FEDERAL MARITIME COMMISSION

DOCKET NO 78 14

CELANESE CORPORATION ETC

v

THE PRUDENTIAL STEAMSHIP COMPANY

NOTICE

July 2 1980

Notice is given that no appeal has been taken to the May 30 1980

dismissal of the complaint in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has

become administratively final

8 FRANCIS C HURNEY

Secretary

23 F M C 1
FEDERAL MARITIME COMMISSION

DOCKET NO 78 14

CELANESE CORPORATION ETC

v

THE PRUDENTIAL STEAMSHIP COMPANY

SETILEMENT APPROVED COMPLAINT DISMISSED

Finalized July 2 1980

By joint motion the complainant Celanese Corporation a shipper 

and the respondent Prudential Steamship Company a common carrie

by water between United States Atlantic Ports and West Coast Ports o

South America seek approval oftheir agreement to settle this proceed

ing and ask further that upon approval the complaint be dismissed

In my judgment the settlement should be approved and the com

plaint be dismissed with prejudice

On April 28 1978 Celanese filed a complaint against Prudentia

alleging that the respondent violated section 18b 3 of the Shipping

Act 1916 46 U S C 817 b 3

2 in connection with nine shipments of 

commodity described in the bills of lading for those shipments a

Kimpac filter material transported from Charleston South Carolina

to Buenaventura Colombia during the period from January 23 197

through September 7 1976 The complainant asks for reparation in the

amount of 21 765 80 with interest pursuant to the provisions of section

22 ofthe Shipping Act 1916 46 U S C 8213

1

The shipper shown on the bills of lading is Celanese Fibers Co adivision of the complainan

Section l8b 3 provides as pertinent

No common carrier by water in foreign commerce or conferences of such carriers shall

charge or demand or collect or receive a

greater or less or different compensation for the

transportation of property or for any service in connection therewith than the rates and

charges which are specified in its tariffs on tile with the Commiasion and duly published and

in effect at the timei nor shall any 8uch carrier rebate refund orremit in any manner orby

any device any portion of therates orchar es 80 specified nor extend ordeny to any person

any privilege or facility except in accordancewith such tsrilTs

8

Section 22 provides 88 pertinent

That any person may tile with theboard asworn complaint selling forth any violation of this

Act by acommon carrier by water orother person subject to this Act and asking reparation

for the illiury ifany caused thereby The boardshall furnish a

copy of the complaint to such

carrieror other person who shall within a reasonable time specified by the board satisfy the

complaint oranswer it in writing Ifthe complaint is not satisfied the board shall except as

otherwise provided in this Act investigate it in such manner and by such means and make

such order as itdeems proper The board if the complaint is mad within two years after the

cause of action accrued may direct the payment on orbefore aday named of full reparation

to the complainant for the injury caused by such violation

2 23 F MC
CELANESE CORP ETC V THE PRUDENTIAL STEAMSHIP 3

co

BACKGROUND

To place the settlement agreement in perspective it will be helpful to

summarize the matters which led up to the motion for approval as

disclosed in the various pleadings memoranda and other material fur

nished either orally or in writing

During the period from January 23 1976 through September 7 1976

there were nine separate shipments ofthe filter material Inadvertently

Celanese s freight forwarder described those shipments on the bills of

lading by trade name Kimpac filter material rather than by the com

modity s generic name Cellulose Wadding Relying on the descrip

tions shown on the bills of lading and the rules and regulations of its

tariff Prudential charged the Cargo N O S rate for the shipments

instead ofthe Wadding Cellulose rate 4

The following table provides relevant data concerning each ship

ment

Meas Cellu Amount

urement Cargo loseto be Paid

Shipment Date of 14 N OS Wad Amount at

No Billof cubic Rate ding Paid Cellulose Difference

Lading feet Per 40 Rate

CfT Per 40 Wadding

CFT CFT

Rate

I 1123 76 1344 93 00 59 75 3 124 80 2 007 60 1 117 20

2 226 76 1928 93 00 6175 482 60 2 976 35 1 506 25

3 3 10 76 1874 96 00 6175 497 60 2 892 98 1 604 62

4 4 29 76 1811 96 00 6175 4 346 40 2 975 73 1 370 67

5 4129 76 1811 96 00 6175 4 346 40 2 975 73 1 370 67

6 6125176 1862 96 00 6175 4468 80 2 874 46 1 594 34

7 7125176 3168 10175 6175 8058 60 4 890 60 3 168 00

8 8 25176 3050 144 75 6175 11 037 19 4 708 44 6 328 75

9 917176 3050 144 75 6175 11 037 19 4 708 44 6 328 75

Sub Total 24 389 25

The complaint when filed contained a

request for reparation in the amount of 24 322 05 Subse

quently Celanese recognized that the causes of action concerning two of the nine shipments accrued

more than two years before the complaint was filed and were time barred by section 22 s

jurisdictional

statute of limitations See Carton Print Inc v Austasia ContainerExpress Steamship Co 20 F M C 31

35 38 1977 The Commission determined not to review July 7 1977 U S Borax Chern Corp v

Pac Coost European Conf 11 F M C 451 471 472 1966 Aleutian Homes Inc v Coastwise Line 5

F M B 602 612 1959 As aresult as set forth in the text infra Celanese withdrew its request for

reparation for those two shipments

The complaint does not explicitly ask for interest but requests soch other sums as the Commission

may determine to be proper as an award of reparation The quoted language has been construed as a

prayer forinterest See Consolidated International Corporation v Concordia Line Boise Griffin Steamship

Company Inc os Agents 18 F M C 180 181 n 3 1975

4 Prudential is amember of Atlantic Gulf West Coast of South America Conference Rule 2 r of

the Conference s Tariff F M C No I p 10 provides Bills of lading describing articles by trade

name are not acceptable for commodity rating Shippers are required to describe theirmerchandise by

its common name to conform to merchandise description appearing herein Bills of lading reflecting

only trade names will be automatically subject to application of the rate specified for Cargo ND S as

minimum

23 F M C
4 FEDERAL MARITIME COMMI SION

Meas Cellu Amount

urement

Car o lose

to be Paid

Shi ment

Date of 14 N O Wad Amount at Bill of cubic Rate ding Paid Cellulose Difference

o

Lading Per 40 Rate feet CFT Per 40 Wadding

CFT CFT Rate

Less Shipments Nos I 2 2 623 4

Total

2I 765 S

No separate computation has been made for Bunker Port Congestion or Po

Delivery Charges which would be the same whether the Cargo N OS rate or th

Cellulose Wadding rate were applied

Payment for Shipment Nos I 2 was made on or before April I 1976 Payment fo

the other shipments was made after May I 1976

As the table and accompanying notes disclose the shipments ident

fied as Shipments Nos 1 and 2 were deliVered to the carrier and th

freight charges thereon were paid by the shipper more than two year

before the complaint was filed Section 22 provides that reparation

claims must be ftled within two years after the cause of actio

accrue sIt is well settled by Commission decisions that A cause o

action arises under section 18b 3 of the Act upon delivery of th

cargo to the carrier or upon payment of the freight charges whicheve

is later United States ofAmerica v Hellenic Lines Limited 14 F MC

255 260 1971 Commercial So vents Corporation International Inc v

Moore McCormack Lines Inc 19 F MC 424 n 3 1977 Sun Compan

Incorporated v Lykes Bras Steamship Company Incorporated 20 F MC

67 69 1977 Cf U S ex rei Louisville Cement Company v lCC 24

U S 638 644 1918

Inrecognition of the fact that the causes ofaction for Shipment Nos

1 and 2 were time barred Celanese later amended its request fo

reparation to the shipments identified as Shipment Nos 3 through 9

inclusive in the table This effectively reduced the claim from

24 389 25 to 21 765 80

Prior to the time the complaint was filed Prudential rejected Celan

ese s claims because ofthe Conference s tariff rule barring consideratio

of claims requiring verification of cargo description before the carg

leaves the carrier s possession eIn apparent awareness that a tariff rul

of this type which in effect infringes on the rights granted by sectio

22 is invalid insofar as it governs filing of cll ims before the Commis

sion Kraft Foods v Federal Maritime Commission 538 F 2d 445 DC

Cir 1976 Prudential does not rely on this rule in its defense of th

complaint

Atlantic Oulf West Coast of South America Conference Tariff F M C No I

p

12 Rule 7b

23 FMC
CELANESE CORP ETC V THE PRUDENTIAL STEAMSHIP 5

co

Nevertheless Prudential vigorously defended against the complaint

At first it filed an answer denying any violation of section 18 b 3 and

a motion for partial summary judgment alleging that the shipments

which were made between January 23 1976 and April 29 1976 were

time barred 6

Afterwards in a reply brief Prudential made a three pronged defense

against the seven remaining causes of action It continued to assert that

the shipments identified in the table as Shipment Nos 3 4 and 5 were

time barred 7

Reinforcing its trade mark argument based upon Rule 2 r

of the Conference s Tariff Prudential noted that affidavits filed by

Celanese did not show that Kimpac filter material is in fact Cellulose

Wadding and in effect suggested that this issue could not properly be

resolved without an evidentiary hearing to test the validity of the

affidavits Third Prudential expanded its trade mark argument urging

that it was obligated to follow the Conference s tariff rules by applying

the Cargo N O S rate for if it did not do so it might be subject to

sanctions imposed by this agency In other words Prudential is simply

saying it should not be faulted 8

for relying on the bills of lading

descriptions even if the commodity shipped is later shown to be Cellu

lose Wadding

THE SETTLEMENT AGREEMENT

Faced with the uncertainty and expense of further litigation includ

ing a potential evidentiary hearing on the commodity description the

parties agreed to settle the proceeding Following the conditions laid

8

Prudential subsequently opted to withdraw the motion for partial summary judgment in favor of

addressing the issue inareply brief

J

The argument made by Prudential is that there was apartial payment of freight charges morethan

two years before the complaint was filed Insofar as Shipment Nos 4 and 5 are concerned payment

was made well within two years prior to filing the complaint With regard to Shipment No 3 5 of

the freight charges were paid more than two years before the complaint was filed but the remaining

95 was paid within the two year period There is no evidence that Prudential considered payment of

the 5 to be satisfaction of the indebtedness The law is well settled that payment means tender by

the debtor with the intention to satisfy the debt coupled with its acceptance as satisfaction by the

creditor lcitations omitted United States v IsthmianS S Co 359 US 314 318 319 1959

8

The Commission has recognized this non fault approach In Sun Company Incorporated v

Lykes

Bros Steamship Company Incorporated supra the Commission said 20 F M C at 10

In cargo misdescription cases where the shipment has left the custody of the carrier and the

carrier is thus prevented from personally verifying the complainant shipper s new descrip

tion the Commission has held that the complainant has a heavy burden of proor and must

establish with reasonable certainty and definiteness the validity of the claim Western Pub

lishing Co v Hapag Lloyd A G 13 S R R 16 17 1973 Johnson Johnson Intl v Venezuelan

Lines 16 F M C 87 94 1973 Colgote Palmolive Peet v United Fruit Co 11 S RR 979 981

1970 It is usually the case as it is here that the carrier in classifying and rating ashipment

must look to the information supplied him by the shipper or freight forwarder Accordingly

we cannot fault the carrier for relying on descriptions set forth on the subject biB of

lading However in determining whether reparation should be awarded in agiven case ie

whether section 18b 3 has been violated vis avis the filed tariffs a tariff is atariff and

the controlling test is finally what the complainant shipper can prove was actually shipped

Footnote omitted

23 F M C
6 FEDERAL MARITIME COMMISSION

down by the Commission for settlement of section 18b 3 complaint

proceedings in Organic Chemicals Glidden Durkee Division of SCM

Corporation v Atlanttrajik Express Service 18 S R 1536a 1979 Or

ganic Chemicals the parties submitted a signed settlement agreement

entitled Agreement of Settlement and Mutual ReleaseD and a Joint

Affidavit10 setting forth the reasons for the settlement and attesting

that the settlement is a bona fide attempt by the parties to terminate

their controversy and not a device to obtain transportation at other

than the applicable rates and charges or otherwise circumvent the

requirements ofthe Shipping Act 1916 as amended

Under the terms of the settlement agreement Prudential will refund

to Celanese the difference between freight charges based on the Cargo

N O S rate and the Cellulose Wadding rate for Shipment Nos 3

through 9 inclusive This amounts to 21 765 80 In addition Prudential

agrees to pay Celanese the sum of 1 000 as liquidated interest

charges llIn sum Prudential agrees to pay 22 765 80 in full satisfac

tion of the claim without admitting liability or admitting to any viola

tion of law

DISCUSSION

In Organic Chemicals the Commission reaffirmed the principle that

the law encourages settlements and that every presumption is indulged

in that favors their correctness fairness and validity However in

section 18b 3 cases the Commission insisted upon a balancing of the

policy of settlement against the possibility of discriminatory rating

practices which might result if settlements are conditionally approved

in the absence of a finding of violation Nevertheless the Commission

enunciated a policy that parties should have the opportunity to settle

disputes but emphasized that in order to prevent abuses certain criteria

had to be met The Commission put it this way Organic Chemicals

supra 18 S R R at 1539 1540

The Commission recognizes the well established principle that

the law encourages settlements footnote omitted and that

every presumption is indulged in that favors their correct

ness fairness and validity footnote omitted But in consid

ering the settlement of claims arising under section 18b 3

the policy favoring the settlement of controversies must be

balanced against the possibility of discriminatory rating prac

tices which might result therefrom For this reason the Com

The Agreement of Setllement and Mutual Relea is attached as Appendix I

10 The Joint Affidavit is attached as Appendix II

lIOn May 8 1980 the Commission announced its policy to grant interest on awards of reparation

in casesarising under section 18b 3 of the Shipping Act 1916 at the rate of 12 accruing from th

date of payment of freight charges The Commiasion authorized exceptions from this general policy o

acase by case basis See 46 C F R 30 12 Policy Statement Interest on Awsrds of Reparation Th

1 000 in interest agreed to by the parties lies wen within the 12 rate

23 F MC
CELANESE CORP ETC V THE PRUDENTIAL STEAMSHIP 7

co

mission has held in the past that approval of the settlement of

claims under section 18b 3 could be made only upon a

finding of a violation of that section This policy appears to be

unnecessarily restrictive We believe that even where section

18b 3 claims are involved parties to the dispute should

under certain circumstances have the opportunity to settle

their disputes To that end and to insure that the Commis

sion s processes are not used to circumvent the requirements

of the statute footnote omitted and that settlements and com

promises do not serve as a means for carriers to disregard

their obligations under the tariff footnote omitted we will

permit the settlement of a claim arising under section 18b 3

ofthe Act if the following conditions are met

1 A signed agreement is submitted to the Commission

2 The parties file with the settlement agreement an affidavit

setting forth the reasons for the settlement and attesting that

the settlement is a bona fide attempt by the parties to termi

nate their controversy and not a device to obtain transporta

tion at other than the applicable rates and charges or other

wise circumvent the requirements of the Shipping Act 1916

or of the Intercoastal Shipping Act 1933 as amended as the

case may be

3 The complaint on its face presents a genuine dispute and the

facts critical to the resolution of the dispute are not reasonably

ascertainable

The signed agreement and affidavit of course meet the technical

standards ofOrganic Chemicals supra More importantly Ifind that the

agreement reflects a rational valid and fair solution of the dispute and

obviates the need for further extensive and expensive litigation The

complaint presents a genuine dispute and the facts critical to the resolu

tion ofthe dispute are not reasonably ascertainable without such further

litigation Moreover it appears that the settlement is a bona fide at

tempt by the parties to terminate the controversy and not a device to

obtain transportation at other than the applicable rates or charges or

otherwise circumvent the requirements of the Shipping Act 1916 as

amended

Accordingly it is ordered that the settlement be approved and the

complaint be dismissed with prejudice It is further ordered that within

ten 10 days after this order becomes final the parties file an affidavit

ofcompliance with the terms ofthe settlement

S SEYMOUR GLANZER

Administrative Law Judge

23 F M C
8 FEDERAL MARITIME COMMISSION

APPENDIX I

AGREEMENT OF SETTLEMENT AND MUTUAL RELEASE

IT IS HEREBY AGREED by and between the undersigned Celan

ese Corporation Celanese Complainant in Federal Maritime Commis

sion Docket No 78 14 and Prudential Steamship Company Prudential

Respondent in said Docket that Docket No 78 14 shall be terminated

by mutual accord on the terms and conditions hereinafter set forth and

for the reasons set forth in the accompanying Joint Motion for Approv

al ofAgreement ofSettlemeni and Mutual Release and for Dismissal o

Proceeding and Joint Affidavitofthe parties

1 Prudential shall pay to Celanese the sum of Twenty Two Thou

sand Seven Hundred Sixty Five and 80 100 22 765 80 Dollars

2 Celanese shall in consideration of the action of Prudential as

provided in paragraph 1 above withdraw its Complaint in Federal

Maritime Commission Docket No 78 14 and shall refrain from further

pursuing its claim in thisproceeding

3 Neither Celanese nor Prudential or any successor in il1terest o

either such party shall initiate any new claim against the other party

arising in connection with the complaint of this proceeding except for

enforcement of any provision of this Agreement

4 Itis understood and agreed that this Agreement ofSettlement and

Mutual Release is in full accord and satisfaction of all disputed claims

in the proceeding

5 This Agreement shall be submitted for any necessary approval to

the appropriate governmental authorities and shall become effective

and binding upon the parties when such approval is obtained

6 It is further understood and agreed that this Agreement of Settle

ment and Mutual Release is in no sense to be understood as constituting

any admission of liability of either party or of any admission of any

violation oflaw by either party

7 This Agreement ofSettlement and Mutual Release constitutes the

entire Agreement between the parties

Dated New York New York

October 30 1979

CELANESE CORPORATION

S EDWARD L KANTER

Assistant Secretary

PRUDENTIAL STEAMSHIP COMPANY

5 JOHN F McHUGH

Secretary

23 FMC
CELANESE CORP ETC V THE PRUDENTIAL STEAMSHIP 9

co

APPENDIX II

BEFORE THE FEDERAL MARITIME COMMISSION

CELANESE CORPORATION ETC

Complainant

v

PRUDENTIAL STEAMSHIP COMPANY

Respondent

Docket No 78 14

JOINT AFFIDAVIT

We the undersigned Edward L Kanter and John F McHugh being

respectively the Assistant Secretary of Celanese Corporation and the

Secretary of Prudential Steamship Company and being each first sever

ally sworn depose and say for and on behalf of our respective corpora

tions

We believe the attached Settlement Agreement in FMC Docket No

78 14 is a reasonable commercial settlement of this case which will

avoid the substantial costs offurther litigation

Said Settlement Agreement is a bona fide attempt by the parties to

terminate this controversy and is not a device to obtain transportation

at other than the applicable rates and charges or otherwise circumvent

the requirements of the Shipping Act 1916 or of the Intercoastal

Shipping Act 1933 as amended

Sworn to before me this

29th day ofOctober 1979

S John J Purcell

Notary Public

S NAME JOHN F MCHUGH

Title Secretary

Sworn to before me this

30th day ofOctober 1979

S J David McCalmont

Notary Public

S NAME EDWARD L KANTER

Title Assistant Secretary

23 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 705 1

3M

v

TORM LINE

REPORT ANDORDER

July 2 1980

BY THE COMMISSION THOMAS F MOAKLEY Vice Chairman

JAMES V DAY LESLIE KANUK AND PETER N TEIGE Commis

sioners

This proceeding is before the Commission upon its determination to

review the decision of Settlement Officer Donald T Pidgeon served

April 7 1980 denying reparation

Complainant 3M alleges that Torm Line applied an incorrect rate on

a shipment of Mixed Commodities l

in that the carrier placed the

cargo on deck and applied the rate for Dangerous or Hazardous

Cargo NOS restricted to on deck stowage only 3M argues that there

was no reason for Torm Line to have placed the shipment on deck and

applied the on deck stowage rate Even though the shipment includ

ed Ethylene Oxide which carries a flammable liquid label 3M points

out this item can be stored either on or under deck 3M argues tha

Ethylene Oxide is a surgical supply and should have been a sessed the

lower Special Rate of 55 25 W1M Accordingly 3M claims tl1at i

was overcharged 1 205 71 in violation of section 18b 3 of the Ship

ping Act 1916 46 D S C 817

Torm Line did not respond to 3M s overcharge claim nor to the

Settlement Officer s letter of July 16 1979 inviting a response to the

informal complaint

Although the Settlement Officer concluded that 55 25 W1M rate

sought by 3M applied to the shipment he denied reparation on the

ground that 3M failed to establish that under deck space was avail

able

Chairman Richard 1 Oaschbach did not participate

1 The bill of lading describes the ahipment as Mixed Commodities per Item Page 93 B of Nort

Atlantic Portugal Freiaht Tariff 2 This tariff lists uSpecial Rates of 5 2S WM any quantity

forcertain commodities in carrier s containers and breakbulk including Surgical Supplies

10 23 FMC
3M V TORM LINE 11

DISCUSSION AND CONCLUSION

The Commission is satisfied that the shipment in question should

have been assessed the Special Rate rather than the rate for Danger

ous Cargo Although placement ofthe cargo on deck may have been

appropriate if there had been no room under deck the availability of

under deck stowage is a matter particularly within the realm of the

carrier s knowledge It is therefore inappropriate to require 3M to

establish this element in meeting its burden of proof especially where

as here the carrier has declined to participate in the proceeding or to

provide any information whatever

THEREFORE IT IS ORDERED That the decision of the Settle

ment Officer is reversed and

IT IS FURTHER ORDERED That Torm Line pay reparations in

the amount of 1 205 71 to 3M with 12 interest accruing from date

ofpayment offreight charges and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary

23 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 766 1

DOW CORNING CORPORATION

v

ATLANTIC CONTAINER LINE

PARTIAL ADOPTION OF DECISION

OF SETTLEMENT OFFICER

Ju y2 1980

This proceeding is before the Commission upon its determination to

review the decision of Settlement Officer Alan J Jacobson awarding

reparation without interest to Dow Corning Corporation for violation

by Atlantic Container Line of section 18b 3 of the Shipping Act

1916 46 U S C 817

In cases involving the misrating of cargo and arising under section

18b 3 the Commission has determined to grant interest on awards o

reparation calculated at the rate of 12 percent and accruing from the

date of payment of freight charges Interpur A Division of Dart Indus

tries Inc v Barber Bue Sea Line 22 F MC 679 1980 See a so Policy

Statement Interest on Awards of Reparation 46 C F R 530 12 This

policy is applicable here

THEREFORE IT IS ORDERED That the decision of the Settle

ment Officer is adopted except as indicated and

IT IS FURTHER ORDERED That Atlantic Container Line pay to

Dow Corning Corporation 12 percent interest on the award of repara

tion accruing from date of payment offreight charges and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

Chairman Richard J Oaschbach did not participate

12 23 FMC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 766 1

DOW CORNING CORPORATION

v

ATLANTIC CONTAINER LINE

DECISION OF ALAN J JACOBSON SETTLEMENT OFFICER 1

Partially Adopted July 2 1980

REPARATION GRANTED

Dow Corning Corporation Dow a

company engaged in the manu

facture and distribution of synthetic resin silicon rubber compounds

and various chemicals filed a complaint against Atlantic Container

Line ACL seeking reparation in the amount of 3 516 92 for alleged

overcharges on two shipments of Polysiloxane The complaint states

that the tariff rate for General Cargo NES was applied to the two

shipments but that the cargo should have been rated as Resin Synthet

ic and assessed the corresponding lower rate Complainant Dow

seeks reparation in the amount of the difference between the assessed

rate and the lower rate which it contends is applicable

The two shipments moved from New York New York to Southamp

ton England pursuant to ACL bills oflading nos A63406 and A63404

dated December 16 1977 aboard the vessel ATLANTIC CHAM

PAGNE The descriptions appearing on the bills oflading describe the

cargo as DRMS Polysiloxane Item 5811062 Flammable Liquid Flam

mable Label 65 F Each shipment according to the bills of lading

consisted of a house to house container containing 80 drums of Polysi

loxane weighing 35 840 pounds and measuring 857 cubic feet

Charges were prepaid by Dow in the amount of 3 652 96 on each

shipment or a total of 7 305 92 Charges were assessed under Item

9310001 General Cargo NES value 1 000 to 2 000 per ton under

the North Atlantic United Kingdom Freight Conference Tariff No 48

FMC 3 and rated at 170 50 per measurement ton

Claimant contends that charges should have been assessed under Item

5810001 Resin Synthetic with minimum weight of 40 320 pounds at a

23 F M C 13

1 Both parties having consented to the informal procedure of the Commission s Rules of Practice

and Procedure 46 CF R fi fi 502 301 304 this decision will be final unless the Commission elects to

review it within 30 days from the date of service thereof
14 FEDERAL MARITIME COMMISSION

rate of IOS 2S per 2 240 pounds or 1 894 S0 each shipment making 

total of 3 789 00 Thus Dow requests reparations of 7 30S 92 a

sessed and paid charges minus 3 789 00 proper charges or a total o

3 SI6 92

ACL does not dispute that Polysiloxane is synthetic resin but firs

disputed Dow s claim by citing tariff rule 4J 2 dealing with dangerou

and hazardous cargo Under rule 4 J 2 such cargo shall be assessed th

General Cargo rate unless otherwise provided Dow however co

rectly noted that Item S81000I Resin Synthetic Note A allow

labeled cargo to be included in that item thus taking precedence ove

Rule 4J 2

ACL conceded that claimant s reasonini is sound but rather tha

affirmatively respond to Dow s claim it declined to honor the claim

under its tariff Rule 20 which requires that all claims for adjustment o

freight charges not presented to the carrier within six months after th

date of shipment be denied

Dow has submitted sufficient evidence to show that the goods tran

ported in the two shipments were Polysiloxane which should have bee

rated under North Atlantic United Kingdom Freight Oonference Tar

No 48 FMC 3 Item No S810001 Dow submitted copies of the bil

of lading freight statements packing lists and Intermodal Expo

Master Set

Based on all the evidenc submittedj Dow has sustained its burden 

proof that the goods transported in the two shipments were Polysilox

ane and should have been rated as Resin Synthetic Dow is entitle

to reparation from ACLin the amount of 3 SI6 92 a

Upon evidence 

payment ofthe amount awarded thi record will be complete

S ALAN J JACOBSON

Settlement Officer

IIACLs reference to its tariff rule No 20 the six month rule does not of course affect the Co

mission s

abilit to order reparations under section 22 of the Shipping Act 1916 Krqft Food Fod 

Marl1m Comml rlo 38 F 2d 44 DC Cir 1976 It Is ashame that time and etTort must be 

pended processing claims opposed only because of the six month rule

23 F MC
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING

MARITIME CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 26 DOCKET NO 80 23

PART 541 FREE TIME AND DEMURRAGE CHARGES ON

EXPORT CARGO

REVOCATION

23 F MC 15

July 2 1980

Final Rule

The Federal Maritime Commission revokes Part 541

of Title 46 Code ofFederal Regulations which pro

vides for regulation of free time consolidation time

and demurrage charges on export cargo at the Ports

of New York and Philadelphia Improved congestion

conditions at those ports would appear to have elimi

nated the necessity for these regulations

DATE Effective July 9 1980

SUPPLEMENTARY INFORMATION

Part 541 of Title 46 Code of Federal Regulations prescribes regula

tions governing free time consolidation time and demurrage charges at

the Ports of New York and Philadelphia The rules were established

following hearings in Docket No 68 9 Free Time and Demurrage

Charges on Export Cargo 13 F M C 207 1970 Evidence in that

proceeding demonstrated that regulations were necessary because ofthe

congested conditions ofthose ports

The rules generally provide for a maximum free time period of ten

days with certain cargo being allowed up to 15 days upon request

Provision is also made for restrictions on the time allowed for consoli

dation of shipments and the assessment ofdemurrage charges

The Port Authority of New York and New Jersey and the New

York Terminal Conference have petitioned the Commission to rescind

Part 541 Petitioners state that the congested conditions giving rise to

the rules no longer exist In the alternative petitioners request that the

coverage ofthe rules be extended to all Atlantic and GulfCoast ports

because the existence of the rules places them at a competitive disad

vantage

ACTION

SUMMARY
16 FEDERAL MARITIME COMMISSION

The Commission solicited comment on the proposal to revoke Pa

541 We have reviewed these comments and found the majority of th

commentators to be in favor of eliminating Part 541 The remainin

comments expressed a neutral position Two comments favored part

revocation only to eliminate the ten day maximum free time restrictio

Of these two comments one felt that the specific ten day prescriptio

should be replaced by wording that would require free time at Ne

York and Philadelphia to be compatible with the free time provision

maintained at other ports in the North Atlantic The other is concerne

that total revocation ofPart 541 may result in free time ofless than te

days and provide no guarantee that other protections to exporters w

be retained The majority of the comments expressed objection 

Petitioners alternative request that the coverage of the rules be e

tended to all Atlantic and Gulf Coast ports The comments contain n

strong objection to the revocation of Part 541 The rule is based o

circumstance not in existence today The modern technique of contai

erization which started in the late 1960 s has replaced much of t

traditional bulk cargo method ofdelivering small lots of cargo that a

assembled at the pier

Only one comment expressed concern over the possibility of fr

time periods of less than ten days and the removal of other detaile

restrictions such as granting an additional five days of free time 

consolidated shipments assessing demurrage against the vessel when 

fails to meet its sailing date assessing first period demurrage against t

vessel in the event ofthe vessel cancellation granting ofadditional fr

time when loading of cargo is prevented by any factor immobilizing t

pier and requiring the piers to issue dock receipts We are not co

cerned that the revocation of Part 541 will lead to reinstitution ofthe

practices or others that gave rise to the rule Carriers and ports have 

responsibility to operate in a non discriminatory manner and specifica

to promulgate reasonable regulations and practices for the receipt 

cargo The Commission will continue to monitor free time and dem

rage practices to ensure that practices do not offend the requiremen

ofsection 16 and 17 ofthe Shipping Act 46 U S C g g 815 816 1916

NOW THEREFORE IT IS ORDERED That effective upon pu

lication in the Federal Register Part 541 of Title 46 Code of Fede

Regulations is rescinded

By the Commission

S FRANCIS C HURNEY

Secretary

23 F MC
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 683

APPLICATION OF FLOMERCA LINE TO BENEFIT

U S DEPARTMENT OF AGRICULTURE

ORDER OF REMAND

July 3 1980

The Commission has before it the February 7 1980 Initial Decision

of Administrative Law Judge Seymour Glanzer in the above captioned

matter This decision denied the petition of Flomerca Line to waive

collection of freight charges totalling 25415 03 for the account ofthe

United States Department ofAgriculture USDA Notice of Determi

nation to Review was served by the Commission on March 10 1980

BACKGROUND INFORMATION

Flomerca Line is the trade name of Flota Mercante Gran Centroa

mericana S A a common carrier controlled by the Government of

Guatemala for purposes of section 18 c of the Shipping Act 1916 46

U S C 817 c

1 The freight charges in question were incurred on two

USDA shipments of bagged corn carried between Galveston Texas

and Puerto Cortez Honduras commencing July 2 1979 A rate of

42 00 for Corn 100 lb bags was allegedly agreed to on May 25

1979 when the cargo was booked but Flomerca neglected to file the

rate with the Commission On July 10 1979 Flomerca billed USDA at

its then applicable tariff rate of 58 00 per short ton 2 USDA ques

tioned the higher rate and on October 19 1979 a

special docket applica

tion was timely filed pursuant to section 502 92 of the Commission s

Rules 46 C F R 502 92 The application as subsequently supplement

ed shows that Flomerca amended its tariff to include a rate for bagged

corn effective October 7 1979 This tariff amendment left the previous

58 00 rate for Corn in effect and added a new 42 00 rate for Corn

in Bags in Minimum Lots of 500 Tons

Section 18 b 3 of the Shipping Act 1916 46 U S C 817 b 3 per

mits the Commission to allow a waiver of freight charges when there

has been a

1 By letter dated November 28 1978 from William Jaffet Smith Jr the Commission advised Flo

merca of its classification as acontrolJed carrier

The shipments weighed 1 165 039 and 2012 837 pounds respectively for a total of 3 177 876

pounds A bunker surcharge of 3 50 per short ton and lighthouse dues of 1 35 per metric ton were

also applicable FlomercaTariff F M C No 17 at 4th Rev 74 1st Rev 4 B and 4th Rev 16

23 F MC 17
18 FEDERAL MARITIME COMMISSION

tariff error of a clerical or administrative nature or an error

due to inadvertence in failing to file a new tariff and that such

waiver would not result in discrimination among shippers

The error relied upon by Flomerca was the inadvertent failure to file

the necessary tariff amendment prior to July 2 1979 due to the confu

sion caused by its change in steamship agents from the Tilston Roberts

agency to Kerr Stelmship Company Inc on June I 1979

USDA arranged for the transportation on May 25 1979 by contact

ing Associated Shipping Agencies a Washington D C freight broker

age firm and did not deal directly with Tilston Roberts USDA book

ing confirmation forms were issued for both shipments May 31 1979

and signed by Associated as Flomerca s agent They quote a 42 00 rate

for Corn 100 lb bags indicate that a tariff amendment was contem

plated and do not specify a 5oo ton minimum Both confirmation forms

plainly show however that USDA reserved space for 525 metric tons

for shipment on July 6 1979 Form No 9896 and for 910 metric tons

for shipment on June 22 1979 Form No 9898 sufficient cargo to

cover the minimum in each instance S

Associated also advised Tilston Roberts of the bookings by separate

letters dated May 25 1979 in which Associated requested a 21 2

brokerage commission Between June I and June 8 1979 Associated

wrote to Kerr Steamship concerning the bookings and sent duplicate

copies of the USDA confirmation forms showing the need to amend

Flomerca s tariff prior to shipment 4 Neither Tilston Roberts nor Kerr

arranged for the agreed upon 42 00 rate to be included in Flomerca s

tariff

The Presiding Officer denied Flomerca s application on two grounds

I Flomerca s corrective tariff filing did not conform exactly to the

originally negotiated arrangement with USDA because the tariff

contained the 500 ton minimum lot requirement and the booking

confirmation documents did not the tariff amendment did not

contain the requisite intended rate United States Lines Inc to

Benefit Merck

Co

Inc 19 S R R 788 1979 Sea Land Service

Inc to Benefit Munoz y Cabero 20 F MC 152 1977

2 Section 18 c conflicts with section 18b 3 and bars state con

trolled carriers from obtaining special docket relief 5In order to

prevent predatory price cutting by controlled carriers section

18 c 3 prohibits them from reducing their rates on less than 30

3

There was originally a

period of 28 and 42 daya respectively between the booking date and the

intended shipment dates but bothshipments ultimately left Galveston on July 2 1979

The record copy of this letter bears a

stamp reading Received June 8 A M which obliterates

the date the letter was written

Section 18 c took effect on November 17 1978 pursuant to the Ocean Shipping Act of 1978

P L 9S 483 92 Stat 1607

23 FMC
FLOMERCA LINE TO BENEFIT U S D A 19

days notice without special permission from the Commission Con

gress intentionally imposed this 30 day delay to provide the Com

mission an opportunity to make an initial assessment ofthe reduced

rate s reasonableness In contrast the relief afforded shippers by

section 18b 3 is premised on the theory that but for the unin

tended error the carrier could have implemented the agreed upon

rate reduction immediately It would therefore defeat the purpose

of section 18 c if controlled carriers could retroactively implement

rate reductions via the special docket process

DISCUSSION AND CONCLUSION

The Commission has reviewed the record and concluqed that further

evidence is required to evaluate aspects ofFlomerca s application found

deficient by the Presiding Officer A limited remand is therefore or

dered in accordance with the following discussion

This is the second recent proceeding which raised questions concern

ing the relationship between the Ocean Shipping Act of 1978 hereafter

Controlled Carrier Law and section 18 b 3

6

Upon review of the

legislative history of both provisions the Commission concludes that

mere classification as a controlled carrier should not negate the possibil

ity that such a carrier can correct an inadvertent failure to implement a

good faith undertaking to secure a timely rate reduction for the benefit

ed shipper

The present situation is analogous to that in Compagnie Nationa e

A gerienne de Navagation to Benefit D F Young Inc 21 FMC 730

1979 where relief was granted when the carrier employed a confer

ence tariff but did not notify the conference of the desired tariff

amendment prior to shipment 7Just as no reduction in a conference

carrier s rates can occur unless the conference is aware of the desired

change under normal circumstances no reduction can occur in a con

trolled carrier s rates upon less than 30 days notice without a grant of

special permission Inboth situations the carrier inadvertently neglected

an action prerequisite to the implementation ofthe specially negotiated

rate which would otherwise have taken effect exactly as the parties

intended 8

In Neptune Orient Line to Benefit Stauffer Chemical Company 19 S R R 451 1979 waiver of

collection was denied on two legally distinct grounds one of which was the Presiding Officer s find

ing that the controlled carrier did not actually intend to implement the rate reduction stated in the

booking contract because of instructions it had given its agents concerning rate reduction filings

1

See also Waterman Steamship Corporation 10 Benefit Hermann Ludwig Inc 20 F M C 670 1978

8

Because of the possibility that the Controlled Carrier Law s advance notice requirements may be

shortened by a

grant of special permission there is no reason for distinguishing between cases where

the negotiated rate was intended to take effect within 30 days and those where it was not This does

not mean however that the time between the date of the alleged agreement and the date of shipment

may not be relevant in ascertaining whether the carrier actually intended to implement the rate reduc

tion in question SeeNeptune Orient Line supra

23 F M C
20 FEDERAL MARITIME COMMISSION

The critical question presented by Flomerca s application is whethe

Congress intended to preclude all opportunity for special docket relie

by shippers using controlled carriers The Presiding Officer believed

this to be the case

8

but review of the Controlled Carrier Law s legisla

tive history leads the Commission to a different conclusion Congress s

awareness of the Baltic Shipping Company proceeding supra the au

thority given the Commission to shorten the 3Qday advance notice

period and the failure to write an express prohibition against specia

docket applications by controlled carriers into the new law are bes

interpreted as evidence of an intention to permit such applications in

appropriate circumstances 1 0

This conclusion is further supported by the canon of statutory con

struction which disfavors repeals by implication When different provi

sions of the same statute are construed together each provision should

be given effect whenever possible Rawls v United States 331 F 2d 21

28 8th Cir 1964 Maiatico v United States 302 F 2d 880 886 D C

Cir 1962 Cf United States v Borden Company 308 U S 188 198 199

1939 In the instant case section 18b 3 was added to the Shipping

Act in 1968 to provide equitable relief from the application of provi

sions requiring strict adherence to published tariffs which would other

wise penalize innocent shippers for a carrier serrors

11 This objective

can be reconciled with the basic purpose ofthe 1978 Controlled Carrie

Law which amended the Shipping Act in order to curtail predatory

rate cutting practices of certain ocean carriers The Controlled Carrie

Law was directed at a particular type of unfair competition and wa

not intended to generally punish or discriminate against controlled

carriers or their shippers

The Controlled Carrier Law also empowers the Commission to re

quire a controlled carrier to justify any of its proposed filed but no

yet effective or existing rates and authorizes the suspension of rates

suspected of being unreasonable These protective procedures fully

apply to rates filed for special docket purposes and provide the Com

mission with sufficient tools to deal directly with the problems which

8

See discuasion of the Senate Commerce Committee s reference to Special Docket No S89 Balti

Shipping Company 10 B nq1 AMG n ml C01 pllmtlon 19 S RR 1091 1979 aproceeding involving

a carrier controlled by Ibe Soviel Union whicb woo pending before the Commi ion during conside

ation of theControlled Carrier Law al page 1 16 of Ibe Inilial Decision

S

Sen Rep No 95 1260 to accompanyH R 9998 951h Cons 2d S 14 18 19 24 1978

The pertlnenl Commiltee reports Indicate thai the Commlasion is pected to waive seclion 18 cX3

3lk1ay nolice requiremenl in al leaallhose ilualions where Iho conlrolled carrier facesan immediat

reduclion by a competitor or a

chonse in markel condition HR Rep No 95 1381 10 accompan

HR 9998 95th Cons 2d s9 10 1978 S n

Reppm aI23 24

11 Sction 18bX3 woo enacted on April 29 1968 P L 90298 82 Slal 111 118 purpose i describe

in HR Rep No 920 10 accompany HR 9473 90th Cons 1 1 S

1967 and Sen Rep No 107

10 accompany HR 9473 90th Cons 2d S 1968

23 F MC
FLOMERCA LINE TO BENEFIT V S D A 21

could result from retroactive rate implementation under section

18b 3

Flomerca s 42 00 filed rate for bagged corn took effect on October

9 1979 following the standard 30 day notice period This rate was not

protested at that time and the Commission has no information that a

42 00 rate is now unreasonable within the meaning of section 18 c

12

Because of section 18 b 3 s retroactive effect however there is a

possibility that special docket procedures could be employed to imple

ment rates which would have been unreasonably low at the time of

shipment but were considered unworthy of challenge when they were

later added to the controlled carrier s tariff Assuming the 42 00 rate

for Corn in Bags was reasonable at the time it finally appeared in

Flomerca s tariff it was not necessarily reasonable on July 2 1979 This

possibility of unreasonableness during a prior period is an insufficient

basis for a flat ban on special docket relief but it does necessitate a

showing by Flomerca that its application is not merely a device for

evading the Controlled Carrier Law Accordingly the application will

be remanded to provide Flomerca with an opportunity to demonstrate

that conditions existed on or about July 2 1979 which would have

warranted the grant of a timely filed special permission request to

implement a 42 00 rate 13

Remand is also warranted for another reason Special docket relief is

unavailable when the tariff amendment finally published does not re

flect the rate intended by the negotiating parties 14 It is unclear to the

Commission whether Flomerca s October 9 1979 tariff filing actually

differed from the intended rate or alternatively whether any deviation

between the originally negotiated contract and the tariff page finally

filed was material in light of the fact that USDA would have paid

42 00 a ton under either arrangement In order to resolve these ques

tions it is necessary to ascertain whether Flomerca handled any other

shipments of bagged corn between July 2 1979 and October 9 1979

and if so whether the shipments were more or less than 500 tons 1S

12 In March 1980 Flomerca amended its tariff to place a 46 25 Corn in Bags rate in effect on

April 2 1980 Tariff FMC No 17 6th Rev 74 This rate has also been unchallenged to date

13 The burden is upon Flomerca to establish these facts and it is assumed that such proof can be

readily made in affidavit form It is not the Commission s intention to turn this or any other special

docket proceeding into an elaborate rate investigation Ifprima facie evidence of reasonableness or

extenuating circumstances is not submitted when a controlled carrier s

special docket application is

filed the application will be denied Such evidence could be but is not limited to afavorable

comparison with the charges of other carriers in the trade ashowing that market conditions were

changing significantly or ashowing that the reduced rate was necessary to move the cargo or to

maintain acceptable service to the affected ports

14 The intended rate is the rate on which the refund would be based in the words of section

18b

3 s second proviso clause

lIS Flomercas application stated that no other shippers were affected by the 42 00 rate Because

of the minimum tonnage condition this does not establish that there wereno other shippers of bagged

cornduring the period covered by theproposed retroactive rate decrease

23 F MC
22 FEDERAL MARITIME COMMISSION

The possible existence of such shipments bears directly upon whether

the SOO ton minimum was originally intended by the parties and wheth

er retroactive implementation of the 42 00 rate would discriminate

among shippers

The Presiding Officer previously encountered difficulties in obtaining

complete and verified information from Flomerca IfFlomerca fails to

produce the information requested by this Order in a timely fashion the

Presiding Officer should issue a brief further decision describing the

procedures followed and denying the application for inadequacy of

proof If additional evidence is provided the Presiding Officer should

prepare findings of fact on the issues specified in this Order and refer

the matter to the Commission for final decision

THEREFORE IT IS ORDERED That this proceeding is remand

ed to the Presiding Officer to determine

1 Whether there were conditions which existed on or about July 2

1979 which would have warranted granting Flomerca special per

mission to file a 42 00 rate on less than 30 days notice

2 Whether any shipments ofbagged corn other than the two USDA

shipments were transported by Flomerca from U S points specified

in its Tariff FMC No 17 between July 2 1979 and October 9

1979 and if so the weight and other transportation characteristics

ofeach such shipment

By the Commission

S FRANCIS C HURNEY

Secretary

Chairman Richard J Daschbach concurs only with the determination that acontrolled carrier is

not prohibited from obtaining relief under section 18 b 3 of the Shipping Act 1916 46 US C 817

b 3

Commissioner Le lie Kanuk concurs only in that portion of the Order which remand the applies

tion for purposes of determining the intended rate agreed upon by the carrier and the shipper

23 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 10

RATES OF FAR EASTERN SHIPPING COMPANY

ORDER ON RECONSIDERATION

July 10 1980

On April 1 1980 the Commission issued an Order in which it found

certain rates of the Far Eastern Shipping Company FESCO to be

unjust and unreasonable and accordingly disapproved them FESCO

has submitted a Petition for Reconsideration of that Order American

President Lines Ltd APL Sea Land Service Inc and the Commis

sion s Bureau of Hearing Counsel have filed replies to FESCO s Peti

tion

POSITIONS OF THE PARTIES

FESCO contends that the Commission s Order contains five substan

tive errors of material fact in that the Commission disapproved five

rates which were not subject to this proceeding In addition FESCO

claims that changes in material fact which have occurred after the

issuance ofthe Order i e the lowering of rates by other carriers in the

PhilippineslU S trade should result in the recision ofthe disapproval

of a number of its rates FESCO identifies several rates which are

allegedly equal to or lower than 19 of the rates disapproved by the

Commission Finally FESCO again raises its earlier argument that rate

comparisons under section l8 c 2 ii of the Shipping Act 1916 should

not be limited to rates in effect on the date of the institution of a

suspension and show cause proceeding but shoul employ the most

current information available FESCO thus lists a number of rates

disapproved by the Commission in this proceeding which it claims are

the same as or similar to rates of other carriers in the same trade which

were effective subsequent to the initiation of this proceeding but prior

to the issuance ofthe Commission s decision

Hearing Counsel agrees with FESCO that three rates were errone

ously disapproved but maintains that one was properly disapproved

and that another should have been disapproved Hearing Counsel fur

ther argues that the rate changes referred to by FESCO have no

bearing on the reasonableness ofFESCO s disapproved rates that the

rates in existence at the initiation of a proceeding are those most

appropriate for rate comparison purposes

APL and Sea Land raise similar arguments in opposition to FESCO s

Petition They both question the validity ofFESCO s rate comparisons

23 F M C 23
24 FEDERAL MARITIME COMMISSION

on the ground that several of the non controlled carriers with which

FESCO compares its rates do not offer a service similar to FESCO s

APL and Sea Land also note certain inaccuracies in FESCO s presenta

tion which allegedly result in meaningless rate comparisons Sea Land

in particular emphasizes the need for inclusion ofactual tariff pages for

any rate comparison so that total transportation charges can be accu

rately ascertained In addition these carriers contend that the Commis

sion s ruling concerning the time period to be used for rate comparisons

ie rates in effect on the date of the order instituting a proceeding is

supported by policy practicality and Congressional intent and should

not therefore be reversed Although APL views the Commission s

Order as not forever forbidding FESCO from instituting a rate the

same as or lower than a disapproved rate it does contend that FBSCO

should not be afforded immediate relief from the Order Itbelieves that

the lower rates of FESCO s competitors which allegedly are in re

sponse to FESCO s rate cutting are a temporary aberration and wil

return to normal higher levels under the force of market conditions

DISCUSSION

A Alleged Errors of Material Fact

The Commission s Order of Suspension and to Show Cause served

on March 2 1979 listed 305 freight rates as subject to this proceeding

and in addition included any changes or amendments to these rates

which wereflied during the 60 days notice period March 2 1979

May 7 1979 FESCO correctly points out that three of the rates

disapproved by the Commission s April 1 1980 Order were not put at

issue in this proceeding The local 16125 W rate for nuts almond

shelled item 1838 FMC 20 and the 106 50 W1M rate for toys and

parts item 3150 FMC 20 were both rued prior to the 60 days notice

period and only became effective during that time In addition the

229 W1M rate for drugs and medicines harmless item 2540 FMC

20 was deleted effective February 7 1979 The Commission s disap

proval ofthese rates will therefore be rescinded

FESCO s assertions concerning the remaining two rates are incor

rect The 95 WIM rate on glassware machine made item 3100

FMC 28 wasin effect on March 2 1979 and was1ncluded in Appendix

A to the Order of Suspension and Show Cause Its disapproval there

fore stands FESCO s local per container rate of 2500 for books and

pamphlets item 400 FMC 20 was rued during the notice period

contrary to FBSCOs assertion However it was not inCluded in At

tachment A to the Commission s Aprii I 1980 Order and was no

thereby disapproved Although filed within the notice period this rate

23 FMC
RATES OF FAR EASTERN SHIPPING CO 25

was not clearly intended as a

replacement rate for asuspended rate1

and its disapproval will also be rescinded

B Alleged Changes in Material Fact

In its Order ofApril 1 1980 the Commission concluded that the

rates in existence at the time an Order institutes a proceeding are those

most appropriate for any rate comparison 2 Order at 13 Any rate

changes occurring after the Order to Show Cause or the Order of

April 1 1980 are not therefore material changes in fact for pur

poses ofRule 261 a I 46 CF R 502 261 a I FESCO s arguments to

the contrary are nothing more than elaborations on or repetitions of

arguments which have already been fully considered and rejected by

the Commission Nothing presented here convinces us otherwise

The Commission notes moreover that a continuation of its disap

proval of most of FESCO s disapproved rates should not adversely

affect FESCO s competitive position in these trades FESCO is permit

ted to meet competition in the subject trades under the Commission s

April Order Indeed the Commission recognized in that decision that in

certain instances rates replacing disapproved rates may actually be lower

than the rate disapproved See Order at 17 n 16 Moreover a rate

replacing a disapproved rate may even be lower than the lowest rate of

a national flag carrier in the trade for the same commodity if it is

necessary to assure the movement of the commodity or to effectively

compete with some other carrier Order at 17

THEREFORE IT IS ORDERED That the Commission s April 1

1980 disapproval of the following rates of the Far Eastern Shipping

Company is hereby rescinded

1 Item 1838 FMC 20 nuts almond shelled Local 16125 W

2 Item 3150 FMC 20 toys and parts 106 50 WM

3 Item 2540 FMC 20 drugs and medicines harmless 229 W1M

4 Item 400 FMC 20 books and pamphlets per container 2500

and

1 At the time of the Commission s Show Cause Order FESCO did not have acontainer rate for this

commodity but only a 143 WM rate Following the Order FESCO did file the 2500 pe 2D rate

so it could arguably be considered a

replacement rate for this commodity It could also be consid

ered anewly filed rate however especially because PESCO also filed a 163 50 replacement rate for

the 143 rate and this replacement rate was subsequently disapproved

2

The Commission has indicated that it will not totally ignore rate changes occurring during the

course of a

proceeding Rather it has stated that such activity could be another appropriate factor

for its consideration but in so doing it will closely scrutinize the reasons for any significant decreases

in rates of comparative carriers See Order at 14 nll The record in this proceeding however was

not sufficiently developed to permit such a

consideration

23 F M C
j

26 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED That the Petition for Reconsider

ation fIled by the Far Eastern Shipping Company is granted to the

extent indicated above and denied in all other respects

By the Commission

5 FRANCIS C HURNEY

Secretary

oj

i

J

i

1

Commissioner Leslie L Kanuk concurs only In that portion of the Order which ind the Com

mlulon disapproval of the followinS ratos In the Far Eastern ShlpplnS Company Tariff FMC20

Items 1838 3150 2540 and 400

Commissioner Peter N Teige did not participate

23 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 80 24

FORTE INTERNATIONAL SALES CORPORATION

v

AMERICAN PRESIDENT LINES LTD

NOTICE

July 10 1980

Notice is given that no appeal has been taken to the June 4 1980

dismissal of the complaint in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has

become administratively final

8 FRANCIS C HURNEY

Secretary

23 F M C 27
FEDERAL MARITIME COMMISSION

DOCKET NO 80 24

FORTE INTERNATIONAL SALES CORPORATION

v

SEATRAIN INTERNATIONAL S A

1 APPROVAL OF SElTLEMENT AND RELEASE

2 DISCONTINUANCE OF PROCEEDING

Finalized July 10 1980

The complaint by Forte International Sales Corporation a

corpora

tion organized under the laws of the State of Delaware against Seatrain

International S A alleges the respondent failed to ship a container o

complainant s goods on the vessel which respondent had advised was

reserved for such containers and the respondent subsequently shut the

container out of two other vessels giving preference to other shippers

in violation of section 14 of the Shipping Act 1916 The complaint was

served April 18 1980

On May 6 1980 the parties advised the Presiding Administrative

Law Judge that they had agreed to settle this matter subject to the

Commission s acceptance of such settlement The parties asked and

received an extension of time for the respondent to answer the com

plaint or for the parties to work out an appropriate settlement agree

ment See grant of request served May 14 1980

On May 23 1980 the parties submitted the following

SETTLEMENT AND RELEASE

It is hereby agreed by and between Forte International Sales

Corp Forte Complainant in Federal Maritime Commission

FMC Docket 80 24 and Seatrain International S A Sea

train Respondent that Docket No 80 24 shall be terminated

by mutual agreement subject to the following terms and condi

tions

1 Seatrain shall pay Forte the sum of 16 00000 but without

admission ofliability therefor

2 Forte and any successor or assign will be barred from

initiating any new claim against Seatrain in connection with

the shipment of mohair pursuant to Seatrain bill of lading

number 095550 2 except for the enforcement ofany of the

provisions ofthis Agreement

28 23 F MC
FORTE INT L SALES CORP V SEATRAIN INT L S A 29

3 It is understood and agreed that this Settlement and Release

is in full accord and satisfaction of Forte s complaint against

Seatrain and is not an admission ofliability or violation oflaw

by Seatrain

4 This Agreement will become effective and binding on the

parties only upon approval of the Federal Maritime Commis

sion and the issuance of an order terminating Docket 80 24

5 This Settlement and Release constitutes the entire Agree

ment between the parties hereto

IN WITNESS WHEREOF the undersigned have executed

this Agreement this 20th day ofMay 1980

FORTE INTERNATIONAL SALES CORP

BY s s JOHN H FORTE

President

SEATRAIN INTERNATIONAL S A

By s s HARVEY M FLETCHER

The parties also submitted the following

JOINT MEMORANDUM IN SUPPORT OF SETTLEMENT AND

RELEASE

Forte International Sales Corp Forte and Seatrain Interna

tional S A Seatrain have entered into a Settlement and

Release Agreement in an effort to terminate the captioned

proceeding This Joint Memorandum is submitted by the par

ties to provide the necessary legal and factual support for such

settlement The statements set forth herein are made for pur

poses of the settlement only and are without prejudice to

either party should the settlement be disallowed by the Com

mission In addition this Joint Memorandum is made expressly

with the understanding that Seatrain does not admit any liabil

ity to Forte nor does it admit in anyway that it has violated

any law

23 F M C

THE FACTS

Forte obtained from Seatrain a booking to ship a container

laden with 119 bags ofmohair to Genoa Italy which were to

be consigned to a Swiss company On or about October 11

1979 it was given Booking Number 957390 and was advised

that the cargo would have to be received by the railroad in

Houston on or before October 25 1979 for movement by rail

to Charleston South Carolina and for carriage on the vessel

SEATRAIN LONDON
30 FEDERAL MARITIME COMMISSION

Forte obtained Seatrain container number 126021 and deliv

ered the loaded container to the participating railroad on Oc

tober 25 1979 and was given Bill of Lading No 09 05550 2

As far as Seatrain can determine a

computer entry activating

the container number against the booking was not made Such

computer entry is necessary to keep track of the container

within the Seatrain system Since the computer entry was not

made no notification of arrival of the container was given and

it apparently remained at the rail yard unknown to Seatrain

representatives in Charleston

In the meanwhile the scheduled vessel the SEATRAIN

LONDON was redeployed by Seatrain management and the

SEATRAIN PEGASIA was substituted therefore The SEA

TRAIN PEGASIA sailed from Charleston on November 6

1979 without the Forte mohair At that time the container was

apparently still at the rail yard in Charleston unbeknownst to

Seatrain

Seatrain s next sailing was the SEATRAIN ITALY on No

vember 25 1979 Seatrain has been unable to ascertain the

reason why the container did not move on that vessel but

notes that as a result of the redeployment of the SEATRAIN

LONDON and the substitution with the much smaller SEA

TRAIN PEGASIA the available vessel slot capacity was

substantially lessened thereby creating a back up of containers

generally

At some time after November 21 1979 Seatrain became aware

ofthe fact that the Forte container had been lost within the

system but by the time it so determined it was apparently too

late to load it on the SEATRAIN ITALY

On November 29 1979 the shipper Forte orally advised

Seatrain to hold the container at Charleston because its cus

tomer in Italy had cancelled the order because ofthe delay in

shipment Subsequently the container was returned to Hous

ton and sold by the shipper to another buyer

From available records it would appear that from at least

October 25 1979 to November 21 1979 the shipper believed

that the container had moved as scheduled and Seatrain

having failed to make the computer entry was unaware that

the container was waiting movement

Forte subsequently filed the complaint here involved charging

Seatrain with discrimination under Section 14 Fourth

23 F MC
FORTE INT L SALES CORP V SEATRAIN INT L S A 31

DISCUSSION

Seatrain does not believe that the failure to enter the container

into its computer against the booking number constitutes dis

crimination under Section 14 Fourth of the Shipping Act

1916 Howev r Seatrain recognizes that through no fault of

the shipper the container was delayed in the system and

missed two sailings and that the shipper has suffered monetary

damages

Given the relative paucity of precedent under Section 14

Fourth Seatrain and Forte both acknowledge that if this

matter is not settled as proposed each could possibly be the

loser in a full and complete adjudication Both parties recog

nize that in the case of a full adjudication they will incur

substantial costs in legal fees travel expenses transcript costs

and the like Both parties also recognize that an adjudication

will take employees away from their day to day functions

Both parties further recognize that an adjudication will in

volve substantial efforts by the Administrative Law Judge

whose efforts might be better employed on other matters In

view of all these factors the parties believe that the Settlement

and Release is the most effective efficient cost saving and

time saving resolution ofthis matter

23 F M C

THE APPLICABLE LAW

In FMC Docket No 78 13 Old Ben Coal Co v Sealand

Service Inc 21 F MC 505 1978 Administrative Law Judge

Norman D Kline extensively discussed the applicable law

concerning settlements The parties believe that the settlement

here proposed fully meets the criteria set forth by Judge

Kline

First it is well settled that the law and Commission policy

favor settlements See eg Merck Sharp and Dohme v Atlantic

Lines 17 F MC 244 247 1973

Second as long as the proffered setUement does not appear to

violate any law or policy and is free of fraud duress undue

influence mistake or other defects the settlement should be

approved As Judge Kline noted in Old Ben

A judicial officer in reviewing a proffered settlement

may look to see if the settlement is fair reasonable and

adequate and may weigh the likelihood of complainant s

success against the estimated cost and complexity of con

tinued litigation 8 S R R at 1093

Third the issues here do not involve any departure from

tariffs Thus unlike settlements which involve tariff departures

which could have an impact on other shippers and upon
32 FEDERAL MARITIME COMMISSION

which the Commission still allows settlements 1

this case

involves as fl1 as can be determined a discrete occurrence

which apparently affects no other shippers and requires no

departure from the applicable tariffs

CONCLUSION

In view of the foregoing facts discussion and law Forte and

Seatrain believe that the Settlement and Release A reemcnt is

a fair reasonable and appropriate method of termmating this

litigation and respectfully request the Administrative Law

Judge and the Commission to approve the Agreement and to

terminate the proceeding

RBSPECTPULLY SUBMITfED

S DONALD FORT JR

Attorney for Forte International

Sales Corp

S NEAL M MAYER

Attorney for Seatrain International BA

j

May 23 1980

On May 29 1980 the Presiding Administrative Law Judge te1

phoned counsel for the respondent who had submitted joint memora

dum referred to above and who is in the D C area the other couns

being in Massachusetts anent substantiation by the complainant of t

latter s claim for lost profits Counsel promised to take the matter 

with counsel for complainant Counsel for complainant apparently w

contacted the same date because a letter dated May 29 1980 w

received June 2 1980 from counsel for complainant stating as follow

Mr Mayer called to say that you had requested background

on market conditions surrounding the sharp decline in mohair

prices betweelL October and December 1979 that contributed

to the loss in the subject case

The mohair market historically has been a volatile one

Mohair is a luxury fiber used to unpart luster and silky texture

to fme flbrlcs and knitting yarns Supply has been relatively

stable in recent years but demand and thus prices have

fluctuated due to changes in fashions consUmer disposable

income and xchange rates Since February 1979 the price of

adult Texas Mohair at the warehoUse has fallen from 6 00 per

pound to 2 90 per pound 52 percent See enclosed copies of

Market News prepared by the Colorado Department of Agri

1 See e

g Organic Ch mlca s Atannrqflk Expresa S rvlel 18 S RR 1 36 1919

23 FMC
FORTE INT L SALES CORP V SEATRAIN INT L S A 33

culture in cooperation with the U S Department of Agricul

ture A decline from February 1979 prices was expected by

some see enclosed clipping from the 5 3079 San Angelo

Texas Standard however neither a dealer such as my client

or its customers know how long or how far prices will fall

My client s sale to Laines et Mohair on October 9 1979 at

4 55 per pound was made in the midst of a declining market

to a customer with an immediate need for mohair hence the

customer s stipulation that the mohair be shipped on October

28 1979 the date for which my client had booked cargo space

with Seatrain At that time it was paying 4 10 per pound at

the warehouse for adult Texas mohair By the end ofNovem

ber 1979 when my client s customer cancelled his purchase

because of my client s failure to ship as prescribed my client

was paying 3 50 per pound for mohair and anticipating fur

ther price declines was attempting to reduce its inventory

Consequently my client was happy to be able to sell the

mohair originally sold to Laines et Mohair to another custom

er on December 14 1979 for 3 75 per pound My client s

current price for adult Texas mohair FOB Texas is 3 20 per

pound Copies of the October 9 and December 14 sales con

tracts are enclosed

Please let me know if you require further information

The respondent s May 29 1980 letter and attachments have been

filed in this proceeding

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

The complainant alleged in its complaint a net loss of 26 804 95 as

being the amount of complainant s damage The amount of loss on sale

of contents of container STLU 126021 is set out as Exhibit 2 to

complaint as follows

difference in sales price 33 133 Ibs X 4 55 3 75

less 2 Commission to Italian agent

shipping from Mertzan to Houston Texas 10 23 79

shipping from Houston to San Antonio 12128179

less difference between shipping from Mertzan to Houston and from San

Antonio to Houston

Net Lost Profits

26 506 40

530 13

700 40

414 34

286 06

26 804 95

Because as to lost profits the complaining party is required to submit

sufficient proof of them so that the trier of fact can find with reasona

ble certainty the fact and amount oflost profits upon having review of

the record herein and finding more information was needed the Presid

ing Administrative Law Judge telephoned counsel on May 29 1980 as

referred to above The information supplied by the complainant in its

23 F M C
34 FEDERAL MARITIME COMMISSION

letter dated May 29 1980 is found and concluded under the circ

stances herein to be sufficient proof of the lost profits Ifthe lost pr

are due to failure ofthe carrier to perform its duty properly in deli

of the goods the claimant is entitled to recover such profits a

element ofhis full actual loss damage or injury Here however s

ment has been reached at 16 000 The Commission is aware of 

fully supports the policy which favors the settlement ofdisputes b

is incumbent upon the decision maker to assure that the settle

proposed by litigants does not violate the law Pierpoint Manage

Co and Retia Steamship Co v Holt Hauling and Warehouse Sys

Inc Docket No 78 44 22F MC 324 326 1979

In their joint memorandum set forth above the parties discuss 

given the relative paucity of precedent under section 14 Fourth o

Shipping Act 1916 Seatrain and Forte both acknowledge that if 

matter is not settled as proposed each could possibly be the loser 

full and complete adjudication Both parties recognize that in the 

of a full adjudication they will incur substantial costs in legal 

travel expenses transcript costs and the like Both parties also re

nize that an adjudication will take employees away from their da

day functions The parties believe that the Settlement and Release i

most effective efficient cost saving and time saving resolution o

matter The Presiding Administrative Law Judge shares this b

There is sufficient justification offered for the 16 000 paymen

Seatrain See Washington Electric Corp v Sea Land Service Inc Do

No 79 15 22 F M C 267 417 1979

Upon consideration of the aforesaid the Presiding Administr

Law Judge finds and concludes in addition to the findings and co

sions hereinbefore stated

1 Circumstances exist to warrant the grant of relief as indic

hereinabove i e approval ofthe Settlement and Release

2 Such Settlement and Release is consistent with the Commiss

support ofthe policy which favors the settlement ofdisputes

Wherefore it is ordered subject to review by the Commissio

provided in the Commission s Rules of Practice and Procedure 

A The Settlement and Release jointly executed by Complainan

Respondent be and hereby is approved

B The parties shall at the proper time advise the Commission 

how and when the Settlement and Release was executed subm

copies ofany pertinent documents

C This proceeding is discontinued

S WILLIAM BEASLEY HARR

Administrative Law Judge

23 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 80 27

CONNELL BROS COMPANY LTD

v

LYKES BROS STEAMSHIP CO INC

NOTICE

July 10 1980

Notice is given that no exceptions have been filed to the June 6 1980

initial decision in this proceeding and the time within which the Com

mission could determine to review that decision has expired No such

determination has been made and accordingly that decision has

become administratively final

8 FRANCIS C HURNEY

Secretary

23 F M C 35
FEDERAL MARITIME COMMISSION

DOCKET NO 80 27

CONNELL BROS COMPANY LTD

v

LYKES BROS STEAMSHIP CO INC

Complaint seeking reparations for freight charges based upon oral agreement with c

representative which differs from charges assessed under existing tariff and 

barred under the special docket provisions of section l8b 3 cannot succeed 

seeking remedy under section l8b S without Commission disapproval of inv

rate and a showing of continued assessment after such fmding Complaint dism

Edward J Martin and R D Vinick for complainant

R J Finnan for respondent

INITIAL DECISIONl OF PAUL J FITZPATRICK

ADMINISTRATIVE LAW JUDGE

Finalized July 10 1980

Connell Bros Company Ltd of San Francisco California by c

plaint served May 9 1980 alleges that Lykes Bros Steamship Co 

assessed charges for ocean transportation which are so unreason

high as to be detrimental to commerce in violation of section l8b 

of the Shipping Act of 1916 2

The focus of the complaint involves a booking quotation of an 

inclusive rate of 78 50 per kilo ton and 5 00 per kilo ton as a bu

charge to be applied to a shipment of transformer oil for carr

during May 1979 Although complainant asserts that the respon

indicated two months earlier that it would take immediate steps to 

the rate published an allegation denied by the respondent it 

assessed freight charges at a higher rate The shipment moved u

respondent s Bill of Lading No 019 dated May 13 1979 aboar

NANCY LYKES at the tariff rates then in effect on lube oil at 9

per kilo ton including a bunker surcharge plus a 6 50 per kilo ton 

receiving charge 3

According to the bill of lading the involved 

1

This decision will become the decision of the Commission inthe absence of review thereof 

