon every voyage after

March 30 1965 until June 24 1965 after which shipments were sus

pended because ofthe iEBA strike In iay 1965 Justamere amended

its agreement with Chilean Line to double its space commitment By

that time the rain was over and gone and so were its effects

Other contract holders including Exportadora Bananera Noboa

S A Noboa and others referred to by complainants as Grace s

favored friends advised Grace of the weather trouble in April

and requested Grace to charge freight only on outturn during the

emergency because of flood damage to plantations and roads which

it wasclaimed caused most companies to have short shipments Grace

turned down the requests In a

telegram to N oboa it stated After

complete review of situation including overall loading performance

Santa Magdalena V64 and Santa Maria V46 our position is that full

freight per contract applies and other possible provisions not appli

cable these vessels Justamere was evidently one of those shippers

that contributed to the overall loading performance mentioned

since it shipped full duringthisperiod and did not claim that weather

damage interfered with its operation

Faced with the latter fact Schwartz testified that the effects of

the April flooding became apparent after the MEBA strike which

ended in September 1965 The record which includes voluminous gov

ernment and other statistics is overwhelmingly to the contrary In

September 1965 moreover Schwartz had ascribed his inability to get

fruitto a temporary condition caused by the mBA strike and in fact

his chief difficulty as we have seen was the loss of his principal sup

plier s crop not by flood or strike damage but because it was con

tracted tobe sold elsewhere

12 F M C
286 FEDERAL MARITIME COMMISSION

Schwartz produced a somewhat ambiguous letter on the letterhea

of an Ecuador Government agency Direccion Nacional del Banan

which was dated February 16 1966 about 2 weeks before this pro

ceeding was commenced and was in reply to a letter from one Jorg

1adinya a promoter who acted for Justamere in Ecuador in certa

phases of its operations The letter from 1adinya was not produce

and Madinya did not testify neither of course did the writer of th

proferred letter The letter says that 1965 exports were 30 perce

lower than in 1964 and further states Observing that in the fin

months ofthe year to which we refer the production wasnot sufficie

to supply the export demand and this was due among other caus

to the serious losses occasioned by the rigorous rainy season that e

ceeded by a

large margin the normal rainfall at this time ofyear Th

rainfall produced floods of the banana plantations destructio

of ways of communication all of which was ofgrave damage for th

production and to the grower of bananas about which the nation

newspapers gave ample information The information from th

national newspapers so far as the record shows had to do excl

sively with local flooding in April the letter cannot have intende

and is not alleged to refer to rainfall in the latter part of the yea

Further official published statistics of Direccion Nacional del Banan

show that total banana exports of bananas from Ecuador were at th

highest levels of the year in September October and November 196

the only months after l1arch when Justamere had any supply d

ficulty and that such exports to the United States alone were at the

highest point of the year in October 1965 whileSeptember and Novem

ber were exceeded only by l1arch April and l1ay The official stati

tics also show that while Ecuador s total exports of bananas for th

year 1965 were about 15 percent not 30 percent less than for th

year 1964 such exports for the 3 months of September October an

November were about 4 percent higher in 1965 than in 1964 Th

negates the contention that the supply of bananas was reduced durin

the period when Justamere did not utilize its full shipping space 

also tends to show that the increase in market price duringthis perio

which discouraged Justamere s grower Ajoy from purchasing b

nanas in the open market resulted from increased demand

Itis concluded that there is no credible evidence either with respe

to the banana supply in general or Justamere s sources in particula

to support a conclusion that performance of Justamere s contract wit

Grace or full utilization of Justamere s space which is not the sam

thing at all was impeded much less prevented by any act of God

including without limitation weather phenomena and their cons

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 287

quences in Ecuador In view of the facts shown to have existed it is

not necessary to consider whether if acts of God had effected Justa

mere s particular sources of supply it might have been excused from

its obligationto pay freight when bananas were available from other

sources although at a higher cost and the purposes of the freighting

agreement werenot completely frustrated

Acts alleged to constit de general preference ofother shippers

In addition to instances set forth above in which Grace is alleged

to have given preference to others and to have discriminated against

Justamere in similar circumstances complainants cite other instances

of alleged failure to require performance by others of their obliga

tions under the banana freighting contracts which they say contrasts

generally with Grace s insistence upon strict compliance by Justamere

One instance was a matter of 450 the full freight payable by

Frutera Granja 011 Santa 111agdalena V46 arriving August 13 1964

Granja pleaded force majeure when his truck carrying fruit to the

port for loading on this voyage went through a bridge a following

trucK was also unable to cross the broken bridge and the entire ship

ment was lost Grace accepted this as a case of force majeure and

waived dead freight on the voyage under similar circumstances it

had not enforced collection of 336 from the shipper Joselow one of

whose trucks had missed the 111agdalena V56 sailing in December

1964 This was the only waiver in the case of Granja who paid dead

freight on a numberof voyages before his unused space was volultarily

relinquished to Justamere in liarch 1965

N oboa wasaHowed a claim of 538 20 under the act of God clause

when a barge sank while carrying Noboa s bananas to be loaded to

Grace s vessel Santa 111aria V46 Noboa purchased fruit to take the

place of that lost but was unable to pack all of it in time for the

vessel s departure Noboa lost 4 100 boxes of bananas in the sinking

Grace waived dead freight equivalent to the 900 boxes which could

not be packed in time The amount waived wasabout four hundredths

of 1 percent of the 1 328 990 in freight paid by Noboa during its

contract period

Another incident involved 1 B Joselow IIe did not load on Santa

lIfariana V74 arriving January 6 1966 claiming that he did so be

cause of a Government decree fixing minimum prices to planters

and that he was excused from paying guaranteed freight under the

provision of his contract relating to acts of God governments etc

Grace did not accept the excuse but eventually wrote off the unpaid

dead freight charge of 2 412 50 when Joselow whose contract ex

pired 2 months later did not apply for a contract for the 1966 68

12 E M C
288 FEDERAL MARITIME COMMISSIOX

period This incident occurred after Justamere s contract had be

canceled for good cause so it was hardly an aot of discriminatio

against Justamere It may be that Grace should have enforced i

claim against Joselow s bond even if it cost more in time troub

andlawyer s fees than the amount recoverable But with Joselow goin

out of the business no other shipper could have suffered any com

petitive disadvantage because Grace took the path of least resis

ance particularly Justamere which was itself out of the busine

and in default by upwUirds of 50 000 at the time

InDecember 1965 Grace granted a temporary reduction in guara

teed freight to all shippers because of seasonal market conditions 

the United States following a request by N oboa It will be recalle

that Grace had likewise made a temporary concession to all shipper

including Justamere in December 1964 in view of the strong repr

sentations made to Grace Line by shippers of bananas under simila

contracts as to the market conditions presently prevailing It w

solely a matter of good business judgment to make such general con

cessions under the circumstances notwithstanding the Commission 

authorization in the Order of firm 2 year advance booking agre

ments Banana exports from Ecuador were in fact about 31 perce

lower in December 1965 than in November 1965 and about 28 perce

lower in December 1964 than in November 1964 N vertheless com

plainants call the seasonal concession of December 1965 which wa

effective on three voyages beginning 6 weeks after Justamere s la

shipment the final stroke to the picture ofdeliberate calculated an

vengeful discrimination against ArthurSchwartz This episod

underscores graphically Grace Line s Janus faced attitude the smi

ing countenance reserved for its favored shippers and the frown in

variably cast upon Justamere It barely waited for the corpse o

Justamere s enterprise to cool before scuttling to alleviate Noboa 

woes hastening to bestow the very relief it had coldly and deliberatel

withheld until Arthur Schwartz had been successfully disposed of

This contention is as absurd in substance as in form The timin

of the concession in late December 1965 wasobviously determined a

it had been in December 1964 by seasonal market conditions in th

United States and not by the cancellation of Justamere s contrac

in the middle of November The reason for the general seasonal con

cession was quitetheopposite ofthat advanced by Justamere as ground

for a

special concession to itself In the one case it was a matter o

too many bananas for the existing consumers market to absorb

a condition which affected the entire trade and all shippers propor

tionately In Justamere s caSe it was the failure of a

single contrac

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 289 

holder allegedly because of a shortage of bananas to utilize the

space reserved for it by contract at a time when the performance

of all other shippers demonstrated that there was no general problem

ofsupply or demand

An equally imaginary grievance has to do with certain shipments

offrozen shrimp in space normally used for bananas The space allotted

to Banana Distributors Inc and Standard Fruit Co included in

each case a freezer compartment which unlike the rest of the vessels

refrigerated space designed for the carriage of bananas could be

brought down to below zero temperatures and was thus suitable for

carrying frozen cargo as well as the mildly refrigerated bananas On

several occasions by arrangement with the affected shipper Grace

utilized one of these freezer compartments to carry frozen shrimp a

high rated cargo To make up for the space thus taken Grace some

times but not always arranged for the use by such shipper of space

not beillg used by another contract holder such as Frutera Granj a

who would otherwise have paid dead freight and adjusted freight

charges accordingly Justamere argues that the transactions involving

the freezer space were somehow discriminatory as to Justamere be

cause Justamere was never given the opportunity to release space for

or in connection with the carriage ofshrimp The contention is without

merit The use of the freezer compartments for shrimp was in every

case for Grace s convenience and not to accommodate any banana

shipper Further all except one of the voyages on which the freezer

space was utilized occurred during the period berore Justamere s

contract was amended to increase its space allocation when it was

shipping full and wanted more space The exception was the first

voyage after the MEBA strike In that case shrimp was loaded in the

freezer compartment in Standard Fruit s space while the ship lay

at Gl layaquil during the strike when Grace had no reason to believe

that Justamere or anyone else would have difficulty in filling his

banana space when the strike wasover and in fact no one did except

as Schwartz told Grace after the vessel had sailed Justamere Justa

mere never evinced any desire to surrender any ofthe space reserved

for its use it just wanted to be excused from paying for the portion

it did not use on any voyage Justamere s space could not have been

used for shrimp in any event and there is nothing to suggest that

Standard surrendered its freezer space which represented about

9 percent of its total space for any reason other than to accommodate

Grace No preference of ordiscrimination against any banana shipper

can be conjured up from the transactions involving the use of the

freezer compartments for the carriage ofshrimp

12 F MC
290 FEDERAL MARITIME COMMISSION 

The failure to offer complainants a banana freighting agreement 

the period 1966 68

Grace s several hanana freighting agreements for the 196466 perio

expired by their terms with the last sailing from Ecuador in Febru

ary 1966 a fact necessarily known to Justamere as a contract holde

and to Schwartz The next 2 year period would begin therefore wit

the first sailing in 11arch 1966 necessarily applications for spa

should have been made well before then

InFebruary 1966 Grace sent a written notice to those then shippin

bananas aboard its vessels from Guayaquil to New York and to othe

who had expressed an interest in shipping bananas in that trade N

such notice was sent to Schwartz or Justamere Neither of them va

then shipping nor it is found had expressed any definite intere

in a new contract although Schwartz testified that he was in con

stant communication with Grace representatives after the 1965 ca

cellation and had asked that they send him a form

Grace did not complete its allocations of space for the 1966 6

booking period until 11arch 9 or 10 Priorthereto it had not receive

any application from Schwartz or Justamere On February 28 196

complainants served their original complaint in this proceeding 

does not contain any allegations with respect to the 1966 68 book

ing period then about to commence In response to a demand for a b

of particulars of the amended complaint served in December 196

Schwartz produced a

copy of a letter dated March 1 1968 addresse

to Grace Line Inc to no one s particular attention as was rus

amere s usual custom in its correspondence with Grace which h

alleges was mailed to Grace on or about that date but which Grac

has never been able to find in its files The letter was as follows

In accordance with your recent offerings of refrigEl n tpcl spnce for banana

under new forward booking arrangements and confirming my prior rfque

by telephone for space I take this opportunity to formally request you for a

allocation of approximately 26000 cuhic feft

I point out again that despite the fact that I have been qualified hy the lIa

time Board as a banana importer you have failed to send me any writte

notice of the availability of space under the new contracts

Very truly yours

JUSTAMERE FARMS INC

Arthur Schwartz

The examiner has serious doubts as to whetherthe letter was eve

sent and is satisfied that it was not received by Grace Even if it wa

sent and received however it was too late to be of any material sig

nificance since as Schwartz and Justnmere had reason to expect th

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 291

allocation of space had been completed llIn fay and June 1966

Schwartz and his attorney made several requests for space by letter

and orally they did not mention the 1arch 11 letter in their cor

respondence In May 1966 Schwartz claimed to have a request from

an agency of the Ecuadorian Government to resume my selling

arrangements in behalf of these small growers Grace pointed out

that as Schwartz knew the line s banana space had been completely

sold out under duly authorized banana freighting agreements and

further stated

I Moreover in the absence of convincing proof to the contrary we must

assume that a deliberate continued failure to pay minimum freight cha l ges the

direction to the bonding company to refuse payment on its bond and the fail

ure to date to pay us either past due freight charges or damages consequent to

our cancellation of your Banana Freighting Agreement continue to render Just

amere Farms and you insuffiCiently responsible financially to undertake banana

carriage on ourvessels

According to Justamere s Federal income tax return as of Jan

uary 31 1966 its accounts payable were 441 533 against accounts

receivable of 4 050 and cash of 2 538 Current liabilities exceeded

current assets by 496 000 Even if other investments of 196 586

constituting all its renlaining assets other than land and buildings

be included as current assets Justamere s current liabilities exceeded

current assets by more than 200 000 although it had reported

a net profit for each of the 2 fiscal years just past which included

the period of its banana freighting agreement and the cancellation

thereof Prior to the latter period Justamere had lost 176 000 on

security transactions resulting in a net operating loss of 154 000 in

the year ending January 31 1963 and had had a net operating loss

of 48 000 in the year ending January 31 1964 As of January 31

1966 its tax return showed a capital deficit of more than 250 000 12

SUlIlfARY DISCUSSION

The theory of the complaint is that Grace in order to bring about

the cancellation of Justamere s banana freighting agreement en

gaged in unfair

unjust and discriminatory acts deliberately designed

11 In dockets 771 and 775 5 F M B 615 the Commission noted at p 626 We are

mindful that once the system is initiated qualified applicants for space would be fore

closed from any proration in the space until the end of any gh en period

12 With its application dated Feb 13 1964 for the 1964 66 forward booking period

Justamere submitted a statement of assets and liab11lties as of June 30 1963 showing

an excess of assets overliabilities of nearly 230 000 According to its Federal income tax

return forthe year ended Jan 31 1965 however it had acapital deficit at the beginning of

that year i e at Jan 31 1964 of 291 708 and its current liabilities then exceeded

current assets including therein other investments by over 312 000 Justamere made

no effort to reconcile orexplain these figures

12 F JLC
292 FEDERAL MARITIME COMMISSION

to drain Justamere s capital so as to make it impossible for Justame

to meet its contract obligations and thus enable Grace to invoke th

termination provisions thereof The complaint alleges that Grac

knowing that Justamere would thereby be deprived ofthe necessa

capital necessary to operate its banana importing business 1 r

fused to adjudicate and pay its claims equitably and fairly wh

discriminatorily according fair and equitable consideration to th

claims of other shippers and 2 refused to recognize the relief 

which Justamere was entitled under the strike and act of Go

provisions of the banana freighting agreement

Complainants do not deny that Justamere breached its agreeme

by its failure to pay freight and stevedoring charges due thereund

This is consistent with the theory of the complaint The record do

not however support the major premises of the theory that Ju

anieres defaults resulted from its loss of capital which in turn w

caused by respondent s acts There was no proof and no findings a

proposed with respect to any deprivation or reduction of Justamere 

capital On the contrary Schwartz testified that he had sufficie

capital at all times to continue the business and that he didn tne

to borrow any money from sources available to him The alleged loss

which Justamere sought to recover by claims or requests for relie

were in fact passed on to and borne by the growers who shipped 

Justamere s space and moneys representing the defaulted paymen

admittedly due Grace did not go to the growers but were held 

Justamere thus enhancing its working capital

Ifwe assume arguendo that Justamere would have been depriv

ofessential working capital if ithad paid the freight and stevedori

charges it was legally bound to pay under its agreement and that 

was therefore justified in withholding payment of freight and stev

doringto the extent of valid claims for relief under its agreement w

are met by the fact that upon the record there were no such va

claims As for oargo damage claims those not clearly barred by co

tract were of doubtful validity at best as far as the record revea

and in any event aggregated less than 9 percent of Justamere s d

faulted indebtedness

All this being so complainants in their brief have abandoned t

basic allegations of their complaint except for the unsupported asse

tion that all of Grace Line s actions were deliberately calculated 

force Justamere to its knees until such time as it could be legally e

pelled The theory now 800n18 to be that Justamere w evicted 

a

shipper onGrace svessels not by denying Justamere its rights und

the banana freighting agreement and causing it to disSipate its capit

but solely throughthe granting of preferences to other contract ho

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 293

ers Complainants do not undertake to estJablish any causal connection

between any such preferences and the defaults of Justamere which

led to the cancellation ofits banana freighting agreement

The record reveals one instance in which it may be found that as a

matter of law Grace discriminated among contract holders similarly

situated to the disadvantage of Justamere and at least oneother con

tract holder and to the advantage of other contract holders That in

stance wasthe forgiveness of dead freight to themajority ofcontract

holders but not to Justamere on three ILA voyages in January

and February 1965 Santa Mercedes V20 Santa Maria V40 and

Santa Mercedes V22 It appears however that the disadvantage to

Justamere by reason of this discrimination amounted to 96 Even if

it were m

any times that amount and complainants do not challenge

respondent s computation it would not have justified Justamere s re

peated defaults JUstamere did not and does not now ask that it be

given the same treatment as other shippers on these tJhree voyages

instead it has asserted and had asserted at the time claims for 6 400

for cargo damage which are and were patently without merit

All the other instances of alleged preference so far as they are of

any Substance whatever are isolated instances of permitting contract

holders to avoid the payment of relatively small amounts which were

probably collectible under the contract but as to which there was a

more or less colorable hasis for relief There is nothing in the record

to suggest that any of these incidents in fact disadvantaged or was

intended to disadyantage Justamere They do not resemble in kind

or magnitude the extravagant claims asserted by Justamere 13

Justamere was granted relief from its contract obligation to the

extent of a wa verof 1 462 in guaranteed freight upon the occasion

of the transitional voyage at the time Justamere s space was ex

panded it developed that Justamere had been too optimistic in com

mitting itself for Space on this voyage and the concession could not

have affected other shippers Also Grace waived and as a

practical

matter had to waive all freight on Santa Magdalena V80 on bananas

consigned to Justamere which it accepted at Justamere s

request

13 For all contract holders other than Justamere the total difference between freight

billed and freight paid is 53 731 This inCludes all freight waived after the event most

of it arises out of the three ILA

voyages as well as amounts withheld by Shippers and un

collected The figure represents seven tenths of 1 percent of total freight billings to these

shippers all of whom paid all stevedoring charges without exception Upon the same

basis for Justamere the difference between freight b11led and freight paid is 37 284 of

which 1 462 was waived This represents more than 17 percent of the freight b11led to

Justamere Besides Justamere defaulted on 14 879 in stevedoring charges the total

amount unpaid is 52 163 or

I

more than 24 percent of total freight billed to Justamere

pursuant to its agreement Twenty four percent of the freight billed to all other contract

holders would amount to nearly 2 000 000

12 F M C
294 FEDERAL MARITIME COMMISSION

following the cancellation of Justamere s agreement On the oth

hand Grace rejected requests of the allegedly preferred shipper

for relaxation of their obligations under their agreements where 

found thatthey werenot in order

Complainants argument or prejudice against them is based in pa

upon their own characterization or Schwartz as an irritant un

questionably contentious and disputatious 14 Complainants also alleg

that Scharwtz has been the object of Grace s

longstanding resen

ment and animosity because of his 1955 complaint in docket No 77

which together with the complaint in docket No 771 led to th

Commission s order 15 In his dealings with Grace Schwartz has n

displayed qualities consistent with harmonious relations and the m

tual trust and confidence desirable among parties who must work t

gether under an arrangement such as the 2

year banana freightin

agreement Cf T1U8teed Funds v Dacey 160 F 2d 413 421 1st C

1947 and lIfcOlayton v TV B Oassell 00 66 F Supp 165 170 D C

Md 1946 But even if Grace may have preferred not to do busine

with Schwartz it does not followthat he was subjected to prejudice

as that vord is used in the statute There is no evidence and no reaso

to assume that animosity toward Schwartz had anything to do wit

such concessions as others were able to worm out of Grace or that 

inftuenced Grace s rejection of tJustamere s always dubious frequent

disingenuous and for the most part preposterous claims and demand

Complainants main brief and their proposed findings do not me

tion the matter of respondent s failure to offer them space for th

1966 68 period allegedly in violation of the Order and section 16 o

the Act This cause of action which asks some 324 000 in reparatio

is given brief mention without any reference to the record in com

14 Many of Schwartz s ventures have been attended by serious disputes or litigatio

After abanana venture with Isbrandtsen Steamship Co in 1952 he sued for over a milli

dollars and settled out of court A banana agreement with Grancolombiana Line 

1963 64 inJustamere s name became the subject of litigation stlll pending Two sh

charters eventuated in the arbitration of claims against the owners His banana freighti

agreement with Chilean Line came to an end with claims and counterclaims which a

stlll pending He began proceedings against one of his customers under the Perisha

Agricultural Commodities Act He is negotiating settlement of a dispute with a partn

in a venture for banana shipments from Ecuador to France A dispute over cocoa bea

brought him to arbitration In 1955 ajudgment was outstanding against him in a Flori

court in the amount of 46 000 He now has aright of way dispute in court in N

Jersey He left one of the Wall Street brokers by whom he was employed because of 

dispute about a

sale of securities in which he claimed some thousands of dollars In 19

be asked Grace to deliver to Justamere some bananas belonging to another shipper wh

lIe claimrd was attempting to break a

contract with Justamere He testified that t

growers with whom he dealt in connection with his 1964 66 Grace agreement owe h

money agreat deal morethan he owes Grace

15 However Banana Distributors Inc which initiated the 1955 litigation with 

complaint in docket No 771 several months before Schwartz served a similar compla