Commission Rule 227 Rules of Practice and Procedure 46 CF R 502 227

46 U S C leetion 817 b 5

Although the llIriff was not provided complainant indicate that the ratesare published in 

Tariff FMC 12 5thRevised Page 145 2nd Revised Page 33 and Original Page 51

36 23 F MC
CONNELL BROS CO LTD V LYKES BROS STEAMSHIP 37

CO INC

ment represents 32 containers which contained 2 400 drums of trans

former oil having a gross weight of 485 523 KGS and resulting in

freight charges of 46 852 97 According to complainant these charges

represent 6 311 79 in excess of the quotation agreed upon prior to the

shipment

Absent any other factual considerations it would appear at this point

that respondent s consideration of utilizing the remedy provided by

Congress in P L 90 2984 might be appropriate since it was designed to

provide recourse where possible inequities may result when shippers

rely upon a carrier srepresentation that an agreed upon reduced freight

rate would he assessed Indeed the statute was designed to cover

situations where there is an error due to an inadvertence in falling to

file new tariff assuming this to be the case here However the

complainant states that its claim was denied and that the exchange

between the parties extended beyond the 180 days to effectuate any

timely request for refund under that statute On the other hand re

spondent denies receipt of the claim and points to Rule 20 of its tariff

which restricts the time for filing claims to six months Inany event an

examination of the circumstance surrounding the failure to file under

section 18 b 3 is not a factor for consideration here However assum

ing that all the requirements of section l8b 3 were met complainant

could have received the refund sought here The determination not to

file for permission to refund a portion of the involved freight charges

on a timely basis effectively foreclosed the remedy provided under the

statute Furthermore the statute does not require a carrier to pursue

such a

remedy

Recognizing that any requested relief fails under section l8 b 3

complainant views as its only refuge the provisions of section 18 b 5

5

It seeks relief in three forms 1 that the Commission disapprove the

higher rates and charges 2 that the rates be found unreasonably high

and the Commission award reparation in the amount of 6 31179 plus

interest and 3 that the relief sought be granted without a public

hearing Respondent denies the first and second but agrees that the

complaint should be resolved without a public hearing First it is

unnecessary to dwell at length about the statutory requirement of

disapproval of any rate after hearing and what constitutes a hear

ing since the first and second requests for relief must be rejected As

to these requests section 18 b 5 is purely prospective in nature Wes

tinghouse Electric Corp v Sea Land Service Inc 22 F MC 267 268

Section 18b 3 ofth Shipping Act of 1916 46 D S C 817 b 3

Section 18b S provides

The Commission shall disapprove any rate orcharge filed by acommon carrier by water in

the foreign commerce of the United States or conference of carriers which after hearing it

finds to be so unreasonably high or low as to be detrimental to the commerce of the United

States

23 F M C
38 FEDERAL MARITIME COMMISSION

j

1979 Ifthe rates here were shown to be so unreasonably high a

be detrimental to commerce then the proper remedy would be for 

Commission to disapprove those rates But the considerations 

involve an agreement to provide a reduced rate which ended 

higher charges at the existing tariff rate hardly the usual ground f

finding of a violation under this section Furthermore only after co

ued adherence to the rate which was found to be disapproved by 

Commission could the respondent be considered in violation ofse

18b S and penalties imposed including the award of reparat

Federal Maritime Commission v Caragher 364 F 2d 709 717 18 1

Commodity Credit Corp v American Export Isbrandtsen IS F MC 

191 1972 In this proceeding none of these necessary elements 

present and complainant has failed to support its position and justif

award ofreparations Accordingly the complaint is dismissed

5 PAUL J FITZPATRIC

Administrative Law Judge

Washington D C

June 6 1980

j

i

23 FMC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 775 1

WILLIAM H KOPKE JR INC

v

SEA LAND SERVICE INC

ORDER PARTIALLYADOPTING

SETTLEMENT OFFICER S DECISION

July 10 1980

The Commission has undertaken a discretionary review of the April

15 1980 decision of Settlement Officer Robert M Skall in the above

captioned proceeding in order to consider the propriety of awarding a

shipper damages which include the cost of reweighing cargo which had

been erroneously weighed by an ocean carrier

In this instance William H Kopke Jr Inc was the consignee of

two freight prepaid containerloads of chestnuts transported from

Naples Italy to New York New York by Sea Land Service Inc

Upon being notified by Sea Land that insufficient freight charges had

been received in Italy for one ofthe two containers the consignee was

required to pay an additional 894 11 to secure the release ofits cargo

This amount wasbased upon Sea Land s determination that the contain

er in question weighed 812 kilos more than the weight stated on the bill

oflading 1

Upon receiving the disputed container the consignee made arrange

ments with the United States Department of Agriculture to weigh the

contents of both containers and paid a total of 102 15 for this service

The reweighing indicated that the cargo in the disputed container

weighed at least 50 kilos less than the 15 000 kilos at which it was

originally rated The consignee then filed a complaint with the Com

mission to collect 894 11 in excess tariff charges and 102 15 for

reweighing Sea Land did not dispute the allegation that it had misrated

the cargo or the amount requested in damages and the Settlement

Officer proceeded to award the consignee 894 11 plus 72 15 an

1 The shipper was charged an additional freight rate of 28147 plus penalty charges provided for

under Rute 26 of the West Coast of Italy Sicilian and Adriatic Ports North Atlantic Range Confer

ence Tariff No FMC15 in the amount of two times the additional freight 562 74 plus the cost of

weighing 50 00 Sea Land did not unpack the container and weigh its contents but instead weighed

the entire load and subtracted the tare weight of the empty container in accordance with figures

from acontainer register

23 F M C 39
40 FEDERAL MARITIME COMMISSION

amount found to be the cost of weighing the one container upon w

excess tariff charges werecollected Interest was also awarded on t

amounts calculated from the date each payment was made

Reparations were awarded for the consignee s

reweighing exp

because of the Settlement Officer s belief that but for Sea Land s S

ping Act violation no reweighing would have been necessary 

though a chain of causation does exist between the violation and 

reweighing it is also clear that the consignee would not have incu

this expense if it had tiotpursued its legal claim against Sea Land 

attorneys fees reweighing expenses are considered to be a cos

litigation primarily within the independent control of the complai

rather than an economic loss flowing directly and without interven

from amisrating violation

The Commission has determined that litigation costs are ra

proper subjects for an awlUd of reparations Ace Machinery Compa

Hapag Lloyd A G 16 S R R IS31 IS34 1976 and should no

considered by Settlement Officers in the context of nonprecede

informal docket proceedings Accordingly the Settlement Oflicer 

cision shall be adopted except insofar as it permits the consigne

collect the costs of reweig 1ing the cargo

THEREFORE IT IS ORDERED That Sea Land Service Inc 

to William H Kopke Jr Inc the sum of 894 11 plus interest a

rate of 12 from October 12 1979 to the date full reparation is m

By the Commission

S FRANCIS C HtJRN

Secretary

Vice Chairman ThODlB8 F Moakley and CommiSlioner Leslie L Kanuk diaaent In the c

tances of this caae they do not con ider the consign reweiibing expense as a coat of litigatio

rather as an expenditure necessarily incurred 88 adirect result of the carrier s failure to perf

duty to ascertain the proper weight of the cargo it tran ports

23 F MC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 775 1

WILLIAM H KOPKE JR INC

v

SEA LAND SERVICE INC

AND

WEST COAST OF ITALY SICILIAN AND ADRIATIC PORTS

NORTH ATLANTIC RANGE CONFERENCE W IN A C

Decision of Robert M Skall Settlement Officerl

Partially Adopted July 10 1980

Reparation awarded in part

PARTIES

William H Kopke Jr Inc claimant is a New York corporation

engaged in the business of importing and distributing fresh fruit and

produce including chestnuts from Italy It maintains offices at 676

Longfellow Avenue Bronx New York

Sea Land Service Inc Sea Land is a common carrier engaging in

transportation by water and is a member of the West Coast of Italy

Sicilian and Adriatic Ports North Atlantic Range Conference

W IN A C As a member ofthat conference Sea Land participates in

WIN A Cs Freight Tariff No 15 FMC 3 tariff on file with the

Commission

CLAIMANT S CASE

By complaint filed January 14 1980 claimant states that on Septem

ber 30 1979 its shipper Ditta Vito Cioffi delivered to Sea Land two

containers loaded with fresh chestnuts in bags for transportation from

Naples Italy to the port of New York ie Port Elizabeth New

Jersey under Sea Land Bill of Lading No 944 713135 2

The two

containers were temperature controlled containers whereby the chest

nuts were to be maintained at a temperature of from 35 to 37 degrees

1 Claimant and carrier have consented to the informal procedure under Subpart S of the Commis

sian s Rules of Practice and Procedure 46 CF R 502 301 304 This decision therefore will be final

unless theCommission elects to review it within 30 days from the date of service thereof

2 Areview of a

copy of this bill of lading supplied by claimant indicates that the actual number is

948 713135 This discrepancy is irrelevant to the decision herein in that the correct number appears

on copies of other documents supplied by claimant eg

Sea Land s corresponding freight bill

23 F M C 41
42 FEDERAL MARITIME COMMISSION

On October 11 1979 two days after it had paid Sea Land s

fr

and accessorial charges claimant intended to take delivery of the 

containers of chestnuts at Sea Land s Port Elizabeth New Jersey 

minal At the same time however pursuant to rule 26 ofW IN A 

tariff one of the two containers container No 22591 underw

weight check by Atlantic Cargo Inspection Corporation ACIC 

behalf ofSea Land and W IN A C Inadvertently the second cont

container No 20781 was released by the terminal without a w

check by ACIC

The weight of the chestnuts in container No 22591 was foun

ACIC to be 15 812 kilos 812 kilos over the weight of 15 000 

stated on the bill of lading Since claimant s earlier payment of fr

and accessorial charges had been based on the weight indicated o

bilI of lading ACIC notified claimant that container No 22591 w

be detained until payment of an additional sum in the amoun

894 11 This amount computed pursuant to rule 26 of W IN A 

tariff included 1 the alleged additional freight and accessorial cha

due 2 the cost of ACIC s weight check and 3 an amount equ

double such additional freight and accessorial charges due 3

Claimant states that since chestnuts are a perishable cargo neces

ing immediate delivery it was forced to make prompt i e Octobe

1979 payment of 894 11 to Sea Land Claimant made this pay

under written protest wherein it invited representatives of Sea 

and WIN AC to attend the October 12 unloading ofboth conta

at claimant s premises This invitation was refused

On October 12 the contents of each of the two containers 

counted and weighed by a

representative of the U S Departmen

Agriculture USDA As indicated on the two USDA inspection ce

cates not only did the chestnuts in container No 22591 not exceed 

weight stated on the aforesaid bill of lading the chestnuts in 

container weighed slightly less than stated on the bill oflading

Accordingly claimant requests reimbursement from Sea Land 

W IN AC of 894 11 plus 102 15 i e the expenditure necessa

have the bags of chestnuts weighed and counted by the USDA 

interest from October 12 1979 a total of 996 26 plus interest Claim

states that the sum of 894 11 is an overcharge and therefor

violation of

theConference s tariff and the Shipping Act of 191

amended Act

In support of its claim claimant has submitted copies of Sea La

short form bill of lading prepared by the shipper Sea Land s co

Although ACIC s inspection report indicates that the contenls of contsiner No 22 9l w

15 812 kilos forsome reason not clear to the Settlement Officer the additional sum was compu

ACIC on the basis of 1 820 kilos Again however this seeming discrepancy is irrelevant to th

sion herein

23 F MC
WILLIAM H KOPKE JR INC V SEA LAND W IN A C 43

sponding freight bill evidence of payment of the freight and accessorial

charges ACIC s biII for 894 11 ACIC s

inspection reports evidence

of payment of ACIC s bill for 894 11 the USDA s

inspection certifi

cates and evidence of payment of the USDA s

inspection charges

RESPONSE TO CLAIM

By response dated March 20 1980 Sea Land states that while it

appears that the claimant has met its heavy burden of proof in

establishing the validity of its claim in connection with an overcharge

Sea Land cannot unilaterally refund the charges for to do so would

represent a violation of its Conference membership agreement

By response dated March 25 1980 counsel for the W IN AC Con

ference states that

In light of the pertinent regulations it is unclear why WINAC

was named as a

respondent to the complaint Nonetheless we

have reviewed the complaint and Sea Land s

response to it of

March 20 1980 The matter appears to be straightforward and

WINAC has nothing to add to Sea Land s

response

4

DISCUSSION AND CONCLUSIONS

This matter involves a decision as to whether claimant has shown

that it should be awarded the whole or any part ofits claim for 996 26

894 11 plus 102 15 and if so whetherinterest also should be award

ed Although 46 C F R 502 301 304 specifically provides for reparation

of only overcharges and damages the Commission considers inter

est to be one form of damages as defined in 46 C F R 502 303

damages means such violations of the Shipping Act 1916 other

than overcharges for which reparation may be granted

As to its claim for the sum of 894 11 28137 representing the

alleged additional freight and accessorial charges due plus 562 74

representing a penalty of twice such additional freight and charges plus

50 representing ACIC s inspection expense claimant states and the

Settlement Officer agrees that that amount is an overcharge Section

18bX3 of the Act prohibits a common carrier by water in foreign

commerce or a conference of such carriers from charging a greater

compensation for the transportation of property than the rates and

charges specified in the applicable tariff Based upon ACICs findings

the charge of 894 11 was not an overcharge and thus did not violate

section 18b 3 whereas based on the USDAsfindings such charge

was an overcharge and a violation of section 18b 3 has occurred

4

Although the Commission s rules governing informal docket procedure do not apply to confer

ences specifically for obvious reasons W IN A C was named by claimant as a

joint party to the com

plaint Accordingly when the Settlement Officer served acopy of the complaint on Sea Land he also

served a copy on WIN A C The question of whether or not W INA C was properly named as a

respondent does not need resolution in this case it is enough that Sea Land is a

respondent

23 FMC
44 FEDERAL MARITIME COMMISSION

Should the USDA s

findings be preferred over ACIC s

find

Without more the answer is no In this case however there is 

Specifically a review of the respective inspection reports indicate 

while ACIC neither weighed nor counted the contents of Sea 

container No 22591 the USDA did ACIC merely weighed the s

container and chassis and subtracted from that gross weight the 

ter weight of the chassis and the register weight of the cont

The remainder i e 15 812 kilps or 812 kilos more than the 15 000 

stated on the bill of lading waspresumed by ACIC to be the weig

the contents The USDA on the other hand counted and weighe

contents of the container and found that the average weight ofthe 

of chestnuts was slightly under the stated per bag weight Furthe

USDA found that there were two bags less than indicated on the b

lading for container No 22591 5

In this case therefore it is concluded that the USDA s

fin

should be preferred overACIC s

findings and that claimant is en

to a refund of overcharges in the amount of 894 11 Further since 

direct result of that overcharge claimant was wrongfully depriv

the use of its money it also is concluded that in IlGcordance 

Commission policy claimant is entitled to interest at 12 percent A

in accordance with Commission policy and as requested by clai

since claimant paid the amount of 894 11 on October 12 1979 in

will be awarded from that date until the date of the refund by 

Land

As to the sum of 102 15 which represents claimant s expen

having the USDA verify the amount and weight ofthe cargo cla

does not use the term damages as the basis for the requested 

bursement The Settlement Officer believes however that reimb

ment for at least a portionS ofsuch expense can be awarded in the 

of damages if it can be concluded that I such damages were sut

as a direct result of the above found violation of the Act and th

reparation may be granted within the meaning of 46 C F R 502 

Did the damages ie the cost of the USDA s verification se

oCCUr as a direct result of the overcharge violation Obviously so 

conclude otherwise would be to conclude that no part of the exp

ture was necessary to prove claimant s case and despite the re

herein that claimant would have requested an impartial weigh

count check in any case No such conclusion can be reached 

Th contents of contain r No 22591 was oaid by the hipper to contain 600 bap weighing 

of 15 000 kilo with each bag marked as w

lghlng 25 kilos 600 x25 15 000 Th USDA ho

oounted only 598 bas with an average w

lght jUlt und r 25 kilos ThuI th che8lnuts in co

No 22591 couldnot have w

lghed 15 000 kilos much I 15 8l2kilol

Th lum of 102 15 r pr ts th USDA service chars in connection with both conta

not just contain r No 22591 which i th only contain r

directly involved in this c

11lMr
WILLIAM H KOPKE JR INC V SEA LAND W IN A C 45

May reparation for damages be granted in this case The Settlement

Officer is aware of no policy that would negate the literal meaning of

the rules and equity7 certainly favors an affirmative answer Further

Sea Land s

response to the claim simply ignored the matter of damages

Accordingly it is concluded that 46 C F R 502 303 entitles claimant

to damages for that portion of the 102 15 applicable to container No

22591

As to the amount of damages to be awarded a review of the

USDA s

inspection certificate for container No 22591 clearly indicates

that its charges including overtime amounted to 72 15 A telephonic

discussion with the USDA inspector who signed the certificate con

firmed that 72 15 does in fact represent the inspection and overtime

charges8 related only to container No 22591 and that no other charges

for any other services are included in that amount It is concluded

therefore that the amount of 72 15 is the awardable amount of dam

ages exclusive ofinterest to which claimant is entitled

Although a viable argument can be made to the contrary the Settle

ment Officer does not believe that he can consider the remaining

amount of 30 which represents the USDA s

inspection fee for the

second container as damages directly related to the overcharge viola

tion While it is true that the USDAs weight and count check of the

bags of chestnuts in the second container supplied strong evidence to

support the findings as to the weight of the bags of chestnuts in

container No 22591 that supporting evidence was not necessary to

prove claimant s contention that an overcharge occurred with respect

to container No 22591

As to the question of whether interest should be awarded on the

amount of 72 15 it must be recalled that the underlying principal at

work here is to make the injured party whole within the limits ofthe

Act the rules and Commission policy 9

The injury suffered by claimant

as the result of its outlay to the USDA is not limited simply to the

amount of the outlay Rather just as in the case ofthe overcharge this

injury also involves the loss of the use of claimant s money It is

concluded therefore that claimant is entitled to interest at 12 percent

7

This is not to imply that the rulesenable the Settlement Officer to completely satisfy equity in this

case The claimant will still be out oC pocket for expenses such as attorney s fees and willreceive no

reparation for the aggravation suffered as aresult of this incident

8

According to the USDA inspector overtime begins at 430 p

m The USDAs weight and count

check of container No 22591 as stated on the inspection certificate began at 4 35 p m October 12

1979 In that connection the Settlement Officer notes that October 12 1979 fell on aFriday It was

after all ACIC who had detained the container on October 11 and held it until claimant could pay the

additional charges onOctober 12 Only then could claimant arrange fordelivery of the container to its

warehouse in the Bronx It is adistinct possibility therefore that the only way claimant could have

avoided overtime charges was to wait for at least two moredays before allowing the USDA inspec

tion to begin

9

46 CF R 502 301 304 is based on section 22 of the Act That section authorizes lull reparation to

the complainant for the injury caused by such violation emphasis supplied

23 F M C
j

i

46 FEDERAL MARITIME COMMISSION

but not from the date ofOctober 12 1979 as requested The US

invoice to claimant is stamped Paid on a date which alth

blurred appears to be October 24 1979 Since telephone discus

with claimant and its attorney could not elicit a different date int

on the amount of 72 15 will be awarded from the date of Octobe

1979

Based on the foregoing Sea Land is hereby ordered to

1 Refund to claimant the sum of 894 11 together 

interest at 12 percent from October 12 1979 to the 

refund is made and

2 Reimburse claimant in the additional amount of 7

together with interest at 12 percent from Octobe

1979 to the date such reparation is made

Evidence of payment in accordance with this decision shou

submitted by Sea Land in order to complete this record

S ROBERT M SKA

Settlement Office

23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 77 13

FIRST INTERNATIONAL DEVELOPMENT CORPORATION

v

SHIP S OVERSEAS SERVICES INC

Freight charges collected by nonvessel operating carrier computed on the basis of the

unfiled rate found to be unlawful Reparation awarded

MichaelA McManus Jr for First International Development Corporation

W B Ewers for Ship s Overseas Services Inc

REPORT

July 17 1980

BY THE COMMISSION THOMAS F MOAKLEY Vice Chairman

JAMES V DAY Commissioner PETER N TEIGE Commissioner

This proceeding is before the Commission on Exceptions filed by

First International Development Corporation FIDCO to the Initial

Decision on Remand issued by Administrative Law Judge William

Beasley Harris on October 30 1979 Ship s Overseas Services Inc

SOS filed a Reply to the Exceptions

BACKGROUND

The matter began with the filing of a complaint by FIDCO charging

SOS with violations of the Shipping Act 1916 46 U S C 801 et seq

and seeking reparation from SOS in the amount of 553 484 71 for the

injury caused by such violations Specifically the complaint alleged

that whereas SOS had entered into an agreement with FIDCO to

arrange for the transportation of a shipment of steel pipe from Houston

Texas to Benghazi Libya at the best rate available at the time of

shipment SOS collected from FIDCO freight charges at the rate of

227 50 per measurement ton m t while shipping the cargo on a

vessel ofthe Jan C Uiterwyk Company at the rate of 125 00 per m t

l

The collection of charges at 227 50 per m t which rate was never

flIed with the Commission FIDCO contends was unduly or unreason

ably prejudicial and disadvantageous unjustly prejudicial and unreason

Chairman Daschbach concurs in part and dissents in part Commissioner Kanuk dissents Commis

sioner Teige did not participate in the previous Commission decisions served in this proceeding

1

The rate of the Gulf Mediterranean Ports Conference of which Uiterwyk was amember

23 FM C 47
I

I

48 FEDERAL MARITIME COMMISSION

able in violation of sections 14 Fourth 16 17 and 18 of the Sh

Act 1916

In the Initial Decision served May 2 1978 2

the Presiding O

determined that SOS was not a common carrier and dismisse

complaint for lack of jurisdiction Because the Presiding Officer 

in his Initial Decision that Complainant s closing brief had not 

received the Commission on exceptions remanded the proceedi

the Presiding Officer for his consideration of the Complainant s 

On remand the Presiding Officer reasserted the fmdings and co

sions ofhis earlier decision

The Commission on review reversed the Presiding Officer s dec

finding that in arranging for the transportation of FIDCOs cargo 

had acted as a non vessel operating common carrier by water an

SOS s failure to me with the Commission a tariff covering such 

portation violated section 18b 1 ofthe Shipping Act 1916 46 U 

817 b 1 The Commission however found the record insufficie

ruling on FIDCO s claim for reparation and again remanded the 

ceeding to the Presiding Officer for a determination of the amou

reparation if any to be awarded FIDCO

PRESIDING OFFICER S DECISION AND POSITIONS OF T

PARTIES

In his Initial Decision on Remand now under consideration 

Presiding Officer dismissed the complaint and discontinued the 

ceeding on the ground thatFIDCO had failed to introduce any 

evidence on remand and had not proven that SOS s violation of s

18b 1 was the cause of any injury to it Moreover the Pres

Officer expressed some doubts as to whether the parties had com

with clean hands so that the matter could be equitably resolved

In its Exceptions to the Initial Decision on Remand FIDCOcont

that the Presiding Officer failed either in that decision or in his e

Initial Decision to consider

1 FIDCOs arguments at law and equity on the question o

the injury and of damages Qaused FIDCO by SOS s violation

of the statute

2 whether a rate 7S in excess of the rate paid SOS to the

underlying carrier was unreasonable

3 the purpose of section 18b 1 which is to prevent unrea

sonable charges and providereview of rates in order to pro

tect own members ofthe public from unscl Upulous ship

pers sic

4 the Commission s decision in J G Boswe1J v American

Hawaiian S S Co 2 U S M C 9S 1939 which requires an

FirstIntematlonaloe Carp Shlp oe S nicInc 18 S R R 415 1978

23 FMC
FIRST INT L DEVELOPMENT CORP V SHIP S OVERSEAS 49

SERVICES INC

analysis ofthe reasonableness ofthe charge where there was a

failure to file a tariff

FIDCO also excepts to the doubt expressed in the Initial Decision on

Remand on the parties clean hands and contends that equity in this

instance weighs heavily in FIDCO s favor Finally it is argued that if

the Initial Decision is allowed to stand carriers will be encouraged to

violate the statute and avoid the filing requirements of section 18b 1

SOS in reply maintains that damages are not presumed but must be

proven It submits that because the further hearings to determine the

amount of damages were held at FIDCO s request its failure to intro

duce any evidence on remand on that question amounts to a fraud on

the Commission and to an abuse ofthe judicial process

SOS insists that FIDCO has not shown that the rate charged was

unjust or unreasonable or that it was in fact damaged Citing Carton

Print v The Austasia Container Express 20 FMC 31 1977 SOS

contends that the Commission has rejected claims for damages resulting

from loss of business3 and maintains that Complainant should have but

has not shown that SOS s failure to file a tariff was the proximate

cause of a specific injury to it which it allegedly has not done Finally

SOS again reasserts its position that it is not a common carrier subject

to FMC regulation

DISCUSSION

The Commission has previously found that SOS utilized the services

of Charles Ragan to procure business and that it shipped FIDCO s

cargo under its own name and assumed liability for the safe water

transportation and delivery ofthe cargo at the port of destination 4

On

that basis it was determined that in arranging for the movement of

FIDCO s cargo to Benghazi SOS had acted as a non vessel operating

common carrier and that its failure to file a tariff covering the transpor

tation was violative of section 18 b I

On exceptiOl 8 SOS again denies that it is a common carrier subject

to regulation and refers to arguments made in earlier pleadings Howev

er the matter of SOS s status has already been fully considered in an

earlier opinion and will not be discussed further SOS s exception to the

contrary is therefore rejected Accordingly the only remaining issue

before the Commission is FIDCO s claim for reparation and damages

Section 22 a of the Shipping Act 1916 provides in relevant part

That any person may file with the board a sworn complaint

setting forth any violation of this Act by a common carrier by

3

That decision turned on the question of the standing of the shipper to claim reparation for freight

overcharges paid by the consignee

4

The essential facts are as set forth in the Commission s decision served March 23 1979 which is

incorporated herein

23 F M C
50 FEDERAL MARITIME COMMISSION

water or other person subject to this Act and asking repara

tion for the injury if any caused thereby The board if the

complaint is filed within two years after the cause of action

accrued may direct the payment of full reparation to the

complainant for the injury caused by such violation Empha

sis added 46 U S C 821 a

As mentioned the Initial Decision on Remand held that FIDCO 

not proven any injury caused by the violation of the statute FID

however claims that it was indeed injured and seeks reparation in 

amount of 553 484 71 500000 of which is claimed for the los

business and profits and as punitive damages while 53 484 71 re

sents the 75 percent difference in the amount 50S collected 

FIDCO over the charges 50S paid the underlying ocean carrier

With regard to the claim of lost business and profits the Pres

Officer correctly found that FIDCO has failed to establish that 5

violation is the proximate cause of any such losses by FIDCO 

Presiding Officer s decision is therefore adopted in that respect

With respect to FIDCO s claim ofinjury resulting from the exce

freight charges paid by FIDCO over the amount 50S paid the und

ing ocean carrier 50S does not deny that it received payment on 

basis ofthe unfiled rate but insists that FIDCO was not injured the

because it had agreed to the payment ofthat rate Upon close exam

tion this argument proves itself to be without merit

The primary purpose of section 18b is to prevent discrimina

among shippers and to make the use of an unfiled rate unlawful 

courts this Commission and the Interstate Commerce Commis

under similar provisions of the Interstate Commerce Act have 

recognized that although carriers subject to regulation may esta

rates under private contracts with shippers the rates so agreed u

may be collected only when set forth in a tariff duly on file an

effect at the time ofthe shipment As the Supreme Court explaine

Armour Packing Co v United States 209 U S 56 1908 in referrin

section 6 ofthe Interstate Commerce Act 6

There is no provision excepting special contracts from the

operation of the law There is no provision for the filing

of contracts with shippers and no method of making them

public If the rates are subject to secret alteration by

special agreement then the statute will fail of its purpose to

IS P L 9 473 recodified the Interstate Commerce Act without substantive change The pe

portions of section 6 now appear at 49 US C 10761 and 10762 These provisions closely paral

tion 18b of the Shipping Act 1916 which among other things 1

requir that water carri

gaged in foreign ccmmerce file with the Commisaion tariffs ccntaining all their ratand 

sets forth theccnditions upon which tariffs of such ratesand ehargwill become effective 3 

its carriers from receiving adifferent cotDpensation than provided in their taritTs and 4 makes 

ful theuse of arate whose filing was rejected by the Commission

23 F MC
FIRST INT L DEVELOPMENT CORP V SHIP S OVERSEAS 51

SERVICES INC

establish a rate duly published known to all and from which

neither shipper nor carrier may depart 209 U S at 816

The Shipping Act similarly prohibits special arrangements between

shippers and carriers unless their terms are fully disclosed in the tariff

Tariff Filing Practices Etc of Containerships Inc 9 F MC 56 1965

Investigation of Tariff Filing Practice 7 F MC 305 1962 Intercoastal

Investigation 1 U S S B B 400 416 1935 Indeed the tariff adherence

requirements of the federal common carrier statutes are so strict7 that

when properly filed tariffs have the force of law and strict liability is

imposed upon shippers and carriers alike 8

The question presented by the instant case therefore reduces itself to

what reparation may a shipper receive when a carrier has unlawfully

collected charges for untariffed services SOS s argument that FIDCO

may receive nothing is based upon the assumption that a carrier with

out a tariff may not be penalized for misrating freight or for giving

rebates or refunds despite being in plain violation of section 18b

because there is no lawful rate against which the unlawful charges

can be measured 9

See also Atchison T I S P Ry Co v Robinson 233 US 173 1913 Chicago IAlton R R Co v

Kirby 225 U S 155 1912 Texas I Pac Ry v Mugg 202 U S 242 1906 New York NH IH RR

Co v ICC 200 U S 361 1906 Bernstein Bro Pipe IMachinery Co v Denver I R G W RR Co

193 F 2d 441 10th Cir 1951 Northern Valley Tronifer Inc v ICCand USA 192 F Supp 600 604

D N 1961 S L Sheppard I Co v Agwilines Inc 39 F Supp 528 531 D S C 1941 American

Broadcasting Companies Inc v PCC No 78 1968 D C Cir Apri128 1980

7

Principles of equity which might prevail in other contractual situations are inapplicable to freight

rate disputes Thus when carriers rate shipments in good faith reliance on cargo descriptions furnished

by the shipper they may nonetheless be held in violation of section 18b 3 and ordered to pay repa

ration if the shipper submits evidence showing that the commodity transported was something other

than that described in the shipping documents Eg Durite Corp v Sea Land Service Inc 20 F M C

674 1978 afjd without opinion Sea Land Service Inc v Federal Maritime Commission 610 F 2d 1000

DC Cir 1979 Sun

Co

Inc v Lykes Bro Steamship CoInc 20 F M C 67 1977 Abbott Laborato

ries v Alcoa Steamship Co 18 F M C 376 1975 Western Publishing Co Inc v Hapag Lloyd A G 13

S R R 16 1972

8 Louisville NR R Co v Maxwell 237 U S 94 1915 Pennsylvania R R Co v International Coal

Mining Co 230 US 184 1913 Chicago B I0 R Co v Ready Mixed Concrete Co 487 F 2d 1263

8th Cir 1973 US v Pan American Mail Line Inc 359 F Supp 728 S DN Y 1972 The recent

amendment to section 22 of the Shipping Act 1916 strengthening the Commission s

authority to pros

ecute rebating underscores the Congressional intent that tariff adherence requirements be rigidly en

forced P L9625 93 Stat 71 effective June 19 1979 The need for a tariff on file as a condition

precedent to thecollection of freight charges is further illustrated by the requirement under thespecial

docket procedure established pursuant to section 18b 3 that when the failure to timely me a new

rate is inadvertent ordue to error before applying to the Commission for relief the carrier must file a

tariff setting forth the rate sought to be charged See e

g

Airlex Shipping AIC v

Lykes Bras S S Co

Inc 19 F M C 16 1975 Oppenheimer International Corp v Moore McCormack Lines Inc 15 F M C

49 1971

9

FIOCG relies heavily upon domestic commerce decisions In J G Boswell v American Hawaiian

S S Co 2 V S M C 95 1939 the Commission held that although certain carriers had collected

charges without tariffauthority complainants were not entitled to reparation unless the sum paid by

complainants amounted to an unjust and unreasonable exaction for the service performed Id at 105

The Interstate Commerce Commission has held that when transportation services are rendered with

out a tariff on file the Ice may find reasonable charges therefor and award reparation where the

charges collected were excessive Manufacturers Shippers Cooperative Ass n v Erie R Co 311 I CC

23 F M C
52 FEDERAL MARITIME COMMISSION

i

Although the Commission has no authority to prescribe jus

reasonable rates in foreign commerce

10 if section 18b is to be re

ably construed to fulml its legislative intent an ocean carrier shou

be allowed to collect and retain the fruits of its unlawful act

11 

fililg requirements benefit and protect shippers by subjecting rat

public scrutiny and the pressures of competing market forces th

ensuring not only equal treatment but also eqlll opportunity f

shippers especially those less experienced in transportation ma

The collectioll of untariffed rates in violation ofthe statute deprive

shipper of those benefits and this deprivation causes hjury for W

reparation may be granted under the terms ofsection 22 of the 

ping Act 1916

Because an unfiled rate is unlawful per se the shipper suffers a le

cognizable injury at the time it pays the unlawful charges 1 a

premise that damages must be proven rather than presumed doe

prevent an award of reparation in circumstances where as here 

disputed charges were unlaWful in their entirety Similar argu

were rejected by the Supreme Court 6S years ago when it held 

proof of particular pecuniary loss to the shipper was unnecessa

overcharge cases and that damages could be awarded upon mere 

that a higher rate was paid Lehigh Valley R Co v Meeker 236 

412 191S 1S

Even though a carrier may not collect charges based on an unta

rate the Commission may in the exercise of the discretion grant

section 22 and as determined by the circumstances of eaoh part

637 641 l9liO South tern Petroleum Co Inc v S IvR Co 310 ICC 431 1960 Hackn 

Body Co v NY CenlralR Co 266 ICC 79 798 1946 CIIII Ssrvlc Oil Co v ErI R 

I CC 387 1940 Internatlonol Pope SoIIlCo va1a It B Co 213 I CC 67 68 193 

South mIbtpms Co 13 ICC 16 1908

10 Section 18 a of th Shlppina Act 1916 46 US C 817 a and sections 3 and 4 of lb In

tal Shipping Act 1933 46 US C 84 and 84 a provld forratemaklng authority in dome

sbor trodonly Th unftled rate is not being challenged under section 18b which forb

which are80 unreasonably high or low as to be d trlm ntalto United States foreign commerc

Th duty to iii rates and charges and to strictly adh r

to tariffs Is th 8III for bolb for

domestic comm rce carriers Ifcarriers which iii no tariffs w r pennllted to benefit from lb 

tion of rev nu from negotiated rates th ult would b lbat carri rs which do obey th la

be h ld to more stringent standards lban those whichdo not

11 Adov MtII 286 US 397 407 1932 N Syndlcot Co v No Y CentlTlI R Co 27 

1927 Loulsvtll Nahvtlle RR Co v SI083h@ ldSt 1 110n Co 269 U S 217 192 

Southem Poclflc Co Qm To nze Lumber Co 24 U S 31 34 1918 where lbe Cou

lbat

The tendency of th law inregard to damaaes is not to go beyond the first step Itholds 

carri rliable if proximately lb plalntifT has xuff red aloss The plaintiffs suffered aIo

lbe amount of the verdict wh n

lbey paid Their claim accrued at onca inlbe lbeory of 

law

Th carrier ought not to be allowed to retain his Ulegal profits and lb only one who 

take It from him is lbe one that alone was In relation wllb him and from whom the ca

took lbe sum 24 U S at 33 34

18 See aso cases cited in n 12 supra

23 FMC
FIRST INT L DEVELOPMENT CORP V SHIP S OVERSEAS 53

SERVICES INC

case consider whether to permit the carrier to retain out of pocke

expenditures made for the benefit of the shipper 14 In this instance the

record shows that of the 123 101 38 it collected from FIDCO SOS

paid 69 616 67 in freight charges for the water movement of the cargo

which is the amount FIDCO would have paid for the ocean transporta

tion had it dealt directly with the ocean carrier 15 FIDCO claims as

reparation only the balance of 53 484 71 which amount reflects the

difference between the amount collected by SOS and the cost of the

transportation service which FIDCO received and from which FIDCO

benefitted In view of the Commission s authority to make equitable

adjustments in the amount of reparation awarded Consolo v Federa

Maritime Commission 383 U S 607 1966 FIDCO will only be grant

ed reparation for the balance of 53484 71 with interest calculated

from the date ofpayment

Other contentions and arguments not specifically discussed have nev

ertheless been considered and found to be without merit

THEREFORE IT IS ORDERED That the Presiding Officer s Ini

tial Decision on Remand is adopted to the extent it denies FIDCO 

claim for damages for loss of business or profits and is vacated in al

other respects and

IT IS FURTHER ORDERED That FIDCO is hereby awarded

reparation in the amount of 53 484 71 with interest of 12 percent pe

annum from the date of payment ofthe freight charges found unlawfu

herein and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary

14 See United States v Columbia Steamship Company 17 F M C 8 1973

15 It is apparent from the record that FIDCOlacked experience in matters concerning ocean trans

portation

23 F M C
54 FEDERAL MARITIME COMMISSION

Chairman Richard J Daschbach concurring in part dissenting in p

Ido not agree with the majority in it conclusion as to the amoun

reparation to be granted to the shipper

Ship s Overseas Services Inc SOS has acted as a regulated n

vessel operating common carrier with respect to the subject ca

shipment and failed to file a tariff covering that shipment in violation 

section 18b The majority correctly notes that rates established un

private contracts between shippers and carriers maybe collected o

when set forth in a

tariff duly on file and in effect at the 1ime 

shipment p SO emphasis added The majority also recognizes that 

unrlled rate is unlawful perse and that legally cognizable injury imm

diately arises upon the payment of such a rate It further states th

The premise that damages must be proven rather than pre

sumed does not prevent an award of repar tlon in circum

stances where as here the disputed charges were unlawful in

their entirety p S2

Despite this analysis the majority invokes the aegis of the Comm

sion s discretionary power to establish reparations awards under sec

22 of the Act and denies the shipper the return of its fu paym

thereby partially sanctioning SOS violation ofthe law

The foundation of regulated liner shipping is the flIed tariff T

Shipping Act 1916 requires strict adherence to these tariffs in orde

j

maintain stability and regularity in the U S liner trades and to prot

j shippers from discriminatory capricious or unscrupulous deviati

from published rates Any effort by the Commission to substitute 

cretionary ratemaldng for enforcement ofstrict tariff adherence ero

the foundation ofthe tariff riling system Consequently Iwould requ

the return to the shipper of all monies collected by SOS for 

shipment ofthe cargo involved in this proceeding

23 F Mc
FIRST INT L DEVELOPMENT CORP V SHIP S OVERSEAS 55

SERVICES INC

Commissioner Leslie Kanuk dissenting

The majority s opinion is based on the best of intentions and my

sympathies are with them Unfortunately the law is not Section 22

permits the award ofreparations for injuries resulting from violations of

the Shipping Act The only violation here is a failure to file a tariff for

the negotiated rate This violates section 18b 1 of the Shipping Act

Had SOS properly filed the rate resulting in the 123 101 38 charge

there would be absolutely no cognizable action which this agency

could entertain However the section 18 b I violation by SOS has not

in my opinion been properly linked to an injury suffered by FIDCO

Even if injury is presumed Ican find no rationale for awarding repara

tions in the amount of 53484 71 as a direct result of failure to file a

tariff

It is unfortunate that the law sometimes does not permit us to act in

complete accordance with our good intentions However I view

FIDCO s situation to be one best remedied in a forum with equity

powers

This regulatory agency cannot properly honor FIDCO s

request for

reparations

23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 101

LORESCO INTERNATIONAL INCORPORATED

v

YAMASHITA SHINNIHON STEAMSHIP COMPANY LIMITE

NOTICE

July 17 1980

Notice is given that no exceptions have been filed to the June 

1980 initial decision in this proceeding and the time within which 

Commission could determine to review that decision has expired 

such determination has been made and accordingly that decision 

become administratively final

5 FRANCIS C HURNE

Secretary

56 23 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 101

LORESCO INTERNATIONAL INCORPORATED

v

YAMASHITA SHINNIHON STEAMSHIP COMPANY LIMITED

Complainant an exporter of a backfill product known as Loresco Type DW2 made

ten shipments of this product via respondent carrier during December 1977 through

February 1978 Complainant contends that the product should have been rated as

calcined petroleum coke instead of artificial graphite Respondent rated the

shipments under the latter tariff item as a result deriving an aggregate amount of

15 634 67 in additional freight It is held that

I The preponderance of the evidence shows with reasonable certainty and definite

ness that the product was in fact calcined petroleum coke since the raw petroleum

coke from which it was made was never heated to the level necessary to convert

calcined petroleum coke to artificial graphite Moreover respondent has in

effect acknowledged this fact by paying a later claim on the same product after

being informed of the true nature of the product

2 Complainant is entitled to show what actually moved notwithstanding erroneous

descriptions inserted into bills of lading or export declarations especially in such a

case as this in which the shipper was apparently inexperienced in exporting its

product and unfamiliar with respondents

tariff structure

3 Reparation in the aggregate amount of 15 634 67 is awarded plus interest on each

individual overcharge from date of payment at the rate of 12 percent as prescribed

by current Commission policy

Joseph F Tatum Jr for complainant Loresco International Inc

Thomas E Kimball and Charles L Coleman for respondent Yamashita Shinnihon

Steamship Co Ltd

INITIAL DECISIONl OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Finalized July 17 1980

This case commenced with the filing of a complaint on December 13

1979 Complainant Loresco International Incorporated is in the busi

ness of selling carbon products overseas Complainant alleges that re

spondent Yamashita Shinnihon Steamship Company Limited a

common carrier by water engaged In the foreign commerce of the

United States overcharged it on 10 shipments of a product known as

1

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227

23 F M C 57
58 FEDERAL MARITIME COMMISSION

Loresco Type DW2 Backfill which respondent carried during 

period December 1977 through February 1978 from New Orlean

Japan under services and rates published in respondent s interm

tariff the Pacific Westbound Conference Westbound Intermodal T

No 8 Loresco alleges that respondent misclassified the products 

question as artificial graphite whereas according to Loresco 

products are actually calcinated or calcined petroleum co

Loresco claims that this misclassitication constitutes a violation of 

tion 18b 3 of the Shipping Act 1916 and that as a result Lore

paid additional freight in the amount of 15 634 67 which it now s

as reparation

Following the filing and serving of the complaint respond

through its general agent requested additional time to me its answe

that it could retain Conference counsel under the Conference s rules 

further reason for this request was to enable respondent to file a 

and complete answer which would deal more thoroughly with 

issues than would a perfunctory general denial answer In gran

permission to respondent I also advised complainant who was 

represented by an attorney or by a

registered Commission practitio

that it was incumbent upon complainant to furnish adequate evide

showing the nature of its product known as Loresco Type D

Backfill since complainant had submitted nothing but bills of lad

tariff pages copies ofCommission regulations a corrected invoice 

citations relating to the two year statute of limitations and a one 

chemical analysis none of which appeared to show that the pro

was in fact calcinated or calcined petroleum coke rather 

artificial graphite Thereafter on January 25 1980 and April 

1980 complainant supplemented its evidentiary submissions with 

literature export shipping instructions packing lists a chemical an

sis and a letter and affidavits from Loresco s president explaining 

the product was calcined petroleum coke Finally in response to 

further instructions complainant on May 12 and 20 1980 throug

freight forwarder W R Zanes Co of La Inc furnished canc

checks and other evidence relating to the date of payment on 

shipments for which the bills of lading appeared to be dated more 

two years prior to the ming of the complaint Since the Commis

has held that date of payment may be used to calculate the two 

period of limitation under section 22 of the Act the furnishing of 

evidence was essential to enable me to consider claims of overcha

on these two shipments on the merits See Sun Co v Lykes Bros 

F M C 67 69 1977 TDK Electronics Co Ltd v Japan Lines 

F MC Docket No 79 87 May 20 1980 p

3 Complainant also 

nished a legible copy of one bill of lading which had originally 

furnished in an illegible form

23 FMC
LORESCO INT L INC V YAMASHITA SHINNIHON S S CO 59

LTD

DISCUSSION AND CONCLUSIONS

THE EVIDENTIARY SUBMISSIONS OF THE PARTIES

The issue for determination in this case is simply whether the prod

uct shipped by respondent known as Loresco Type DW2 Backfill is

calcinated or calcined petroleum coke rather than artificial graph

ite If it is the former then respondent has overcharged Loresco in

violation of section l8b 3 of the Act because respondent applied the

higher rate for artificial graphite published in its tariff at the time of

the shipments in question 2In determining this issue Imust also deter

mine the subsidiary issue ofwhetherthe evidence submitted by Loresco

is sufficient to sustain its contention that the product was in fact

calcined petroleum coke

As mentioned above Loresco submitted its evidence at several differ

ent times and in different forms At the time of filing the complaint

December 13 1979 complainant submitted various documents consist

ing ofthe pertinent bills of lading tariff pages Commission regulations

a corrected invoice chemical analysis and case citations These docu

ments while useful in providing background information did not dem

onstrate whether the product Loresco Type DW2 Backfill was cal

cined petroleum coke or artificial graphite For example the various

bills of lading for the ten shipments involved merely showed that the

commodity had been described as Loresco Type DW2 Backfill

After Iadvised complainant that its evidence required supplementation

if complainant wished to pursue its claims Loresco furnished additional

evidence in the form of sales literature export shipping instructions

packing lists chemical analyses affidavits of Loresco s president Mr

Joseph F Tatum Jr excerpts from a chemical reference book and

evidence showing dates ofpayment for all ten shipments

Respondent replied several times in response to the various allega

tions and to the evidence submitted by Loresco Initially on January

28 1980 respondent filed its answer and brief in support thereof

Respondent denied that it had misrated the shipments in question

although generally acknowledging the veracity of the bills of lading

and the fact that respondent had denied the claims when they had been

submitted under the Conference s rules because they had not been

submitted within the time period required by Conference Rule 20 See

2

Complainant is claiming that a rate of 94 per kt should have been applied This was the rate

published in respondent s tariff for Petroleum Coke N DS packed with an Item No at that time of

332 9000 40 See tariff 9th rev page 403 attached to complaint According to the rated bills of

lading for the ten shipments and the table of calculations attached to the complaint respondent rated

nine of the shipments at 117 per cubic meter and one shipment at 117 per kt Respondent admitted

that it assessed the 117 per cubic meter rate on the nine shipments but couldn t read the rated bill of

lading showing 117 per kt Complainant later furnished alegible copy of that bill of lading dated 12

17 77 showing the rate as 117 per kt The 117 WM rate which respondent charged was that for

artificial orcolloidal graphite with an Item No at the time of the shipments of 599 7200 00 See

the two tariffpages 524 attached to respondenfs Brief in Support of AnswertoComplaint

23 F M C
60 FEDERAL MARITIME COMMISSION

i

letter from respondent s agent Lilly dated September 19 1979 

tached to the complaint Respondent also acknowledged that it 

rated the shipments as artificial graphite However respon

argued that the shipments had moved in sealed containers lea

respondent with minimal opportunity to verify the contents of 

container that Loresco submitted evidence which was insufficien

carry complainant s heavy burden of proof and that the evide

submitted was consistent with respondents rating the shipment

artificial graphite Respondent also commented on the fact that s

of the evidence submitted was illegible and that at least two of 

shipments moved on bills of lading which were stamped freight 

paid and were dated December 8 1977 a date beyond the two 

period of limitation prescribed by section 22 of the Act since 

complaint was filed on December 13 1979 Finally respondent 

tended that the export declarations which it located and furni hed 

the record relating to six of the shipments in question show that 

commodity classification number selected for export purposes 

Schedule B number 8

was the number for artificial graph

Therefore argued respondent both the bills of lading and the ex

declarations indicate that the product shipped was artificial graph

rather than calcined petroleum coke Respondent also furnished a

tional evidentiary materials for the record incluelingtariff pages sh

ing how its tariff had been conformed to the Schedule B numb

and excerpts from a chemical dictionary explaining the physical dif

ences between calcined petroleum coke anel artificialgraphiie

Because respondent had not had an opportunity to analyze and c

ment upon some of the evidence which was submitted by Loresco 

January 25 1980 consisting of sales literature paCking lists a le

from Loresco s president and a chemical analysis Igranted respond

permission to file additional responses See Notice of Instruction

Supplement the Record March 31 1980 Respondent did so 

argued that the additional evidence still did not show that the prod

in question was ca1cinated petroleum coke Respondent conten

furthermore that the chemical analysis was not shown to be that 

calcinated petroleum coke that the packing lists continued to sh

Loresco Type DW2 Backfill as did the sales literature and that 

literature suggested that some of the component parts of this prod

might have been graphite In short respondent again 1Irgued 

Loresco had not carried its burden of proof and that respondent 

relied upon the information presented to it in the bills of lading 

This so called Schedule a number entered on export declarations refers to a list of num

printed in the Schedule a StatisticalClll8Sficstlon of Documenta and Foreign Commodities Exp

from the United State8 published by the US Department ofCommerce

23 F MC
LORE8CO INT L INC V YAMA8HITA 8HINNIHON 8 8 CO 61

LTD

export declarations which indicated that the product shipped was arti

ficial graphite

After the filing of respondent s supplemental arguments described

above complainant filed its last evidence and arguments as permitted

under my ruling of March 31 1980 cited above 4In this last submis

sion dated April 30 and May I 1980 Loresco furnished product

literature excerpts from a book entitled Carbon and Graphite Handbook

and affidavits explaining how the product was manufactured so that it

became calcined petroleum coke rather than artificial graphite

Except for a few later documents relating to dates ofpayment and one

illegible bill oflading the above materials completed Loresco s eviden

tiary case Because the record seemed sufficient for me to issue an

initial decision without the need for oral hearing and cross examination

I

instructed the parties to advise me if they consented to my following

such procedure See Final Instructions to Furnish Additional Evidence

and Advise Regarding Desired Procedure May 6 1980 In the interest

of avoiding unnecessary expense and delay which a trial type hearing

would have caused both parties consented To its credit respondent

not only agreed that a trial type hearing was unnecessary but acknowl

edged that such formal hearing would be wasteful of the resources of

all parties and the Commission s

ANALYSIS OF THE EVIDENCE AND ARGUMENTS

Analysis of the evidence and arguments submitted by both parties

reveals that there is essentially only one factual issue to be resolved in

this case namely whether the product known as Loresco Type DW2

Backfill was heated to the level necessary to convert calcined petro

leum coke into artificial graphite The evidence especially the prod

uct literature shows that the product in question is a backfill Le a

substance intended to be used to fill in a trench or excavation surround

ing a foundation 6

Furthermore there appears to be no dispute regard

ing the fact that the backfill is a carbon product and that it originated

as raw petroleum coke Le a residue ofpetroleum distillation 7

There

4

In that ruling I noted that in cases of this type it is customary for complainant who has the

burden of proof to tile the last pleading For example under the Commission s shortened procedures

Rules 181 through 187 46 CF R 502 181 187 when both parties wish the case to be decided upon

written pleadings and evidence complainant has the right to file its memorandum in reply to respond

ent within 15 days after respondent s answering memorandum See Rule 184 46 CF R 502 184 As I

note later both parties inthis case haveconsented to the use of the shortened procedure

IS Although respondent consented to my issuing adecision without needless oral hearings and cross

examination respondent did prepare and file cogent pleadings together with useful evidence which

served to narrow the issues in this case considerably thereby helping to move the case along to

prompt disposition

6

According to Webster s Third New International Dictionary p 158 a backfill is the material

used in backfilling or the refilling of atrench or other excavation orof the space around afounda

tion

7

Petroleum coke is deJined as aresidue obtained as the final still product in the distillation of

crude petroleum Webster s Third New International Dictionary p 1691

23 F M C
j

62 FEDERAL MARITIME COMMISSION

fore the only question is whether this raw petroleum coke was he

to the level necessary to convert it into artificial graphite

Respondent itself argued and furnished evidence showing tha

though raw petroleum coke calcined petroleum coke and a

cial graphite are related products of carbon the critical distin

between the latter two is the degree to which the raw coke was h

in the manufacturing process Thus as respondent states

Raw coke becomes calcined after being heated to 1200 1800

degrees C Coke changes into artificial graphite when it is

heated above 2400 degrees C Brief in Support of Answer to

Complaint p

4n 7

The excerpts which respondent has furnished from a reference 

entitled Kirk Othmer Encyclopedia of Chemical Terminology 1968 

1978 editions fully support the above quotation and describe the 

ess of calcination and manufacture of artificial graphite in 

detail Another reference work furnished by complainant en

Carbon and Graphite Handbook written by Charles L Mantell Lib

of Congress No 67 29457 appears to agree substantially with resp

ent s authority This author states that graphitization can be desc

in a series of steps which occur as the temperature is raised to 

3000 degrees Centigrade See book cited p

9 quoted in comp

ant s pleading received May 3 1980 and attached to letter from 

plainant dated May 1 1980

Both complainant s and respondent s textbook authorities appe

agree substantially as well as to the nature of the calcination proc

Thus complainant s authority Carbon and Graphite Handbook 

cates that calcination is merely a heating process and that inc

graphitization does not commence until the heating or calcining 

ceeds 1300 degrees Centigrade See book cited p

9 Full graph

tion does not occur according to complainants authority unt

temperature is raised to 2500 3000 degrees Centigrade as Iment

above As noted respondent s authority stated that raw coke be

calcined after being heated to temperatures of 1200 1800 de

Centigrade and further stated that artificial graphite is not cr

until the carbon product is heated above 2400 degrees Centig

Accordingly it is obvious that Loresco s backffil couldllot have 

converted into artificial graphite unless it had been heated 

temperature of at least 2400 or 2500 degrees Centigrade depe

upon which authority one relies Furthermore it is obvious tha

raw petroleum coke should be considered to have become calc

petroleum coke if it has been heated either between 1200 to 

degrees Centigrade according to the respondent s authority or bet

1000 to 1300 degrees Centigrade according to complainant s auth

See Carbon and Graphite Handbook p

9 cited above

23 FMC
LORESCO INT L INC V YAMA8HITA 8HINNIHON 8 8 CO 63

LTD

The determination of the nature of Loresco Type DW2 Backfill

therefore in large measure boils down to the manufacturing process

Le to what temperature was the raw petroleum coke heated Respond

ent contends that complainant is in a much better position to provide

evidence regarding the composition of its product See respondent s

supplemental reply received April 14 1980 p IBut complainant has

furnished the evidence According to the unrefuted affidavit of Lores

co s president Mr Joseph F Tatum Jr the product in question could

not possibly have become artificial graphite because the temperature

to which it was raised in the kiln never exceeded 1315 degrees Centi

grade Indeed the average temperature in the center of the kiln is only

in the range of 1200 degrees Centigrade and the product is heated to

about 1300 degrees Centigrade only for a short period oftime Because

this affidavit is so critical to my finding that the product in question is

in fact calcined petroleum coke I quote the affidavit in full as

follows

The calcination of Loresco Type DW2 Backfill is per

formed in a rotary kiln lined with fire brick The kiln is

approximately 11 in diameter and approximately 80 long As

the calcined fluid petroleum coke enters the kiln in what we

call the front of the kiln it has a temperature of about 871

degrees Centigrade As it reaches the center of the kiln and

only for a short period of time it reaches a momentary tem

perature in the range of about 1300 degrees Centigrade The

maximum which has ever been recorded was 1315 degrees

Centigrade and the average temperature of the center burned

of the kiln is in the range of 1200 degrees Centigrade When

the kiln is running in the range of 1300 degrees Centigrade we

experience brick problems and hence do not often approach

the temperature of 1300 degrees centigrade At the tail of the

kiln the temperature has decreased and the average outfall of

the material is approximately 870 degrees Centigrade To the

best ofmy knowledge the above is true and factual

Although the above evidence is sufficient to show that the product in

question is in fact calcined petroleum coke as complainant has al

leged this evidence does not stand alone Complainant alleges and

respondent admits that several months after the ten shipments in ques

tion Loresco filed a claim with respondent on another shipment of its

product which claim respondent honored This later shipment which

sailed from Oakland on August 14 1978 moved under a bill of lading

which unlike the bills of lading relating to the shipments in question

showed a Schedule B number 517 5120 for petroleum coke cal

cined See Briefin Support ofAnswer to Complaint p5 The bill of

lading for this claim which respondent paid is attached to the com

plaint It is dated August 5 1978 and describes the product as Backfill

DW2 Respondent as noted admits that it honored this claim The

23 EMC
64 FEDERAL MARITIME COMMISSION

only distinction which respondent otTers between this honored 

and the claims for the 10 shipments in question which it contests is 

the bill of lading on the honored claim listed the correct Schedu

number Therefore respondent did not deny that the Type 

Backftll shipped by Loresco was calcined petroleum coke appa

ly because it relied upon the fact that the correct Schedule B nu

was shown on the bill of lading However respondent is denyin

present claims on the grounds that the bills of lading and e

declarations showed the wrong Schedule B numbers and that no

the documents shown to respondent at least prior to the fmal aff

which Ihave quoted showed that the product was calcined petro

coke rather than artificial grllphite Furthermore since the bi

lading and export declarations showed the Schedule BU numbe

artificial graphite respondent feels it was justified in rating the 

uct as artificial graphite

GOVERNING PRINCIPLES OF LAW

The Commission has held for some time that a

shipper is entitle

reparation for overcharges if the shipper can show what act

moved notwithstanding an incorrect description which the shipp

its forwarder may have placed on the bill oflading The leading ca

recognized to be Western Publishing Co v Hapag Lloyd A G 13S 

16 1972 but this was the Commission s view even before that 

See e gUnion Carbide Inter America v Norton Line 14 F MC 

264 1971 and the case cited therein 8

Although the basic doc

holding that the shipper can recover for an overcharge if it can 

what actually moved is still the law the Commission has rermed 

various ways Thus the Commission has adopted language expla

the Western Publishing doctrine to mean that the shipper must set 

sufficient facts to indicate with reasonable certainty and definitenes

validity of the claim See Merck Sharp Dohme v Atlantic Line

F M C 244 24S 1973 and the cases cited therein Sun Co v L

Bros 20 F MC 68 70 1977 A decision to award reparation is iss

furthetmore after consideratIon of all the evidence of record wit

single document or piece of evidence necessarily being controll

Kraft Foods v Moore McCormack Lines Inc 19 F MC 407 410 19

Although some Commission decisions reiterate the statement th

shipper has a heavy burden of proor when the goods have lef

s

Itis also established Jaw in numerous CommJs8ion decisions thallbe shipper may recover fo

charg even if lbe slUpper inserted a

Indename on lbe bill of ladlnll in violalion of a

carper 

rule or faJIed to comply wilb some olber tariffrule regarding cargo deacriplion See e

g Pan 

can Heallh 018fJnlzatlon Prudential Llne Inc 19 P M C 412 1976 DUrite COl pOrallon LId 

Land Sel Vice Inc 20 P M C 674 675 1978 Order on Reconaideralion November 8 1978 un

ed aftlrmed wilboul opinion Sea Land Service Inc Federa Marltlme Commission 610 F 2

DC Clr 1979 see also cases collected In Sanrio Company LId Maersk Line 19 S RR 1627 

1 0 April 21 1980

23 FMC
LORESCO INT L INC V YAMASHITA SHINNIHON S S CO 65

LTD

custody of the carrier these words have been explained by the Com

mission to mean that the shipper will have difficulty in obtaining the

necessary evidence rather than to the weight to be given to such

evidence Informal Docket No 387 1 Pan American Health Organiza

tion v Moore McCormack Lines Inc Report on Remand September 12

1979 p 5 n 9 The Commission reaffirmed this explanation of the so

called heavy burden ofproor in Pacific Freight Audit Inc v American

President Lines et al 22 F MC 207 209 1979 The Commission has

furthermore confirmed that the standard of proof in overcharge cases is

the normal standard observed in administrative proceedings ie a pre

ponderance of the evidence Thus in replying to a court sinquiries

regarding what standard of proof the Commission was following in

overcharge cases the Commission replied

a complainant seeking reparation under section 22 of the

Shipping Act 1916 for freight overcharges caused by such

error must set forth sufficient facts to prove with reasonable

certainty and definiteness the validity of its claim by a prepon

derance of the evidence Pan American Health Organization v

Moore McCormack Lines Inc Report on Remand cited

above pp 4 5

As discussed above complainants evidence showing that the product

shipped was in fact calcined petroleum coke which was entitled to a

lower rate than that for artificial graphite which latter rate had been

charged consists of a variety of shipping documents and excerpts from

chemical dictionaries chemical analyses and affidavits as well as the

fact that respondent had honored a claim for the product in question at

a later date The critical evidence however appears to be the affidavit

of complainant s president describing how the backfill product was

manufactured so that raw petroleum coke was heated to become cal

cined petroleum coke rather than artificial graphite This evidence

considered together with the chemical authorities cited shows with

reasonable definiteness and certainty that Loresco s claim is valid

Added to this evidence is the fact that respondent itself paid a claim for

a later shipment of the backfill product without contesting that it was

in fact calcined petroleum coke apparently only because the bill of

lading showed the Schedule B number applicable to calcined petro

leum coke Had the bills oflading for the 10 shipments at issue in this

proceeding shown the correct Schedule B number for calcined

petroleum coke or had respondent not been required to reject the

claim under Rule 20 of its tariff because the claim was filed after the

goods left the carrier s custody perhaps this present case might not

have been brought before the Commission 9

9 Rules in tariffs which do not allow carriers to consider claims for overcharges fIled morethan six

months after date of shipment are not illegal See Proposed Rule Covering Time Limits on the Filing of

23 F M C
66 FEDERAL MARiTIME COMMISSION

MISCELLANEOUS ARGUMENTS OF RESPONDENT

To rebut the evidence presented by complainant respondent has

furnished its own evidence and arguments Mainly respondent argues

that complainant has not sustained its heavy burden of proof that the

shipping documents and chemicalcanalyses submitted by complainant do

not show that the product was calcined petroleum coke and tha

respondent relied upon the bill oflading and export declaration descrip

tions and Schedule a numbers which if anything indicated that the

product was artificial graphite Moreover some of the sales litera

ture according to respondent indicates that some graphite may have

been included in the backfill 10 None of respondent s

arguments o

evidence in my opinion is sufficient to outweigh the evidence showing

that the product was heated only to the level necessary to convert raw

petroleum coke to calcined petroleum coke or to the fact that re

spondent itself paid a later claim on the Loresco backfill without

contesting the fact that the product was calcined petroleum coke

As Ihave explained the socalled heavy burden of proof which

respondent recites refers merely to the shipper s difficulty in obtaining

evidence The normal standard of preponderance of the evidence is

the standard that governs In this case Loresco s affidavit showing that

its product was not heated above the level necessary to convert the

coke to artificial graphite coupled with respondent s own payment of

a similar claim on this product at a later date when the claim was

apparently not barred by the Conference s claims rule in my opinion

outweigh the fact that Loresco s forwarder used a Schedule a

number for artificial graphite when completing the export declaration

or that some particles of graphite are found in the product Although

the Commission has held that export declarations are entitled to great

weight in the very case cited by respondent the Commission indicated

that it considered export declarations only as one part of the entire

body ofevidence since it was the Commission s well established policy

oerchorg CI lms 10 P M C I 1966 How ver th y

and olb r tariff time limitation rules such as

Rule 20 h re bav been h ld 10 be nQ bar againstth filina of complaints with the CoItuidssion witbin

the two year period prescribed by Section 11 of the Act See KrQjI Foods Y Fed 1 MII11I1m Commls

sto 338 P 1I443 DC Cir 197 l U to Corbld l t Am rlCQ 1111 Y V I LI 19 F M C

97 99 1976 The Commission s r sulations require carriers 10 advise shippers of their rishts 10 file

complaints with the Conunission wltIlln 10 years See Docket No 78 30 FilingofR h1I d Ch rges

21 P M C 984 1979 Reapondent did 80 advise complainant of its rishts See 1 1Ier dated September

19 1979 from respondent s

sen ra t

to complain t

forwarder Mr Co ran of the Zan s

C

attached 10 the complaint N verth I but for tbis tariff rule respondent would bave beeJi able to

COllBider the claims on their merits and Ills pOllibJe thet Loresco would bav been spared th trouble

of filins aformal complaint with Ibe Commission

lOIn all faimto respondent I should mention lb fllQtthat these arsumenl8 ll1d comments w re

directed to th evidence which had been submitted by Loresco prior 10 AprU 30 when Loresco sub

mitted its final affidavit explaininll thai the bIlQkfill was heated only to the level necessary to create

calcined petroleum coke However after this later evidence was submitted respondent as noted

consented to issuance of an initial deciaion wllbout undersoiDs th ex nse and delay of oral hearings

and croswxamlnation S Consent 10 Shortened Procedure Mey 13 1980

23 FMC
LORESCO INT L INC V YAMASHITA SHINNIHON S S CO 67

LTD

of considering any type of evidence by which a shipper may show the

true nature of his cargo Chevron Chemical Co v Mitsui O SK 20

F MC 216 218 1977 affirming the Commission s earlier decision

reported in 17 S R R 1269 1270 1977 Furthermore an export decla

ration like the corresponding inbound document the consumption

entry is generally prepared by someone other than the shipper ie the

forwarder or the customhouse broker for purposes other than ocean

carrier tariff classification or rating Therefore as the Commission has

observed these documents may not be based upon knowledge of the

actual contents of the shipments and in the case of the consumption

entry the Commission has determined what the commodity shipped

was notwithstanding a contrary description in the entry See Equality

Plastics Inc et aL 17 F M C 217 227 228 1973

Similarly respondent argues that Loresco s product literature sug

gests that some of the particles in the product may consist of graphite

which was added as a lubricant because it is well known that graphite

is used as a lubricant Loresco s product literature submitted with its

letter of January 25 1980 does indeed show that carbon lubricants

have been added to the backfill Even more as part of the chemical

analysis of the product Loresco states that conductive and lubricating

graphite particles have been added in the range of three percent to one

percent by weight per unit of calcine sic fluid petroleum coke The

adding of such a minuscule portion of graphite which incidentally is

apparently natural not artificial graphite does not change the essential

nature of the product which is 99 or more percent calcined petroleum

coke 11 The ultimate question remains what is the essential nature of

the product and whether complainant has shown that the product may

reasonably be included in the tariff item for calcined petroleum

coke See United States ofAmerica v Farrell Lines Inc 16 F MC 41

46 1972 Crestline Supply Corp v Concordia Line 19 F MC 207 211

1976 applicable freight rate should depend upon the intrinsic

nature and market value of the goods themselves rather than a ship

per srepresentation as to the intended use of the goods Europe

an Trade Specialists v Prudential Grace Lines 21 F MC 888 890 1979

true nature ofthe commodity

Ultimately respondent claims that it relied upon both the bills of

lading and export declarations which used Schedule B numbers for

artificial graphite and contends that neither these documents nor the

11 In his last pleading dated April 3D 1980 Loresco s president Mr Tatum states that the minus

cule portion of graphite added to the backfill is a

naturally mined natural graphite and that accord

ingly Loresco Type DW2 Backfill is over 99 percent pure calcined fluid petroleum cokeSee

pleading cited pp 3 4 Mr Tatum also states that graphite as even respondent s dictionary definition

states is a soft substance whereas Lorescos backfill has long been known forits rigidity and hard

ness Id p 4 Also he states that due to its excessively high cost per pound graphite is not

commonly used as abackfill Jd

23 F M C
68 FEDERAL MARITIME COMMISSION

fact that respondent later honored a claim on this product which was

not time barred under the Conference s claims rule permit the infer

ence to be drawn that the product was calcined petroleum coke

However as I have discussed Loresco has ptovided the critical evi

dence showing how the product was heated and respondent nowhere

explains how it could pay a later claim on the product apparently

acknowledging that it was in fact calcined petroleum coke in August

1978 while contesting similar claims on the same product in this case

Respondent merely states that the bills of lading for the later claim

showed the proper Schedule B number for calcined petroleum

coke 18 As has been made clear by the Commission however in

many cases an erroneous descril tjon in a bill of lading does not

determine the nature of the commodity It is the total evidence which

the shipper now presents which is considered in determining what

actually moved The preponderance of this evidence show in my

opinion that the product could not possibly have been artificial graph

ite and that it was indeed calcined petroleum coke

Accordingly Ifind that complainant has shown the validity of its

claim for reparation for overcharges on 10 shipments carried under bills

oflading dated at various times between December 8 1977 and Febru

ary 28 1978 Ifind furthermore that the aggregate amount of repara

tion for the financial injury incurred as a result of the overcharges is

IS 634 67 as shown in the table of computations on page 2 of the

complaint18

The Commiuion has a policy of awarding interest in overcharge

cases calculated at the rate of 12petcent accruing from the date of

payment of freight charges See Policy Statement dated May 8 1980

Furthermore inhiB last pleading Mr Tatum prident of Loreaco staleS that the product

shipped in Auguat 1978 as to which r pondent paid the claim was the same product as that shipped

in the preaent case yet reapondent conleS18 the preaent claims Moreover Mr Tatum atate that

Lore CO was inexperienced in experting and that the Schedule B number for arli lclal graphite

and rate was aelected by r pendent not by Loreaco which did not understand how r pendent s

tariff was constructed Mr Tatum 8l8tea that when Loreaco became familiar with exporting they ad

vlaed reapendent of the true nature of Ilie product and reapendent agreed with Lore CO assigning the

lower rate and uSchedule Bft number for calcined petroleum coke n

See Lorescos p1eadiol April

30 1980 pS

Rpondent did not dispute this table of computatlona generally but raised 80me specific prob

lems which have been corrected For example the table contained typographical errora for three of

the bills of lading in areas not pertinent to the calculation of the overcharg On bill of lading dated

12 177 furnished with the table was not legible A legible copy of that bill of lading has been fur

nished confirming complainant s calculation in the table as noted earlier The only substantive objec

tion raiaed by reapondent related to tbe fact that two of tbe billa of Iadina were dated December 8

1977 more than two years prior to the filing of the complaint However in reaponse to my Instruc

tiona complainant throulJh i18 forwarder submitted checks and other evidence showing date of pay

ment of the freight Indicating that payment for the shipmen18 shown on the two billa of lading oc

curred by check dated January S 1978 within the twoyear periodpreacribed by aectlon 22 of the

Act The Conunisslon baa held that date of payment of freight may be uaed to calculate the two year

period See Sun Co P

Lykes Bros 2O F M C 67 69 1977 Unlled Slales qfAmerica P Hellenic Lines

Llmlled 14 F M C 2SS 260 1971

23 FMC
LORBSCO INT L INC V YAMASHITA SHINNIHON S S CO 69

LTD

46 C F R 530 12 Interpur A Division of Dart Industries Inc v Barber

Blue Sea Line 22 F MC 679 1980 Accordingly interest is awarded

at the rate of 12 percent for each of the 10 overcharges accruing from

date of payment of each shipment in addition to the aggregate award

of 15 634 67 14

8 NORMAN D KLINE

Administrative Law Judge

Washington D C

June 16 1980

14 Although it is current Commission policy to award interest at the rate of 12 percent dating from

date of payment of freight the Commission stated in its policy statement that it would consider wheth

erto depart from its policy on acase by case basis In the present case complainant did not ask for

interest but merely forthe aggregate overcharge in the amount of 15 634 67 Furthermore applying

interest at 12 percent dating back morethan two years orso on the individual shipments means that a

12 percent rate is applied although at the time of the overcharge payments the rate of interest was

probably substantially lower and total interest to time of judgment may approximate 4000 Cf the

different rate of interest established for payments of refunds under section 4 of the Intercoastal Ship

ping Act 1933 average prime rate during the applicable time period Of course but for respondent s

tariffRule 20 it might have been possible forthe parties to settle this case when Loresco first submit

tedits claim to respondent The Commission may wish to consider these factors in determining wheth

erto foHow its current policy inthis particular case

23 FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 80 30

IN THE MATIER OF EXEMPTION OF KUGKAKTLlK

LIMITED PROM TARIFF PILING REQUIREMENTS

REPORT AND ORDER

July Ja 1980

BY THE COMMISSION RICHARD J DASCHBACH Chairman

THOMAS F MOAKLBY Vice Chairman JAMES V DAY LESLlB

KANUK AND PETBR N TEIGB Commissioners

Kugkaktlik Limited Petitioner an Alaskan corporation organized

pursuant to the Alaska Native Claims Settlement Act 43 U S C 1601

et seq has petitioned the Commission for an order declaring that a tug

and barge operation to be established during 1980 is exempt from the

tariff filing requirements of the Intercoastal Shipping Act 1933 46

U S C 844 by virtue of the small vessel exemption contained in 46

C F R 531 1c

1

Alternatively Petitioner seeks an exemption of its

operations pursuant to section 35 of the Shipping Act 1916 46 U S C

833

Petitioner is a village corporation based in the village of Kipnuk

Alaska population approximately 400 Its shareholders consist solely of

the Alaskan native population of the village According to its latest

financial statement the total assets of Kugkaktlik Limited are

2 273 917

In 1979 Petitioner purchased two vessels for purposes ofestablishing

a common carrier service between Bethel Alaska and eight smaller

villages including Kipnuk The primary cargo would be liquid fuels of

Grade B and below the majority ofwhich would be fuel oil howev

er general commodities would also be transported

Petitioner s vessels consist of a sixty foot all steel tugboat with ton

nage 73 gross and 49 net and two 500 horsepower diesel engines and a

steel combination deck cargo and oil barge with dimensions of 120 x

30 x 7 and a

cargo fuel capacity of approximately 3 000 barrels

46 CF R 531 1e

provides an e

emption for

c TranBpOrtatJon by vessel with carso carryins capacity of 100 ton or I or with an

indie ted horsepower of 100 or 1 Provided That ueh vessel I

arenot employed by

orunder the common control or manasement of a domestJc olTahore carrier which oper

ates v l in e cess of these limits 2 are not operated as part of athroUgh route with

another domeatic offshore carrierj and 3 are Dot performing lighterage services in con

nection with or on behalf of another domestic oftihore camerj

70 23 FMC
IN THE MATTER OF KUGKAKTLIK LIMITED

The tug and barge service will transport liquid fuels and general

commodities from the vicinity of Bethel Alaska on the Kuskokwim

River downstream to the village of Tuntutuliak also on the Kuskok

wim River thence out to the western coastal waters of Alaska to the

villages of Kongiganak Kwigillingok Kipnuk Chefornak Tooksook

Bay Nightmute and Tununak 2

The freight service will be conducted

only six months of the year commencing in May and tetminating in

October The primary customers of this service will be the village

corporations of the villages served each of which owns large liquid

fuel storage tanks These corporations act essentially as wholesalers

retailing liquid fuels to individuals and companies Furthermore many

of the general commodities will also be ordered by these corporations

most of which conduct retail businesses within their respective villages

Other than serving the three villages listed in note 2 supra Petitioner

has no current plans for expansion of the tug and barge service de

scribed above either in terms of number of vessels or geographical

scope ofoperation

Petitioner alleges that each of its vessels qualifies for a section

53Ll c exemption since the tug has less than 100 tons cargo carrying

capacity and the barge has less than 100 horsepower The Commission

disagrees Petitioner s proposed service contemplates tandem use of the

tug and barge at all times The barge clearly could not operate without

benefit of the tug and vessels which are operated as a unit must be

considered to be a single vessel for purposes of determining whether

the exemption applies As such the exemption does not apply to Peti

tioner s two vessels because the tug and barge combined have a cargo

carrying capacity in excess of 100 tons and an indicated horsepower in

excess of 100

Petitioner alternatively requests that it be exempted from the tariff

filing requirements pursuant to section 35 of the Shipping Act because

imposition of such requirements would serve no regulatory purpose

3

The Commission has determined to grant the requested section 35

exemption Petitioner has shown that its activities are both small and

geographically remote and that the support of its customers for the

2

Petitioner may also extend service toQuinhagak Eek and Goodnews Bay all south of the mouth

of the Kuskokwim River

s

Section 35 provides

TheFederal Maritime CommisSion upon application oron its own motion may order orrule

exempt forthe future any class of agreements between persons subject to this chapter or any

specified activity of such persons from any requirements of this chapter or the Intercoastal

Shipping Act 1933 where it finds that such exemption wi lnotsubstantially impair effective reg

ulation by the Federal Maritime Commission be unjustly discriminatory or be detrimental to

commerce

The Commission may attach conditions to any such exemptions and may by order revoke

any such exemption

No order or rule of exemption orrevocation of exemption shall be issued unless opportuni

tyfor ahearing has been afforded interested persons Emphasis added

23 FMC

71
I

1

72 FEDERAL MARITIME COMMISSION

proposed operation has been uniformly enthusiastic The expense of

complying with the Commission s tariff regulations would be relatively

large for a business of Petitioner s size Moreover the unique relation

ship between the customers and the operators of Petitioner s proposed

water carrier service indicates that the commercial impact of the serv

ice may be small In this region of Alaska ongoing communications

between operator andeustomers are more likely to effectively establish

and maintain fair and equitable rates than would Federal regulation

based upon technical tariff tling requirements For these reasons the

exemption granted here should not substantially impair effective regula

tion

Neither does it appear that the exemption would be wUustly discrimi

natory or detrimental to commerce The instant petition was served on

the only known competitor ofthe proposed service United Transporta

tion Inc United and noticed in the Federal Register on May 21 1980

45 F R 34065 No response to the petition has been received Peti

tioner has demonstrated that the scope of United s service is much

larger and includes more and larger vessels than does Petitioner s serv

ice It has also been sU8gestedthat United has been unable to serve

some of the viIlages adequately Considering that no objection has been

lodged to the requested exemption the operations of Petitioner s only

known competitor are not comparable and Petitioner would fill a need

not served by the existing carrier in this trade the Commission con

cludes that grant of the exemption will neither be unjustly discriminato

ry nor detrimental to commerce

The exemption is from tariff ming requirements only and will be

limited to those service points north of the Kuskokwim River which

Petitioner proposes to serve this year At such time as Petitioner is

ready to expand its operation it may petition the Commission for an

extension ofthis exemption

Therefore pursuant to section 35 of the Shipping Act 1916 46

U S C 833 a

the following exemption is adopted

Transportation by Kugkaktlik Limited a village corporation orga

nized under the Alaskan Native Claim Settlement Act limited to the

following description is exempt from the tariff ming requirements of

the Shipping Act 1916 the Intercoastal Shipping Act 1933 and Part

531 ofTitle 46 C F R

1 Transportation on vessels consisting of a sixty foot all steel tug

boat with tonnage 73 gross and 49 net and two 500 horsepower diesel

engines and a steel combination deck cargo and oil barge with dimen

sions of 120 x 30 x 7 and a

cargo fuel capacity ofapproximately 3 000

barrels

23 F MC
IN THE MATTER OF KUGKAKTLIK LIMITED 73

2 Transportation between Bethel Alaska and the villages of Tuntu

tuliak Kongiganak KwigiIlingok Kipnuk Chefornak Tooksook Bay

Nightmute and Tununak

8 FRANCIS C HURNEY

Secretary

23 FMC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 746 1

GIRTON MANUFACTURING COMPANY

v

PRUDENTIAL LINES INC

ORDER ADOPTING DECISION

July 30 1980

The Commission has determined to review the March 14 1980 deci

sion of Settlement Officer Donald F Norris in the above captioned

matter This decision awarded Girton Manufacturing Company repara

tions based upon a finding that Prudential Lines Inc collected 525 78

in excess ocean freight charges but denied any recovery for interest

expenses because Girton or the independent ocean freight forwarder

retained by Girton was found to have exercised insufficient care in

preparing the bill of lading upon which the ocean carrier relied 1

The

Settlement Officer also stated that the Commission s Rules prevented

him from reducing the amount awarded to the shipper so as to compen

sate the carrier for the brokerage and freight forwarder compensation

paid on the 525 78 in excess freight 2

The Settlement Officer s calculation ofthe excess freight charges was

carefully and accurately accomplished Review was warranted only

because of the need to articulate a standard approach to interest awards

and the deduction of offsetting carrier expenses in informal docket

cases

On May 8 1980 the Commission announced its intention to apply a

uniform policy in awarding interest in overcharge situations 46 C F R

1 Girton shipped milk storaJle equipment from Philadelphis Pennsylvani to V lparsiso Chile on

October 30 1977 under single bill of lading This bill listed three items I milk cooling tanks 2

acceasori and 3 condensing unil8 and noted that freight and ancillary chargtotaling 8907

were prepaid The controlling tariff was Atlantic OulflW t Coast of South Americ Conference

Tariff No FMC1 The instant dispute concerns only the condensing units which were designed for

attachment to the cooling tanks These units were rated by Prudential as llsteam condensers but were

entitled to the lower rate for milk coolen shown on 11th Rev Page 137 because they were in fact

parts for such coolers The Settlement Officer also discovered and corrected 8Jl arithmetic error in the

calculstion of the shipment s cubic footage which fvored the carrier

The Settlement OIllcer pparently perceived significant distinction between the terms over

charges and dam g

as used in the Commisaion s informal docket regulstions 46 CF R 502 301

502 303 The Shipping Act 1916 permits the w rd of repar tions for any illiury suffered as

r ult of statutory viol tions 46 U S C 821 Overcharg are simply particul r

type of injury In

adjudicating an informal claim aSettlement Officer may properly consider acounterclaim against the

complainant which arises from thesame incident and is also under 5000 in amount

74 23 F MC
GIRTON MFG CO V PRUDENTIAL LINES INC 75

530 12 45 Fed Reg 31722 3 An ocean carrier s duty to rate cargo in

strict accordance with its tariff is a nondelegable one Section l8 b 3

ofthe Shipping Act 1916 46 V S C 8l7 b 3 is violated regardless of

whether the carrier relies upon documentation furnished by the shipper

Although exceptional cases of shipper deception or misconduct could

result in a refusal to allow full recovery of overcharge expenses such

determinations should be made in a procedural context other than that

of a pro forma nonprecedential informal docket dispute Settlement

officers shall therefore consistently award interest from the date the

excess freight charges were paid

Similar considerations of administrative efficiency and uniform statu

tory compliance apply to Prudentials claim for reimbursement of the

excess freight broker and freight forwarding expenses it paid on Gir

ton s shipment Items of carrier expense are not ordinarily deducted

from an overcharge claim 4and this is particularly so in the case of

payments to freight forwarders subject to the FMC regulation under

the Shipping Act 1916 Such persons are required to adjust their

brokerage receipts when a carrier submits appropriate documentation of

an overpayment and in recent special docket proceedings the Commis

sion has specifically ordered carriers to collect excess payments from

licensed forwarders Sea Land Service Inc to Benefit New Era Shipping

22 F MC 270 1979 Sea Land Service Inc to Benefit BDP Internation

al Inc 22 F MC 226 1979 To the extent freight brokerage pay

ments are made to persons not subject to the Shipping Act carriers can

readily modify their contractual arrangements with such persons to

account for overcharge possibilities 5

A final matter which concerns the Commission is the presence of

evidence which indicates that Girton s sale was made C IF Valpar

aiso and that Girton has probably been reimbursed for the entire

amount it paid Prudential including the 525 78 overcharge This fact

does not defeat Girton s standing to file a Shipping Act complaint and

receive full reparations 6In the interest of fairness however a copy of

the Commission s decision will also be mailed to the consignee

THEREFORE IT IS ORDERED That except to the extent indi

cated above the decision of the Settlement Officer is affirmed and

3

See also Interpur v Barber Blue Sea Line 22 F M C 679 1980

4

Although the Commission possesses authority to adjust reparations awards based upon equitabk

considerations see Consolo v Federal Maritime Commission 383 US J7 1966 it is highly unlikely

that asituation would arise wherein ashipper would be awarded overcharge damages less adeduction

for carrier expenses When the shipper s conduct is particularly culpable the moreappropriate remedy

would be to deny reliefentirely

5 Carriers could commit themselves to pay no morethan a

percentage of the lawful rate specified in

their tariff subject to adjustments in theevent of error

See Adams Y Mills 286 US 397 407 1932

1J IIr
76 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED That Prudential Lines Inc pay to

Girton Manufacturing Company Inc the amount of 525 78 plus

interest at the rate of 12 accruing from the date freight charges were

paid and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretory

Commissioner Leslie Kanuk dissenting Chairman Richard J Daschbach not participating

71 P M C
GIRTON MFG CO V PRUDENTIAL LINES INC 77

Commissioner Leslie Kanuk dissenting The award of interest in infor

mal dockets is a matter which involves an exercise ofdiscretion on the

part of the Commission As a general rule I support the award of

interest as a means of compensating shippers for the deprivation of the

use of their money during the period in which overcharge claims are

litigated However Iwould not award interest in situations where the

misrating was caused by or contributed to by documentary errors made

by the shipper This appears to have been the case in this proceeding

Chairman Richard J Daschbach not participating I am not participat

ing because I do not believe that the Commission should review the

decisions of Settlement Officers in informal docket proceedings Under

Subpart S of the Commission s Rules of Practice and Procedure 46

cP R 502 301 parties consent to waive the rights and obligations

associated with normal adjudicatory proceedings for the express pur

pose of receiving prompt consideration of a small claim Commission

review precludes the inexpensive and expeditious handling of small

claims which is the foundation of the informal docket process The

settlement officer s decisions in informal dockets do not have preceden

tial value Commission review therefore imposes unnecessary expense

and delay in an arbitration process designed to settle minor commercial

disputes in a

prompt and responsive manner

23 FM C
i

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 746 1

GIRTON MANUFACTURING COMPANY

v

PRUDENTIAL LINES INC

Decision of Donald F Norris Settlement Omcer1

Adopted July 30 1980

Reparation awarded claim for interest denied oll setting claim denied

By its complaint med with the Commission on October 22 1979 the

Girton Manufacturing Company Girton through its agent claims

224 76 plus 6 interest of the Prudential Lines Inc Prudential this

amount representitlg an alleged overcharge arising out of a Girton

shipment transported by Pf ldential in one of its vessels from Philadel

phia Pa to Valparaiso Chile pursuant to a bill oflading dated October

30 1977 The shipment comprised the following a 17 crates of milk

cooling tanks measuring 2 IS3 cubic feet hereafter feet b one crate

of accessories measuring 22 feet and c 17 crates of condensing

units measuring 379 feet Girton prepaid freight and ancillary charges

amounting to 8 907 60 assessed it by Prudential pursuant to the latter s

interpretation of the controlling tariff i e the United States Atlantic

and Gulf West Coast of South America Conference s Tariff No S B

SA 12 FMC l

the Tarifl While no violation of section 18b 3 ofthe

Shipping Act 1916 is alleged such is presumed in that the res of the

complaint is that Prudential did not assess and collect rates offreight in

accordance with the commodity descriptions and classifications then

applicable

By way of reply Prudential has submitted a general denial along

with three complete affmnative defenses which are quoted in their

entirety

First defense

V Carrier relied upon the description of the articles carried pro

vided by the shipper and acted in reliance upon those repre

sentations in stowing and securing the cargo and in paying

commissions to brokers and charges of freight forwarders

1

Both parties havil1ll consented to the informal procedure under Subpart S of the Commi88ion

Rule of PraCtice and Procedure 46 CP R I502 301 304 thla dec lsion will be fmal unless the Com

mi88ion elec ts to review itwithin 30 day from the date of service thereof

78 23 F MC
GIRTON MFG CO V PRUDENTIAL LINES

VI Carrier having acted in reliance upon shippers description and

having made payments which cannot be recovered based

thereon claimants complaint should be dismissed

Second defense

VII Claimant supports this claim only with shippers records and

advertising materials

VIIIClaimant asserts that shippers records previously resulted in a

misdescription of the freight resulting in a higher freight

charge

IX Claimant having impeached the shippers records cannot rely

solely on those records to support this claim

X The freight shipped having been delivered and not being avail

able to either party the claimant has not met its heavy burden

ofproof in this case as no creditable evidence has been provid

ed to support its allegation that the freight was other than that

previously described by the shipper in documents of equal

weight to those now relied upon by claimant

Third defense

XI The higher assessment of freight charges alleged was done by

shipper and or shippers agent and not by the carrier

XII Any award of refund here should be without interest and

should be reduced by the amount of brokers and freight for

warders fees paid by carrier

Each defense will be dealt with in turn As to the first the Settle

ment Officer S O considers it irrelevant to the issue As the S O

views it the issue here is how should the shipment any of its compo

nents and all else accompanying the shipment have been classified and

rated 2The issue established it seems to the S O that the holding in

Union Carbide Inter America v Norton Line 14 F MC 263 1971

applies Briefly summarized that case stands for the proposition that it

is what was actually shipped in any instance not necessarily what

appears upon the bill of lading as shipped as controlling for classifica

tion and rating purposes

The second defense runs to what the S O conceives to be Pruden

tials evaluation of the evidence submitted in support of Girton s

claim and the weight which should be accorded it Prudential is

correct in its assertion that the cargo having left its possession that the

burden of proof lies upon Girton 5 A corollary flowing from Union

2

To be distinguished from claims for damages to cargo where reliance upon shippers assertions as

to the nature ordescription of cargoes may well be relevant

3 Often described as heavy However the adjectival heavy relates to the shipper s difficul

ty in obtaining the necessary evidence rather than the weight to be given such evidence Informal

Docket No 387 1 Pan American Health Organization v Moore McCormack Lines Inc 22 F M C 98

1979

23 F MC

79
i

80 FBDBRAL MARITIMB COMMISSION

Carbide supra however is that any claimant is entitled to submit any

materials of reasonably probative value seeking to establish the true

identity of any merchandise shipped his knowledge of the cargo being

considered intimate if not unique 4Advertising matter or sales literature

are acceptable European Trade Specialists Inc and Kunzle Tasin v

Prudential Grace Linea Inc and the Hipago Co Inc 19 F M e 148

183 1976

The relevant materials submitted here consist of a a Copy of the

original bill of lading b a Girton invoice addressed to the notify

party appearing upon the bill of lading c a certificate of insurance

involving the notified party appearing upon a and b and d sales

literature All except d make reference to the same import permit

or license number Exhibits a and c describe the cargo in identical

terms In particular a the bill of lading was sufficiently clear so as to

enable a part of the shipment to have been rated correctly in any event

The invoice b

describes the cargo in more detail and by referral to

the sales literature d assists in determining what the 8 0 conceives

to be the crucial issue here whether the 17 crates of condensing

units are to be considered parts ofthe milk cooling tanks as contem

plated by the Tariffs Rule No 2g

As to the third defense no determination can be made from the bill

of lading as to who rated it Girton Girtons forwarder or Pruden

tial s staff Whoever did made something of a hash ofthings Whatever

this is really not material to the statutory Obligation imposed upon

Prudential by the terms of section 18b 3 of the Shipping Act 1916

46 use 817 ie and to wit that Prudential is to ensure that it shall

not charge or demand or collect or receive a greater or less or

different compensation for services than the rates and charges which

are specified in its tariffs The claim for offsets set forth in XII is

dealt with below

As stated previously the critical issue here is to determine whether

the condensing units are parts of the milk cooling tanks so as to fall

within the Tariffs Rule No 2g That Rule provides

Whenever rates or ratings are provided for on articles named

herein the same basis willal80 be applicable on named parts

of such articles when 80 descrited on the ocean bills of

lading except where specific rates or ratings are provided for

such parts

Tobe distinguished from sbippers argumentll 10 lhe proper interPretation of tariffs rales terms

and conditionl

The phrase urne baaio appearlns in the 8OCOIld line can create confualon if nol read In Ihe con

texl of Ihe entire rule In lbe TarllT proper the baaia of rating Is whether any rate aeued is 10 be

based upon a lweiSht ton of 2000 pounds or a measurement ton of 40 cubic feet Read the

contexlof the entire rule however Ihe 8 0 10 convinced thaI 88IIle buis refe to the tates o

ratings appear In the fourth and fifth lines Even If this were nol 80 any alternative construction

would resullln tarlft ambiguities which require resolution in any shipper favor

23 FMC
GIRTON MFG CO V PRUDENTIAL LINES

Despite the fact that they were shipped and transported in separate

crates Girton s invoice describes the cargo shipped as being bulk milk

cooler s of various models with emphasis added condensing unit s

of varying horsepowers A diagram in the sales literature indicates that

the condensers are in someway attached or connected to each coolers

divided cold plates although each condenser lies outside ofthe cooler

proper However each seems to be critical to the coolers milk cooling

function This conception is reinforced by the standard order form

incorporated in the sales literature In essence the standard order form

calls for the purchase of a milk cooling unit of a recommended capabil

ity with again emphasis added a condenser or condensers of various

makes or varying power The sales literature makes clear the point that

no condensers need be ordered if any serviceable condensers are in the

purchasers possession still Further condensers are distinguished from

various listed milkhouse accessories e gstainless steel wash sinks

sani spray valve brushes brush racks etc whose purchase is optional

with the buyer but which as with the one crate of accessories

someone thought clearly fell within the application of Rule No 2 g

Upon the evidence submitted the S O considers the condensers to be

parts ofthe milk cooling tanks if not vital components Accordingly

Girton is entitled to a reparation

In structuring the claim Girton s agent the Traffic Service Bureau

Inc seems to have overlooked several things First and in apparent

reliance upon although without mention of Rule No 2

g

it claims

that the entire shipment should have been rated as per TariffItem 735

Refrigerators NOS at a rate of 130 50 per 40 cubic feet On October

17 1977 the Conference amended its Tariffto reflect that shipments of

milk storage tanks also coolers milk to Group 3 Chilean ports

including Valparaiso were to be assessed a Class 17 rate and as

applies here of 126 20 per measurement ton of40 cubic feet 6

Second

ly Girton was overcubed by some 20 cubic feet through an errone

ous addition as it appears in the rating box in the lower left hand comer

of the bill of lading copy and as mirrored in much of the Service

Bureau s correspondence concerning the matter Thirdly the Service

Bureau did not make compensating adjustments in the various ancillary

charges assessed

According to the S Os calculations based upon the bill of lading

figures as recited in the first paragraph of this decision the shipment

amounted to 2 554 feet rather than 2 574 feet working out to 63 85

measurement tons of 40 feet each The applicable rate of freight was

126 20 per 40 feet for the tanks and its parts including the condensers

6

Eleventh revised page 137 effective October 17 1977 This rate was actually applied to the milk

cooling tanks and their accessories The condensing units were rated as steam condensers at arate

of 173 per 40 feet

23 F MC

81
82 FEDERAL MARITIME COMMISSION

as per Rule No 2 g

The proper freight amounted to 8 057 88 In

addition the Tariff required the assessment of a terminal surcharge of

125 per measurement ton 79 81 and a Chilean governmental im

portation tax of 3 of the total transportation charges 244 13 The

total due and payable to Prudential then amounted to 8 381 82 As

recited in the first paragraph and as reflected in the submitted docu

ments Girton paid a total of 8 907 60 Accordingly Girton is entitled

to a

reparation to the amount of 525 78 So ordered 7

Girton claims interest The award of interest is left to the Commis

sions discretion Flota Mercante Grancolombiana v Federal Maritime

Commission 373 F 2d 674 D C Circuit 1967 The claim arose from

Girton s lack of care in adequately describing the condensers upon the

bill of lading A description reading milk cooling tanks condensing

units would have brought the item involved squarely within the ambit

of Rule No 2g Further a claim was lodged with Prudential only

about a month before the complaint here was filed with the Commis

sion In the circumstances the S O can see no reason why interest

should be awarded The claim for interest is denied So ordered

Prudential contends that any reparation be reduced by the amount of

brokers and freight forwarders fees paid by Prudential There are

several reasons for denying this The most important however is that

the S O does not believe that he has the authority to do so Subpart S

Informal Procedure for Adjudication of Small Claims 46 C F R

502 301 et seq of the Commission s Rules of Practice and Procedure is

directed to Claims against common carriers subject to the Shipping

Act 1916 for the recovery of damages not including claims for

loss or damage to property or for the recovery of overcharges

Section 502 303 defmes overcharges as charges in excess of those

applicable under tariffs lawfully on file with the Commission

Damages means such violations by common carriers of the

Shipping Act 1916 as amended other than overcharges for which

reparation may be granted As the S O views it under section 22 of

the Act Prudential must demonstrate a that Girton is an other person

subject to the Shipping Act 1916 e g

section 16 initial paragraph

and as no tariff is involved b demonstrate that it has in someway

violated the Act for it to have a chance of prevailing This is clearly

beyond the scope of the authority delegated to the S O Lastly the

claim is really directed to a party not present here given the peculiar

relationships of freight forwarders to common carriers whereby the

latter and not the forwarders principals are the primary source of

The result here is in accord with that reached in Informal Docket No 568 1 Girton Mon qoclUr

Ing ComHIny Y Prudential Llne Inc served February 29 1979 The same collllllodltles were involved

as well as the application of the sameTariffllule Only the defendiffered There Prudential relied

upon the Conferences 80 called six months rule as precludina its consideration of the matter

23 F MC
GIRTON MFG CO V PRUDENTIAL LINES

forwarders compensation for services rendered The S D suggests that

Prudentials proper recourse is to re bill the forwarder involved using

this decision as the basis of adjustment Accordingly the claim for

offset is denied So ordered

S DONALD F NORRIS

Settlement Officer

March 14 1980

23 F MC

83
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 704

APPLICATION OF SEA LAND SERVICE INC

FOR THE BENEFIT OF UNITED FORWARDERS

SERVICE INC AS AGENT FOR MIRRO ALUMINUM CO

Application for permission to refund a portion of freight charges in the amount of

2 992 50 granted

Errors made by applicant in filing the 47 00M rate found to be of a clerical or

administrative nature within the purview of the remedial provisions of section

18b 3 of the Shipping Act 1916

REPORT AND ORDER

July 31 1980

BY THE COMMISSION RICHARD J DASCHBACH Chairman

THOMAS F MOAKLBY Vice Chairman JAMBS V DAY LESLIB

KANUK AND PBTBR N TEIGB Commissioners

The proceeding is before the Commission on Exceptions filed by Sea

Land Service Inc to the Initial Decision ofAdministrative Law Judge

Joseph N Ingolia denying Sea Land permission to refund a portion of

the freight charges collected from United Forwarders Service Inc as

agents for the shipper the Mirro Aluminum Company on a shipment

of aluminum kitchen utensils carried from Elizabeth New Jersey to

Puerto Limon Costa Rica Sea Land asks permission to refund

2 992 50 ofthe 5 363 50 collected

Pursuant to negotiations with the shipper s agent and the consignee

Sea Land had agreed to publish a rate of 47 ooM trailerload TL

minimum 1800 cu ft for Mirros shipment Due admittedly to a clerical

error the revision to the tariff filed prior to the sailing ofthe vessel did

not reflect the rate agreed upon and as a result freight charges were

collected at the rate of 113 50M per 40 cu ft the rate in effect at the

time of shipment Because of further errors made in filing the 47 00

rate Sea Land revised its tariff several more times before applying for a

refund

The Presiding Officer denied the application on the ground that Sea

Land s many revisions failed to properly set forth the proposed rate but

rather rendered the tariff ambiguous

84 23 FMC
APPLICATION OF SEA LAND SERVICE INC

Sea Land on exceptions maintains that as ultimately filed the tariff

properly reflects the intended rate 1

DISCUSSION

The Presiding Officer correctly found that the application was timely

filed and that the errors made in the tariff were ofthe type contemplat

ed by the statute 2Therefore the only question before the Commission

is whether prior to applying for authority to refund a portion of the

freight charges Sea Land filed a new tariff setting forth the rate on

which the refund can be based

As mentioned the Presiding Officer held that Sea Land had not filed

such a tariff The Initial Decision however is somewhat ambivalent on

that point The conclusion that the record does not justify a finding

that a new corrected tariff was filed prior to the application appears to

rest not so much on the failure to file the 47 00 rate but rather on a

finding ofambiguity in the tariff

After a

sequence of revisions and corrections the tariff which was to

serve as the basis for the refund provided at the same time both a class

and a commodity item number as well as two different rates for the

same commodity and on its face at least could appear to be ambigu

ous Tariff ambiguity alone however is not a ground for denying

relief

Here notwithstanding Sea Land s careless filing practices the

47 00M rate upon which the refund would be based appears in the

tariff Following the principle of long standing that any ambiguity in

the tariff must be construed against the carrier the Commission finds

that the filing satisfies the requirements of section 18b 3

The cases cited in the Initial Decision as precedents are not control

ling here In Munoz y Cabrera v Sea Land Service Inc 20 F MC 152

1977 permission to waive collection of a portion of freight charges

was denied because the tariff Sea Land filed before the application set

forth a rate other than the negotiated rate agreed upon before the date

of the shipment and in Louis Furth Inc v Sea Land Service Inc 20

1 Sea Land addresses the various ways available for amending atariffand submits that the technical

aspects of how to revise atariff are best left to thecarrier s discretion

2

Section 18b 3 of the Shipping Act 1916 provides in part

That the Federal Maritime Commission may in its discretion and for good cause shown

permit acommon carrier by water in foreign commerce or conference of such carriers to

reCund aportion of freight charges collected from ashipper or waive the collectionof a

por

tion of the charges from a

shipper where it appears that there is an error in atariff of a

clerical or administrative nature or an error due to inadvertence in failing to tile anew tariff

and that such refund orwaiver will not result in discrimination among shippers Provided fur

ther That the common carrier by water in foreign commerce has prior to applying for

authority to make refund filed a

new tariff with the Federal Maritime Commission which

sets forth the rate on which such refund or waiver would be based And provided fur

ther That application for refund or waiver must be tiled with the Commission within one

hnndred and eighty days from the date of shipment 46 V S C 817 bX3

23 F M C

85
86 FEDERAL MARITIME COMMISSION

F M C 186 1978 and in A G Staley Mfg Co v Mamenic Lines Inc

20 F MC 385 642 1978 the carriers had failed altogether to file a

new tariff prior to their applications

Accordingly the Initial Decision of the Administrative Law Judge

issued in this proceeding is hereby reversed and Sea Land is granted

permission to refund the amount of 2 992 50 of the 5 363 50 collected

from Mirro for freight charges

THEREFORE IT IS ORDERED That applicant js granted permis

sion to refund 2 992 50 of the charges collected from Mirro Aluminum

Company and

IT IS FURTHER ORDERED That applicant shall publish prompt

ly in its appropriate tariff the following notice

Notice is hereby given as required by the decision of the

Federal Maritime Commission in Special Docket No 704 that

effective August 18 1979 and continuing through January 23

1980 inclusive the rate on file on aluminum utensils cooking

kitchen hospital or toilet N O S electric or non electric not

forks knives or spoons TL minimum 1800 cu ft is 47 ooM

subject to all applicable rules regulations terms and condi

tions in this tariff

and

IT IS FURTHER ORDERED That refund of the charges will be

effectuated within 30 days of service of this notice and applicant shall

within five days thereafter notify the Commission of the date and

manner ofeffectuating the refund

5 FRANCIS C HURNEY

Secretary

23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 104

SPECIFIC COMMODITY RATES OF FAR EASTERN

SHIPPING COMPANY IN THE PHILIPPINES U S

PACIFIC COAST TRADE

Controlled carrier s rates on Burl Furniture and Woven Articles found to be unjust

and unreasonable and are therefore disapproved

Steven B Chameides and John F Dorsey for Far Eastern Shipping Company

Edward M Shea and Francis W Fraser for Sea Land Service Inc

Charles F Warren and George A Quadrino for Philippines North America Confer

ence

Polly Haight Frawley Alan J Jacobson and Paul J Kaller for Bureau of Hearing

Counsel

REPORT AND ORDER

August 5 1980

BY THE COMMISSION RICHARD J DASCHBACH Chairman

THOMAS F MOAKLEY Vice Chairman JAMES V DAY PETER N

TEIGE Commissioners

This proceeding was initiated on December 28 1979 by Order of

Suspension and to Show Cause directed to the Far Eastern Shipping

Company FESCO l

In that Order the Commission 1 found that

eight FESCO rates on five commodities in the PhilippineslU S trade

may be unjust and unreasonable 2

and ordered FESCO to show cause

why they should not be disapproved and 2 suspended those rates for

180 days pursuant to section 18 c 4 of the Shipping Act 1916 46

D S C 817 c 4 pending the Commission s determination in this pro

ceeding Sea Land Service Inc and the Philippines North America

Conference PNAC intervened

The proceeding was assigned to Administrative Law Judge Norman

D Kline for the expedited development of an evidentiary record with

the record to be certified to the Commission for decision On April 18

Commissioner Leslie Kaouk dissents in part Aseparate opinion will follow

1 FESCO is a controlled carrier subject to regulation under the Ocean Shipping Act of 1978 PL

95483 92 Stat 1607 which amended sections I and 18 of the Shipping Act 1916 46 U S C 801

817 FESCO is directly orindirectly owned and controlled by the government of the US S R under

whose flag its vessels operate

2

See Attachment A

23 FMC 87
88 FEDERAL MARITIME COMMISSION

1980 the Presiding Officer certified a record consisting of 20 docu

ments admitted as Exhibits 1 through 19 including Exhibits 16A and

16B Three late filed exhibits were subsequently received 20 21 and

22 and made part of the record FESCO Sea Land PNAC and the

Commi8ilion s Bureau of Hearing Counsel filed simultaneous opening

briefs Reply briefs were flledby all porties eXGept PNAC FESCO s

request for oral argument was dflnied by the Commission

POSITIONS OF THE PARTIES

FESCO contends that the eight rates at iSllue are similar to rates of

other carriers in the same trade It compares its suspended rates both

with other carriers rates in existence at the time this proceeding began

and at the time the record closed Its rates for four out of five of the

commodities are allegedly the same as or similar to other carrier rates

as of the commencement of the proceeding while at the close of the

record every rate is allegedly the same or higher FESCO maintains

that the Commission s earlier determination that rate comparisons

employ rates in existence at the time ofthe issuance of an investigative

order was incorrect that the effect of a finding of unreasonableness is

prospective only and that the Commission s decision should be based

on the most current information available

FESCO also states that its service is different than that of the Confer

ence carriers i

e less frequent and slow r and that this results in

greater costs to shippers primalily the buyer s 9Qst of financing the

goods as part of its inventory and insurance costs FESCO contends

therefore that its rates should be lower than the Conference carriers

rates by the amount of these added costs Finally in an attempt to

show that its rates are required to assure the movement of particular

cargo FESCO offers affidavits from one Philippine exporter and one

U S importer endorsing FESCO s rate levels on furniture and woven

articles

PNAC and Sea Land offer similar arguments in response to FESCO

They initially note that the Commission previously concluded that

Military Sealift Command MSC rates of competing carriers are inap

propriate for rate comparison purposes They also contend that a com

parison ofsuspended rates with current rates is inappropriate Sea Land

claims that the OCean Shipping Act of 19c78 was not intended to be

prospective only and that by die time the Commission commences a

proceeding by suspending controlled cartier rates the damage which

the Act was designed to prevent may already have occurred i

e a

controlled carrier may already have gained an unjlijlt and unreasonable

market penetration If rates in effect at the time of the Commission s

Order to Show Cause are used PNAC andSea Land conclude that

FESCO s rate for each of the subject commodities is the lowest in the

trade and should therefore be disapproved

23 FMC
RATES OF FAR EASTERN SHIPPING COMPANY 89

PNAC also points out that one independent carrier used by FESCO

for comparison purposes Scindia Steam Navigation Co Ltd has not

offered service in the eastbound PhilippineslU S trade since 1976 In

addition PNAC notes that for Woven Articles FESCO has convert

ed its individual measurement rate to a per container rate and then

compared this rate with per container rates of other carriers even

though some carriers provide a measurement rate for this commodity

Sea Land further maintains that certain FESCO comparisons contain

inaccuracies and that the only way to ensure meaningful rate compari

sons is by reference to actual tariff pages something FESCO has failed

to provide

PNAC and Sea Land contend that nothing in the record supports

FESCO s argument that its rates are necessary to assure the movement

of particular cargo especially since one of FESCO s shipper witnesses

remains a PNAC dual rate contract signatory and the Conference

members and Sea Land continue to carry the particular commodities

They further maintain that FESCO s argument that its inferior serv

ice requires lower rates I is based on unsupported inventory and

insurance costs 2 understates FESCO s sailing frequencies and 3

ignores the majority of Conference carriers with service frequencies

less than its own Moreover Sea Land points out that differences in

total transportation times and vessel itineraries are transient in nature

and are therefore of questionable value In fact Sea Land asserts that

it offers a slower service in the trade than does FESCO

Hearing Counsel also agrees that the Commission should use rates of

noncontrolled carriers on file at the time of a suspension in assessing

rate similarity It argues that a Commission determination of unlawful

ness is based on certain conditions in the trade and that such a determi

nation would not necessarily apply if conditions changed Hearing

Counsel further states that consideration of rate changes after asuspen

sion would be procedurally unworkable and could restrict a controlled

carrier s competitors from responding to its rates or other competitive

pressures in the trade during the pendency of a proceeding

Hearing Counsel maintains that FESCO s rates on Burl Furniture

and Woven Articles are not similar to those of its competitors and

should therefore be disapproved Hearing Counsel explains that while

FESCO s total transportation charges for all five commodities are

lower than comparable competitors charges it does not believe there is

sufficient evidence from which to conclude that other carriers suffered

injury from the rates on the remaining three commodities particular

ly where in 1979 FESCO did not carry any commodities under these

tariff descriptions Glass Manufactures N O S Reefer Cargo

other and Fruit Juice Concentrates

23 F M C
i

90 FEDERAL MARITIME COMMISSION

DISCUSSION

For the purposes ofdetermining whether rates of a controlled carrier

are just and reasonable the Commission is permitted to take into ac

count appropriate factors four of which are set forth in section

18 c 2

8

In an attempt to meet its statutory burden FESCO has

presented evidence relating to the second and third factors Other

parties take issue with this presentation The Commission has reviewed

the entire record and has found that rates on two of the commodities

at issue are unjust and unreasonable

FESCO s attempt to justify some of its rates as necessary to assure

the movement of particular cargo relies on affidavits of one exporter

and one importer These affidavits relate at best to only two of the

five commodities at issue Buri Furniture and Woven Articlls

One of the atliants is a dual rate contract signatory with PNAC and

ships some of its goods via PNAC member carriers Exhibit 6 at 14

In addition the record reveals that even thouShFESCO s share of

these commQdities is growing the Conference still carries lubstantial

amounts of these items Exhibit 6 at 9 It appears therefore that

consistent with recently established principles FESCO s rates on these

two commodities are not necessary to assure their movement See Rates

of Far Eastern Shipping Company 22 F M C 651 656 1980

In Rates of FESCO supra the Commission determined that ratl

comparisons madl pursuant to section 18 c 2 ii should generally

employ rates of other carriers in effect on the date of the order

instituting the proceeding The Commission reaffIrms this position In

proceedings under the Ocean Shipping Act of 1978 the Commission is

not empowered to set rate levels for a controlled carrier to adhere to in

the future The Commission is simply determining the justness and

reasonableness of a rate based upon circw nstances existins at a particu

lar point in time when the rate is initially questioned Such an

approach is the only rational way of administering our regulatory

duties under this Act If a later date certain eg the close of the

record or a sliding reference point were employed it would become

very difficult to resolve controlled carrier rate cases within the 180 day

Section 18 cXZ lates in part

the Commission may take into account appropriate facton inclu 1ing but not limited to

whether

I the rates which havebeen llIed are below alevel which is fully compensatory to

the controlled carrier based upon that carrier actual coolo or upon ill constructive

cosio which are hereby denned the coolll of another carrier other than a controlled

carrier operating similar vessels and equipment in the sameorasimilar trade

il the rates are the same or similar to thollIed or d by other carriers in the

sametrade

Iii the rates arerequired to ll8llure movement of particular cargo in the trade or

iv the rates are required to maintain acceptable continuity level orquality of common

carrier serviceto or from affected ports

F M
RATES OF FAR EASTERN SHIPPING COMPANY 91

suspension period and potentially unjust or unreasonable rates could be

reinstituted pending resolution of the proceeding Moreover without a

predetermined reference point for rate comparison purposes the parties

could find it extremely difficult to marshall their facts conduct discov

ery and prepare their briefs In addition the impacts ofsubsequent rate

changes on a trade or their duration could not be ascertained for some

time following their effective dates The Commission will therefore

rely upon rate comparisons using rates of other carriers in effect on

December 28 1979

Section 18 c 2 provides the Commission with the option of consid

ering other appropriate factors when determining the justness or

reasonableness of a controlled carrier s rates 46 U S C 817 c 2 The

Commission is not therefore relegated to merely reviewing naked rates

presented to it for comparison purposes The Commission can and will

look behind these rates to the service characteristics of the carriers

themselves when appropriate to do so In this case for instance some

carriers whose rates are compared with FESCO s offer only feeder

service rather than direct service Zim Israel Navigation Company and

Evergreen Line Others operate much larger vessels than FESCO

Zim or different types of vessels Knutsen Line semicontainer In

addition at least one compared carrier is a non exempt state owned or

controlled carrier Neptune Orient Line 4

Absent any proof that these

differences have no relevance to the level of rates set by these carriers

the Commission will give greatest weight to comparisons between

FESCO and those carriers most operationally similar to it At the very

least the rates of any carrier not presently operating in the trade will

be disregarded 6

FESCO has claimed that because the frequency and speed of its

service are less than those of Sea Land and American President Lines

APL its rates must necessarily be lower to remain competitive This

theory is based upon the assumption that slower service results in

increased inventory and insurance costs to shippers Certain parties

have questioned FESCO s exclusive reliance on the sailing frequencies

of Sea Land and APL The itineraries presented by FESCO have also

been disputed Sea Land for instance provides a service from Cebu

4

Listing of Controlled Carriers 45 Fed Reg 5397 January 23 1980 Zim Israel Navigation Com

pany is also state owned or controlled Itis exempt from the requirements of the Ocean Shipping Act

of 1978 by virtue of its status as a carrier of astate whose vessels are entitled by treaty to receive

most favored nation treatment See 46 V S C 817 c 6 i

IS Scindi8 Steam Navigation Co Ltd has had rates on file for this trade since 1976 but has never

amended these rates or apparently offered any service in the trade during that time See Exhibit 6 at

3 4 This is supported by a recent advertisement in the Pacific Shipper which indicates that Scindia

does not presently offer inbound service from the Philippines Exhibit 20 Although not amatter at

issue here Scindia s failure to serve the trade could result in the cancellation of its inbound Philippine

tariff under the principles developed in Docket No 77 35 Publication of Inactive Tariffs by Carriers in

Foreign Commerce 20 F M C 433 1978

71 Mr
92 FEDERAL MARITIME COMMISSION

the port from which 86 of FESCO s Philippine cargo originates

which is actually slower than FESCO s 31 days vs 29 days In any

event FESCO s contentions concerning the level of insurance and

inventory costs are unsupported by any evidence

FESCO has converted its measurement rates on Woven Articles to

per container rates and then compared these rates with per container

rates of other carriers However many carriers in this trade offer

measurement rates for this commodity including some of the carriers

with which FESCO has compared per container rates Measurement

rates are intended to apply to shipments which are not eligible for full

container rates because of their volume Ifother carriers also publish

measurement rates such rates are the best basis for comparison 8

For

comparison purposes the Commission will therefore give greatest

consideration to measurement rates which have been filed for woven

articles

The Commission has established certain principles for deciding con

trolled carrier rate cases Rate comparisons should include any differ

ences which affect the total transportation charge to a

shipper 7 Rates

of FESCO 19 S R R at 1541 However rate similarity between a

controlled carrier and another carrier in a trade is not conclusive proof

that a controlled carrier s rate is just and reasonable If there is evi

dence that differences in rates no matter how slight have caused trade

disruption such rates could be found unlawful Rates of FESCO 19

S R R at 1543 We will now examine the particular rates at issue in

light ofthese principles

FESCO s suspended rate for Glass Manufactures N O S is the

only 20 foot container rate offered in the trade As a result it is

necessary to convert this rate to a weight basis See Exhibit 9 at 3

Once converted a comparison of FESCO s rate with that of the Con

ference indicates that FESCOs total charges on a weight basis are

actually higher than PNAC s

8

Even though this rate was deleted

subsequent to its suspension it will not be disapproved 9

e

Conversions of measurement orweight rates to per container rate or vice vena introduce a

variable whlcb Itbeir valueindicators the towase factor forIbe particular commodity

7

The Commission has previously indicated that acontrolled carrier relying upon a rate comparison

should provide

Iapplicable tariff pages 2 an explanation of any adjustments made to effect acomparison

3 all relevant charses whicb affect tb total transportation charS and 4 if converting a

per container rate to aweisbtmeaaure rate orvlc na representative bill of ladinS Rates

ojFESCO 19 S RR at IS41 fn 9

ThouSb FESCO haa failed to comply with this requirement there does appear to be seneral agree

ment to all applicable ratand charS

The various rate comparison in the record employ contract ratoo alTered by PNAC and other

carriero These ratoo are senerally IS percent below tbe ordinary rates for any siven commodity and

are available to any shipper wbich illDl acontract slvins all orafIXed portion of iIB bu iness to the

Conference or carrier S 46 US C 813a

Th impact of tbi rate or lIB predecesoors appears minimal siven the fact that FESCO carried

none of the commodity coveredby the rate in 1919 Exhibit IS

1 PM r
RATES OF FAR EASTERN SHIPPING COMPANY 93

FESCO has attempted to justify its reefer rates Reefer Cargo

other and Fruit Juice Concentrates solely by reference to rates

filed by Scindia Such a comparison is of no value because Scindia has

not and does not operate in the trade However Hearing Counsel has

also provided comparisons for these items using carriers which do

operate in the trade Attachments G and H These comparisons indi

cate that FESCO s charges are significantly less than those of PNAC

and Seatrain However these rates have also had a minimal impact on

the trade because of FESCO s failure to carry any cargo under them in

1979 See Exhibit 15 They will not therefore be found unjust and

unreasonable

FESCO s total charges for Buri Furniture and Woven Articles

are significantly lower than the Conference s charges for these com

modities They are also lower than the charges assessed by the relevant

independent carriers in the trade See Attachments Band C Furni

ture10 and woven articles are two ofthe seven major moving commod

ities in the trade Exhibit 6 at 9 Exports of these commodities have

increased steadily from 1977 to 1979 Exhibit 14 at 4 5 However

during this period the Conference and Sea Land experienced a de

crease in their carriage ofthese commodities See Attachment D

Furniture and woven articles were the principal commodities

FESCO carried from the Philippines in 1979 accounting for 80 percent

of its total carriage Exhibit 15 11 From 1978 to 1979 FESCO in

creased its share offurniture and woven articles by 75 percent Exhibit

16A at 2 By the end of 1979 FESCO was carrying over one third of

this cargo

12 This increasing market penetration has been accompanied

by the consistent maintenance ofsignificant differentials in total charges

between FESCO and PNAC and Seatrain See Attachments E and F

These facts indicate that for Buri Furniture and Woven Articles

FESCO s rates have had a significant impact on the trade Because

FESCO has failed to meet its burden ofproving that these rates are just

and reasonable they will be disapproved

THEREFORE IT IS ORDERED That the rates of Far Eastern

Shipping Company for Buri Furniture and Woven Articles as

10 The record data does not distinguish between furniture and UBurl Furniture though the latter is

obviously subsumed in the former The commodity description of the rateunder consideration is Burl