Is one of Grace s favored shippers according to complainant s brief

12 F lfC
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 295

plainants reply brief where it is alleged that Grace was merely con

tinuing its existing policy of discrimination against complainants by

refusing to consider him in any respect during the 1966 68 freighting

period As indicated above it is found that there was no such policy

of discrimination against complainants

Justamere s existing defaults under its prior contract were suffi

cient to justify a refusal by Grace to enter into further contractual

relations of the same sort with Justamere or Schwartz and a

lJno ri

to justify its failure to offer space to Justamere orSehwartz orto send

them any notification of its readiness to accept applications for the

1966 68 period even if either of them had given timely indication

as the Order implicitly requires or definite interest in making appli

cation Nothing could have been more repugnant to the qualification

of a

shipper under the Order than a continued failure and refusal to

pay or permit to be paid on its behalf its outstanding freight and

stevedoring bills This is so entirely apart from the question ofJusta

mere s ability to pay which in view of Justamere s financial condi

tion as presented to the Internal Revenue Service is a

very serious one

The Commission s 1959 finding in dockets 771 and 775 that

Sclnvartz was then a qualified shipper to whom Grace should offer

space pursuant to the Order was of course not conclusive for all time

as Schwartz has contended The Order includes certain standards for

determining the qualifications of applicants and the Commission

manifestly did not intend to exempt Schwartz from continuing com

pliance with these or otherreasonable standards Vhatever Schwartz s

potential ability may have appeared to be at the time of the Commis

sion s decision Schwartz and Justamere have now shown themselves

not to be qualified shippers withinthe meaning ofthe Commission s

Order

In dockets 771 and 775 the Commission was concerned with the

fair and reasonable proration ofshipping space among shippers exist

ing and potential in the relevant trade Itrecognized the danger of

any requirement that the carrier be required to enter into the pre

scribed forward booking contracts indiscriminately and put appro

priate safeguards in the Order These included provisions relating to

the financial and commercial competence of applicants including

specifically their ability to purchase bananas the payment of dead

freight to assure utilization of space allocated prohibitions against

the transfer of rights secured under the agreement and the furnishing

of a substantial performance bond Such provisions were not to pro

tect the carrier alone They provided some assurance that space needed

to fulfill the genuine demands ofthe trade would not be diverted to in

12 F l1C
296 FEDERAL MARITIME COMMISSION

competent irresponsIble or otherwise unqualifiedoperators who wou

not make the fullest possible use ofit to the common detriment ofth

carrier fully qualified shippers and the commerce of the Unite

States

Justamere s operations were quite different from hat the Commi

sion s decision contemplated Its avoidance of responsibility was n

confined to its failure to pay its bills Justamere did Ilot purchas

bananas as Schwartz had told the Commission in his complaint 

docket 775 he was at all times prepared to do The shipping spac

reserved to Justamere through its freighting agreement was n

used to transport Justamere s goods but was parceled out by Just

mere without regard to the qualification standards of the Order 

subcontractors who were the real shippers and to whom Justame

attempted to transfer substantially all the risks of the enterprise 

return for a theoretical possibility ofprofit which never materialize

Justamere used its freighting agreement to establish itself as th

growers exclusive selling agent as Schwartz testified he was de

nitely a commission agent Justamere made no investment in the bu

ness other than working capital to finance advances to growers pen

ing sale of their shipments it owned no trucks or storage or oth

operating facilities Ithad no personnel in Ecuador to acquire or i

spect fruit or supervise its loading Moreover Schwartz testified th

while the large exporters buy the best possible quality and reje

everything in between he wouldn tthrow out and reject every stem

In fact he did not see the bananas until they arrived at the Port 

New York Ifthey were reasonably good Icould sell them to m

trade perhaps at 10 25 20 below the highpriced monopolistic market

This contrasts with the Commission s conviction 5 F MC pp 62

625 that bananas of different shippers can be commingled in th

same compartment since all shippers rigidly inspect their fruit prio

to loading

Schwartz s operations during the 196466 period carried o

through Justamere Farms Inc did not redound to the benefit of th

growers who still owed him money according to Schwartz and 

least one ofwhom was still trying to collect hisagreed advances fro

Schwartz they left Grace with more than 50 000 in unpaid freig

and stevedoring bills and they resulted in the diversion of l

efri

erated space neither used nor paid for which should have been ava

able for theuse ofqualified shippers

It is found and concluded that complainants Justamere a

Schwartz were not qualified shippers yithin the meaning of the Com

mission s Order at the time when pursuant to the said Order respon

12 F M C
ARTHUR SCHWARTZ ET AL V GRACE LINE INC 297

ent offered refrigerated space for the carriage of bananas on its ves

sels from Ecuador to New York for the 2 year period beginning in

arch 1966 and ending in February 1968

ULTIMATE CONCLUSIONS 

Findings and conclusions proposed by the parties have been incor

porated herein to the extent that they are found to be material and

supported by the record and are otherwise denied

Upon the record herein it is found and concluded that

1 The cancellation by respondent Grace Line Inc of its banana

freighting agreement with complainant Justamere Farms Inc dated

February 27 1964 as supplemented and amended did not violate any

provision of the Commission s Order issued May 4 1959 in the pro

ceeding entitled Arthur Schwartz v Grace Line Inc 5 F MB 615 627

2 The said cancellation was for good cause and in accordance with

the terms and conditions of said agreement and did not subject or

result from the subjection of complainants Justamere and Arthur

Schwartz or either of the ll to any undue or unreasonable disadvan

tage or prejudice or discrimination and did not make orgive or result

from the making or giving of any undue or unreasonable preference

or advantage in violation of section 16 First of the Shipping Act

1916 and did not violate any ot her provision of the said Act

3 Respondent Grace Line Inc did not vialate any provision of the

Commission s said Orderissued May 4 1959 by omitting or refusing

to offer refrigerated space to complainants or either of them for the

forward booking period beginning in March 1966 andending in Febru

ary 1968 or far any portion ofsaid period

4 The omission or refusal of respondent Grace Line Inc to offer

refrigerated space to complainants or either of them far the said

forward booking period or any portion thereof did not subj ect either

complainant to any undue or unreasonable prejudice or disadvantage

or discrimination or make or give any undue or unreasonable prefer

ence or advantage in violation of the provisions of section 16 First of

the said Act and did not violate any Other provision ofthe said Act

An appropriate order dismissing the complaint herein will be

entered

Signed WALTER T SOUTHWORTH

Presiding Examiner

12 F M C
FEDERAL 1ARITIl1E CO 1l1ISSION

DOCKET No 65 5

PROPOSED RULE COVERING TUlE LaI ION THE FILING OF

OVERCHARGE CLAIllS

Decided Alay 7 1969

Present voluntarily established rules of carriers pre cribing time limits for th

presentation to them of claims for adjustment of freight charges not show

to be unreasonable unjustly discriminatory or otherwise unlawful

Commission proposed rule to prohibit carrier rules providing a time for prese

tation of claims to carriers of less than 2 years from date of shipment n

promulgated as sufficient showing for necessity of such rule n

demonstrated

Carrier limitations on time for presentation of claims to them cannot be used 

any way to limit or condition right of recovery in reparation action base

on such claims brought before the Commission within 2 years of eve

upon which reparation claim is based

Proceeding discontinued

Paul S Auf1ichtig for Petitioner Ocean Freight Consultants In

Burton H lVhite Elliott B Nixon and Randolph W Taylo J

fo

Interveners West Coast of Italy Sicilian and Adriatic Ports Nort

Atlantic Range Conference C VINAC and Continental North Atlan

tic Vestbound Freight Association

Ed1 oard D Ranso J Robert Fre Jnlin Elkan TUTk and Th01nas E

imball for Intervener Pacific vVestbound Conference

Elme1 O Afaddy John Williams and Oarl T Tursi for Intervener

North AtlanticBaltic Freight Conference North AtlanticContinenta

Freight Conference North Atlantic French Atlantic Freight Co

ference Far East Conference North Atlantic United IGngdo

Freight Conference North Atlantic 1editerrallean Freight Confe

ence Atlantic Gulf Panama Canal Zone Colon PaJlallla Cit

Conference Atlantic Gulf Vest Coast of Central America Mexic

Conference Atlantic 8 Gulf Vest Coast of South America Confe

ence East Coast Colombia Conference Havana Steamship Conferenc

Havana Northbound RateAgreement Leeward vVindward Island

12 F l1C

298
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 299

Guianas Conference Santiago de Cuba Conference United States

Atlantic Gulf Ilaiti Conference United States Atlantic Gulf

Jamaica Conference United States Atlantic Gulf Santo Domingo

Conference United States Atlantic GuH Venezuela and Nether

lands Antilles Conference Test Coast South America Northbound

Conference Atlantic and Gulf Indonesia Conference Atlantic and

Gulf Singapore NIalaya and Thailand Conference Calcutta East

Coast of India and East Pakistan U S A Conference India Pakistan

Ceylon and Burma Outw Hd Freight Conference South and East

Africa RateAgreement No 8054 tVest Coast ofIndia and Pakistani

U S A COil ference River Plate and Brazil Conference and U S

Atlantic Gulf Australia New Zealand Conference

Roncdd A Oapone Rober t llenri Bincler and Stuart S Dye for

Intervener North Atlantic T estbound Freight Association

John P Meade Leonard G Jwnes andF Oonge1 Fawcett for Inter

veners Latin America Pacific Coast Steamship Conference Out vard

Continental North Pacific Freight Conference Pacific Coast Euro

pean Conference Pacific Coast River Plate Brazil Conference Pa

cific Indonesian Conference and Pacific Straits Conference

DLldley J Olapp for Intervener n1ilitary Sea Transportation Serv

ice Department ofDefense

AQ1 aha1nSte1 llUlnfor Intervener United Nations

Ba1 rie V1 eeland for Intervener Shippers Conference of Greater

New York Inc

Des1nond B Good Lin for Intervener Burroughs Corp

Robert Sergeant for Intervener Lamp and Shade Institute of

America

illark Tann enba Lt1n for Intervener Mark Tannenbaum Company

Robert E Vantine for Interveners Bloomingdale Bros the New

York Retail Traffic Association and National Retail n181 chants

Association

Paul T S1nith for Intervener United States General Accounting

Office

Donald J Bntnner E Dwncan Harnne1 and Robert P TVatking

I

Iearing Counsell

1

The following were granted intervention but did not otherwise participate in the pro

ceeding Department Store Traffic Coordinating Corp Go ernment of Israel Supply

Mission Toseany Imports Ltd Italy America Chamber of Commerce Commerce and

Industry Association of New York Inc ToscPort International Corp Sea Land Service

Inc Foster Wheeler Corp International Association of Great Lakes Ports Gulf Oil Corp

Gulf Associated Freight Conferences Gull Mediterranean Ports Conference Gulf United

Kingdom Conference and Gulf Scandinavian Baltic Sea Ports Conference

1 l M C
300 FEDERAL MARITIME COMMISSION

REPORT

By THE COMMISSION John Harllee Chairman James V Day V

Chairman Ashton C Barrett James F Fanseen Commissione

PROCEDURAL BACKGROUND

This proceeding is before us on exceptions to the initial decisio

Examiner John Marshall The proceeding was originally instituted 

March 27 1965 to examine the validity under the Shipping Act 1

the 1916 Act and the Intercoastal ShippingAct 1933 1933 Act 

certain restrictions imposed by carriers subject to our jurisdict

limiting thetime withinwhich they would voluntarily consider cla

for adjustment of freight charges The Commission alleged that 

restrictions might be contrary to

1 Section 22 of the 1916 Act by establishing a period for lim

tion of claims otherthan the 2 year period provided therein

2 Section 18 b 3 ofthe 1916 Act and section 2 ofthe 1933 

by allowing a carrier to retain freight charges greaterthan those sp

fied in its tariff

3 Section 17 of the 1916 Act as constituting an unjust or unre

onable practice

Specifically promulgation of the following rule was proposed

Common carriers by water as defined in section 1 of t e Shipping Act 1916 

amended 46 U S o 801shall not by tariffrule or otherwise limit to less t

2 years after thedate of shipment the time within which claims foradjustm

of freight charges may be presented

Te did not however promulgate the rule In our earlier rep

TimeLinlit on theFilingofOvercharge Claims 10 F MC 1 196

we distinguished between a

regulation which would limit to less th

2 years the time within which a person may file a

complaint un

section 22 of the 1916 Act orwhich would attempt to place conditio

on that right on the one hand and on the other hand those regu

tions which merely limit to less than 2 years the time within wh

the carriers would voluntarily consider claims for freight adjustme

presented to them We found the former to be contrary to the congr

sionai policy embodied in section 22 which guarantees to claimants 

right to pursue actions for reparation before the Commission with

the 2

year period from date of violation free from carrier impos

restraints 2 We concluded that a limitation uponthe time during wh

IIAlthough so far as appeared no carrier actually had a rule of this type the argume

raised by the carriers in the course of the proceeding indicating their pOSition that s

rules would be lawful required that the Commission clarify the situation to insure t

Shippers and consignees would be guaranteed their rights to file claims for and in pro

cases collect reparation free of any pOSSible restraints which might be impOSed by carr

in thefuture

12 F M u
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 301

a carrier will voluntarily consider a claim did not of itself necessarily

prevent the shipper or consignee from filing for or recovering repara

tion as provided in section 22 and sinc the proceeding had been

limited to written comments and oral argument before the Commission

there was no evidence to indicate that these limitations had operated

in a manner contrary to the reparation procedure provided in section

22 Similarly we found section 18 b 3 or the 1916 Act and section

2 or the 1933 Act would not outlaw the carrier imposed time limita

tions unless it could be shown that thelimitations had theeffect or pre

venting recovery or just claims under section 22 of the 1916 Act

Finally we observed that the second paragraph of section 17 of the

1916 Act wasnot applicable to practices ofthe type underinvestigation

since it related solely to practices involving forwarding and terminal

operations The proceeding was discontinued

Ocean Freight Consultants Inc aFC a firm providing an ocean

freight auditing service petitioned on July 25 1966 for reopening

or the rulemaking proceeding the institution of a Commission investi

gation or such further proceedings as might be necessary to prohibit

the present practices or carriers with respect to claims for adjustment

offreight charges andthe adoptionofthe proposed rule

Ve requested further comment from interested persons indicating

1 the sections of the 1916 Act under which the existing carrier

imposed time limitation rules were challenged and under which the

proposed rule should be promulgated together with a full statement

of the facts and law relied upon and 2 the type of hearing required

ifthe proceeding werereopened

Various shippers shipper organizations and OFC filed comments

indicating their dislike for certain carriers practices and alleging

violation of various sections of the 1916 Act The Commission re

opened the proceeding setting it down for full evidentiary hearings

before an examiner The issues presented by the reopened proceeding

are

Vhether the present carriertime limitation rules

1 Have resulted in orwill result in unfair orunjust discrimination

in the adjustment and settlement of claims contraTY to section 14

Fourth

2 Have resulted in or will result in unjust discrimination detri

ment to the commerce ofthe United States contrariness to the puhlic

interest or the failure or refusal to adopt and maintain reascmable

procedures or have prompt and fair hearings and consideration of

shippers requests and complaints under section 15

12 F MC
302 FEDERAL MARITIME COMMISSION

3 IIave resulted in or will result in undue or unreasonable pre

ence or advantage or undue or unreasonable prejudice ordisadvant

contrary to section 16 First

4 Have resulted in or will result in retention of unlawful cha

by carriers under section 1R b 3 of the 1916 Act and section 2 

the 1933 Act

5 Have resulted in orwill result in preventing shippers from fi

for or recovering reparation pursuant to claims under section 22 

6 Necessitate the promulgation of the proposed rule under sec

43

Sit7 tat ion lVith Respect to Oarrier l1nposed Ti 171e Li1nitations

Although there is no standard carrier imposed time limita

provision neady all provide for 6 months from shipment as the t

within which claims based on alleged overcharges must be presen

to the carriers called generally herein 6 month rules Afew ta

of carriers operating in our domestic offshore commerce prov

for greater or lesser periods l1any carrier rules also provide 

claims based on weight or measurement a few add descriptio

ill not be considered unless presented before the shipment leaves 

carrier s possession while some make consideration after such tim

matter of carrier discretion

Only 22 of 76 carriers in the domestic offshore trade with tariffs 

file with the Commission have overcharge time limitation rules 

132 conferences in the foreign commerce of the United States w

tariffs on file with the Comlnission about half 65 have no time 

itation rule Of the remaining 67 45 are outbound and 22 are inbou

rhere aTe nonconference carriers which have time limitation rules 

there are eonferences which have no such rules but whose individ

memb rs may

The Initial Decision

In his initial decision the exanliner concluded that the car

imposed time limitations had not violated and werenot likely to vio

either sections 14 Fourth 15 16 and 18 b 3 of the 1916 Ac

section 2 of the 1933 Act He further concluded that the limitati

did not preclude shippers fronl filing for or recovering repara

under section 22 He therefore found no necessity for the promu

tion of the Commission proposed rule under section 43 of the 

Act Additionally the examiner concluded that in any case the C

mission has no juri diction to promulgate any rule prescribing 

time within which carriers must consider claims presented to th

for adjustment offreight charges

12 F LC
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 303

Exceptions have been filed to the initial decision alleging that each

of the above mentioned findings and conclusions of the examiner is

incorrect as being contrary to law and or the evidence and testimony

presented in the proceeding Exceptions are also taken to the exam

iner s exclusion of certain proffered evidence and testimony from the

record in this proceeding as well as his failure to take official notice

of certain matters Except for the position taken by the examiner on

our jurisdiction to promulgate any rule governing carrier imposed

time limitations our conclusion generally agrees with his

Authority To Promulgate Rule

All parties excepting to the initial decision take issue with the exam

iner s conclusion that regardless of what the effects of the carrier

time limitation rules were shown to be the Conmlission lacks the

authority to promulgate its proposed rule These proponents of out

proposed rule contend that the Commission has broad rulemaking

powers authorizing it to promulgate a rule relating to the subject

matter of any section of its statutes irrespective of a showing that

such rule is needed to prevent violations of a type which has occurred

in the past or is likely to occur in the future Additionally they urge

that even ifthe Commission s l ulemaking powers are not so broad the

carrier time limitation rules are violations per se of section 18 b 3

of the 1916 Act and section 2 of the 1933 Act because adherence to

them can only result in the retention of greater compensation for the

transportation service rendered than that specified in the tariff when

ever overcharges are made and no claim is presented to the carrier

within the sp cified time Finally the argument is made that the

language of section 22 of the 1916 Act and the interpretation by

courts and administrative agencies of similar statutes establishing

limitation periods indicate Congress in section 22 enunciated a public

policy outlawing carrier limitations ofless than 2 years on considera

tion ofovercharge claims

Opponents of our proposed rule urge that the examiner was correct

in his conclusion that we lack the authority in any case to promulgate

the proposed rule because there is no specific authority to promulgate

rules relating to the time within which carriers must consider claims

in the statutes we administer They point to the Interstate Commerce

Commission and its experience under the Interstate Cormnerce Act

and argue that since the shipping acts and the Interstate Commerce

Act are to be similarly construed see U S Navigation 00 v Ounard

S 00 284 U S 471 1932 the presence ofspecific time limitations

in the Interstate Comnlerce Act and the absence in our statutes should

compel the conclusion that we are without jurisdiction over carrier

12 F M C
304 FEDERAL MARITIME COMMISSION

imposed time limitations Alternatively the carriers assert that e

assuming the Commission had the authority to prohibit time lim

tions if they violated the statutes we administer they may no

prohibited on the theory that they are per se violative of section

and 18 b 3

The Commission has carefully reviewed the reasoning which 

the examiner to conclude that we werewithout jurisdiction to prom

gate a rule governing the time within which carriers subject to 

jurisdiction will voluntarily accept for consideration claims for fre

adjustments We have also considered the arguments of the part

both those in support of and those opposing the conclusion of 

examiner Nothing presented here requires that we change our con

sions as set forth in our prior report in this proceeding 10 F MC 

As for the attempted analogy betwee rl the Interstate Commerce 

and the statutes we administer we have already said in response 

much the same argument

The practice of the ICC prior to the amendments of thestatutes under w

it operates providing that claims against carriers and forwarders had to 

made and that actions on such claims had to be brought within certain t

limitations is notinstructive forourpurposes Ibid at 5

vVe might also reiterate that our decision not to promulgate the r

at this time is not to be interpreted to allow carriers in any way 

limit the right of a

shipper to file his claim under section 22 of 

1916 Act including but not limited to such matters as attempting 

condition the filing of a complaint with us upon a prior filing w

the carrier

Necessity for Proposed Rule

Proponents of the proposed rule make two basic attacks on 

present carrier imposed limitation provisions one relating to the 

lawfulness of theperiods established by these provisions and the ot

concerning the allegedly inequitable manner in which these provisio

have been applied both of which they allege demonstrate the nec

sity for the proposed rule

Lawfulness of the LimitationPeriods

Proponents of the proposed rule maintain that shippers are una

to have their files audited until after carrier limitation periods ha

expired and are thus unable to file withinthe time allowed Additio

ally they allege that claims are often not acknowledged and if fi

after the limitation periods have expired are not considered even 

acknowledged to be valid Delays in settlement of many claims 

also alleged and it is charged that carriers have in specific instanc

12 F MC
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 305

actively defeated the right of shippers to seek reparation here by

effectively utilizing their limitation rules to waste away the 2 year

period for bringing an action before the Commission

The ground upon which time limitation rules established by carriers

can be declared to be unreasonable is of course the inability ofshippers

to discover the basis of the alleged wrongs and to present claims with

the carriers for their correction withinthe prescribed periods Inshort

is 6 months a fair reasonable time to allow shippers to discover and

file overcharge claims 3

Robert E Vantine appeared on behalf and in his capacity as

general traffic manager Qf Bloomingdale s New York and its six

branch stores a division of Federated Department Stores Mr Van

tine maintained that carrier imposed 6 month limitations for the filing

ofclaims with them are unreasonable because ofthe usual course ofhis

company s business operations He testified that the merchandise of

many shippers is often transported in a consolidated shipment covered

by a single hill of lading Ittakes a staff of five to nine people in the

import office from 7 to 10 days to obtain landed costs of each commodi

ty in a shipment Two to four days are needed to remove freight from

the piers and another week is needed to obtain all cases and cartons

from U S Public Stores O er 75 percent of Bloomingdale s

imports

are stored because ofthe large volume duringJune July and August

until they are ready for processing in our normal receiving opera

tion When mer handise is called in from thewarehouse itis matched

to the receiving record attached to the figured invoice Shipments are

then checked for shortages and damage and merchandise is retailed

by the individual department manager after which price tickets are

made and marketing is done Imports for the branch stores are sent

to these stores from the warehouse together with the invoices after the

merchandise is retailed at the New York store Loss and damage claims

are then processed and sent back to the import office which computes

the prorated charges covering the loss and or damage portion of the

shipment and releases supporting documents for actual claim filing

with the carrier It is impossible to release any documents from our

files untilevery single invoice has been checke4 marked and processed

3 As we have observed the typical period of time carriers establish for the presentation

of alleged overcharge claims is six months from the date of shipment Although a few

carriers operating in our domestic offshore trades have greater or lesser limitation periods

no representatives of any domestic offshore carriers testified and the evidence and testi

mony of shipper witnesses related almost exclusivelJ to overcharge claims in foreign

trades In fact the only indications of record that domestic claims are different from

foreign claims would seem to suggest that they may be processed more quickly The limita

tions respecting the time within which carriers will consider overcharge claims based on

alleged errors in weight measurement or description present a special situation whicb we

will treat separately hereinafter

12 F lfC
306 FEDERAL MARITIME COMMISSION

through the necessary nonselling departments which can take upwa

of 6 months from date of shipment Although domestic freight 

are audited internally and are sent out for post audit after one ye

no audit is made of foreign freight bills The reason given for th

that we do not have the various steamship lines tariffs

Ve would have to probably hire extra people just to take 

tariffs and to keep them up to date we do not employ 

expert rate man who knows steamship tariffs Itwas estimated 

the total additional expense involved in a preaudit of freight 

would be in the neighborhood of 15 000 and 20 000 and that 

expense was not justified because the loss estimated on overcha

claims was only 5 000 to 6 000 In instances where moneys are 

vanced by the shipper s agent it might take some time to get 

dence of the paid freight bill Atone time post payment audits w

performed for Bloomingdale s by OFC but such audits have not b

Illade for 3 or 4 years

4

1r Barrie Vreeland appearing on behalf of the Shippers C

ference of Greater New York Inc an association consisting of 

proximately 60 large and small manufacturing and trading indus

in the greater New York area also maintained that shippers could 

present claims withinthe time periods established by carriers beca

of the expense required for a preaudit which he estimated w

require a fully assigned nlan or personnel to work on a daily basi

Heraised the problem also alluded to by 1r Vantine ofthe diffic

in obtaining quickly all the documents which nlight be needed to 

stantiate a claim which theshipper may have prepared abroad beca

of the great distance involved in import transactions NIl Vree

also acknowledged that the reason why foreign departments of CO

rations do not employ the tiIlle and nloney to audit foreign claim

that The big money is in domestic

1r Desmond B Goodwin traffic manager Burroughs Corp te

fied that his company had not made an audit in well over a

year 

4 Although Mr Vantine also appeared on behalf of the New York Retail Traffic Ass

tion a nonprofit organization comprised of 32 leading retail stores in and around 

New York area it does not appear from the record exactly what the experience of 

stores has been with respect to carrier limitation rules or that their methods in han

claims are similar to those of Bloomingdale s The record in this proceeding merely s

that Mr Vantine was authorized to speak on the matter of the carrier rules because 

problem in trying to tile overcharge claims we find is a common thing with our 

store members Copies of Mr Vantine s statement were not submitted to anybody in 

association prior to his testimony At the oral argument Mr Vantine also appeare

behalf of the National Retail Merchants Association an organization comprised of 

12 000 retail stores throughout the United States which excepts to the examiner s dec

on the grounds that carrier rules denied shippers the opportunity to have 

shipments audited by an outside agency in order to recover overcharges due to 

present sixmonth limitation on the filing of ocean freight shipments

12 F M C
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 307

that no full or regularly occurring audit is performed but that docu

ments are called in from the company s divisions for a

spot check at

irregular intervals ofnot less than ayear Spot checks are performed

only upon a select number offreight bills after which the freight bills

are sent to an outside audit firm for post audit Few overcharge claims

are picked up in the internal spot check many more being picked up

in the outside audit

Robert Sergeant appearing on behalf of the Lamp and Shade Insti

tute of America testified that many ofhis members must use an out

side auditing firm to do their auditing because of their inexperience

with tariff matters and that the internal handling the in

surance the internal workings of the organization the limited

personnel small organizations contribute to the inability of

shippers to have audits made within six months He acknowledges

however that some of them do use an outside agency to file claims

withincarrier imposed 6 month rules

111 Henry Wegner executive vice president Ocean Freight Con

sultants Inc also testified that his customers were not able to perform

audits within 6 months ormake documents available to outside audit

ing firms within that time

The foregoing indeed shows that claims are not nOl1nally presented

to carriers within 6 months but it does not show that 6 months is an

unreasonable period in which to require that claims be presented The

testimony demonstrates that some shippers do not present their ocean

freight overcharge claims because of their merchandising practices

others because of their internal auditing procedures orlack thereof

and still others because they prefer to process claims which offer a

greater monetary return These are all matters of managerial judg

ment and we will not intrude in this area 110reover they are matters

not relevant to the ability of a

shipper to present a claim in atimely

fashion Insofar as delays are caused by a

shipper s internal proce

dures or even by a

backlog of auditing with which a shipper might

be faced the delays are chargeable solely to the shipper See

United States v SS Olai borne 252 F Supp 897 900 S D Ala

1966

The only relevant consideration is whether or not shippers can ac

quire the necessary documents and can make some sort ofprelinlinary

examination of them in order to present a claim to the carrier within

6 months There is no indication on this record that they calillot do so

The general allegations that claims cannot be filed in a

timely fashion

12 F M C
308 FEDERAL MARITIME COMMISSION

to the extent they are supported at all are supported by factors whi

are not relevant 5

Once a claim is presented withinthe meaning ofthe carrier rul

more detailed information may be needed to substantiate the clai

However the essential purpose of carrier s limitation rules is mere

to require that an indication be made to the carrier within its p

scribed time period that a shipper is presenting a claim on a certa

nlatter and to inform the carrier in a general way ofthe basis for th

claim The uncontradicted testimony of one experienced in both fo

eign freight forwarding and auditing activities stated that the limit

tion periods could be met by filing th bill oflading and or freight b

together with a statement of the basis of claim Although addition

documents such as shipper s certified invoices and packing lists mig

be important in eventually establishing the validity of a claim the

is no requirement under the carrier rules either that claims be fu

substantiated or that refund be made within 6 months Furthermo

once a claim has finally been denied by a carrier the shipper may s

seek and in a proper case recover reparation before the Commissi

at any time within 2 years of the alleged injury and this is tr

whether the claim has been denied by the carrier on the merits or 

thebasis of atime limitation rule

We find the record in tlusproceeding bare of any significant in

cations that a 2 year period is heeded tor the filing of overchar

claims The record actually shows that all types ofshippers small a

large acting for themselves or through forwarders importers a

exporters not only can but in fact do file claims within 6 months

Shipper testimony indicates that since very small amounts oft

less than 200 are involved in overcharge claims some shippers 

not wish to spend time and money trying to collect them But th

situation would exist whether there was a 6 month rule or no ru

at all The only meaningful indicatio of an additional substant

financial outlay which might have an impact on the filing of clai

would be the expense necessitated by the utilization of a preaudit T

question of whether to pursue such a practice is also obviously o

5

The extent to which internal procedures like those described by some of the ship

witnesses herein are widespread moreover does not appear Although several of th

witnesses represented large Shipper groups because the 6 month rules were matters 

common interest there is no clear indication of record that merchandising and audi

practices like those described by these witnesses were common to all or even most of 

members of their associations In most cases speakers statements were not submitted 

approval to the groups for which they spoke

Additionally even if such considerations were relevant they would not on the b

of the record in the proceeding adequately support the promulgation of the Commissio

proposed 2 year rule since the longest period mentioned in connection with the de

alleged to be caused by such practices isabout 1 year

12 F M C
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 309

properly within the sphere of business judgment but there is nothing

inherent in the carrier limitation rules which would necessitate such

preaudit nor does the record indicate that the operation of the rules

has made itnecessary

Several shipper interests testified as indicated above that many

shippers did notpossess the requisite skill required to interpret tariffs

and could not afford to have or did not have tariffs readily available

These arguments likewise do not indicate that the carrier time limita

tion rules are unreasonable The technical problems involved in tariff

interpretation are facts of transportation life and would exist under

any or even inthe absence ofcarrier limitation rules

Since we find that shipp rs can and do present claims to carriers

within their limitation periods we cannot conclude that the mere

establishment ofthese periods by conferences is an unreasonable pro

cedure for hearing and considering shippers requests and complaints

For the same reason we cannot find that such periods are unreasonable

ifestablished by nonconference carriers or individually by conference

carriers Furthermore the limitation rules cannot be found to violate

either section 14 Fourth or 16 First ofthe 1916 Act since they purport

to treat everyone subject to them alike 6and since all types of shippers

can and do comply withthem 7

Section 15 requires not only that the procedures established by con

ferences for hearing and considering shippers requests and complaints

be reasonable but also that they insure that such hearing and consid

eration will be given promptly and fairly

In maintaining that carriers use their time limitation provisions

so as not to promptly hear and consider their requests and complaints

shippers maintain that claims are often not acknowledged and that

delays in settlement are encountered The failure to acknowledge or

promptly consider claims would obviously when adopted as a practice

by conferences be unlawful under section 15 Moreover such failure

by conferences or carriers could result in violations of sections 2 and

J 8 b 3 and defeat actions for reparation contrary to the policy of

section 22

There is however no necessary relationship between failures to

acknowledge claims and a limitation rule Neither is there a

necessary

o The U S Government presents a justified exception and its situation is considered

infraat 20 22

7

Section 14 Fourth forbids carriers to unfairly treat or unjustly discriminate against

any shipper in the matter of adjustment and settlement of claims Section 16 First

prohibits any undue orunreasonable preference of advantage orany undue or unreasonable

prejudice or disadvantage to any particular person The question of whether the applica

tion of the limitation rules has resulted or will result in unlawful activities under the