Furniture Only FromAll Ports Except Cebu Though its extent cannot be precisely detennined it is

clear that the subject rate contributes to FESCO s overall penetration of the market for the carriage of

furniture

11 FESCO is the only independent carrier to carry a significant amount of furniture and woven

articles Exhibit 11

12 FESCO carried 79 percent as much furniture as the entire 17 carrier conference and 49 percent

as much woven articles See Attachment D

FM r
94 FEDERAL MARITIME COMMISSION

listed in Attachment A are hereby disapproved as unjust and unreason

able and

IT IS FURTHER ORDERED That this proceeding is discontinued

5 FRANCIS C HURNEY

Secretary

1 PMr
RATES OF FAR EASTERN SHIPPING COMPANY 95

ATIACHMENT A

Far Eastern Shipping Company Freight Tariff FMC 23

From Ports in the Philippines

To U S Pacific ports and Overland Common points

DESCRIPTION

Glass Manufactures NO S

Furniture made of

Burl Furniture Only

Woven Articles Viz Bags Market

ingShopping of Woven Fiber Bas

kets BamboolBuri Rib Braids

Buri Brooms Cloth Abaca

Burlap Raffia Saguran Mats Mat

tings BamboolBankmanlBuril

GrasslHemp Door Woven Fiber

Nipa Strips Petutes Rakes

Bamboo Rugs BalangotlHemp

Sawali and Screen Woven Fiber

N O S

Reefer Cargo

Other

Fruit Juice Concentrates

TAR

IFF RATE SUSPENDED

ITEM

510 Local 1 200 00 PIC 20

480 Local 4O S0M

OC P 36 00M

1070 Local S4 00M

OC P S4 S0M

EFFEC

TIVE

DATE

12 30 79

105 80

106 80

890 Local S2 00W or 46 S0M 115 80

890 Local 113 40M 115 80

23 EM C
96 FEDERAL MARITIME COMMISSION

ATIACHMENT B

BURl FURNITURE

PERCENT BY

WHICH

FESCO S

TOTAL

CARRIER RATE BUNKER TOTAL CHAROE

SURCHAROE CHAROE DIFFERS

FROM

COMPETI

TOR S TOTAL

CHAROE

FESCO LOC 4O S0M 4 00 LOC 44 S0M

OCP 36 00M 4 00 OCP 4O 00M

PNAC LOC 4S 00M 9 S0 LaC S4 S0M 18 3S

OCP 39 00M 9 S0 OCP 48 S0M 17 S2

SEATRAIN LOC 4100M 8 00 LaC 49 00M 9 18

OCP 3S 00M 8 00 OCP 43 00M 6 98

EVER

OREEN LOC 43 00M 8 00 LOC S100M 12 74

OCP 39 00M 8 00 OCP 47 00M 14 89

FMC
RATES OF FAR EASTERN SHIPPING COMPANY 97

AITACHMENT C

WOVEN ARTICLES

PERCENTBY

WHICH

FESCO S

TOTAL

CARRIER RATE BUNKER TOTAL CHARGE

SURCHARGE CHARGE DIFFERS

FROM

COMPETI

TORS TOTAL

CHARGE

FESCO LOC 54 00M 4 00 LOC 58 00M

OCP 54 50M 4 00 OCP 58 50M

PNAC LOC 6O 00M 9 50 LOC 69 50M 16 55

OCP 58 50M 9 50 OCP 68 00M 13 97

SEATRAIN LOC 54 00M 800 LOC 62 00M 645

OCP 52 50M 800 OCP 6O 50M 3 30

Per container rates of Zim and Knutsen which were converted to measurement rates

have been disregarded because the conference and Seatrain offer rates on a measurement

basis

23 FMC
98 FEDERAL MARITIME COMMISSION

ATTACHMENT D

CARGO MOVEMENTS REVENUE TONS IN THE

PHILIPPINES U S PACIFICCOAST TRADE

Commodity PNAC Sea FESCO Land

1979 Furniture 64 486 6 288 50 847

1994 TEU s x 25 5 cm stow

Woven Articles 40 239 9 821 19 660

771 TEU s x 25 5 mwt stow

1978 Furniture 66 782 7 530

Woven Articles 41 173 11 489

1977 Furniture 66 939 12 183 4

Woven Articles 41 627 15 204

IExhibit 6 at 9

2 Exhibit 7 Attachment D and Exhibit 16B at 3

3 Exhibit IS provides data in TEU s Stowage factora are available from Exhibit 2 at 

No data was provided for other years

4 No data avai1able

23 FMC
RATES OF FAR EASTERN SHIPPING COMPANY 99

ATTACHMENT E

BURl FURNITURE LOCAL

TOTAL CHARGES

FESCO

5 679

57 79 47 00

6 1179

8 1579

8 2879

9 27 79

10 179 5100

10 15 79

10 24 79

11 18 79

11 2779

1129 79

1180

15 80 4450

Exhibit 5 Schedule 3

Suspended

PNAC

59 50

63 00

6125

62 75

60 75

54 50

SEA TRAIN

590

63 50

58 50

56 00

49 00

50 50

BURl FURNITUREOCP

TOTAL CHARGES

FESCO PNAC

620 76 3775

215 77 43 25

4 178 5125

5 3178 49 00

3 179 39 00

5 6 79 53 00

5 79 4100

6 1179 57 00

8 1579 56 75

828 79

927 79

10 179 45 00 58 25

10 1579

10 2479 56 25

11 1879 48 50

11 2779

11 29 79

1180

15 80 40 00

Exhibit 5 Schedule 4

Suspended

23 F M C

SEATRAIN

53 00

57 00

54 00

52 00

43 00

44 50
tOO FEDERAL MARITIME COMMISSION

ATIACHMENTF

WOVEN ARTICLES LOCAL

TOTAL CHARGES

FESCO PNAC

6 20 76 46

2115 77 55 00

11 19177 60 00

4 178 66

3 1179 59 00

3 15 79 53 50

5 6 79 70

5 7 79 59 25

5 25 79 64 00

6 11179 68 00

8 28 79

927 79

10 179 63 25 69 50

10 15 79

11 179 63 50

1180

16 80 58 00

Exhibit 5 Schedule I

WOVENARTICLES OCP

TOTAL CHARGES

FESCO PNAC

6 20176 42 25

2115177 49

11 19177 54

6 14 78 6UO

3 1179 54 00

3 15179 49 50

5 6179 65 50

5 7179 54 25

5 25179 62 50

6 11179 66 50

8 28179

9 27179

10 1179 58 25 68 00

10 15179

11 1179 58 50

1180

16 80 58 00

Exhibit 5 Schedule 2

23 FMC

SEATRAIN

64 00

68 00

62 00

63 50

Suspended

SEATRAIN

62 50

66 50

60 50

62 00

Suspended
RATES OF FAR EASTERN SHIPPING COMPANY 101

ATTACHMENT G

REEFER CARGO OTHER

PERCENT BY

WHICH

FESCO S

BUNKER TOTAL TOTAL

CARRIER RATE SUR CHARGE CHARGE

CHARGE DIFFERS FROM

COMPETITOR S

TOTAL

CHARGE

FESCO LOC 52 00W 4 00 LOC 56 00W

LOC 46 50M 4 00 LOC 50 50M

PNAC LOC 58 00W 9 50 LOC 67 50W 17 04

LOC 5175M 9 50 LOC 6125M 17 55

SEATRAIN LOC 52 00W 8 00 LOC 6O 00W 6 66

LOC 47 00M 800 LOC 55 00M 8 18

Exhibit 5

23 F MC
102 FEDERAL MARITIME COMMISSION

ATIACHMENT H

REEFER CARGO FRUIT JUICE CONCENTRATES

CARRIER RATE

BVNKER

S1R

CHARGE

TOTAL

CHARGE

PERCENT BY

WHICH

FESCO S

TOTAL

CHARGE

DIFFERS FROM

COMPETITOR S

TOTAL

CHARGE

FESCO LOC 113 40Mo 4 00 LOC 117 40M

PNAC LOC 142 00W 9 0 LOC m ow 22

SEATRAIN LOC 128 00W 8 00 LOC 136 00W 13 68

o

FESCO filed a measurement rate The appropriate conversion rate is one metric ton

per measurement ton of cargo Exhibit 1 at 6

Exhibit

23 F MC
RATES OF FAR EASTERN SHIPPING COMPANY 103

Commissioner Leslie Kanuk concurring and dissenting in part With

this decision the Commission has made some progress towards achiev

ing a rational approach to cases arising under section l8 c of the

Shipping Act 1916 I concur in the disapproval of FESCO rates on

Buri Furniture However I do have difficulties with the majority s

approach to other issues in this proceeding

The majority states that ifthere is evidence that differences in

rates no matter how slight have caused trade disruption such rates

could be found unlawful Slip Opinion at p11 This statement begs

the question of what constitutes trade disruption In the context of this

particular proceeding the majority seems to supply a working defini

tion oftrade disruption when it observes that

FESCO s increasing market penetration has been accompa

nied by the consistent maintenance of significant differentials

in total charges between FESCO and PNAC and Seatrain

Slip Opinion at p

13

Ifdisruption is defined as increasing market share Ifear the Commis

sion has foreclosed the possibility of a controlled carrier exerting bene

ficial competitive influences on a trade This fear is accentuated by the

Commission s

requirement in an earlier proceeding that a controlled

carrier s replacement rates must meet the level of the national flag

carriers serving the trade This requirement presumes that the nation

al flag rates are set at a level which is indeed just and reasonable For

the sake of the shippers in any affected trades I

earnestly hope this is

true

In other proceedings involving section l8 c of the Shipping Act I

have expressed my reservations about the rigidity which the Commis

sion has imposed on proceedings involving controlled carriers See

FMC Docket No 79 10 Rates ofFar Eastern Shipping Company sepa

rate opinions of November 28 1979 and June 9 1980 Though Iwill

not treat those issues in detail in this particular opinion they are

incorporated herein However Ireiterate my general concern that in its

zeal to disapprove rates filed by Soviet flag carriers the Commission

has created a precedential monster which will make it nearly impossible

for any non conference controlled carrier to have a pro competitive

impact in the United States ocean trades I continue to consider the

dangers ofpredatory rate practices ofcontrolled carriers to be a serious

threat Nonetheless I consider it unwise for the Commission to create

case law which will make it virtually impossible for a non predatory

non conference controlled carrier to offer an alternative service to the

shipping public at competitive rates

FMC Docket No 79 10 Rates of Far Eastern Shipping Company Report and Order of April I

1980 Slip Opinion at p 17

23 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 80 35

PACIFIC COAST EUROPEAN CONFERENCE

AGREEMENT NO 5200 DR 4 EXTENSION OF

DUAL RATE CONTRACT TO INTERMODAL SERVICE

NOTICE

August 7 1980

Notice is given that no exceptions were filed to the July 3 1980

order discontinuing this proceeding and the time within which the

Commission could determine to review has expired No such determi

nation has been made and accordingly the order has become ac4rinis

tratively final

5 FRANCIS C HURNEY

Secretary

104 23 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 80 35

PACIFIC COAST EUROPEAN CONFERENCE

AGREEMENT NO 5200 DR 4 EXTENSION OF

DUAL RATE CONTRACT TO INTERMODAL SERVICE

ORDER DISCONTINUING PROCEEDING

Finalized August 7 1980

Proponents of Agreement No 5200 DR4 who are the member lines

of the Pacific Coast European Conference have moved to dismiss this

proceeding on the basis of mootness since the Agreement has been

formally withdrawn by its letter of June 17 1980 1

The Agreement which is a modification to the Conference s existing

Dual Rate Contract was filed in mid 1976 and had been held in abey

ance at the request of the Conference until the institution of this

proceeding by Order of Investigation and Hearing served May 28

1980 Basically the modification includes cargo of contract shippers

described as moving overland from a Pacific Coast area port via

connecting water movements from U S Atlantic Great Lakes and

Gulf ports to a destination port within the scope of the conference

agreement According to the order the apparent purpose ofthe modifi

cation is to include under the contract mini bridge traffic which may

be moved underthe authority ofthe conference agreement

The stated basis for withdrawing the application is that the issue of

this Commission s

jurisdiction to approve an extension of an exclusive

patronage agreement to mini bridge traffic moved by members of a

conference under their approved conference agreement is presently

before the United States Court of Appeals for the District of Columbia

Circuit 2

The proponents indicate that depending on the outcome ofthe

litigation or perhaps clarifying legislation in the interim the Confer

ence may wish to file a similar application at some future time

1 The undersigned did not receive either a

copy of the Motion to Dismiss on Grounds of Mootness

served June 17 1980 oracopy of the letter in support thereof Apparently Hearing Collnsel were not

served as well since those documents which were eventually received in this office were made avail

able to Hearing Counsel for duplication and appropriate response Since the motion included acertifi

cate of service I

trust that all other parties weremore fortunate and actually were served

2 See U SA v FM c No 79 1299 Seatrain Pacific Services SA v FM

C

No 801248 and USA

v FM C No 80 1251

23 FM C 105
106 FEDERAL MARITIME COMMISSION

Hearing Counsel by their reply to the motion served June 26 1980

indicate they have no objection to the motion and the designate

protestants have not objected

The above actions dispose ofthe issues to be decided herein Accord

ingly this proceeding is discontinued

5 PAUL J FITZPATRICK

Administrative Law Judge

July 3 1980

23 F MC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 724 I

COTTON IMPORT AND EXPORT CO

v

SEA LAND SERVICE INC

REPORT AND ORDER

August 11 1980

BY THE COMMISSION THOMAS F MOAKLEY Vice Chairman

JAMES V DAY LESLIE KANUK AND PETER N TEIGE Commis

sioners

This proceeding is before the Commission upon its determination to

review the decision of Settlement Officer Donald F Norris served

March 14 1980 awarding reparation The Settlement Officer found

that Sea Land Service Inc violated section 17 of the Shipping Act

1916 46 D S C 816 in billing Cotton Import and Export Co Com

plainant for deficit weight charges resulting from Sea Land s substitu

tion of 4O foot containers for 35 foot containers without notifying Com

plainant

Complainant alleges that it had ordered 35 foot containers on ship

ments of cotton and that Sea Land substituted for its own convenience

4O foot containers without the knowledge or consent of Complainant

Consequently the shipments did not meet the minimum weight require

ments for 4O foot containers Complainant alleges that it was billed for

and paid deficit weight charges as a result of Sea Land s action and

requests reparation in the amount of 2 327 87 1

Sea Land by letter to the Settlement Officer dated October 17 1979

admitted error in its action stating in part

It is our understanding that Sea Land did not notify the ship

per that larger equipment would be substituted for the ordered

equipment Had the shipper been made aware of the substitu

tion of equipment the shipper sloading pattern could have

been changed to accommodate the larger box thereby pre

cluding the billing ofdeficit charges

Chainnan Daschbach filed aseparate opinion

1

This figure is aUegedly the sum of 683 93 415 35 and 1 273 59 supposedly the deficit weight

charges on each of three trailers The figures add up to 2372 87 however

23 EM C 107
108 FEDERAL MARITIME COMMISSION

The issue therefore is a carrier Sea Land substituting equip

ment for its own convenience and the shipper being penalized

for the carriers actions

Sea Land urges the Settlement Officer to award reparation in

the amount of 2 327 87 as claimed a

By letter dated September 18 1979 the Settlement Officer requeste

additional information from Complainant including inter alia

evidence that your Company was billed JUld subsequently

paid the additional charges for deficit weights in the amount

claimed 2 327 87

Complainant s response dated November 20 1979 addressed this quer

merely by stating

We enclose photo copy of our check in the amount of

2 338 87 which is the amount under claim

Attached was a

copy of the front of a check dated April 18 1979

made out to Sea Land Service Inc Complainant did not respond to th

Settlement Officer s

request for proof of billing Nor was the new

figure of 2 338 87 explained The Settlement Officer however award

ed reparation in that amount

Upon its review ofthe Initial Decision the Commission was trouble

by several aspects of Complainant s case there remained despite th

Settlement Officer s

request no evidence that Sea Land sent a bill fo

the deficit weight the copy of the check did not indicate endorsement

and the variance in amounts claimed was unexplained Pursuant to th

Commission s instructions a letter from the Commission s Secretar

was sent to Complainant on May 19 1980 requesting clarification o

these matters by June 15 1980 3

Complainant sresponse was received July 8 1980 Despite the tard

ness of the submission the Commission accepts the submission fo

consideration Complainant enclosed three copies ofbillings from Sea

Land for the three trailers in question but again failed to produce a bi

for deficit weight charges Complainant resubmitted the copy of the

front of its check to Sea Land but the July 8 1980 submission contains

calculations not on the copy of the check submitted on November 20

1979 On the check is written

Sea Land tetler also makuse of the erroneously added 2327 87fiaure

The Secretary letler requested the following information

1 Evidence of Sea Land bllllng to you forthe freight charginvolved 2 Evidence of

yourpayment of the chargif by check how face and back of check and 3 An e

plana

tlon of the discrepancy between the alleged billing of Sea Land of 2338 87 and the amount

claimed of 2 327 87

23 F MC
corrON IMPORT AND EXPORT CO V SEA LAND 109

SERVICE INC

971 869525

961 869516

961 869503

1284 59

638 93

415 35

2338 87

Complainant also submitted a

copy of a back of a check endorsed by

Sea Land and dated by the bank May 20 1980 The discrepancy in

amounts was explained

The correct difference is 2 327 87 and due to an error in

addition we paid 2 338 87

DISCUSSION AND CONCLUSION

Because the Commission is not satisfied that Complainant has met its

burden of proof the reparation award is denied and the decision of the

Settlement Officer is reversed

Complainant s

responses to the Settlement Officer s and the Commis

sion s

inquiries have raised more questions than they answered There

remains not the slightest indication of where the various numbers

adding up to 2338 87 2327 87 or 2372 87 came from nor is it clear

whether the 1 284 59 and 638 93 figures written on the copy of the

check or the 1 273 59 and 683 93 figures listed in the complaint and

concurred with by Sea Land are the basis of the amount claimed The

exact amount of the deficit weight charges would be expected to

appear on the bill which Complainant asserts it received from Sea

Land but despite two requests Complainant has failed to produce any

documentation verifying its claim that it in fact was billed for deficit

weight

Moreover the validity of the copies of the check has not been

established to the satisfaction of this Commission If Complainant

indeed submitted copies of the front and back of the same check the

question arises as to why a check dated April 18 19795 was not

endorsed until May 20 1980 Complainant s submissions indicate that

Sea Land held the check for over a

year and endorsed it twelve days

after the Commission expressed its concern about the check s validity at

its open May 8 1980 meeting Thus the parties original contention that

the bill for deficit weight had been paid appears to have been

misleading Complainant sinability or unwillingness to establish the

basic premises of its complaint i e that it was billed for and paid

deficit weight charges in an identifiable amount precludes a finding

that it has met its burden ofproof 6

4

Compare with calculations in complaint See n l

supra

II Even this date is questionable The copy submitted by Complainant shows that the line on which

the date is typed is broken in several places suggesting that the date of the check was at some point

altered

6

It is therefore unnecessary to address the issue of whether the facts if established amounted to a

violation of section 17 of the Shipping Act

23 FMC
110 FEDERAL MARITIME COMMISSION

THEREFORE IT IS ORDERED That the Initial Decision of t

Settlement Officer is reversed and

IT IS FURTHER ORDERED That Cotton Import and Expo

Cos

request for reparation is denied and

IT IS FURTHER ORDERED That this proceeding is discontinue

5 FRANCIS C HURNEY

Secretary

CHAIRMAN DASCHBACH S SEPARATE OPINION

I am not participating because Ido not believe that the Commissio

should review the decisions of Settlement Officers in informal dock

proceedings Under Subpart S of the Commission s Rules of Practic

and Procedure 46 C F R 502 301 parties consent to waive the righ

i and obligations associated with normal adjudicatory proceedings for th

express purpose of receiving prompt consideration of a small claim

Commission review precludes the inexpensive and expeditious handlin

of small claims which is the foundation of the informal docket proces

The settlement officer s decisions in informal dockets do not hav

precedential value therefore Commission review imposes unnecessa

expense and delay in an arbitration process designed to settle mino

commercial disputes in a prompt and responsive manner

23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 80 17

WESCOT INTERNATIONAL INC

v

SEA LAND SERVICE INC

ORDER ADOPTING INITIAL DECISION

August 13 1980

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

Wescot International Inc seeking a refund offreight charges from Sea

Land Service Inc Its claim was based on an alleged error in the

measurement ofbundles of iron pipe Sea Land admitted all allegations

in the complaint

Administrative Law Judge Paul J Fitzpatrick issued an Initial Deci

sion in which he awarded reparation in the full amount claimed by

Wescot and in addition awarded interest at 12 percent from the date

ofpayment ofthe freight charges Sea Land filed Exceptions only as to

the award ofinterest

Though Sea Land recognizes that an award of interest could be

proper in a case such as this one it argues that the Commission should

exercise its discretion and vacate the award of interest Sea Land al

leges 1 it was not responsible for the erroneous mismeasurement of

the cargo 2 the error was not known to it nor did it have the ability

to ascertain it and 3 Wescot did not seek an award of interest

The Commission is not persuaded by Sea Land s arguments Sea

Land had a non delegable duty to assess its freight charges on the basis

ofthe actual measurement of the commodity being shipped In this case

particularly it is difficult to understand how Sea Land lacked the ability

to assess this cargo The iron pipes in question were presented to the

carrier in slings and were not hidden away in containers Their correct

measurement could have been easily ascertained

Sea Land should further understand that an award of interest in this

proceeding is not meant as a penalty for some perceived malefaction on

its part Rather the award ofinterest simply serves to make this shipper

whole Sea Land after all has had the benefit ofthis shipper s overpay

ment from the date the freight charges were paid

The Presiding Officer s decision to award interest was clearly consist

ent with our policy statement of May 8 1980 concerning interest on

23 FMC 111
112 FEDERAL MARITIME COMMISSION

awards of reparation The circumstances of this case do not warrant 

exception to this general policy

THEREFORE IT IS ORDERED That the Exceptions ftled 

Sea Land Service Inc are denied and the Initial Decision in t

proceeding is hereby adopted and

IT IS FURTHER ORDERED That this proceeding is discontinue

By the Commission

S JOSEPH C POLKING

Assistant Secretary

Commissioner Leslie Kanuk would not award in t in oituations where a

stroni showlni is ma

that the error in measurement was due to erroneous entries made by shippers in the documentat

which ollowsthe shipment

23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 80 17

WESCOT INTERNATIONAL INC

v

SEA LAND SERVICE INC

Through a combination of error in supplier s preparation of a packing list and carrier s

corresponding billing in reliance thereof complainant was overcharged for shipment

of ductile iron pipe Reparation awarded

Everett S Layman Jr and Edward Winslow for complainant

John MRidlon for respondent

INITIAL DECISIONOFPAUL J FITZPATRICK

ADMINISTRATIVE LAW JUDGE 1

Adopted August 13 1980

By complaint served March 26 1980 Wescot International Inc of

San Francisco California Wescot or complainant seeks a refund of

freight charges resulting from an alleged error in the calculation of

weight applied to a shipment of ductile iron pipe Wescot requested

that the proceeding be handled under the Shortened Procedure provid

ed by the Commission s Rules of Practice and Procedure 46 C FR

502 181 187 Sea Land Service Inc Sea Land consents to handling

of the matter under the shortened procedure and in essence admits to

all of the allegations and contentions included in the numbered para

graphs ofthe complaint

Wescot an exporter of goods manufactured in the United States

entered into a contract with Misato Kogyo Co Ltd of Naha City

Okinawa to provide among other commodities certain ductile iron

pipe It also entered into a contract with P E O Hair and Company of

Pittsburg CA a supplier to purchase the iron pipe to be delivered

FO B Dock San Francisco The shipment moved under Sea Land bill

oflading dated May IS 1979 on 55 LEADER Voyage 14 W on May

20 1979

The gravamen giving rise to the requested refund concerns the cubic

measurement reflected in the bill of lading Item 004 of the bill of

lading specifies 26 Slings Cast Iron Pipe 72 395 KG Gross Weight and

1

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

Commission Rule 227 Rules of Practice and Procedure 46 eFR 502 227

23 F MC 113
114 FEDERAL MARITIME COMMISSION

a measurement of 223 CBM a

According to the complainant a refund

for the freight charges incurred is due for 98 598 CBM which is the

difference between the measurement of 223 CBM and 124402 CBM o

the actual cube size of the involved slings Apparently the error was

spotted after management examined the me and after the cargo had

already been unloaded at destination The error itself is attributed to the

supplier s preparation of the packing list Evidently the supplier s typist

in not referring to the underlying work copies showed all slings as 19

feet high 48 inches long and 48 inches wide In using this standard the

involved slings yields an equal distribution of 304 cubic feet per sling o

a total of 7 794 cubic feet And because of the error it is olaimed that

the actual cubic feet represents a difference of 3 526 cubic feet from

that reflected on the packing list used by Sea Land 8In order to

substantiate the difference in measurement the Pacific Cargo Inspection

Bureau located in San Francisco was requested to inspect and measure

As Shipped samples at the supplier s yard The Bureau measured the

bundles of pipe which were said to be identical to the slings shipped

under the bill of lading The results of these measurements were shown

to be as follows 9 slings at 5 256162 47 305 CBM 12 slings at

4 798752 57 585 CBM and 4 slings at 3 828348 15 313 CBM or a

total of 120203 CBM for 25 slings Although the remaining sling

composed of4 and 6 pipe was not available for measurement it was

calculated by the complainant to be 4 199CBM and appar ently Sea

Land agrees with that measurement As a result ofits explanation ofthe

error and the Bureau s measurements complainant seeks a refund o

20 774 59 4

I

In adcIldon to the oIlnp Item 004 included I Bundle Cast Iron Jipq 1 4SI KG with meaaure

mentof 2 747 CBM The measurement and IrelJhtcharaea aaaeaaed here are not in conlroveny

I

Tbe luppDer clalma the actual measuremenllto be follows

Unl1 to 9

8 Ductile Iron Pipe 12 Pea 4 Pea Wide by 3 Rows Hlahl Lenath 19 Peet Width 40 InchHeight

29lnch184 7Cubic Peet Per Unit

Unl10 to 21

6 Ductile Iron Plpe l8Pea 6 Pea Wide by 3 Rows Hlahl Lenalh 19 Peet Width 44 InchHeight

29lnch 168 4Cubic Peet Per Unit

Unl 22 to 25

4 Ductile Iron Pipe 27 Pea 9 Pea Wide by 3 Rows HlahlLenalh 19 Peet Width 45 Incbaa Helaht

23 Inch 136 6Cubic Peet Per Unit

Unit 26

4 and 6 Ductile Iron Pipe Miled Unit 9 Pea WlcIe by 3 Row Hiahl Lenalh 19 Peet Width 4S

InchHelaht 2S Inch 148 4 Cubic Peet Per Unit

I

The calcu1adOl la baaed upon the followina

Actual charge 223 000 CBM

Pipe remeuured 124 402 CBM

98 598CBM

15 282 69

985 98

16268 67

492 99

98 598 CBM

AB

Subtotal

B8

x5155 00

10 00

5 00

23 FMC
WESCOT INT L INC V SEA LAND SERVICE INC 115

Under the circumstances presented here it is found that the com

plainant is entitled to reparation in the full amount Initially a com

plainant is not bound where the misdescription of cargo results from a

shipper s complainants unintended mistake or inadvertence5 and even

a showing of a lack of equitable justification on the part of a shipper

complainant has not precluded an award where it is considered that

an overcharge would operate as a windfall to that carrier 6 Here the

error leading to the misdescription by the supplier has been well

documented and confirmed by an independent measurement In addi

tion the complainant has supplied other appropriate documentation to

support the relief requested 7

One final matter requires consideration Althougll complainant does

not request an award of interest in addition to the overcharges on the

shipment of its goods the Commission in a recent policy statement

declared an intention to grant interest on awards of reparation in cases

involving the misrating of cargo and arising under section l8 b 3 of

the Act8And while exceptions from this general policy will be consid

ered on a case by case basis and this proceeding involves a misde

scription rather than a misrating of cargo it would seem that the

current policy would apply here as well

ULTIMATE CONCLUSION

Complainant is awarded reparation in the sum of 20 774 59 with

interest computed at a rate of 12 percent from the date of payment of

the freight charges

S PAUL J FITZPATRICK

Administrative Law Judge

Washington D C

May 16 1980

HDL

cu

1100

18 90

1 084 57

2 928 36

20 774 59

Western Publishing Company v Hapag Lloyd A G Docket No 283 1 13 S R R 16 17 1972

6

Union Carbide Inter America v Venezuelan Line 17 F M C 181 182 1973 Cj United States v

Columbia S S Company 17 F M C 8 10 1973

7

For example among other material it submitted the commercial invoice the biJI of lading its

packing list and its supplier s packing list

S

Interpretations and Statements of Policy Interest on Awards of Reparations dated May 8 1980

23 FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 80 18

PORT OF NEW YORK OCEAN FREIGHT FORWARDERS

CONFERENCE AGREEMENT NO 8370

REPORT AND ORDER

August 13 1980

BY THE COMMISSION RICHARD J DASCHBACH Chairma

THOMAS F MOAKLEY Vice Chairman JAMES V DAY LESL

KANUK AND PETER N TEIGE Commissioners

On March 27 1980 the Commission ordered the 22 independe

ocean freight forwarders participating in FMC Agreement No 8370 

show cause why the Agreement should not be cancelled The Commi

sions Order explained that no business had been conducted under th

Agreement since 1958 and that if activities were resumed it would b

necessary for the parties to justify the Agreement s price fixing prov

sions under the Svenska doctrine 1

The Respondents were given until April 30 1980 to respond to th

Commission s Order but have yet to do so Instead a request for 

days additional time was filed on April 28 1980 This request w

found to be unjustified under section 502 102 ofthe Commission s Rul

46 C F R 502 102 and was denied 2 On May 22 1980 a secon

extension request was submitted asking for 120 additional days Th

request incorporated an intervening letter dated May 9 1980 whic

stated that only 5 of the original 22 parties remained interested in th

Agreement but that 34 additional parties wished to further consid

joining a New York area freight forwarder conference No attem

was made to dispute or explain Respondents 26 years of inactivity 

to justify the Agreement in terms of present transportation benefit

Under these circumstances Agreement No 8370 will be disapproved 

THEREFORE IT IS ORDERED That Agreement No 8370 b

tween the 22 independent ocean freight forwarders listed in the Com

mission s March 27 1980 Show Cause Order is disapproved and

1 Federal Marltime Commission v Aktlebolaget Svenska Amerika Linlen 390 US 238 1968 affirm

the need for proponents of anticompetitive section 15 agreements to demonstrate the existence of 

setting transportation benefits

2 Order of May 12 1980

3

Interested ocean forwarders may submit anew agreement and justification statement for Co

mission consideration at any time

116 23 F MC
PORT OF NEW YORK OCEAN FREIGHT FORWARDERS 117

CONFERENCE AGREEMENT NO 8370

IT IS FURTHER ORDERED That this proceeding is terminated

S FRANCIS C HURNEY

Secretary

23 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 798 1

KOBRAND CORPORATION

v

SEA LAND SERVICE INC

ORDER PARTIALLY ADOPTING

DECISION OF SE1TLEMENT OFFICER

August 15 1980

This proceeding is before the Commission upon its determination to

review the decision of Settlement Officer Donald F Norris awarding

reparation without interest to Kobrand Corporation for violation by

Sea Land Service Inc of section 18b 3 ofthe Shipping Act 1916 46

U S C 817

In cases involving the misrating of cargo and arising under section

18b 3 the Commission has determined to grant interest on awards of

reparation calculated at the rate of 12 percent and accruing from date

of payment of freight charges Interpur A Division ofDart Industries

Inc v Barber Blue Sea Line 22 F MC 679 1980 See also Policy

Statement Interest on Awards of Reparation 46 C F R 530 12 The

circumstances in this proceeding do not warrant an exception to this

general policy The award of reparation in this proceeding will there

fore be with interest at 12 percent

THEREFORE IT IS ORDERED That the decision of the Settle

ment Officer is adopted except as indicated and

IT IS FURTHER ORDERED That Sea Land Service Inc pay to

Kobrand Corporation 12 percent interest on the award of reparation

accruing from the date ofpayment offreight charges and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Assistant Secretary

Commisaloner Leslie L Kanuk would not award interest The separate opinion of Chairman Rich

ard J Oaschbach i attached

118 23 F MC
KOBRAND CORPORATION V SEA LAND SERVICE INC 119

Chairman Daschbach s separate opinion

I am not participating because Ido not believe that the Commission

should review the decisions of Settlement Officers in informal docket

proceedings Under Subpart S of the Commission s Rules of Practice

and Procedure 46 CFR 502 301 parties consent to waive the rights

and obligations associated with normal adjudicatory proceedings for the

express purpose of receiving prompt consideration of a small claim

Commission review precludes the inexpensive and expeditious handling

of small claims which is the foundation of the informal docket process

The settlement officer s decisions in informal dockets do not have

precedential value therefore Commission review imposes unnecessary

expense and delay in an arbitration process designed to settle minor

commercial disputes in a prompt and responsive manner

23 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 798 1

KOBRAND CORPORATION

v

SEA LAND SERVICE INC

DECISION OF DONALD F NORRIS SETTLEMENT OFFICER

Partially Adopted August 15 1980

Reparation Awarded

By its complaint filed with the Commission on February 28 1980 th

Kobrand Corporation Kobrand claims 409 22 of Sea Land Service

Inc Sea Land this amount representing an alleged overcharge arisin

out of Kobrand shipment transported by Sea Land from Fos sur me

France to Miami Florida pursuant to a bill oflading No 967 707359

dated either in October or November 1978 This shipment comprise

cases of still wines whose total weight amounted to 16960 kilogram

kgs according to the bill of lading Kobrand claims that this is 

error that the actual weight amounted to only 13585 kgs and that th

resulting disparity of 3 375 kilo tons entitles it to the sum claimed

By way of reply Sea Land states correctly that Kobrand has th

burden of proving its case inasmuch as the cargo in question has lon

since left Sea Land s possession If however reparation is in order Se

Land submits that the amount of that should be 431 16 Kobran

having used an incorrect rate in structuring its claim 2

At the outset Kobrand s standing to press the claim probably oug

to be discussed Kobrand appears on the bill of lading as the consigne

with another firm Miami Crown Distributors Crown as the notif

party Freight and charges were payable at destination Crown in fa

paid the freight which amounted to 2 166 64 Subsequently Crow

notified Kobrand of the overcharge and the latter credited 415 t

Crown s account in the form of a credit memo 4097 dated June 2

1979 Has Kobrand acquired standing by right of subrogation Th

Settlement Officer S O will hold that it has despite the fact that an

1

Both parties having consented to the informal procedure of the Commission s Rules of Practi

and Procedure 46 CFR 502 301 304 Ihis decision will be final unless the Commission elects 

review it within 30 days from the date of service thereof

II Kobrand calculated its claim on the basis of a rate of 12125 per 1 000 kgs rather than the ra

applicable at the time of shipment 127 7 per kilo ton as per the terms and conditions of the contr

ling tariff that of the Med Gulf Freight Conference Freight Tariff No 3 FMC 3 26th revised pa

136

120 23 FMC
KOBRAND CORPORATION V SEA LAND SERVICE INC 121

small lingering doubt would be dispelled had Kobrand remitted the

overcharge by check or in cash so that Crown could have enjoyed full

discretion in disbursing the sum received

The principle controlling in resolving this matter as the S O views

it is that laid down in Union Carbide Inter America v Norton Line 14

F MC 263 1971 Briefly summarized that case stands for the proposi

tion that what is actually shipped in any instance not necessarily what

appears upon the bill of lading as shipped as controlling for classifica

tion and rating purposes By analogy this principle should extend to

quantities as well

According to the bill of lading the shipment consisted of 675 cases

of 12 x 24 oz still wines claimed by Kobrand to have weighed 18 kgs

each and another 70 cases of 24 x 12 oz still wines each of which is

alleged to have weighed 20 5 kgs the total amounting to 13 585 kilo

tons In support of its contentions Kobrand has submitted as evidence

a a supplier s invoice which is easily associable with the bill oflading

and b copies of twenty other bills of lading involving similar ship

ments of wines transported by Sea Land and six ofSea Land s competi

tors The former serves to substantiate expressly Kobrand s assertion

and at least nine of the twenty bills all involving the same shipper as

here either expressly or by eduction clearly corroborate Accordingly

reparation in the amount of 431 16 representing the discrepancy in

weights 3 375 kilo tons x 127 75 is in order 3 However by this

decision Kobrand is directed to credit an additional 16 16 to Crown s

account So ordered

Kobrand did not request interest However it is now the Commis

sion s intention to grant interest on awards ofreparations in cases

involving misclassification of cargo and arising under section 18 b 3

Exceptions from this general policy will be considered on an ad hoc

basis Moreover interest shall be calculated at the rate of 12

accruing from the date of payment of freight charges Interpur A

Division ofDart Industries v Barber Blue Sea Line 22 F MC 679 April

8 1980 4

The S O assumes that this policy is intended to extend to

misdeclarations of weights as well inasmuch as the controlling tariff

here reflects the universal commercial practice ofassessing rates on the

basis of actual quantities of cargoes shipped Assessments of freight on

any other basis unless clearly sanctioned by appropriate tariff are

violative of section 18b 3 ofthe Shipping Act 1916

3 No surcharges of any sort were being assessed at the time of the shipment

4

The language here indicates to the S D that it is the Commission s intention to award interest on

an annual either pro rated orcompounded as appropriate rather than asimple basis Recent decisions

by other 8 05 raise aquestion Whatever until advised accordingly this S O will proceed on that

principle that all interest is on an annual basis which should be compounded orpro rated as circum

stances require

23 F M C
122 fEDERAL MARITIME COMMISSION

The problem here however is that the person preparing the bill o

lading is the cause of the error resulting in the weight discrepancy

which is the foundation of the claim Kobrand contends that Sea Land

prepared the bill of lading whereas Sea Land asserts We have bee

advised by our office in Europe that 1 Sea Land provides blank bill o

ladings forms 2 BIL 967 707359 that involved here was prepared by

Kobrand 3 The BIL was issued by our agent Agena on SlL s behalf

In order to determine the commercial practice in the trade involved

the S O contacted employees of four of those lines whose name

appeared on copies of the twenty bills oflading submitted by Kobrand

Three declared flatly that shippers prepare bills of lading issued in

France The fourth stated that this was the case 90 of the time

From this it is reasonable to conclude that Kobrand is mistaken an

that the bill of lading was prepared by the shipper S T R Aubrey o

Chalon sur Saone or its agent

Without question Sea Land can be conceived of as having had th

use of the sum awarded here since that day when Crown paid th

freight By the same token an award of interest here estimated t

amount to some 75 if interest is compounded on an annual basis i

effect penalizes Sea Land for a mistake for which it is innocent

The bill of lading here and all copies of the twenty bills submitte

by Kobrand indicate that all shipments were house to house move

ments in containers This means that the shipper is responsible fo

stufTmg or loading the container and the consignee for stripping o

discharging it The carriers involved saw nothing else but the contain

ers and paper purporting to state what was in them Further the Sea

Land bill of lading and some of the twenty submitted by Kobrand are

claused shippers load and count and in Sea Land s case stow

There are equities involved here or so it seems to the S O Sea Lan

is not at fault for the discrepancy and probably neither is Kobrand

given the fact that S T R Aubrey was the shipper Whatever in th

circumstances the 50 cannot see any reason why interest should b

awarded So ordered

S DONALD F NORRIS

Settlement Officer

May 30 1980

23 F M C
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

DOCKET NO 80 36 GENERAL ORDER 46

PART 520 EXEMPTION OF HUSBANDING AGREEMENTS

August 15 1980

Final Rule

The Federal Maritime Commission hereby exempts

certain husbanding agreements from the filing and

approval requirements of section 15 of the Shipping

Act 1916

DATE Effective August 21 1980

SUPPLEMENTARY INFORMATION

The Federal Maritime Commission solicited comment on a proposed

rulemaking by notice filed in the Federal Register on June 4 1980 45

F R 37703 to exempt certain husbanding agreements between persons

subject to the Shipping Act 1916 from the f1ling and approval require

ments of section 15 of the Shipping Act 1916 46 U S c 814 Hus

banding agreements generally fall into two categories The first consists

ofthose agreements that deal with routine vessel operating activities in

port such as notifying port officials of vessel arrivals and departures

ordering pilots tugs linehandlers delivering mail transmitting reports

and requests from the Master to the owner operators arranging bunk

ers stores repairs water garbage disposal assisting with passengers

and crew matters and related services The second consists of those

agreements which in addition to the foregoing also cover agency

matters involving the solicitation and booking of cargoes and signing of

contracts ofaffreightment and bills of lading

Section 35 of the Shipping Act 1916 46 U S c 833a provides that

the Commission upon application or on its own motion may by order

or rule exempt any class of agreement between persons subject to the

Act or any specified activity of such persons from any requirement of

the Act where it finds that such exemption will not impair effective

regulation by the Commission be unjustly discriminatory or be detri

mental to commerce

The first category of husbanding agreements has such minimal com

petitive impact that continued regulation of these agreements through

ACTION

SUMMARY

23 F M C 123
124 FEDERAL MARITIME COMMISSION

the section 15 review process serves no substantive purpose The delay

involved in the regulatory process is not offset by any corresponding

regulatory benefit under the Act provided that such agreements do not

preclude the agents from servicing other carriers These agreements are

rarely protested nor are they frequently made the subject of forma

Commission proceedings to determine their approvability under the

standards of the Shipping Act Exemption from the filing and approva

requirements of section 15 is warranted for this category of agreements

as it will present no impairment to the Commission s effective regula

tion of the parties activities nor will it be unjustly discriminatory o

detrimental to commerce The exemption will not confer antitrust im

munity however section 15 approval consideration will remain avail

able to parties requesting it

The second category of husbanding agreements has a potential fo

competitive impact which requires a thorough analysis of the relation

ships between the parties involved This category is presently unde

review for consideration for possible exemption in a separate proceed

ing

The comments support the exemption of husbanding agreements from

the filing and approval requirements ofsection 15 of the Shipping Act

The Commission has adopted one suggested change in the require

ment that exempted husbanding agreements be available for public

inspection at the agent s office After considering what is fair to the

parties affected by the rule no reason was found to now require the

agreement including rate schedules to be made public Thus exempted

agreements shall be kept by the parties and shall be available for the

purpose of inspection by the Commission only

The same comment also suggested that all agency agreements b

exempted from the filing and approval requirements of section 15 with

certain exceptions The Commission is limited in affording relief to th

scope of its published proposed rule Therefore we will treat thi

comment as a suggestion for further study

NOW THEREFORE pursuartt to sections 15 35 and 43 of th

Shipping Act 1916 46 U S C 814 833a and 841a and section 4 o

the Administrative Procedure Act 5 U S C 553 IT IS ORDERED

That effective upon publication in the Federal Register Title 46 C F R

is hereby amended by the addition ofPart 520 as follows

PART 520 EXEMPTION OF HUSBANDING AGREEMENTS

Sec

520 1

520 2

520 3

520 4

Purpose

Definition

Exemption

Termination ofApproved Husbanding Agreements

23 F MC
EXEMPTION OF HUSBANDING AGREEMENTS 125

520 5 Compliance with the Filing and Approval Requirements of

Section 15

AUTHORITY Section 15 35 43 46 U S C 814 833a and 841a

520 1 Purpose

a Section 15 of the Shipping Act 1916 requires that certain agree

ments between common carriers by water and other persons subject to

the Act be filed with and approved by the Commission prior to imple

mentation Section 35 ofthe Act as pertinent in this context provides

that the Commission may by order or rule exempt any class of agree

ments between persons subject to the Act where it finds that such

exemption will not impair effective regulation by the Commission be

unjustly discriminatory or detrimental to commerce

b In the interest of minimizing unnecessary delay in the implemen

tation of routine husbanding agreements between persons subject to the

Act and to avoid the cost of unnecessary regulation the Commission is

exempting certain husbanding agreements from the filing and approval

requirements of section 15

520 2 Definition

As used in this part husbanding agreements are agreements between

a common carrier by water and another person subject to the Shipping

Act 1916 through which the carrier contracts with an agent to handle

routine vessel operating activities in port such as notifying port offi

cials of vessel arrivals and departures ordering pilots tugs and line

handlers delivering mail transmitting reports and requests from the

Master to the owner operators dealing with passenger and crew mat

ters and providing similar services related to the above activities The

term does not include agreements which provide for the solicitation or

booking of cargoes signing contracts or bills of lading and other

related matters nor does it include agreements that prohibit the agent

from entering into similar agreements with other carriers

520 3 Exemptions

Husbanding agreements between persons subject to the Act are

hereby exempted from the filing and approval requirements of section

15 Exempted agreements shall be kept by the parties and shall be

available for inspection by the Commission during the term of the

agreement and two years thereafter

520 4 Termination ofApproved Husbanding Agreements

Husbanding agreements which have received section 15 approval

shall continue to be approved for the duration of their term or until

terminated by the parties

23 F M C
126 FEDERAL MARITIME COMMISSION

520 5 Compliance with the Filing and Approval Requirements ofSection 1

Notwithstanding the provisions of this part persons who desire ap

proval of husbanding agreements may continue to submit such agree

ments to the Commission for section 15 consideration in accordanc

with ordinary filing procedures

By the Commission

5 JOSEPH C POLKING

Assistant Secretary

23 F MC
RITIME COMMISSION

KET NO 80 7

MENNEN CO

v

MIT VI O S K LINES

PARTIAL ADO ION OF INITIAL DECISION

ugust 21 1980

This proceeding is before he Commission upon Mitsui O S K Lines

Exceptions to the Initial D ision of Chief Administrative Law Judge

John E Cograve The Presi ing Officer found that Mitsui had violated

section 18b 3 ofthe Shipp gAct 1916 46 U S C 817 and awarded

the Mennen Co reparations in the amount of 3 005 12 with interest at

the rate of 12 from the dat ofshipment

Mitsui excepts only to the award of interest insofar as it is calculated

to accrue from date of ship ent Mitsui cites the Commission s policy

that interest shall accrue fro date ofpayment of freight charges and

requests that the award ofin erest in this proceeding reflect that policy

See Interpur A Division ofD rtIndustries Inc v Barber Blue Sea Line

22 F MC 679 1980 see alo Policy Statement Interest on Awards

of Reparation 46 C F R 53 12 Mennen did not respond to Mitsui s

Exceptions

The Commission agrees t at its policy on accrual of interest should

be applied here The award finterest on the reparation will be amend

ed to accrue from date ofpa ment offreight charges

THEREFORE IT IS 0 DERED That the Initial Decision is

adopted except as indicated d

IT IS FURTHER ORD ED That Mitsui O S K Lines pay the

Mennen Co 12 percent inte est on the award of reparation accruing

from date of payment offrei ht charges and

IT IS FURTHER ORDE ED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Assistant Secretary

23 F M C 127
FEDERAL MARITIME COMMISSION

DOCKET NO 80 7

THE MENNEN CO

v

MITSUI O S K LINES

Respondent Mitsui found to have violated section 18b 3 of the Shipping Act 1916

Reparation awarded

M Robert Livesey for complainant

George E Dalton for respondent

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGEl

Partially Adopted August 21 1980

The Mennen Company alleges that Mitsui has violated section

18b 3 of the Shipping Act 1916 on two shipments of Mennen s

products Mennen requested that the case be tried under the shortened

procedure provided in Rules 181 to 187 of the Commission s Rules o

Practice and Procedure and Mitsui acquiesced

The first shipment which complainant says consisted of2 069 cases o

Shaving Cream Hair Tonic and Baby Lotion was described on the bil

oflading as

Consumer Commodities ORM D Toilet Preparations Toilet

Preparations

The second shipment alleged to consist of 1 960 cases of Hair Tonic

and Baby Bath was described on the bill oflading as

687 Cases Consumer Commodities ORM D Hair Tonic 1263

Cases Toilet Preparation

On this shipment the 687 cases of Hair Tonic were as complainant

admits correctly rated as Hair Tonic With the exception of the 687

cases of hair Tonic all the commodities were classified by Mitsui as

Toilet Preparations N O S and rated at 167 00 per cubic meter plus

an 8 currency adjustment factor Under this rate complainant paid a

total of 9 875 26 in freight charges

1

This decision will become the decision of the Commisaion in the absence of review thereof by the

Commioslon Rule 227 Rules of Practice and Procedure 46 CFR 502 227

128 23 F MC
THE MENNEN CO V MITSUI O S K LINES

At the time of the shipments Mitsui s tariff contained the following

classifications 2

Item No 553 0010 40 Shaving Cream 94 00 W1M

Item No 553 0020 60 Hair Tonic 102 00 W M

Item No 553 0035 48 Baby Lotion 12100 WIM

Item No 554 1000 00 Soap N O S 120 00 WIM

In support of the complaint Mennen has submitted the packing lists

for the two shipments to show that the commodities rated as Toilet

Preparations N O S were actually

1584 cases Hair Tonic 31403 cu m 3564 lbs

203 cases Baby Lotion 2 937 cu m 27601bs

75 cases Shaving Cream 1076 cu m 1106 lbs

180 cases Shaving Cream 1019 cu m 900 lbs

1273 cases Baby Bath 1O 817 cu m f1457 Ibs

Mennen argues that the commodities in the two shipments should have

been rated as follows

255 cases of Shaving Cream 180 cases ofbrushless shave and

75 cases ofsof stroke regular 2 095 cu m at 94 00 per cu

m plus 8 CAF 212 68 under Item No 553 0010 40 Tariff

No 27 p367

1584 cases Hair Tonic 31403 cu m at 102 00 per cu m

plus

8 CAF 3459 36 under Item No 553 0020 60 Tariff27 p

367 3

230 cases Baby Lotion FAS value over 30012000 lbs 2 937

cUm at 12100 per cu m plus 8 CAF 383 81 under

Item No 553 0038 48 Tariff 27 p 368

Mennen claims that the correct total for the above is 6 852 14 and

claims reparation in the amount of 3 005 12

Mitsui moves to dismiss4 Mennen s complaint on two grounds First

Mitsui contends that the use of the classification Toilet Preparations

N O S was proper because it was based upon Mennen s own descrip

tion of the commodities shipped Second Mitsui urges that Mennen has

not met the heavy burden ofproof required by the Commission in cases

such as this

The first argument made by Mitsui was disposed of in the very case

cited by Mitsui in support ofits second argument In Western Publishing

Co v Hapag Lloyd A G 13 S R R 16 1972 the Commission expressly

held that a shipper is entitled to reparation for overcharges if he can

show what actually moved notwithstanding an incorrect description

which the shipper or forwarder may have placed on the bill of lading

2

The applicable tariffis the Far East Conference Tariff No 27 FMC No 10

3

The 687 cases of Hair Tonic which moved in the second shipment were correctly rated under

Item No 553 0020 60

4

Although entitled Motion to Dismiss Mitsui asks that the pleading be considered its memoran

dum of law under Rule 183

23 F M C

129
130 FEDERAL MARITIME COMMISSION

The heavy burden of proor referred to by Mitsui and imposed b

the Commission has subsequently been explained by the Commission a

referring to the shipper s difficulty in obtaining the necessary evidence

rather than the weight to be given to such evidence Pan America

Health Organization v Moore McCormack Lines Inc Docket No 387 1

FMC Report on Remand September 12 1979

In support ofits charge that Mennen has failed to sustain its burde

of proof Mitsui refers only to the bills of lading and the expor

declarations covering the two shipments and which were attached t

the complaint As already noted except for 687 cases of Hair Tonic a

the articles were described as Toilet Preparations The export decla

rations variously describe the articles shipped as Shaving Preparation

Hair Preparation Cosmetic creamS lotions and Bath Preparations

Mitsui claims that this only confuses matters and that on the expo

declarations the articles are not accurately described

Mitsui makes no mention on the packing lists and sales literature

which were also attached to the complaint The packing lists describ

the articles as Mennen Brushless Shave Mennen Soft Stroke Reg

Mennen Hair Tonic Mennen Baby Lotion Mennen Ha

Groom and Mennen Baby Bath The sales literature demonstrate

that these descriptions coincide with the items Shaving Cream Ha

Tonic Baby Lotion and Soap N O S cited above and appearing i

Mitsui s tariff at the time of shipment In a great many previous case

the Commission has accepted just such evidence as sustaining the re

quired burden of proof See eg Western Publishing Company v Hapa

Lloyd A G supra Abbott Laboratories v Alcoa SS Company 18 F MC

376 1975 Union Carbide v Venezuelan Line 17 F M C 185 1974

On the basis of the foregoing Iconclude the complainant has prove

that respondent Mitsui has violated section 18b 3 of the Shippin

Act 1916 by improperly classifying the shipments under consideratio

here Complainant Mennen is awarded reparation in the amount o

3 005 12 with interest at the rate of 12 from the date of shipmen

S JOHN E CooRAVB

Administrative Law Judge

Washington D C

May 27 1980

23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 94

ALL FREIGHT PACKERS FORWARDERS INC

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE APPLICATION

ORDER ADOPTING INITIAL DECISION

August 26 1980

This proceeding was initiated by Order ofInvestigation and Hearing

served October 29 1979 to determine

1 Whether All Freight Packers and Forwarders Inc violated

section 44 a Shipping Act 1916 by engaging in unlicensed

forwarding activities

2 Whether civil penalties should be assessed against All Freight

Packers Forwarders Inc pursuant to 46 U S C 831 e for

violations of the Shipping Act 1916 and if so the amount of

any such penalty which should be imposed taking into consid

eration factors in possible mitigation of such a penalty

3 Whether All Freight Packers Forwarders Inc is fit willing

and able properly to carryon the business of forwarding and

to conform to the provisions of the Shipping Act 1916 and

the requirements rules and regulations of the Commission

issued thereunder

On May 16 1980 Administrative Law Judge Joseph N Ingolia

issued an Initial Decision finding that All Freight Packers and For

warders engaged in forwarding without a license but that the applicant

was nevertheless fit willing and able to carryon the business of

forwarding Exceptions to the Initial Decision were filed by All

Freight to which the Commission s Bureau of Hearing Counsel re

plied

THE INITIAL DECISION

The Initial Decision first makes certain findings of fact concerning

the three issues raised in the Order and then concludes that I All

Freight engaged in six instances of forwarding without a license 2 a

civil penalty of 5 000 be assessed for these violations 3 All Freight is

nevertheless fit willing and able properly to carryon the business of

forwarding and to conform to the provisions ofthe Shipping Act 1916

and the requirements rules and regulations of the Commission issued

thereunder and 4 within 90 days of the Commission s adoption ofthe

Initial Decision All Freight must file a statement with the Commission

11 F M C 111
132 FEDERAL MARITIME COMMISSION

affirming that it established reasonable accounting procedures for re

cording its ocean freight forwarding transactions

With respect to the penalty issue the Presiding Officer advises tha

the 5 000 amount reflects the fact that the violations were unintention

al in nature few in number that All Freight received no compensation

for its unlawful forwarding that All Freight cooperated fully during

the investigation and took steps to correct the situation once it learned

it was acting improperly The Presiding Officer further points out tha

this penalty is sufficient to remind freight forwarders that they act in 

fiduciary capacity and must maintain a high standard ofconduct which

requires knowledge of and adherence to Commission rules and poli

cies

When considering the fitness issue the Presiding Officer takes into

account numerous mitigating factors to wit that the applicant has a

untarnished business reputation and an unblemished past there wer

few violations there was no attempt to conspire with others to deceiv

or mislead the Commission the violations did not involve acts of mora

turpitude or false statements or result in unjust enrichment Inshort th

Presiding Officer concludes that there is nothing to indicate that Al

Freight would be deficient in the operation of freight forwarding o

should be deprived of an opportunity to engage in such business

POSITION OF THE PARTIES

All Freight restricts its Exceptions to a challenge of the amount o

penalty assessed in the Initial Decision It urges the Commission t

reject the finding that a 5 000 penalty be assessed and instead refe

the matters ofpenalties to the Commission s Office ofGeneral Counse

for assessment of civil penalties consistent with mitigating factors rele

vant to this proceeding Besides recapitulating the mitigatin

factors cited by the Presiding Officer All Freight submits that it

financial condition and losses already suffered by the delay in process

ing its license application also be considered

In its Reply to All Freight s Exceptions Hearing Counsel points ou

that the Commission s rules and regulations provide that assessment o

civil penalties may be made only in a formal section 22 proceeding

and that Hearing Counsel shall participate as attorney for th

Commission entering into stipulations and settlements 46 C F R

505 3 Hearing Counsel also notes that formal assessment proceeding

against All Freight were instituted by the Commission pursuant t

sections 22 and 32 of the Shipping Act 1916 and that All Freight 

Harry D Kaufman D B A Intematianal Shipping Co ofN r

Independent Ocean Fretght Forward

Ltcense 16 F M C 256 271 1973 Dixie Forwarding Co IncApplicotion for License 8 F M C 1

1964

1 RM
ALL FREIGHT PACKERS FORWARDERS INC 133

request to refer this matter to General Counsel for negotiations is

therefore inappropriate

Moreover Hearing Counsel asserts that the mitigating factors cited

by All Freight in its Exceptions were considered by the Presiding

Officer in determining the 5 000 penalty amount Hence Hearing

Counsel urges the Commission to reject the Exceptions and to adopt

the Initial Decision

DISCUSSION AND CONCLUSION

The Commission after a thorough review of the record in this

proceeding finds that the conclusions reached in the Initial Decision

are proper and well founded The contentions advanced by All Freight

regarding the reasonableness of a 5 000 civil penalty merely reargue

matters already considered and correctly disposed of by the Presiding

Officer Accordingly payment of the recommended amount will be

required

THEREFORE IT IS ORDERED That the Initial Decision in this

proceeding is adopted by the Commission and

IT IS FURTHER ORDERED That the Exceptions of All Freight

Packers Forwarders Inc are denied and

IT IS FURTHER ORDERED That within thirty 30 days of the

date of this Order All Freight Packers Forwarders Inc contact the

General Counsel of the Federal Maritime Commission to arrange for

payment ofthe assessed penalty and

IT IS FURTHER ORDERED That within ninety 90 days of the

Commission s adoption of the Initial Decision All Freight Packers

Forwarders Inc file a statement with the Commission affirming that

it has established reasonable accounting procedures for recording its

ocean freight forwarding transactions and describing in sufficient detail

the nature and operation ofthose procedures including but not limited

to the nature of original books of entry retrieval capability and the

availability offinancial statements

Finally IT IS FURTHER ORDERED That this proceeding is

discontinued

S JOSEPH C POLKING

Assistant Secretary

23 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 79 94

ALL FREIGHT PACKERS FORWARDERS INC

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE APPLICATION

Held

IAll Freight violated section 44a of the Shipping Act by engaging in the business 

ocean freight forwarding without a license in at least six separate instances

2 Where AII Freight s principal officer believed one could forward ocean freight witho

a license if no compensation were received and where it stopped forwardin

ocean freight after being advised it was illegal to do so except in one or tw

inadvertent instances and where after being advised it was illegal to forward oce

freight without a license it instructed ita employees not to do so and referred 

customen to other licensed ocean freight forwarden it is held that a penalty 

5 000 shall be assessed against All Freight under section 32 e of the Shipping A

3 Where the applicant applied for an ocean freight forwarder s license and cooperate

fully with the Commission s investiption into ita activities and in light of the fac

set forth in parasraph 2 above it is held that All Freight is I1t willing and ab

properly to carry on the business of forwarding and to conform to the provisions 

the ShippinS Act 1916 and the requirements rules and regulations of the Comm

sion issued thereunder it is further held that within 90 days of Commission adopti

of this decision All Freight me a statement with the Commission describing 

accounting procedures regarding its ocean freight forwarding activities

Carlos Rodriguez for respondent AIIFreisht Packen Forwarden Inc

John Robert Eweand Joseph B Slunt as Hearing Counsel

INITIALDECISION OF JOSEPH N INOOLIA

ADMINISTRATIVE LAW JUDOE

Adopted August 26 1980

This proceeding was instituted by a Commission Order of Investig

tion and Hearing issued October 29 1979 The issues set forth in th

Commission s Order and under consideration in this proceeding ar

1 Whether All Freight Packers Forwarders Inc violated se

tion 44a Shipping Act 1916 by engaging in unlicensed fo

warding activities

2 Whether civil penalties should be assessed against All Freig

Packers Forwarders Inc pursuant to 46 U S C 831 e f

violations ofthe Shipping Act 1916 and if so the amount 

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

Commilslon Rule 227 Rules of Practice and Procedure 46 CPR 02 227

134 23 F MC
ALL FREIGHT PACKERS FORWARDERS INC 135

any such penalty which should be imposed taking into consid

eration factors in possible mitigation of such a penalty

3 Whether All Freight Packers Forwarders Inc is fit willing

and able properly to carryon the business of forwarding and

to conform to the provisions of the Shipping Act 1916 and

the requirements rules and regulations of the Commission

issued thereunder

In accordance with the Commission s Order the parties submitted

original and reply memorandums of law together with several affida

vits They later agreed that no oral testimony or cross examination was

necessary and that the case should stand submitted on the basis of the

written material already in the record The various documents in the

record and the respective exhibit number assigned to each are as fol

lows

Document Exhibit

No

1

2

Affidavit of Carlos D Niemeyer

Affidavit of Robert James Klapouchy

Affidavit of Eleanor V Navickas

1214 79

Affidavit of William M Adams

Affidavit of Eleanor V Navickas

129 80

3

4

5

FINDINGS OF FACT

lOn June 14 1978 Mr William M Adams President ofAll Freight

Packers Forwarders Inc All Freight voluntarily telephoned the

Commission s San Francisco office He asked for information about

how he might acquire an independent ocean freight forwarder license

Mr Adams stated he had forwarded some ocean shipments and wanted

a license so he could collect compensation on future shipments Ex I

par s 2 3 Ex 4

par 3

2 At the time Mr Adams telephoned the Commission s San Francis

co office he and All Freight believed it was not improper to forward

without a license as long as compensation was not collected Ex 4

par 3

3 Mr Adams was informed that section 44 Shipping Act 1916 and

General Order 4 require a license before forwarding any ocean ship

ment and he was advised not to forward any more shipments by water

until such time as he was licensed Ex I

par 4

4 By letter dated June 14 1978 Mr Adams was sent a Form FMC

18 Application for a License as an Independent Ocean Freight For

warder copies of General Order 4 and sections I and 44 of the

Shipping Act 1916 The letter specially directed Mr Adams to the

11 RM r
136 FEDERAL MARITIME COMMISSION

need to obtain a license before engaging in the business of forwarding

Ex I par 5

5 On June 21 1978 Mr Adams was interviewed by an investigato

in the Commission s Los Angeles Office Pacific District At that tim

aU records were made available to the investigator and Mr Adam

fully cooperated Mr Adams stated All Freight had only recently ap

plied for a freight forwarder s license in order to accommodate a fe

requests from customers for ocean freight shipments and that A

Freight forwarded two ocean freight shipments but did not colle

forwarding compensation from the ocean carriers Ex 3 par s 2 

Ex 4 par 6

6 The Commission s

investigator verified what had transpired wit

respect to the two shipments by contacting third parties and learne

that All Freight has not received any brokerage fees from the tw

shipments Ex 3 par s 5 6

7 Sometime between July I 1978 and October 1978 All Freigh

filed its application for an independent ocean freight forwarder license 

By letter dated November 22 1978 the Commission s Office of Freigh

Forwarders acknowledged receipt of the application and advised Al

Freight that if it engaged in freight forwarding before receiving it

license it would be subject to penalties provided by law and migh

prejudice the issuance of its license Ex 2 par 4 Ex 4 par 21

8 InJuly of 1978 AU Freight advised its employees that they shoul

not offer ocean freight forwarding services until the company receive

its license from the Commission Ex 4

par 10

9 Beginning in the summer of 1978 All Freight advised some of it

customers that it was not licensed to engage in ocean freight forward

ing and referred them to licensed ocean freight forwarders such as AP

Maritime Services Inc API Senderex Cargo Inc Senderex j

an

Amerford International Corporation Amerford Ex 4 par s 9 10

Ex 5 par 6

10 During the period from July 14 1978 until October 29 1979 Al

Freight has handled packing for at least twenty ocean export shipments

all of which were referred to licensed forwarders Ex 4

par 17

11 On January 4 1979 the Commission investigator again inter

viewed Mr Adams in All Freight s offices Files dating back to th

company sinception were provided It was found that no ocean ship

ping journals were maintained by All Freight A review of its sale

invoices indicated that in addition to the two ocean shipments describe

Mr Adams amnns that the application was filed on July I 1978 at Washington D C Ex 4 pa

21 The affidavit of the Commission s

investigator states the application was received in the Pacif

District s San Francisco office on October 10 1978 Ex par 13 Since letters of recommendatio

were sent to the San Prancisco office in September it would appear the application was tiled befor