statutory provisions involved inthis proceeding is treated infra at pages 20 25

12 F M C
310 FEDERAL MARITIME COMMISSION

relationship between delays in the settlement of a cla im once it ha

been presented to the carrier and a rule prescribing the time durin

which a claim must be so presented Clearly such occurrences cou

exist under the Commission s proposed 2 year rule or no rule at a

On the other hand the existence of 6 11l0nth rules clearly does not 

itself prevent acknowledgment orcause delay in processing claims s

such relationships exist they must therefore be demonstrated on th

record

The record in this proceeding fails to show a

relationship betwee

failures to acknowledge and delays in processing claims and thecarrie

rules 10reover it fails to show that failure to acknowledge or delay

in processing claims are in general common occurrences To the con 

trary the record is replete with documentary evidence ofconsideratio

of claims filed within carrier limitation periods provided by carri

rules and acknowledgnlent of claims filed after limitation period

had expired There is little indication that claims filed after theexpira 

tion of the limitation periods vere not acknowledged aside from th

bare allegations to that effect from a few witnesses 9

Insofar as delay

are concerned some delay is necessitated by attempts by carriers 

verify older claims In spite of this however payment of claims 

general appear to have been quiteprompt 1o 

Thus carrier limitation rules not having been shown to be unreaso

able or unfair as to time periods provided for the presentation o

claims and not having been shown to have been used by conference

or carriers to failto acknowledge or to delay settlement ofclaims ca

only be declared unlawful as proceduresll if their effect is to violat

sections 2 and 18 b 3 by defeating the policy of section 22 There 

nothing inherent in the carriers present time limitation rules whic

would prevent a

shipper from seeking reparation based on overcharge

and in a proper case collecting them if a

complaint is filed under se

tion 22 at any time within2 years ofthe alleged injury Moreover w

8Of course such rules if valid would allow carriers to refuse to consider VOluntar

claims filed after 6 months However since as we have indicated such procedures ha

not been shown to be unreasonable if not shown to be otherwise unlawful the refusal 

consider claims not filed within the limitation periods established by carriers as disti

guished from a general failure to acknowledge claims or the delay in considering time

filed claims ould not be improper

9 A very few follow up form letters from OFC about a dozen at most indicate th

letters originally sent to carriers were not acknowledged but the original letters wit

respect to these claims are not of record and even with respect to the claims to which th

follow up letters refer the exhibits often indicate that discussions were being conducte

between OFC and the carriers There is some indication that claims already denied eith

on the meritsor as time barred were not acknowledged when refiled

10 Exhibits cited by OFC to indicate delay in pa yment of claims show the vast majori

of them were paid within 4 months from time of filing

11 This is of course aside from the question of inequities in their application discusse

infra 20 25

12 F l1C
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 311

have declared that it would be contrary to the policy of Congress and

a violation of the shippers rights granted by section 22 for a carrier

in any way to limit or condition the availability of the reparation

rbmedy The sole remaining question under section 22 therefore is

whether there has been a sufficient showing in this proceeding that

carrier limitation rules have been used as a device to thwart recovery

before the Commission In maintaining that the rules have had such

effects the shipper interests in thisproceeding allege that carriers keep

the existence of section 22 as a jealous secret that shippers are not

informed by carriers of the right to reparation under the 1916 Act

that even if they knew of such remedy the expense of pursuing it

would be prohibitive and that the record shows several instances of

carriers wasting away the 2

year statute of limitations for filing

complaints with the Commission through their 6 month limitation

rules Although carriers generally do not inform shippers about section

22 procedures there is absolutely nothing in therecord in this proceed

ing that bears out the allegation that carriers guard the existence of

section 22 as a

jealous secret Iffact there is documentary proof

of several instances in which carriers and conferences have informed

shippers that nothing in their rules in any way prohibits a shipper

from seeking reparation before the Commission in a proceeding

brought under section 22

Itis obviously true that all shippers may not kno v of the remedies

a vailable under the 1916 Act Because of this the Commission pub

lishes a

special booklet describingin detail but in simple nonteclmical

language the remedies available to shippers under the statutes it ad

ministers The booklet Ocean Freight Rate Guidelines for Shippers

is available for general sale to the public at the U S Government

Printing Office Pages 10 11 of the booklet describe the procedures

offered by the Comn1ission for informal staff adj ustment of claims 12

as

well as reparation procedures under section 22

The evidence of record gives no indication that carriers have

thwarted the shippers right to seek reparation under section 22 by

wasting away the 2

year period during which such action could

have been brought The impression given by OFC is that shippers

were deluded into believing that overcharges would be refunded on

claims which had been presented after the expiration of the limitation

periods and then after the 2

yea rshad run such claims were denied on

the basis of a time limitation rule Although there is an abundant

12 Evidence of record suggests that on several occasions overcharges were recovered in

formally through the assistance rendered by the Commission s staff without the necessity

of filing acomp alnt under section 22

12 F 1C
312 FEDERAL MARITIME COMMISSION

amount ofevidence indicating that claims filed after expiration of limi

tation periods were denied by carriers as time barred and there is 

showing that some late filed claims were paid there is virtually no ev

dence indicating that shippers were misled by carriers into thinking

that carrier rules would be waived and discovering to their detrimen

when claims were eventually denied op the basis of carrier imposed

limitation rules that it was too late to file a complaint with th

Commission 13

Ve conclude therefore thatthe carrier rules have not been shown to

and as we have observed cannot lawfully be used to prevent the re

covery of overcharges made in violation of sections 2 and 18 b 3

within thestatutory period provided in section 22

Finally although the costs of pursuing recovery of alleged over

charges before the Commission would exist any time a shipper sough

reparation here regardless of whether carriers had limitation rule

or not and thus bear no direct relationship to such rules we do no

wish cost to ctas a deterrent to anyone seeking to recover over

charges no matter how small the amount in controversy Specifically

for this reason we have promulgated special simplified procedures fo

the handlingof all claims involving 1 000 or less specifically includ

ing overcharge claims 14 Rules of Practice and Procedure 19 and 20

46 CFR 502 301 and 502 311 These procedures are neither costly no

time consuming All that is required is the filing of a sworn claim to

gether with supporting documents Unless the carrier against whom

the claim is made does not consent to determination of the claim o

the basis of documents and written arguments no further activity

is required on the part of the shipper Ifthe carrier demands a more

formal adjudication he files an answer to the claim and the shippe

may if he chooses file areply which need be nothing more than 

clarification ofhis original claim Ifareply is filed theshipper serve

a

copy on the carrier Oral hearings and arguments before an examine

will not be held unless the examiner feels that such are necessary t

the proper disposition of the proceeding In fact before hearings ar

held parties requesting them must demonstrate that the filing o

13 The ev1den e of record which OFC contends supports such a conclusion relates t

several claims which were originally filed In periods ranging from about a year to 1

years from date of injury by Westinghouse and had already twice been denied on the bas

of a 6 month rule with an indication that they would also probably haVE been denied o

the merits These claims were then resubmitted by OFC after the 2 year statute had run

14 The evidence of record indicates that the average overcharge claim is under 200 an

very few Individual claims exceed 1 000 Moreover individual claims mlly be aggregate

In a single filing if they total less than 1 000 and in the rare instances where overcharg

claims exceed 1 000 they may be consolidated and handled by a single examiner see 4

CFR 502 158 when such handling facilitates the processing of claims involving the sam

parties and similar issues In filet such consolidation occurs as a matter of COHrse

12 F M C
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 313

affidavits or other documents will not permitthe fair and expeditious

disposition of the claim and the precise nature of the facts to be

proved at the hearing The Commission reserves the statutory right

to review all final determinations ofthe examiner Thus unless a party

can demonstrate that more is needed the small claims procedure re

quires merely thesubmission of a few pieces ofpaper

On the basis of the foregoing we conclude that there has been no

demonstration that the 6 month rules now used by carriers are un

lawful as procedures and no necessity on such basis has therefore

been shown for the promulgation of the Commission s proposed rule

Overcharge Olaims Based on Weight Measurement or Description

Some carrier imposed time limitation provisions require that over

charge claims based on alleged errors in weight or measurement will

not be considered unless presented to the carrier in writingbefore the

shipment involved leaves the custody of the carrier 15 Others include

errors in description in the category of claims which must be pre

sented while the shipment involved is still in the custody of the car

rier 16 Still others provide that claims for overcharges based on al

leged errors in weight or measurement may be considered by the car

rier if presented within 6 months but may be rejected if not presented

while the cargo to which they relate is still in the car ier s custody 17

Shippers or the forwarders who act as their agents are guaranteed

prompt issuance of bills of lading by law and the evidence of record

indicates that such bills oflading are in fact available to them at or

shortly after the time the vessel sails Other documents which may

be helpful in establishing such claims are also promptly available to

shippers Packing lists provided by packinghouses engaged in the

business of packaging shipments for export which are issued to ship

pers andaclrnowledged by OFC to be used by these shippers or their

forwarders to supply the information which appears on the bills or

lading are also obviously available to shippers or their agents in such

cases not only before cargo arrives at destination but at the time itis

delivered to the carrier Additionally OFCacknowledges that dock

receipts which must by law be issued when cargo is received hy car

riers have provisions for the receiving clerk to show measurements

and that any discrepancy between these figures and the packing list

can be checked Ifany error occurs the shipper should be able to con

III See e g North Atlantic Mediterranean Freight Tariff No 10 FMC 3 2d rev p 36

effectiveDec 6 1968

16 See eg Pacific Westbound Conference Local Freight Tariff No 3 FMC 8 original

p 43 effective Mar 15 1969

17 See e g US Atlantic Gulf Santo Domingo Conference Freight Tariff FMC No 1

4th rev p 13 effective May 6 1968

12 F M C
314 FEDERAL MARITIME COMMISSION

tact the com ignee or his agent in sufficient time to have the cargo re

checked at dest ination before the carrier releases it from its custody

l10st of the evidence and arguments in thisproceeding related to claim

other than those involving alleged errors of weight or measuremen

and there is no clear showing on the record in this proceeding that ca

rier rules requiring the presentation ot certain claims betore shipment

lea ve the custody of the carrier have prevented shippers from makin

it timely presentation of such claims because the necessary documen

werenot availablein time

On the other hand the record indicates that there aresome practica

considerations supporting the carriers overcharge limitations Hearin

counsel themselves indicate that the older the claim the more difficu

the proof andthat proof of misweighing or mismeasurement or mi

description is obviously more difficult after the goods leave the custod

of the carrier Obviously it is extremely difficult to verif

weights and measures and in many instances descriptions once carg

has been released fronl a carriers custody Cargo can be reweighed o

remeasured whilestill within a carrier s custody and such calculation

determined with absolute certainty Once removal has been made how

ever thecarrier no longer has the means to verify weights or measur

ments physically In many cases cargo is untracea le either because 

has been consumed or no longer exists in its original form In st

others it has been sold and is no longer available to the original shippe

or consignee Even if cargo werestill in existence and could be tendere

to carriers for reweighing or remeasuring the possibility exists that 

may be less than it originally was Descriptions too are difficult 

verify because once cargo is put into the stream of commerce its phys

cal characteristics may have changed so that it no longer resemble

the description originally contained in the bill oflading orother doc

ments available to shippers and carriers Overcharge claims based o

changes in commodity descriptions after the cargo has left the ca

rier s custody may also present problems requiring technical guidanc

from experts such as engineers and chemists which the record he

shows can be especially difficult and time consuming The carrier

efforts to protect themselves against such claims cannot on the bas

of the record in this proceeding be said to be unreasonable

Larwfu7Jness of Manner of Enforcem ent of Time LimitationProvision

A number of conferences have amended their tariffs to specifical

exempt overcharge claims by the Government frOln the 6 montll rule

and only three of four carriers still apply these rules to the Gover

ment In these few instances the General Accounting Office withhold

payment pendinga preaudit

12 F M C
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 315

Ithas been contended in exceptions to the initial decision that the

failure to apply time limitation rules to claims presented by the Gov

ernment results in the unfair treatment of or unjust discrimination

against any other shipper in the matter ofthe adjustment or settlement

of claims in violation of section 14 Fourth It is true that when the

United States comes down from its position of sovereignty and enters

the field of transportation it may subject itself to the same conditions

affecting that transportation to which private individuals may lawfully

be subjected Specifically it has been held that limitation periods pro

viding for the time ofboth filing of claims with carriers and the bring

ing of suits are valid conditions controlling the G01rernment s trans

portation contracts when such conditions are lawful when applied to

other shippers 18 However the United States also has the power to

exempt itself from conditions of carriage which may lawfully be ap

plied to other shippers 9

and in fact article 11 of the Standard Mili

tary Sea Transportation Service contract exempts the Government

from the provisions of the Carriage of Goods by Sea Act requiring

notice of loss or damage before the carrier surrenders custody of the

cargo and the institution of suit based on loss or damage claims within

1 year The United States does not generally bargain with the car

riers at arm s

length and as an equa1 20 The General Accounting Office

is required by statute 31 U S C 71 to audit ocean transportation

accounts and in situations in which carriers refuse to exempt the

Government from limitation rules has refused to make freight pay

ments until the accounts have been audited

Section 14 Fourth does not outlaw all differing treatments between

shippers with respect to the adjustment and settlement of claims but

only those hich are unfair or unjustly discriminatory and it is

well settled that the determination of whether ornot actions under 14

Fourth are unjustly discriminatory orunfair is a question of fact whose

resolution must turn upon the record established in a particular pro

ceeding 21 and that the existence of unfair or unjustly discriminatory

conduct must be clearly established by substantial proof 22

There is nothing in any prior decision of the Commission which

would dictate as OFC contends that the United States must in all

18 See eg United States v Chicago RI P R Co 200 F 2d 263 5th Cir 1952

United States v Seaboard Airline RR Co 22 F 2d 113 4th Cir 1927

19 For indications of the existence of this power see U S v Gydnia American Shipping

Lines 57 F SUIPP 369 D C NY 1944 and U S v Cia Na veira Continental S A 202

F Supp 698 S D N Y 1962

20 For example the Government may lawfully require as a condition for dealing with

carriers that rates be guaranteed for 1 year See AlIterican EX J01 t Isbrandtsen Lines Inc

F M C 380 F 2d 609 612 DC Cir 1967

Zl See Anterican Export Isbrandtsen Limes Ino v F M C J supra at 619

22 See PhUa Ocea1t Tra ffic Bureau v EXp01 t S S Corp 1 VS S B B 538 541 1936

12 F M C
316 FEDERAL MARITIME COMMISSION

circumstances be treated iike every other shipper 23 and hearing cou

sel themselves conceded that the Government is unique and may 

entitled to special treatment on occasion We conclude that althoug

the United States as a shipper has no absolute right to be exempte

from the carrier limitation rules the failure to apply such rules to th

United States is not unfair or unjustly discriminatory with respect 

other shippers because of the peculiar bargaining position of th

United States originating in statute and sanctioned by court decision

Additionally the carriers have a legitimate interest in facilitatin

prompt payment of freight charges and the record in this proceedin

indicates a variety of problems which the United States may meet 

its attempts to comply with the carriers time limitations because ofit

unique size and the far flung nature ofits transportation activities

OFC and hearing counsel contend that even ifthe exemption ofth

Government is proper the inequitable mannerof applying time lim

tation rules to other shippers has resulted in unfair treatnlent of an

unjust discrimination between those shippers in the adjustment an

settlement of claims in violation of section 14 Fourth

In support of this contention hearing counsel maintain that the

exhibit 74 alisting of claims filed by the United Nations as a shippe

against various carriers indicating some claims filed after the carrie

6 month limitation periods werepaid andsome werenot showsthat th

United Nations was also frequently exempted from the carrier lim

tations and that the proferred evidence contained in thisexhibit show

sufficient proof of violation of section 14 Fourth to require promulga

tion ofthe Commission proposed rule Exhibit 74 wasexcluded by th

examiner and hearing counsel and OFC except to this exclusion 

Even assuming arguendo that the examiner should have admitte

23 OFC refers as authority for this proposition to several statements made by a Comm

sion examiner in the initial decision in docket No 6649 North Atlantic Mediterrane

Freight Conference Rates on Household Goods These statements indicate only th

Government shipments are in the commerce of the United States within the meaning 

the 1916 Act and inddcate the examiner s opinion as to whether or not a competitive re

tionship is necessary between shippers to establish violation g of sections 16 and 17 of th

1916 Act The Commission sreport in docket 6649 11 F M C 202 1967 reversed o

other grounds American Export Lines Inc and Prudential Lines Inc v FMO an

Unitedl States F 2d 2d Cir 1969 differed from that of the examiner In it th

Commission merely found after concurring with the examiner that Government shipmen

are commerce that ch8llging two agencies of the Govern menlt the Departmen1t of Sta

and the Military Sea Transportation Service different freight rates violated the firs

paragraph of section 17 of the 1916 Act but not section 16 absent a Showing of a com

petitive relationship The use of the same language in section 14 Fourth as that used t

relate to unlawful rates under section 17 i e unjustly discriminatory would seem 

indicate that the carriers are incorrect in asserting that a

competitive relationsh

between shippers isrequired to establish aviolation of 14 Fourth

24 The examiner had excluded the exhibit because of the failure to make available fo

examination the bills of lading and the proof of pa yment for each claim which would hav

shown the nature of the claim involved and demonstrated payment in fact

12 F M C
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 317

exhibit 74 into evidence we cannot agree with hearing counsel that it

shows an exemption of the United Nations from the carrier rules

The exhibit as clarified and refined by hearcing counsel in their ex

ceptions shows that only 62 clainls out of175 filed after 6 months wexe

paid According to hearing counsel s chart which treats each line in

each conference separately one line paid 41 another 3 4 other lines

2 each and 10 lines 1 claim each Most lines paidnone Except for the

41 claims paid by one line there are almost as many single carriers

involved as there are late payed claims 25

The remaining exhibits of record are equally unconvincing of any

clear pattern of discrimination orunfair treatment In fact the pat

tern indicated would seem 00 be that the farther in time the claim

was made from the end of the limitation period the less likely it was

to be paid 26 and that such misapplications of the rules have grown

less frequent with the passage of time 27 Specific responses to inquiries

from the chairman of the Associated Latin American Freight Con

ference indicate that the payment of at least some claims after the

expiration of the time periods was the result of inadvertence due to

clerical or administrative error Although self serving after the

fact statements are generally not entitled to much weight there are

indications here that such inadvertence may in fact have been rea1 28

Although the record in this proceeding does not show the total num

ber of overcharge claims filed by or for any or all claimants in any

givenperiod what can be gleaned from the record would seem to show

thatthe number of overcharge claims filed against aU ocean carriers

m

It might also be observed with reference to these 41 claims that they may in fact not

Indicate violations of 6 month rules at all These claims were paid by Blue Star Line in

the trade in which it operates as a member of the North Atlantic Mediterranean Freight

Conference which as has been noted has a rule allowing the consideration and payment

of overcharge claims presented after 6 months In cases of obvious errors in calculation

Lacking the supporting b11ls of lading one ma of course not be sure but it is possible

these claims may have been based on such errors and thus payment would have been proper

under the rule

OFC s charts Indicate the following relationships betweeQ claims rejected and time of

claim for carriers using 6 month limitation rules

Timebetween shipments and claims

Over 6 but 12 18 1824 Over

under roths mths 24 mths Total

12 mths

Claims Paid u u

u u u u u u 22 3 36

Claims

Rejected

u 5 17 40 10 72

r1OFC s charts prepared in the first third of 1966 indicate 1 late filed claim was paid

in 1966 4 in 1965 12 in 1964 16 in 1963 and 3 in 1962

S The claim of actual inadvertence Is in fact supported by Independent evidence in at least

one specific instance An official of the Atlantic Gulf West Coast of South America Con

ference advised that a time barred claim had been paid by the Chilean Line because a

clerical error had been made in approving the adjustment the reading of the date of

shipment as April 1963 when It was reallyApril 1962 This is borne out by his letter to

OFC authorIzing the adjustment whereIn the date of vessel departure was mistakenly

giyen as April 5 1963

12 F M C
318 FEDERAL MARITIME COMMISSION

in a

single year may well be in the hundred of thousands 29 The to

number of all overcharge claims of record in this proceeding wh

werepaid after expiration ofthe limitation periods does not appea

exceed 200 Many of these claims were filed from 4 days to 1 mo

after the time periods expired

Many different single carriers are involved often in only a

sin

case To the extent carriers deviated from their rules and paid shipp

after their limitation periods had expired they did so with resp

to both small and large shippers alike In short there is nothing 

the record to demonstrate that the carriers have discriminated betwe

shippers in the adjustment or settlement of claims or that they

likely to do so let alone the existence or likelihood of unjust 

unfair discrimination or treatment in this regard Moreover e

if some showing of unjust discrimination in the application ofcar

limitation rules had been made this would not necessarily dict

promulgation of the Commission s proposed rule A distinction m

be made between the validity of the rule itself and the validity of 

application to individual shippers Rules not unlawful in themsel

do not necessarily become unlawful because they may not alwa

lawfully be applied Promulgation of the proposed rule is not 

remedy for individual misapplications of the carrier impos

limitations 

OFCalso maintains that the application of carrier rules has cau

violations of section 16 of the 1916 Act However it follows that if 

showing has been made ofunjustly discriminatory or unfairtreatm

under section 14 Fourth OFC s claim of undue or unreasonable pr

erence or advantage or undue or unreasonable prejudice or d

advantage of any particular person within the meaning of sect

16 must be rejected since the establishment of a violation of sect

16 generally appears to require in addition to the demonstration 

dissimilar treatment between shippers lacking here a

showing a

lacking here of acompetitive relationship between shippers S

North Atlantic Mediterranean Freight Oonference Rates on Hou

hold Goods supra It is equally clear that the carrier rules are 

unjustly discriminatory between shippers within the meaning 

section 15

Finally there is no evidence that any conference has failed to fai

consider any claims properly filed with it Nor can we on this rec

find unlawful conduct under other provisions of section 15 i e c

l9The record shows that in the period 1964 66 Grace Line alone handled 1 489 o

charge claims and that in a 3 year period Royal Netherlands Steamship Co han

approximately 6 000 overcharge claims just relating to alleged error in weight 

measurement orobvious errors In calculation

12 F M C
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 319

trariness to the public interest or detriment to the commerce of the

United States since the allegations of violations of these provisions

by hearing counsel are conclusory in nature and hearing cowlsel rest

them solely upon the allegations of violations of other statutory pro

visions which we have found the record herein does not support

MiscellCllMous Ewceptions to theInitial Decision

In addition to the exceptions already discussed OFC excepts to the

examiner s exclusion from evidence of letters and certain other matters

appended to their reply brief to the examiner which they claim were

made necessary because of incorrect statements made in a conference

brief and the examiner s conduct ofthe proceeding in general and his

issuanceof a subpeona against OFC in particular

Each ofthese objections is without substance The matters appended

to OFC s brief wereproperly excluded by theexaminer for the reasons

that they were not introduced at the hearing although available at

the time and hence were not subjected to the possibility of cross

examination of their purported authors or because they contained

testimony which attempted to contradict evidence introduced at the

hearing which also of course could not be tested by cross examination

Moreover even assuming that the contested matter should have been

admitted however its presence in the record would make no difference

in our conclusions here

Exception is also taken to the examiner s failure to take official notice

of discrimination between shippers economic reprisals by carriers

against shippers and the report of the investigating officer in fact

finding investigation No 6 Questions of discrimination and economic

reprisal are so clearly questions offact and improper for official notice

that this exception borders on the frivolous The examiner s refusal

was absolutely correct The facts found in the investigative report

are not facts which have been found by the Commission and which

it knows in its expertise but merely the conclusions of a member of

the Commission s staff Even if we were to take official notice of the

conclusions contained in the investigative report they would in no

way affect the results we have reached in this case Itshould also be

noted that although the examiner did not officially notice the report

he did allow OFC s attorney to use its findings in questioning a wit

ness and invited him to utilize the report in his arguments on brief

ofwhich opportunity heavailed himself

Exception is also taken to the examiner s noticing of the Court s

decision in Armement Deppe v United States 399 F 2d 794 5th Cir

1968 The examiner s use and interpretation ofthe court decision was

proper The fact that the decision was handed down after briefs had

12 M C
320 FEDERAL MARITIME COMMISSION

been filed with the examiner is irrelevant Itis his function to exami

all of the law which he feels has a bearing on the resolution of a leg

issue The matter is one involving interpretation of the law and do

not involve questions of fact to be noticed at all Additional

exception was taken to the examiner s official notice of protocol 

amend the international convention for the unificationof certain rul

of law relating to bills of lading done at Brussels 24 February 196

The protocol has not as of this date been transmitted by the U 

Department of State to the Senate for ratification Vhile the examin

certainly acted properly in considering its possible implications w

have chosen not to do so because our decision not to promulgate t

proposed rule herein could not be affected by any interpretation oft

protocol

Finally OFC charges that the examiner s conduct of the proceedin

was unfair We find no merit for this contention whatsoever The e

aminer generally allowed a wide latitude to all parties most partic

larly OFC and often over objections of conference counsel to explo

all possibly relevant matteTS The fact that a

subpoena was issue

against OFC is not an indication that it wasunfairly treated T

subpoena in question was not only the only one served in the procee

ing but wasthe only one requested by any party The matter require

to be produced was entirely relevant to the proceeding relating 

general to OFC s method of operation and in particula r

to overcharg

claims denied on the basis of carrier limitation rules Moreover th

subpoena vas in fact quashed in part because the examiner felt one 

its demands was unreasonable Any exceptions not specifically treate

herein have been considered and rejected as immaterial or otherwi

without merit orunnecessary to the decision herein

For the reasons stated in this report we conclude that the propose

rule should not be issued

The proceeding is discontinued

oommissioner GEORGE H HEARN dissenting

Iconcur generally with the majority report in its co

L 

lating to the lawfulness of carrier 6 month rules and the reasons fo

denying the staff proposed 2 year rule To require carriers to proce

claims submitted after 6 months might encourage spurious claims an

unduly burden carriers in their attempts to defend against all claim

In upholding the carrier rules the majority report finds nothin

therein which would prevent a

shipper from seeking reparation und

section 22 of the Shipping Act 1916 Itis found further by the m

jority that there is insufficient evidence of a use by carriers of the

12 F M C
PROPOSED RULE TIME LIMIT ON FILING OVERCHARGE CLAIMS 321

rules to thwart recovery before the Commission or mislead shippers

as to thefinality ofthe 6 monthtime limitation

On the other hand the majority report does point out that the car

rier 6 month rules cannot be used to prevent shippers from seeking

reparation before the Commission withinthe 2years provided in se

tion 22

Ithink the Commission is obligated to go further than this warn

ing to the carriers by way of an opinion The average shipper is much

less learned than carriers in the laws and rules pertaining to repara

tion and other disputes Shippers have only the carrier s tariff to

guide them The shippers and carriers are often unequal in their posi

tions vis a vis each other

Consequently Iwould require the carriers and conferences to 111

elude in their tariffs where the 6 month rules areset forth or referred

to a recital to the effect that the 6 month limitation in no way abro

gates the shipper s rights under seotion 22 Some carriers and confer

ences have according to the evidence informed shippers of their

rights under section 22 Ifthis has been done voluntarily it cannot be

an undue burden to place on carriers and conferences the requirement

to so advise shippers

I therefore dissent from the continued approval of the carrier

6 month rules without a provision therein informing shippers of

their rights under section 22

SEAL Signed FRANCIS C HURNEY

A88istant SeC1 etary

12 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 404

lIAWAllAN AGRICIDE FERTILIZER CO LTD

v

MICRONESIA INTEROCEAN LINE INC

NOTICE OF ADOPTION OF INITIAL DECISION AND ORDER GRANTING

REFUND

Adopted June 11 1969

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

aminer in this proceeding and the Commission having determine

not to review same notice is hereby given that the initial decisi

became the decision of the Commission on June 11 1969

1tis ordered That Micronesia Interocean Line refund to Hawaiia

Agricide and Fertilizer Co Ltd the amount of 676 26

1tis further ordered That Micronesia Interocean Line Inc publi

promptly in its appropriate tariff the following notice

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

Commission inSpecial Docket No 404 that effective December 23 1968 the ra

on fertilizer no s in bags or sacks from Honolulu Hawaii to Korol Pala

Western Caroline Islands for purposes of refunds or waiver of freight charg

on any shipments which may have been shipped on vessels of the responde

during the periOd from December 23 1968 until March 12 1969 inclusive 

45 25 a ton of 2 000 pounds subject to all other applicable rules reg latio

terms and conditions of the said rate and of this tariff

1tis further ordered That 1icronesia Interocean Line notify t

Secretary on or before July 11 1969 of the date and manner in whi

the refund herein ordered has been made

By the Commission

SEAL Signed THOMAS laSI

Secretary

12 F M C 322
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 404

HAWAllAN AGRICIDE FERTILIZER CO LTD

v

MICRONESIA INTEROCEAN LINE INC

Refund authorized of portion of freight charges collected because of error due

to inadvertence in failure to file a new tariff item on shipment of fertilizer

in bags from Honolulu Hawaii to Koror Palau Western Caroline Islands

Richard Talifor complainant

KaiAngermawn for responden t

INITIALDECISION OF CHARLES E MORGAN PRESIDING

EXAMINER 1

This applicrution under section 18 b 3 of the Shipping Act 1916

the Act wasseasonably filed on 1ay 12 1969 within 180 days from

the date of shipment by the respondent Micronesia Interocean Line

Inc and it was concurred in by the complainant Hawaiian Agricide

Fertilizer Co Ltd The application is for permission to refund to

the complainant 676 26 as a portion of the freight charges collected

on 20 440 pounds of fertilizer in bags shipped December 23 1968

from Honolulu Hawaii to 1 0101 Palau ITestern Caroline Islands

An agreement between the Trust Territory of the Pacific Islands

and the respondent cnlls for freight rates no higher than those in

effect on shipments moving on vessels of the Pacific Far East Line to

the Trust Territory via Guam 01 on the vessels of various other

carriers to theTrustTerritory viaJapan

The shipment of fertilizer herein in issue was charged a

cargo n O S

rate of 94 50 w m whereas it apparently could have been moved

on Pacific Far East Line at a rate of 45 a ton Respondent originally

issued its own tariff effective September 2 1968 but erroneously omit

ted a commodity rate for fertilizer in bags Itsubsequently established

a commodity rate for fertilizer n o s in bags or sacks of 45 25 a ton

of 2 000 pounds effective March 13 1969 Respondent previously had

attempted to obtain statistics showing commodities etc on movements

1This decision became the decision of the Commission June 11 1969

12 F M C 323
324 FEDERAL MARITIME COMMISSION

to the TrustTerritory but was unable to do so in part because reco

in Saipan were destroyed by typhoon Jean

Based on the respondent s newly established rate of 45 25 a

freight charges of 462 46 compared with the freight charged 

1 138 72 approval is now sought to refund the difference of 676 

No other shipments of fertilizer moved on respondent s line duri

this period in issue and the authorization of the refund will 

discriminate among any shippers

Section 18 b 3 of the Act provides that the Commission may 

its discretion and for good cause shown permit a common carrier 

water in foreign commerce to refund a

portion of freight charg

collected where it appears that there is an error due to inadverten

in a failure to file a new tariff item and that such refund will 

result in discrimination among shippers provided that the comm

carrier has prior to applying for authority to make refund file

new tariff item which sets forth the rate on which such refund wou

be based and provided further that if permission is granted by t

Commission to the carrier to make the refund that an appropria

notice will be published in the tariff or such other steps taken as 

Commission may require which give notice of the rate on which su

refund would be based

InSpecial Docket No 403 Italsuler AltiForni e Acciaierie Ri tn

llva e Oornigliano S pA Genoa Italy v Lykes Bros Steamship 0

Inc decided March 2G 1969 the Commission required publication 

a tariff notice regarding a refund under section 18 b 3 of the A

A similar notice in the present proceeding appears to be requir

Accordingly the respondent shall be required to publish ill 

appropriatetariff the follmying notice if this application receives fi

approval

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

Commission inSpecial Docket No 404 that effective December 23 1968 the r

on fertilizer no s in bags or sacks from Honolulu Hawaii to Koror Pa

Western Caroline Islands for purposes of refunds or waiver of treight char

on any shipments which may have been shipped on vessels of the respond

during the period from December 23 1968 until March 12 1969 inclusive 

4525 a ton of 2 000 pounds subject to all other applicable rules regulatio

terms and conditionsof the said rate and of this tariff

Good cause shown the respondent hereby is authorized to refu

to the complainant 676 26 provided that the respondent upon 

ceiving final permission to make this refund publishes the notice 

out in the paragraph preceding this one The respondent shall not

the Commission within 30 days after the date of final decision her

of the date and manner in which the refund herein authorized w

made

CHARLES E MORGAN

Presiding Examine

12 F M C
FEDERAL IVIARITIME COMMISSION

DOOKET No 664

HENRY GILLEN S SONS LIGHTERAGE INC ET AL

v

AMERICAN STEVEDORES INC ET AL

DOCKET No 6647

HENRY GILLEN S SONS LIGHTERAGE INC ET AL

v

COLUMBIA STEVEDORING CO ET AL

Initial DecisionAdopted June 27 1969

Where the Commission in prior decision and order directed respondents to dis

continue charges for shipside lighter service in the future without an ex

press finding of past unlawfulness of such charges complainant inreparation

proceeding cannot rely upon such prior decision and order to establish that

past charges were unlawful since determination of future unlawfulness does

not necessarily mean that past acts were found to be unlawful at the time

thereof

In a reparation proceeding parties who were not parties to a prior adjudicatory

proceeding are notbound under theory of collateral estoppel by the Commis

sion s findings in the prior proceeding

In reparation proceeding to recover charges for shipside loading and unloading

of lighters were complainant lightermen relied upon Commission decision

and order in an investigation proceeding for proof of unlawfulness of the

charges held as to charges prior to effective date of that decision that unlaw

fulness thereof was not established either by findings in the investigation

ploceeding or upon record in the reparati ln proceeding and that in any

e ent lightermen could not recover without proof of actual injury where

Commission had expressly found charges to be authorized by approved

section 15 agreement and therefore not unlawful per se

Complainants found entitled to reparation without proof of injury for charges

assessed by parties to prior investigation proceeding subsequent to effective

date of order therein forbidding such charges forthe future

Ohristopher E lleck lnan for complainants

Alark P Schlefer and Stephen F Eilperin for respondents Ameri

can Stevedores Inc Bay Ridge Operating Co Inc Grace Line Inc

12 F M C 325
326 FEDERAL MARITIME COMMISSION

Internatianal Terminal Operating Ca Inc Maher Stevedaring C

Inc n1arra Bras Inc Jahn V n1cGrath Carp Nacirema Operati

Ca Inc Nartheast n1arine Terminal Ca Inc Pittstan Stevedari

Carp Transaceanic Terminal Carp and Universal Terlninal Stev

doring Corp in docket No 664

Elven S Sheahan far respandent The Cunard Steam Ship Ca Lt

in docket No 664

Frank A Fritz and Averillll1 TVillia1ns for respandent T Hag

Sans Inc in dacket NO 6647

REPORT

By THE Ca lfIISsION Jo11n Ilarllee Ohainnanj James V Day Vi

hai1 1

lWnj Ashtan C Barrett Gearge IHearn and James 

Fanseen 0o1rwnissioners

These consalidated camplaints were braught by the three campla

ant lighterage campanies to recaver as reparatian the full amount 

charges levied by respandents far the loading 01

unlaading Qf CO

plainants lighters and barges alangside vessels maared at piers in Ne

Yark IIarbor The reparatian claims werebased an QUI priar decisi

in dacket 1153 TTuck and Liqhte1 Loading and Unloading Practic

at Neto Y01 c IlarboT 9 F M C 505 1966 wherein we faund the im

pasitiQn af acharge to lightermen far the service in questian to be 

unj ust and unreasanable practice

Dacket 664 is befare us an exceptions to the initial decisian 

Valter T Sauthwarth presiding examiner issued an Iarch 19 196

The examiner faund that reparatian was nat warranted far charg

assessed priar to auI decisian in dacket 1153 and tllat reparatian w

warranted withaut praaf af actual inj ury far charges assessed aft

that decisian Camplainants excepted to that portian af the decisi

denying reparatian whilerespandents excepted to that partian awar

ing reparatian

Ve find that the exceptians are essentially a

reargument af cante

tians which were exhaustively briefed and cansidered by the examin

in his initialdecisian Upan cansideratian afthe recard theexceptian

briefs and arguments af counsel we canclude that the examiner s fin

ings and cQnclusians in dacket 664 were wen supparted and carre

Accardingly we adapt the initial decisian in that praceeding as a

awn and make it a

part hereaf

T

e issued a natice af intentian to review dacket 6647 in the absen

af exceptians to the examiner s decisian in that proceeding The e

aminer found that respandent T I

lagan Sans Inc was nat subje

to Cammissian jurisdictian and concluded that ve cauld nat enterta

12 F M C
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 327

a

complaint against fIogan seeking relalation under section 22 of the

Shipping Act 1916 as amended

Additionally fIogan vas not a party to docket 1153 and our order

therein requiring respondents in that proceeding to delete the charges

in question from their tariff did not apply to Hogan Therefore com

plainants cannot now obtain recovery from Iogan solely by relying

on our past decision in docket No 1153 Since conlplainants introduced

no independent proof of illegality of charges assessed by Hogan no

reparation can be awarded

In other words it is unnecessary for us to resolve the jurisdictional

question to reach our decision Accordingly we are adopting the ex

aminer s decision in these proceedings except that portion thereof

which discusses the question of Commission jurisdiction over re

spondent fIogan ith which we express neither agreement nor

disagreement

The complaint in docket No 664 is dis111issed as to respondents

Cunard Steam Ship Co Ltd and Morace Stevedoring Corp The

complaint in docket No 6647 is dismissed in its entirety

The remaining parties to docket No 664 may either agree or make

proof respecting the amount of reparation if any due fronl each

respondent to each complainant in ac conlance with this decision pur

suant to rule 15 of the Commission s Rules of Practice and Procedure

subject to the stipulation of the parties approved January 14 1969

SEAL THOMAS LISI SeCl eta ry

12 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 664

HENRY GILLEN S SONS LIGHTERAGE INC ET AL

V

AMERICAN STEVEDORES INC ET AL

DOCKET No 6647

HENRY GILLEN S SONS LIGHTERAGE INC ET AL

V

COLUMBIA STEVEDORING CO ET AL

The Commission is without jurisdiction to direct payment of reparation pur

suant to section 22 of the Shipping Act 1916 by a

stevedoring contractor

who does not furnish wharfage dock warehouse or other such terminal

facilities and is neither a carrier nor a forwarder and therefore is not a

common carrier by water or other person subject to this act

Where the Commission in prior decision and order directed respondents to dis

continue charges for shipside lighter service in the future without an

express finding of past unlawfulness of such charges complainant in rep

aration proceeding cannot rely upo such prior decision and order to

establish that past charges were unlawful since determina tion of future

unlawfulness does not necessarily mean that past acts were found to be

unlawful at the time thereof

In a reparation proceeding parties who were notparties to a prior adjudicatory

proceeding are not bound under theory of collateral estoppel by the Com

mission s findings in the prior proceeding

In reparation proceeding to recover charges for shipside loading and unloading

of lighters where complainant lightermen relied upon Commission decision

and order in an investigation proceeding for proof of unlawfulness of the

charges held as to Charges prior to effective date of that decision that

unlawfulness thereof Was notestablished either by findings in the investig a

tion proceeding or upon record in the reparation proceeding and that in any

event lightermen could not recover without proof of actual injury where

Commission had expressly found charges to be authorized by approved sec

tion 15 agreement and therefore notunlawful per se As to charges assessed

by parnes to investigation proceeding subsequent to effective date of order

therein forbidding such eharges for the future complainants found entitled

to reparation withoutproof of injury

R 12 F M C
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 329

Ohristopher E Heckrnanfor complainants

Mark P Schlefer and Stephen F Eilperin for respondents Ameri

can Stevedores Inc Bay Ridge Operating Co Inc Grace Line Inc

International Terminal Operating Co Inc Maher Stevedoring Co

Inc Marra Bros Inc John V McGrath Corp N aciremaOperating

Co Inc Northeast Marine Terminal Co Inc Pittston Stevedoring

Corp Transoceanic Terminal Corp and Universal Terminal Steve

doring Corp in docket No 664

Elmen S Sheahan for respondent The Cunard Steam Ship Co Ltd

in docket No 664

F1 ank A F1it z and Averill M lVilliarns for respondent T Hogan

Sons IIc in docket No 6647

INITIAL DECISION OF WALTER T SOUTHWORTH

PRESIDING EXA INER1

These are complaint proceedings consolidated for hearing and

decision brought by three lighterage companies to recover by way

of reparation the full amount of charges severally paid by thenl to

respondent terminal operators and stevedoring contractors for serv

ices in connection with the loading or unloading of complainants

lighters and barges alongside vessels moored at piers in New York

IIaroor The complaints Were filed in August 1966 following the

Commission s

2

decision of May 16 1966 in docket No 1153 Truck

and Lighter Loading and Unloading Practices at N eWI York Harbor

F M C 505 hereinafter No 1153 In that decision the Commis

sion held that 1 The imposition of a

charge pursuant to lighterage

tariff No 2 of the New York Terminal Conference for over the side

transfer services of the kind in issue here was authorized by the ap

pro Ted section 15 agreement of the said Terminal Conference but

that 2 the imposition of such charge is nevertheless an unjust and

unreasonable practice under section 17 ofthe ShippingAct 1916 the

act 9 F fC at 510 511 Certain other practices not pertinent here

were found to be contrary to section 16 First or section 17 of the act

By order served May 16 1966 the Commission ordered the respond

ents therein the Terminal Conference and its members to cease and

desist frOlll engaging in the violations of section 16 First and section

17 ofthe act herein found to have b n committed by respondents

and within 15 days after the said date to modify the provisions of

their lighterage tariff No 2 and their truck tariff No 6 in a manner

consistentwith our report herein ld at 524

1

This diecis1 D became the decision of the Commission Jurue 27 1969

2 Commission as used herein refers to the Federal Maritime Commission or its

immediate predecessor the Federal Maritime Board

12 F M C
330 FEDERAL MARITIME COMMISSION

On August 4 1966 complainants rull of whom had been intervenQ

in No 1153 fi1ed their complaint in the above captioned docket N

Gti 16 against 16 members or former members of the New York Term

nal Conference 3all of vhom had been respondents in No 1153 

whom the Comnlission s said order of 1ay 16 1966 had been direct

except 10race Stevedoring Corp 10race ltnd Cunard Stea

Ship Co Ltd Cunard Cunard although originally named as 

respondent in No 1153 had been dismissed as a

respondent by ord

of the Commission dated Th1ay 5 1964 Morace was never a party 

that proceeding

The complaint lists by date and amount a number of paymen

alleged 1y made under protest by specified compb inants to specifi

respondents pursuant to the conference s

lighterage tariff for ov

the side transfer between lighters and vessels alongside piers operat

by respondents Most but not all of the payments are alleged to ha

been invoiced upon dates which are within the 2 year period prior 

August 4 1966 and presumably cover transactions at 01 about tho

dates Complainants allege that they have been injured to the exte

of the payments made and seek to recover the amounts thereOf

a

gregating about 284 000 as unlawful unjust and unreasona

charges in violation of secs 15 16 and 17 of the act

On August 15 1966 the same three complainants filed their C0

plaint in the above captioned docket No 6647 against T I

Iogan

Sons Inc Hogan a

corporation which is not alleged to have be

a meniber of the Terminal Conference and vas not a

respondent 

No 1153 5

IIogan is alleged to have collected charges from certain 

the three complainants for similar services aggregating a bout 18 0

which the complainants seek to recover under allegations similar 

those of the complaint in docket No 66 46

The proceedings were stayed pending decision of the U S Co

of ppeals upon a petition to review the Commission s order in N

1153 Upon such petition the Commission s decision was affirmed 

all respects American EJport lsbrandtsen Lines et al v Fede

3 American Stevedores Inc Bay Ridge Operating Co Inc Cunard Steamsbip Comp

Limited Grace Line Inc International Terminal Operating Co Inc Mabel Stevedor

Co Inc Marra Bros Inc Morace Stevedoring Corporation Jobn W McGratb Corpo

tion Nllcirema Operating Co Inc Nortbeast Marine Terminal Company Inc Pie

Terminals Inc Pittston Stevedoring Corp Transoceanic Terminal Corporation Tur

Blancbard Inc and Universal Terminal Stevedoring Corp

Since respondent s cbarges were fixed by filed and publisbed tariffs complaina

right to contest tbem arose and their cause of action accrued if at all upon the date 

set vices were performedrather than any subsequent dateof billing

The cOIlllPlaint in No 6647 was dismissed as to two other respondents simila

situated Columbia Stevedoring Co and United Fruit Co since tbe only claims asse

against those respondents were clearly barred by tbe 2 ear limitation of sec 22 of 

t

12 F l1C
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 331

illaritinw 001nn1ission 389 F 2d 962 D C Cir 1968 The consoli

dated cases were heard August 7 and 8 196 8 Thereafter the parties

undertook pursuant to stipula tions at the hearing to agree upon the

amounts of reparation involved if any After it became apparent that

they could not reach timely agreement upon an details tl1ey stipu

lated with the examiner s approval that the examiner should proceed

to decide the issues as to violations inju ry to complainants right to

reparation and dates ofaccrual thereof andthat ifcomplainants were

found entitled to reparation the amount thereof should thereafter be

determined by a

stipulated pr ocedure for agreement or further hear

ing upon failure to agree Huling upon Stipulation of the Parties

dated January 14 1969

Complainants cla im for reparation is based entirely upon the Com

mission s decision in No 1153 They say that since the Commission

found charges to lightermen for over the side transrer between vessel

and lighter to result in double charges for the same se rvices and there

fore to violate section 17 of Ithe act the charges theretofore collected

from complainants by respondents for such services have been deter

mined to be illegal may be recovered by complainants They contend

that the Commission s determination of illegality applied to all charges

for identical services whether or not exacted by a party to No 1153

and that recovery may be had by the lightermen as the persons obliged

to pay such allegedly illegal charges without further proof of loss

orinjury to them

Respondent members of the New York Terminal Conference herein

arter sometimes referred to as the Terminal Conrerence respondents

argue thatthe Commission is without jurisdiction to award reparation

for illegal stevedoring practices that it cannot award reparation based

upon an investigation insti tuted on its own motion where they say no

finding of past unlawfulness wasmade that the charges in issue were

authorized as the Commission held by respondents approved section

15 agreement and such authoriz tion cannot be retroactively repealed

that complainants cannot show injury to themselves and that jn any

fwent the Commission should not in its discretion award reparation G

6

These respondents also state that they reserve the right to reassert their argument

made upon a motion to dismiss that failure of complainants to verify their complaints

in the first instance was fatal to Commission jurisidiction The examiner denied the

motion to dismiss without prejudice to renewal thereof if respondents did not verify their

complaints promptly permitted complainants to verify their complaints and held that

such verification prior to hearing cured the initial failure to verify citing John8ton

BroarlcasUmg Co v Fecleral Com71wnication8 Com1ni88ion 175 F 2d 351 DC Clr 1949

In 1 e Royal Ci1 cle ojFriend8 Bldg Corp 159 F 2d 539 7th Clr 1947 City Cab8 Inc v

Federal Communications Commi8sion 275 F 2d 165 DC Cir 1960 and Berwick v

Federal Communications Commi8sion 286 F 2d 97 DC Cir 1960 Ruling dated May 29

1968

12 F 1C
332 FEDERAL MARITIME COMMISSION

Respondent Cunard advances several of the same arguments 

adds that it vas not a party to lighterage tariff No 2 having resig

from the Tenninal Conference in March 1964 and that the Comm

sion dismissed Cunard as a respondent in No 1153 prior to decis

therein noting in its order of dismissal that hearing counsel did 

opposethe dismissal inasmuch as the record made duringthe heari

contains no allegations of any past violation by Cuna rd

Respondent Hogan contends that it is not subject to Commiss

jurisdiction since it is a

stevedoring contractoronly and not a tenu

opevator and is therefore not an other person subject to the act 

points out that it was not a

party to the Terminal Conference ag

ment or tariff or to No 1153 and contends that as to itself there 

been a

complete failure of proof ofillegality

THE FACTS

During the 1920 s about 75 percent of the cargo loaded to or 

charged from ships upon the New York City waterfront moved to 

from the oceangoing vessels by lighter as against 25 percentthatmo

over the road When cargo was transferred directly over the sid

between the ship and a

lighter owned oremployed by shipper or c

signee the lightenuan supplied his own men usually casual waterfr

labor to move cargo overthe lighter s deck to or from the ship s tac

from or to the point of stowage on the lighter Ifthe cargo was mo

from the lighter to the steamship pier or vice versa instead of be

transferred directly between lighter and ship the work was likew

done by labor supplied by the lighterman Around the time of VVo

War Ithe lightenuen began to use the stevedores who were enga

in working the oceangoing vessels to move the cargo to and fr

the ship s tackle on the lighter s deck rather than provide their o

men for this purpose When they used the stevedores it was pursu

to arrangements usually informal in nature between the lighterm

and stevedores under which the lightermen paid the stevedores 

agreed amount for the services otherwise no charge wasmade aga

the lighter by the vessel tenuinal operator orstevedoring contracto

connection with moving cargo ove rthe side to or from the light

With the subsequent fonualization of labor practices presumably 

a result of legislation affecting labor relations and wages and hou

the use of the vessels stevedores instead of lightenuen s labor beca

general at or about the time of World vVar IISchedules of char

for direct transferbetween lighter and vessel were worked out betwe

the Stevedoring Committee and the Lighterage Committee of 

Maritime Association of the Port of New York the Maritime 

change an association whose members included steamship operato

12 F M C
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 333

ship chandlers and insurance interests as well as stevedores terminal

operators and lightermen The lightermen paid such agreed charges

lor handling cargo aboard their lighters in connection with over the

side transfer in lieu ofperforming the work themselves When cargo

was transferred between lighter and pier the lightermen generally

used and now use almost exclusively the firm of William Spencer

Son who are primarily railroad stevedores engaged in loading and

unloading railroad lighters and cars at steamship terminals Spencer s

charges are negotiated with the lightermen Spencer s charges to inde

pendent lightermen for transfer between lighter and pier were at all

times two to three times the amount ofrespondents charges to lighter

men in connection with direct transfer between lighter and ship since

the latter covered only movement on the lighter deck from the ship s

hook to point ofrest and stowage onthe lighter or vice versa

From and after 1949 at least it was the practice to include in con

tracts between carriers and stevedores or terminal operators covering

the stevedoring of the carriers vessels the following clause or an

equivalent provision

Income from handling lighters and cars The contractor shaH collect and retain

its customary cha rges for 3Jbor services in cQnnecUon WJiMl the load ing and

unldading of railroad cars lighters barges and SCows

The foregoing clause was developed and published by the Stevedor

ing Committee of the 1aritime Association of the Port of New York

in 1949 The customary charges referred to therein included those

in issue here

The amount of the charges for direct transfer came up for discus

sion between the lighterage and stevedoring committees every 2 years

Agreement uponrates for the ensuing period wasattended by consider

able wrangling particularly as labor became more expensive while the

lightermen s business was declining rapidly a witness estimated

that only 3 or 4 percent of all cargo now moves by independent

lighter From 1951 to 1961 printed rate sheets were publi hed bear

ing the heading Schedule of rates for loading and discharging der

rick lighters covered barges and deck scows alongside of vessels in

the Port of New York adopted by the Stevedoring and Lighterage

Committees of the Maritime Association of the Port of New York

The last ofthese stated that it was effective from October 1 1959 to

September 30 1961

In or about 1960 the terminal operators who as such were subject

to the Commission s

jurisdiction realized for the first time appar

ently that their joint agreement upon such rates required Commission

approval In 1954 they had filed for section 15 approval an agreement

12 F IC
334 FEDERAL MARITIME COMMISSION

designated New York Terminal Conference Agreement with resp

to charges for truck loading at their terminals F MC Agreement 

8005 approved 1arch 23 1955 Under date of May 6 1960 they s

mitted an amendmant to agreement No 8005 which recited that 

parties desired to establish publish and maintain tariffs fix

charges for loading and unloading lighters and barges at piers op

ated by said parties and provided for appropriate amendments 

agreement No 8005 to authorize such activity The amending ag

ment No 8005 3 wasduly approved by the Commission J une 30 19

Pursuant to this agreement the Tenninal Conference issued 

Lighterage Tariff No I dated January 20 1961 effective Febru

20 1961 showing rates for various commodities and cargo not oth

wise specified Except for the addition of less volume rates applica

to transfers aggregating less than 100 tons the rates were the same 

those in the then current rate sheet agreed upon by the stevedor

and lighterage committees The rates were stated to cover the serv

of loading and unloading derrick lighters covered barges and d

scows all of which yill hereinafter be referred to as lighters alo

side vessels which are moored at steamship piers within the Port 

Greater New York operated by the participatingterminal operator

and to include whatever movement is necessary aboard the ligh

to make cargo accessible to the ocean vessels

loading gear and 

affixing of cargo to said loading gear as yell as stowage of c

r

aboa rdlighters in a safe reasonably efficient manner consistent 

the custom and practice in the Port of New York The terminal op

ator agreed to supply all necessary labor alid equipment mechan

apparatus used on lighters was to have rubber tired wheels and be 

such weight and construction as to avoid damage to the light

Charges were to be for the account of the owner of the lighter unl

the terminal operator wasgivenprior notice to the contrary in writi

Under date of January 31 1961 the three complainants herein f

with the Commission an unsworn protest and petition for susp

sion which alleged among other things that the parties to the ta

received fulland adequate compensation from the steamship operat

for the same services and that collection of the tariff charges fr

the protesting lighter owners or operators would eonstitute dou

compensation and unjust enrichment for the same services The p

test and petition did not constitute and was not treated as a siv

complaint under section 22 of the act w hic ll commenced a proceed

before the Commission No action appears to have been taken on 

protest untilafter the Terminal Conference issued a revised Light

age Tariff No 2 effective May 27 1963 in the same form as tariff 

1 but with different rates with respect to which the three complaina

12 11 rc
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 335

immediately filed an uns vorn protest and complaint in substan

tially the same fonn as the earlier protest and petition

By order of investigation and hearing served October 25 1963 the

Commission initiated the investigation hereinabove referred to No

1153 The order of investigation referred to Terminal Conference

Agreement No 8005 and the two lighterage tariffs and noted thalt

both of these tariffs had been protested on the alleged ground among

others that the lighterage charges duplicated stevedoring charges

assessed against the vessel and resulted in double payment for the

same service Complainants were not made parties to the proceeding

by the order but subsequently joined in a petition for leaye to inter

vene which vas duly granted November 21 1963 As stated above

n10race and I

Iogan which was not apady to agreement No 8005

were not made parties to the proceeding and Cunard was dismissed

as a

party more than 2

years before the Commission s orcler was

entered

The Commission s decision and order in No 1153 which are dis

cussed hereinafter were served May 16 1966 Thereafter respondents

herein generally ceased to make any charges against lighter operators

in connection with over the sidetransfers 7

Since that time however at least some of the respondents have col

lected similar charges either from the carrie ror the shipper or con

signee usually the carrier Sometimes a carrier has asked the terminal

operator to bill the shipper or consignee and the operator has clone

so It was the position of the terminal operators and stevedores that

since their reimbursement for the work aboa rd lighters had come from

the lightermen the Commission s order requiring them to forego any

charges against the lightermen made it necessary to collect an equiva

lent amount from the carrier they refused to do the work yrithout

being paid for it Their contracts for stevedoring the vessels had been

made on contemplation of their collecting the lighterage charges from

the lightermen and had expressly provided that they should retain

such charges and the stevedoring contract rates had been determined

and agreed upon accordingly Further it appears from the uncontro

verted testimony in the instant proceedings that it costs more to work

cargo to and from lighters than to and from the pier because of lower

operating productivity as well as additional nonproductive hours

Nonproductive time is required to rig the ship s tackle for over the

side operation and to put mechanical handling equipment such as lift

trucks aboard the lighters and remove it and time is lost while lighters

7At the hearing the comiPlaints were amended to claim reparation for charges If any