October of 1978 Mr Adam also amnned that the Pacific District Omce told him the application ha

been sitting on someone s desk

1 J1tA r
ALL FREIGHT PACKERS FORWARDERS INC 137

in paragraph 6 there were seven other ocean shipments as set forth

below

All Freight

Invoice Date

1 01 1079

2 11 1578

3 07 14 78

4 06 0978

5 04124 78

6 0223 78

7 10 24 77

Shipper Carrier Vesse and Bill of Lading

Kaynar Mfg

Co

Globe Union

Plasticos

Modernos

Abdul Al Alami

North Supply

Co

Sun Marketing

Kaynar Mfg

Co

Johnson Scanstar Antonio Johnson V 4GE B L

No 530176

APL President Fillmore V 73 B L No 053347

Delta Line Delta Africa B LNo 7

Maersk Line B Lunavailable

Matson Line Transoneida V 35 B L No T 42880

Hoegh Line Hoegh Elite V 31 B L No LA 16

Johnson Scanstar San Francisco V 40E B L No

430172

Ex 3 par 9

12 All Freight did not receive any forwarding compensation with

respect to any of the above shipments nor did it receive any brokerage

fees Ex 3 par 16 Ex 4

par 20

13 The bill of lading relating to the 1979 Kaynar Mfg Co shipment

does not list anyone as the forwarding agent although the Commis

sion s investigator affirms that the Department of Commerce Shipper s

Export Declaration lists All Freight as agent of exporters Forwarding

Agent The signature J S JETTE appears as the Duly authorized

officer or employee of exporter or named forwarding agent for All

Freight Packers and Forwarders Inc Mr Adams indicates he does

not recall All Freight performing any freight forwarding services and

that since the time of the shipment Kaynar had been using Amerford

for over a year and he believed the only services besides packing

provided by us had to do with the labeling and documentation relating

to the shipping of hazardous cargo Ex 4 par s 13 15 Ex 5

par 11

14 The bill of lading relating to the Globe Union shipment indicates

that All Freight was the forwarding agent All Freight does not dispute

this fact but avers the shipment was unintentional isolated and inad

vertent Ex 3 par 10 Ex 4 par s 13 15 16

15 The bill of lading relating to the P1asticos Modernos shipment

lists Amerford as the forwarding agent Ex 3 par 10

16 The bill of lading relating to the 1977 shipment of Kaynar Mfg

Co lists Amerford as the forwarding agent Ex 3 par 10

17 All Freight is a California corporation formed on October 15

1976 with principal offices at Anaheim California It is a packer for

firms and individuals who are involved in the transportation ofgoods in

export and domestic trades Ex 4 par 1

23 F M C
I

i

138 FBDBRAL MARITIMB COMMISSION

18 All Freight has been an air freight forwarder lATA since Ma

22 1978 Ex 4 par 2

19 lATA agents are required to secure a license if they colle

compensation for their services A person may forward air freigh

without a license if no compensation is collected Ex 4 par s2 3

20 AlI Freijht employs twelve persons and nets less than SOO pe

month Ex 4 par 23

21 William M Adams the qualifying officer after graduating from

Brigham Young University worked in the transportation industry a

follows

1971 Began workingfor Airborne Freight Corporation

1971 1972 Sales Representative for International Department

1972 1974 Salesman for AirSea Forwarders Promoted to

Assistant General ManaJer working closely with both air and

ocean department coordmating shipments and preparing docu

ments for customers

1974 1976 Vice President of Marketing for Airport Packers

Forwarders Supervised air and ocean sales and operations

Reviewed special project documentation consular work

1976 to Present President ofAlI Freight Packets Forward

ers Directed all operations and sales activities for the compa

ny Works closely with operations manager in reviewing docu

ments and coordmating shipments for various customers

22 From early 1979 through June 6 1979 Mr Adams had severa

conversations with Commission employees in the Office of Freigh

Forwarders On May 14 1979 he was told there were no serious

problems with the application However on June S 1979 he was tol

the application would be recommended for denial Ex 4 PW 21 4

23 By letter dated July 12 1979 Mr Adams was informed that th

Commission intended to deny the application whereupon he timel

requested a hearing on behalf ofAll Freight

ULTIMATE FINDINGS OF FACT

24 All Freight violated section 44a of the Shipping Act 1916 b

forwarding ocean freight without a license albeit without compensa

tion

2S Prior to being informed that one could not forward ocean freigh

without a license from the Commission All Freight s qualifying office

believed that as in the case of air freight one could forward ocea

freight without a license if he did not receive compensation for it

26 After being advised by the Commission that it was unlawful t

forward ocean freight without a license All Freight advised its employ

ees not to do so and after informing some of its customers that it Al

Freight could not forward ocean freight referred them to other l

censed freight forwarders in at least twenty instances In one or two

instances AU Freight did list itself as freight forwarder or perform a

23 FMC
ALL FREIGHT PACKERS FORWARDERS INC 139

isolated freight forwarder activity after being advised not to do so but

these instances were inadvertent unintentional oversights not willful

acts meant to bypass the Commission the law or the regulations pro

mulgated under it

27 A civil penalty of 5 000 assessed under sections 32 a and e of

the Shipping Act is proper and adequate as it recognizes the lack of

willfulness or intentional disregard of the law and regulations and at

the same time is deterrent enough to indicate that freight forwarders

act in a fiduciary capacity and must maintain high standard ofconduct

which requires knowledge of and adherence to the Commission sregu

lations and policies

28 All Freight is fit willing and able properly to carryon the

business of forwarding and to conform to the provisions of the Ship

ping Act 1916 and the requirements rules and regulations of the

Commission issued thereunder

DISCUSSION

ISSUE NO 1 VIOLATION OF SECTION 44 A

Section 44 a ofthe Shipping Act 1916 provides

No person shall engage in carrying on the business offorward

ing as defined in this Act unless such person holds a license

issued by the Federal Maritime Commission to engage in such

business

This issue is basically a factual one and there is no dispute in the record

regarding the fact that All Freight did carryon the business of for

warding without having obtained a license to do so from the Commis

sion While the parties disagree as to the exact number of times the

unlicensed forwarding occurred even if All Freight were given the

benefit of the doubt in each of the disputed instances it still would

have violated section 44 a in the following six instances

Date Shipper

I 1115 77 Sun Marketing

2 12 0577 Sun Marketing

3 11115 78 Globe Union

4 06 09 78 Abdul AI Alami

5 042 78 North Supply Co

6 02123 78 Sun Marketing

Schedule ofShipments

Carrier Vessel and Billof Lading

Hoegh Line Roech Orchid V 22 B L No

LA 7

Hoegh Line Not Legible V 17 B LNo LA

12

APL President Fillmore V 73 BIL No

053347

Maersk Line B Lunavailable

Matson Line Transoneida V 35 B L No T

42880

Hoegh Line Hoegh Elite V 31 BIL No LA

16

23 F MC
140 FEDERAL MARITIME COMMISSION

It is held that All Freight violated section 44 a Shipping Act 19

by engaging in unlicensed forwarding activities

ISSUE NO 2 CIVIL PENALTIES

Section 32 a of the Shipping Act provides in pertinent part th

whoever violates section 44 of this Act shall be

subject to a civil penalty not to exceed 5 000 for each such

violation

Further section 32 e of the Shipping Act states

the Commission shall have authority to assess or compro

mise all civil penalties provided in thisAct

Since it has already been determined that AllFreight has violat

section 44 a ofthe Shipping Act by engaging in the business offreig

forwarding without a license what remains to be determined is t

amount ofcivil penalty to be assessed under the above sections He

ing Counsel takes the view that

A penalty of 40 000 5 000 for each of the eight violations of

section 44 a could be assessed against All Freight In consid

eration of the limited amount of fees collected by All Freight

and the fact that it nets less than 500 per month Respond

ent s Memorandum at 13 we submit that a 5 000 penalty

is appropriate

In answer the respondent asserts that a lesser penalty or none at 

should be assessed because it was unaware it was unlawful to forwa

ocean freight without a license if One did not collect compensation a

because it has already been sufficiently punished because of the inor

nate delay in processing its application Hearing Counsel replies

the delay in the processing of respondent saplication has

been a direct result of the applicant s own activities If All

Freight had not engaged in carrying on the business of for

warding without a license its application would have been

processed in the normal time Any delay which resulted from

the respondent s activities should not be a factor in reducing

the amount of a civil penalty

And further

Likewise respondent s claim that it did not realize that its

activities were unlawful should not serve to reduce the

proposed penalty as Mr Adams has several years of experi

ence in the forwarding industry and All Ereight continued to

carryon the business of forwarding after it was warned not to

do so

It is clear that given a statute providing for a civil penalty of 5 0

for each violation and given the fact that the word each refers 

individual transactions here it is each shipment there is a wide ar

of discretion as to the amount of the penalty which might be assess

23 FMC
ALL FREIGHT PACKERS FORWARDERS INC 141

and as to the factors which one should consider In essence it is an area

one might traverse ranging from a purely unintentional technical viola

tion which damages or unjustly enriches no one to a willful and

flagrant illegal act intended to unjustly enrich the person perpetrating

it to the detriment of others Here the record will not support a

holding that the violations which occurred were willful or deliberate

Rather they support a holding that All Freight Mr Adams forward

ed ocean freight without compensation and believed the lack of com

pensation obviated the need for a license 3

Further he voluntarily

applied for a license and once he was advised by the Commission that

he was in error in forwarding freight without a license he took steps to

correct the error

4

Also the record is devoid ofany unjust enrichment

from any service directly or indirectly related to the unlicensed ocean

forwarding and there is no falsification or duplication ofrecords

As to Hearing Counsels averment that the delay in this case resulted

from the fact the respondent forwarded without a license there is no

doubt that a portion of the period June I 1978 to July 12 1979 was

taken up in the investigation of that wrongdoing However one must

read the record myopically to conclude that the delay was due entirely

to the respondent

On the other hand the respondent avers that it has been sufficiently

punished because ofthe inordinate delay in processing its application

A

portion ofthat delay was attributable to its own actions and in any

event the record contains no evidence of how any delay would or

should monetarily affect the amount of the penalty 5

For example it

would seem appropriate to show the exact period of delay which was

inordinate and what financial damage was suffered during that period

oftime In short the mere fact that there was some delay inordinate or

not should not of itself serve to reduce what otherwise would be a

proper civil penalty

The respondent argues further that the civil penalty should be less

than 5 000 because Hearing Counsels proposed sanction represents

All Freight s net profit for a whole year of operation However true

and unfortunate that fact may be standing alone it cannot be allowed

to govern the amount of civil penalty to be assessed The record

contains no evidence as to why All Freight s net profit is low in the

3

This argument was advanced in Concordia International Forwarding Corporation Independent

Ocean Freight Forwarder Application and Possible Violations of Section 44 Shipping Act 1916 Docket

No 78 34 served December 18 1978 21 F M C 587 and rejected by the Commission which bot

tomed its decision on differentiating the word compensation from the word consideration

4

Findings of Fact 8 9 10 where the respondent advised his employees not to offer ocean freight

services until licensing was obtained and where he referred clients to other licensed freight forwarders

pending his own receipt of alicense

S The citation of Fabio A Ruiz D B A Far Express Company 15 F M C 242 247 relying on Inde

pendent Ocean Freight Forwarder License Application Guy G Sorrentino 15 F M C 127 is not helpful

since it lacks specificity and refers to the general question of fitness

23 F M C
142 FBDBRAL MARITIMB COMMISSION

year in question Even if it did the correlation between net profit an

the amount of penalty is vague If there is a true inability to pay a

opposed to a low net profit that aspect could more properly have bee

addressed initially with Hearing Counsel in settlement negotiations an

even now may still be raised if it has any validity So here the mer

assertion that yearly net profit is less than the penalty to be assesse

dOes not by virtue of the assertion itself warrant any real consideration

In his brief Hearing Counsel in support of his argument states tha

The shipments were forwarded in order to hold on to clients that th

respondent had no right to serve The record does not support such 

far reaching conclusion It is based on assumption rather than fact an

is elaborated upon in a later portion of this opinion Also Hearin

Counsel s argument that the respondent s claim that it did not realize it

activities were unlawful should not serve to reduce the proposed pena

ty is not valid Certainly a

knowing violation is more abhorrent tha

one which is unintentional and although both are nonetheless viola

tions the equal application of a penalty to both would be erroneous

Further the fact that Mr Adams had some experience as an ocea

freight forwarder does not serve to establish that he knew he had to b

licensed before forwarding ocean freight without compensation Tha

he should have known is indisputable that he did know is debatable

Finally as to carrying on the business of forwarding after being warne

not to do so there appears to be one inadvertent instance Glob

Union where a shipment was made after the warning was given two

others where some incidental freight forwarding may have occurred

after the warning was given and over 20 others where shipments wer

referred to licensed forwarders Mr Adams says the one incident wa

inadvertent and since there is nothing in the record to refute tha

statement it has been so held as a fact The other instances where some

freight forwarding services may have been performed were also inad

vertent

So here while we do not agree with all of his reasoning we do

agree with Hearing Counsel that a civil penalty should be assesse

against AllFreight and that the amount of that penalty taking into

consideration the factors in mitigation should be S OOO That figure

gives adequate consideration to the unintentional nature of the viola

tion the fact that there was no deviousness or unjust enrichment tha

the number ofviolations was not great and that AllFreight did cooper

ate fully during the investigation and took steps to correct the situation

once it learned it was acting improperly On the other hand it is a

deterrent enough to signal that freight forwarders act in a fiduciary

capacity and that they must maintain a high standard of conduct which

23 F MC
ALL FREIGHT PACKERS FORWARDERS INC 143

requires knowledge of and adherence to Commission rules and poli

cies 6

ISSUE NO 3 APPLICANT S FITNESS

Section 44b ofthe Shipping Act provides in pertinent part

A forwarder s lIcense shall be issued to any qualified applicant

therefor if it is found by the Commission that the applicant is

or will be an independent ocean freight forwarder as defined

in this Act and is fit willing and able properly to carryon the

business of forwarding and to conform to the provisions of

this Act and the requirements rules and regulations of the

Commission issued thereunder and that the proposed forward

ing business is or will be consistent with the national mari

time policies declared in the Merchant Marine Act 1936

otherwise such application shall be denied

Hearing Counsel in making his argument concludes that

in view of the clear prohibition of section 44 a not to

forward ocean shipments without a license and the applicant s

disregard of warnings from the Commission not to do so All

Freight does not qualify for licensing

The conclusion is erroneous It is based on the applicant s disregard of

warnings from the Commission a fact which has no real support in

the record To the contrary as has been noted the record shows and

we have found as fact that once the Commission warned the appli

cant he advised his employees not to offer clients ocean freight for

warding services and referred his customers to other licensed forward

ers The record contains documentary evidence from the employees

forwarders and shippers to this effect Again while there are three

instances where All Freight was involved in ocean shipments after the

Commission warning only in one instance was it listed as the ocean

freight forwarder We have found as fact that incident as well as any

other incidental act of forwarding was unintentional and they hardly

justify the leap to a holding that All Freight disregarded Commission

warnings not to forward without a liceI 6

As to the cases cited by Hearing Counsel we do not disagree with

the import of the cases or the quoted language setting forth general

tenets to be followed However the issue here is basically factual and

when one looks behind the broad language and compares the specific

facts the cases cited are clearly distinguishable from what is involved

in this proceeding or have no specific application to the issue to be

decided In Harry Kaufman supra the facts clearly show an involved

scheme whereby the holder of an ocean freight forwarding license sold

8

Independent Ocean Freight Forwarder License Applica ion Guy G Sorrentino supra Harry D Kauf

man D B A International Shipping Co of NY Independent Ocean Freight Forwarder License 16

FM C 256 271 1973 Dixie Forwording Co IncApplicationfor License 8 F M C 109 1964

23 F M C
144 FEDERAL MARITIME COMMISSION

his business to another party whose freight forwarder s license h

already been revoked by the Commission and allowed his own lice

to be used by the other party all without any notice to the Comm

sion The situation in Kaufman is so aggravated that when compa

with the facts involved in the instant case one is hard pressed to f

any correlation between the two cases except to note the basic diff

ence as to how the violation occurred As to the citation of Independ

Ocean Freight Forwarder Liqense Application Guy G Sorrentino 

F MC 127 128 1972 there the Commission ultimately approv

issuance ofthe license and Hearing Counsel does not make any relev

factual comparisons to the instant case The general language is pe

nent but its application is what is at issue As to Independent Oce

Freight Forwarder Application Lesco Packing Co Inc 19 F MC 1

136 137 1976 once again the general statement cannot be disput

but the denial of the freight forwarder license involved the same pa

who was involved in Kaufman supra 8110 had been convicted 

criminal fraud willfully and knowingly made false statements in app

ing for a prior ocean freight forwarding license and who had previo

ly violated the export control laws These kinds of facts are not 

volved in this proceeding so that the case cited is clearly distingui

able

Hearing Counsel cites Concordia International Forwarding Corporat

Independent Ocean Freight Forwarder Application and Possible Violatio

of Section 44 Shipping Act 1916 Docket No 78 34 served Decemb

18 1978 21 F MC 587 to support the argument that

Mr Adams the qUlilifying officer of the applicant had four

years ofexperience in the forwarding industry Inaddition the

applicant received at least two oral and two written warnings

that to carry on the business offorwarding without a license

The applicant s disregard of the Shipping Act and these

warnings demonstrates that it is not fit and cannot be found to

be willing to conform to the provisions of the Shipping Act

and the Commission s

regulations Therefore All Freight s ap

plication for an independent ocean freight forwarder license

should be denied

The only similarity between Concordia and the instant case is t

both respondents averred that they believed they could engage in oce

freight forwarding if they did so without charge but that lone simil

ty is hardly material here When one compares the other facts in the

cases he is apt to conclude that Concordia inferentially at least s

ports All Freight more than it does Hearing Counsel In Concordia 

applicant was initially an individual and principal employee of Conc

dia He had many years of experience in freight forwarding includ

12 years in ocean freight forwarding where he had supervised over 

people in the ocean freight division of a corporation In the inst

23 F MC
ALL FREIGHT PACKERS FORWARDERS INC 145

case Mr Adams has experience as a forwarder since 1972 While the

record indicates some experience in ocean freight forwarding it is

apparent that Mr Adams did not ever engage in the business on a full

time basis His activities have been conducted on a small scale basis

Even more compelling is the fact that in Concordia the individual

involved worked for another company as an ocean freight forwarder

and immediately after he left the old company to go to Concordia the

new company Concordia forwarded ocean freight for his customers

without a fee Six other employees had already moved from the old

company to Concordia The Commission saw through these machina

tions holding that while Concordia did not receive compensation it

certainly did not perform the services without consideration In this

proceeding there are no similar facts although Hearing Counsel con

tends that Mr Adams continued to forward ocean freight after being

warned not to do so because he wanted to hold onto clients which

respondent had no right to serve The evidence underlying such a

conclusion is woefully weak The Commission investigator affirmed

Ex 3 par 11 that

Mr Adams stated that he continued to forward ocean freight

shipments after he had been warned he was in violation of

General Order 4 because he feared losing his air cargo cus

tomers who occasionally made ocean shipments

Mr Adams states that while he may have told the investigator one

always fears losing its clients by referring them the fact was that once

informed of the unlawfulness of forwarding without a license all of

All Freight s shipments with one concrete inadvertent exception were

referred to licensed forwarders The customer involved in the exception

was not an Air Freight customer The record is replete with documents

verifying these facts Further as to Mr Adams contentions regarding

the original statement made by the investigator the investigator s re

sponding affidavit avoids dealing with whether or not Mr Adams ever

made the specific statement attributed to him but rather says

I relied solely on what Mr Adams told me about his fear of

losing air cargo customers I have made no attempts to

verify whether All Freight s clients were or were not air

cargo customers

Based on the above it has been found as a fact that All Freight did not

intentionally continue to forward ocean shipments after being warned

not to do so To find that it did so is not supportable on the facts and

to find that it did so to retain air freight customers is the kind of

judicial bootstrapping one should avoid For example here such a

fact would have to be based on the sworn statement of one person the

Commission investigator as to what another person Mr Adams told

him where the other person Mr Adams denied making the statement

where the documentary evidence of record refutes the statement and

23 F M C
146 FEDERAL MARITIME COMMISSION

where given the opportunity to amplify on the statement the perso

originally advocating it the investigator desists So here we believ

Hearing Counsel s argument and its use of Concordia is misplace

In essence we think this case presents a situation where the app

cant while experienced was not so experienced as to be all knowing

Consequently it made a mistake a mistake which was brought to ligh

by its own voluntary act Once aware of the mistake it took measure

to avoid making it again The record shows that the applicant and i

principal officer have an untarnished business reputation There is n

record of prior wrongdoing ofany nature either in maritime or in othe

matters and statements from established financial institutions and bus

ness associates attest to their business reputation and acumen As to th

initial act of forwarding without a license All Freight s activities we

much less serious than in the cases that usually come before the Com

mission There was not a large number of violations there was n

attempt to conspire with others to deceive or mislead the Commissio

no act of moral turpitude no false statement no unjust enrichment 7

short there was nothing to indicate that if granted an ocean freig

forwarder s license All Freight would be deficient in the operation 

such a business or should be deprived of an opportunity to engage 

that business Application for Freight Forwarder License Carlos H Cab

zas 8 F MC 130 1964

Therefore it is held that All Freight is fit willing and able proper

to carry out the business of forwarding and to conform to the prov

sions ofthe Shipping Act 1916 and the requirements rules and regul

tions of the Commission issued thereunder In so holding there is on

further point which needs to be addressed The record indicates th

throughout the investigation of this application All Freight kept a poo

set of books or none at all regarding its ocean freight forwardin

activities From time to time it either had no record of a transaction o

was at a loss to explain what it did on a particular shipment It seem

clear that the import ofthe law and regulations require anyone engage

in the business of freight forwarding to keep books and records acc

rately recording those transactions occurring on a day to day basi

Accordingly within 90 days of the date the Commission adopts th

decision in whole or in part All Freight is directed to me a stateme

with the Commission affirming that it has established reasonable a

counting procedures for recording its ocean freight forwarding transa

tions and describing in sufficient detail the nature and operation 

7

cr Application for Freight Forwarding License DIx eForwarding

Co

Inc 8 F M C 109 196

Investigation of Practices OperatiollS ActlollS and Agreements of Ocean Freight Forwarders 6 F M B 3

1961 Independent Ocean Freight Forwarder License Eo LMobley Inc

Docket No 77 26 Report a

Partial Adoption of Initial Decision served March 12 1979 Independent Ocean Freight ForWarder 

cellSeApplication LT c Air Co1Io Inc 13 F M C 267 1970 York Forwarding Corp JB Wood Sh

ping Co

Inc IEdwards Fay Corp IS F M C 114 1972

23 F MC
ALL FREIGHT PACKERS FORWARDERS INC 147

those procedures including but not limited to the nature of original

books of entry retrieval capability and the availability of financial

statements

8 JOSEPH N INGOLIA

Administrative Law Judge

Washington D C

May 16 1980

23 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 566 1

EXCAM INC

v

LYKES LINES AGENCY INC

AND COSTA LINES

ORDER

August 28 1980

By Complaint filed August 16 1978 Excam Inc seeks reparation in

the amount of 1 594 10 for freight overcharges assessed by Lykes

Bros Steamship Co Inc on two shipments described on the bills o

lading as Firearms Excam further seeks reparation for overcharge

assessed by Costa Line in the amount of 778 38 on one shipment tha

was also rated as Firearms

Settlement Officer Donald T Pidgeon issued a decision on Decembe

27 1979 awarding 1 594 10 and 743 17 in reparation to Excam on the

basis that the merchandise shipped was in fact Replica Arms and no

Firearms The Commission determined to review the Settlement Off

cers decision on its own motion

The Commission after reviewing the record found that Complainan

had failed to sustain its burden of proof and by Order on Remand

served April 17 1980 directed the Settlement Officer to offer Excam 

further opportunity to demonstrate that the commodity shipped was in

fact Replica Arms and to issue another decision setting forth hi

supplemental findings On June 4 1980 the Settlement Officer issued 

Supplemental Decision reaffirming his Initial Decision citing additiona

findings in support of his earlier ruling 1

Unexplainably the Settlemen

Officer did not as directed by the Commission offer Excam a furthe

opportunity to present evidence in support ofits claim

The Commission remains unconvinced that the shipments at issu

were indeed Replica Arms as alleged and not Firearms The fou

additional findings that are offered in support of the Presiding Off

cers Supplemental Decision have little probative value in the resolu

1 These include 1 the fact that Complainant has been trying since June 17 1976 to petition th

Med Gulf Conference for areduced rate on Replica Arm 2 that there was no doubt on the pa

of the carriers that the cargo hipped was Replica Arm 3 that on May 3 1977 a

pecial freig

tariff and commodity classification was created for Replica Arms Muzzle Loading finished or ki

accessories and partsi and 4 that the shipments inquestion weremade after the new rate was create

148 23 FMC
EXCAM INC V LYKES LINES AGENCY INC AND COSTA 149

LINES

tion of this controversy The Settlement Officer s particular reliance

upon the admission of the carriers that the cargo shipped was Replica

Arms is misplaced in a misrating proceeding

Rather than remanding this proceeding for a second time the Com

mission will directly offer Complainant a further opportunity to

produce convincing evidence e

g invoices bills of lading manifests

which would serve to corroborate the assertion that the commodity

shipped was different than the description stated on the bill oflading 2

THEREFORE IT IS ORDERED That Excam Inc submit to the

Commission by September 26 1980 evidence to support its contention

that the commodity shipped was Replica Arms and not Firearms

and

IT IS FURTHER ORDERED That if this information is not sub

mitted within the time prescribed above the Settlement Officer s Sup

plemental Decision will be reversed and the reparation prayed for will

be denied

Chairman Daschbach not participating

I am not participating because I do not believe that the Commission

should review the decisions of Settlement Officers in informal docket

proceedings Under Subpart S of the Commission s Rules of Practice

and Procedure 46 C FR 502 301 parties consent to waive the rights

and obligations associated with normal adjudicatory proceedings for the

express purpose of receiving prompt consideration of a small claim

Commission review precludes the inexpensive and expeditious handling

of small claims which is the foundation ofthe informal docket process

The Settlement Officer s decisions in informal dockets do not have

precedential value Commission review therefore imposes unnecessary

expense and delay in an arbitration process designed to settle minor

commercial disputes in a prompt and responsive manner

By the Commission

S FRANCIS C HURNEY

Secretary

2

This principle was enunciated inEl DuPont v Sea rain In ernational 18 S RR879 1978 where

it was held that

adetermination of the applicable rate must be based not on a mere admission by the

carrier that it misrated the cargo but on evidence in the record showing the true nature of the

commodity shipped 18 S R R at 880

23 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 681 F

SANRIO COMPANY LTD

v

MAERSK LINE

ORDER ADOPTING INITIALDECISION

September 5 1980

The Commission has before it the Exceptions of the Trans Pacifi

Freight Conference of Japan Korea TPFCl

to the April 21 198

Initial Decision of Administrative Law Judge Norman D Kline in th

above captioned matter Replies to Exceptions were filed by the Com

plainant Sanrio Company Ltd

This is a complaint proceeding in which an importer of goods manu

factured in Japan alleges it was overcharged for 42 different commod

ities shipped on Maersk Line vessels from Tokyo to Oakland Californi

in November and December 1977 under the provisions of TPFC 

Tariff FMC No 6 Ifproven each such overcharge would represent 

violation of section 18b 3 of the Shipping Act 1916 46 U S C

817 b 3 for which reparations may be awarded The Presiding Off

cer ultimately concluded that 38 of the 42 products were incorrectl

rated by Maersk 2but withheld his decision on the amount of repara

tion due Sanrio until a reparation statement is filed pursuant to Sectio

502 252 of the Commission s Rules 46 C FR 502 252 TPFC now

argues that the Initial Decision is erroneous for giving undue weight t

Sanrio s evidence and for failing to consider the policy ramifications o

awarding reparations when a shipper is responsible for the carrier 

misrating ofthe commodities shipped Sanrio supports the Initial Dec

sion in all respects

I TPFC is an association of steamship lines operating under an agreement approved by theComm

sion FMC No 150 Maersk Line the Respondent in this proceeding is amember of TPFC and 

governed by its tariff The Conference was granted leave to intervene on March 4 1980 in order 

present Maersk sviewpoint from abroader prospective

a

Commodity rates for Stationery Bags Baskets and Luggage Artist s Materials Trav

Kits uPaper Manufactures Toys Personal Ornaments Ceramicware Plastic Manufa

tures uBrushes under 1 00 Hari Clip Tape Cart Printed Matter Towel Bar a

uNovelty Pencil were found to apply instead of the Cargo ND S rate

150 23 FMC
SANRIO COMPANY LTD V MAERSK LINE

POSITION OF THE PARTIES

Respondent Intervenor

TPFC s primary contention is that the Commission is following an

unwise policy by adjudicating section l8 b 3 claims exclusively upon

the evidence presented as to what was actually shipped 3

TPFC states

that this policy is not legally mandated and that a more flexible ap

proach could be taken both in determining whether violations have

occurred and whether reparations should be awarded under section 22

of the Shipping Act 1916 46 U S C 821 This proposition is support

ed by citations to State of Israel v Metropolitan Dade County 431 F2d

925 5th Cir 1970 and Consolo V Federal Maritime Commission 383

U S 607 621 622 1966

TPFC believes the Commission should adopt a policy ofconsidering

the respective culpability of the parties and the purposes of the

Shipping Act 1916 before awarding damages for misratings The Con

ference further alleges that it is experiencing increased difficulties with

cargo rating disputes which arise after the goods leave the carrier s

custody and believes shippers deliberately furnish vague commodity

descriptions with the intention of subsequently recovering overcharges

if a section l8 b 3 violation occurs TPFC advises that Sanrio itself

has eight overcharge claims pending against Conference lines

In the instant case TPFC claims that Maersk Line was blameless

because the containerized goods were loaded by the shipper before

they reached the carrier and the ocean bills of lading were prepared by

a freight forwarder retained by the shipper 4

Sanrio therefore should

not be awarded reparations

TPFC alternatively argues that Sanrio s evidence is insufficient under

existing Commission standards which recognize the carrier s difficulty

in rebutting after the fact allegations concerning the nature ofthe goods

shipped 5

Sanrio is a subsidiary of Sanrio Ltd from whom the goods

were purchased in Japan and the shipping documents were prepared by

representatives of one or the other of these companies TPFC would

have Sanrio explain why it initially described its goods as General

Merchandise which receives a clearly higher Cargo N O S rate

waited over a year to file its claim provided no inventory records

covering the goods in question and entered descriptions on U S Cus

3

See Durite v Sea Land Service Inc 20 F M C 674 affd without opinion 610 F 2d 1000 DC Cif

1979 Pan American Health Organization v Moore McCormick Line Inc Order on Remand 22 F M C

98 1979 Western Publishing Company v Hapog Loyd 13 S R 16 1972 Mueller v Peralta 8

F M C 361 1965

4

TPFC al1eges that the preparation of rated bills of lading by freight forwarders is afirmly estab

lished practice in Japan

S The Commission requires that shippers provide corroborating evidence to supplement their unilat

eral assertion that thehilt of lading incorrectly described the goods E g Pacific Freight Audit v Amer

ican President Lines 22 F M C 207 1979

23 F M C

151
152 FEDERAL MARITIME COMMISSION

toms documents different from those on the Bill of Lading and th

Sales Invoice

Complainant

Sanrio claims that any policy change made for reasons extendin

beyond the immediate facts of this case would violate its procedura

rights and further asserts that TPFC s proposal is inappropriate in ligh

ofthe Shipping Act s clear intention that the ocean carrier be respons

ble for accurately rating the cargo it transports 6 Once the carrie

breaches this duty section 18b 3 and analogous provisions of th

Interstate Commerce Act require the imposition of liability withou

fault See Penn Facing Mills Co v Ann Arbor Ry 182 IC C 614 1932

No other approach is consistent with the overriding statutory purpos

of eliminating unjust discrimination between shippers See generally

Louisville Nashville Ry v Maxwell 237 U S 94 1915 United State

v Pan American Mail Inc 359 F Supp 728 733 735 S D N Y 1972

Tyson Jones Buggy Company v Aberdeen Ashebofo Ry 17 IC C

330 1909

Finally Sanrio argues that it did adequa ly prove its assertion tha

the bill of lading was incorrect by introducing catalogs and sample

which corroborated the entries on its packing lists and invoices

DISCUSSION

The record in this proceeding presents the Commission with n

reason for altering its position concerning the proper rating of cargo

This function is and must remain a nondelegable duty of the ocea

carrier It is true that this task becomes more difficult when containe

ized cargo moves on a House to House basis but the very difficult

ofthe process makes it even more important that carriers take the step

necessary to ascertain what is being shipped before freight charges ar

assessed or collected The Shipping Act would be virtually unenforce

able if carriers were entitled to rely upon cargo descriptions provide

by shippers and the halfway measure of denying reparations to ship

pers otherwise in compliance with the law would also discourage th

type of industry conduct necessary to effectuate the present statutor

scheme ofstrict tariff adherence 7

The Commission fully recognizes that reparation awards are discre

tionary under section 22 see First International Development Corp v

8

It follows Sanria argues that any cargo rating functioDs performed by an ocean forwarder a

performed as an agent of the carrier and it is the carrier that mustbe held accountable for any erro

made in this regard

Section 16 Initial Paragraph 46 US C 81S imposes civil penalties upon shippers which knowing

Iy or willfully by means of any unfair device or method obtain or attempt to obtain transportation 

rates less than those otherwise applicable The unintentional furnishing of inaccurate information to 

carrier would not ordinarily violate this section

23 F MC
SANRIO COMPANY LTD V MAERSK LINE

Ship s Overseas Services Inc 20 S R R 209 1980 but continues to

believe that its discretion is best exercised by awarding reparations for

overcharges in situations where the shipper was merely negligent in

preparing shipping documents

The State of Israel decision requires no contrary result There a

terminal tariff provision was construed as conditioning a favorable

standby berthing rate for cruise ships upon the receipt of notice that

a vessel was in a nonloading status 8The Maersk Line rates involved in

this proceeding were not subject to a condition precedent but even if

they had been expressly dependent upon the shipper sfurnishing some

specific and reliable type of cargo description they might not have

been lawful in light of the holding in Kraft Foods Inc v Federal

Maritime Commission 538 F 2d 445 D C Cir 1976 9See also Union

Carbide Corporation v American and Australian Steamship Line 17

F MC 177 1973 The Carborundum Company v Royal Netherlands

Steamship Company 19 F MC 431 1977 Cone Mills Corp v Trailer

Marine Transport Corp 20 F MC 143 1977 regarding the need for

any such condition to be reasonably related to transportation circum

stances

The Commission has reviewed the evidence presented by Sanrio and

believes it sufficiently demonstrates that the two shipments in question

consisted ofthe articles alleged by Sanrio to have been present and that

the Presiding Officer properly determined which tariff rates should

have been applied to each item

THEREFORE IT IS ORDERED That the Exceptions of the

Trans Pacific Freight Conference of Japan Korea are denied and the

Initial Decision served on April 21 1980 is adopted as the final decision

ofthe Commission and

IT IS FURTHER ORDERED That Sanrio Inc submit a repara

tions statement to the Presiding Officer pursuant to section 502 252 of

the Rules within 30 days from the service date of this order with

copies to all parties of record

By the Commission

S FRANCIS C HURNEY

Secretary

8

After failing to give notice avessel operator later attempted to obtain the lower rate by demon

strating that the ship had actually been in anonloading status The Court denied relief on the grounds

that the notice requirement was reasonably implied by the tariffbecause knowledge of operating status

was amatter particularly within the knowledge of the vessel operator

9

The Kraft decision overturned aCommission order denying reparation because ashipper failed to

comply with a tariff rule requiring freight adjustment claims based upon alleged errorsin cargo de

scription weight or measurement to be brought to the carrier s attention before the cargo left the

carrier s custody The Court held that a rule of this nature could not be used to deny the shipper s

right to seek reparations under section 22 of the Shipping Act 1916 even if it limited the carrier s

obligation to voluntarily correct rating errors

2J F M C

153
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 681 F

SANRIO COMPANY LTD

v

MAERSK LINE

Complainant an exporter of small products designed mainly for children filed claims fo

overcharges with respondent Maersk Line claiming that Maersk had misrated 4

products which the shipper or its forwarder had described as General Merchandise

on the bills of lading the carrier allegedly violating section 18b 3 of the Shippin

Act 1916 After Maersk declined to consider the merits of the claims because of 

tariff rule complainant filed a complaint with the Commission furnishing evidenc

of the nature of the products such as packing lists invoices catalogs actual sample

sales literature and employee s sworn statements Maersk and intervenor Conferenc

argue that complainant s evidence is unreliable that complainant has not met 

heavy burden of proof and that present Commission law and policy in overcharg

cases are harmful and ought to be changed It is held that

I Complainant has submitted the type of evidence customarily relied upon in cases 

this type which evidence has enabled complainant and sometimes respondent 

show the correct rate that should have applied to 38 of the 42 products shippe

2 The Commission s policy is to permit shippers to show what actually moved on th

basis of a preponderance of the evidence notwithstanding incorrect bill of ladin

descriptions originally presented to carriers The shipper must however set fort

sufficient facts to prove with reasonable certainty and definiteness the validity of 

claim Its heavy burden of proor refers to the difficulty the shipper will have 

obtaining evidence long after the shipment The preponderance of the evidence

standard is the traditional standard employed in administrative and most civil case

3 The principles of law governing cases of this type are derived from tariff n

contract law Tariff law is much stricter than contract law ordinarily not allowin

for mistakes or even misrepresentations because of an overriding purpose of preven

ing discrimination However the Conference s and respondent s argument that th

Commission ought to reverse its present views on the law because of alleged harm 

carriers and departure from contract law is a policy matter for the Commission 

decide

4 Complainant must submit a reparation statement under Rule 252 if this decision 

adopted by the Commission so that the total amount of reparation to be awarde

canbe determined

Daniel L Goldberg for complainant Sanrio Company Ltd

R Frederic Fisher for respondent Maersk Line

Charles F Warren and George A Quadrlno for intervenor Trans Pacific Freig

Conference of Japan Korea

li4 l F M C
SANRIO COMPANY LTD V MAERSK LINE 155

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Adopted September 5 1980

This is a complaint proceeding which began with the filing of a

complaint by a claimant known as Sanrio Inc which on April 20

1979 had filed with the Commission s Secretary a complaint under the

Commission s informal settlement procedures contained in Subpart S

46 C F R 502 301 to 304 In this complaint Sanrio Inc an importer

located in Foster City California had alleged that respondent Maersk

Line a member of the Trans Pacific Freight Conference of Japan

Korea had overcharged Sanrio on some 42 different articles imported

from Japan moving under three separate bills of lading two of which

bore dates inserted as November 3 1977 and the final one December

29 1977 All of the bills of lading were stamped Freight Prepaid

Most of the allegedly overcharged commodities moved under the first

two bills of lading on the vessel ANDERS MAERSK on Voyage 7710

out of Tokyo The last shipment moved on the vessel ALBERT

MAERSK on Voyage 7802 out ofthe same port

Before filing the complaint three claims for the alleged overcharges

were presented to Maersk by an entity known as Traffic Associates

on behalf of Sanrio Inc the Importer These claims were broken

down to correspond to the shipments on each of the three bills of

lading and were designated as Claim SA 81 Claim SA 82 and

Claim SA 83 They were submitted to Maersk by letter dated De

cember 5 1978 Together with the claim letter Traffic Associates

furnished Maersk with ocean bills of lading invoices packing slips and

worksheets Maersk had also been furnished with the Sanrio Inc

catalog and specific information on the packing slips showing the tariff

items which Sanrio believed should have been applied instead of the

rate actually assessed Traffic Associates did indicate in their transmittal

letter that although they believed that some of the products should

have been rated under the tariffs toy rate rather than the stationery

rate they had been conservative and requested the carrier s opinion as

to the correct rate See Exhibit A 3

On January 5 1979 Maersk Line declined the claims on the ground

that Rule 59 of the Conference tariff required claimants to submit

claims seeking adjustment of freight charges because of alleged errors

in description weight and or measurement in writing before the ship

ment involved had left the custody ofthe carrier Ex A4 Thereafter

in April as noted above the claims were filed with the Commission

under the Commission s informal procedures As provided by the Com

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

Commission Rule 318 Rules of Practice and Procedure 46 CF R 502 318

1 PM r
156 FEDERAL MARITIME COMMISSION

mission s regulations the claims were assigned to a Settlement Office

were docketed as Informal Docket No 681 1 and were served o

Maersk See service letter of July 9 1979 On July 23 1979 Maers

requested that the case be handled under the formal procedure set fort

in Subpart T 46 C F R 502 311 to 321 and stated that it would nee

additional time to locate a number of documents in Tokyo and tha

claimant had not submitted readable copies of complete bills of ladin

so that the carrier s task could be accomplished Thereafter in Septem

ber 1979 the case was transferred to the formal procedures and bega

to be processed accordingly

Upon assignment to me I examined the file and determined tha

there were basic jurisdictional problems which required immediate a

tention The main problem concerned the question of Sanrio s standin

to seek reparation Since the shipping documents indicated that it wa

the Japanese shipper Sanrio Company Ltd and not the importe

Sanrio Inc which had paid the freight it appeared according t

pertinent case law that the nominal complainant Sanrio Inc had n

standing to seek recovery of the alleged overcharges unless it obtaine

an assignment ofthe various claims Itherefore instructed Sanrio Inc

to clarify its status See Order to Complainant to Show Standing t

Seek Reparation September 28 1979 I also instructed respondent 

file its answer which had not been done although the complaint ha

been served on July 9 1979 within 10 days after service ofmy rulin

concerning the question of standing See Order to Respondent to Fi

Answer September 28 1979

In response to the above rulings Mr Daniel L Goldberg of Traff

Associates a registered F MC practitioner representing Sanrio Inc

advised me that he would substitute the Japanese shipper Sanrio Com

pany Ltd for the importer Sanrio Inc and that he would furnis

evidence that he was authorized to represent the Japanese shipper 

this matter An amended complaint substituting Sanrio Company Ltd

for Sanrio Inc was filed on October 19 1979 and thereafter served o

Maersk 2 Maersk retained counsel for the first time who requeste

additional time to file a comprehensive and informative answer to th

COmplaint The request was granted and the answer together wit

detailed accompanying materials dealing with each of the 42 product

was filed mailed on November 16 1979 Thereafter on December 

1979 complainant Sanrio Company Ltd through Mr Goldberg

mailed its Reply Memorandum in Answer to Respondent as permitte

8

Ihad cautioned complainant to consider tbat the two year statute of limitation in section 22 of 

Shipping Act might bar an assignment or amended complaint unless such complaint were fil

promptly See Order to Complainant cited above page 6 note 2 Since the amendedcomplaint w

med on October 19 1979 it fell within the two year period which had begun on orabout Novemb

and December 1977

1 J4 A rl
SANRIO COMPANY LTD V MAERSK LINE 157

under Rule 313 46 C F R 502 313 These pleadings are quite detailed

and deal with each ofthe 42 items in question

THE NATURE OF THE ISSUES

As noted above the claims in this case have been classified into three

shipments according to the three separate bills oflading In each ofthe

three claims designated as SA 81 SA 82 and SA 83 complain

ant has identified the product by the Sanrio catalog number and has

furnished various materials including invoices packing lists the Sanrio

catalog actual specimens of some of the products pictures from the

sales manual a statement in a letter from a distribution manager em

ployed by Sanrio Inc consumption entries and arrival notices A

general survey of the Sanrio catalog as well as the accompanying

materials indicates that Sanrio Company Ltd appears to manufacture

or sell a variety of relatively small inexpensive products designed

primarily for children and according to the complainant for children

aged 7 to 12 See Reply Memorandum by Complainant in Answer to

Respondent p

3 Thus Sanrio s present catalog Ex A 28 shows a

variety of products classified under the following headings Kitchen

and Dining Ware Toiletries and Grooming Aids Beauty Items Person

al Accessories Items for Room Decor Mascots and Miniatures Dolls

Bags School Supplies and Stationery Origami Gift Books and The

Strawberry The invoices for the three shipments show that the prod

ucts consisted of a number ofdifferent items such as Paper Clips Box

Eraser Pencil Sharpener Dear Diary Mini Seal Pack Memo Petite

Elegance Mini Stamp Set Vanity Set Bath Kit Tiny Clip Board

Phone Pal Doll Pencil Friendly Message Coin Purse Mini Sketching

Set Hankie Set Towel Hanger Strawberry Newspaper Adhesive

Tape Barrette Scissors Key Chain Phone Book Happy Tooth Brush

Little Mascot Charming Holder and Ponytail Holder See list of

these descriptions shown in the complaint page 3 line 22 to page 5

line 3

On the first two shipments Claims SA 81 and SA 82 Maersk

rated the items as General Merchandise which wasthe description on

the bills of lading for each shipment The rate for this description was

the Cargo N O S rate Item 9999 00 of the Conference s tariff The

last shipment Claim SA 83 was rated under various tariff items for

toys scissors stationery general merchandise and brush

See Ex A 22 It is not quite correct to allege as complainant does

that the entire shipment was rated under Item 9999 00 Cargo s NOS

of the tariff unless only the first two shipments are meant Complain

ant alleges that its products should have been rated under the Confer

ence s TariffItems for Travel Kits Stationery Toys Plastic Mfgs and

not as Cargo NOS and it disputes Maersk s use of tariff items which

were assessed against the third shipment

1 F M I
158 FEDERAL MARITIME COMMISSION

Maersk has checked each of the items which Sando now identifie

specifically from its catalog as products other than general merchandis

shown on the first two bills of lading or than the items listed in th

third bill of lading In the majodty of instances Maersk appears t

agree with Sando assuming the evidence to be determinative on th

rate that should have been applied See Answer to Complaint pp 3

8

3 However on 18 of the products identified by Sando Maers

disagrees with Sando s contentions that they were incorrectly rate

even if the evidence shows the items to be what Sanrio claims them t

be In almost all of these disputes 15 Sanrio claims the products ar

toys and should be rated as such while Maersk claims they were no

toys and should be rated as stationery Cargo NOS Bags

Baskets Luggage or Artist s Materials 4

In the other three in

stances Sanrio claims the products to be Stationery Travel Kit

and Paper Mfg Mixed Shipment On these last three products

Maersk claims the proper tariff rate to he Cargo NOS Obviously th

definition of a toy for tariff rating purposes is critical to this cas

since it will decide 15 of the 18 outstanding disputes However befor

resolving these disputes it is necessary to clear away a number o

ancillary issues dividing the parties

Complainant asserts that respondent was provided with invoices an

packing lists so that it could rate the products properly Responde

denies that this is so except for the last shipment where responden

rated the products as items other than general merchandise i e Carg

NOS in its tariff Respondent also asserts that it rated the products o

the basis of what the shipper had represented to it according to ship

per s load and count and that it had minimal opportunity to confir

the shipper s representations without breaking into the sealed contain

ers the shipments having all moved house to house Le betwee

containeryards in sealed containers Respondent also calls upon com

plainant to furnish import declarations prepared for the U S Cus

tom s Service and denies the probative value of documents passin

between one Sanrio affiliate and another i e between Sanrio in Japa

and its affiliate in the United States because they were not subject t

outside verification Respondent contends that the Commission 

being asked to accept complainant s revised representations as 

3 Maersk does not admit that itimproperly rated any of the products and states in its answer that 

denies that any of the products were something other than what was indicated on the bills of ladin

However in agreeing that ifthe products werein fact what Sanrio now claims them to be the majo

ty of the products would take the tariffclassifications which Sanrio seeks Maersk seems to be say

that Sanrio would be entitled to reparation if the evidence supported Sanrio In each instance of t

halfway agreement by Maersk Sanrio has presented evidence showing what the product specifica

was usually tracing it to the catalog

For ready reference these IS commodities which Sanrio claims to be toys while Maersk clai

them mostly to be stationery but sometimes other things for tariffrating purposes are listed in Br

of Respondent Maersk Line in Support of Answer to Complaint page S note S

ttO ur
SANRIO COMPANY LTD V MAERSK LINE 159

what it in fact shipped nearly two years ago Respondent summarizes

its position by stating

As matters presently stand complainant has failed to meet its

heavy burden of proof in establishing that the nature of the

goods shipped was different than indicated on the bills of

lading This is so because 1 the bills of lading were based

upon complainant s representations 2 complainant did not

contradict these representations when the bills of lading were

issued or at any time when the goods were in respondent s

custody 3 complaints supporting documentation is entirely

internal in nature not subject to verification by outside parties

and 4 complainant has omitted information of great eviden

tiary weight in the form of customs declarations from its

complaint Bri f of Respondent Maersk Line in Support of

Answer to Complaint pp 4 5

DISCUSSION AND CONCLUSIONS

The basic principle of law which has governed overcharge cases

arising under section 18b 3 remains essentially what the Commission

held in the leading case of Western Publishing Company v Hapag Lloyd

A G Docket No 283 1 May 4 1972 13 S R R 16 In that case

interestingly also involving a claim that part of the shipment should

have been rated as toys the Commission dealt with the contention

that the shipper should have been held to what he had described on the

bill of lading that the carrier had relied on the shipper s description in

the bill of lading that the carrier might have special problems in

defending itself once the goods had left its custody and that the

evidence relied upon by complainant consisted essentially of commer

cial invoices and packing lists In dealing with all of these problems the

Commission stated

Furthermore we have recently taken the approach that the

description on the bill of lading should not be the single

controlling factor in cases of this nature Rather the test is

what claimant can now prove based on all the evidence as to

what wasactually shipped even if the actual shipment differed

from the bill of lading description In rating a shipment the

carrier is not bound by shipper s misdescription appearing on

the bill of lading Likewise claimant is not bound at least

where the misdescription results from shipper s unintentional

mistake or inadvertence 13 S R R at 16 17

Having freed the shipper from his own misdescription of the goods

which he or his forwarder had placed on the bill of lading and having

allowed the shipper to show what actually moved notwithstanding bill

of lading descriptions the Commission appeared to soften the blow on

the carriers who no longer had custody of the goods and could not

verify the shipper s claims by actual examination of the goods by

l F M r
160 FEDERAL MARITIME COMMISSION

establishing a heavy burden of proof on the shipper In this regar

the Commission stated

But where the shipment has left the custody ofthe carrier and

the carrier is thereby prevented from personally verifying

claimant s contentions the claimant has a heavy ultimate

burden ofproof to establish his claim 13 S R R at 17

The statements quoted have remained essentially unchanged sinc

that time and continue to govern cases of this nature However th

Commission has in later decisions clarified the meaning of the Wester

Publishing decision in certain significant respects Thus while repeatin

the doctrine that the shipper is entitled to prove what actually move

based upon all the evidence notwithstanding descriptions in bills o

lading the Commission has adopted language showing that this mean

that the shipper must set forth sufficient facts to indicate with reasona

ble certainty and definiteness the validity of the claim See Merc

Sharp Dohme v Atlantic Lines 17 F MC 244 245 1973 and th

cases cited therein Sun Co v Lykes Bros 20 F MC 68 70 1977

Informal Docket No 387 1 Pan American Health Organization 

Moore McCormick Lines Inc 22 F MC 98 99 100 1979 The dec

sion is issued furthermore after consideration of all the evidence o

record with no single document or piece of evidence necessarily bein

controlling Kraft Foods v Moore McCormick Lines Inc 19 F MC

407 410 1976

The fact that the Commission has frequently stated that the com

plainant has a heavy burden ofproof in these cases has required som

clarification In an earlier case in which the presiding officer ha

believed the standard of proof to be beyond a reasonable doubt th

Commission expressly disavowed such a test See Johnson Johnso

International v Venezuelan Lines 16 F MC 84 85 1973 Such a tes

of course applies in criminal proceedings In traditional proceeding

before courts there have been recognized three different degrees ofth

burden ofproof These are in ascending order ofdifficulty preponde

ance of the evidence clear and convincilg

and beyond a reasonab

doubt See McCormick Evidence 2d Ed 1972 f

339 p793 Th

normal burden of proof in most civil cases is preponderance of th

evidence Id Similarly in administrative proceedings the usual stand

ard is that of preponderance of the evidence Sea Island Broadcastin

Corporation of S c v FC c 627 F 2d 240 D C Cir 1980 McCo

mick op cit f355 p853 Oin Construction Co v OSHRC 525 F 2

464 2d Cir 1975 As the court stated in the Sea Island case

The use of the preponderance of evidence standard is the

traditional standard in civil and administrative proceedings It

is the one contemplated by the APA 5 U S C 556 d Foot

note citation omitted 627 F 2d at 243

I11 O U r
SANRIO COMPANY LTD V MAERSK LINE 161

Whenever an agency has been told to use a stricter standard ofproof

i e clear and convincing evidence this has been done because of a

particularly valuable or vital interest involved such as deportation of a

person or revocation of a valuable license upon which a person may

depend for his living See Sea Island Broadcasting Corporation v F C c

627 F 2d at 243 Collins Security Corp v SEC 562 F 2d 823 D C Cir

1977 Likewise the higher standard of proof has been held to be

applicable in certain types of extraordinary civil cases involving such

things as fraud establishment of the terms of a lost will proceedings to

set aside written transactions etc McCormick op cit 355 340

pp 796 797

In recent cases the Commission has explained its use of the term

heavy burden of proof That term which has no counterpart in the

courts or administrative law as far as I am aware has been explained

by the Commission to refer to the fact that the claimant will have

difficulty in proving its case after much time has elapsed after the

shipment because of the difficulty of obtaining evidence Furthermore

the Commission has also indicated that the usual standard ofpreponder

ance of the evidence is to be followed in cases of this kind notwith

standing the continual reiteration of the phrase heavy burden of

proof Thus in Informal Docket No 387 1 Pan American Health

Organization v Moore McCormick Lines Inc the Commission was

asked by a

reviewing Court of Appeals to explain what standard of

proof it required ofcomplainants in this type of case The Commission

responded as follows

With respect to the burden of proof although the shipper is

conclusively presumed to have knowledge of the carrier s

tariff citation omitted the Commission has recognized that

bona fide errors may occur in the preparation of shipping

documents and a complainant seeking reparation under section

22 of the Shipping Act 1916 for freight overcharges caused

by such error must set forth sufficientfacts to prove with reason

able certainty and definiteness the validity of its claim by a

preponderance of the evidence Citation omitted 22 F MC at

99 100 Emphasis added

The Commission furthermore explained the term heavy burden of

proof as follows

The Commission held that once the shipment has left the

custody of the carrier and is no longer available for inspec

tion the shipper has a heavy burden of proving that the

shipment is other than described on the bill of lading Citing

Western Publishing This heavy burden however relates to the

shipper s difficulty in obtaining the necessary evidence rather than

23 F M C
162 FEDERAL MARITIME COMMISSION

to the weight to be given to such evidence 22 F MC at 100 n 9

Emphasis added 5

The Commission repeated its holding that these cases are to be

decided on a preponderance of the evidence and that the term heavy

burden ofproor merely referred to the difficulty in obtaining evidence

shortly after the report in Pan American Health Organization quoted

above In Docket Nos 78 24 and 78 25 Pacific Freight Audit Inc v

American President Lines Sea Land Service Inc and American Presiden

Lines Ltd 22 F MC 207 209 1979 the Commission stated

One final matter needs to be addressed Inhis Initial Decision

the Presiding Officer advised that the Complainant in these

cases bore a heavy burden of proof While this statement is

not necessarily inaccurate it does require some clarification

particularly in light ofthe Commission s recent decision in Pan

American Health Organization There the Commission

explained that references in carrier decisions to an overcharge

claimant s heavy burden related to the difficulty in obtain

ing the necessary evidence rather than to the weight to be

given such evidence The applicable standard here is that the

validity of the claims be established by a preponderance of

the evidence

The Commission has indicated in other cases that such decisions are

based upon a weighing of the evidence in such a way as to suggest tha

it has been using a preponderance of the evidence test even when it has

not specifically said so See e g European Trade Specialists v Pruden

tial Grace Lines 21 F MC 888 891 1979 official notice contra

venes the weight of the record evidence Docket No 78 27 Merck

Sharp Dohme International v K Line 22 F MC 396 399 1979

We conclude that these fmdings of the Presiding Officer are con

trary to the weight ofthe record evidence

The Commission has also established that it is of no consequence

whether the shipper should have been more careful in filling out the

commodity descriptions in the bill of lading although acknowledging

that a carrier has a

right to expect the shipper to fill in the bills o

lading correctly 6

Furthermore even if the carrier relies on the errone

ous information prepared by the carrier and is not expected to check

export declarations or other shipping documents when rating the ship

ment as it has not been required to do 7

the Commission has found

6

The Court of Appeals has recently affirmed the Commission s Report on Remand See P A H Q

v F M C No 78 1690 Judgment February 22 1980

United States of America v Farrell Lines Inc 16 F M C 42 48 1972 ocean Freight Censul

ants Inc v

Ita1pacific Line IS F M C 314 319 1972 Sun Ce v Lykes Bros 20 F M C 67 7

1977 Carborundum Ce v Royal Netherlands Steamship Co

19 F M C 431 435 1977

Royal Netherlands Steamship Ce v FMB 304 F 2d 938 4 S R R 20 276 20 281 DC Cir 1962

2J F M C
SANRIO COMPANY LTD V MAERSK LINE

violations of section 18 b 3 and has awarded reparation In other

words the lack of equities on the part ofthe shipper has not prevented

the shipper from receiving a

reparation award and the carrier is held to

a standard of absolute liability i e liability without fault under section

18 b 3

8

Thus in Union Carbide Inter America v Venezuelan Line 17

F MC 181 1973 Abbott Laboratories v Alcoa Steamship Company 18

F MC 376 1975 and Carborundum Co v Royal Netherlands Steam

ship Co 19 F M C 431 1977 the Commission held that equities were

irrelevant in cases of this kind In Union Carbide Inter America v

Venezuelan Line the Presiding Examiner had denied a claim because of

the lack of equities on the part of the shipper and because of failure to

meet the standard ofproof which he believed to be beyond a reasona

ble doubt 17 F MC at 185 He found that it would have been

inequitable to award reparation to the shipper a large corporation

engaged in marketing products as to which the exact technical descrip

tion is known to it who furnished the carrier with a description

which was applicable to an item set forth in the tariff Furthermore

the Examiner found the carrier to have acted without fault stating that

i nsofar as may be determined the carrier had no reason to doubt the

veracity of that description That carrier was without fault Complain

ant was solely responsible for the error if an error was made Id

The Commission however totally rejected the Examiner s equity

theory although stating that we are not without sympathy for the

carrier 17 F M C at 181 The Commission felt that the carrier was

not entitled to retain an overcharge because it was required to adhere

to the rate specified in its tariff Hence in the Commission s view to

permit the carrier to retain the overcharge would in fact provide the

carrier a windfall 17 F MC at 182 The Commission reiterated its

position that what is actually shipped determines the rate to be ap

plied but stated that the equities would be considered in determining

whether enforcement penalties should be sought against the carrier Id

In Abbott Laboratories v Alcoa Steamship Company the Commission

found itself again unhappy with the shipper s careless practice in de

scribing goods shipped on the bill of lading and in sympathy with the

carrier who relied on the inaccurate descriptions Nevertheless the

Commission awarded reparation to the shipper expressing its belief that

it had no equitable powers which if it had would have resulted in

8 Rates Hong Kong United States Trade 11 F M C 168 178 179 1967 Union Carbide Inter

America v Venezuelan Line 17 F M C 181 1973 European Trade Specialists v Prudential Grace

Lines 21 F M C 888 891 1979 Carborundum Co v Royal Netherlands Steamship Co 19 F M C

431 4356 1977 United States v Pan American Mall Line Inc 359 F Supp 728 734 735

S DNY 1972

23 F M C

163
164 FEDERAL MARITIME COMMISSION

denial of the claim 18 F M C at 379 9A similar result occurred in

Carborundum Co v Royal Netherlands Steamship Co

To recapitulate the present status of the case law governing over

charge claims filed under section 18 b 3 is that the complainant i

entitled to show what was actually shipped notwithstanding descrip

tions which the shipper or its agent may have entered on a bill o

lading and notwithstanding the fact that the shipper or his agent ma

have acted carelessly when filling in the bill of lading and that the

shipper may not have relied upon a lower rate before shipping the

goods Where the shipment has left the custody of the carrier the

shipper may have problems in obtaining evidence but the shipper mus

nevertheless set forth sufficient facts to indicate with reasonable certain

ty and definiteness the validity of the claim The Commission wil

decide the case on the basis of a preponderance of the evidence afte

consideration ofall the evidence of record with no single document o

piece of evidence necessarily controlling This statement disposes o

respondent s first two contentions set forth in its Brief regarding com

plainant s erroneously described bills oflading and alleged misrepresen

tations relating thereto There remain questions concerning the type o

evidence which complainant has submitted and which respondent dis

putes as lacking credibility

THE TYPE OF EVIDENCE CUSTOMARILY UTILIZED

A survey ofovercharge cases reveals that the Commission has relied

upon various types of evidence in determining the nature of the com

modity involved Such things as commercial invoices packing lists

export declarations sales literature dictionary definitions letters actua

samples as well as oral expert testimony have all played a role in one

case or another See Rules 304 a 311 to 313 46 C FR 502 304 a

502 311 to 502 313 In the case which first enunciated the doctrine

allowing the shipper to prove what actually moved notwithstanding bi

of lading descriptions Western Publishing Company v Hapag Lloyd

A G the evidence ofrecord consisted only of commercial invoices lInd

packing slips See 13 S R R at 17 In Abbott Laboratories v Alcoa

g

Notwithstanding this belief that the Commission must grant reparation to shippers whenever 

violation of section 18b 3 is found regardl of equities the Commi ion h

in one ca denie

reparation precisely because its sense of equity had been otTended even though aviolation of sectio

18b 3 had occurred In United States a America v Columbia Steamship Company Inc 17 F M C 

1973 the shipper who was the United States Government sought to recover an overcharge on 

shipment of unboxed trucks The carrier had charged arate above that published in its tariff and ha

therefore violated section 18b 3 However because the Government had negotiated that higher rat

with the carrier prior to shipment and had expected to pay it the Commission refused to allow th

shipper to renese on its agreement although the carrier had failed to file the asreed upon rate Th

Commission held that relief under section 22 is discretionary and permissive and the merefact that 

violation of the Act has been found does not in itself compel a

grant of reparation 17FM C at 

10 To award the shipper reparation in that case according to the Commission would be to grant it 

windfall which it neither anticipated nor bargained for17 F M C at 10

23 F MC
SANRIO COMPANY LTD V MAERSK LINE

Steamship Company the evidence was limited to the same two docu

ments plus an export declaration See 18 F MC at 377 In Union

Carbide v Venezuelan Line 17 F M C 181 the only evidence of record

was an invoice and a letter 17 F MC at 185 Moreover in reversing

the Examiner and awarding the claim the Commission relied upon the

invoice alone 17 F M C at 182

In European Trade Specialists v Prudential Grace Lines the record

included oral testimony actual samples and dictionary definitions al

though the latter were characterized as being useful for purposes of

aiding memory and understanding rather than as evidence in the strict

sense 21 F MC at 891 10 In Docket No 78 27 Merck Sharp Dohme

International v Kawasaki Kisen Kaisha Ltd the critical evidence on

which the case turned was complainant s sales literature which showed

the purpose of the commodities in question which were found to be

pharmaceuticals rather than animal feed 22 F M C at 399 In Kraft

Foods v Moore McCormick Lines cited above 19 FMC 407 a case in

which the issue concerned measurement ofthe commodity shipped the

evidence included a sales invoice bill of lading dock receipt and a

sales brochure price list 19 FMC at 410

In Docket No 78 2 Organic Chemicals Glidden Durkee Division of

SCM Corporation v Atlanttrafik Express Service 21 F MC 1082 1979

the evidence used to prove the measurement of drums which had been

shipped but which were no longer available was entirely indirect

consisting of evidence of standard drum measurements of the type

involved in the shipment and affidavits based on random sampling

indicating that the drums that were shipped conformed to the standard

Thus indirect evidence consisting of hearsay has been used to deter

mine what was actually shipped and the Commission has utilized such

evidence to draw reasonable inferences although the product shipped

was incapable ofbeing retrieved for remeasurement

In accepting documents affidavits sales literature letters etc in

cases ofthis kind the Commission has obviously not followed the strict

rules of evidence observed by the courts This approach is entirely

consistent with administrative law in which it has long been held that

the strict rules pertaining to courts should not apply to the more

informal administrative process As early as 1934 this Commission s

predecessor recognized that a

regulatory body ought not to be

hampered in its proceedings by the hard and fast rules as to pleading

and practice which govern courts of law and that even when acting

in a quasi judicial capacity the strict rules which prevail in suits be

tween private parties do not apply and that inquiries should not be too

10 But in Informal Docket No 653 1 J T Baker Chemical Company v Yamashita Shinnihon Line

22 F M C 553 1980 the Commission relied heavily on dictionary definitions without limiting their

evidentiary value

nJi fr

165
166 FEDERAL MARITIME COMMISSION

narrowly constrained by technicalities Oakland Motor Car Co v

Great Lakes Transit Corp I U S S B B 308 311 1934 This Commis

sion has continued to follow the principle established in the Administra

tive Procedure Act and by case law that a ny oral or documentary

evidence may be received but the agency as a matter of policy sha

provide for the exclusion ofirrelevant immaterial or unduly repetitious

evidence APA 5 U S C 556 d Rule 156 46 C F R 502 156 In any

proceeding under the rules in this part all evidence which is relevant

material reliable and probative and not unduly repetitious or cumula

tive shall be admissible In keeping with current views of administra

tive law furthermore the Commission has decided cases involving

serious matters such as rebating and approval of pooling agreements

under section 15 of the Act in reliance upon hearsay even if tha

hearsay has been uncorroborated by direct evidence See e g Malprac

tices Brazil United States Trade 15 F MC 55 1971 relying upon Rich

ardson v Perales 402 U S 389 1971 Docket No 77 43 Agreement No

10286 21 F MC 676 679 1979 See also Unapproved Sect 15 Agree

ments SAfrican Trade 7 F MC 159 167 170 178 184 1962 In the las

case cited the Commission found that internal correspondence culled

from the files of the parties was admissible and reliable Furthermore

contrary to respondent s contentions in this case the fact that the

documents were intra company correspondence did not detract from

their probative value The Commission specifically found that in ou

view this enhanced rather than detracted from their evidentiary value

because the communications contained completely candid utterances

bearing directly on the subject of the inquiry 7 F MC at 183 In tha

case furthermore the Commission emphasized the principle that it

proceedings were not governed by strict technical rules of evidence

observed in the courts 7 F MC at 167 168 citing the Administrativ

Procedure Act and numerous cases One reason for this principle i

that administrative agencies unlike the lay juries for whom the exclu

sionary rules were meant are presumed competent to judge the weigh

that should be given evidence 7 F MC at 167 For that reason too

Maersk s comments that certain affidavits submitted by Sanrio s Distr

bution Manager are self serving post hoc affidavits of complainant 

employees such as Exhibit A 31 of no value Brief of Maersk

page 9 n 9 are not quite correct As the Commission stated in

Unapproved Sect 15 Agt Coal to Japan Korea 7 F MC 295 302 1962

Testimony does not become sacrosanct when uncontradicted

nor is self serving testimony automatically to be discredited

These are but factors to be considered in determining the

validity and probative value of the testimony and the infer

ences that may properly be drawn therefrom in light ofall the

evidence
SANRIO COMPANY LTD V MAERSK LINE 167

As a final matter respondent has contended that Sanrio should have

furnished verification of its claims in the form of import declarations

made to United States Customs in connection with these shipments

Brief of Respondent Maersk Line in Support ofAnswer to Complaint

p

4 Maersk states that these declarations are entitled to great eviden

tiary weight according to the Commission s decision in Chevron Chemi

cal Co v Mitsui O SK Lines Ltd 20 FMC 216 217 1977 In

Chevron the document in question was an export declaration since the

shipment moved in the export not import trade unlike the present case

In the case of imports the pertinent document is a consumption entry

which is prepared by a customhouse broker for the purpose of paying

the proper customs tariff duty See Equality Plastics Inc et al 17

F MC 217 227 228 1973 In its reply pleading in this case Sanrio did

furnish the consumption entry prepared by the broker WJ Brynes

Co See Reply Memorandum by Complainant in Answer to Respond

ent As the Commission noted in Equality Plastics however these

entries are prepared for purposes other than conformance to ocean

carriers tariffs and do not necessarily show the contents of shipments

for tariffrating purposes 17 F MC at 227 The Commission stated that

ocean carrier tariffs have no real relationship to the TSUS the Tariff

Schedule of the U S and that consumption entries are not prepared

based on knowledge of the actual contents of the shipments Id

Indeed although the broker had not used the TSUS entry for toys in

connection with the products shipped in that case but had used another

customs item under electrical machinery and equipment the Commis

sion nevertheless found that one of the products a battery operated

drink mixer was a toy for ocean tariff rating purposes Id Even in

the Chevron case cited by Maersk the Commission indicated in a later

ruling that it considered export declarations only as part of the entire

body ofevidence since it was the Commission s well established policy

of considering any type of evidence by which a shipper may show the

true nature of his cargo Chevron Chemical Co v Mitsui O SK 20

F MC 216 218 1977

THE PRODUCTS WHICH WERE SHIPPED

An analysis of the complaint and answer reveals that there were 42

separate products which were involved in the three claims SA 81

SA 82 and SA 83 which constitute the substance of the com

plaint Of the 42 products it appears that 24 concern products as to

which Maersk agrees with Sanrio regarding the proper tariff classifica

tion provided Sanrio s evidence identifying the products is reliable and

probative Of the remaining 18 products Maersk disagrees with Sanrio

as to the proper tariffclassification even ifSanrio s evidence identifying

them is to be believed Of these 18 15 products are claimed by Sanrio

to be ratable as toys whereas Maersk claims they should be rated as

1 F M r
168 FEDERAL MARITIME COMMISSION

stationery for the most part Finally there are three products remain

ing which Sanrio claims to be ratable as stationery travel kit an

paper manufactures but which Maerskclaims to be ratable unde

different tariff items again assuming the evidence identifyinS them is t

be believed

The first category of 24 products is shown in the following tllbl

identified by catalog numbers and by the tariff commodity descriptio

which both Sanrio and Maersk agree would apply if Sanrio s evidence

is considered to be sufficiently reliable and probative

24 Commodities as to Which Parties Agree as to Proper Tariff

Classification if the Evidence is Sufficient

New

Old Catalog No Commodity Catalog Agreed TarljJItem

No

CNo 3024 14 19 Box Eraser Stationery

Item 5820 10

CNo 3040 1 20 Pencil Sharpener Stationery

Item 5820 10

CNo 30411 10 Pencil Sharpener Stationery

Item 582010

CNo 2010 1 14 Mini Seal Toy

Item 602000

CNo 2011 1 20 Mini Seal Toy

Item 6020 00

CNo 201211 20 Mini Seal Toy

Item 6020 00

CNo 2013 1 20 Mini Seal Toy

Item 6020 00

CNo 2018 1 17 Petite Elegance Personll1 Ornament

Item 6260 15

CNo 2019 1 17 Petite Elegance Personal Ornament

Item 6260 15

CNo 1010 1 88 Vanity Set A 211 1 Plastic Manufactures

Item 9460 00

CNo 1011 1 2 Vanity Set A 211 2 Plastic Manufactures

Item 9460 00

C No 3020 1 50 Doll Pencil Novelty Pencil

Item 6020 00

CNo 1029 35 75 Towel Hanger A I09 1 ToweLBar

Item 436O

CNo 1 2 Cart Cart

Item 5420 00

CNo 1 25 Strawberry Newspaper Printed Matter

under 1200

Item 5760 05

CNo 6 8 Adhesive Tape Tape

Item 6560 00

CNo 1014 1 10 Barrette A 213 1 Hair Clip

Item 640000

1lM r
SANRIO COMPANY LTD V MAERSK LINE

24 Commodities as to Which Parties Agree as to Proper Tariff

Classification if the Evidence is Sufficient Continued

New

Old Catalog No Commodity Catalog Agreed TariffItem

No

ClNo 1016 1 20 Scissors A 31O 1 Stationery

Item 5820 10

CNo 1010 1 65 Vanity Set A 211 1 Plastic Manufactures

Item 9640 00

CNo 10111 85 Vanity Set A 211 2 Plastic Manufactures

Item 9640 00

CNo 1018 1 30 Happy Tooth Brush A 106 1 Brushes under 1000

Item 5940 05

CNo 1019 1 50 Happy Tooth Brush A 106 2 Brushes under 1000

Item 5940 05

No 20011 20 Little Mascot Ceramicware

Item 1320 00

CNo 1003 1 26 Ponytail Holder Plastic Manufactures

Item 9640 00

There appears to be little reason to linger over these 24 products

Sanrio has submitted evidence consisting of pictures specimens pack

ing lists and invoices which identify these products Most of these

products were rated as Cargo N O S because of the fact that the

shipper or the forwarder provided no specific descriptions in the first

two bills of lading by which the Maersk s

rating clerk could have

selected the proper tariff item Maersk apparently now recognizes that

specific tariff items would have been applicable had the specific de

scriptions been entered although Maersk does not concede that Sanrio s

evidence is adequate to carry its heavy burden of proof I have

already discussed the fact that the Commission has invariably relied

upon just the type of evidence which Sanrio has produced to determine

whether the commodity can be reasonably found to be included in the

tariff commodity description e g sales literature invoices packing

lists actual samples pictures

Most of the products in the above table are identifiable by their

names alone For example the box eraser pencil sharpener mini seal

doll pencil towel hanger cart Strawberry Newspaper adhesive tape

barrette happy tooth brush and ponytail holder are erasers pencil

sharpeners seals pencils hangers carts newspapers tape etc The

invoice packing list and catalog give additional description to these

items For example the box eraser which Maersk agrees would be rated

as stationery is shown on the invoice Ex A 8 and the packing list

Ex A II which state that 720 of them were shipped In the new

catalog box erasers are shown under School Supplies and Stationery

See Ex A 28 p 42 The other products are also listed on the invoice

23 F M C

169
170 FEDERAL MARITIME COMMISSION

and packing list in most instances and pictures or samples are provid

ed In some instances the name of the product is not self explanator

but the packing list invoice catalog pictures or actual samples ar

provided which show what these products really are For example th

Petite Elegance is a pendant made of glass and metal according t

the invoice Ex A 9 Pictures of this product are shown on Exhibit A

40 It appears indeed to be a personal ornament as both Sanrio an

Maersk seem to agree it should be rated The Vanity Set is also no

self descriptive However the invoice describes it as a Book Shape

Mirror Comb Set Plastic 80 Mirror 20 Ex A 9 Sanrio s late

catalog shows a picture of a Vanity Set KIT which corroborates th

invoice description of the earlier catalog set See Ex A 28 p

14

Both Sanrio and Maersk agree that the set would be rated as plast

manufactures Both the packing list and invoice show several thousan

pieces of Mini Sea See Exs A 8 A 9 A II A 12 A picture ofth

Mini Seal is shown on Exhibit A 40 They appear to be tiny image

ofchildren bicycles pistols buckets of no great value with no seriou

function or use Both parties would rate them as toys The penc

sharpener is listed on the packing list and invoice Exs A ll and A 

and a picture of a Sanrio pencil sharpener is shown in the later catalo

Ex A 28 p45 under School Supplies and Stationery Both Sanr

and Maersk would rate this product as stationery The doll pencil 

identified on both packing list and invoice and a picture and actu

sample are provided See Exs AI3 A IO A 36 A 4O The evidenc

shows it to be a type ofpencil with a kitty s head on the top and brig

writing on the side Both Sanrio and Maersk would rate it as a novel

penci Similarly the towel hanger Strawberry Newspaper adhesiv

tape barrette scissors happy tooth brush and ponytail holder a

identified on the pertinent packing list and invoice and in most in

stances the same or similar products can be seen in the catalogs Ex

A 28 A 40 In other instances e g

the Cart the product is describe

only on the packing list and invoice but the parties agree on the prop

rate Cart rather than Cargo N O S if the invoice and packing l

are to be believed Finally the little mascot appears on the invoic

for the third claim SA 83 which identifies the product as Ceram

100 See Ex A 24 A picture of these little objects is shown o

Exhibit A 4O Both Sanrio and Maersk would rate them as cerami

ware

In summary as regards the above 24 products Sanrio has furnishe

evidence which is sufficient to indicate with reasonable definiteness th

the products were not Cargo N O S as most ofthem were rated b

were in fact specific commodities for which Maersk would in 

probability have rated them under specific tariff commodity items ha

they been properly identified on the bills oflading Although a pictu

ofthese products is not provided in every instance and sometimes on

23 F MC
SANRIO COMPANY LTD V MAERSK LINE

a picture of the later Sanrio catalog item bearing the same or similar

name is shown the packing lists and invoice show what the products

were with sufficient detail to permit rating them by a specific tariff

commodity item Indeed now that Sanrio has provided the packing list

and invoice and other evidence Maersk has gone down the list of

products and has rated them in agreement with Sanrio insofar as these

24 products are concerned although not conceding that the evidence is

adequate Even the product which is described by the least amount of

evidence the Cart which is listed on the packing list and bill of

invoice Exs A IS A 16 and described as consisting of a cart body and

iron handle with a price of 46 is shown with reasonable definiteness

to qualify for the tariff rate for Carts It will be recalled that in the

very case which established the doctrine that the shipper could show

what actually moved notwithstanding bill of lading descriptions West

ern Publishing Co v Hapag Lloyd the only evidence describing the

commodity consisted of the packing list invoice and the bill of

lading 11

Since the evidence establishes what each of the above products was

and both Sanrio and Maersk have agreed on the proper tariff rate

which was not assessed because of inadequate bill of lading descriptions

at the time ofthe shipments the only reason to deny the claims on each

of the above products would be on the basis that the evidence is not

sufficient to establish the true nature of the commodity for rating

purposes However as discussed above this type of evidence has tradi

tionally been relied upon by the Commission in deciding overcharge

cases and the shipper is not held to a standard of proof requiring that

his evidence show what the commodity was by clear and convincing

evidence or beyond a reasonable doubt The requirement is only that

the shipper prove the validity of the claim with reasonable certainty

and definiteness by a preponderance of the evidence As to the above

24 products although I do not applaud Sanrio s careless habit of pro

viding uninformative descriptions on bills of lading Ifind that Sanrio

has made the requisite showing and met the pertinent standard ofproof

The more difficult issues in this case relate to the next two categories of

products in which Maersk does not agree with Sanrio on the tariff

commodity item that should apply The first of these two categories

concerns IS products which Sanrio alleges to be ratable as toys and

is now discussed

11 Later cases as discussed earlier have established that the shipper may show what actually

moved regardless of bill of Jading description and have cited the Western Publishing case as the basis

for this doctrine It is interesting however to note that in Western Publishing the bill of lading did

show the commodity shipped to be pre school puzzles as well as crayons and the Commission

accordingly found that the carrier should have rated that portion of themixed shipment which consist

ed of puzzles as toys rather than crayons In Western Publishing therefore the shipper had pro

vided an adequate description on the bill of lading

23 F M C

171
172 FEDERAL MARITIME COMMISSION

THE DISPUTES CONCERNING TOYS

The bulk ofthe really viable disputes involve Sanrio s contention tha

15 commodities should have been rated as toys whereas Maers

claims that they should be rated under various tariff items namel

stationery Bags Baskets Luggage or Artist s Materials A

list of these 15 commodities is set forth below together with Sanrio 

old and new catalog numbers where available and Maersk s conten

tions

15 Commodities Which Sanrio Claims to be Toys

Old Catalog New

Commodity Catalog Maersk Clalms They Are

Number Number

CINo 3005 1 14 Paper Clips Plastic BI2 1 stationery

CINo 3049 36 100 Dear Diary 031 1 Ustationery

CINo 3050 26 100 Dear Diary 031 2 stationery

CINo 3054 1 25 Pack Memo stationery

CINo 3055 1 25 Pack Memo stationery

CINo 30011 10 Tiny Clip Board 052 1 stationery

CINo 300211 3 Tiny Clip Board stationery

CINo 3011 1 17 Phone Pal stationery

CINo 4006 1 63 Friendly Message stationery

CINo lOO4 I S Coin Purse A311 1 tbags baskets luggage

CINo 3009 18 84 Mini Sketching Set l

artist s materials

CINo 3010 14 84 Mini Sketching Set D42 artist s materials

CINo 4013 Key Chain Phone 0

Book

CINo 2015 1 7 Charming Holder Key 0

Holder

CINo 2017 18 Charming Holder Key 0

Holder

OMaersk does not state in its answer whatit believes the proper rate to be

Sanrio claims that all of the above products should be rated a

toys It states that the Commission has ruled that in determining th

essential character of an article the starting point should be the ship

per s catalog sales efforts common understanding of what is for sale

and samples of the commodities themselves and believes that it ha

furnished evidence in these respects Sanriocontends that its evidenc

shows that the articles are designed to appeal to children age 7 to 1

and that they are advertised in its magazine known as The Strawbe

ry which is heavily oriented toward children and contains slogan

such as Kitty delivers your letters personally on her little tricycle

and Little writing sets for hand deliveries Sanrio asserts that it 

unusual for children of the ages stated to keep diaries write letters o

record pJ10ne numbers as a matter ofhabit and that the products are o

such small size as to preclude any practical use for adults See Repl

23 F MC
SANRIO COMPANY LTD V MAERSK LINE 173

Memorandum of Complainant Although Sanrio concedes that it does

manufacture some articles included in its catalog as School Supplies

and Stationery which may not be toys Complaint paragraph 3 L

nevertheless the bulk of its articles and those listed above albeit in

some instances educational Sanrio contends are not intended or suitable

for practical use ie that they are not fit and appropriate for the end

in view US v American Paterson 9 Ct Cust App 244 245

Complaint paragraph 3 I Sanrio states furthermore that it is an

unreasonable practice to make the shipper determine whether each toy

might have some minuscule ulterior purpose outside its normal intended

use Id To summarize Sanrio contends that the products in question

were manufactured and marketed for children as playthings and are not

really suitable or intended for practical use Furthermore Sanrio be

lieves that it has furnished the type ofevidence which the Commission

has relied upon in the past in determining validity of claims for over

charges As to the reliability ofinvoices and packing lists sent from one

Sanrio affiliate to another which Maersk disputes because of lack of

outside verification Sanrio claims that these documents are entitled to

belief because they are kept in the regular course of business and fall

within Federal Rule of Evidence 803 6 28 U S C A the court rule

which permits admission into evidence ofrecords kept by a business on

a regular basis notwithstanding the fact that they are hearsay

Maersk claims that Sanrio has failed to meet its extremely heavy

burden of proof established under the Western Publishing case Maersk

contends that Sanrio has changed its story regarding the nature of the

commodities from what Sanrio had described at the time of shipment

and that it is relying upon in house documents which are not subject to

outside verification by evidence such as customs documentation As to

the nature of the products in question Maersk contends that they are

mainly stationery designed for use by children but that they have

practical uses and are clearly suitable for and intended for use as

stationery Brief of Maersk at 7 Maersk cites its tariff definition of

toys and numerous cases in the field of customs law which hold that

smaller articles which are really junior editions of articles used by

adults such as boxing gloves baseball gloves cheap musical instru

ments cheap phonographs and table croquet sets have been held not

properly classifiable as toys for customs purposes Maersk states that

Sanrio s own literature never uses the word toys but appears to be

marketing junior editions ofadult articles Finally Maersk seems to rely

upon two things 1 its belief that the articles in question can be

actually used to perform a function which is more than serving as a

mere prop in a child s

fantasy and 2upon its tariff definition of a

toy Item 6020 00 which it believes to rule out these articles because

they can in Maersk s opinion be used for practical purposes or are

suitable for such purposes

23 F M C
174 FEDERAL MARITIME COMMISSION

Most of Maersk s contentions regarding Sanrio s evidence have bee

discussed in my treatment of applicable principles of law It has lon

been established that the shipper is permitted to depart from the d

scription first entered on the bill of lading and show what actual

moved by various types of evidence including the types of evidenc

furnished by Sanrio in this case Furthermore as I have noted th

heavy burden of proof does not change the usual standard requirin

a preponderance of evidence demonstrating the validity of the clai

with reasonable certainty and definiteness but merely refers to th

shipper s problems in obtaining evidence according to recent decision

of the Commission As to Maersk s contention that certain evidentia

documents such as the packing lists and invoices are not entitled 

much weight because they were sent from one Sanrio affiliate to a

other I

agree with Sanrio that they are documents kept in the regula

course of business and are therefore recognized in law as being trus

worthy not only under Federal Rule ofEvidence 803 6 but under we

established principles ofthe law of evidence See notes to Rule 803 6

28 U S C A at 586 587 Even if Sanrio the importer is affiliated wit

Sanrio the shipper it is hard to believe that a company active

engaged in manufacturing and selling its products would keep inacc

rate inventory records and invoices in the daily conduct of its busines

or that it would be sloppy when dealing with an affiliate in the condu

ofits affairs

Although Ido not agree with Maersk s various contentions on que

tions of law regarding the propriety of using the type of evidenc

which Sanrio has furnished nor with Maersk s contentions that Sanr

has a heavy burden of proof if that is supposed to mean that Sanr

must meet a clear and convincing or beyond a reasonable doub

standard of proof I find that Sanrio s evidence that the 15 produc

listed above are toys does not establish with reasonable certainty an

definiteness the validity of its claims In other words the preponde

ance of credible evidence in my opinion does not establish that th

small articles such as Paper Clips Dear Diary Pack Memo Cl

Board Phone Pal Friendly Message and the like are toys within th

common meaning of that word under various dictionary and cou

definitions under the Commission s definitions and finally and perha

most importantly under the tariff definition of toys In the la

analysis the evidence submitted shows that these products can perfor

useful functions and are not merely child s playthings having no prac

cal use whatsoever The fact that the products are aimed at childre

and are designed for small fingers does not establish that they a

useless playthings any more than children s aspirins diapers articles 

clothing small forks spoons etc are toys because they are designe

for small people rather than for adults

23 F MC
SANRIO COMPANY LTD V MAERSK LINE

GENERAL PRINCIPLES OF LAW AND DEFINITIONS OF TOYS

Before discussing the specific evidence which Sanrio has furnished in

support of its claims that the 15 products are all entitled to the tariff

rate for toys a discussion of the various principles of tariff law and

the meaning of the word toy is warranted

Generally Sanrio claims the 15 products to be toys because accord

ing to Sanrio they are small cheap designed for children s play and

are not suitable or intended for practical use Maersk on the other

hand contends that although they may have been designed for children

they do have practical uses ie that they are not merely playthings

and that their construction value and transportation characteristics

show them to be more like stationery for children than toys and that

Sanrio s own catalog and sales literature identify most of them as

School Supplies and Stationery having practical uses Maersk cites

cases arising under customs law in which courts have followed the

principle that an article of small size which resembles a practical object

is in reality only a junior edition of the adult product and should be

classified like the adult product rather than as a toy Essentially

Maersk contends that the products have practical uses and are really

junior editions ofadult products

As my discussion regarding the specific evidence will show I

agree

with Maersk that the products have practical uses and are mainly

stationery for children Furthermore as I also discuss Sanrio s own

sales literature and catalog never refer to the products as toys they

describe them as having many uses and show them under School

Supplies and Stationery or Personal Accessories

Ultimately for Sanrio to prevail it must show that its products

qualify for the tariff item which describes toys As the Commission

states in United States ofAmerica v Farrell Lines Inc 16 FM C 41 46

1972

The burden is on complainant to establish that the article

shipped may reasonably be included in the tariff item

It is also basic tariff law that terms in a tariff must be used in the

sense in which they are generally understood and accepted commercial

ly and that neither carriers nor shippers are permitted to urge a strained

and unnatural construction for their own purposes Matson Navigation

Company v PortAuthority of Guam 20 FMC 506 512 1978 Europe

an Trade Specialists v Prudential Grace Lines 21 F MC 888 890

1979 National Cable and Metal Co v American Hawaiian SS Co 2

U S MC 470 473 1941 Corn Products Co v Hamburg Amerika Lines

10 F MC 388 393 1967 National Van Lines Inc v United States 355

F 2d 326 332 7th Cir 1966 Ifthere is no specific commercial mean

ing to a term that term must be given its ordinary meaning and one

can turn to the dictionary definitions as an aid European Trade Special

ists v Prudential Grace Lines Inc 21 F M C 890 891

23 F M C

175
176 FEDERAL MARITIME COMMISSION

The tariff definition used by Maersk the dictionary definitions cou

definitions and Commission decisions all appear to be very similar i

their definitions of a toy Essentially they define toys as plaything

usually designed for children chiefly for purposes of amusement o

diversion and having no practical use Thus Maersk s tariff defines 

toy as follows

A toy is defined as a play thing for children or pets which is

neither suitable nor intended for other use

There are several dictionary definitions of a toy In Equality Pla

tics Inc et al 17 F MC at 228 n 13 the Commission quoted th

following defmition from Webster s Third New Dictionary 1966

toys are defined as something designed for amusement

or diversion rather than practical use

The more complete definition contained in Webster s Third Intern

tional Dictionary 2419 Rev Ed 1971 is as follows

Something designed for amusement or diversion rather than

practical use an article for the playtime use of a child either

representational and intended esp to stimulate imagination

mimetic activity or manipulative skill or nonrepresentational

and intended esp to encourage manual and muscular dex

terity and group mtegration something diminutive esp in

comparison with others ofthe same general class the tug was

a toy beside the ship that it guided

The Random House College Dictionary 1390 Rev Ed 1975 define

a toy as follows

1 an object often a small representation ofsomething familiar

as an animal object person etc for children to play with

plaything 2 something of little or no value or importance

trifle 3 something diminutive especially in comparison with

like objects

Webster s New World Dictionary 1505 2d College Edition 197

defines toys as follows

2 a thing of little value or importance trifle 3 a little orna

ment bauble trinket 4 any article to play with esp a play

thing for children 5 any small thing person or animal specif

a dog of a small breed

The Tariff Schedule of the United States TSUS defines toy 

follows

Any article chiefly used for the amusement of children or

adults 19 U S C A 1202 Schedule 7 Part 5 at 613

The above TSUS definition was quoted by the Commission in Ro

Products and Taub Hummel Schnall Inc 16 F MC 333 341 1973

Furthermore in Equality Plastics Inc the Commission had occasion 

determine whether a battery operated vacuum cleaner an immersio

23 F M C
SANRIO COMPANY LTD V MAERSK LINE 177

heater and a battery operated drink mixer were toys for ocean tariff

rating purposes The Commission noted both the dictionary and TSUS

definition of toys and determined that only the drink mixer could be

rated as a toy under the carrier s tariff on the ground that the mixer did

not have a more practical use than one chiefly for amusement 17

F M C at 228 Although the drink mixer consisted of a jar with cock

tail recipes printed thereon and a plastic cover with batteries which

operated a stirring rod the Commission nevertheless believed the mixer

to be a toy because it did not work very well even with new batteries

17 F MC at 221 It would appear that the Commission agrees with

Maersk that the touchstone is whether the item can be used to per

form a function Brief ofRespondent Maersk p

8

The idea that something is a toy because it has no practical function

and is suitable only for amusement diversion orplay seems to be found

not only in the preceding definitions but in various decisions of the

courts under customs law cited by Maersk In such cases as Mego Corp

v United States 405 F Supp 1088 Cust Ct 1975 New York Mer

chandise Co v United States 294 F Supp 971 Cust Ct 1969 and

other cases cited by Maersk in its Brief page 8 n 7 the Customs

Court has held that little articles such as boxing gloves baseball gloves

croquet sets musical instruments cheap music boxes etc are not toys

but are really junior editions of adult articles which do perform practi

cal functions albeit on a reduced scale In other cases arising under the

TSUS the courts have found articles to be toys when such articles had

no practical functions but were used primarily for amusement or diver

sion See e g U S v Topps Chewing Gum Inc 440 F 2d 1384

C C P A 1971 metallic buttons with humorous sayings printed on

them worn by children Henry A Wess Inc v U S 434 F Supp 650

Cust Ct 1977 battery operated practical joke known as Frisky

Whiskey Bottle

As will appear in my discussion below the 15 products which Sanrio

claims to be toys are not shown by the evidence to have no practical

purpose On the contrary they appear to be usable for clipping paper

writing holding keys holding coins drawing sketching etc and no

where does Sanrio s catalog indicate that they cannot or should not be

used for those purposes The fact that children may play with them

moreover does not change their essential nature It is the controlling or

primary use not possible use that should be considered if necessary to

determine the nature of an article for tariff rating purposes Royal

Netherlands Steamship Co v Federal Maritime Board 304 F 2d 938 941

D C Cir 1962 Continental Can Co v United States 272 F 2d 312

315 2d Cir 1959 Merck Sharp Dohme International v KLine 22

F MC 396 399 1979 Indeed possible use rather than controlling or

primary use does not constitute a lawful basis for establishing different

tariff charges Royal Netherlands Steamship Co v Federal Maritime

23 F M C
178 FEDERAL MARITIME COMMISSION

Board 304 F 2d at 941 United States v Baltimore O R Co 225 U S

326 342 1912 Misclassification and Misbilling of Glass Articles 

F MB 155 159 1960 Raymond International Inc v Venezuelan Line

6 F MB 189 191 1961

In finding that the 15 products are not toys as Sanrio contends bu

mainly stationery for children or other things I

recognize the fact tha

in cases of this nature it is not always easy to classify different article

under their proper tariff descriptions Frequently reasonable person

may differ as to the proper classification and the answer is very close

As the court observed in Continental Can Company v United State

there is no justification for holding that one classification is so clearl

right and the other wrong 272 F 2d at 316 In that case as th

court noted further the Board s Examiner had reached one conclusion

the Board reached another with one member dissenting and the cou

reversed the Board with three separate opinions 272 F 2d at 316 M

analysis of the evidence however convinces me that Sanrio has no

carried its burden and has not shown that the 15 products qualify fo

Maersk s tariff definition of a toy as merely a child s plaything which 

neither suitable nor intended for other use with reasonable certaint

and definiteness by a preponderance ofthe evidence

ANALYSIS OF THE EVIDENCE SHOWING THE NATURE OF

THE 15 PRODUCTS ALLEGED TO BE TOYS

As with the 24 products discussed earlier where Sanrio and Maers

were able to agree upon the applicable tariff commodity item Sanri

has furnished catalog pictures sales literature invoices packing lists

actual samples and statements of its distribution manager Mr Camer

on describing the purposes and uses of the products This evidenc

certainly identifies the products so that they can be rated mostly a

something other than General Cargo N O S In most instances further

more the description given in the above table is self explanatory The

Paper Clips are described as paper clips on the invoice Ex A 8 an

described to be 100 Plastic with 15 pieces in a plastic case Sample

ofthem are attached as Exhibit A 36 They are about one and one ha

inches in length and can clip paper together as the sample provide

shows However Sanrio claims that they are really toys because the

break easily and would not hold up well as attachments being more

decorative than practical Reply Memorandum by Complainant at 4

Igrant that the paper clips are colorful and have little animal heads o

the top so that they appeal to children But they do perform a practica

function and Maersk s tariff commodity item lists paper clips specifical

ly under stationery Item 5820 10 Tariff 8th rev page 306

Similarly the Dear Diary Pack Memo Tiny ClipBoard Phone Pa

Friendly Message Coin Purse Mini Sketching Set Key Chain Phone

Book as far as can be seen from the pictures and samples provided ca

23 FMC
SANRIO COMPANY LTD V MAERSK LINE

perform practical functions although aimed at children and designed

for little fingers Furthermore many of these products are marketed

and shown under Sanrio s later catalog Ex A 28 under the caption

School Supplies and Stationery For example the Dear Diary is

shown in the catalog on p38 as an actual booklet of paper and is

marketed in the catalog as School Supplies and Stationery It is

shown together with a number ofother products such as ballpoint pens

mechanical pencils staplers and other products which are shown lying

on a desk Ex A 28 at 41 It is difficult to argue from this evidence

that the products do not work have no practical functions and are

mere playthings especially when Sanrio itself does not list them as

toys and advertises that the products have many uses For example

in discussing many of these products Sanrio s own sales literature

states

Other items in this line are miniature stationery items like the

My Pockette memo book and the mini letter set Mini color

pencils delight the eye with their bright colors and compact

shape and the variety of charming holders available indicates

their customer appeal Petite push pins and paper clips have

many uses and the mascot stapler and refills are an attractive

way for customers to get it all together Also available are key

charms and key chain phone book Children always enjoy

using things designed on a smaller scale with their fingers in

mind As inexpensive and unusual gifts these miniatures are

unbeatable Ex A 32 Emphasis added

Sanrio s business now encompasses a wide range of fields

centering on the design manufacture and wholesaling and

retailing of merchandise for young people andfor those adults

who have preserved youthful enthusiasm and joy Ex A 29

Emphasis added

Contrary to Sanrio s contentions that the Pack Memo Tiny Clip

Board Phone Pal Friendly Message Coin Purse Key Chain Phone

Book Charming Holder key holder are really tiny items having no

practical use they are in reality constructed and marketed as stationery

or as items having many uses albeit appealing to children aged 7 to 12

Where pictures are provided usually in the later catalog Ex A 28

moreover it is obvious that the products are constructed of paper and

for purposes of writing not for useless diversion or for turning into

missiles or spitballs As Maersk remarks many of these products are

really stationery for use by children and bear far more physical resem

blance in terms of value and carriage to stationery than to toys which

for the most part are less compact not constructed ofpaper and do not

have the high value per cubic foot that stationery does Brief of

Respondent Maersk at 9

Most of the 15 products listed in the above table or their close

analogues are shown in Sanrio s catalog Ex A 28 as School Supplies

23 F M C

179
180 FEDERAL MARITIME COMMISSION

i

i

and Stationery and are advertised as having uses not as being who

impractical Having placed them together with stationery items a

marketing them in its catalog under such nomenclature Sanrio is n

very convincing when it argues that they are really toys having 

practical use Such a contention contradicts its own marketing a

advertising efforts Evidence of the manner in which acompany m

kets its goods has been considered probative in determining the natu

of the product See New York Merchandise Co Yo US 294 F Sup

971 976 eust Ct 1969 Davis Products Inc v U S 59 Cust Ct 2

1967

To recapitulate of the above 15 products the first nine Pap

Clips through the Friendly Message are all in fact children s s

tionery items made of paper and plastic materials capable of practi

uses according to Sanrio s own sales literature and visual inspection 

the actual samples and catalog pictures provided In no instance is the

any marketing or advertising in which the products are described 

toys and in most instances they are listed under School Supplies a

Stationery in Sanrio s own catalog Iagree furthermore with Maer

which has re rated these items without conceding that the evidence 

reliable and sufficient and contends that the products are ratable und

the tariff item for Stationery Item 5820 Not only do the produc

fit the generic description of stationery for children far better than to

but in most instances they or their analogues are specified in the ta

item cited l2 Maersk has persuaded me that the nine products m

reasonably be included in the tariff item United States of America 

Farrell Lines Inc 16 F MC at 46

Similarly as to the next three products Coin Purse and the two M

Sketching Sets Sanrio has failed to show by a preponderance 

reliable and probative evidence that they are toys ie that they a

mere playthings having no practical functions whatsoever The Co

Purse is shown on Exhibit A 36 where an actual sample is provided 

is several inches in size and comes with a little pencil and paper entitl

Shopping Memo The invoice Ex A 10 describes it as Coin Pur

w One Pencil Cotton 90 Pencil 10 Sanrio s later catalog carri

it under Personal Accessories Useful and Handy Ex A 28 pp 

19 The product appears capable of carrying coins and enables childr

to write lists of things on the memo with the pencil The other pro

ucts shown in the catalog under the same heading Personal Access

ries appear equally capable of performing useful functions and a

more than mere playthings having no practical purpose For examp

under this heading in the catalog Sanrio also sells scissors wallets n

1 a

For example listed under the Stationery Item ill the tariffare such things as Clipboard Dia

Loose LeafBooks Note Books and Blocks Address Books Letter Paper Paper Clips Paper Clam

See Tariff 8tbrev page 306

23 F MC
SANRIO COMPANY LTD V MAERSK LINE

clippers sewing sets etc which could hardly be called useless toys

Indeed as noted earlier even Sanrio agreed that scissors should not be

rated as toys but as stationery I

agree with Maersk and with Sanrio s

catalog that the Coin Purse is useful and handy and is therefore not a

toy I also agree with Maersk assuming the evidence is acceptable

and sufficient as I so find that the proper rate for the product is the

tariff item for Bags Baskets and Luggage Item 3440 That item not

only includes bags but also lists such things as Purses and Wallets

See Conference Tariff 17th Rev Page 258

The Mini Sketching Sets are shown in Sanrio s catalog under

School Supplies and Stationery Ex A 28 pp 32 33 The invoice

Ex A lO describes them as containing 14 color pencils in a plastic

case with a sketch book in a vinyl case The catalog further describes

Sanrio s School Supplies and Stationery as Aiding Study and Crea

tivity Ex A 28 p

32 Sanrio contends that the toy rate should

apply but again Ifind that the product has an obvious practical func

tion for drawing and sketching and Sanrio s own catalog indicates that

the product as well as the other products shown on the same page and

heading have practical purposes I

agree with Maersk s contentions

assuming the evidence to be sufficient as Iso find that the proper tariff

rate is for artist s materials In the tariff artists materials are

specifically listed under the item for stationery Item 5820 8th rev

page 306

The Key Chain Phone Book and two Charming Holders are the last

products in the list Again Sanrio has failed to show that these prod

ucts are toys having no practical uses The Phone Book is shown on

Ex A 40 the previous Sanrio catalog Other products on that exhibit

have already been discussed and appear to be products made of paper

for writing purposes ie Phone Pal Friendly Message which Ihave

already found to be functional The invoice describes the Key Chain

Phone book to be Metal 40 Paper 60 Ex A 24 Sanrio s sales

manual discusses the Phone Book in the context of products having

many uses and of children using things designed on a smaller scale

with their fingers in mind Ex A 32 13 Sanrio has simply failed to

provide a preponderance ofevidence to sustain its burden of proof that

the Phone Book is really a useless toy On the contrary the evidence

suggests that the product cannot only hold keys but that names can be

written into the little book However Maersk has not argued nor

shown what the rate for this product should be other than Cargo

N O S It is not shown by Maersk that the little phone book which is

smaller than the Phone Pal but is 60 paper qualifies for the sta

tionery rate or any specific commodity rate other than Cargo N O S

13 I have quoted the pertinent language from the sales manual above which discussed such products

as petite push pins paper clips mascot staplers as well as key charms and the key chain phone book

71 F M C

181
182 FEDERAL MARITIME COMMISSION

Finally we come to the two Charming Holders Pictures of these

products from the previous Sanrio catalog are shown on Ex A 40

They appear to be key holders with little images of little people at

tached to one end of a chain The invoice Ex A 24 shows that the

Charming Holder consists of Plastic 70 Mirror 10 Metal 20

From all that can be determined from the evidence relating to this

product the little key holder can do the job it appears designed to do

namely hold keys It was Sanrio s burden to prove that the key holder

had no practical purpose and was a child s plaything useful for nothing

else so as to qualify for the tariff rate for toys As in the caSe of the

Key Chain Phone Book Maersk has not re rated this product and has

not contended that it should be rated under a specific tariff item I am

cited to no evidence or specific commodity tariff item exoept by Sanrio

which incorreotly olaims they are ratable as toys For all that the

reoord shows therefore they should be rated as Cargo N O S

To conclude I

agree with Maersk on the re rating of 12 of the above

15 produots as being stationery bags baskets and luggage o

artist s materials within the meaning ofthe oited tariff items and find

that the evidenoe and Maersk s contentions regarding the proper tariff

item are persuasive As to the last three there is neither persuasive

evidenoe nor argument from either side showing that the products

qualified for a specific commodity tariff item rather than for Cargo

N O S In no event do Ifind that any ofthe 15 products have no useful

function so that they could qualify for the toy rate On the oontrary

in each instance the product appears to be useful for children and

designed for their little fingers and Sanrio s own sales literature and

catalog appear to belie its contentions that the products have no practi

cal use

THREE OTHER COMMODITIES WHICH SANRIO CLAIMS

WERE OVERCHARGED

There are three remaining products which Sanrio claims were over

charged but which Sanrio does not claim to qualify for the toy rate

These are its Mini Stamp Set Bath Kit and Hankie Set which

Sanrio claims should have been rated as Stationery Travel Kit

and Paper Manufactures respectively The following table shows the

products

Old Catalog No

CINo 402272

CINo 1031 1 126

C No 1006 18 116

Commodity

Mini Stamp Set

Bath Kit

Hankie Set

Sanrio Claims

Stationery

Travel Kit

Paper

Manufactures

Mixed Shipment

Maersk Claims

Cargo NOS

Cargo NOS

Cargo NOS

l F M r
SANRIO COMPANY LTD V MAERSK LINE

I

find that Sanrio has shown with reasonable certainty and definite

ness that the Bath Kit and Hankie Set were misrated In the other

instance there is a failure ofproof

The Mini Stamp Set according to Sanrio consists of four character

stamps two stamp pads and name cards Sanrio refers to the picture of

this set in the later catalog Ex A 28 p

25 Reply Memorandum p

4 Sanrio claims that the set is really a plaything for children and

would have qualified for the toy rate but for the fact that rubber

stamp sets over 9 00 per gross were excluded from the toy rate

Reply Memorandum p

4 The invoice shows the stamp set to be 4

stamps 2 color ink with message card in plastic case Plastic 80

Paper 10 Ink 10 Ex A9 The later catalog Ex A 28 shows

this set under Mascots and Miniatures and it appears to function for

children to affix stamped images onto little cards As Sanrio itself

admits the set could not qualify for the toy rate in the tariff because

rubber stamp sets of its value were excluded from the toy rate

Reply Memorandum p

4 However it cannot qualify for the sta

tionery rate which Sanrio has selected in the alternative because as

Maersk points out the stationery rate covers only Rubber Stamps

and Stamp Pads but this set includes more than the pads and stamps

ie it includes ink and message cards Answer to Complaint p

5

Since the burden is on Sanrio to show that the article shipped may

reasonably be included in the tariff item United States v Farrell Lines

Inc 16 F MC at 46 and since Sanrio has not shown that the set can

qualify for either the toy rate or the stationery rate for the reasons

discussed it appears that Maersk s only alternative was to rate the set

as Cargo N O S I therefore cannot find that Sanrio has proven this

particular claim

The Bath Kit is identified in Sanrio s sales literature as a travel kit

intended for that specific use See Ex A 38 A verified statement of

Mr Bruce Cameron Sanrio s Distribution Manager confirms that this

item is intended for use as a travel kit which allows parents to wash

and bathe children on trips each kit containing asponge brush towel

soap and soap case Ex A 39 14 Sanrio s later catalog Ex A 28 p

10 shows a Bath Kit under two item numbers 1031 and 1050 They

appear to contain the things that Mr Cameron states they do They are

listed in the catalog under Toiletries and Grooming Aids together

with such articles as a wash up kit a towel hanger hair brush hand

mirror bath towel face towel etc Sanrio therefore believes that the

14 As I discussed earlier Maersk has argued that the verified statements of Mr Cameron should not

be given much weight because they are self serving However as I noted the Commission in Unap

proved Sect 15 AgI Coal 0Japan Korea 7 FM C at 302 has held that self serving testimony is not

automatically discredited but is considered together with all the evidence For asimilar holding see

Builders Steel Co v Commissionerof InternalRev 179 F 2d 377 380 8th Cir 1950

23 F M C

183
184 FEDERAL MARITIME COMMISSION

product qualifies for the Maersk tariff rate published for Travel Kit

with or without toiletries Item 3440 10 Maersk concedes that th

Sanrio catalog mentions some items in relation to travel but argues tha

the plastic bag in which the toilet articles are held may be for storage

purposes rather than travel as far as the evidence shows Answer t

Complaint p

5 Maersk therefore urges a Cargo N O S rate Ifin

that the evidence shows with reasonable certainty and definiteness tha

the Bath Kit is essentially made for travel purposes and that it i

reasonably included in the Maersk tariff item for Travel Kits A

discussed earlier the standard of proof is not clear and convincing

evidence or evidence beyond a reasonable doubt but simply a pre

ponderance ofthe evidence Furthermore Maersk s speculation that th

travel bag may be used for storage purposes is not convincing o

probative evidence As discussed earlier the primary purpose of th

product is what determines its essential nature not speculation as t

possible uses Maersk s tariff publishes a commodity item which reads

Bags Baskets and Luggage includes Travel Bags Travel

Cases and Travel Kits with or without Toilet Articles Item

3440 00 17th rev page 258

The evidence shows with reasonable certainty that the Bath Kit is 

travel kit with various articles included for use on trips Maersk 

argument that the Bath Kit cannot fit into the tariff item seems straine

and unnatural Iwould therefore grant this particular claim

The final product is a Hankie Set which Sanrio claims should hav

been charged under the tariff rate for Paper Manufactures The

relevant invoice Ex A 8 shows the set to consist of Handkerchie

and Tissue Paper in Vinyl Case The packing list contains notations in

pen stating that the set consists of Plastic Tissue Cotton Cloth Ex

A 14 Sanrio claims that the hankie set qualifies for the Paper Manu

factures rate under the Conference s mixed shipment rule 44 which

requires that a shipment ofmixed goods be rated under the rate for th

highest rated commodity included in the mixed set See Rule 44

attached as appendix 6 to Affidavit of Robert D Grey Conference

Chairman

Maersk claims that the hankie sets were properly rated as Cargo

N O S because the shipper did not show Maersk separate valuations fo

the component parts of the shipment so that Maersk could apply Rul

44 The Conference agrees that Maersk was unable to apply Rule 4

because the commercial invoice was not furnished so that Maersk wa

forced to apply the Cargo N O S rate

Notwithstanding the failure of Sanrio to explain the nature of the

hankie set at the time of shipment Sanrio has now shown that it does

consist of three different materials paper cloth and vinyl Further

more Sanrio has furnished an exhibit Ex A 51 attached to its Reply

to the Conference which explains the application of Rule 44 and Rul

23 FM C
SANRIO COMPANY LTD V MAERSK LINE 185

11 in the tariff which latter rule pertains to valuation of the elements of

the mixed shipment The exhibit shows that if Rule 44 is applied the

hankie set should be rated under the rate for Paper Manufactures

118 WM which is the highest of the rates higher than the rates for

plastic goods or cotton Sanrio has now shown with reasonable certain

ty and definiteness the validity of its claim that the hankie sets are

entitled to the Paper Manufactures rate of 118 WM rather than the

rate for Cargo N O S As shown earlier the failure of a shipper to

provide full information on the bill of lading does not preclude the

shipper from later showing the true nature of the cargo I would

therefore grant this particular claim

PROCEDURE TO DETERMINE TOTAL AMOUNT OF

REPARATION

As discussed above there are 42 different products as to which

Sanrio has filed claims alleging overcharges This total can be divided

into three groups The first group consists of 24 products which both

Sanrio and Maersk have agreed as to the proper tariff rate although

Maersk does not concede that Sanrio s evidence was adequate to prove

the true nature of the products The second group consists of 15

products which Sanrio claimed to be toys but which Maersk con

tends to be something else mainly stationery products for children Of

this group Maersk has shown persuasively that 12 of the products

while not toys should be rated as stationery bags baskets and

luggage or artists materials The third group consists of three

products which Sanrio claims should have been rated under specific

tariff items rather than Cargo N O S I have found that Sanrio has

proven that two of these three products Bath Kit and Hankie Set

were misrated

To summarize I have found that the evidence and arguments pre

sented by both Sanrio and Maersk show what the proper rate should

have been on 38 products out of the 42 24 from the first group 12

from the second group and two from the third group Since Sanrio

based its calculations of total overcharges on favorable findings for all

42 of its claims it calculated total overcharges to be 4 360 76 Maersk

re rated some ofthe products without conceding that Sanrio s evidence

was sufficient and arrived at a figure of 2 288 06 The record there

fore does not contain an exhibit showing overcharge calculations based

upon my findings that the proper rate has been shown for 38 products

out ofthe 42

Under these circumstances the Commission s rules provide an appro

priate procedure Both Rules 251 and 252 46 C FR 502 251 252

permit parties to furnish exhibits showing reparation calculations when

the record has not been fully developed on the question of reparation

Rule 251 provides that ifcomplainant is found entitled to reparation

23 F M C
186 FEDERAL MARITIME COMMISSION

the parties thereafter will be given an opportunity to agree or mak

proof respecting the shipments and pecuniary amount of reparation

Rule 252 provides that when the amount cannot be ascertained upo

the record the complainant shall immediately prepare a statement

Complainant shall forward the statement to the carrier fo

checking and certification as to accuracy Statements so prepared an

certified shall be filed with the Commission for consideration in dete

mining the amount ofreparation due Disputes concerning the accurac

ofamounts may be assigned for conference by the Commission or in its

discretion referred for further hearing

It is obviously necessary to follow the procedures set forth in the

above rules Furthermore because the record shows the correct rate

for 38 of the 42 products Ibelieve that the amount of overoharge o

these 38 should be calculated rather than the overcharge on merely

those 26 products as to which only Sanrioand Maersk or Sanrio alone

have shown what commodity rate should have applied Otherwise i

nothing is done to correct the rating on the 12 products which a

though not toys have been shown by Maersk to be ratable unde

specific tariff items Maersk will retain freight even when Maersk itse

has made a persuasive showing of the rate that should have been

supplied Had this simply been a Cl Se in whichSanrio had failed to

prove the validity ofits claims the prevailing decisions ofthe Commis

sion hold that the claims should be denied See eg Pacific Freigh

Audit Inc v Sea Land Service Inc 22 F MC 207 1979 Poirette

Corsets Inc v Consolidated Express Inc 22 FMC 376 1979 Abbot

Laboratories v United States Lines Inc 18 F Mc at 264 265 But since

Maersk has admittedly without conceding that Sanrio s eviden9C is

sufficient shown what the correct specific commodity tariff rate should

have been in 12 instances even when it disagreed with Sanrio s claims

in those instances the record permits those products to be re rated so

that Maersk will ultimately retain the correct freight Under such cir

cumstances claims can be granted even when the claimant has not

made the showing See e

g

European Trade Specialists Inc and Kunzle

Tasin v Prudential Grace Lines Inc 19 F MC 148 163 164 1976

Informal Docket No 607 1 deal TOJl Corporation v Atlantic Containe

Line Order Remanding Proceeding October 31 1979 Cf Union Car

bide InterAmerica v Venezuelan Line 17 F MC at 182 u

1 a On the other hand where neither Sanno nor Maersk has made a persuasive showing that th

product should have been rated under a

specific tariffcommOdity item as is the case with four of the

products in question itwould conceiva ly be 8

violation of due proccS 8

to make sua sponte findings i

neither side had had an opportunity to argue and litigate the matter In other words a

new finding o

new theory should not be utilized in adecision detrimental to a

party when no party hid notice tha

such findings would be made noropportunity to present theirarguments and evidence on the particu

lar matter See NLRB v Temp eES ex Inc S79 F 2d 932 936 Sth Cir 1978 Incidentally in the

present c Sanriohad the last opportunity to reply to Maerak s re rating of the IS allegedly toy

products and inthat final reply continued to argue that the products wereratable as toys

23 FMC
SANRIO COMPANY LTD V MAERSK LINE

Since findings concerning the proper re rating of 38 products have

been made if these findings are affirmed by the Commission the case

can be closed quickly by submission of the relevant arithmetic calcula

tions which both sides ought to be able to agree upon Final determina

tion of the proper rating for these products as well as the amount of

reparation should also serve a useful purpose of curtailing the scope of

the three other informal dockets involving similar claims now pending

before Settlement Officers as well as future claims which Sanrio ap

pears to be preparing all leading toward quicker termination of formal

dockets

Accordingly if this decision is adopted by the Commission the

complainant shall prepare an exhibit showing calculations of over

charges by re rating the 38 products in accordance with the findings

made in this decision shall submit its calculations to Maersk for verifi

cation and shall thereafter submit them to the Commission as provided

by Rule 252 under such schedule as the Commission may devise Unless

disputed by Maersk such exhibit will form the basis for determining the

amount of reparation to be awarded

THE CONTENTIONS OF THE TRANS PACIFIC FREIGHT

CONFERENCE OF JAPAN KOREA

On February 12 1980 the Trans Pacific Freight Conference of

Japan Korea petitioned for leave to intervene The Conference stated

that this case is only one of at least four similar cases involving the

same shipper and members of the Conference and that critical issues

concerning its tariff were involved which justified its participation

Respondent Maersk supported the petition while complainant Sanrio

opposed I granted intervention so that the Conference could make

known its views on matters concerning its tariff and on the evidentiary

materials submitted by Sanrio and further instructed the Conference to

file tariff pages and furnish explanations on certain matters which the

original parties had failed to do See Intervention Granted March 4

1980 The Conference complied fully with my ruling and furnished its

arguments and an affidavit ofthe Conference Chairman Mr Robert D

Grey within 16 days ofthe date of service ofthe ruling 16

The arguments of the Conference are directed to two problems 1

the present state of Commission law which permits shippers to obtain

reparation awards if they show what was actually shipped notwith

standing contrary or obscure bill oflading descriptions and 2 the type

16 I accepted the filings of the Conference one day late because as Conference counsel explained in

acover letter unexpected absence of counsel overseas coupled with aheavy work load made it im

possible to file everything in 15 days See letter from George A Quadrino to me dated March 20

1980 Despite the short period of time granted the Conference to file all of the requested materials

counsel was able to furnish the record with explanatory evidence and critical missing tariff pages

which proved to be of great benefit to me in understanding the opposing contentions

23 F M C

187
188 FEDERAL MARITIME COMMISSION

of evidence submitted by Sanrio in this case which the Conference

believes to be unreliable and contradictory The affidavit submitted by

the Conference Chairman Mr Grey states that the present Commis

sion law in this type of case encourages careless and negligent practices

on the part ofshippers and forwarders interferes with the Conference s

rate policing efforts and encourages the growth of outside traffic con

sultants working for percentages of refunds Mr Grey asks the Com

mission to reconsider its decisions and recognize that the shippers they

are protecting are multimillion dollar international corporations well

schooled in international transportation and well able to enter into

binding contracts with carriers Affidavit at 5

SANRIO S REPLY TO THE CONFERENCE S CONTENTIONS

Sanrio has replied to the Conference Sanrio contends that the Con

ference rather than help in determining how to interpret its tariff thei

ostensible reason for intervening has used this case as a platform to ai

its criticism ofprior Commission decisions and the profession offreight

auditing in particular Reply by Complainant to Conference at 2

Sanrio contends that the Conference s idea that the bill of lading is a

contract and that shippers are held to their cargo descriptions placed in

the bills of lading contravenes principles of tariff law which hold that

tariffs have the same status as statutes and take precedence over private

contracts citing a case that the Conference also cites State of Israel v

Metropolitan Dade County Florida 431 F 2d 925 926 5th Cir 1970

Sanrio defends the reliability and authenticity of the evidence it has

submitted stating that the invoices and packing lists are dated at the

time of the shipments and signed by a Mr Z Takahashi of the Interna

tional Division that the invoice is a record of transfer of merchandise

by sale from Sanrio the shipper in Japan to Sanrio Inc the purchaser

in California and that the reference numbers on the invoices packing

lists and bills oflading all correspond Moreover the invoice comprises

a more detailed statement whereas the bill oflading constitutes only a

summary according to Sanrio s argument Sanrio rebuts the Confer

ence s assertion that customs declarations should be relied upon to

show that the products alleged to be toys are not toys stating that

those declarations show only the opinion of the customhouse broker

who prepared them for purposes of customs clearance not for purposes

related to carrier tariff classifications

Sanrio strongly objects to certain statements ofConference Chairman

Grey and Conference counsel that criticize shippers use of outside

freight consultants considering some of the remarks scandalous

Sanrio asserts that many shippers do not employ rate experts and rely

upon outside professionals as needed and that the Conference is at

tempting to discredit a profession which serves the shipping public

Furthermore Sanrio asserts that these cases were made necessary be

23 F MC
SANRIO COMPANY LTD V MAERSK LINE 189

cause ofthe Conference s own practices and rules under which Maersk

had to deny the claims when first presented although Sanrio filed the

claims only a few months after the alleged classification errors were

discovered Sanrio contends moreover that it is the Conference which

is unfair in its treatment of claims and that if as alleged by Mr Grey

some forwarders may be intentionally misdescribing goods on bills of

lading the Conference ought to begin verifying documents presented to

them relating to the bills of lading Furthermore Sanrio contends that

it is absurd to expect that shippers or forwarders would deliberately err

in filling out bills of lading so that the shipments would be charged

higher rates with the intent ofrecovering something later

DISCUSSION OF ISSUES RAISED BY THE CONFERENCE

The Conference is asking the Commission to reverse its policy of

awarding reparation on the basis of evidence showing what actually

moved regardless of previous bill of lading descriptions The Confer

ence contends that this policy is contrary to contract law which holds

that a contractor may not avoid its agreed upon obligations by relying

upon its own mistakes is contrary to the decision ofthe Court in State

of Israel v Metropolitan Dade County Florida 431 F 2d 925 5th Cir

1970 places carriers in extremely difficult and unfair positions in trying

to defend against overcharge claims filed many months after the ship

ment when the goods have long since disappeared into the stream of

commerce and encourages purposeful inaccuracies by forwarders and

shippers who may misdescribe commodities on bills oflading but never

theless seek reparation later notwithstanding their own misdescriptions

Most of these arguments have been made in past cases However

almost all of them have been rejected by the Commission which has

invariably reversed any Administrative Law Judge or Settlement Offi

cer who has denied reparation because ofthem

The Commission has long held that a shipper is entitled to reparation

for overcharges if he can show what actually moved notwithstanding

an incorrect description which the shipper or its forwarder may have

placed on the bill of lading As discussed earlier the leading case is

Western Publishing Co v Hapag Lloyd A G but this was the Commis

sion s view even before that case See e

g Union Carbide Inter America

v Norton Line 14 F MC 262 264 1971 and case cited therein

Moreover the shipper has been granted reparation even when the

shipper has failed to comply with tariff provisions regarding use of

trade names in bills of lading or requiring the shipper to designate on

the bill oflading that the cargo was proprietary in nature and therefore

entitled to special lower rates See e gPan American Health Organiza

tion v Prudential Lines Inc 19 F M C 412 1976 shipper awarded

reparation despite its noncompliance with tariff trademark rule Abbott

Laboratories v Venezuelan Line 19 EM C 426 1977 shipper s use of

23 F M C
190 FEDERAL MARITIME COMMISSION

trademark description no bar to recovery Carborundum Co v Roy

Netherlands Steamship Co Antilles N v 19 F MC 431 1977 same

Cities Service Internationa Inc v The Lykes Bros Steamship Co Inc

19 F MC 128 1976 shipper awarded reparation although not com

plying with tariff rule requiring shipper to indicate on bill of lading tha

cargo was proprietary Durite Corporation Ltd v Sea Land Servic

Inc 20 F MC 674 1978 Order on Reconsideration November 

1978 21 F M C 4 8

17 affirmed without opinion Sea Land Service In

v Federal Maritime Commission 610 F 2d 1000 D C Cir 1979 repa

ration awarded despite shipper s noncompliance with tariff provision

requiring specification of proprietary cargo on bills of lading Sun Co

Inc v Lykes Bros Steamship Co Inc 20 F MC 67 1977 reparatio

awarded despite shipper s failure to comply with tariff requirement

governing specification of value of cargo proprietary nature of carg

and use oftrade name descriptions

The Commission summed up its policy in this area of law by statin

in the Durite case 20 F MC at 675

The Commission has consistently held with respect to over

charge claims that what actilally was shipped determines the

proper rate and has permitted shippers who had failed to

comply with some tariff provision to cure the defect by later

introduced evidence Cities Service followed this policy

The Conference s

arguments that the Commission s policy in thes

cases encourages careless or even deliberate misdescriptions on bills o

lading and fosters the development of an industry of outside rate aud

tors protects huge companies experienced in exporting and importing

etc have also been heatd considered and consistently rejected by th

Commission Pan American Health Organization v Prudential Lines Inc

provides a good example ofthe present state of the law with respect t

the Conference s arguments In that case as mentioned the shipper wa

awarded reparation although the shipper had provided an inadequat

description of the goods shipped on the bill of lading Which not onl

ignored the tariffs commodity index but violated the tariff rule agains

using trade names The Initial Decision discussed the fact that th

carrier had little choice but to rely upon the shipper s poor descriptio

when initially rating the goods since it was not expert in identifying th

shipper s merchandise and had a tariff rule specifically governing th

situation 1Jle decision emphasized the importance of shippers describ

ing goods correctly in bills oflading and the right of carriers to expec

that a shipper will properly identify the shipment just as the shipper ha

17 In the Order on Reconsideration the Commission oorrecte4 atechnical error in its decision b

ublltitutins reference to lOOtion 2 of the Intercoastal Shipping Acl 1933 for eclion 18bX3 of t