made after the dates of the complaints and listed in tabulations introduced as exhibits

subject to the stipulations hereinabove referrtd to concerning determination of the

amounts of any reparation

12 F M C
336 FEDERAL MARITIME COMMISSION

are shifted to proper position opposite the vessels hatohes The limi

working space aboard a

lighter makes the movement of cargo to 

from the hook slower than on the pier particularly when it is neces

to segregate cargo for loading orunloading and cargo must be pr

erly stowed on Ithe lighter under the lighter captain s supervision 

discharging copper which is the principal commodity for yhieh in

pendent lighters are now employed a comparison on vessels of sim

type showed that 39 8 tons per hour could be worked from ship to 

against 27 3 tons per hour from ship ro lighter

The lightermen s rates to their customers the shippers or c

signees had atall times included the cost of overthe side trans

their contracts with their customers expressly provided that ships

loading orunloading oflighters should be done by the lightermen 

or wbout the time when pursuant to Ithe Commission s order t

ceased to be billed in connection with over the side transfer t

renegotiated their contracts with their customers to del te the amo

ofthe charges for overthe side transfer from their rates to their 

tomers As a result of contemporaneous adjustment due to increa

tug costs it did not follow that their rates were reduced but t

would have been increased more if the transfer costs had not b

eliminated Prior thereto when lighters were worked to the d

instead ofoverthe side throughno fault of thelighterman theligh

man billed his customer pursuant to an express provision of his c

tract with his eustomer for the greater amount lIt cost him to tran

the cargo to or from the pier usually done by Spencer less the e

amount he would have been charged by respondents had the ligh

been worked over the side Thus the ighterman s rate ItO his custo

was credited with the amount thereof against the higher cha

which the lighterman was required to pay and which he likew

passed on ro the customer when he was directed ro work to the 

instead ofOvertheside

Additional findings are included in the following discussion wh

appropriate

The Status of T Hogan Sons Inc an Independent Stevedo

Oontractor in aProceeding for Reparation Under the Act

Hogan denies that it is subject to the Commission s

jurisdict

since it is not a terminal operator but is in the business of stevedo

only as an

independent contractor Complainants concede that Ho

was not a member of the Terminal Operators Conference or a p

to its tariff Prior to the hearing complainants contended and 

they would show that Hogan was a 1 ermina l operator but no p

12 F I
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 337

thereof was offered and the undisputed evidence was all to the

contrary

Since Hogan is not a carrier the Commission s

jurisdiction todirect

it to pay reparation under section 22 of the act depends on its being

an other person subject to the act defined in section 1 thereof as

carrying on the business offorwarding or furnishing wharfage dock

warehouse orother terminal faciHties in connection with a common

carrier by water Itis not a forwarder and does not furnish or have

any interest in any such terminal facilities Itis purely in the business

of providing stevedoring services for and in connection with the load

ing and unloading of ships at terminal facilities furnished by others

Despite statements of a predecessor agency in Status of Oarloaders

and Unloaders U S MC 761 767 1946 cited by complainants

the Commission has not asserted jurisdiction over stevedores not en

gaged in other activities of a kind whioh independently make them

subject to the act Oalifornia Stevedore Ballast 00 v Stockton

Port District 7 F MC 75 81 1962 Philippine Merchants Stea ln

ship 00 v O trgill Inc 9 F M C 155 161 162 1965 Ohr Salvesen

00 v lVest Afichigan D Al Oorp 12 F M C 135 Dec 12 1968

Stevedoring is nota facility such as a wharf dock or warehouse

and the rule of ejusdem generis restricts other terminal facilities to

things similar to those enumerated That a stevedore furnishe port

able labor saving devices such as hand tools and lift trucks for the

use of its men does not bring it within the act such devices could

hardly be considered to be terminal facilities particularly in the

context of wharfage docks and warehouses The term clearly refers

to permanent terminal installations such as docks and warehouses

dockside elevators crane installations and the like An early version

of the bill which became section 1 ofthe act included in the definition

of other persons subject to the act the business of forwarding

ferrying towing or furnishing transfer lighterage dock warehouse

orotherterminal facilities Even in thisbroader version stevedoring

was not specified although it probably represented a larger periton

cost factor than most ifnot all of the things mentioned If it be con

sidered to have been included in transfer the elimination of the

latter word showed an intention to eliminate it United States v

American Union Tratn slrt 327 U S 437 452 1946

Itseems reasonable to assume that stevedoring as such wasexcluded

simply because stevedores to the extent that their services are rendered

in connection with common carriers by water are merely servants or

contractors employed by carriers or terminal operators who are subj ct

to the act

12 F M C
338 FEDERAL MARITIME COMMISSION

It is concluded that the Commission is without jurisdiction 

entertain a complaint seeking reparation under section 22 aga

respondent Hogan an independent contractor which furnishes no r

vant faeilities or services otherthan stevedoring services anel isneit

a eHlTier noranother person subject to the act as one who furnishes 

minal flcil ities in connection with a carrier Since I

Iogan is the o

rernaining party respondent in docket No 6647 the complaint in t

proceeding must be dismissed for Inck ofjurisdiction

JUTisdictio n Over Stevedoring Practices of ResfJ01ulents lVho A

Subject to the Act

The Terminal Conference respondents although concededly sub

to Commission jurisdiction by reason of their terminal operations 

gue that the Commission is ithout jurisdiction to a yard reparat

based upon their stevedoring practices because stevedores are 

subject to the act That does not follow As terminal operators th

respondents have sought and obtained the Commission s approva

an agreement authorizing charges for services of the very kind 

f

uestion thus securing antitrust exemption for their rate fixing ac

ity thereunder In imposing rates so established they are subject 

other persons subject to the act to the requirement of section 

that th yobse rve just and reasonable practices in connection with 

receiving handling and delivery of property Commission jurisdict

over respondents depends on respondents status as carriers or ot

persons subject to the act not upon the nature of the particular pr

tices which are the subject of inquiry Then jurisiction has been 

tablished the Commission s authority extends to any of their acts a

practices which are within the scope of the act The Terminal Conf

ence respondents are indisputably subjeot to the act and the matt

in issue which aTe directly concerned with practices relating to 

handling of cargo are clearly within the Commission s authority w

respect to persons subject to the act American Export Isbrandt

Lines v Federal Afm itil11e 00111 1n ijsion 389 F 2d 962 972 D C C

1968 Oalifo i

ia Stevedore ill Balla8t 00 v Stockton P01 tDistr

7 F l1 C 75 81 1962 and cf Grace Line v Federalllfariti111e Boa

280 F 2d 790 2d Cir 1960 cert denied 364 US 933 1961

The ol1l1nission s Decision in No 1153 a8 Proof of Illegality 

Oharges for TVhich 001nplainants Seek Reparation

Complainants did not attempt to show as an original matter t

respondents charges in issue here violated the act For that th

relied exclusively upon the decision and order of the Commission 

No 1153 which they submit constitutes collateral estoppel on aU 

issues involved in the instant proceeding

12 F lrC
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 339

The common law doctrine of res judicata including the subsidiary

doctrine of collateral estoppel is designed to prevent the relitigation

by the same paTties of the same claims or issues 2 Davis Administra

tive law hereinafter Davis section 18 12 Vhen an administrative

agency is acting in a judicial capacity and resolves disputed issues of

fact properly before it which the parties have had an adequate oppor

tunity to litigate the courts have not hesitated to apply resjudicata to

enforce repose United States v Utah Const eX 111ining Co 384 U S

394 422 1966 There was a contested proceeding before the Inter

state Commerce Conunission with decision depending upon the pres

ent issue and the present parties taking opposi e sides upon it Res

judicat a should and does apply Seatntin Lines v Penna R 00 207

F 2d 255 259 3d Cir 1953 The party asserting collateral estoppel

has the burden of showing that issues are identical a nel that

they were

decided on the merits in the first proceeding Lack of identity of issues

may result from differences in facts in subject matter in periods of

time in case law in statutory provisions in notions of public interest

in qualifications of tribunals and in other similar factors Davis

section 18 12 Inname and tradition resjudicata means thing adjudi

cated Only what is adjudicated can be res judicata Administrative

action other than adjudication cannot be res judic ta Even if an

exercise of the rulemaking power depends on a

finding of faQts neioher

the rule nor the

finding is regarded as res judicata Davis section

18 08

Complainants do not seriously contend that collateral estoppel ap

plies with respect to n10race or Cunard or to ITogan if jurisdic tion be

assumed arguendo and it clearly cannot since they werenot pRrties

to No 1153 Cullard having been dismissed before decision and before

the submission of proposed findings and conclusions

The Terminal Conference respondents who were parties to No 1153

contend that since the Commission cannot under section 22 award

reparation in an investigation initiated on its own motion a party

seeking reparation cannot rely on the investigation proceeding but

must present independent proof that respondents actions wereunlaw

ful This conclusion does not follow The real question is whether the

precise matters necessary to establish a

right to reparation were de

termined by the Commission in an investigation proceeding adjudi

catory in nature so as to constitute collateTal estoppel under the

principles set forth above For example the Commission cannot order

reparation based solely upon its findings in an investigation where no

express finding of past unlawfulness was intentionally made and the

fact that the Commission has ordered that a practice be discontinued as

unlawful does not necessarily mean that the Commission has deter

12 E 1f C

RR 560 0 70 23
340 FEDERAL MARITIME COMMISSION

mined that prior acts of a similar kind were unlawful at the tim

thereof William N Fei11J3tein 1 00 v United States 317 F 2d 5

2d Cir 1963

Feinstein concerned a railroad s charges for unloading onions at p

stations in New York City The long history of the case is set forth 

the District Court s decision 209 F Supp 613 S D N Y 1962 T

Interstate Commerce Commission ICC had found after hearing th

the charges werenot shown to be just and reasonable and ordered the

to be canceled as of a specified future date Inreaching its conclusion 

unlawfulness the ICC concluded among other things that undert

applicable tariffs theline haul rate included delivery and that delive

was nQt effected until the onions were unloaded by the carrier a

placed on the pier floor that the exaction of the unloading charg

in addition to the line haul charge violated the Interstate Commer

Act and that the labor cost of unloading the traffic in issue was on

about half of that for unloading other freight delivered at the sa

or similarpoints for which no separate charge wasmade

Thereafter a

shipper sued for reparation in the U S District Cou

as the Commerce Act provides alleging that assessment ofthe charg

duringthe period prior to cancellation thereof wasnecessarily unla

ful by reason of the ICC s decision The court held that a

lthough t

Commissioll S decision and order put an end to the unloading charg

for the future it did not followthat the Commission also decided th

they had been unlawful when paid and that the plaintiff s claim f

reparation required an express finding by the Commission that the u

loading charge was unjust and unreasonable during the prior perio

Feinstein v New York Oentral R 00 159 F Supp 460 S D N 

1958 summarized 209 F Supp p

618

The shipper thereupon filed a complaint with the Commission 

leging that the charges were unlawful duringthe period at issue as 

assessment for a service which was included in theline haul transpor

tion and thatthe findings and conclusion of the ICC in theproceedi

vhich had canceled the charges for the future were applicable 

charges imposed during the period immediately prior to cancellatio

for which reparation was sought The primary issue before the IC

was not the reasonableness of the charges when made but whether t

unloading charge could lawfully be exacted in any amount 8

The IC

refused to make the finding requested npon the basis of its earl

decision stating that the shipper fail ed to recognize the inhere

differences between findings of past and future unreasonableness 

8

See 209 F Supp 613 622 The fact that In an earlier decision whl h had not b

superseded at the time the charges were made the lee had held the charges to be just 

reasonable In amount was not a significant factor in the proceedings described above

12 F M C
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 341

concluded that the prior cha ges were not shown to have been unjust

unreasonable or otherwise unlawful when made Feinstein v N Y

OentralR 00 313 IC C 783 789 793 1961

The shipper then filed suit to set aside the ICC s

report and order

One of the primary grounds asserted was the alleged inconsistency of

the decision s ultimate conclusion and certain of its subsidiary find

ings with the ICC s prior determination Itcontended that the facts

t

licited before the ICC in both cases were identical and that therefore

the different findings and conclusion in the later proceeding were by

their very nature illogical arbitrary and illegal The court held

Feinstein v United States 209 F Supp 613 620 S D N Y 1962

nfl 317 F 2d 509 2d Cir 1963

This contention is not sustainable The mere fact that a Commission

decision may be inconsistent witha prior Commission determination is not a valid

ground for its reversal An administrative body such as the Commission

is not required to deal with a particular case as it has dealt witha prior case that

seems similar since diverse factors may be present in the second determination

which the Commission feels in the exercise of its specialized experience justify

a different result In the situation presented here the record in the prior case

might have been inadequate or the Commission might have been wrong in its first

determination II

The Commission in the earlier decision merely held that the

cha rges were not shown to be just and reasonahle forfuture application Sueh a

finding of unlawfulness for the future however did not logically compel a sub

sequelltfinding of unlawfulness forthe past As was stated by the Supreme Court

in Baer Bros i1ercantilc 00 v Denvc1 R G R 00 233 U S 479 486 34 S

0t 641 58 L Ed 1055

awarding reparation for the past and fixing rates for the future

involve the determination of matters essentially different One is in its nature

private and the other public One is made by the Commission in its qnasi

judicial capacity to measure past injuries sustained by a private shipper the

other in its quasi legislative capacity to prevent future injury to the public

Thus there was extant no prior finding which would bind the Commission in 313

LC C 783 to find that the unloading charge was unlawful when paid

So when an appropriate administrative agency determines that a

charge for a particular kind of service is unlawful regardless of

nmount and forbids the future imposition of such a charge without

expressly finding that past charges of the same nature were unlawful

when made a claimant seeking reparation for such past cha rges cannot

rely upon that decision to establish that the charges wereunlawful In

such a situation the claimant must seek and obtain from the agency

upon evidence adduced in the reparation proceeding a determination

that the past charges were unlawful when made and even though the

eddence adduced i the same as that which was before the agency in

1 F l
342 FEDERAL MARITIME COMMISSION

the earlier

proceeding the agency need not necessarily find p

u nlawfulness

Complainants here contend in effect that they should prevail un

the rule of Feinstein They assert that there is a prior finding t

past acts of respondents constituted a violation of law so as to b

the Commission to find that the charges in issue vere unlawful sim

because its order referred to violations herein found to h

been cOln ln itted by respondents Emphasis complainants Th

words appear in the Commission s order however and not in its fi

ingsand conclusions and the order states that its findings and conc

sions are contained in its decision 9

The pertinent paTagraph 

the order was not a

finding 01 conclusion but a direction 

respondents to cease such violations as it had found in its report 

have been committed and the order directs respondents to mod

their lighterage tariff which it found to be authorized by th

approved agreement within 45 days after the date of service of 

order There is a

general finding of past violation in failure to ad

a

proper lighter detention rule of that the Commission says failu

to do so for the future will be as it has been in the past contrary 

section 17 of the act 9 F M C p

514 Vhatever the effect of s

language may have been with respect to the lighter detention practi

there is no such finding conclusion or observation with respect to 

lighter loading and unloading charges On the contrary the Co

mission s

finding that the conference agreement does authorize 

charges was an affirmative finding of past legality under section 

of the act as charges established and governed by normal econo

forces Oontinental Nut 00 v Pacific Ooast Rive l Plate Oonf 

F M C 563 570

That neither the Commission nor at thattime any of complaina

was concerned with unlawfulness of the lighter charges in the pas

9

The entire text of the order which applied to all the several different SUbjects 

posed of by the Commission s decision of May 16 1966 was as follows 9 F M C p

5

emphasis added

This proceeding having been initiated b3 the Federal Maritime Commission 

the Commission having fully considered the matter and having this date made 

entered of record a Report containing its findings ancl cOllc usions thereon w

Report ishereby referred to and made a

part hereof

It is o1Clerecl That respondents be and they are hereby notified and required 

cease and desist from engaging in the violations of section 16 First and section 1

the Shipping Act 1H6 46 D S C 815 816 herein found to have been conunittec

respondents and

It is further ordered That respondents be and they are hereby required wi

45 da rs after the date of service of this order to modify the provisions of t

Lighterage Tarilf No 2 and their Truck TarilfNo 6 in a manner consistent with 

report herein and

It is further ordered That the proceedings in Docket 1153 are hereby discontin

except for that portion thereof upon which the Examiner reserved decision pen

resolution of a related subpoena enforcement proceeding currently before the co

12 l M C
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 343

indicated by the dismissal of two respondents without objection from

the complainants as intervenors upon their plea that they had re

signed from the Terminal Conference after No 1153 was commenced

Packet Shipping Corp moved January 13 1964 to be dismissed

because it had resigned from the Terminal Conference effective

December 22 1963 the investigation wasinstituted October 25 1963

and had not done over the side lighter work since June 14 1963 Packet

was dismissed 1arch 6 1964 just before hearings commenced without

objection from anyone Cunard moved to be dismissed April 14 1964

after hearings had terminated upon the grounds so far as pertinent

to lighterage that it had resigned from the Terminal Conference

March 17 1964after hearings had commenced and had decided

not to file a

lighterage tariff There being no objection to Cunard s

motion the Commission dismissed Cunard as a respondent 1ay 5

1964 stating In view of Cunard s resignation from the New York

Terminal Conference and its filing of its own truck loading tariff

no further useful purpose would be served by its continuing as a party

respondent herein The dismissal of Cunard after hearing simply

because while hearings were in progress it had resigned from the

Terminal Conference and resolved not to file its own lighter handling

tariff was like the dismissal of Packet inconsistent with any inten

tion on the Commission s part to make any findings of past violations

andno such findings werein fact made 10

It is found and concluded that in its decision and order served

1 1ay 16 1966 in No 1153 the Commission neither made nor intended

to make any finding or conclusion to the effect that eharges assessed

pursuant to the Terminal Conference respondents lighterage tariff

No 1 or No 2 prior to service ofits said decision and order were unlaw

ful at he time they wereassessed

The La1fulness of the Oharges Prioto the Decision in No 1153

The record herein establishes that at all times prior to the effective

date of the Commission s decision and order in No 1153 respondents

charges in connection with shipside loading orunloading of shippers

and consignees lighters were in accordance with the long standing

custom and practice of the Port of New York that in the case of the

respondent Terminal Conference members such charges were author

ized by an agreement duly approved pursuant to sec ion 15 of the act

10 The Commission noted in its order dismissing Cunard that hearing counsel did not

oppose the withdrawal of Cunard Inasmuch as the hearing record contained no allega

tions of any past violations by Cunard Respondents say the record was identical with

respect to themselves nnd Cunard The Commission s

findings In No 1153 do not suggest

an material distinction and complainants contend that Cunard s overtheslde operations

were in all respects the same as the other respondents

12 F M C
344 FEDERAL MARITIME COMMISSION

by the Commission that pursuant to the aforesaid custom and practi

of the port the responsibility for performing the services covered 

such charges was not undertaken by ocean carriers as part of the

transportation service but vas understood to be the responsibility 

the shipper or consignee and as such was assumed by the lighterme

who by contract with their employing shippers and consignees c

lected from such customers the full cost of performing or causing 

be performed the said services Upon such findings it must be co

cluded that the charges in issue to the extent that they were mad

with respect to transactions occurring prior to June 30 1966 th

effective date of the Commission s order were not unlawful

Such conclusion is not inconsistent with the Commission s decisio

in No 1153 Rather this is a clear example of the difference betwee

awarding repaTation for the past and dete rmining future practic

which may and in this case does justify results which might otherwi

seem to be inconsistent Feinstein v United States 317 F 2d 509 5

2d Cir 1963

In No 1153 the Commission determined that the imposition of th

charges for the future would violate section 17 because it resulted 

a double charge In arriving at that conclusion the Commission relie

upon reasoning from wbstract principles which while appropriate 

that proceeding does not compel or upon this record permit the awa

ofreparation sought here

InNo 1153 the Commission noted that traditionally the ship has th

responsibility of moving cargo between the end of ship s tackle an

place of rest on the pier and that in the absence of a specia lhandlin

charge l1 the freight rate will include the charge for such stevedorin

The respondents therein apparently undertook to show as they did 

the instant proceeding that additional expense was included in dire

transfer services but upon the basis of proof to the contrary which wa

not offered in the instant case the Commission resolved a conflict o

evidence against respondents contention The Commission then re

soned that in direct transfer the lighter deck replaces the pier as th

place of rest 12 Since the respondent iterminal operators were paid b

the ship to perfonn the stevedoring function which included move

ment of cargo to and from place of rest on the pier it conclude

11 As for example at Pacific coast ports where tariff rates are broken down to provid

for separate charges to cover this portion of the steyedoring function Sun Maid Rais

Growers Assn v United States 33 F Supp 959 ND CaI 1940 aff 312 U S 677 1940

12 Upon the record in the instant proceeding it could not be found that movement b

tween end of ship s tackle and place of rest on the lighter deck is equivalent to moveme

between end of ship s tackle and place of rest on the pier for there is competent convin

ing and uncontroverted evidence establishing that extra expense is involved in the light

operation It is not necessary however to rely upon this apparent difference between th

records in this and the earlier proceeding

12 F lfC
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 345

sy IIogistic ally that their charge to the lightermen for direct transfer

service results in collecting twice for the performance of a single

servicethe imposition of a double charge

The Commission was not concerned with and did not discuss the

facts that traditionally the ship did not assume the responsibility of

moving cargo between ship s tackle and pla ce of rest including

stowage on shippers or consignees lighters that the carrier s tradi

tional obligation to move cargo between ship s tackle and place of rest

on the pier like the carrier s obligation to allow free tinle was by cus

tom of the port deemed i applicable in thecase oflighter delivery and

pickup 13 that the amount received from the carriers by the terminal

operators for all stevedoring services was arrived at in contemplation

ofthis tradition or custom of the port with contracts expressly provid

ing forthe collection and retention by stevedore terminal operators of

charges customarily assessed against the lightermen and that the

lightermen contracted wLth shippers or consignees to perform the work

ofshipside loading and unloading with lighterage rates fixerl accord

ingly For the purposes of No 1153 these matters wereconsidered ir

relevant the Commission s point wassimply that since a service which

the Oommission found to be equivalent to the service in question was

covered by the freight paid by the shipper to the carrier there should

not in the future be an additional charge for the service in question

notwithstanding a

long standingpractice to the contrary

The obligationto provide the service without extra charge was nec

essarily found to bethe carriers but the Commission had the terminal

operators not the carriers before it in No 1153 There could be no

inequity in the Commission s accomplishing its purpose for the future

by requiring the terminal opeTators to stop assessing the charge for

it could assume that the operators would in the future collect enough

from the carriers to cover the service which ithad determined the car

riers should provide The record herein shows that that in fact has

occurred for the respondents have collected additional compensa

tion equal to the amount of the disputed charges from the carriers

since they have been required to forego any charges to the lightermen

Similarly the Commission did not find it necessary to mention re

spondents argument that elimination of the charges would produce a

windfall for the lightermen who by contract had undertaken to per

form the services The reviewing court explained why that argument

was not material to the Commission s position The Commission could

reasonably conclude the GOurt said thatthe rate charged by thelight r

ISIn determining past unlawfulness the history of the charges at the port and the

action of the parties in relation thereto would have been important in determining whether

loadlngand unload rng lighters had been RP8rt of transportation Adams v Mills 286 U S

397 409 1932

12 F M C
346 FEDERAL MARITIME COMMISSION

men to the shipper would be reduced commensurately 389 F 2d at 

973

Like the Commission the court gave no consideration to the pos

bility of a

retrospecti ve application ofthe Commission s ruling wh

would indeed produce a windfall for the lightermen It would ca

the respondent terminal operators who had not in fact been paid by t

caniers for the service in question to return the compensation they h

received for such service to the lightermen who had already collect

the full amount thereof from their customers the shippers and c

signees The shippers and consignees the only ones vho eould on a

theory be said to make a double payment once to the carriers as p

of the freight and once to the lightermen wouldrecei ve nothing T

eanier the only person who could be said to collect twice once by w

of the freight collected from the sh i pper and once by arrangi

through its stevedoring contracts to have the stevedore get his compe

sation fr0111 the lightermen would give up nothing14

Such would bethe result ofapplyingretrospectively a

ruling evolv

for prospective application It illustrates what the ICC called t

inherent differences between findings of past and future unreasonab

ness Feinstein v N Y Oent1 al R 00 313 IC C 783 789

Proofof Injury a8 aP1 ereqtttisite to Reparation

The Terminal Conference respondents contend that even if t

charges be deemed to have been unlawful when made the Commissi

should not in its discretion award reparation under the circumstance

citing Oonsolo v Federal Ma1itime Oom1ni88ion 383 U S 607 6

1966 They further contend that as a matter of law there can be 

reparation because complainants were not injured As to the peri

prior to the effective date of the Commission s decision and order 

No 1153 the examiner agrees with respondents on both counts but n

as to any subsequent charges imposed by those respondents who we

parties to No 1153 at the date ofthe said order

Itis evident that there was no actual injury to the complainant ligh

ermen concededly their rates to their customers ineIuded a defin

factor to cover the charges in issue which they eliminated only aft

respondents had eliminated the charges pursuant to the Commission 

order COJllplainantsargue that the question of injury tQ thmn is n

in issue however because ofthe rule that the carrier ought not to 

allowed to retain an illegal profit and the only one who can take 

14 Since nothing is free in the long run it may be assumed that freight rates w

eventually include an increment for the additional charges now payable by the carrier 

steyedores or terminal operators however the amount thereof will be spread among 

shippers instead of the few shippers emplo illg lighters who prior to the Commissio

order were paying such charges in addition to the same freight paid by all other shippe

12 F M C
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 347 

from him is the one from whom the carrier took the sum citing 80nth

e1 nPacifi c o v Danwll 7aetnze1 00 245 1J S 531 534 1918 110w

ever Interstate 001nme1 ce ommi 5sion v United States 289 U S 385

1033 made it clear thnt that rule applies only where the charge

exaetecl of a

shipper is excessive or unreasonable in tnd of itself and

therefore inherently unhlwfnl The court said at page 390

But a different measure of reeovery is applicable where a party that

has paid only the reasonable rate sues upon a discrimination because some other

11 1 paid less 80 Puc Go v nnJ CU W1ZC1 00 245 U S 5X1 HIlS p 34

Such a one is notto recover as of course a payment reasonable in amount fora

serviee given and accepted He is to recover the damages that he has suffered

which may be more than the preferent e or less Penn R 00 v International Ooal

Co 230 U S 184 l l PV Oj 207 bllt which whether 1l10re or less is some

thing to be proved and not presumed Ibid p 204 Recovery cannot be had unless

it is shown that as a result of defendant s acts damages in some amount sus

ptible of expre ion in ligures resulted Keogh v C N W Ry 00 260 U S

156 1922 p165 The question is not how much better off the complainant

would be today if it had paid a lower rate The question is how much worse off it

is because others have paid less

The present case is analogous to that of a discriminatory charge

reasonable in itself and not to that of a charge which is excessi ve

01 unreasonable in and of itself and therefore unlawful per se

There is no eOlllplaint here as to the amount of the cha rge The

Commission expressly found ill No 1158 that the charge contained

in respondents tariff was authorized by the Terminal Conference

reSlJonclellts section 15 agreement vhich the Commi sion had ap

proved upon an examination that fail ed to show sa id agreement

to be unjustly discriminatory 01 unfair or violative of the

act The Commission s

finding necessarily carried with it 1

finding

that the assessment of charges so found to be authorized yas not

inherently u nla wful so as to permit recovery of reparation without

proof of loss uncleI J

fOldhe1 nPacifi c and the later ICe caseY

It does not follow of course that such charges however lawful

pel se might lawfully be collected twice and that is in fact the

essence of complainants claim To recover reparation upon such a

claim however they must show that respondents in fact collected

each cha rge twice and that as a result of respondents acts they

suffered actual damage To pantphrase the courfs observation in the

ICe case 289 Ci S at page 390 the question is not how much better

15 Although the Commission ordered respondents in No 1153 to modify their lighterage

tariff in accordance with its decision within 45 days it did not direct them to modify

thir sec 15 agreement and it nppears that the ngreement is still in effect without relevant

change The decision and order established however that the respondents therein could not

la wfully implemen t

the agreement by the imposition of overthe side charges under the

circnmstances described in the decision after a date 45 days from the date of the order

After that effective date snch charges were no longer of the kind authorized by the

agreement Cf Continental Nut 00 v Paoific Ooast River Plate Oon9 F l IC 563 1966

12 F M C
348 FEDERAL MARITIME COMMISSION

off the complainants would be if they had not paid the charges but

how much worse off they are under all the circumstances because

they have paid them The evidence discloses not that complainants

paid the charges twice directly or indirectly but that at all times

prior to the Commission s decision in No 1153 and until an unspeci

fied date thereafter they made but one payment and collected the

entire amount thereof from their customers When they worked their

lighters to the pier they collected an additional amount precisely

equal to the difference between the charges in issue and the higher

charges whioh they had to pay others for service to the pier 16 Com

plainants had expressly contracted with their customers to perfonn

the shipside loading and unloading which respondents actually per

formed in return for the charges Prior to the effective date of the

Commission s order in No 1153 after which complainants revised

their rates to their customers and respondents for the most part

ceased to assess the charges in issue complainants were in effec

adding the charges under a sort of cost plus arrangement Cf Han

overShoe v United Shoe Machinery 392 U S 481 494 1968

Even if it be assumed arguendo that respondents violated section

17 when they assessed the charges against complainants prior to the

Commission s order in No 1153 it is concluded that complainants

would not be entitled to reparation with respect thereto because they

have not shown that any injury to themselves was caused thereby

The Commission s order in No 1153 was served May 16 1966 and

required the respondents in that proceeding to modify th provisions

of their lighterage tariff No 2 in a mannerconsistent with its decision

within 45 days i e on or before June 30 1966 The assessment o

any of the charges at issue by any ofthe respondents herein who wer

subject to the Commission s said order was unlawfulper se in viola

tion of section 17 or the act with respect to loadingor unloading afte

that date 17 and complainants are entitled to reparation in the amoun

of any such charges without further proof of injury pursuant to sec

tion 22 ofthe act

16 Had respondents not been permitted to collect the charges it is possible tha

respondents or the carriers would have required complainants to work to the pier an

thus to pay Spencer s higher charges on some occasions but it does not appear a

respondents suggest that this would always have been the case so as to provide a furthe

ground for denial of reparation Over the side transfer was of benefit to the carrier a

well as the shipper or consignee the benefit to the carrier was reduced and the alread

substantial benefit to the shipper or consignee enhanced by the requirement that n

charges be collected from the lightermen but the record does not establish that it ha

been completely eliminated

17 Ifthe charges were Imposed after the Commission s order pursuant to agre me

among the Terminal Confieremce respondents they likewise violated sec 15 the record su

gests however that the respondents proceeded individually after the date of the orde

since several of them apparently ceased to Impose the charges

12 F MC
GILLEN S SONS LIGHTERAGE V AMERICAN STEVEDORES 349

It is not necessary to consider the effect of the Commission s order

with respect to charges thereafter assessed by respondents Morace

and Cunard who were not respondents in No 1153 and subject to the

Commission s order therein since the schedules of claims submitted

by claimants show no charges by such respondents after the date or

the said order Respondent Hogan was clearly not a carrier or other

person subject to the act whom the Commission could direct to pay

reparation undersection 22

ULTIMATE CONCLUSIONS

Findings and conclusions proposed by the parties have been incorpo

rated herein to the extent that they are found to be material and

supported by the record and are otherwise denied

Upon the record in these proceedings it is concuded and found

that

1 The Commission is without jurisdiction to entertain a complaint

against T Hogan Sons Inc under section 22 of the Shipping Act

1916 since said respondent was not at any material time a common

carrier by water or other person subject to this act

2 Prior to the effective date or the Commission s decision and

order served May 22 1966 in Truck and Lighter Loading and Unload

ing 9 F MC 505 the imposition by respondents or any of them of

charges in connection with the shipside loading and unloading of

complainants lighters has not been shown to have violated the Ship

ping Act 1916 and did not injure complainants

3 Such charges as were imposed against complainants in connec

tion with the shipside loading or unloading aIter June 30 1966 the

effective date of the saId order of the Commission ofcomplainants

lighters by respondents American Stevedores Inc Bay Ridge Oper

ating Co Inc Grace Line Inc International Terminal Operating

Co Inc aher Stevedoring Co Inc Marra Bros Inc John W

1cGrath Corp Nacirema Operating Co Inc Northeast arine

Terminal Co Inc Pier 8 Terminals Inc Pittston Stevedoring

Corp Transoceanic Terminal Corp Turner Blanchard Inc and

Universal Terminal Stevedoring Corp or any of them were in

violation of section 17 or the Shipping Act 1916 and complainants

are entitled to reparation in the amount thereof

An order will be entered dismissing the com plaint in docket No

664 with respect to respondents Cunard Steam Ship Co Ltd

and Morace Stevedoring Corp and dismissing the complaint in

docket No 66 47

12 IfM C
350 FEDERAL MARITIME COMMISSION

The remaining parties to docket No 66 46 may either agree 

make proof respecting the amount of reparation if any due fro

each respondent to each complainant in accordance with this decisi

pursuant to rule 15 of the Commission s Rules of Practice and P

cedure subject to the stipulation of the parties approved January 

1969

S WALTER T SOUTHWORTH

P1 esiding Examine1

12 F M C
FEDERAL MARITIME COM11ISSION

No 1118

PACIFIC COAST EUROPEAN CONFERENCE INCREASED HANDLING

CHARGES

A dopt el Novem be1 rt 1966

Increased cargo handling charges of the Pacific Coast European Cnference not

found to violate section 15 or e

tin 18 b 5 of the Shipping Act 1916

and proceeding discontinued

Leonal d G James Robe1 t L Ilarmon Oha rles F Warren and

F Oonge Fa1ocett for respondent the Pacific Coast European Con

ference and its member lines

Wm Jarrel Sm ith Jr Robe t J Blacktvell F ank G Gormley

llarold F Witsanwn Norman D Kline Richard L Abbott Samuel

B LV ermi J o1V andDonald J Brunner as Hearing Counsel

IlE F anklin for Seattle Traffic Association intervener 

INITIAL DECISION OF PAUL D PAGE JR PRESIDING

EXA 1INER 1

This investigatory proceeding was instituted to determine if in

creased cargo handling charges of the Pacific Coast European Con

ference the Conference violate sections 15 or 18 b 5 ofthe Ship

ping Act 1916 the Act Both the Conference and llearing Counsel

now ask that the proceeding be discontinued The intervener Seattle

Traffic Association did not participate in the hearing and has filed

nothing but its petition to intervene

The charges in question are made for handling cargo from the place

where it is turned overto the carrier to ship s tackle a service not cov

ered by the ocean carriage rate The propriety of suchi

charges has

been specifically recognized in J G Bos1 ell 001nJ any et al v Arneri

can Ilawaiian Stea lnship Oompany et al 2 U S M C 95 1939 and

other cases This being true and the Conference s approved agreement

1 This decision became the decision of the Commission on Nov 17 1966

12 F l1G 351
352 FEDERAL MARITIME COMMISSION

covering the establishment and maintenance of such charges they a

not objeotionable under section 15 ofthe Act 2

There is no evidence that the charges under investigation 3

are s

unreasonably high or low as to be detrimental to the commerce of th

United States and all the evidence is to the contrary

Those who protested the original increases no longer do so an

when contacted by Hearing Counsel advised that they did not desi

to press the matter further or to testify in this proceeding The in 

creases in the charges made since this proceeding was instituted hav

produced no protests

The undisputed evidence is that the Conference uses the most eco

nomical means available to handle the cargo and that the charge

although at times they may show a profit are intended to reimburs

the carriers and no more Such charges are prima faci e reasonabl

and here there is no evidence that they are excessive

Itis found that the charges here under investigation are not show

to violate section 15 or section 18 b 5 of the Shipping Act 1916

and the proceeding is discontinued

Signed PAUL D PAGE JR

Presiding Eroaminer

Wasl1ington D C

O tober 27 1966

2

Paragraph 1 of Agreement No 5200 coversil1ter alia the establishment 

agreed rates for or in connection 1vith the transportation of cargo Emph9 81s supplie

8

These include increases subsequent to th institution of the proceeding bringing t

charges to their present

level

12 F lC
FEDERAL l1ARITIME COl1l1ISSION

DOCKET No 65 12

CROWN STEEL SALES INC ET AL

V

PORT OF CHICAGO MARINE TER IINALASSOCIATION ET AL

Adopted by the CornrnissionJanuary 23 1967

The 9 cents per 100 pounds inlandcarrier loading andunloading charge

assessed by terminal operators at the Port of Chicago found to

be noncompensatory but not found to have been an unjust or un

reasonable practice in violation of section 17 or to have unduly

or unreasonably prejudiced importers of iron and steel or other

shippers using the Port of Chicago in violation of section 16

First or to have operated in a manner detrimental to the com

merce of the Gnited States or contrary to the public interest in

violation of section 15

The tariff amendments of Mediterranean U S A Great Lakes vVest

bound Freight Conference and Federal Pacific Lakes Line found

not to have been in violation of notice of change provisions of

section 18 b 2

Federal Atlantic Lakes Line found not to have violated the unjust

or unreasonable practice provisions of section 17 or the tariff

compliance provisions ofsection 18 b 3

The Associated Great Lakes Freight Conferences found not to be

an interconference agreement organization subject to section 15

approval

The Great Lakes United Kingdom Westbound Conference found not

to have violated section 18 b 2 by not filing a tariff amendment

in 1965

Respondent terminals are admonished to restudy and revise their

tariff rate structures

Complaint dismissed

Alan D Hutchison for complainants Crown Steel Sales Inc Heads

Threads Division of MSL Industries Inc Interstate Steel Co

1etron Incorporated Nortown Steel Supply Company Taubellsee

12 F M C 353
354 FEDERAL MARITIME COMMISSION

Steel Tire Co The Ietron Steel Corp Union Steel Co vVilso

Steel vVire Co and vVireSales Co

Joseph E lVyse and Abraharr A Diamond for respondents Po

of Chica Yo Marine Terminal Association and its members North Pie

b

Terminal Co Calumet Harbor Terminals Inc Great Lakes Storage

and Contracting Co Maritime Services Ltd Rogers Terminal an

Shipping Corporation and Transoceanic Terminal Corp

TVarren A Jackl1 an and Daniel K Schlm f

for respondents Federa

1arine Terminals Inc Federal Atlantic Lakes Line and Federa

Pacific Lakes Line

Thomas K Roche and William F Faison for respondents United

States Great Lakes Bordeaux Hamburg Range vVestbound Confer

ence Scandinavia Baltic Great Lakes Testbound Freight Conference

Great Lakes United l

ingdom Vestbound Conference the membe

lines of said conferences and Associated Great Lakes Freigh

Conferences

Elliott B Nixon for respondent Mediterranean U S A Great Lake

Vestbound Freight Conference

Philip G Kraemer for intervener Traffic Board of the North At

lantic Ports Association

Donald J Brunner and Norman D line intervener Hearin

Counsel

By THE COl Il HSSION John Harllee Ohairman Ashton C Barret

Vice Ohairman James V Day George H Hearn Oom1nissionels

This proceeding is before lis on exceptions to the initial decision o

Hearing Examiner John Marshall Complainants exceptions merel

constitute a reargument of the same issues allegations and conten

tions considered by the Examiner in his initial decision with the ex

ception oftwo points not raised in the opening brief ofcomplainants 

After a careful review and consideration of the record in this pro

ceeding we conclude that the Examiner s disposition of the issue

herein waswell founded and proper Accordingly we hereby adopt th

Examiner s decisionwhich is set forth below

INITIALDECISION OF JOHN MARSHALL PRESIDING EXAMINER 2

Complainants allloc3Jted in the Chicago area are users of steel no

nlally imported through the Port of Chicago They allege that th

establishment of an inland carrier loading and unloading charge of

cents per 100 pounds effective April 1 1965 constituted violations o

various sections of the Shipping Act 1916 by respondent termina

1 A discussion of these po nts is DGund in this reDort following the Initial Decisio

See post

2

This decision was adopted by the Commissionl January 23 1967

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 355

operators steamship carriers and conferences 3 More specifically it

is charged that

1 The 9 cent charge assessed under the tariffs of the Port of

Chicago Marine Terminal Association 4

and Federal Nlarine Termi

nals Inc is an unjust and unreasonable practice in violation of sec

tion 17 of the Act Furthermore that since it applies to all cargo

regardless of ease ofhandling bulk or value it is unduly prejudicial

to iron and steel and unduly preferential to general cargo in violation

ofsection 16 First of theAct

2 The charge operates to the detriment of the commerce of the

United States is contrary to the public interest creates undue and

unreasonable prej dice to shippers using the Port of Chicago and

is in violation of sections 15 and 16 First of the Act

3 The tariff amendment of the Mediterranean U S A Great Lakes

Westbound Freight Conference 5filed March 12 1965 to become ef

fective March 15 1965 and of Federal Pacific Lakes Line 6filed

April 22 1965 to become effective April 23 1965 both discontinuing

the practice of including terminal charges in the ocean freight rate

constituted indirect rate increases in violation of the thirty day notice

requirement of section 18 b 2

4 The United States Great Lakes Bordeaux lIamburg Hange East

bound and Vestbound Conferences the United States Great Lakes

Scandinavian and Baltic Eastbound and Testbound Conferences and

the Great Lakes United IGngdom Eastbound and Westbound Con

ferences 7took concerted action through the Associated Great Lakes

Freight Conferences to obtain an indirect rate increase without filing

an inter conference agreement as required by section 15

5 The Great Lakes United Kingdom Westbound Conference failed

to file a tariff amendment reflecting the indirect rate increase thus

violating sections 15 and 18 b 2

6 Federal Atlantic Lakes Line filed an amendment to its tariff 8

on April 9 1965 to become effective May 10 1965 but attempted to

collect the 9

truck loading charge through its subsidiary Federal

3

The pertinent portions of the Shipping Act 1916 as amended the Act are attached

as Appendix A

Port of Chicago Marine TermtnaI Association flarlff No 1 Section VII FMC No IT 12

G No 6 FMC 2 Page N13 Fourth Revised Rule 35

o

FederalPacific Lakes LineFMC No 2 2nd Revised Page 2

7

The three eastbound conferences were included on brief but were not namtd respondents

in the complaint and did not participate In the proceeding

S Federal Atlantic Lakes Line FMC No 2 2nd Revised Page 3

12 F M C
356 FEDERAL MARITIME COMMISSION

rarine Terminals Inc before the effective date in violation of s

tions 15 9and 18 b 3

Respondents filed answers in the nature of general denials 10

THE FACTS

The record establishes the following facts

1 Respondent terminal operators are engaged in the business 

stevedoring and marine terminal operations As stevedores they lo

and discharge cargo from water carriers As marine terminal ope

tors they provide a waterfront facility and perform various servic

to accomplish the interchange of cargo between inland carriers a

water carriers 

2 From the time oceangoing vessels first entered the Great Lake

it had been the practice of tho se serving the Port of Chicago in t

foreign trades to include r

ailroad car and truck loading and unloadi

hereinafter collectively termed truck loading within their oce

line haul rates Except for Duluth this was the practice at oth

Great Lakes ports but not elsewhere in the United States or at maj

foreign ports As early as 1960 ship owners seeking some forrp 

economic relief in serving the Great Lakes trade expressed the des

that this practice be changed to conform to that more normally f

lowed They were faced with the fact that while ocean freight ra

from Lakes pODtS necessarily tended to be on the same approrima

level as those from competitive tidewater ports the Lakes servic

involved extra voyage time of 15 to 20 days and the absorption 

truck loading charges The latter represented a cost burden of 2 

3

per ton

3 Acting through the United States Great Lakes Shipping Ass

ciation 11 Shipping Association the owners endeavored to persua

terminal operators 12 at Chicago and other Great Lakes ports to fo

associations file tariffs and a sess truck loading charges thus relie

ing thecarriers of thisexpense

4 The Ohicago terminal operators were not anxious to file tar

as they did not wish to become involved in government regulatio

oOn brief section 15 was apparently dropped and section 17 added

10 Intervener Traffic Board of the North Atlantic Ports Association took no part in 

proceeding

11 Prev ously the Chica go Overseas ShLpping Association It is concerned with mat

of interest to both conference and nonconference lines serving the area but it does not 

rlltes It was not the entity which decided to separate truck loading charges from oc

rates

12 Terminal operators as used hereinafter does not include respondent Federal Ma

Terminals InlC Federal is Dot a member of the Port of Chicago Marine Ierminal Associa

and did not be n operatioDs until 1965

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 357

to assume the burden of collecting terminal charges or to incur ex

penses for the preparation of tariffs and for legal services They were

also apprehensive as to the likelihood of diverting traffic to otherports

Consequently lthey refused to adopt an agreement and tariff which

a special committee of the Shipping A sociation drafted in the fall

1961

5 On September 20 1962 the Federal Maritime Commission

ordered a non adjudicatory investigation regarding the practices of

common carriers by waJter in the United St3Jtes Gre3Jt Lakes overseas

trades 13 The Report and Findings served January 21 1963 con

tained the followingfinding and conclusion

7 Certain carriers and conferences of carriers operating in the Great Lakes

have a tariff rule substantially as follows

Rates are port to POlt a s customaryand unless otherwise specifically

stated do notcoyer charges established by custom of the port and or estab

Hshed port tariffs which are fortheaccount of the owners of the goods

The practice of these carriers in interpreting their present tariffs as

including customary terminal charges at Great Lakes ports otherthan

Duluth is a distortion and in violation of such rule which is itself

ambiguous

6 Following service of the investigative Report and Findings the

Comlnission s Executive Director jn January 1963 communicated

with each steamship conference and many of the individual lines

then serving the Gre3Jt Lakes requesting voluntary compliance with

this finding No voluntary complimlce wasforthcoming

7 On May 16 1963 the Chicago terminal oper3Jtors changed their

position and informed the Shipping Association that they had agreed

to form a terminal association and to thereafter file a tariff However

the operators pointed out th3Jt they were fearful of possible legal

expenses in carrying Out the wishes of the carriers and felt that they

should not be eaUed upon to shoulder the entire burden An agreement

forming thePort of Chicago Marine Terminal Association Terminal

Associ3Jtion was filed July 11 1963 and approved by the Commis

sion March 17 1964 but no terminal tariff was forthcoming

8 On August 8 1963 the Commission instituted a formal investi

gation to determine whether conferences and independent carriers

serving the Great Lakes in foreign trades were in violation of sections

15 16 17 or 18 b ofthe Act H During the course ofthe proceedings

but before hearing Hearing Counsel conducted a

seriE13 of discussions

13 Possible Discrimination by Activities of Carriet s Operating in Traaes Between Great

Lakes Port8 and Foreign Ports Fact Finding Investigation No 2

14 Carriers Operating in Trades Between Great Lakes Ports and Foreign Ports Docket

No 1135

12 F M C
358 FEDERAL MARITIME COMMISSION

with aU respondents and the Commission s staff These wentua

produced a

nlutualIy acceptable clarification ofthe objectionable ru

An effect of this clarification was the separation of truck loadi

charges from the ocean rates contrary to then prevailing practic

at Great Lakes portsother thanDuluth 15

9 On 1ay 22 1964 counsel for the terminal operators advised t

ship owners that a truck loading tariff had been prepared but cou

not be filed until an agreement could be arrived at with the ca rrie

which would afford adequate protection to the terminal operators 

the event of litigation orother difficulty arising out of the enforc

ment of their tariff Negotiations conducted over the preceding fo

years had failed to solve various problems including 1 the appare

refusal of some of the carriers to be parties to a

protection agreeme

and 2 the limited period covered by the carriers proposed guarant

of tariff collections The terminal operators offered the alternativ

suggestion that prior to any change in the tariffs ofeither the carrie

or the terminal operators the Federal 1aritime Commission be ask

to decide who should bear the charge for truck loa ding at Great Lak

ports

10 Discussions and meetings continued and the carriers continue

to urge the terminal operators to file a tariff On July 29 1964 th

terminal operators advised the carriers that they would file a tariff 

they weregiven a

guarantee of indemnincation by the carriers again

all losses and legal expenses arising out of the filing of such tari

The carriers offered an alternative plan which was not accepted an

again requested that a tariff be filed preferably before October 1

H 64 to be effective before the 1965 Great Lakes shipping season N

tariff vas filed On January 7 1965 another mooting was held 

which the terminal operators offered to assess truck loading charge

ifthe carriers would undertake the collection ofthe charges This wa

because the terminal operators considered their administrative staf

inadequate to handle credit arrangements and other detailed function

incident to collections Itwas agreed that a formal proposal would b

submitted for consideration by thecarriers

11 The carriers filed amended tariffs with the Commission durin

llarch effective on orbefore April 1065 and on 11arch 24 1965 a

vised the terminal operators by telegram that a terminal tn riff had 

be filed immediately as the carriers amended tariffs no longer pro

vided for absorption of truck loading charges and that such absor

tion ould therefore be illegal Thus the Terminal Association had n

15 The practice at Duluth of assessing truek loading charges against the cargo rathe

than the vessel gRve rise to the section 16 First and 17 violations alleged in the Commi

sion s Order of Investigation in Docket No 1135

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 359

thoice but to file a terminal tariff An informal meeting of its mem

bers was held at once and a tariff establishing 9 as the truck loading

charge was mailed to the Commission that same day March 24 to be

issued 1arch 29 effective April 1 1965 This action was ratified at a

formal meeting of the Terminal Association held April 13 1965

Section VIIof this tariff provided as follows

A charge of nine cents 91 per 100 pounds will be made against the shipper

consignee or owner of cargo for the service of loading and unloading cargo

to and from railroad cars and trucks and is applicable on all cargo handled on

through or by the terminal whether or not said cargo actually comes to rest on

the terminal premises in its transfer or terminal property between the inland

arrier and the vessel with a minimum charge of 1 00 per bill of lading

This charge is to be collected from the shipper consignee or owner of the

cargo by the vessel or its agent

lhis charge Shall be 11aid by the vessel or its agent to the Terminal Operator

along with allI at the same time as other charges payable to the Terminal Opera

tor 1I v the vessel its owner agent or operator

12 Associated Great Lakes Freight Conferences AGLFC is an

administrative name employed for certain housekeeping functions

by the three Eastbound conferences each of which serve diffe rent

fLl eas

16 Such functions include leasing office quarters paying bills and

distributing general information of common interest Ithas no formal

organization and holds no meetings The secretary of the three con

ferences Mr DeGroote serves as manager secretary of AGLFC Two

other office employees of the conferences also assist with the york of

AGLFC

13 Until 1953 only one of these conferences existed Then the

Commission approved the other two it was decided that for rea

sons of economy all three would use the office facilities of the original

conference for commolJ housekeeping functions The Com111 ission has

been aware of the existence of AGLFC at least since 1959 and for a

time listed it in a publication of approved agreements the so called

Green Book 11 The conferences are otherwise separate noncompeti

tive and make their decisions independently of each other There is

no agreement between them with respect to ratemaking or any other

matter pertaining to the operations of their member carriers

14 The ahove mentioned telegram of March 24 1965 to the ter

minal operators was dispatched by AGLFC Thereafter on lllarch 30

1965 with authority from its participating conferences it published

10 United States Grell t Lakes Bordeaux I

Iamburg Range Eastbound Conference Unilted

States Great Lakes ScanlimlYia and Baltic Eastbound Conference and Great Lakes Unrited