Shipping Acl 1916 which had been Inadvertently discussed by the COmmission in this dome tic o

shore case

23 F MC
SANRIO COMPANY LTD V MAERSK LINE 191

the right to expect the carrier to charge the proper rate for the type of

goods actually carried The decision stated that shippers were playing a

rating game with the help of outside rate auditors by misdescribing

goods on bills of lading and later claiming overcharges and believed

that these practices should be discouraged Finally the decision sug

gested a more equitable policy by which carriers would be found in

violation of law only in cases in which it was shown that the carrier

made a mistake in classifying the commodity shipped to be determined

merely by looking at the face of the description entered on the bill of

lading In other words the carrier should be able to rely upon the

shipper s description in the bill of lading and to rate the shipment

accordingly and not to be held to a latent description made known to

the carrier many months after the shipment The precise words ofthis

decision 19 F M C at 414 415 give the full flavor ofits sentiments and

Iquote them here

It is usually the case as it is here that the carrier in classify

ing and rating a shipment must look to the information sup

plied him by the shipper To require the carrier to inquire

of a shipper as to whether the supplied description of cargo is

correct would place an undue burden on the carrier We

cannot expect the carrier to be a mind reader n b sealed

drums or a chemical analyst

The importance of declaring in bills of lading the correct

description of the cargo shipped cannot be overemphasized

The carrier has the right to expect that a shipper will properly

identify his shipment just as the shipper has the right to

expect the carrier to charge the proper rate for the type of

goods actually carried The now prevalent practice of

some shippers to provide trade name descriptions for their

cargoes or vague descriptions that do not comport with any

thing listed on filed tariff commodity index lists and a year or

more later to play the rating game by newly arguing with

documentation never before presented to the carrier that

some other tariff rate lower of course should have been

used should be discouraged The fact that there are firms that

offer to audit shippers records in the hopes of finding just

such potential conflicts with regard to long completed ship

ments does not make the practice any more palatable Foot

note reference omitted A more equitable rule would seem to

limit reparations to those cases where the actual language used

on the face of the bill of lading indicates an improper misclas

sification or obvious disregard by the carrier ofthe descrip

tive language used by the shipper

Notwithstanding all ofthe above the Initial Decision granted repara

tion to the shipper stating that

Having said this however we must return to what the law is

under present Commission policy and case interpretation and

23 F M C
192 FEDERAL MARITIME COMMISSION

this requires a finding for the complainant Case citations

omitted Past Commission policy and precedent have

unquestionably declared shipper s misdescriptions of cargo to

be legitimate bases to award relief even without fault on the

part of the carrier In cases involving alleged overcharges

under section l8 b 3 of the Act the Commission has deter

mined that the controlling test is what the complainant ship

per can prove was actually shipped Case citations omitted

19 F MC at 415

The Commission adopted the Initial Decision with respect to thes

ultimate conclusions but not with respect to the sentiments expressed b

the Administrative Law Judge regarding his belief that the presen

situation under Commission policy was unfair See Notice of Adoption

19 F MC 412 In other cases the Commission has followed this sam

policy reversing various Administrative Law Judges or Settlemen

Officers who have shared the sentiments of the Judge in the Pa

American Health Organization case Furthermore the Commission ha

found no basis to deny reparation to shippers who have misdescribe

goods on bills oflading merely because the shippers are large and we

experienced in exporting and importing the goods they manufacture o

even because the shipper has been inexcusably careless in describing th

goods shipped on the bill oflading For example in Abbott Laboratorie

v Alcoa Steamship Company 18 F MC 376 1975 the Commissio

severely criticized the shipper for its slipshod procedures and it

willnilly description of such items as corn oil and detergents as raw

drugs on a bill of lading a practice which the Commission found t

be inexcusable 18 F MC at 379 The Commission stated that w

sympathize with a carrier who relies upon a drug producing firm s ow

description of packaged goods as raw drugs and assesses a raw drug

tariff rate based thereon Id The Commission also expressed disfa

vor towards Abbott s practice Id Nevertheless the Commissio

awarded reparation to the shipper stating that although such a decisio

might not be equitable the Commission was unable to judge the cas

on the basis of equities being without equitable powers in cases suc

as this Id

Similarly in Johnson Johnson v Prudential Grace Lines 18 F MC

244 1975 the Commission affirmed an Initial Decision which ha

awarded reparation to the shipper although the shipper had violated th

tariffs trademark rule governing use of trademark descriptions Th

carrier had argued on exceptions that such a decision was unfair be

cause it imposes no responsibility upon the shipper to describe h

goods accurately while leaving the carrier open to later claims agains

which he may be unable to defend 18 F MC at 246

In Abbott Laboratories v Venezuelan Lines the Commission reversin

the Initial Decision granted reparation notwithstanding the contention

23 F MC
SANRIO COMPANY LTD V MAERSK LINE 193

of the respondent carrier that it had relied upon information supplied

by the party most informed about the nature of the commodity who

was a knowledgeable shipper 19 F MC at 429 The Commission

held that it does not matter whetherthe carrier misrated the commodi

ty knowingly or inadvertently In either event it is liable under section

l8b 3 of the Act However as Ihave noted earlier since the statute

imposes liability without fault the Commission refrains from seeking

penalties although awarding reparation Id

In The Carborundum Company v Royal Netherlands Steamship Com

pany Antilles N v and Union Carbide Interamerica v Venezuelan Line

the Commission reversed two Initial Decisions which had denied repa

ration on equitable grounds namely that the shippers were large and

knowledgeable exporters who should have described the goods proper

ly on the bill oflading In The Carborundum case the Commission again

dismissed this type ofcarrier argument stating

T he Administrative Law Judge s conclusion is based on a

discussion of equities regarding size and experience of shipper

and frequency of shipments made These considerations have

nothing to do with proof of the nature of the commodity

shipped and in any event the Commission has previously

disavowed equity theories regarding overcharge claims Foot

note citation omitted Emphasis added 19 F M C at 435 436

In the face of this overwhelming precedent it is obvious that I

cannot dismiss the complaint on the various grounds advanced by the

Conference concerning the carrier s reliance on a large knowledgeable

shipper s descriptions placed by the shipper or its forwarder on bills of

lading nor on the basis that this complaint had been prepared by an

outside rate auditor some time after the shipment Nor since the Com

mission believes that allowing a carrier to retain freight based upon a

higher N O S or other rate later shown to be mistakenly applied in

reliance on the shipper s description of the goods placed in the bill of

lading would permit the carrier to enjoy windfalls can I follow the

Conference s arguments that the continual sloppy practice of shippers

in misdescribing their goods must be terminated by denying their claims

because the practice interferes with the Conference s policing efforts

Moreover in cases of this type the shipper is not attempting to misclas

sify the goods in order to obtain a lower rate in violation of section 16

first paragraph ofthe Act such as occurred in Equality Plastics Inc et

al and similar cases Rather the shipper through negligence pays

higher freight at the time of shipment than necessary and as always

the extra money is passed on to the consignee One might argue that

such a practice is costly inefficient and bad business but the Commis

sion has not held it to be unlawful and as so clearly seen by Commis

sion decisions has not precluded shippers from recovery of the over

charges A change in the policy ofthe Commission which the Confer

23 F M C
194 FEDERAL MARITIME COMMISSION

ence is strenuously urging is a matter obviously for the Commission

not for an Administrative Law Judge

What is perhaps a new argument however is the Conference s con

tention that the Commission s policy contravenes contract law The

Conference argues that under contract law a contractor i e the ship

per cannot renege on its promise to pay the applicable freight based

upon the description of the goods which the shipper itself has placed

on the bill oflading This is so argues the Conference because the bi

oflading on which the shipper placed its own description ofthe good

is a contract and if the contractor finds that it has made a mistake i

cannot later disavow its obligations under contract law This argumen

provides further rationale for the old arguments of carriers in cases o

this type that the shipper is bound to the description which the shippe

or its agent placed in the bill of lading and upon which the carrier ha

a right to rely when rating the shipment As we have seen however

the Commission has consistently refused to bind the shipper to the bil

of lading description when the shipper later shows what actually

moved notwithstanding the carrier s so called right to rely upon th

shipper s description ofthe goods and the shipper s so called duty t

describe the goods properly 1S Obviously the Commission has no

followed general principles of contract law when it permits shippers t

disavow the earlier bill of lading descriptions This does not mean

however that the Commission must reverse its policy because suc

principles exist

A bill of lading is indeed a contract between shipper and carrier a

well as other things such as a

receipt and sometimes evidence of titl

to the goods See e

g

Bills ofLading Incorporation ofFreight Charges

3 U S M C 111 114 1949 and cases cited therein However a bill o

lading is subject to relevant provisions of the Shipping Act 1916 an

the bill oflading does not take precedence over the tariff with which 

must be filed atld to which it must conform under section 18b 1 o

the Act and the Commission s regulation General Order 13 46 C F R

S36 S d 8 Furthermore the bill oflading is merely a contract wherea

the tariff has long been held to have the same standing of a statute ie

as having the force and effect of law In short it is not contract law

which governs but rather tariff law

In Compagnie Genera e Transatantique v American Tobacco Co 31 F

2d 663 2d Cir 1929 cert denied 280 U S SSS the consignee sued t

enforce an aWard of reparation granted by the United States Shippin

18 I have referred to these rights and dutiesll in this fashion because usually the violation of 

r1sJlt orduty lead to some conli8queru es adverse to the party violating theright orduty However 

B of this type ifa

shipper does notcomply with ita duty to describe the goods properly on th

bill of lading the shipper recovers reparation anyway Similarly the carrier in exercising its flrigh

to rely upon the bll of lading description i later found to be aviolator of ection 18b 3

23 F MC
SANRIO COMPANY LTD V MAERSK LINE

Board one of this Commission s predecessors which had found that

the carrier had violated sections 16 and 17 of the Shipping Act injuring

the consignee The court found no merit to arguments that application

of the Shipping Act was improper because it would disturb rights

under a contract which the parties had executed in France The court

held that a lawful statute in force at the time the contract was made is

read into the contract and becomes part of it a nd the power of

Congress to regulate also extends to and embraces the right to control

the contract power of the carrier in so far as the public interest

requires such limitation It is often manifested in bills of lading and

tariffs Parties are free to contract with the carrier but are subject

to the rule which prohibits discrimination Such a contract must be

and is deemed to be modified to conform to the statute 31 F 2d

at 666

At the time of the decision in the Compagnie Generale case 1929

there was no section 18 b 3 and no requirement that carriers operating

in the foreign commerce of the United States file tariffs to which they

must rigidly adhere Since 1961 of course such carriers must file their

tariffs and adhere strictly to them Unlike the bill of lading further

more the tariffs are considered to have the same force and effect as a

statute and no contract will be enforced which departs from the tariff

See e g Penna R R Co v International Coal Co 213 U S 184 197

1913 Farr Co v Seatrain 20 F MC 411 414 1978 and the cases

cited therein In Louisville Nashville R R v Maxwell 237 U S 94 98

1915 the Supreme Court emphasized the binding nature of tariffs and

their supremacy over other contracts between shipper and carrier

stating

When a tariff has become legally promulgated it is binding

upon both the carrier and any shipper taking advantage of it

and its terms in essence become in such respects the only

contract between the two allowed by law

In a similar vein the Court in State of Israel v Metropolitan Dade

County Florida stated

As with taxes we start with the proposition that morality

equity or the invidious reflex of each has no part in tariff

application A tariff required by the appropriate regulatory

statute footnote citation omitted like the law of the Medes

and Persians which altereth not is more than a consensual

contract It has the force of law with the analogous dignity of

a statute Citations omitted 431 F 2d at 928

See also Kansas Southern Ry v Carl 227 U S 639 653 1913 and

Chicago Alton R R Co v Kirby 225 U S 155 165 1912 holding

that a common carrier and shipper cannot even contract for a special

service or rate unless the carrier publishes the special service or rate in

its tariff making it open to all equally and see S L Shepard Co v

23 FMC

195
196 FEDERAL MARITIME COMMISSION

Agui ines Inc 39 F Supp 528 531 E D S C 1941 refusing to

enforce a contract for special services absent tariff authority Note that

at the time ofthis case however section 18b 3 was not enacted For

more cases holding that the tariff has the force and effect of a statute

and overrides contracts between parties see 13 Corpus Juris Secundum

Carriers 302 at 700 702

The short answer to the Conference s arguments therefore is that

contract law has been supplanted by section l8b 3 an overriding

regulatory statute This tariff law and similar tariff laws moreover

have long developed their own peculiar principles based upon strict

congressional policies designed to prevent discrimination among ship

pers Moreover it has long been recognized that these peculiar tariff

laws and policies take precedence over ordinary principles of contract

law As seen by the quotation cited above from the decision in Louis

ville Nashville R R v Maxwell 237 U S at 98 the tariff becomes in

effect the supreme contract Furthermore whereas mistake fraud mis

representation or contrary intention of the parties may have some

relevance under principles of contract law they are irrelevant unde

tariff law As the Commission stated in Sun Co v Lykes Bros 20

F MC at 70 n 8

Neither mistake inadvertence contrary intention of the par

ties hardship nor principles of equity permit deviation from

the rates rules and regulations in the carrier s filed tariff

Case citations omitted

The Commission has several times19 quoted the following language

from Louisville Nashville RR v Maxwell cited above 237 US at 97

Under the Interstate Commerce Act similar to section

18b 3 the rate of the carrier duly filed is the only lawful

charge Deviation from it is not permitted under any pretext

Shippers and travelers are charged with notice ofit and they

as well as the carrier must abide by it unless it is found by the

Commission to be unreasonable Ignorance or misquotation of

rates is not an excuse for charging either less or more than the

rate filed This rule is undeniably strict and it obviously may

work hardship in SOlne cases but it embodies the policy which

has been adopted by Congress in the regulation of interstate

commerce in order to prevent unjust discrimination

To cite a few examples of cases in which tariff law has supersede

contract law consider that a carrier may actually intentionally misrep

resent rates to a shipper who relies upon the erroneous quotation in

booking the shipment Under contract law the contract would prob

19 See Farr Co v Seatrain Lines cited above 20 F M C at 417 n 8 Mueller v Peralta Shippin

Corp 8 F M C 361 365 1965 Ocean Freight Consultants Inc v Bank LineLtd

9 F M C 211 21

215 1966

23 F MC
SANRIO COMPANY LTD V MAERSK LINE

ably be voidable because of fraudulent inducement But under tariff

law the carrier may recover the full amount of the tariff rate if the

carrier performs the service See the cases discussed in 88 American

Law Reports 2d 1375 1377 1387 1388 1963 Or the shipper may have

booked the shipment with the carrier only because the carrier had

promised to file a lower rate in its tariff prior to the time of shipment

Ifthe carrier fails to file the lower rate and the higher rate remains in

the tariff the carrier can recover the full amount of freight under tariff

law notwithstanding the shipper s defense that the carrier breached its

agreement See Chicago B Q R Co v Ready Mixed Concrete Co

487 F 2d 1263 8th Cir 1973 in which this state of events actually

occurred 20 Or to give a final example even if the shipper fails to

comply with some provision in the tariff itself ie in contract law

terms it breaches the contract such as when the shipper fails to insert

the notation in the bill oflading that the cargo is proprietary or fails to

provide a specific commodity description but rather provides a trade

name description in the bill of lading as discussed earlier the Commis

sion does not bar the shipper s

recovery of an overcharge regardless of

any doctrine in contract law

But the Conference has another string to its bow namely the case of

State of Israel v Metropolitan Dade County Florida In that case the

Court permitted a Port to assess and retain a higher tariff dockage

charge even when the shipowner showed after the fact that its vessel

was in the status required to qualify for a lower rate The Court found

that because the shipowner had failed to provide written notice that its

ship was in a non loading status as required by the Port s tariff the ship

was required to pay full dockage rather than half dockage but that

when the shipowner notified the Port of this fact the ship was entitled

to half dockage thereafter The Court simply read the tariff provision as

requiring advance notice of the vessels status and applied the provision

literally finding that the shipowner s failure to comply with the notice

requirement would result in assessment ofthe full dockage rate and that

the shipowner could not gain retroactive relief merely by giving notice

later The Court relied upon the principle that a tariff has the force of

law and that it was unreasonable to shift the burden of determining the

status of the vessel on the Port when the shipowner had better knowl

edge 431 F 2d at 928 929

The Conference argues that the shipper in the instant case Sanrio is

trying to do what the shipowner in State of Israel tried to do namely

seek a lower rate by showing the actual facts which would have

20 Of course the only relief for the shipper is the special docket provision of section 18 b 3 of the

Act by which acarrier may file an application seeking to refund orwaive additional freight when the

carrier forgot to file the tariff rate promised to the shipper This is an exceptional provision in tariff

Jaw and gives the carrier the option of filing the application not the shipper

23 F M C

197
198 FEDERAL MARITIME COMMISSION

justified a lower rate after the event If we assume that there is 

difference in the law applicable to terminal tariffs filed under Comm

sion regulation General Order 15 46 C F R 533 rather than unde

statute section 18b 3 of the Act which governs common carrie

tariffs 21 there are still some factors that should be noted when deali

with the case

First the Court treated the issues in State of Israel as merely requ

ing a literal reading ofthe tariff without feeling the need for any exp

assistance 431 F 2d at 928 The Court interpreted a provision in t

tariff Item 215 which required shipowners to give advance writte

applications to the Port regarding the status of its vessels as being 

notice provision and treated that provision as an essential condition 

the determination ofthe correct rate The tariff provision itself did n

specify that failure to comply with the provision would result in asse

ment of higher dockage However the Court believed that there w

good reason to construe the provision as a binding condition determ

ing the dockage rate But as discussed the Commission in many cas

does not construe tariff provisions regarding designation of proprieta

cargo or use of nontrade names in cargo descriptions on bills ofladi

as being essential conditions As the Commission stated in one of t

many cases following this policy Durite Corporation Ltd v Sea La

Service Inc 20 F MC at 675

The Commission has consistently held with respect to over

charge claims that what actually was shipped determines the

proper rate and has permitted shippers who had failed to

comply with some tariff provision to cure the defect by later

introduced evidence

This decision ofthe Comrilission was as mentioned affirmed by t

Court of Appeals without opinion in Sea Land Service Inc v Fede

Maritime Commission 610 F 2d 1000 DC Cir 1979 In its brief 

the Court the Commission had pointed out the many cases in which 

had permitted shippers to recover overcharges notwithstanding t

shippers failure to comply with tariff provisions requiring various typ

of specification so long as the shippers could prove what actua

moved The Commission explained that it did not view the tariff pro

sions as unyielding conditions precedent but merely as something us

for initial rating purposes In other words although the carrier m

have had to rate the cargo under higher rate categories because o

particular tariff provision at the time of shipment this initial rating w

subject to change if the shipper later presented evidence showing t

21 The Court made no distinction between terminal tariffs and common rrier tariffs altho

nOling Ihol the PorI taritT was filed under 46 CF R 533 431 F 2d 01928n 6 The Court discus

the Port s tariff assuming that it was required by the appropriate regulatory statute 431 F 

01928

23 FM C
SANRIO COMPANY LTD V MAERSK LINE

actual commodity See Brief for Federal Maritime Commission Sea

Land Service Inc v Federal Maritime Commission 610 F 2d 1000 D C

Cir 1979 No 78 2271 22

Second it appears that the Commission had not intervened in State

of Israel Consequently the Court did not have the benefit of the

Commission s views This does not mean that the Court would neces

sarily have agreed with the Commission s policy of permitting com

plainants to show after the fact what actually moved or what was the

true state of events notwithstanding tariff provisions However the

Commission obviously does not treat these tariff cases as merely involv

ing simple interpretations of tariff language but has established and

followed a policy ofwhich the Court was not aware

23

Third since the Commission was not a party to State of Israel that

decision while entitled to respect is not binding on the Commission If

the Commission finds the reasoning in State of Israel persuasive and

agrees that granting shippers recovery causes carriers to bear unreason

able burdens under present policy the Commission can change its

policy However present Commission law and policy do not seem to

agree with the Court Moreover Chief Judge Brown who wrote the

opinion in State of Israel and who had remarked that the case did not

require the assistance of a supposedly expert body 431 F 2d at 928

in a later opinion recommended that courts have the assistance of

expert agencies in cases having industry wide consequences and policy

considerations and cited the inadequacy of trial courts reliance on

limited evidentiary records presented by private adversary parties when

the courts attempted to make far reaching decisions See Usery v Ta

miami Trail Tours Inc 531 F 2d 224 239 246 5th Cir 1976 Apropos

of these later remarks of Judge Brown in the instant case the Confer

ence and Sanrio are making pointed comments about the role ofoutside

rate consultants whether they serve the public whether shippers or

forwarders who place inadequate descriptions of goods on bills of

lading should be given relief or whether it is the Conference and

carriers who have a duty to establish verification practices etc There

is no evidence that the Court in State ofIsrael was aware ofall ofthese

issues nor how widespread the problem of overcharges has become in

the shipping industry The Commission however can consider all of

these factors in fashioning policy in cases ofthis type 24

22 The Commission also explained to the Court that the carrier had not gone to any extra expense

in handling the cargo because of the shipper s failure to follow the tariff rule requiring specification of

proprietary cargo on thebill of lading Brief pp 8 23 n 26

23 Of course the present Commission policy was developed primarily by decisions issued after the

date of State of Israel 1970 Apparently no one has cited that case to the Commission in these later

decisions

24 Moreover the Commission is in abetter position to consider whether freight forwarders are con

tributing to the overcharge problem by carelessly describing goods on bills of lading and if so how

2 F M c

199
200 FEDERAL MARITIME COMMISSION

THE CONFERENCE S ARGUMENTS CONCERNING THE

EVIDENCE SUBMITTED BY SANRIO

To some extent the Conference repeats the arguments made b

Maersk that the evidence submitted by Sanrio is unreliable and insu

cient because the invoices and packing lists were sent between affiliate

companies and were not subject to outside verification The Confe

ence makes clear that it is not opposing the admission into evidence 

the Sanrio documents i e packing lists invoices etc but it is arguin

that they are not to be given much weight The Conference also argu

that the documents were not verified that they are inconsistent a

contradictory may not be authentic and that Sanrio has presented fo

different versions ofits claims in the past a fact if true the Conferen

believes to undermine Sanrio s case The Conference also questio

whether the poor descriptions on the bills of lading General Me

chandise were truly inadvertent As Imentioned earlier Sando co

tends that its evidence is reliable and authentic and asserts that it 

absurd to argue that any shipper would deliberately misdescribe 

goods with the result that the shipper would have to pay more freig

Sanrio also explains the alleged discrepancies in the earlier clai

submitted and points to the invoices which it believes to show cons

tute the best evidence of what actually moved rather than the bill 

lading descriptions which a forwarder may have filled out for the sa

ofexpediency Reply by Complainant to Conference p

3

Ihave discussed earlier in this decision the various types of eviden

which the Commission has customarily accepted and relied upon 

deciding cases ofthis type Ihave also discussed the doctrine that ho

that court rules ofevidence are not followed by administrative agenc

operating under the Administrative Procedure Act 5 U S C 556 

Sando has submitted exactly the type of evidence consistently utiliz

in cases of this type e g packing lists invoices sales literature act

samples and even the Conference does not question their admissibi

into evidence As to the Conference s contention that the packing li

and invoices may not really relate to the shipments in question I

ag

with Sanrio that the signature of Mr Z Takahashi the contemporan

ous dates on the documents and the mutually corresponding referen

numbers serve to authenticate the evidence I note furthermore th

even the Conference does not argue that Sando lacks integrity 

submitting those documents Reply ofIntervenor Conference pp 8 

Furthermore there is additional evidence in the case such as catalo

this practice can be curbed Also the Commission can consider the Complainant sargument that 

Conference should institute averification of documents practice instead of relying upon bill of la

descriptions However the Commission once tried to impose aduty on carriers to verify docum

but was rebutTed by acourt See Ocean Freight Consultants 1 Royal Nether ands Steamship Camp

17 F M C 143 145 1973

71 FM r
SANRIO COMPANY LTD V MAERSK LINE

and actual samples which corroborate the packing lists and invoices In

the last analysis it should be remembered that the essential question in

this case as in the three other cases pending before Settlement Officers

is to determine what products Sanrio Company Ltd is actually manu

facturing and shipping to the United States That is are they toys

stationery for children or other things The catalogs and samples as

well as the invoices and packing lists provide answers and even if one

believes that because the shipper and consignee are affiliated companies

their invoices are not to be trusted one can turn to the catalogs and

samples for corroboration

The Conference also argues that Sanrio s evidence is contradictory

The Conference argues that the first version of what was shipped was

presented by the bill of lading the second version relating to claim

SA 81 by a document prepared by Traffic Associates on December

5 1978 the third version was shown on the complaint filed with the

Commission on April 11 1979 and finally a fourth version was shown

by the Customs consumption entry In each of these versions there are

certain changes concerning the description of the shipment and the

volume of alleged toys Sanrio has explained these discrepancies how

ever and Ihave discussed the status of bill of lading descriptions and

consumption entries earlier in this decision

The first description of the shipment involved in claim SA 81 was

that shown as General Merchandise on the bill of lading But ship

pers are not bound to bill oflading descriptions as the cases so amply

demonstrate since it is what can now be shown to have moved that

counts in cases of this kind The second document questioned by the

Conference is the claim letter which Traffic Associates sent to respond

ent Maersk which showed fewer cubic meters of alleged toys than the

third document cited which is the complaint But Sanrio replies that

the original claim letter Ex A 2 dated December 5 1978 asked

Maersk to verify the claim but Maersk did not do so Therefore when

the third document was filed the complaint Sanrio revised the earlier

claim and resolved doubts in its favor Sanrio also criticizes Maersk

because the claim was not considered on its merits but was rejected

under the so called six months rule in the Conference tariff but for

which this complaint might not have had to be filed 25 Reply by

Complainant to Conference p

7 The final document the Customs

consumption entry does not show toys as a description although Sanrio

25 Maersk rejected the claim by letter dated January 5 1979 Ex A4 citing Conference Tariff

Rule 59 which does not permit Conference carriers to consider claims for freight adjustments unless

the claims are presented within six months of the date of shipment The rule therefore left Sanrio with

no choice but to file its complaint with the Commission It is well settled that the so called six months

rule and other time rules in tariffs cannot bar ashipper from seeking reparation for overcharges under

section 22 of the Shipping Act 1916 See eg Kraft Foods v Moore McCormack Lines Inc 19 F M C

407 1976 Union Carbide Inter America Inc v Venezuelan Line 19 F M C 97 99 1976

23 F M C

201
202 FEDERAL MARITIME COMMISSION

claims most ofits products shipped to be toys However Sanrio asser

that the consumption entry represents the opinion of the customhous

broker as to how the goods should be classified for customs purpose

and is not necessarily the best evidence of what the goods were Th

Commission as I have discussed earlier in this opinion agrees wit

Sanrio See Equality Plastics Inc et al 17 F MC at 227 In that cas

as noted the Commission found a battery operated drink mixer to b

ratable as a toy under the carrier s tariff although the consumptio

entry showed it as something else To illustrate further the point th

ocean carrier tariffs and the U S Customs Tariff Schedule of th

United States may not correspond Sanrio asserts that the Conference 

tariff Item 6020 for toys includes a number ofspecific articles whic

would not be classified as toys in the TSUS

I conclude therefore that the Conference is seeking to persuade th

Commission to reverse its now well established policy that the shipp

can recover reparation for overcharges on the basis of a preponderanc

of evidence showing what actually moved notwithstanding carele

descriptions on bills oflading prepared by the shipper or forwarder 

the shipper s failure to comply with tariff rules requiring particul

designations But in so doing the Conference is relying almost entire

on rejected arguments or on theories of contract law which are he

not applicable to tariffs The Conference does however cite one cou

decision which seems contrary to the Commission s policy but th

case decided in 1970 preceded the bulk of Commission law on t

subject nor did the Commission participate in that case and anoth

United States Court of Appeals for the District of Columbia does n

appear to be disturbed by the Commission s policy The Conference 

arguments that Sanrio s evidence is not entitled to much weight a

though admissible into the record mainly repeats the arguments 

Maersk New arguments made by the Conference have been rebutte

by Sanrio which has explained apparent discrepancies and inconsiste

cies which occurred over a period of time during which the claim

werebeing prepared and filed

ULTIMATE CONCLUSIONS

Complainant Sanrio Company Ltd ashipper in Japan which man

factures and exports a variety of small products designed mainly f

children shipped 42 different products to the United States via r

spondent Maersk Line in late 1977 which were described on three bi

of lading mainly as General Merchandise A traffic consultant fir

audited the freight records of these shipments for the importer a

submitted claims to Maersk stating that the products in question we

specific commodities entitled to specific commodity rates und

Maersk s tariff which Maersk had not given them Maersk refused 

consider the merits ofthese claims because of its tariff rule and that 

11 F M C
SANRIO COMPANY LTD V MAERSK LINE 203

the Conference to which Maersk belongs barring consideration of the

merits of claims submitted more than six months after date ofshipment

Thereafter Sanrio filed its complaint with the Commission after correct

ing a jurisdictional problem relating to the fact that the complaint was

originally filed in the name of the importer who had not paid the

freight

Sanrio has submitted evidence which it claims shows the true nature

of the products for carrier tariff rating purposes In 24 instances both

Sanrio and Maersk agree on what tariff rate should apply although

Maersk does not concede that the evidence submitted is reliable and

sufficient In 15 other instances in which Sanrio claims that the prod

ucts were ratable as toys Maersk disagrees and shows the proper rate

for 12 mainly stationery products although not conceding the suffi

ciency of the evidence submitted by Sanrio In three other instances

Sanrio has shown what rate should apply for two ofthe products The

record thus shows the proper commodity rate for 38 of the 42 products

shipped There is a failure ofproof and inconclusive evidence as to the

remaining four products Since this is a bellwether case being the

forerunner of at least seven more claims26 in which Sanrio products are

involved conclusive findings on the 38 products are desirable and

should help curtail future litigation Sanrio being an active continual

shipper

Since the record does not contain an exhibit calculating the total

amount ofovercharge and consequently the amount ofreparation to be

awarded Sanrio shall comply with the Commission s procedures under

Rule 252 which are designed to deal with such situations namely by

preparing areparation statement based upon the findings in this deci

sion checking it with Maersk for accuracy and then submitting it to

the Commission which should be able to issue an appropriate repara

tion order without further litigation if the findings in this decision are

adopted

Both respondent Maersk and intervenor Trans Pacific Freight Con

ference of Japan Korea whose tariff is involved argue that Sanrio s

claims should be denied for a variety of reasons although Maersk

suggests alternatively that partial reparation on 24 of the products may

be acceptable Maersk and the Conference argue that Sanrio has not

borne its heavy burden of proof applicable in cases of this type that

its evidence is unreliable and insufficient and that respondent relied

upon Sanrio srepresentations on the bill oflading when first rating the

products The Conference amplifies the arguments of Maersk urging

that present Commission law and policy be reversed because of its

26 Since I began writing this decision I notice officially that four more complaints have recently

been filed by Sanrio Inc the importer besides the three earlier complaints mentioned earlier in my

decision
204 FEDERAL MARITIME COMMISSION

belief that such policy encourages carelessness in preparing bills 

lading is unfair to carriers subject to belated claims is contrary 

principles of contract law and fosters continual litigation frequen

brought by outside rate consultants Sanrio rebuts all of these arg

ments defending and explaining its evidence relying upon Commiss

decisions and explaining the need for shippers to have the assistance 

freight consultants if carriers do not verify shipping documents and r

shipments correctly at the time ofshipment

On the basis ofwell settled Commission precedent and policy San

must prevail in its arguments concerning applicable principles oflaw 

overcharge cases The Commission has countless times affirmed 

principle that the shipper may recover overcharges if the shipper 

show what actually moved on the basis of all the evidence notw

standing the shipper s failure to describe the goods on the bill oflad

properly or the shipper s failure to comply with some tariff provis

requiring particular types of descriptions or designations on bills 

lading Furthermore although frequently stating that the shipper ha

heavy burden of prooF in cases of this type the Commission 

explained that this merely means that the shipper will have difficulty 

obtaining evidence after the shipment The Commission has clarif

the matter further by stating that the shipper must show with reaso

ble certainty and definiteness the validity of its claim on the basis o

preponderance ofthe evidence

In the present case Sanrio has presented evidence which has f

quently and customarily been utilized by the Commission such 

invoices packing lists sales literature and actual samples Althou

Sanrio has not shown that its products in dispute are mainly to

because the evidence reveals that they have practical uses as Mae

shows Sanrio and Maersk either alone or together have shown 

correct nature and rate for 38 of the 42 products The fact that some 

the evidence may be self serving on Sancio s part that the invoices 

packing lists were sent between affiliated companies that the Custo

consumption entry has different descriptions and that there are ot

criticisms of Sanrio s evidence does not alter the fact that on bala

the basic documents the catalogs and actual samples show with 

sonable certainty and definiteness the nature ofthe products shipped 

carrier tariff rating purposes

In the last analysis this is another of the many cases in whic

shipper with or without the help of outside rate consultants has p

sented claims to a carrier for alleged overcharges months after 

shipment and which the carrier s tariff requires to be rejected with

consideration of the merits Thereafter the shipper filed a formal c

plaint with the Commission and presented evidence showing that 

bill of lading description on which the carrier relied at the time 

shipment was inaccurate Maersk and the Conference are urging m
SANRIO COMPANY LTD V MAERSK LINE 205

ignore an overwhelming body of Commission case law which has

firmly established the policy of permitting shippers to show what actu

ally moved notwithstanding erroneous bill oflading descriptions alleg

ing various adverse consequences flowing from this policy and asserting

contrary principles of contract law Icould not adopt the Conference s

arguments even if I believe them to have merit since a change in

Commission policy is a matter for the Commission not an administra

tive law judge

Under prevailing Commission law and precedent therefore I have

considered all of the evidence determined what rates should have

applied when the record enabled me to do so and recommended that

the proceeding be concluded under the procedures established by Com

mission Rule 252 governing determination oftotal amount ofreparation

to be awarded

8 NORMAN D KLINE

Administrative Law Judge

Washington D C

April 15 1980

23 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 79 27

EASTERN FORWARDING INTERNATIONAL INC

INDEPENDENT OCEAN FREIGHT FORWARDER APPLICATION

POSSIBLE VIOLATIONS SECTION 44 SHIPPING ACT 1916

NOTICE

September 8 1980

Notice is given that no exceptions have been filed to the July 31

1980 initial decision in this proceeding and the time within which th

Commission could determine to review that decision has expired N

such determination has been made and accordingly that decision ha

become administratively final

5 FRANCIS C HURNEY

Secretary

206 23 RM C
FEDERAL MARITIME COMMISSION

DOCKET NO 79 27

EASTERN FORWARDING INTERNATIONAL INC

INDEPENDENT OCEAN FREIGHT FORWARDER APPLICATION

POSSIBLE VIOLATIONS SECTION 44 SHIPPING ACT 1916

Settlement of a proceeding seeking to determine whether respondent engaged in forward

ing activities in violation of section 44 a and 44 e Shipping Act 1916 approved

Respondent ordered to pay 7 500 as a civil penalty pursuant to the terms of the

settlement agreement

John H Dougherty for respondent

Paul J Koller and Joseph B Slunt as Hearing Counsel

INITIAL DECISION OF SEYMOUR GLANZER

ADMINISTRATIVE LAW JUDGE

Finalized September 8 1980

This proceeding was instituted by Order of Investigation and Hear

ing served April 2 1979 to determine whether Eastern Forwarding

International Inc the respondent had violated section 44 ofthe Ship

ping Act 1916 46 U S C 841b by engaging in forwarding activities

without a license and receiving compensation therefor and whether its

application for a license should be granted or denied In particular said

Order required the determination ofthe following issues

1 Whether Eastern Forwarding International Inc has violated sec

tion 44 a and section 44 e Shipping Act 1916 by engaging in

forwarding activities subsequent to revocation of its license on

May 13 1977 and by receiving payment of compensation from

oceangoing common carriers in violation of section 44 e Shipping

Act 1916 and section 5 10 24 e Commission General Order 4

2 Whether Eastern Forwarding International Inc continues to

engage unlawful forwarding activities under the guise of port

agent on behalf of non vessel operating common carriers by

water and possibly others in violation of section 44 Shipping Act

1916

3 Whether in light of the evidence adduced pursuant to the forego

ing issues together with any other evidence adduced Eastern

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

Commission Rule 227 Rules of Practice and Procedure 46 cP R 502 227

F M r 07
208 FEDERAL MARITIME COMMISSION

Forwarding International Inc and its corporate officers posses th

requisite fitness within the meaning of section 44b Shipping Ac

1916 properly to carryon the business of forwarding and 

conform to the provisions of the Shipping Act 1916 and th

requirements rules and regulations ofthe Commission issued ther

under

By letter dated October 23 1979 2

the respondent notified the Com

mission that it wished to withdraw its application and to enter in

negotiations for settlement of any civil penalty claims arising from th

activities at issue in the proceeding 3

The Commission responded to respondent s letter request on Decem

ber 5 1979 by issuing an Amended Order of Investigation providin

for the assessment or settlement of civil penalties under section 32 

the Shipping Act 46 U S C 831 The amendment added a fourth iss

to the proceeding as follows

4 Whether civil penalties should be assessed against Eastern Fo

warding International Inc pursuant to 46 U S C 831 e for vio

tions of Shipping Act 1916 and if so the amount of such pena

ties

In addition the Commission gave the parties until March 3 1980 

conclude any settlement negotiations

Upon the retirement of Judge Levy the proceeding was assigned 

me On February 28 1980 Iwas advised by Hearing Counsel that the

was no likelihood that settlement negotiations would be concluded 

March 3 1980 By Notice of Hearing served February 28 1980 

ordered that this matter proceed to hearing on April I 1980 At t

hearing the parties informed me that they had come to agreement 

the terms of settlement but would require some additional time 

reduce their understanding to writing Under the circumstances I o

dered that the settlement be submitted not later than April 25 198

That time was later enlarged to May 12 1980

On May 12 1980 the parties filed jointly a Proposed Settlement 

Civil Penalties4 and a Stipulation to which were attached a Promisso

Note Containing Agreement for Judgment executed by respondent a

various other attachments including a receipt issued in the name oft

Commission for a certified check in the amount of 1 071 42 represe

ing payment of the first installment of monies due under the terms 

2

The Order of Investigation directed that the hearing be held not later than October 2 1979 

cordingly Administratiye Law Judge Stanley M Levy the Judge to whom this proceeding was 

tially assisned established atimetable to comply with that directive However the respondent s c

executive officer later became ill and the schedule wasnecessarily interrupted

3

The withdrawal of the application makes it unnecessary to decide issue Number 3

Should this decision become the decision of the Commission see n 1 supra pursuant to 46 CF 

505 3 the Proposed Settlement of Civil Penalties i attached as Appendix I and made a

part of 

decision

23 F MC
EASTERN FORWARDING INTERNATIONAL INC 209

the settlement agreement Separately the parties also filed a Memoran

dum of Respondent Eastern Forwarding International Inc in Connec

tion With Proposed Settlement of Penalties and Hearing Counsels

Memorandum in Support of the Proposed Settlement Negotiated With

Respondent

THE STIPULATED FACTS

The Stipulation contains the following recitation ofthe facts 5

1 Eastern Forwarding International Inc Eastern was licensed as

an Independent Ocean Freight Forwarder license No 1353 on August

11 1971 Eastern s license was revoked as of May 13 1976 in accord

ance with section 44 c of the Shipping Act 1916 because ofEastern s

inability at that time to deposit cash collateral required by the Surety

on Eastern s

freight forwarder bond This resulted in the surety cancel

ling the bond

2 On two occasions in the summer of 1977 Commission Investiga

tors from the New York District Office visited Eastern s place of

business The first occasion followed a report from a vessel operating

common carrier to the Commission that Eastern was continuing to

show its name and license number 1353 in the forwarder identification

box on vessel operating ocean carrier bills of lading prepared by East

ern The second occasion followed Eastern s second application in May

1977 and was an investigation of Eastern s activities

3 The FMC staff members ascertained that Eastern was continuing

to send to ocean carriers a line copy of the bill of lading for non

Government movements of household goods It would do so with a

hand stamped certification in the form prescribed by section 44 e of

the Shipping Act This authorizes a common carrier to compensate a

forwarder for soliciting the cargo covered by the bill of lading or for

booking space for the cargo This results in the carrier payment of the

ocean freight compensation Non Government movements ofhousehold

goods then constituted about 10 percent of Eastern s business with

military Government movements of household goods constituting the

balance No compensation is paid on Government movements ofhouse

hold goods The Commission s staff members informed Jay Goldberg

Eastern s president that Eastern could not collect compensation from

ocean carriers They ascertained that Eastern while handling approxi

mately 440 ocean freight shipments during the period from revocation

of its forwarder license until July 8 1977 collected some 2 944 in

ocean freight compensation from 23 ocean carriers on about 50 com

mercial shipments ofhousehold goods

6

The Stipulated Facts which appear in that text are unedited except for bracketed inserts represent

ing additions ordeletions

23 F M C
210 FEDERAL MARITIME COMMISSION

4 Goldberg discussed these practices with FMC staff members o

the occasions oftheir two visits to Eastern s place ofbusiness and wit

the Chief of the Office of Freight Forwarders following each of thes

visits Following the second visit he stopped listing the former licens

number on ocean bills of lading upon learning that the Commission 

staff considered that the use of the license number violated section 4

of the Act Eastern refunded all these payments to the carriers and ha

done so by Fall 1977 Some vessel operating ocean carriers continue

to send payments of ocean freight compensation to Eastern on ship

ments handled by Eastern without the solicitation billing or certifica

tion on the part of Eastern Eastern has retained these compensatio

checks uncashed and has made all ofthem available to Hearing Cou

sel for inspection and copying

5 Since discontinuing its collection of ocean freight compensatio

Eastern has not increased its charges to its NVOCC non vessel opera

ing common carrier princip Us Those charges have remained u

changed from the levels lit which they have stood since 1963

6 By letter of February 15 1978 the Commission s Managing Direc

tor advised Eastern that the Commission intended to deny Eastern 

May 1977 application As Eastern did not request a hearing on th

intent to deny the application by letter dated April 18 1978 Eastern 

application was denied

7 In dealing with ocean carriers Eastern has usually acted an

identified itself as a port agent The documentation Eastern sends to th

ocean carrier on such a shipment customarily consists of a set contain

ing the ocean carrier bill of lading a letter of transmittal of the bill o

lading addressed by Eastern to the ocean carrier and where necessar

an export declaration Eastern s letter of transmittal has been in th

same form since Eastern commenced operation Attachment and refe

ence thereto omitted

8 The Military Traffic Management Command MTMC receive

quotations from household goods carriers for household goods move

ments in response to invitations for bids which MTMC issues semiannu

ally Such invitations take note ofthe existence and role ofport agents

Attachment and reference thereto omitted From time to time MTM

issues special instructions concerning actions to be taken by port agent

functions to be performed or reports to be submitted by them Attach

ment and reference thereto omitted

9 The August 1979 issue of the magazine Containerzation Interna

tional Vol 13 No 8 contains pp 54 55 an article entitled Facts o

life for US forwarders which is a discussion ofthe business of ocea

freight forwarding in the United States Attachment and further refe

ence thereto omitted

10 By letter dated November 24 1978 the FMC Managing Directo

notified Eastern that the FMC intended to deny Eastern s third applica

23 F M C
EASTERN FORWARDING INTERNATIONAL INC 211

tion unless Eastern asked for a

hearing Attachment and reference

thereto omitted

11 Before requesting a hearing Goldberg asked for and received the

letter attached hereto as Appendix II

12 Eastern asked for a hearing by letter dated January 10 1979

Thereafter on April 2 1979 the Commission issued the Order of

Investigation and Hearing in this proceeding

13 Since the visits of the Commission staff members in 1977 and

Goldberg s conversations then and subsequently with the Chief of the

Office of Freight Forwarders Eastern has described itself on bills of

lading and other shipping documents relating to shipments it handles as

port agent for its NVOCC principal whom it identjfied as the shipper

and no longer collects compensation from ocean carriers retaining

uncashed and for this proceeding only such brokerage checks as are

still being sent to it by carriers

14 As a port agent Eastern performs the following services al

though not all of them on every shipment or for every NVOCC

principal

a Books export shipments with the ocean carrier

b Prepares ocean bills of lading

c Sends the ocean bills of lading to the NVOCC principal and

the overseas agent ofthe NVOCC

d Advises the NVOCC s of the expected arrival time of ship

ments at the port ofdischarge

e Prepares the export declarations on shipments bound for for

eign destinations

f Arranges for the packing of the ocean carrier container and

the delivery of the container to the pier through an affiliated

company

15 Eastern does not maintain written agency agreements with its

NVOCC clients In one instance the NVOCC has provided Eastern

with a manual of written instructions which sets forth the working

details of the arrangement between the NVOCC and its port agents

Attachment and reference thereto omitted

THE SETTLEMENT

Briefly the Settlement6 requires the respondent to pay 7 500 to the

Commission 7

in consideration for the barring of any civil action or

6

See n 4 supra and Appendix I

7 Under the terms of thepromissory note respondent shall make 7equal payments of 1 071 43 The

last payment is due June 3D 1983 The note bears interest at the rate of twelve percent 12

per

year The method of payment and the instruments executed meet the requirements of the applicable

Commission Regulation appearing at 46 C FR505 7

23 F M C
212 FEDERAL MARITIME COMMISSION

claim for recovery ofcivil penalties against the respondent arising from

the alleged violations set forth in the Order of Investigation and Hea

ing and occurring during the period from May 13 1976 through De

cember 31 1978 The Settlement expressly states that the Agreemen

is not to be construed as an admission of guilt by Respondent i

officers directors or employees to the alleged violation The Settl

ment is of course conditional in that it is expressly made subject to th

approval ofthe Commission

DISCUSSION AND CONCLUSION

Both Hearing Counsel and the respondent submit that the amount o

7 500 is a fitting and appropriate settlement Separately each poin

out that the respondent made restitution of the 2 944 which the re

spondent received from the ocean carrier that the respondent ha

terminated the practices related to the use ofits former freight forward

er license and collection of compensation from ocean carriers and tha

the respondent has agreed to refrain from such practices and to observ

the procedures specified by the Commission s staff in its port age

activities in the future 8Under the circumstances they concur that th

settlement is likely to prove a sufficient deterrent in the future

In addition the respondent asserts that at the outset of its alleged

unlawful activities it labored under some misunderstanding of the la

applicable to port agents of NVOCC principals in that it was not the

aware that the Commission s staff considered such port agents to be 

related person to its NVOCC prineipal for purposes of Sectio

51O 22 c

9

of the Commission s General Order 4 and therefore inelig

ble to collect compensation from oceangoing common carriers fo

forwarding services performed on behalf of NVOCC principles t

In this connection respondent contends that because there has as y

been no administrative or judicial testing of the Commission s stafr

construction there is some doubt about the outcome of any litigatio

SeeThe Stipulated Fact NQ 9 Appendix II

Section 51O 22 c of the Commission s Freight Forwarder Regulations 46 C F R 51O 22 c

p

vides as follows

c A nonvesst l operating common carrier by water or person related thereto otherwise

qualified may be licensed as an independent ocean freight forwarder to dispatch export ship

ments moving on other than its through export bill of lading Such carrier or person related

thereto may collect compenSation under section 44e when and only when the follOwing

certification is made on the line copy of the ocean c ri r sbilL of ladipg in addition to all

other certifications required by section44 of the Shipping Act 1916 and this part

The undersigned certities that neither it nor any related person has issued abill of lading

covering ocean transportation orotherwise undertaken commoncarrier responsibility for the

ocean transportation of the shipment covered by this bill of lading Whenever a

person acts

in thecapacity of anonvessel operating common carrier by wateras to any shipment he shall

not be entitled to collect compensation under section 44ey nor shall a common carrier by

water pay such compensation to anon vessel operating common carrier for such shipment

10 See Appendix II

23 FM C
EASTERN FORWARDING INTERNATIONAL INC 213

that might be undertaken 11 It supports this argument by references to

what it considers to be contrary positions taken by the Commission s

staff in November and December 197812 and an article which appeared

in a publication in August 1979 which it perceives to reflect its own

prior understanding of permissible conduct under regulation Neverthe

less the respondent does not wish to pursue the litigation alternative

because it cannot be assured of a favorable result and because of the

expense involved in a lawsuit

Most important respondent states that other than these activities

which were short lived and which were terminated following the

staffs visits in the summer of 1977 13 it has had no history of violations

ofthe Shipping Act It stresses that the activities which are called into

account in this proceeding do not involve fraud deceit or other con

duct involving moral turpitude Indeed respondent states that it coop

erated with the Commission s staff and Hearing Counsel through all

stages ofthis investigation

Following enactment ofPublic Law 96 2514 the Commission promul

gated rules and regulations governing the compromise assessment set

tlement and collection of civil penalties 15 indicating that the criteria

for compromise assessment or settlement included the standards set

forth in 4 C FR Parts 101 105 16

The standards enunciated in 4 C F R Parts 101 105 particularly

those appearing in Part 103 have long been a part of this agency s

program in the mitigation of civil penalties prior to the passage of P L

96 25 17 They continue to provide valuable assistance to the Commis

sion as an aid in determining the amount of penalty in assessment

proceedings and in determining whether to approve proposed settle

ments in assessment proceedings Angel Alfredo Romero Independent

Ocean Freight Forwarder Application and Foreign Freight Forwarders

Inc Possible Violations of Section 44 Shipping Act 1916 22 F MC 788

1980 H K International Forwarding Inc Independent Ocean Freight

Forwarder License Application 22 FMC 622 1980

11 Respondent candidly states that the doubt about the outcome is not shared by Hearing Counsel

12 The Stipulated Facts paragraph Nos 10 and 11

13 Id paragraph Nos 2 3 4

1446 US C 831

16 General Order No 30 46 GFR Part 505 entitled Compromise Assessment Settlement and Co

lection of Civil Penalties Under the Shipping Act 1916 and the Intercoastal Shipping Act 1933 Award

ed

16 Federal Claims Collection Standards issued jointly by the Comptroller General of the United

States and the Attorney General of the United States under section 3 of the Federal Claims Collection

Act of 1966 31 U S C 952

17 See enclosure to letter dated July 12 1978 from the Commission s Deputy General Counsel

Edward G Gruis to the Chairman Administrative Conference of the United States Robert A An

thony at pp 5 8

23 F M C
214 FEDERAL MARITIME COMMISSION

Those standards recognize the value of settling claims on the basis 

litigative probabilities 18 ie theabililfY to prove a case for the f

amount claimed either because of legal issues involved or a bona fi

dispute as to facts A pragmatic approach is warranted in utilizing th

criteria

Those standards also recognize that settlement may be based upon 

determination that the agency s enforcement policy in terms of dete

rence and security compliance both present and future will be ad

quately served by acceptance ofthe sum to be agreed upon

19 In th

connection the Comptroller General aad Attorney General advise th

These accidental or technical violations maybe dealt with less sever

ly than willful and substantial violations so

It should also be observed that those standards recognize that pen

ties may be settled for one or for more than one of the reaso

authorized in this part Sl

On the record before me I am satisfied that the proposed settleme

of penalties should be approved as it comports with established criteri

Although the activities of the respondent might not be classified 

merely a technical or accidental violation they certainly cannot 

considered as deliberate attempts to defeat regulation Moreover the

was no effort to conceal those activities or to defraud anyone This 

manifest from the fact that respondent cooperated with the staff a

attorneys for the Commission and made full restitution Complian

with regulation was obtained almost immediately after the matters we

brought to the respondent s attention There has been no resumption 

the allegedly illegal activities Under the circumstances it is manife

that the Commission s enforcement program will be served by t

payment ofthe amount agreed upon pursuant to and in addition to t

other terms and conditions of the settlement agreement

846 CP R O3 3

846 CP R 03 S

o

Id

a

46 CP R O3 7

23 F MC
EASTERN FORWARDING INTERNATIONAL INC 215

Accordingly it is ordered that the settlement agreement entitled

Proposed Settlement of Civil Penalties be approved and in accord

ance with the terms ofthat agreement respondent is ordered to pay the

sum of 7 500 in settlement ofcivil penalty claims

S SEYMOUR GLANZER

Administrative Law Judge

Washington D C

July 31 1980

Editor s Note Appendices Iand II lire included in the official docket

files for this proceeding

23 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 80 28

IN THE MATTER OF FURNISHING CONTAINER CHASSIS

ORDER

September 8 1980

The Maryland Port Administration and the Delaware River Mass

chusetts and Virginia Port Authorities have filed a Petition for Decla

atory Order seeking a

ruling from the Commission that commo

carriers by water must tender cargo containers mounted on chassis f

removal of the cargo from the pier to the ultimate consignee at 

interior point On May 13 1980 the Commission served notice oft

filing of this petition Subsequently sixteen replies were submitted 

behalf of a large number ofinterested parties

Section S02 68 ofthe Commission s Rules 46 C F R S02 68 provide

for the discretionary issuance of a declaratory order to terminate 

controversy or remove uncertainty Petitions seeking such relief mu

1 state clearly and concisely the controversy or uncertaint

2 name the persons and cite the statutory authority involve

3 include a complete statement ofthe facts and grounds promp

ing the petition

1 ABC ContainerUne NV 2 Oulf Mediterranean Ports Conference 3 Board of Trustees of 

Oalveston Wharves 4 National Maritime Council S JapanKorea Atlantic and Oulf Freight C

ference Japan Puerto Rico Virgin Islands Freight Conference New York Freight Bureau Ph

pines North America Conference Straits New Yark Conference Thailand Pacific Freight Conf

ence ThailandlUS Atlantic Oulf Conference TransPacific Freight Conference Hong Kon

Trans Pacific Freight Conference of Japan Korea Agreement No 10107 and Agreement No 101

6 Latin AmericalPacific Coast Steamship Conference and North Europe U S Pacific Coast Frei

Conferencej 7 Australia Eastern U S A Shipping Conference the 8900 Lines Rate Agreeme

GreecelUnited States Atlantic Rate Agreement Iberian U S North Atlantic Westbound Freight C

ference Marseilles North Atlantic US A Freight Conference MedOulf Conference Mediterrane

North Pacific Coast Freight Conference North Atlantic Mediterranean Freight Conference U 

North Atlantic Spain Rate Agreement U S South Atlantic Spanish Portuguese Moroccan and Me

terranean Rate Agreement and West Coast of Italy Sicilian and Adriatic Ports Nh Atlantic Ran

Conference 8 Counsel of American Flag Ship Operators 9 Port of Houston Authority of Ha

County Texas 10 Delta Steamship Lines Inc 11 National Customs Brokers Forwarders As

ciation of America Inc 12 American President Lines Ltd 13 Steamship Operators Intermo

Committee 14 West Oulf Maritime Association 15 the Commission s Bureau of Hearing Coun

and 16 North Atlantic United Kingdom Freight Conference North Atlantic French Atlantic Frei

Conference North Atlantic Continental Freight Conference North Atlantic Baltic Freight Conf

ence Scandinavia Baltic US North Atlantic Westbpund Freight Conference Continental North 

lantic Westbound Freight Conference North Atlantic Westbound Freight Association South Atlan

North Europe Rate Agreement Oulf United Kingdom Conference Oulf European Freight Asso

tion United Kingdom U S A Oulf Westbound Rate Agreement Continental US Oulf Freight 

sociation and FMC Agreement 10140

216 23 F MC
IN THE MATTER OF FURNISHING CONTAINER CHASSIS 217

4 fully disclose petitioner s interest and

5 be served upon all parties named therein

Moreover section 502 68 b expressly limits the availability of declara

tory rulings to situations where a Commission order would allow per

sons to act without peril upon their own view Because the instant

petition fails to satisfy several of these requirements it will be denied

Petitioners have failed to clearly articulate the controversy which

they wish the Commission to resolve At best the petition indicates

some dissatisfaction with the Commission s decision in another proceed

ing Docket No 79 86 Japan Korea Atlantic and GulfFreight Confer

ence Rules Pertaining to Chassis Availability and Demurrage Charges 22

F MC 466 1980 The Petitioners have also failed to adequately dis

close their interests in any controversy which might exist Most impor

tantly however they have not provided a complete statement of the

facts and grounds for relief Without a detailed statement of the factual

situation prompting the petition the Commission cannot reasonably be

expected to pass judgment on containerized carrier operations through

out the United States

Finally the petition fails to reveal how the requested relief would

materially affect the conduct of the Petitioners themselves It appears

that only particular terminal operators and ocean common carriers

would be directly affected by the Commission s resolution of the peti

tion

THEREFORE IT IS ORDERED That the Petition for Declarato

ry Order filed by Delaware River Port Authority Maryland Port

Administration Massachusetts Port Authority and Virginia Port Au

thority is hereby denied without prejudice and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

2J F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 69 57

AGREEMENT NO T 2336 NEW YORK SHIPPING

ASSOCIATION COOPERATIVE WORKING ARRANGEMENT

ORDER REOPENING PROCEEDING FOR LIMITED PURPOS

OF SATISFYING CLAIM OF ZIM AMERICAN ISRAELI

SHIPPING CO INC AND DIRECTING NEW YORK SHIPPING

ASSOCIATION TO SATISFY REMAINING CLAIMS OR TO

SHOW CAUSE WHY SUCH CLAIMS SHOULD NOT BE

SATISFIED

September 9 1980

On July 30 1980 the United States Court ofAppeals for the Distr

of Columbia Circuit issued an opinion in actions brought to revie

various aspects of our orders in this proceeding issued on April 3 19

and July 5 1978 InNo 78 1479 New York Shipping Association Inc 

FMC USA the Court affirmed our order directing New York Shi

ping Association Inc NYSA to satisfy all of the remaining claims f

assessment adjustments which the Commission had found to have be

viable and timely tiled In No 78 1871 Zim American Israeli Shippin

Co Inc the Court reversed the Commission s denial ofZitn s claim o

the grounds that a similarly situated claimant Korea Shipping Corpor

tion had been granted an assesSment adjustment

The Commission had denied Zim s claim on the basis that it had bee

filed in an untimely fashion and had also been waived The Court foun

that Zim s claim was still viable since Zim s negative response to a po

requesting its opinion as to whether it wished an assessment refund d

not constitute a waiver of its claim because of the unofficial an

nonbinding nature of the poll It also found that the Commission 

grant of an extension of time to Korea Shipping Corporation to tile 

claim when such extension was requested after the tiling deadline b

failure to grant a similar extension to Zim was arbitrary and capriciou

The Court went on to say that the fact that Zim was treated in th

same way as other late tiling claimants requesting an extension out 

time suggests that Zim was not the only tirm treated arbitrarily

Slip opinion at 16 1

1

The Court was not persuaded by theCommission s

argument that Korea Shipping was in adiff

ent position from all other late filing claimants because it alone had sought assenment adjustments e

lier by a

positive response to the above discussed poll

21R 1 FM
AGREEMENT NO T 2336 219

The consideration by the Commission of Korea Shipping s claim out

of time appears in law to have constituted a waiver ofthe Commission

imposed limitation for the filing of claims and required the Commission

to consider all claims which were filed during the additional filing

period granted to Korea Shipping See Montship Lines Limited v FMB

111 U S App D C 160 164 295 F 2d 147 151 1961 All ofthe late

filed claims were in fact filed during such additional period Korea

Shipping filed its claim on January 13 1977 having been given until

January 31 1977 to file and the last claim that of Moore McCormack

Lines Moore McCormack was filed on January 17 1977 The only

distinction which could be made among the various late filing

claimants is that some requested an extension of time to file and some

did not 2

Since however the requests for extension were themselves

out of time the distinction would indeed appear to be one without a

difference

NYSA although served with notice of the extension for filing grant

ed to Korea Shipping never objected to that extension Moreover

NYSA while formerly contending that it was not liable for claims

adjustments and that claims granted by the Commission were barred by

waiver and estoppel contentions which have been rejected by both the

Commission and the Court of Appeals has at all times recognized the

need to insure that assessment adjustments are made in a fair and non

discriminatory manner See eg NYSA s Objection to Claims re

ceived December 9 1976 at 9 NYSA s Petition for Reconsideration or

Stay filed October 18 1976 at 3 10 11

Zim and the other late filing claimants have of course computed the

amount which they feel is due them One slight adjustment is necessary

in these computations As the Commission held in its orders of August

22 1977 and April 3 1978 the claims of all successful claimants must

be reduced by the amount of the assessment adjustments due and

granted to those in whose favor adjustments were made because of

overassessments on automobile carriage since to the extent automobiles

were overassessed all other claimants were underassessed All success

ful claimants have borne their share of the automobile assessment ad

justments and it is only fair that Zim and the other late filing claims for

2

Another possible distinction that based on anegative response to the informal poll which would

have applied to Moore McCormack has been removed by the Court s holding that a

negative re

sponse to thepoll did not constitute awaiver of an assessment adjustment claim

l F M r
220 FEDERAL MARITIME COMMISSION

which oadjustments are to be made also bear their share 3 There wou

thus seem to be no dispute as to the dollar amount of the claims 

The late filed claims previously denied by the Commission compute

in exactly the same manner as were those of all of the successf

claimants in the earlier orders herein affirmed by the Court ofAppea

are as follows

Zim American Israeli Shipping Co Inc

S 004 344 Puerto Rican carrier underpayment less 801 2

total automobile credits or 4203 130 multiplied by 17S

of Zim s assessments vis a vis total tonnage assessment

73 SSS

Additional Late Filed Claims

Total Adjustments

Required if Claims

Granted 291 697

5 004 344 Puerto Rican carrier under payment less SOI 2

total automobile credits or 4 203 130 multiplied by 6 94

of claimaints assessments vis a vis total tonnage asse

ment

Adjustments for each individual late filing

claimant if claims granted

North American Maritime Agenoies on

behalf of Maritime Co of the Philip

pines

Crossocean Shipping Company Inc as

general agents for Jugolinija Rijeka

Crossocean Shipping Company Inc as

general agents for Muhammadi Steam

ship Co Ltd Karaohi

Venezuelan Line

J H Winohester Co Inc

Norton Lilly Co Inc as agent for

Fassio Line

The Shipping Corporation of India Ltd

Norton Line

American Australian Line

Ellerman Buckna11 Steamship Co Ltd

Port Line

Moore McCormack Lines Incorporated

6 725 0 16 of total tonnage

53 3S0 1 27 of total tonnage

1 681 0 04 of total tonnage

23 95S 0 57 of total tonnage

24 378 0 58 of total tonnage

52 119 124 of total tonnage

21 016 0 50 of total tonnage

13 450 0 32 of total tonnage

3 783 0 09 of total tonnage

5464 0 13 of total tonnage

4 623 0 11 of tctal tonnage

3 783 0 09 of total tonnage

129 456 3 08 of total tonnage

a

The orders establishing the liability of claimants to bear their share of the automobile assessm

adjustments were those of December 27 1976 which granted NYSAspetition for reconsideration 

thequestion of theeffect automobile assessment adjustments should haveon other claims see espec

ly page 10 the order of February 23 1977 which held that claims should be reduced to take acco

of all non automobile claimants underpayments occasioned by the overassessment of automobiles 

especially pages 2 4 7 and 14 and the order of August 22 1977 which determined the exact amo

of the automobile assessment adjustments and thus the amount by which all other claims would 

reduced see pages 23 67 These orders were served on all claimants have never been challenge

and thetime for court review of them has long pll8led

NYSA itself admits that the uCommission now has available the basic information needed for 

accurate computation of all of the additional claims Response of NYSA October 24 1977 at 