Kiuldom Eastbound Conference

1

Approved Steamship Conference and Related Agreements published periodically by

theFederal Maritime COlllmisr ion

12 F M C
360 FEDERAL MARITIME COMMISSION

the followingnotice to exporters and importers on behalf of the thr

Eastbound as well as the three counterpart vVestbound conferences 

CHICAGO MILWAUKEE DULUTH DETROIT TOLEDO CLEVELAND

AND OTHER US GREAT LAKES PORTS

Terminal Oharges

For your information please note that with the opening of the 1965 Shipp

Season at all U S Great Lakes Ports the rates of freight cover only loadin

unloading of cargo on or from the vessel direct from to cars or trucks 

from to place of rest on the dock or in the shed

All prior costs or costs beyond including loading unloading of cars or truc

areforthe account of thecargo

The Terminal Operators at U S Great Lakes Ports will assess a separ

charge for the loading unloading of railcars trucks which will be collected 

them or Carriers agents in accordance with the lerminal Tariffs from the 

porters at the U S Great Lakes ports of Loading or from Importers at the U 

Great Lakes ports of discharge

15 The ambiguity referred to by the Report and Findings in Fa

Finding Investigation No 2 and by the Commission s Executive D

rector s letters of January 1963 having been removed by the fil

tariffs the Commission on September 29 1965 granted a motion 

Hearing Counsel to discontinue Docket No 1135 as moot

16 The establishment of the 9 cent charge contrary to prior pra

tices came as a surprise to complainant importers The record sho

that during the 1965 shipping season they made payments total 

approximately 197 300 for truck loading iron and steel items As 

customary most of these imports were purchased from foreign su

pliers during October November and December for delivery beg

ning the following April when the season opened Because of sev

competition in this field of business the importers were seldom a

to pass this increased cost on to their customers or back to their su

pliers Their profits were therefore reduced by the sum of the loadi

charges plus certain related accounting and legal expenses A fesa

may have been lost

17 Toward the end of 1963 more than a

year before the termi

tariff was filed the terminal operators conducted a

relatively simp

study hereinafter called study No 1 c0vering the period Octo

28 to November 8 1963 in an effortto determine specific truck loadi

costs Though still resisting the installation of a charge they 

conscious of the possibility that it might be forced upon them T

cost oftruck loading iron and steel products was found to be appro

mately 9 5 cents per 100 pounds refrigerated cargo 17 cents machine

IS The owners going eastbound were substantially if not entirely the same as th

going westbound

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 361

and heavy lifts 13 6 cents pre palletized cargo 5 3 cents and general

eargo NOS 13 6 cents Realizing that the study was inadequate as

a basis for a permanent rate structure the terminal operators retained

Mr Philip E Linnekin an authority in the field of cost accounting

with extensive experience as a consultant on marine terminal rate

matters On October 26 1964 he issued a preliminary report study

No 2

recommending procedures to be followed in determining costs

and formulating a

complete marine terminal tariff fIe specifically

pointed out inter alia that

1 Study NO 1 was inadequate for a permanent rate structurebecause among

otlwr reasons the cost period was too short and labor costs were out of date

2 Rates should be separately established for those commodities moving in

snbstantial volume where handling characteristics such as type of package stow

age factors etc affect the output

3 The costs determined through the recommended procedures would serve as

a basis foran initial tariff to be effective only until more complete and defensible

cost studies could be compiled during the next shipping season

4 Cost is only one factor inrate making Others include competition volume

and ability to pay

18 Thereafter the terminal operators decided that the initial tariff

would not be a complete terminal tariff including dockage and wharf

age but would be limited to loading and unloading of inland carriers

A preliminary study submitted by 1r Linnekin February 18 1965

study No 3 was accordingly limited to such costs It covered the

operations of four of respondent terminals during the months of

October and November 1964 19 Some of the data was actual and some

estimated

19 Mr Linnekin concluded and so advised the terminal operators

thilt studies No 1 and 3 together with the published rates of other

terminals 20 should provide a reasonable basis for their initial tariff

to become effective with the opening of the 1965 season However he

urged that substantive cost studies be made by all operators during

the coming season because a

permanent rate structure capable of

withstanding complaint by the shipping public or inquiry by the

Federal Maritime Commission must be more firmly based

20 Study No 3 recommended rates on iron and steel products vary

ing from 8 cents Steel in coils to 16 cents Over 40 foot length

classifications of cargo from 4 cents Pre palletized cargo to 49 cents

General cargo measuring over 160 cu ft per 2240 lbs and on

General cargo NOS 12 cents per 100 pounds However a review of

eost studies No 1 and 3 together with a comparison of the rates with

9 North Pier Terminal Co Great Lakes Storage Contracting Co Rogers Terminal

Shipping Corporation and Transoceanic Terminal Corp

2Those considered included New York Philadelphia and Gulf and South Atlantic ports

12 F MC
362 FEDERAL MARITIME COMMISSION

those at Philadelphia and New York and knowledge that railroad

serving South Atlantic and Gulf ports had recently increased the

line haul rates by 9 cents per hundred weight to offset loading an

unloading costs for commodities moving through those ports pe

suaded the terminal operators that a 9 cent rate would not be exce

sive ornoncompetitive and would not invite attack with respect to an

particular commodity 1r Linnekin continued to prefer a commodit

tariff 21 but agreed that under the circumstances in which this partic

ular rate was published it was a reasonable thing to do

21 After the opening of the 1965 season the ternlinal operator

retained Mr Linnekin to eonduct the further more definitive stud

he had recommended study No 4 This was desired for use in th

proceeding the complaint having been filed May 4 1965 as well a

future ratemaking considerations It covers the 3 month period o

August September and October 1965 considered reasonably norm

months representing about 40 percent ofthe shipping season and in

cludes the operating results of the four then operating menlbers of th

Chicago l1arine Terminal Association 22 Data was submitted to M

Linnekin by the terminal operators on forms which he prepared

Included wereseparate reports for each rail car and truck loading an

unIoacling operation some 19 244 in all Tonnages man hours an

direct eosts were determined for toueh labor lift trucks crane

checkers foremen and overhead Ten percent wasadded to commodit

totals as provision for profit before federal income taxes The stud

was distributed to all parties before the hearing in this proceeding

In summary it disclosed the following

Short tons Total cost Totalcost Cost in ce

and profit Per 100 Ibs

Iron and Steel Products

wire rods in coils u u u u u u u u 22 987 26 577 29 235 6 

angles bars beams billets etcu u 29 137 30 144 34 038 5 

pipeu u u u u u u u u u

1 328 1 799 1 979 

plateu u 1 742 1 041 1 145 3 

sheetsteeL u u u u 10 512 9 129 10 042 4 

flanges u u u 1 170 3 566 3 923 1

Total ironand steel products u u u 66 876 73 056 80 362 I

Other commodities 175 293 562 294 618 523 l

All commodities u u u u 242 169 635 350 698 885 14 

22 Thereafter during the course of the hearing 111 Linneki

testified that in accordanee with principles underlying the so calle

n

References to commodity tariffs and commodity rates include other forms of carg

classification snch as weight measurement packaging and palletization

Hogen Telminnl and Shipping Corporation North Pier Terminal Compan O Na 

Pier and Lake Calumet operations Transoceanic Terminal Corporation s South ChIcag

operation and Shed R operation at Lake Calumet and Great Lakes Storage and Contractin

Company s Navy Pier operation

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 363

Freas farmula 3these casts shauld be adjusted to include pravisian

far the cast f facilities compased mainly af rentaJs leasehald im

pravements and related casts paid by the terminal aperators Based

upan casts reported in periadic aperating statements af respandent

terminal operators the cast af facilities was camputed to be equa lto

5 cents per 100 pounds hen applied equa lly to each commadity this

praduced a total cast far iron and steel products af 11 cents all ather

commadities 22 6 cents and an average af all colnmadities 19 4 cents

23 Based upon the single rate of 9 cents far all commadities far

the manths af August September and Octaber 1965 1r Linne cin

deternlined that without pravision for cost af facilities there was a

tatal revenue deficiency of 262 981 01 54 cents per 100 paunds Iran

and steel praducts produced a prafit af 47 321 befare allowance far

cast affacilities but a deficit thereafter

24 Iran and steel praducts canstitute the majar camlnadities

nlaving thraugh the Part af Chicago During the above three manth

periad they tataled 66 876 shart tons Appraximate tonnages afather

cammadities nlaving in substantial valume during the same periad

Vere bagged cargo 48 000 tans general cargo 32 000 tans refrigerated

cargo 15 000 tans barrels and drums 12 000 tans and liquar wine and

beer 12 000 tons

25 The terminal aperators cantinue to lnaintain separate canunad

ity rates in their cantracts far the pravisian af stevedaring services

to the vessels They are based upan difficulty af handling and the

magnitude of liability far damage 01 lass A representative cantract

shaws that the 1965 stevedoring rates on steel praducts were consid

erably lawer than r tes an ather commadities vVhile steel products

rates ranged fram 3 97 to 5 25 per lang ton the rate far bagged

cargo was 7 96 general carga NOS 8 17 refrigerated cargo 12

cargo in kegs 01 barrels 8 06 and liquar Vine and beer 9 95 The

rate far toys and Christmas arnaments af 49 73 per lang tan was the

anly rate higher than the 12 rate for refrigeraIted cargo

26 Until 1965 stevedoring commodity rates were applied by the

terminal aper atars in determining the charges far services which in

cluded truck laading Now the cargaes are maved fram the vessel

to the point af rest rut a commodity rate under a

stevedoring con

tract and fram there to the truck at the uniform tariff rate af 9 The

Li11l1ekin studies are limited to cost analyses and are not concerned

ZI1h i

ila formula for segreglliting marine terminal Costs among wharfingersel ices fo r

the llUrpoi e of allo cating such costs between vessel and cargo It was appro ved ill Docket

No 640 Jcnninal ReLie Ft1Icture CaUjornia POIt 3 U S M C 57 1948 for lL plica ti on

to California Ports and in Docket No 744 Terminal Rate StructurePacific N01 thlVe8t

Port qF M B 3 1956 for application to Pacific Northwest Ports In priIlciple it is

llllicable to other Ports but with variatioIls as required by unlike practices and condition

12 F M C
364 FEDERAL MARITIME COMMISSION

with such ather ratemaking factors as competition value and abi

to pay

27 There are some ports which use uniform rate truck load

tariffs e g Philadelphia Baltimore and Norfolk but commod

rate tariffs are far more common Included in the latter group 

the ports of New York North and South Carolina Georgia Mob

Houston and Great Lakes Ports of Detroit and Milwaukee AtBos

and at Pacific Coast ports the truck services alrange for truck load

andthe terminal operator does not enter into it

28 Since respondent Federal 1arine Terminals Inc a nonme

ber of the Port of Chicago Marine Terminal Association did 

start operations until 1965 it had no actual experience upon wh

to base a study of loading and unloading costs For competitive r

sons it simply adopted the 9 cent rate assessed by Association mem

operators

DISCUSSION

The 9 0ent O ha1

ge

Section 17 of the Act makes it unlawful for any person subj

thereto to observe unjust or unreasonable practices relating to 

receiving handling storing or delivery of property Complaina

contend that th 9 cent truck loading charge constitutes an unjust a

unreasonable practice In support of this position they urge that 

terminal operators failed to make an adequate cost study and to g

adequate public notice that the studies that were conducted w

insufficient and inaccurate that the Terminal Association refused 

consider a

commodity rather than a uniform flat rate even thou

aware of the differences in thecost ofhandling different commoditi

that the allowance of a profit margin of 10 percent is unjust and 

reasonable that a number ofthe cost allocations to loading iron 

steel in the latest Linnekin report No 4 are inappropriate or und

high resulting in overcharging for this commodity that the allo

tion of cost of facilities is primarily a

charge to dockage and wha

age and is not a proper charg for truck loading any commodity 

that rEspondent Federal Marine Terminals conducted no cost stud

to justify its 9 cent rate

Hearing Counsel urge that the record does not show that the 9 c

charge is clearly an unjust or unreasonable practice in violation 

section 17 at this time but that it is ofquestionable propriety and m

eventually prove to be unreasonable Specific note is taken of the 

that there is no showing that the charge disrupted the importation 

steel into Chieago or caused any signillcant loss of sales It is emp

sized that the charge from an overall stLlldpoint is noncompensa

12 F M
CROWN STEEL SALE l

INC ET AL V PORT OF CHICAGO 365

and that ifMr Linnekin s allocation of cost of facilities or a reaSOll

able portion thereof is accepted it is noncompensatory vith l espel t

to iron and steel As hearing counsel rightly conclude there is somo

question as to the propriety of a single rate which ignores different

handling characteristics among individual commodities and results

in substantial deficits

Adequacy of Studies and Notice

In considering the positions taken by the parties with regard to the

adequacy of the rate studies underlying the terminaltariff a material

distinction must be recognized Respondent terminals and hearing

counsel expressly base their respective judgments upon the acceptance

of the tariff as being the initial one i e a rate structure that is tenlpo

rary to the extent that it is subject to the accumulation of actual experi

ence and further study Complainants indicate no such qualification

and thus apparently presume it to be of a more permanent nature On

brief their repeated reference is to a permanent rate structure

The terminal operators realized or should have realized that they

would eventually have to adopt their own tariff but they did not know

when This remained uncertain until receipt of the March 24 1965

telegram advising that the carriers had amended their tariffs to

eliminate the absorption of truck loading charges The terminal oper

ators were thereby compelled to immediately promulgate a tariff to

become effective upon the opening of the shipping season the follow

ing week Longer notice to importers was not possible 24 In any event

it is to be recalled that since virtually all of the iron and steel products

concerned were purchased before the end of the preceding December

and thatthe ultimate market was competitive to such a degree that cost

increases could not be passed on subsequent notice of whatever length

would have been oflittle ifany benefit to complainants

The detennination with reasonable certainty of an enduring rate

for a particular service requires actual experience in the performance

of the service in the manner anticipated Moreover the experience

must be reasonably current Studies based on out of date costs and

procedures are of limited value Initial rates cannot be more than

reasonable approximations to be use duntil actual experience provides

a basis for more positive and lasting determinations In the past the

Commission has afforded carriers the opportunity to develop their

There Is no provision of law or regulation requirIng notice with respect to tariffs filed

bJ terminal operators rhe agreEment creating the Port of Chicago Marine Terminal

Association as approved by the CommissIon March 17 1964 provides for 30 days notice of

tariff changes unless good cause exists for shorter notice but this does not apply to an

initial filing

12 F M C
366 FEDERAL MAIUTIME COMMISSION

Services without having their initial rates declared unlavdu12j Th

has been true even hen the initial rates were found to be nonco

pensatory and despite the Commission1s repeated holding that rat

which continue to be noncompensatory impose a burden on other se

ices performed by terminal operators and are detrimental to the co

Inerce of the United States within the meaIling of section 15 of t

Act 26

The terminal operaJors tariff establishing the separate loadin

eharge for the 1965 season witS their first They were vithout pri

experiene e

or time to conduct further studies TndeI the circumstance

reliance upon the bvo earlier preliminary studies Nos 1 and 3 th

reference to such things as rates at Philadelphia and New York te

minals 27 the previously noted I cent increase in line haul rates of ra

roads to coveT loading and unloading costs on commodities movi

thl Ollgh South Atlantic and Gulf ports and their general recogniti

of competitive considerations vas just and reasonable In fact it w

auont all they could do

G01nnwdity Rates and liandling Omits

Complainants cO ntend that it is unjust unreasonahle and undu

prejudicial to burden an easily and inexpensively handled commod

such as steel with a 9 cent chal

ge while commodirties vhich are nlu

more difficult and expensive to handle pay the same rate Steel 

ueing charged more than its rail share while commodities which a

expensive to handle are being undercharged and actually su

sidized by steel

I

Iearing Counsel1s problenl v ththe unirormrate is thrut by ignori

differences in handling characteristics it produces substantial defie

The D cellt rate is not eonsidered by them to be unduly low or hi

with respect to iron and steel products but they find it nonconlpe

satory when related to the cost of handling other commodities Th

urge that the indefinite continuance or a rate structure which resu

in substantia deficits nlay prove detrimental to the com meI ce of t

United States vVhile they conclude that the means to rectify this s

uationl whether by establishment or acommodity rate tariff 01 by so

Red lIced Butes rm Machinery and 1ractors Jiram United States 4tlantic Ports to Po

in Pncrto Rico E j IC DOiCket No 1187 May 10 1966 11 13 Red1 wUon in Ratcs Pnc

Voast HnwaM Oliver J Olson Vo 8 F M C 258 265 1l64 Freiqht Rates a1ul P

ti ces PloridaIPUC1 to Rico Prade 7 M C 6 S 6 694 l Wi 1964

t

Status of Oarloa ders and Unloaders 2 U S M C 761 773 1946 Seas Shipping 00 

Amcdcan SonthAfr ioan lAne 1 VS S B B 568 583 1936 and Status of Carloarler8 

Vnloll crs 1 V S1 C 116 121 1949

2

TIle comparablE iron and steel rate at Philadelphia was 91h cents aDd at New Y

SlJJ tu In cents At Detroit and Milwaukee the rates were lower However without deta

Information regarding such things as eOl lts revenues union affiliations contract requ

ments Ip l seho d alTJlngements etc the value of such OHl larisonfl is Limited RfIpo n

say that 3uch information is not readily avaiIable from other terminals

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 367

other adjustment of rates to reflect costs is for the terminal operators

to fashion they feel that the Commission should maintain close sur

veillance over the situation

Hespondeat terminal operators aTgue that they have no obligation

to adopt a

commodity tariff They rely upon the fact that terminals at

Philadelp1hia Baltimore and Norfolk apply unifonn truck loading

rates and that it is not uncommon for Iail caIriers to employ uniform

rates for port handling services A number of Interstate Commerce

COl11Jnission cases are cited in support of the contention that uniform

rates are propel for terminal services

The record shows that the 9 cent rate is generally depressed A re

duction on iron and steel products would therefore be inappropriate

rhe fact that the rate hen applied to other commodities is even less

compensatory cannot justify a reduction for these products

The use by other terminals and rail carriers of unifol ln rates is rele

n1nt ith regard to the question of whether uniform rates are per se

unlawful hat the local practices are and perhaps in a

general way

the relative magnitudes of rates for similar services Iowever as this

recordis without evidence bearing on costs types and volumes of cargo

handling characteristics labor arrangements competition and other

factors pertinent to the operations of terminals at the three above

named ports no determinrution can be made as to whether their use

of uniform rates is or is not unjust unreasonable discriminatory or

detrimental to the commerce The record does show that the majority

of the marine terminals in this country which have truck loading

tariffs prescribe commodity rates and that a uniform rate of 9 cents

is belothe cost of providing the service at Port ofCllicago terminals

Among the Interstate Commerce Oommission cases cited in support

of uniform rates are three which have to do with switching charges 28

They pertain to the movement of cars between tracks and sidings The

cost of performing this service is presumably uniform and does not

depend upon the handling characteristics of the contents of the rail

cars In two other cited cases the Commission actually disapproved

the charges 29 As Hearing Counsel point out all of the remaining ICC

cases cited really stand for the proposition that a carrier is entitled to

reasonable compensation for its services and that rates should be at a

c

ompensatory level to insure that no party is unduly burdened with

an unfair proportion of the cost In one case the Commission in ap

proving a

port handling charge of50 cents pel tOll on jmported China

28 Reoiprooal Switoh i ng at Riohmond Va 222 IC C 783 1937 Switohing Rates in

Chioago Switching Distriot 195 I C C 89 1933 Switclling Charges at Floyclada Texas

206 IC C 671 1934

29 Rttcs on Hawaii Consolidated Railway 118 IC C 489 1926 Import hon and Steel

A1tiolcs 129 LC C 350 1927

12 F M C
368 FEDERAL MARITIME COMMISSION

clay and ball clay in carloads from North Atlantic ports specifica

pointed out that this pproximately equalled the actual cost to 

carriers of performing this service 30 In still another the Comm

SIon stated that loading and unloading charges which were below c

wereunlawful concessions unjustly discriminatory and conferred 

due and unreasonable preferences 31 In another case the Commiss

made clear that its decision was based upon cost determinations a

the charges should approximate the cost of service 32

In the remaining two cited cases

33 the Commission approved u

form loading and unloading charges to be added to the line haul ra

of various railroads to cover the costs of a

variety of services requir

at the ports for transferring and handling oceangoing cargo In 

Parte No 212 304 IC C at 375 the Commission concluded 

follows

The cost of these loading and unloading serv ices should and must be bo

as nearly as may be by theshippers and consignees for whom they arerender

in order to avoid an undue burden on other traffic and the shippers and c

signees thereof and to enable respondents to render adequate transportati On s

ice Italic supplied

In giving meaning to the Interstate Commerce Commission O jud

ment that the cost of loading and unloading services should and m

be borne as nearly as nay be by those for whom rendered particu

facts and circumstances pertinent to that proceeding and to railro

operations and tariffs must be keptin mind The objective was to p

vide uniform charges for similar services at New York and Philad

phia as well as otherpoints in the eastern territory Despiteconte

tions by shippers thatthe charges should reflect theactual costs at ea

port and for specific commodities the Commission accepted avera

costs as justification for the proposed uniform charges The fact 

that it had no alternative Railroad tariffs include great numbers ev

thousands of commodity rates The Commission did not have a

could not reasonably obtain individual commodity cost studies Und

the circumstances reliance upon cost averages was as nearly as m

be

Inthis case on the other hand the Chicago terminal operators ha

studies although preliminary and withinadequacies and deficiencies 

individual commodity handling costs Moreover they now have act

operating experience of reasonable duration Mr Linnekin in stu

No 3 advised that a permanent rate structure should not be based up

30 International Paper Oompany 177 IC C 191 195 1931

31 Freight Forwarding Inve8tigation 229 IC C 201 237 1938

32 Oho ges for Protective Services to Peri8hable Freight 241 IC C 503 549 1940

33 Increased Freight Rates 1958 ED Parte No 212 302 I C C 665 1957 and 

IC C 289 1958 Increa8ed Freight Rate8 1960 ED Parte No 223 311 I C C 373 19

12 F M
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 369

anything less than a full shipping season under an initial tariff The

three month Linnekin study No 4 details the costs applicable to six

categories of iron and steel products and to Other products The

average for the iron and steel products of 6cents before the allocation

of 5 cents additional for cost of facilities is approximately one third

ofthe 17 6 cents shown for Other products Each of the previously

mentioned 19 244 separate reports ofloading and unloading operations

identifies the commodity Itis obviously advantageous to be concerned

with one or a few rates rather than with the multitude of rates that a

substantial refinement of cost analysis and judgment would produce

However commodities moving through the Port of Chicago in major

volume have been found to fall into relatively few classifications

bearing any significant relationship to handling characte6stics In

order of approximate tonnages moved duringtheAugust October 1965

study period the principal commodities or classifications of cargo

were iron and steel products 67 000 tons bagged cargo 48 000 tons

general cargo 32 000 tons refrigerated cargo 15 000 tons barrels and

drums 12 000 tons and liquor wine and beer 12 000 tons These termi

nal operators are clearly in a far better posi tin than the railroads to

tailor their rate structures to recognize handling costs and to produce

compensatory revenues As Hearing Counsel note imprecise general

increases in line haul rates were the only means available to the rail

roads in the cited ICC cases

Noncompensatory Rates

The Federal Iaritime Commission as earlier noted has long held

that noncompensatory rates are detrimental to the commerce of the

United States within the meaning ofsoction 15 In Investigation of

Free Time Practices Port of San Diego FMC Docket No 1217

May 25 1966 pp 25 and 31 the Commission has again stated that

noncompensatory rates are unduly prejudicial and unreasonable within

the meaningof sections 16 and 17 ofthe Act

thepractice granting stowage at noncompensatory rates was unduly and

unreasonably prejudicial within the meaning of section 16 F1irst This was so

because users of storage at noncompensatory rates were not providing their

proper share of essential terminal revenue and thus a disproportionate share

of this burden was being shifted to users of other terminal services whose

charges are or should be based on rates considered to be reasonable or com

pensatory 2U S M C at 603

practices which result in the provision of services at rates or charges less

than that which it costs the terminal to provide the service are unreasonable

practices within the meaning of section 17 lhe concern with the compensatori

ness of terminal rates and eharges aside from any prejudice 01 preferrence nOIl

12 F M C
370 FEDERAL MARITIME COMJHISSION

oompensatory charges may York is a thread running throughout terminal ca 

h1 In fact no other concept fully explains the precedent Cases cited

Respondent terminal operators are by now in a position to unde

take the revision of their rate structures to the end that charges a

compensatory and are borne as nearly as may be by those for who

the services are rendered For that matter the Terminal Associatio

has jlist filed a tariff revision which increases the charge from 9 

10 cents except on 1 specified manufactured iron and steel article

2 pre palletized or pre unitized cargo and 3 conunodities in r

usable outer containel s

34 Thile this is certainly a

step in the rig

direction reference to the previously noted disparities in the cost 

handling particular commodities andthe relative volunles ofthe maj

categories or classes of cargo moving through this port leaves su

stantial doubt as to whether the revised rates 1 are reasonably com

pensatory and 2 place the cost burden upon those for whom th

loading and unloading services are rendered The tariff revisio

naturally does not disclose the cost data and other ratemaking facto

relied upon

P1 ofit 111argin

Complainants contend that the markup of 10 percent over cos

used by 1r Linnekin as an allowance for profit before income tax

study No 4 is too high They point out that the steel fabricato

york on a 2 percent profit margin and that in Te1 1ni1Wl Rate Stru

ture Oalifo1 1da P01 tS 3 US 1C 57 64 1948 the Commission a

lowed a returnof 7 percent on invested capital

On the basis of August October 1965 costs adjusted to approx

mate the entire shipping season the terminal operators 10 perce

before tax profit Inargin is found to become about 5 6 percent aft

federal income taxes In judging the cost profit ratio of one busine

versus another the makeup of the costs of each is significant 

reasonable profit ratio for a business which incurs large costs for m

terials such as steel fabricating is not directly comparable to a bu

iness such as a marine terminal operation which incurs most of 

costs for labor and service equipment Also in this instance resort 

return on invested capital would not be appropriate as most of th

terminals facilities and equipments are rented The fact that ov

the past 3 years these terminalshave not been making 10 percent befo

taxes on their overall operations including stevedoring is not d

3

This tariff revision of which official notice istaken is on file with the Commission a

isdesignated Fl 1C T No 2 First Revised PageNo 17 et seq issued August 1 1966 eff

tive September 1 1966 On brief counsel for complainants and Hearing Counsel refer to 

recently rHised taritr of respondent Federal Marine Terminals Inc This is not on 

with the Commission orotherwise subject to official notice

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 371

terminative and the record does not otherwise show the allowance to

the unjust orunreasonable for this type of business

Oost of Oheckers

Objection is also raised to including a charge of 7 508 representing

the cost of Checkers 35 Complainants argument is not that the func

tion is unnecessary but rather that the cost should be assessed against

the vessel for the use ofterminal facilities and servicesand not against

the cargo for truck loading They point out thatllir Linnekin in study

No 2 advised the terminal operators that checking cost should not

be included in loading and unloading IIowever in study No 3 aftBr

the terminal operators had decided not to adopt a complete terminal

tariff covering all services normally provided by marine terminals

but only a

loading and unloading charge he further advised as

follows

On the assumption that the Association would be publishing a complete

marine terminal tariff we did notprovide any instructions for theaccumulation

of the costs of checking cargo when handled to and from inland carriers In

such a complete tariff checking costs would more logically fall in some other

category Under the present circumstances we believe that checking costs

shouldbe provided forin loading and unloading rates

The Commission has held that under the Freas formula handling

and service charges are assessed against the party for whom they have

been incurred In this case the charges are incurred on behalf of the

consignees and are against the cargo The added argument that the

Terminal Association s revision of its tariff in 1966 36 to include

specific reference to checking in the definition of truck loading con

stitutes an admission that checking WM not properly chargeable to

truck loading under its 1965 tariff is of limited validity One could

argue the other way with at least equal logic

Overhead

As earlier found respondent terminal operators are engaged in

stevedoring as well as terminal operations Study No 4 contains an

allowance for truck loading overhead expense of 106 831 10 315 is

attributed to iron and steel products Complainants contend that the

record would seem to indicate that all ofthe overhead expenses have

been applied against truck loading and none to any ofthe other func

35 These are people wbo are employed by the terminal operators to count the cargo

and determine whetber it is in good condition flbey are stationed at the truck Or rail car

36 Port of Chicago Marine Terminal Association Tariff No 2 issued March 7 1966

effective April 7 1966

12 F M C
372 FEDERAL IARITIME COMMISSION

tions carried on by these combined stevedore terminal operatio

The study contains the following explanation ofthis computation

By reference to operating statements of each operator the percentage rela

ship of overhead expenses to touch labor costs were determined The sepa

percentages wereweighted inthe same manneras the foremen costs The weig

percentage amounted to 44 5

The touch labor costs for truck loading during the months 

August September and October 1965 as reported to Mr Linne

by the terminal operators were 240 066 of which 23 175 was 

iron and steel products Applicllition of a

percentage ratio of overh

to touch labor clearly serves to allocate overhead between stevedo

and terminal operating services in direct proportion to the touch la

expenses of each Moreover Mr Linnekin testified that this comp

tion was made in conformance with the principles set forth in 

Freas formula an objective of which was to apportion terminal 

penses between vessel and cargo Stevedoring expenses in this insta

are accordingly assessed against the vessel and truck loading expen

are assessed against the cargo

In Terminal Rate Structu1 e Oalifornia P01 ts supra at page 

it is stated that

All expenditures were apportioned to vessel and cargo in proportion to 

use made of the facilities provided and of the services rendered The ye

was held responsible to the wharfinger for all usages and services from 

not including the point of rest on outbound traffic and to but not includ

the point of rest on inbound traffic All other whar finger costs were asse

against the cargo The pOint of rest is the location at which the inbound c

is deposited and the outbound cargo is picked up by the steamship compan

Oost of Facilities

Complainants contend that the alloca tion of5 centsper 100 pou

for cost of facilities is not a proper charge to truck loading T

point out that at West Coast ports this cost is allocated to wharfa

Ratemaking processes at individual ports whether or not ba

upon the Freas formula must be varied to recognize local differen

in practices procedures and objectives Inthis instance there are s

differences which are peculiar to the Vest Coast Mr Linnekin testi

that in the original studies in Dockets Nos 640 and 744 supra one 

of the cost of aisle space in transit sheds open areas and rearload

platforms was allocated to loading and unloading rail cars and tru

but that this cost is now allocated to wharfage for the follow

reasons

One is to estahlish uniformity of practices within the membership grou

the California Association of Port Authorities Some of those ports are w

12 F M 
CROWN STEEL SALES INC ET AL V PORT OF 9HICAGO 373

we call landlord ports They provide a facility but do not perform any physical

handling operations Other ports we call operating ports who not only provide a

facility but also perform the services of loading and unloading checking and

other related general services

The landlord ports perform no loading or unloading but under the Freas

formula as it was Originally constructed for cost purposes costs were allocated

to those operations

So to develop uniformity within their own group they have reallocated those

costs on the part of the landlord ports to wharfage so that all members of that

association are now on a comparable basis of applying a cost formula The

same is true of theNorthwest

Another reason is that the competing car loading and unloading conferences

in the San Francisco Bay and Souhtern California do not have a facility This

work is done by stevedores and the competition in these loading and unloading

l ates is a factor of rate making so to be eonsistent with the manner in which

those conferences develop their costs the facility costs are not presently being

considered as a

part of the rate making for loading and unloading They are

allocated to wharfage

A third reason is that there is no truck loading anel unloading performed as

such by California and Northwest ports under marine terminal tariffs

At the Pacific Coast I

there is a uniform wharfage charge on general

cargo of 80 cents with minor exceptions At the Port of Chicago the wharfage

charge is 20 cents and this includes both the Port of Chicago and the Chicag o

Port District In both instances both Chicago and the Pacific Coast the wharf

age charge is collected from the vessel and is passed on by the essel to the cargo

Another difference is that the terminal operator on the Yest Coast pay

only for office space They don t pay anything else for the rest of the terminal

except at the Port of San Francisco where there is a nominal charge called a

preferential assignment charge

Another pertinent consideration is that at Chicago wharfage and

dockage charges although collected by the tenant terminal operators

are prescribed by the tariffs of and are remitted to the City of Chi

cago and the Chicago Regional Port District Therefore unless the

City

and or the PortDistrict arrange to reduce rents proportionately

thecollection of cost of facilities through wharfage charges would not

benefit the terminal operators who actually incur the expense

All costs should be apportioned to the yarious services concerned

Ihere is no question that facility costs are being incurred in con

nection with a stevedoring b truck loading and 0 wharfage

These costs should be distributed accordingly and the stevedoring

portion recovered by the stevedoring business through their contract

rates charged the vessel the truck loading portion by the terminal

operators through their truck loading charges or some tariff charge

againstthe cargo and the wharfage portion though wharfage charges

coupled with reduced rents Although no exhibit was presented Mr

Linnekin testified that using actua l costs revealed in respondents

12 F M C
374 FEDERAL MARITIME COMMISSION

operating statements which were disc losed to complainants he ca

lated and applied facility costs in aceordanee with the service app

tionment provisions of the Freas formula Eventually ofeourse 

apportionment of terminal serviee costs for given comlnodities as 

tween cargo alld vessel beeomes aeademic because all sueh costs as w

as those of the water transportation are ultimately borne by the ca

importer

Both complainants and Hearing Counsel violently and with c

siderable justification object to the manner in which cost of facili

was brought into and developed on this record They consider 

last minute effort to support the 9 eent charge for iron and s

produets Itwasnot inc luded in any of the studies and came as a c

plete surprise to the parties when raised during the course of MT L

nekin s testimony In fact both Hearing Counsel and complaina

understood certain statements contained in studies 2 3 and 4 to m

that cost of facilities was a

charge assessable against the vessel t

it was provided for in the terminal services portion of the steved

contracts and that it was not proportioned to truck loading un

the Freas formula They were also misled by the fact that the exh

detailing the calcu ation of the revenue deficiency of the 9 cent 

made no provision for the allocation of cost of facilities against tr

loading In addition to coming without notice this cost adjustm

item was without the carefully prepared explanation of the met

of computation so typical of other calculations contained in Mr L

nekin s exhibits There was no explanation of the allocation of 

cost as between truck loading stevedoring and wharfage

1r Linnekin testified that cost of faeilities was not a last min

thought and that this was indicated in his first report study No 

wherein he suggested a new tariff item a charge against the ves

called Terminal Facility and Service that under the Freas form

a portion of the cost of facilities is allocable to truck loading t

if these costs are not so allocated cargo will be getting a free 

on faeilities that in comparison to Pacific Coast ports the Por

Chicago wharfage charge is about 25 percent of what it should 

that he had been hard pressed to complete study No 4 in time 

meet even the postponed date of this hearing and that he hoped 

eventually eome up with a Freas formula application that will d

nitely reeognize facility eosts and get them into cost studies on a m

sophisticated basis

There are ample grounds for finding procedural faults on b

sides Counsel for respondent Terminal Association and 1r Linne

who has appeared as an expert witness in many Federal 1arit

12 F M 
CROWN STEEL SALES INC ET AL 1 PORT OF CHICAGO 375

Commission hearings should have prepared an exhibit of some kind

disclosing at least the data and method of computation employed and

the proportionate allocations ofthe cost to other charges such as wharf

ageand stevedoring On the other hand counsel for complainants or

Hearing Counsel could have moved to adjourn the hearing pending

preparation or a reasonable explanation of the calculation or failing

that to strike that portion of Mr Linnekin s testimony Also at least

some information could have been gained from revie ing his work

papers which he had with him Be that as it may and acknowledging

that there are grounds for uncertainty and some doubt regarding the

5 cent adjustment the fact remains that as Hearing Counsel point

out the cost of facilities is properly allocable in some proportion to

truck loading charges the 9 cent rate is depressed overall and the cost

of service is not the only element in ratemaking

Federal Marine Terminals Inc

Respondent Federal Marine Terminals Inc a non member of the

Terminal Association without operating experience prior to 1965

but faced with competition from all of the terminals in the area did

not engage in an unjust or unreasonable practice by merely adopting

the Terminal Association s initial tariff without conducting its own

cost study Under the circumstances it ould seem to be a most reason

able thing to have done at least initially

Alediterranean U S A Great Lakes Westbound Freight Con erenee

and Federal Pacific Lakes Line

Complainants charge thatrespondents l1editerranean U S A Great

Lakes Testbound Freight Conference and Federal Pacific Lakes Line

included truck loading in the ocean rate prior to the 1965 season that

by tariff amendments in March andApril 1965 respectively with less

than 30 days notice to the shipping public they eliminated the service

of truck loading from the ocean rate and that these tariff amendments

resulted in an increase in cost to shippers in violation of section 18 b

2 of the Aot Seotion 18 b 2

requires that no change shall be

made in ocean rates rules or regulations which result in an increase

in cost to the shipper except by publication and filing wilth the Com

mission not less than 30 days prior to the effective date

Had the conference tariff actually authorized the inclusion of truck

loading charges in the ocean freight rates any amendment providing

that the charges ould be for the account of the cargo and thus in

crease the cost to the shipping public would have required 30 days

notice Before amendment the conference tariff provided

12 F M C
376 FEDERAL MARITIME COMMISSION

Rates apply from under tackle export vessel at port of loading to end of sh

tac1c e Cleveland Detroit Toledo Ohicag o Milwaukee or any other Un

S tates ports I

I

Italic pplied

After amendment the tariff provided

TERMINAL CHARGES U S A To all ports of discharge rates named he

cover discharge of cargo from vessel direct to cars or trucks or to place of 

on the dock or in the shed all costs beyond including the oadinu of rai ca1 

t1 uclcs willbe for account of ca rgoimporte1 s Italic supplied

The amendment did not reflect a

change in the service offered 

the previous tariff did not authorize the absorption of the truck lo

ing charges in the ocean rates Such rates applied only to end of sh

tackle and therefore the restatement by amendment did not requ

30 days notice 37

The tariff ofFederal Pacific before amendnlent provided

Ocean freight rates set outherein apply from and to first place of rest on d

or in barge or transport alongside the ship all other expenses being for 

account of the cargo except that the ocean freight rates named herein co

hand ing to rail ca1 or truck tailgate direct or via the dock on steel on gen

cargo Italic supplied

Afterthe amendment thetariff provided

Unless otherwise specified all rates published herein apply from ship s ta

n t all ports of loading to the dock or place of rest in the shed at all ports of 

charge All other costs at discharge port including cost for loading to cars 

tniCks or other means of transportation are for the account of cargo Wharf

or lighterage or all other expenses beyond ship s tackle at the loading port 

for the account of the owner shipper or consignee of the cargo payable at 

loading port Italic supplied

Here again the tariff before amendment did not authorize the 

sorption of the truck loading charges handling to rail ca

truck tailgate is not analogous to loading to cars or trucks One 

alongside and the other on board The record does not show who 

now paying for this handlingservice nor whether its deletion from 

tariff resulted in an increase in cost to shippers In any event 

specific exclusion in the amended tariff oftruck loading services wh

were not included in the previous tariff did not effect a change in se

ice and did not require 30 days notice

Associated GreatLakesFreight Oonferences

Complainants contend that six conferences three Eastbound a

thl eeVestbound see footnote 7 took concerted action through 

Associated Great Lakes Freight Conferences AGLFC to obtain 

31 The issUl of whether the absorption of terminal charges in ocean rates prior to 

constituted a violation of section 18 I 3 isnot within the scope of this proceeding

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 377

indirect rate increase in violation of section 15 and that AGLFC is

a de facto interconference agreement organization in violation of

section 15

As found above AGLFC is in reality an administrative name used

to identify a housekeeping office supported by the three Eastbound

conferences The objective is simply administrative economy

to avoid the expense of maintaining three housekeeping offices The

record shows that AGLFC has nothing to do with ratemaking or any

other matter pertaining to the operations of the carrier members of

the conferences Itis not an interconference agreement organization or

so called super conference In fact it holds no meetings and has

no charter articles of association or byla ys prescribing any type or

form of organization

In its true substance AGLFC represents a cooperative working

arrangement having no function pertaining to competitive matters

The participating conferences are not in conlpetition In a recent

decision the Commission reaffirmed its past judgment holding that

such cooperative working arrangements are not section 15 agreements

Although the literal language of Section 15 is broad enough to encompass any

cooperative working arrangement entered into by persons subject to the Act

the legislative history is clear that the statute was intended by Congress to

apply only to those agreements involving practices which affect that competition

which in the absence of the agreement would exist between the parties when

dealing with the shipping or travelling public or their representatives D J

Roa ch Inc v Albany Port District et al 5 F l1B 333 335

Thus for example while agreements of persons subject to the Act to pool secre

tarial workers or share office space may literally be cooperatiye working ar

rangements they arenotthetype of agreements which affect competition by the

parties in vying to serve outsiders and hence are not subject to Section 15

Volkswagenwerk A G vMarine Terminals 001 p 9 F l1C 77 1965

The Origin of the Terminal Truck Loading Oharge

The discontinuance of the practice of absorbing truck loading

charges in ocean rates did not conle about by conspiracy or concerted

action subject to section 15 approval Ithad been the subject ofdiscus

sions between the carriers and the terminal operators for years but to

no avail In the end it was actually precipitated by the Commission

itself through Fact Finding Investigation No 2 and Docket No 1135

Tariff amendments were filed at various times during Nlarch 1965 ex

cept for one conference Great Lakes United Kingdom YVestbound

which filed no amendment until 1966 The use of the joint telegram of

March 24 1965 and the joint notice or March 30 1965 by the six con

ferences does not of itself indicate the existence of an agreement

12 F M C
378 FEDERAL MARITIME COMMISSION

subject to section 15 approval In acase in point involving handli

charges the Commission held

As heretofore noted the action taken by defendant carriers in their 

spectiye conferences concerning the establishment of said charge has be

eyidenced by amendments and supplements to conference tariffs filed in c

nection with and fonning a part of their approved conference agreements 

file with thisCommissioll The is uance of thejoint notice on behalf of a num

of confe rences of itself does not justify a

finding that the action vas tak

pursuant to agreement between the conferences Los Angeles By Product 00 

Barber S S Lines Inc 2 U S M C 106 114 1939

G1 eat Lakes United J ingdom lVestbound Oonfe1 ence

Next by complaint but not on brief complainants allege that t

Great Lakes United IGngdom Vestbound Conference violated s

tions v and 18 b 2 by failing to file a tariff amendment in 19

reflecting the indirect rate increase i e an amendment providing th

its ocean rates would no longer include truck loading charges Suff

it to say that as IIearing Counsel aptly point out in some detail the

as no violation because the unamended tariff a1though in need 

clarification yas keyed to the custom of the ports and thus render

flexible enough to provide authorization for respondents discontin

ance of the absorption of these charges when the custom of the po

so changed

F ede iCtl Atlantic Lakes Line

Lastly complainants contend that respondent Federal Atlan

Lakes Line amended its tariff to discontinue the absorption of th

truck loading charge in the ocean fleight effective May 10 1965 b

attempted to collect the 9 charge through its subsidiary Fede

l1arine Terminals Inc before the effective date in violation of se

tions 17 and 18 b 3 This carrier s tariff before amendment co

tained exactly the same provision regarding terminal charges as th

preyiously discussed tariff of respondent Federal Pacific Lakes Lin

Both specified that ocean freight rates covered handling to ra l c

or truck tailgate Thus as before the tariff did not authorize th

absorption of truck loading charges and therefore the amendme

specifically excluding this seITice as actually a clarification and n

a change in services Under a

proper application of the tariff befo

amendment truck loading charges were for the account of the carg

see footnote 37 The record does not show that this respondent 

any time collected such charges for its own account in violation of 

tariff The effective date specified for the clarifying amendment an

the corporate relationship if any of Federall1arine Terminals In

are therefore immaterial

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 379

ULTIMATE FINDINGS AND CONCLUSIONS

Even though some ofthe elements ofthe costs relied upon may have

been overstated the record on the whole supports the conclusion that

the expense of truck loading iron and steel as well as other com

modities exceeds the assessed charge of 9 cents per 100 pounds

The record does not show and will not support a

finding that the

9 cent charge has been an unjust orunreasonable practice in violation

of section 17 or that the chf rge has unduly orunreasonably prejudiced

or disadvantaged shippers or importers of iron and steel produots in

violation of section 16 First or that the charge has operated in a

manner that was detrimental to the commerce of the United States or

contraryto the public interest in violation of section 15

However the prolonged continuance ofthis charge even as recently

changed may well be subject to question Vhi1e the record shows that

the terminal operators acted in good faith in the first instance they

have now gained sufficient experience to enable them to determine

with far greater certainty and particularity a rate structure under

which the charges will be compensatory and will be borne as nearly

as may be by those for whom the services are rendered Prompt action

to this end is expected

There was no violation of the tariff change notice provisions of

section 18 b 2 by resp0ndents n1editerranean 1J S A Great Lakes

Vestbound Freight Conferenee or Federal Pacific Lakes Line or of

the unjust and unreasonable practice provisions of section 17 or tariff

compliance provisions of section 18 b 3 by Federal Atlantic

Lakes Line Their tariffs prior to 1965 did not authorize absorption

of truck loading charges by the ocean carriers Amendments filed in

1965 did not change but merely clarified the provisions of the previous

tariffs

The Associated Great Lakes Freight Conferences is an adminis

trative name describing an office facility utilized by the three par

ticipating eastbound steamship conferences for housekeeping func

tions only Itis not a de facto interconference agreement organization

regulating competition among its participants or a cooperative ork

ing arrangement of a nature requiring sec tion 15 approval

Respondent Great Lakes United IGngdom Vestbound Conference

did not violate section 15 or 18 b 2 by not filing a tariff amend

ment in 1965 since its tariff then in effect although ambiguous au

thorized discontinuance of the absorption of truck loading charges in

accordance with the changed custom of the port

The complaint is hereby dismissed

JOHN MARSHALT J

Pi e8idina Exmnine r

12 F M C
380 FEDERAL MARITIME COMMISSION

On exception Complainants have requested a remand of the ca

to the Presiding Examiner with instructions to review the financ

statements of the respondent terminal operators for the 1965 Gre

Lakes shipping season

A proceeding should not be reopened except ror unusual orweigh

reasons

38 Itis the view of the Commission that these reasons are n

present in this case and reopening would be disruptive or the a

ministrative process

Complainants have also injected new arguments relatingto thetar

of Federal Pacific Lakes Line and Federal and Atlantic Lakes Lin

to support their position that these respondents effected changes 

service without complying with sections 18 b 2 and 3 of t

Shipping Act

In regard to Federal Pacific Lakes Line complainants ask us 

reconsider the tariffs in light of additional tariff language not p

v

iously taken into account by the Examiner or the parties Cited is 

tariff provision which states that At Lake Superior ports seco

handling charges are for aceount of the cargo Complainants arg

that eargo therefore is not aceountable for such charges at otherGr

Lakes ports including Chieago and the carrier must have includ

them as part of its ocean freight rates previously The amended ta

deletes rererences to these charges illustrating that the carrier 

longer will absorb these charges However there is no hingin the r

ord to show what seeond handling means Complainants are inf

ringone interpretation rrOln the context One could inrer another 

terpretation as ell The reeorc1 will not clearly support one interp

tJaJtion over another Thereean thus be no finding or a vioJation or 

on the sole basis or inrerence orpreference ror a particular interpre

tion

Complainants contend that Federal and Atlantic Lakes Lines c

lected loading charges before May 10 1965 the effective date or 

tariff amendment in violation or section 18 b 3 This tariff ame

ment does not clearly reflect a change in service wherein truck load

ceased to be included in the carrier s ocean freight rates Moreover 

record does not show whether terminal charges assessed berore M

10 1965 presumably ror truck loading were paid to the carrier ror 

own aecount in violation or its tariff or as a collecting agent ror 

terminal operator FederallIarine Terminals Inc As the Exami

38 Alaska Steamship Co et a1 FelleraZ Maritime Commission 356 F 2d 59 a

1966 See also Interstate Commerce Cor l1n iRsion v City of Je1 sey CUll 322 U S 

514 515 1943

12 F M C
CROWN STEEL SALES INC ET AL V PORT OF CHICAGO 381

correctly found under a proper application of respondents tariff in

effect untilMay 10 1965 truck loadingcharges werefor the account of

the cargo anyway They should therefore have been paid by Complain

ants both before and after the tariff was amended A finding of viola

tion of section 18 b 3 by this respondent therefore does not hava

sufficiently clear record support

1tis ordered That this proceeding is hereby dismissed

By the Commission

SEAL Signed THOMAS LISI

Seere ta1 Y

APPENDIX A

Shipping Act 1916 AsAmended 46 U S C 801 et seq

Section 15 inpart

Every common carrier by water or other person subject to this chapter shall

file immediately with the Commission a true copy or if oral a true and com

plete memorandum of every agreement with another such carrier or other person

subject to this chapter or modification or cancellation thereof to which it may

be a party or conform in whole or in part fixing or regulating transportation

rates 01 fares giving orreceiving special rates accommodations or other special

privilegesor advantages controlling regulating preventing or destroying com

petition pooling or apportioning earnings losses or traffic allotting ports or

restricting or otherwise regulating thenumber and character of sailings between

ports limiting or regulating in any way the volume or character of freight or

pa nger traffic to be carried or in any manner providing foran exclusive pref

erential or cooperative working arrangement The term agreement in this

ection includes understandings conferences and other arrangements

The Commission shall by order after notice and hearing disapprove cancel

or modify any agreement or any modification or cancellation thereof whether

or not previously approved by it that itfinds to be unjustly discriminatory or

unfair as between carriers shippers exporters importers or ports or between

exporters from the United States and theirforeign competitors or to operate to

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

public interest 01 to be inviolation of thisAct and shall approve all other agree

ments modifications or cancellations

Section 16 First inpart

That it shall be unlawful for any common carrier by water or othEr person

subject to this chapter either alone or in conjllllctioll witl1 allY utl1er llerson di

rectly or indirectly

First To make or give any undue or unreasonable preference or advantage to

any particular person locality or description of traffic inany respect whatsoever

or to subject any particular person locality ordescription of traffic to any undue

or unreasonable prejudice or disadvanta e in any respect whatsoever

Section 17 inpart

Every such carrier and every other person subject to this chapter shall es

tablish observe and enforce just and reasonable regulations and practices relat

ing to or connected withthereceiving handling storing or delivering of property

Whenever the Board finds that any such regulation or practice is uujust 01 un

12 F M C
382 FEDERAL MARITIME COMMISSION

reasOnable it may detennine prescriue and O rder enfOrced a just and reasO

regulatiOn 0 1

practice

SectiOn 18 b 2 inpart

2 NO change shall be made in rates charges classificatiOns rules 0 1 

lations which results inan inerease in cost to the shipper nOT shall any ne

initial rate Of

any commOn carrier by water in fOreign commerce 01 confer

O f such carriers be instituted except by the publicatiOn and 1iling as afore

O f a new tariff 0 1 tariffs which shall becOme effective noteaTlier than thirty 

after tlle dMe of publicatiOn and filing thereof with the Commission and 

such ta riff 0 1 tariffs shall p1ainly IshOW the cha nges prOposed to be made in 

tariff 01 tariffs then infOrce and the time when the rates charges classificati

r ules or regulatiOns as changed are to become effective The term ta

as used in this paragraph shall include any amendment supplement 01 reiss

Section 18 b 3

3 No CmmOn eanier by water in foreign cOmmeree or cOnference of 

calrriers shall charge or demand 0 1 collect 01receive a greater or less or diffe

cOmpensation fOr the transPOrtatiOn O f

property orfO r any service in connec

therewith than the rates and charges which are specified in its tariffs on 

with theCO mmissiOn and duly publiShed and ineffect at the time nO r shall 

such carrier rebate refund 01 remit inany manner 01 by aollY device any por

O fthe rates 01 charges so specified nor extend 01 deny to any persDn any p

lege 01 facility except in accOrdance with such tariffs

Section 22 inpart

Any person may file with the Federal Maritime BDard ia SWDrn cOmplaint 

ting fOrth any violation f this chapterby a CDmmDn carriel by water 01 D

person subject to this chapter and asking reparatiOn fOr the injury if 

caused thereby The BDard shall furnish a COPy O f the complaint to such car

or other person whO shall within a reasOnable time specified by the BO

satisfy the cOmplaint Dr answer it inwriting Ifthe coonplaint is not satis

the BOard shall except as otherwise prDvided in this chapter investigate i

such mluner and by such means and make such order as it deems proper 

Board if the complaint is filed within twO years after the cause O f ac

accrued may direct the payment O n Dr befOre a day named Df full reparat

to the complainant fOr theinjury caused by such viOlation

12 F M C
TABLE OF COMMODITIES

Apples and pears U S North Atlantic and United Kingdom Eire 34

Automobiles U S North Atlantic and United Kingdom Eire 34

Books U S North Atlantic and United Kingdom Eire 34

Egg albumen U S North Atlantic and United Kingdom Eire 34

General Seattle Bellingham Wash and Alaska Peninsula Aleutian Islands 20

General United States United Kingdom Eire 34

Meat offal U S North Atlantic and United Kingdom Eire 34

Onions U S North Atlantic and United Kingdom Eire 34

Plastic sheeting U S North Atlantic and United Kingdom Eire 34

Rags U S North Atlantic and United Kingdom Eire 34

Refregerated cargo Florida to San Juan P R 25

Sleds U S North Atlantic and United Kingdom Eire 34

Toys U S North Atlantic and United Kingdom Eire 34

383

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INDEX DIGEST 413

Clause of preferential minimum maximum payments terminal agreement

providing for retroactive effect could not be approved Crediting of payments

made prior to approval to the minimum maximum provisions constituted giv

ing effect to the provisions of an unapproved agreement Giving effect and

carrying out are terms not readily distinguishable The clause must be

deleted as a prerequisite to approval ld 132

Establishing a set of accounting standards to apply to future terminal agree

ments relating to terminals furnishing facilities for containerized cargo might

be beneficial However any attempt to do so in this proceeding would consti

tute rulemaking without the required notice to all interested parties Methods

used by ports in arriving at rentals or compensation for preferential use are

of Commission concern however the test here applicable is whether the ulti

mate result provides adequate compensation to the port While methods used

lJy the Port of Oakland in computing compensation may not be proper under

all circumstances there was no basis for criticizing the judgment of manage

ment in computing a fair return which return was shown to be compensatory

ld 133

Argument by Stockton Port District that as a preferential minimum maxi

mum terminal agreement provides for an allocation of the terminal charges

after the maximum has been reached there is an unlawful rebate which

operates unlawfully to limit competition was rejected The fact that the car

riers would derive monetary benefit under the compensation provisions was

not a sufficient basis to support a finding of undue or unreasonable competitive

disadvantage to another port An agreement is not unlawful because it does

not follow the terminal s tariff charges Monetary benefits to the carriers after

the maximum was reached would not be unlawful refunds merely because

thereafter no payments were made or that the tariff earned was apportioned

between the parties ld 133

TERMINAL OPERATORS See also Terminal Leases Loading and Unloading

Practices

Where a Port Authority was permitting a lumber dealer to operate a public

terminal and to backhandle its own lumber while denying other lessees the

same privileges the Port Authority could choose to remove the privileges and

thus remOVe the preference or it could afford a similar privilege to others

similarly situated If it chooses the latter course it must place the prejudiced

lessee in a position comparable to the privileged lessee in respect to the opera

tion of a pUblic lumber terminal and the backhandling of lumber It would

not be unreasonable for the Port Authority to prohibit nontenants from per

forming their own backhandling in view of space restrictions and problem

of delay and congestions which would ensue Similarly it would not be un

reasonable for the Port Authority to restrict the privilege of backhandling

of lumber by lessees to their own premises Ballmill Lumber Sales Corp I

Port of New York Authority 29 32

To the extent a terminal operator holds itself out to perform a particular

service it must publish a tariff describing the charges for such service to

insure equal treatment of all users of the service An operator would not be

permitted to discontinue publication of lumber backhandling rates to leased

areas but instead to contract privately for such services while continuing in

effect its present structure including volume discounts in respect to the public

lumber terminal If the development of circumstances caused the operator to
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