1 F Mr
AGREEMENT NO T 2336

In accordance with the Court s direction that Zim be permitted to

file its claim and no reason appearing why the claim should not be

satisfied we shall direct that NYSA satisfy such claim in one of the

three ways which we have recognized as proper herein in proceedings

which have twice been upheld by the Court of Appeals namely cash

refunds credits against present and future assessments or partial assess

ments 5

We perceive no reason why NYSA should not satisfy all of the late

filed claims in the amount set forth in the foregoing chart and in the

manner we have directed for all other claims Since however NYSA

has not as yet had an opportunity specifically to address itself to the

problem of apparent discrimination in making assessment adjustments

for Zim but not other late filing claimants in the light of the Court s

July 30th order we shall allow NYSA such opportunity NYSA will

thus be directed to satisfy the remaining late filed claims or in the

alternative to show cause as to why the remaining late filed claims

should not be satisfied The claim of Zim must of course be satisfied

promptly 6

THEREFORE IT IS ORDERED That this proceeding be re

opened

IT IS FURTHER ORDERED That NYSA shall within 30 days of

the date of service of this order satisfy the claim of Zim American

Israeli Shipping Co Inc in the amount of 73 555 by means of cash

payments or a system of credits or partial credits against present and

future assessments as outlined herein and in our orders ofApril 3 1978

December 27 1976 and our report and order in 19 F MC 248 and

notify the Commission in writing that such claim has been satisfied and

describe the method ofsatisfaction employed

IT IS FURTHER ORDERED That NYSA shall within 30 days of

the date of service of this order satisfy the remaining late filed claims

by means of cash payments or asystem of credits or partial credits

against present and future assessments or in the alternative show

cause why in light of the Court s holding regarding Zim the other

claimants should not be accorded the same treatment as Korea Shipping

5

As we have earHer explained should asuccessful claimant cease to serve the port of New York

credits or partial credits will no longer be a satisfactory means of assessment adjustments and cash

refunds wi1l be required to satisfy the remaining liability See eg Agreement No T 2336 19 EM C

248 262 265 1976 affd sub nom New York Shipping Ass n v FMC 187 US App DC282 292 571

F 2d 1231 1241 1978 Orders of December 27 1976 at 5 9 10 and April 3 1978 at 21 and notice of

July 5 1978 at 34

6

Although we have utilized 60 days in the past as the time during which adjustments which we

have ordered are to be made 30 days seems more appropriate here All problems relating to Zim s

claim have been fully resolved and that claim should be satisfied expeditiously Thirty days also seems

sufficient for the satisfaction of the additional late filed claims in light of the small number of such

claims and NYSA s experience in making the necessary adjustments in compliance with our other

orders herein Moreover jfNYSA chooses to show cause why the remaining late filed claims should

not be satisfied in light of the narrow questions presented 30 days should also be sufficient

1 F M C

221
222 FEDERAL MARITIME COMMISSION

Company IfNYSA elects to show cause in lieu of satisfying all of th

remaining claimants it shall make proper service upon all person

whose claims it contests

IT IS FURTHER ORDERED That if NYSA submits argument

that some or all of the remaining claimants should not be satisfied

those claimants may file replies to NYSA within 15 days ofthe date o

service ofNYSA s submission

By the Commission

S FRANCIS C HURNEY

Secretary

PM
FEDERAL MARITIME COMMISSION

DOCKET NO 79 98

AIR COMPAK INC INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE APPLICATION

NOTICE

September 10 1980

Notice is given that no exceptions have been filed to the August 5

1980 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 FRANCIS C HURNEY

Secretary

l PM r 223
FEDERAL MARITIME COMMISSION

DOCKET NO 79 98

AIRCOMPAK INC

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE

APPLICATION

Held

1 The applicant Air Compak Inc violated section 44 a Shipping Act 1916 by engag

ing in unlicensed freight forwarding activities in at least seven instances

2 Where the applicant was notified not to engage in freight forwarding activities withou

a license by the Federal Maritime Commission both orally and in writing and wher

the applicant did engage in such activities after being so notified a civil penalty o

5 000 is warranted and will be assessed pursuant to 46 U S C 831 e The penall

gives adequate consideration to any mitigating circumstances involved on the on

hand and constitutes a sufficient deterrent to future like conduct on the othe

Clarence Morse for respondent

Joseph B Slunt and Alan J Jacobson as Hearing Counsel

INITIALDECISIONl OF JOSEPH N INGOLIA

ADMINISTRATIVE LAW JUDGE

Finalized September 10 1980

This is a proceeding begun pursuant to sections 22 and 44 46 U S C

821 and 841 b respectively of the Shipping Act 1916 and section

S10 8 of the Commission s General Order 4 46 C F R 510 8 The

issues to be determined are

l Whether Air Compak Inc violated section 44 a Shipping

Act 1916 by engaging in unlicensed forwarding activities and

2 Whether civil penalties should be assessed against Air

Compak Inc pursuant to 46 U S C 831 e for violations o

Shipping Act 1916 and if so the amount of such penalty

which should be imposed taking into consideration factors in

mitigation of such a penalty

BACKGROUND INFORMATION

This proceeding was begun by the Commission s Order ofInvestiga

tion and Hearing dated December 7 1979 The Order noted that Air

Compak had apparently engaged in freight forwarding without a Ii

1 This decision will become the decision of the Commission in the absence of review thereof by th

Commission Rule 227 Rule of Practice and Procedure 46 C F R 502 227

4 1 HM r
AIR COMPAK INC

cense and in addition to the two issues set forth above directed that

the following issue related to the applicant s fitness be determined

3 Whether Air Compak is fit willing and able properly to carry

on the business of forwarding and to conform to the provi

sions of the Shipping Act 1916 and the requirements rules

and regulations ofthe Commission issued thereunder

The Order further provided for seriatim filings of memorandums of

law etc from the parties 2

and directed that any additional procedure

adopted by the Administrative Law Judge

shall include oral testimony and cross examination in the dis

cretion of the Presiding Officer only upon a showing that

there are issues of fact which cannot be resolved on the basis

of sworn statements affidavits depositions or other docu

ments or that the nature ofthe matters in issue is such that an

oral hearing and cross examination are necessary for the devel

opment of an adequate record

Respondent filed a motion on February 21 1980 to extend the time

for its opening memorandum which motion was granted Then by

letter dated February 29 1980 it notified the Commission that it was

withdrawing its application for a freight forwarder s license without

prejudice and filed a motion to dismiss the proceeding in part3 as well

as for an extension of time so that it might negotiate with Hearing

Counsel and or to reach settlement or otherwise plead The motion

was granted as was a subsequent motion for an extension of time to

submit the opening memorandum Finally after the parties failed to

reach agreement on settlement both filed opening memorandums of

law accompanied by affidavits and other evidence and Hearing Counsel

filed its reply In addition both parties have agreed that the case should

stand submitted on the written filings without the taking of direct oral

testimony and without cross examination

FINDINGS OF FACT

For purposes of this decision the following documents are accepted

as evidence and identified as follows

2

January 21 1980 Opening Filing of Hearing Counsel

February 22 1980 Opening Filing of Respondent

March 14 1980 Reply Filing of Hearing Counsel

3

The issue sought to be dismissed was the issue of fitness Issue No 3 set forth in the Commis

sion s Orderof Investigation dated December 7 1979

1 Ji A r

225
226 FEDERAL MARITIME COMMISSION

Document

Exhibit

No

Affidavit of Robert James Klapouchy

Letter of Charles W Clow dated 67 78

Affidavit of District Investigator Miguel G Tello

Affidavit of District Investigator David M Johnson

Affidavit of Thomas N Davis

I

2

3

4

5

1 Air Compak is a corporation with its principal office

bourne Florida Mr Thomas Davis is its president Exs I 5

2 Thomas Davis work history is as follows

in Me

1961 1973 Employed in family owned and operated business trucking as a driver 

daily runs as claims investigator and as a rate clerk In 1968 becam

Dispatch Supervisor and Traffic Manager and in 1972 Director of Ope

ations

1973 1974 Employed by Birdsall Inc agents for Tropical Shipping Ltd as Equipme

Control Manager In October of 1973 was given responsibility of Po

Operations which entailed direct supervision of stevedoring and all po

and marine related functions

1974 1978 Employed by Harris Corporation as Transportation Manager who w

responsible for all domestic and international traffic by ocean land and a

His duties included booking ocean freight space and supervising th

procurement of accurate and proper bills of lading shipper s expo

declarations and other pertinent shipping documents While at Harris 

performed many if not all of the various activities engaged in by freig

forwarders

3 On June I 1978 Robert James Klapouchy ofthe FMC s Office 

Freight Forwarders discussed Air Compak s application for an ocea

freight forwarder license with Mr Davis Mr Klapouchy informed M

Davis that Air Compak was not permitted to engage in ocean freig

forwarding without a license Ex 1

4 On June 7 1978 the FMC sent the following letter to Ai

Compak over the signature of Charles L Clow Chief Office 

Freight Forwarders

Receipt is acknowledged of your application for an independ

ent ocean freight forwarder license The application is being

processed and further information regarding it will be sent to

you in the future The application has been assigned number

B l83 Correspondence concerning the application should

refer to the application number and be submitted in triplicate

Your attention is specifically directed to Section 44 Shipping

Act 1916 which prohibits any person from engaging in carry

ing on the business of forwarding unless such person holds a

license issued by the Federal Maritime Commission to engage

in such business Carrying on the business of forwarding is

110 f ro
AIR COMPAK INC

defined under Section 510 2 of the enclosed General Order 4

and Section I Shipping Act 1916

If you should engage in the business of forwarding before

receiving your license you will be subject to penalties provid

ed by law and may prejudice the issuance of your license

Any changes in facts contained in your application including

addresses telephone numbers additional corporate officers

etc should immediately be reported to the Commission in

triplicate Delay in reporting such changes may delay the proc

essing of your application

Ex 2

5 On December 18 1978 after asking Mr Davis to have Airl

Compak s records available for inspection FMC District Investigator

Miguel G Tello interviewed Mr Davis and reviewed Air Compak s

records at its Melbourne office Mr Davis supplied M Tello with the

forwarding paperwork performed in Melbourne and told Mr Tello

the bookkeeping records were maintained in the Houston Texas office

He stated it would have been inconvenient to bring those records to

Melbourne Ex 3

6 Mr Tello found five instances where Air Compak engaged in

freight forwarding between August 4 1978 and October 3 1978 after

being told it would violate the law if it did so He prepared a schedule

setting forth the violations which schedule has been made a part of the

record Ex 3 paras 8 9 Attachments A B 1 through F 3

7 Air Compak invoiced its ocean freight clients 60 for Bill of

Lading which charge was for preparing the bills of lading and

handling the shipments which included contacting the ocean carrier

arranging for booking the shipments and preparing the export docu

mentations Ex 3 para II

8 At the December 18 1978 meeting Mr Tello asked Mr Davis if

he had engaged in ocean freight forwarding Mr Davis stated he had

on a limited number of occasions for clients for whom he also had

performed air freight forwarding services He also stated he had experi

ence in handling ocean shipments to the relevant foreign destinations

due to his prior employment Ex 3 para 5

9 Mr Davis informed Mr Tello that he had received a letter from

the Commission which enclosed a

copy of the Commission s rules

regarding ocean freight forwarding and stated he was familiar with the

Commission s rules He also stated that he did not know his activity

was improper since he did not receive compensation from ocean carri

ers which receipt he thought would have been improper Ex 3 paras

6 7

10 At the end of the December 18 1980 meeting Mr Tello in

formed Mr Davis not to perform any more ocean freight forwarding

1 I 11 6r

227
i

228 FEDERAL MARITIME COMMISSION

without a license and to turn such work over to a licensed freigh

forwarder Ex 3 para 12

11 On January 3D 1979 Commission District Investigator David M

Johnson reviewed Air Compak records at its Houston office Th

records reflected two other instances of ocean freight forwarding e

gaged in after the Commission had advised Air Compak not to engag

in such activity without a license One eccurred on December 28 197

and the other on January S 1980 Ex 4

paras 3 4 S Attachments A

Ithrough A 3 B 1 through B 3 and E l

throughE 4

ULTIMATE FINDINGS OF FACT

12 Air Compak through its principal officer Thomas N Davis ca

ried on the business of ocean freight forwarding within the meaning 

sections 1 and 44 ofthe Shipping Act 1916 and 46 C F R SID et seq

without a license

13 Air Compak carried on the business of ocean freight forwardin

after being notified by the Commission that it was illegal to do 

without a license

14 Under section 32 a of the Shipping Act 1916 46 U S C 31 a

the Commission may assess a civil penalty not to exceed S OOO f

each violation ofsection 44 ofthe Shipping Act

DISCUSSION

Issue No 1 Whether Air Compak Inc violated section 44 a

Shipping Act 1916 by engaging in unlicensed forwarding

activities

Section 44 a Shipping Act 1916 provides

No person shall engage in carrying on the business of for

warding as defined in this Act unless such person holds a

license issued by the Federal Maritime Commission to

engage in such business

The record in this case clearly establishes that Air Compak violate

section 44a in at least seven different instances and it has been 

found as fact Indeed the respondent does not contest such a findin

and has admitted in its own proposed findings of act that the violation

occurred Respondents OpenilJg Memorandum of Law and Affida

of Facts Proposed Findings of Fact paras S 6 Consequently n

further discussion of this issue is necessary to this decision

Issue No 2 Whether civil penalties should be assessed against

Air Compak Inc pursuant to 46 U SC 831 e for violations

of the Shipping Act 1916 and if so the amount of such

penalty which should be imposed taking into consideration

factors in possible mitigation ofsuch a penalty

Section 32 a ofthe Shipping Act 1916 provides that

e1l
AIR COMPAK INC

whoever violates section 44 of the Act shall be

subject to a civil penalty not to exceed 5 000 for each such

violation

Further section 32 e provides that

the Commission shall have authority to assess or com

promise all civil penalties provided in this Act

The real question to be decided here is the amount of the penalty to

be assessed On the one hand the respondent urges a penalty not to

exceed 1 000 On the other Hearing Counsel argues for a penalty of

5 000 The respondent bases his argument on the assertions that neither

Air Compak nor Mr Davis has engaged in any prior violations of law

that Mr Davis did not believe he was doing business as an ocean

freight forwarder that he thought as in the case ofair forwarding that

he could forward ocean freight before a forwarding license was issued

that Mr Davis was ignorant of the Commission s

freight forwarder

statute and the regulations applicable to ocean freight forwarders that

he did not intend to violate Commission rules and regulations that he

did not collect brokerage fees from the carriers that he recognizes he

gave little attention to the FMC application that he has already

suffered damage because ofdelay and the fact that he had to withdraw

his application

Hearing Counsel notes that while the minimum penalty is 5 000 the

relative severity ofthe violations and the cooperation ofthe respondent

did not warrant such a penalty and that 5 000 is the minimum realis

tic penalty He suggests that the 1 000 penalty espoused by the

respondent neither recognizes the significance of the violations nor

serves as a meaningful deterrent against future misconduct

As to the case law cited by the parties respondent cites several cases

most of which were decided before the Commission had authority to

assess civil penalties He cites E L Mobley Inc Docket No 77 26

Report and Partial Adoption of Initial Decision served March 12 1979

for the general proposition that the sanctions imposed by the law and

regulations must be in the public interest and not punitive in nature He

then cites a series of cases which are concerned with the granting or

denial of a license rather than with the penalty to be assessed 4 Re

spondent does cite Concordia International Forwarding Corporation Inde

pendent Ocean Freight Forwarder Application and Possible Violations of

Section 44 Shipping Act 1916 Docket No 78 34 21 FMC 587 1978

and Angel Alfredo Romero Independent Ocean Freight Forwarder Appli

cation and Foreign Freight Forwarders Inc Possible Violations of Section

4

Independent Ocean Freight Forwarder License Application Guy G Sorrentino 15 F M C 127 1972

Fabio A Ruiz d b aFarExpress Company 15 F M C 242 247 1972 Independent Ocean Freight For

warder License Appliea ionKey Air Freight Inc 14 F M C 290 1971 Independent Ocean Freight For

warder License Application LT C Air Cargo Inc 13 F M C 267 1970

229
230 FEDERAL MARITIME COMMISSION

44 Shipping Act 1916 Docket No 79 29 22 F M C 788 1980 which

are concerned with the penalty provisions He analogizes the facts in

those cases with those involved here and notes that the severity and

number of violations involved in those cases exceeds what is involved

in this proceeding

As to the cases involving licensing Hearing Counsel responds tha

equally irrelevant to the pending question of assessment for violations

are the Commission s actions cited by Respondent regarding the licens

ing or revocation of licenses of forwarders Hearing Counsel then

proceeds to distinguish Concordia from the instant case pointing ou

that Concordia involved a settlement agreement between the parties and

not an assessment Likewise he distinguishes Romero from this case

noting that in Romero the facts indicated that the respondent wa

unable to pay any more than the 2 500 penalty assessed while here

there is no inability to pay

Afterreviewing the entire record in this case it is held that a penalty

of 5 000 is appropriate While in mitigation one can agree with the

respondent that the number of violations was not great that the

amounts received for services rendered were small and that Mr Davis

moral character and business reputation are good these facts do no

outweigh what is clearly reflected in the record namely that eve

after he was told not to forward ocean freight without a license Mr

Davis did so It is not enough to dismiss his actions by calling them

technical violations by pointing to a lack of willfullness or by asserting

that he was ignorant of the law and regulations Given Mr Davis

background and experience and the fact that in July of 1978 he wa

told it would be wrong to forward ocean freight without a license an

was referred to the law and regulations one is hard pressed to loo

upon his latter actions as inadvertent or forgetful Any reasonable ma

being so put on notice would have inquired of the Commission as t

what he might or might not do and Mr Davis failure to make suc

inquiry evidences at the very least the kind of negligence the kind o

brinksmanship and the kind of conscious inaction the penalty provisio

was meant to deter While the severest of penalties is not warranted

certainly some penalty having a deterrent effect is called for The

5 000 figure is appropriate

In its brief the respondent properly notes that it is difficult to set 

minimum settlement figure for all cases and cites the many factua

variations present in the cases such as the presence or absence o

willfullness lawful intent and state of mind etc and experience as 

freight forwarder He then proceeds to argue that a 5 000 penalty her

would be unreasonable in light of Concordia and Romero supra wher

there were many more violations and where the violations were willfu

Respondent also makes a penalty per violation computation which h

uses to demonstrate how severe the 5 000 penalty would be here W
AIR COMPAK INC

agree with Hearing Counsel that Concordia and Romero should not be

compared to this case and are distinguishable from it because Concordia

was the result of a settlement and not a hearing on the merits as here

and because in Romero the assessment was clearly predicated on an

inability to pay which is not present in the instant case

As to the factual variances in each case it is obvious and we would

agree with the respondent that each case must stand on its own

However that is not to say that given the embryonic posture of the

Commission s assessment authority it cannot or should not proceed to

establish certain criteria so as to achieve some predictable degree of

uniformity The holding in this case stands for the proposition that once

Commission warnings not to engage in ocean freight forwarding have

been clearly disseminated to a

respondent so that a reasonable man

would either understand them or lacking such understanding would

undertake to inquire as to matters he does not understand the subse

quent act of engaging in freight forwarding without a license is not a

technical violation and will not be excused because of alleged lack of

willfullness ignorance lack ofharm or other similar factors Further a

civil penalty of at least 5 000 is warranted in such cases where there

are no material distinguishing facts Here a decision assessing such a

penalty gives adequate consideration to the mitigating circumstances

involved in that it recognizes that the respondent s actions did not

result in unjust enrichment or an inordinate number ofviolations and at

the same time recognizes the need for the Commission to assess a

penalty which will deter illegal ocean freight forwarding in the future

either by the respondent or others who may find themselves similarly

situated facing similar alternatives

In light of the above facts and discussion as well as the entire

record it is held that the respondent Air Compak Inc violated sec

tion 44 a Shipping Act 1916 by engaging in unlicensed freight for

warding activities and that civil penalties in the amount of 5 000 are

hereby assessed against Air Compak Inc pursuant to section 831 e 46

U S C 831 e ofthe Shipping Act 1916

S JOSEPH N INGOLIA

Administrative Law Judge

Washington D C

August 5 1980

11

231
FEDERAL MARITIME COMMISSION

DOCKET NO 80 2

AVION FORWARDING INC INDEPENDENT OCEAN

FREIGHT FORWARDER LICENSE APPLICATION

NOTICE

September 10 1980

Notice is given that no exceptions have been filed to the August 4

1980 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired N

such determination has been made and accordingly that decision ha

become administratively final

5 FRANCIS C HURNEY

Secretary

11 J C
FEDERAL MARITIME COMMISSION

DOCKET NO 80 2

AVION FORWARDING INC

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE

APPLICATION

Respondent found to have carried on the business of ocean freight forwarding without a

license also found that a civil penalty should be assessed against respondent and that

mitigating factors are insignificant and unimpressive and that respondent is not fit to

be licensed Application denied

John L Alfano and Roy A Jacobs for respondent

John Robert Ewers Joseph B Slunt and William D Weiswasser as Hearing Counsel

INITIAL DECISION 1 OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

Finalized September 10 1980

Avion Forwarding Inc Avion the respondent filed an application

for a license as an independent ocean freight forwarder During the

course of the Federal Maritime Commission s

investigation of Avion it

appeared that Avion had engaged in unlicensed forwarding activities

although previously warned not to engage in such activities

Avion was advised ofthe Commission s intent to deny its application

for a license and Avion requested a hearing By order of investigation

and hearing served January 11 1980 this proceeding was instituted to

determine I whether Avion violated section 44 a of the Shipping

Act 1916 the Act by engaging in unlicensed forwarding activities 2

whether civil penalties should be assessed against Avion pursuant to

section 32 e ofthe Act 46 U S c 831 e for violations ofthe Act and

the Commission s General Order 4 46 C F R 510 and if so the

amount of such penalty which should be imposed taking into consider

ation factors in possible mitigation of such a penalty and 3 whether

Avion and its corporate officers possess the requisite fitness within the

meaning of section 44b of the Act to be licensed as an independent

ocean freight forwarder

In accordance with the order of investigation Hearing Counsel filed

their opening memorandum of law their request for a penalty of

25 000 and affidavits offacts respondent subsequently filed its memo

1

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

Commission Rule 227 Rules of Practice and Procedure 46 GFR 502 227

23 FMC 233
234 FEDERAL MARITIME COMMISSION

randum of law and affidavit of facts and later Hearing Counsel filed

their reply memorandum oflaw

The order of investigation further provided within two weeks follow

ing the reply memorandum ofHearing Counsel that the parties subm

written statements identifying any unresolved issues offact and specify

ing the type of procedure to resolve them any such procedure to

include oral testimony and cross examination at the discretion of the

Presiding Officer only upon a showing of necessity to develop an

adequate record

In response to the above directive neither the respondent nor Hear

ing Counsel requested opportunity for oral testimony But Hearing

Counsel on May 19 1980 petitioned that the record be reopened to

receive new evidence of continuing violations by the respondent to

which petition the respondent did not reply For good cause the sai

petition was granted and the record was reopened to receive the

affidavit and supporting documentation offered by Hearing Counse

The parties then were given two weeks following the ruling reopening

the record ruling served June 11 1980 to submit written statement

identifying unresolved issues of fact and specifying the type of proce

dure suited to resolve them No response was received from the re

spondent and Hearing Counsel submitted that the record was sufficien

stating that as of June 17 1980 they had submitted for the recor

evidence of at least 137 violations of section 44 a of the Act Hearin

Counsel reiterated their earlier recommendations that respondent s l

cense application be denied and that a civil penalty of 2S OOO b

assessed

The following findings of facts are based upon the written recor

submitted by the parties

Respondent is a New York Corporation established in Novembe

1978 for the purpose of serving shippers of freight in both air an

surface modes oftransportation Its principal office is in Jamaica New

York Respondent is approved as an air forwarder by the Civil AerO

nautics Board and possesses a license from the International Air Trans

port Association Respondent also handles consolidations and domesti

shipments throughout the United States

An affiliate of respondent Lorme International Inc holds a custom

house brokers license and arranges customs clearance for all types o

cargo Another affiliate Avion Air Sea Trucking Inc provide

motor carrier support to respondent s other companies while conduct

ing local cartage operations in the New York New York area

Neither respondent nor its two affiliates are connected with i

control of or associated with any shipper or consignee of shipments t

or from foreign countries

Respondent has operated at a small loss for the seven months endin

January 31 1980 Respondent attributes this loss to the provision by 

23 F MC
AVION FORWARDING INC

of certain services without compensation and anticipates a

profit when

and if it receives a license as an independent ocean freight forwarder

Over the year ending March 19 1980 respondent admits that it has

provided its customers ocean freight forwarding service including ex

amining instructions and documents received from shippers ordering

cargo to port preparing or processing delivery orders and dock re

ceipts and preparing and processing ocean bills oflading

Respondent has not received brokerage from ocean common carriers

and believed that as long as it did not receive such brokerage that it

could continue to furnish ocean freight forwarding services

Respondent states that it had the impression that so long as a licensed

forwarder was shown on the bill oflading the law was being complied

with

Respondent further states that its conception of the term carrying

on the business of forwarding implies that compensation is being paid

Inasmuch as respondent was compensated by its shippers for its for

warding services apparently respondent s definition of compensation is

limited to brokerage from ocean common carriers

Respondent states that even if it violated the Shipping Act technical

ly that it should not be penalized when it has not benefited received

brokerage from ocean common carriers that it is willing to accept a

license as an independent ocean freight forwarder on a limited term

basis providing for a review of its fitness prior to the expiration of the

term and that if at a later date it has demonstrated that it can comply

with the Shipping Act that it should be granted a

permanent license

On January 10 1979 Avion received a form letter from the Commis

sion in Washington D C transmitting the application form for license

as a freight forwarder which had been requested by A vion The form

letter received by Avion explicitly refers to section 44 of the Act and

to the requirement of a license to carryon the business of forwarding

The form letter further warned that forwarding without a license sub

jected an applicant to possible penalties and prejudice to the issuance of

a license

On March 5 1979 Avion s president Mr Charles Lorme was told

by a transportation industry analyst employed by the Commission in

Washington D c in a telephone conversation that Avion was not

permitted to conduct ocean freight forwarding work before being

issued a license by the Commission This analyst gives the same warn

ing to all applicants for licenses as freight forwarders

On March 9 1979 the Office of Freight Forwarders ofthe Commis

sion in Washington D C sent Avion a letter which the analyst had

referred to in the March 5th telephone conversation with Avion This

letter as shown by the postal receipt was delivered to Avion on

March 14 1979 The letter acknowledged receipt ofAvion s application

and directed its attention to the fact that

23 F M C

235
236 FEDERAL MARITIME COMMISSION

section 44 of the Shipping Act 1916 prohibits any person

from engaging in carrying on the business of forwarding

unless such person holds a license issued by the Commission to

engage in such business

The letter also warned Avion that if it should engage in the business o

forwarding before receiving a license it would be subject to penalties

and such activities might prejudice the issuance ofits license

On March 28 1979 an investigator employed by the Commission a

its Atlantic District Office in New York City spoke by telephone with

Avion s president Charles Lorme and Mr Lorme then was warned

not to forward any more ocean shipments

On April 4 1979 the District Investigator of the Commission re

ferred to above met with Mr Lorme and with Rosemarie Bacchi Vice

PresidentOperations Manager of Avion and with Angelo M Durso

Secretary of Avion On May 30 1979 Ms Bacchi acknowledged in 

written statement witnessed by District Investigator Wilfred P Ca

kins that

On April 4 1979 Atlantic District Investigator Wilfred P

Calkins advised us that we were not permitted to handle ocean

freight forwarding without being licensed by the Federal Mat

itime Commission Calkins affidavit paragraph 17 and Exhib

itF

On May 30 1979 the district investigator once more warned Mr

Lorme and Ms Bacchi that forwarding without a license was a viola

tion of section 44 a of the Act and that a significant fine would b

assessed and that their application for a license would be prejudiced

thereby

On November 6 1979 the Managing Director of the Commissio

wrote to the president of Avion that information had been brought t

the attention of the Commission that Avion had engaged in ocea

freight forwarding activity on at least 31 occasions in violation o

section 44 a of the Shipping Act 1916 and further advising in par

that the Act requires that no person shall engage in carrying on th

business of forwarding unless such a person holds a license issued b

the Commission to engage insuch business

Mr Lorme states in his affidavit We then immediately sought th

assistance of counsel because ofthe apparent seriousness ofthe situatio

and our crucial need for a forwarder license in order to offer our custom

ersa complete service Emphasis supplied

As seen at least as of November 6 1979 respondent s presiden

acknowledged its crucial need for a forwarding license

Charles Lorme respondent s president has worked 10 years as 

manager of import and export air freight for an air forwarder whic

also held an independent ocean freight forwarder s license Amon

23 FMC
AVION FORWARDING INC

other employment he worked as assistant manager import department

for another combined ocean and air forwarder and customhouse broker

Ms Bacchi respondent s vice president worked three years for an

air freight forwarder She worked a

year as air freight manager for a

forwarder which also held an independent ocean freight forwarder s

license

Between January 10 1979 when Avion received its first warning

notifying it of the requirement of a license to carryon the business of

ocean freight forwarding and March 5 1979 when Avion got its

second warning Avion admitted having forwarded 14 ocean ship

ments

Between March 6 1979 and March 28 1979 Avion admitted having

forwarded seven ocean shipments

Between March 28 1979 and April 4 1979 Avion admitted having

forwarded six ocean shipments

Between April 5 1979 and May 30 1979 Avion admitted having

forwarded five ocean shipments Avion during that period also for

warded at least 10 other ocean shipments Exhibit C 2

Since May 30 1979 until some few days before the time of the

affidavit of Mr Calkins dated February 20 1980 attached to the

opening memorandum of Hearing Counsel A vion had forwarded at

least 53 ocean shipments

Since January 26 1979 and prior to February 25 1980 Avion

forwarded a total of at least 95 ocean shipments without holding a

license from the Federal Maritime Commission

When the record was reopened the new evidence showed that

Avion had forwarded 33 more ocean shipments with bills of lading

dated as early as February 15 1980 and as late as April 18 1980

Appendices A and B to the Affidavit of Edwin Hartin International

Traffic Manager of Mallinckrodt Inc the respondent s major ocean

client Of these 33 invoices 20 were billed under the invoices ofHome

Pack Transport Inc and 13 were billed under the invoices of Avion

Avion had an agency agreement dated March I 1977 with Home Pack

Transport Inc in the sale of international air freight transportation

Avion has invoiced its shippers for a wide variety of services includ

ing an ocean freight forwarding fee Exhibit A shows that on the 31

shipments listed Avion collected a forwarding fee of 35 in 29 in

stances and a forwarding fee of 40 in 2 instances or a total of 1 095

Generally the facts show that even after numerous warnings Avion

continued to carryon the business of ocean freight forwarding without

a license from the Commission

DISCUSSION AND CONCLUSIONS

The respondent in general contends that its violations ofthe Shipping

Act were technical in nature not flagrant nor deceitful whereas Hear

23 F M C

237
238 FEDERAL MARITIME COMMISSION

ing Counsel contend that respondent s violations of the Act we

knowing and flagrant and in fact that the evidence shows that th

respondent is unwilling to conform to the rules and regulations of th

Commission

The evidence clearly supports the view of Hearing Counsel From

time to time respondent has offered different explanations of its con

duct

Respondent asserted that the district investigator did bring to re

spondent s attention the second paragraph ofthe letter dated March 

1979 concerning the prohibition against carrying on the business o

forwarding but that he did not fully explain how broadly the Commis

sion defines forwarding and that respondent understood the paragrap

merely to mean that it could not cut shipping documents under its ow

name

On May 30 1979 respondent s Vice President Ms Bacchi acknow

edged the district investigator s warning given on April 4 1979 an

stated that respondent had not accepted any more shipments from tha

day on Exhibit F

Charles Lorme the president of respondent stated that when r

spondent received the Managing Director s letter dated November 

1979 respondent was aware ofthe seriousness ofthe situation and ofi

crucial need for a forwarding license

Yet respondent continued to forward ocean shipments including 3

such shipments as late as February March and April 1980 including 

least 13 where respondent billed the shipper under its own name fo

forwarding services

It is concluded that the respondent knowingly and flagrantly violate

the Shipping Act after repeated written telephonic and oral in perso

warnings

The respondent on brief argues that in the absence of brokerag

payments by ocean common carriers unlicensed forwarding does n

violate the statute In Concordia International Forwarding Corporation

Independent Ocean Freight Fowarder Application and Possible Violatio

ofSection 44 Shipping Act 191621 F MC 587 the Commission consi

ered the same argument as now made by Avion and ruled again

Concordia The Commission pointed out that the plain meaning 

section 44 a of the Act is a flat proscription against dispatching shi

ments ofothers without a license

On brief respondent also contends that if Avion technically violate

the statute by performing forwarding services without a license eve

though no brokerage was received from ocean common carriers th

such violations were not so severe or so flagrant as to warrant th

assessment of civil penalties Respondent s contention that it was unce

tain as to the law and that in good faith that respondent had adjuste

its operations to meet the legal requirements certainly does not ho

23 F M C
AVION FORWARDING INC

water Maybe at the outset of its operations respondent was uncertain

but after repeated warnings and acknowledgments by its vice president

and by its president that it could not forward ocean shipments and that

a license was crucial respondent could not have been uncertain of the

law

Respondent contends also that by not accepting brokerage from

ocean common carriers it has avoided the one evil against which the

law sought to protect and if this factor does not excuse the alleged

violations of the Act it certainly should mitigate in Avion s favor in

determining whether civil penalties should be assessed While Avion

did not receive brokerage it did receive consideration in the form of

money from its shippers for its unlicensed forwarding services Re

spondent did benefit from the services it rendered

Respondent points out that it did not obtain legal counsel until

November 1979 However even afterwards well into February

March and April 1980 respondent continued to forward without a

license

Respondent also asserts that it does not seek condonation of its

activities but nevertheless that no regulatory purpose is served by

denial of its application for an ocean freight forwarder s license be

cause respondent is otherwise fit willing and able to carryon its

business for which there is a public need and that no one has been

damaged by respondent s misconduct

Respondent as seen suggests that it be given a limited term license

so that the Commission may monitor Avion s activities and obtain

assurance that the Commission s

regulations are being complied with

Needless to say Avion s activities in 1980 have been monitored and it

has continued to violate the law after repeated warnings and acknowl

edgments of the law No further monitoring is justified by the circum

stances herein

It is concluded and found that on nUD 1erous and continuing occa

sions the respondent Avion violated section 44 a of the Act by carry

ing on the business of ocean freight forwarding without holding a

license from the Federal Maritime Commission that a civil penalty of

25 000 as recommended by Hearing Counsel should be assessed

against Avion pursuant to section 32 3 ofthe Act and that the factors

in possible mitigation of such a penalty are insignificant and unimpres

sive in view ofthe continued and flagrant nature ofthe violation ofthe

Act by A vion and that Avion and its corporate officers as shown by

their past disregard of the Act do not possess the requisite fitness

within the meaning of section 44 b of the Act to be licensed as an

23 F M C

239
240 FEDERAL MARITIME COMMISSION

independent ocean freight forwarder The said application hereby 

denied

S CHARLES E MORGAN

Administrative LawJudge

Washington D C

August 4 1980

I

23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 80 41

THE PORT AUTHORITY OF

NEW YORK AND NEW JERSEY

v

THE WEST COAST OF ITALY

SICILIAN AND ADRIATIC PORTS

NORTH ATLANTIC RANGE CONFERENCE

AND ITS INDIVIDUAL MEMBERS

NOTICE

September 10 1980

Notice is given that no appeal has been taken to the August 6 1980

dismissal of the complaint in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has

become administratively final

8 FRANCIS C HURNEY

Secretary

23 F MC 241
FEDERAL MARITIME COMMISSION

DOCKET NO 80 41

THE PORT AUTHORITY OF

NEW YORK AND NEW JERSEY

v

THE WEST COAST OF ITALY

SICILIAN AND ADRIATIC PORTS

NORTH ATLANTIC RANGE CONFERENCE

AND ITS INDIVIDUAL MEMBERS

MOTION TO DISMISS COMPLAINT

AND DISCONTINUE PROCEEDING GRANTED

Finalized September 10 1980

On July 21 1980 Respondents served and tiled the instant motio

that the complaint be dismissed and that this proceeding be discontin

ued as moot In support ofthis motion respondents attached a

copy o

their tariff tiling by which the subject drayage charge tariff provision

Rule 20 9 of the Conference Tariff has been cancelled effective Sep

tember 1 1980 Respondents say that cancellation of the subject tari

rule is exactly the relief sought in the complaint Therefore the pro

ceeding is moot and should be discontinued

On August S 1980 the Complainant served and filed the followin

Reply to Respondents Motion to Dismiss Inasmuch as respondent

the West Coast of Italy Sicilian and Adriatic Ports North Atlanti

Range Conference and the individual members of that conference hav

cancelled the tariff item which is the subject ofthe Complaint the Po

Authority of New York and New Jersey has no objections to Respond

ents Motion to Dismiss

Upon consideration of the above the Presiding Administrative Law

Judge finds and concludes the motion should be granted

Wherefore it is ordered

A The motion is granted The complaint is dismissed

B This proceeding is discontinued

August 6 1980

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

242 23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 76 11

AGREEMENT NOS 150 DR 7 AND 3103 DR 7

MOTION TO DISAPPROVE DENIED

September 11 1980

The Commission has before it the Motion to Disapprove Agreement

No 150 DR 7 filed July 25 1980 by Seatrain Pacific Services S A

and the August 4 1980 Reply of the Trans Pacific Freight Conference

ofJapan Korea TPFC

Seatrain contends that the amended version of Agreement No 150

DR 7 does not meet the conditions specified in the Commission s De

cember 31 1979 Report and Order conditionally approving that Agree

ment 1 Seatrain s position is based upon the fact that TPFC was or

dered to modify its dual rate contract to

clearly allow shippers the choice of binding only their

port to port shipments or only their joint through intermodal

shipments to the Conference 22 F M C 378 392

This requirement arose out of the two contracts rather than one

contract issue which was argued throughout this proceeding and

Seatrain interprets the Commission s

language as mandating the use of

separate documents to describe the intermodal and the port to port

contract obligations of merchant signatories TPFC however filed a

single document with two different signature lines marked Port to

Port Trade and Joint Through Intermodal Trade respectively The

other modifications in TPFC s contract except for those in Article 2 a

were in the form prescribed by the December 31 1979 Order

The Commission finds merit in Seatrain s argument that the Agree

ment would be clearer and less confusing to shippers if the two con

tracts were physically as well as legally separated The use of at least

two different signature pages and the addition of clarifying language to

Articles 1 and 2 a would have reduced the possibility of confusion on

the part of contract shippers Nonetheless the amended Agreement is

sufficiently clear when read in conjunction with the Commission s

Report and Order and the Conference should not be seriously faulted

for concentrating its attention on the specific modifications set forth

1 The Commission ruled that Agreement No DR would be disapproved unless certain shipper

protection amendments were submitted on or before February 29 1980 An amended version was

timely filed and approved but the approval was subsequently vacated when the Commission discov

ered that TPFC had not served other parties to theproceeding Order of July 14 1980

23 F M C 243
244 FEDERAL MARITIME COMMISSION

therein The amended version of Agreement No 150 DR 7 submitt

on February 29 1980 will be approved Seatrain s objections to t

TPFC amendments are in actuality a petition for reconsideration of t

December 31 1980 Report and Order and as such are inconsiste

with section 502 261 of the Commission s Rules 46 C F R 502 26

TPFC will also be directed however to make modifications 

Agreement No 150 DR 7 which assure that each contract has a co

bined cover and signature page that plainly identifies it as either 

Port to Port contract or a Through Intermodal contract 2Amen

ments to Articles 1 and 2 a are also necessary to better describe t

determinative effect of the two different cover signature pages Alte

natively the Conference may remove all references to its intermod

service from its present contract so as to create two completely sep

rate six page documents but the Commission does not wish to requ

any greater duplication of material and effort than is reasonably nece

sary to notify shippers of their right to choose between the two TPF

contract services 3

The further amendments should be submitted within 60 days of t

service date of this Order and captioned Agreement No 150 DR 

revised This Agreement need not be served on the parties to t

proceeding Instead it will be published in the Federal Register a

otherwise processed as a separate and distinct section IS matter 4Ift

requested amendments are not filed within 60 days an order will 

entered disapproving Agreement No 150 DR 7 pursuant to section 

ofthe Shipping Act 1916 46 U S C 824

THEREFORE IT IS ORDERED That the Motion to Disa

prove ofSeatrain Pacific Services S A is denied and Agreement N

150 DR 7 is approved and

IT IS FURTHER ORDERED That this proceeding is terminate

and

IT IS FURTHER ORDERED That on or before the sixtieth 60

day following service of this Order the member lines of the Tran

Pacific Freight Conference of Japan Korea shall cause to be deliver

to the Commission s offices in Washington D C a complete copy 

the dual rate contract approved today captioned as Agreement N

150 DR 7 Revised signed by all the proponent lines and modified 

the following respects

Z

Ie a shipper wishing to sign both contracts would be required to sign two separate pieces 

paper but not two separate six page contracts

3

TPFC has several thousand contract signatories many of which may wish to sign both the p

to port and intermodal contracts

The legal and factual issues litigated before the Commission and now on review in the Un

States Court of Appeals in Seatrain Pac jic Services SA v Federal Maritime Commission DC Cir 

801248 would not be reexamined in the consideration of Agreement No 150 DR 7 revised how

er

l PM r
AGREEMENT NOS 150 DR 7 AND 3103 DR 7 245

1 Article 1 is amended to read in pertinent part

in the trade from ports in Japan and Korea to United

States Pacific Coast ports in California Oregon Washington

Hawaii and Alaska hereafter Port to Port Trade or the

trade from ports or points in Japan and Korea to inland points

in the United States via ports in California Oregon Washing

ton Hawaii and Alaska hereafter called the Through Inter

modal Trade

2 Article 2 a is amended to read

Except as otherwise provided in this Agreement the Mer

chant shall ship or cause to be shipped all of its ocean ship

ments moving in the Port to Port Trade the Through Inter

modal Trade or both on Conference vessels depending

upon which contract the Merchant has executed A Merchant

signing only the Port to Port Contract need only commit its

Port to Port shipments to the Conference and a Merchant

signing only the Through Intermodal Contract is obligated to

commit only its Through Intermodal shipments to the Confer

ence A Merchant may but is not required to sign both the

Port to Port and the Through Intermodal contracts in which

case both types of shipments would be reserved for Confer

ence vessels

3 Separate cover signature pages are attached to the Agreement one

plainly designated as controlling TPFC s Port to Port Trade and the

other as controlling its Through Intermodal Trade so that shippers

desiring to commit themselves to both contracts are required to sign

two separate pieces ofpaper

By the Commission

S FRANCIS C HURNEY

Secretary

Commissioner Teige did not participate

c r
FEDERAL MARITIME COMMISSION

DOCKET NO 77 23

AGREEMENT NO 10294

ORDER OF DISCONTINUANCE

September 17 1980

This proceeding was initiated by Order of Investigation and Hearing

on June 9 1977 to determine 1 whether Agreement No 10294 is a

true and complete copy of the understandings or arrangements between

the parties 2 whether the parties entered into and implemented any

agreement or agreements understandings and or arrangements without

prior Commission approval and 3 whether Agreement No 10294

should be approved disapproved or modified pursuant to section lS o

the Shipping Act 1916 46 U S C 814

Agreement No 10294 prohibits any signatory from paying consolida

tion allowances to offpier non vessel operating consolidators for thei

services in consolidating less than containerload cargoes notwithstand

ing anything to the contrary in any tariff or other agreement However

the Agreement permits the payment of any authorized consolidation

allowance for consolidation which occurs on the pier at a deepsea

waterfront facility By its terms the Agreement applies to shipments

from to or via all Atlantic and Gulf Coasts ports and is open to any

common carrier by water Moreover upon approval it would void o

cancel any provisions in existing Commission approved agreements

which conflict with it

Agreement No 10294 was initially executed by seven ocean carri

ers

l

and was later signed by six other carriers 2Eight carriers subse

quently withdrew from the Agreement leaving only Sea Land USL

Seatrain Dart and ACL as parties The Order of Investigation also

designated Boston Consolidation Service Inc the International Asso

ciation of NVOCCs the United States Department of Justice DOJ

and twelve non vessel operating common carriers as Protestants How

ever because several Protestants withdrew only DOl C S Greene and

Company Inc Emery Ocean Freight Yellow Freight International

1 American Export Lines Inc Atlantic Container Line ACL Dart Containerline Co Ltd

Hapag Lloyd AG Sea Land Service Ine Seatrain International S A and United States Lines Inc

USL

2

Ziffi American Israel Shipping Co Inc Japan Line Ltd Mistui O S K Lines Ltd Nippon Vise

Kaisha Kawasaki Kisen Kaisha Ltd and Yamashita Shinnihon Steamship Co Ltd

AI 11 J r
AGREEMENT NO 10294

Lyons Transport Inc and the Wilson Group remain as Protestants

The Commission s Bureau ofHearing Counsel also participated

On December 13 1979 Administrative Law Judge Norman D Kline

served an Initial Decision in which he concluded that Agreement No

10294 should be disapproved Exceptions to this decision were filed by

three of the remaining Proponents 3

Hearing Counsel DOJ and protes

tant NVO consolidators filed replies to exceptions

The Commission presently has before it Proponents Motion to Dis

continue Proceeding This motion is based upon Proponents withdraw

al of Agreement No 10294 on July 14 1980 which allegedly renders

this proceeding moot Protestant NVO s have replied in opposition to

this motion claiming that Proponents withdrawal of the Agreement is

an attempt to avoid an adverse decision of the Commission Protestants

contend that it was apparent at the Commission s open meeting of July

9 1980 that the Commission had unanimously decided to uphold the

Initial Decision and disapprove the Agreement even though the Com

mission postponed the adoption of its report and order until its next

scheduled meeting

DISCUSSION

A Commission decision is not final until the order effecting it is

issued Until that time Commissioners votes are always subject to

change Likewise the Commission s

report or order following a deter

mination made at either an open or closed meeting can also be modified

considerably prior to its ultimate publication

In this particular case the only issue which is before the Commission

is whether the Agreement should be approved disapproved or modi

fied 4Since the Agreement was withdrawn by Proponents prior to the

Commission s final decision the Commission has nothing before it upon

which it is required to act

THEREFORE IT IS ORDERED That the Motion to Discontinue

Proceeding filed by the parties to Agreement No 10294 is granted

and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Assistant Secretary

3

Seatrain and ACL did not join in these exceptions

4

The other two issues raised by the Order of Investigation and Hearing have been disposed of and

are not before the Commission on Exceptions

23 F M C

247
FEDERAL MARITIME COMMISSION

DOCKET NO 80 tO

BORDEN WORLD TRADE INC

PETITION FOR DECLARATORY ORDER

A combination of tariff ambiguity carrier complacency and circumstantial evidence 

the correct cargo measurements is sufficient to establish misrating by ocean carrier 

violation of section 18b 3

Jayson S Rice for Borden World Trade Inc

David W Gunther for Lykes Bros Steamship Co Inc

REPORT AND ORDER

September 23 1980

BY THE COMMISSION RICHARD J DASCHBACH Chairman

THOMAS F MOAKLEY Vice Chairman JAMES V DAY LESLI

KANUK AND PETER N TEIGE Commissioners

The Commission has before it the Petition for Declaratory Orde

of Borden World Trade Inc and responsive materials submitted b

Lykes Bros Steamship Co Inc 1 Borden seeks a

ruling that Lyke

Bros would violate section 18b 3 of the Shipping Act 1916 4

U S C 8l7 b 3 by collecting an amount for the transportation o

certain food processing equipment from New Orleans to Balboa Cana

Zone which exceeded the charges specified in its published FMC tarif

Lykes Bros denies the allegation

BACKGROUND INFORMATION

The shipment in question sailed on December 3 1977 It was packe

in three 4O foot containers one 20 foot container and two Low Boy

storage devices all of which were owned by Lykes A freight rate o

142 00 per weight ton was assessed in accordance with Atlantic

Gulf Panama Canal Zone Colon and Panama City Conference Tari

FMC No 1

2

The parties agree as to the nature of the commodit

1 On May 16 1980 the Commission ruled that Lykes Bros Tariff Rule No 8did not bar conside

ation of Borden s claim in a

proceeding under section 22 of the Shipping Act 1916 At that time bo

Borden and Lykes Bros were ordered to provide further information regarding thedisputed shipmen

Responses were received from these parties on June 16 and June 6 1980 respectively Lykes replie

to Borden s

Response on July 3 1980

Lykes Bros was and is amember of this steamship conference Borden was a signatory to th

Conference s dual rate contract at the time of shipment The Conference s tariffFMC No 1 was ca

celled by Tariff FMC No 3 effective May I 1979

248 23 FMC
BORDEN WORLD TRADE INC

shipped and the basic 142 00 rate Their dispute relates only to addi

tional charges claimed by Lykes for unused space in the four carrier

owned containers 3

The shipping documents were prepared by Cobal

International Inc an independent ocean freight forwarder selected by

Borden but the rating was performed by Lykes Bros The bill oflading

issued in New Orleans shows an entry for Freight Prepaid totaling

19 899 14 Only part of this amount was paid at the time of shipment

Lykes did not measure the contents of the containers before or after

shipment

On June 5 1978 Lykes billed Borden for a

remaining balance of

8 537 76 derived entirely from charges contained in Tariff Rule 24

The remaining balance includes 8 19163 under Rule 24 n 2 based on

the unused portion of the containers and a container use charge of

346 13 under Rule 24 t based on the total assessed tonnage Unless

Borden prevails in the present proceeding Lykes would be expected to

collect the unpaid balance of 8 537 76

The critical provisions of Lykes tariff are subsections 24 n 2 and

n 3 which provide that containers rated on a weight basis will be

charged as though they weigh out at 85 of the container s capacity

unless the container is 85 full by volume Lykes assessed a rate based

upon 188 105 pounds 85 of the containers weight capacity rather

than the 72 730 pounds actually placed in the containers by Borden

However if the containers were 85 full by volume the minimum

weight charge would not apply

POSITION OF THE PARTIES

I Borden

A Borden states that each of the four containers was filled to

85 of its capacity by volume and supports this contention

with the following evidence

1 An Export Shipping Order also referred to as an Invoice

Packing List dated October 18 1977 and showing cubic

measurements totalling about 87 of container capacity

for the contents ofeach container Exhibit E

2 A statement that Lykes based its June 5 1978 invoice

Exhibit B on an earlier copy of the Export Shipping

Order which showed about 79 utilization This figure

was reached only because Borden inadvertently omitted

hundreds of small flexible items such as filters washers

scaffolding and piping The Lykes invoice was immediate

ly challenged by Borden

3

Tariff Rule 24 governed container use charges No such minimum charges are alleged to be appli

cable to Low Boy devices

23 FM C

249
1

250 FEDERAL MARITIME COMMISSION

3 A statement that Borden was guided in selecting th

amount of container space required by Mr Paul Brown 

Lykes cargo planning specialist who actually visited th

loading site and recommended the use of four 4O foo

containers in addition to the Low Boys

4 The June 13 1980 affidavit of James E Thompson th

Arthur Morgan Co employee who supervised the pack

ing of the containers stating that after three of the fou

4O foot containers were packed the fourth was returne

to Lykes in exchange for a 20 foot container and that a

of these containers were filled to full visual capacity

and that 15 of usable space did not remain This expla

nation is verified by the affidavit of Borden s Director o

Distribution Jayson S Rice who was also present a

loading

5 A statement that Borden first questioned the applicab

rate while the containers were still in Lykes possession

but that Lykes failed to measure or even visually inspe

the cargo

B Borden alternatively argues that Rule 24 nis inapplicable t

its shipments because the first heading under that rule state

that it governs arrangements for the exclusive use of contain

ers Exhibit C 3rd Revised Page 18 and the December 

1977 bill of lading Exhibit A contains no exclusive us

specification

II Lykes Bros

A Lykes contends that Borden twice supplied it with sets o

measurement figures showing less than 85 utilization onc

at the date of shipment 50 and again on March 22 197

79 The second version was in the form of a Borde

Export Shipping Order dated October 18 1977 Elthibit I

and bearing the statement that it was certified true and co

rect The third and final measurement figures were submitte

on August 7 1978 Exhibit 2 The third version was a

identical copy ofthe second except for the volume figures an

the signature ofA J Amore a person unidentified by positio

or function There were no additional items listed on th

Export Shipping Order which might explain the difference i

volume and no such explanation has been provided by Borde

or Cabal International Inc

B Lykes states that Borden did not bring the meaSllrement prob

lem to its attention Until the cargo left its custody and failed t

provide timely written notice of its disagreement with th

assessed freight as required by Tariff Rule No 8

C Lykes further asserts that Rule 24 n is not limited to exclusiv

container use It describes the exclusive use phrase referre

to by Borden as only a subheading pertaining to a previou

23 F MC
BORDEN WORLD TRADE INC

set of rates and not a heading affecting the entire section

Moreover Rule 24 a permits containers to be filled with the

cargoes of more than one shipper only if all of the cargo is

consigned to the same person so that unless multiple cargoes

were placed in the containers used by Borden before they

reached Lykes Brosfacilities in New Orleans the carrier

would have been unable to place additional cargo inside them

at that time 4It would allegedly have been legally and practi

cally impossible for Lykes Bros to have put another ship

per s cargo in House to House containers such as those in

volved in the Borden shipment

FINDINGS OF FACT

The shipment was of a complex and unusual nature Special rate

negotiations were conducted between Borden and the Conference and

Lykes sent Mr Paul Brown to Borden s plant in Milstadt Illinois to

review the shipment and make loading recommendations Mr Brown

was not present at a time when the cargo was in the containers

however Upon Mr Brown s recommendation Borden requested and

Lykes initially provided four 40 foot containers from its marshalling

station in St Louis These were trucked by Borden s agent the Arthur

Morgan Co to Borden s plant for packing 5

Borden never requested exclusive use of the containers and Lykes

never advised Borden that it would be enjoying exclusive use or that

the applicable rate was based on an exclusive use theory

After loading three of the 4O foot containers Borden exchanged the

fourth for a 20 foot container All four containers were loaded by the

Arthur Morgan Co and delivered to Lykes terminal in New Orleans

via the Illinois Central Gulf Railroad at Borden s

expense Upon arrival

4 Rule 24 bears aheading which reads as follows

These rulesand regulations govern the carriage of cargo in ocean Carrier s hereinafter called

the Carrier containers which the shipper orconsolidator orinland common carrier ssubject

to prior booking arrangement with the Carrier may fill and ship the cargo therein pursuant

to the following terms and conditions and will apply unless otherwise indicated only when

the container has been filled by shipper consolidator or inland common carrier as agent for

the shipper s at his expense off the premises of the Carrier The Carrier as defined herein

may not itself be or act as consolidator

The term of shipper s or consignee s

referred to herein include his their agent s or au

thorized representative s acting on behalf of the shipper s at port of loading or on behalf of

the consignee s at port of discharge whichever the case may be

All rules and regulations published elsewhere in this Tariff and not conflicting with these

rules will apply

Rule 24 a states that

Cargo from one ormore shippers at one loading port only to one consignee at one port of

discharge only unless otherwise provided may be placed in one container Containerized

cargo will be delivered at port of discharge either to Customs orto consignee inaccordance

with Customs regulations and at Carrier soption

5

The Arthur Morgan Co of St Louis is an industrial contractor which performs professional haul

ing rigging assembly disassembly and packing functions for its clients

23 F M C

251
252 FEDERAL MARITIME COMMISSION

in Panama the containers were delivered directly to agents of th

consignee taken to the plant site unpacked and assembled

Lykes initially charged Borden for the shipment on December 5

1977 The rates shown on the bill of lading were based upon Lykes

determination at the point of loading that the containers did not weig

out at 85 oftheir capacity but Lykes did not open the containers t

determine whether they were 85 fullby volume It gathered the fact

necessary for cargo rating simply by telephoning the ocean freigh

forwarder on December 3 1977 and requesting the cubic measurement

of each container At that time Cobal International quoted measure

ments which equalled about 50 of the containers stowage capacity

Because Lykes did not receive payment for all the charges listed on th

bill of lading at the time of shipment and had to make arrangements t

extend Borden credit Lykes had adequate notice ofthe need to verif

the cargo s measurements before it relinquished possession of the con

tainer 6

Lykes subsequently agreed to remeasure the set up food processin

equipment at the consignee s plant in Panama in the context of partic

pating in a FMC adjudicatory proceeding with Borden When Borde

decided not to file a formal complaint Lykes withdrew its offer be

cause the remeasuring would be very difficult and because its Tari

Rule No 8 prohibited voluntary refunds for mismeasurement afte

cargo has left the carrier s custody

Certain exclusive use rates were deleted from Lykes Tariff Rul

24n on January 28 1975 but at the time of shipment that rul

continued to bear the following heading

Freight rates to be applied will be specified in this tariff

subject to the following conditions

Exclusive use of containers 20 and over

Minimum charges for exclusive use containers appear only in subsec

tion 7 of Rule 24 n Rule 24 a restricts the situations in which th

cargo of more than one shipper can be tendered in a single containe

but there are no Rule 24 rates for nonexclusive container use and n

other tariff provisions governing nonexclusive use

Tariff Rule 24 does not expressly state whether or when the ocea

carrier may add cargo to shipper loaded containers but Borden has no

rebutted Lykes assertion that carriers in the trade customarily refrai

from placing additional cargo in containers moving in a House to

6

Lykes offers no explanation for its issuance of a Freight Prepaid bill of lading orwhy it waite

over six months to send Borden an invoice for the balance due Credit transactions of this nature a

not provided for in Lykes tariff See 46 C F R S36 S d 7 regarding tariff rules governing cred

terms

1

The Conferencets current tariffstill bears thisheading

23 FMC
BORDEN WORLD TRADE INC

House configuration 8 Carriers receiving less than trailerload cargo on

a Pier to Pier basis will commonly combine several shippers cargo in a

single container however

DISCUSSION

Lykes Brostariff is vague and incomplete regarding the rates and

practices applicable to shipper use of carrier owned containers There

are no provisions instructing shippers how to obtain a particular type of

container use and Rule 24 as a whole does not indicate with reasonable

clarity that all House to House shipments will be afforded exclusive

container use and rated on an exclusive use basis Lykes dismisses the

misleading heading appearing under Rule 24 n as an obvious typo

graphical error but it is difficult to understand why such an error was

allowed to remain in place for over five years without correction The

Conference should take prompt action to clarify these aspects of its

tariff

Although the incomplete condition of Lykes Bros tariff alone might

not persuade the Commission that the additional charges were improp

er that fact plus Borden s evidence that the containers were 85 full

warrants a finding that the lawful rate in this instance was 8 537 76

less than the amount assessed by Lykes on December 3 1977 The

affidavit of the Arthur Morgan Co supervisor the recommendation of

a Lykes employee that four 4O foot containers were necessary and the

fact that one of these large containers was subsequently exchanged for

a 20 foot container all lend substantial credence to Borden s unilateral

declaration that its initial paper work was incorrect because it inadvert

ently failed to measure the great number of small parts which were

included in the shipment The alternative explanation offered by Lykes

implies that Borden deliberately falsified at least the final August 7

1978 version of its Export Statement in order to save some 8 500

conduct which would subject it to civil penalties ofup to 5 000 under

section 16 Initial Paragraph of the Shipping Act 1916 as that statute

then read The sounder conclusion is that Borden twice made an honest

mistake

Finally the Commission notes that Lykes made no independent effort

to ascertain the volume ofthe cargo it carried despite the fact that the

Shipping Act places the duty for accurately rating cargo upon the

ocean carrier and not the shipper It is no defense to a misrating claim

for a carrier to rely upon information provided by the shipper or a

freight forwarder selected by the shipper If Lykes had made contem

poraneous cargo measurements of its own which totalled less than 85

Borden s circumstantial evidence would probably not have prevailed

8

Ie loaded and unloaded away from the ocean carriers premises by agents of the shipper Pier to

Piercargo is loaded at thecarrier s facilities

23 F M C

253
254 FEDERAL MARITIME COMMISSION

In this instance however the combination of tariff ambiguity Lyke

issuance of a Freight Prepaid bill of lading when the freight was n

paid in full Lykes failure to inspect the containers before rating them

and Lykes insistence upon a written request before attempting to veri

the rate applicable to cargo in its possession provides a sufficient bas

for the Commission to find that the four containers were loaded to 

least 85 of their capacity by volume Accordingly it is conclude

that collection of the unused portion charge and the challenge

percentage ofthe container use charge stated on Lykes Bros bill 

lading and subsequent invoice would violate section 18b 3 of th

Shipping Act 1916

THEREFORE IT IS ORDERED That the Petition for Declarato

ry Order of Borden World Trade Inc is granted to the exte

indicated above

5 JOSEPH C POLKING

Assistant Secretary

23 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 724

APPLICATION OF SEA LAND SERVICE INC

FOR THE BENEFIT OF STAR KIST FOODS INC

ORDER ADOPTING INITIAL DECISION

September 24 1980

Pursuant to Rule 92 b of the Commission s Rules 46 C F R

502 92 b Sea Land Service Inc filed an application for permission to

waive collection of a portion of the freight charges due from Star Kist

Foods Inc for six shipments of frozen eggs from Houston Texas to

San Juan Puerto Rico

Sea Land and Star Kist had negotiated a reduced rate for the ship

ment of eggs However because of an alleged administrative error the

negotiated rate was not published in Sea Land s tariff at the time of

shipment Sea Land admitted that the freight charge billed which was

based upon the rate legally in effect at the time ofshipment was unjust

and unreasonable in violation of section 18 a of the Shipping Act

1916 46 V S C 817 a Sea Land further contended that the negotiated

rate was the just and reasonable one

Administrative Law Judge William Beasley Harris issued an Initial

Decision in which he denied the application to waive the uncollected

freight charges This decision was based upon his legal conclusion that

in the domestic offshore commerce a waiver could only be granted

upon a finding that the legally applicable rate was unreasonable and a

finding that the rate actually charged wasreasonable Initial Decision at

7 The Presiding Officer ultimately concluded that Sea Land had failed

to prove either fact and that the record would not permit such a

determination

Sea Land has filed Exceptions to the Initial Decision stating I that

its application met the standards of Rule 92 b or 2 that its tariff

publication error was the establishment of an unjust practice in viola

tion of section 18 a for which reparations should be awarded to Star

Kist

DISCUSSION

Rule 92b

ofthe Commission s Rules 46 C F R 502 92b sets forth

the procedures which must be followed by carriers in domestic offshore

commerce seeking to refund or waive collection of a portion of freight

charges The remedy to which this special docket procedure applies

arises under section 18 a of the Shipping Act 1916 46 US C 817 a

23 F M C 255
256 FEDERAL MARITIME COMMISSION

and section 4 of the Intercoastal Shipping Act 1933 46 U S C 845a

Although an application is procedurally considered the equivalent of 

complaint and answer admitting the facts complained of the Commi

sion is not bound by any such admission The carrier must still establis

the essential elements of the relief as set forth in the relevant statutes

Sea Land has also alleged that its tariff publication error results in th

establishment of an unjust practice in violation of section 18 a ofth

Shipping Act This theory was not raised in Sea Land s application no

was it discussed in the Initial Decision Sea Land cannot now raise 

for the first time in its Exceptions In any event this single inciden

between Sea Land and Star Kist cannot be said to have risen to th

level of a practice

The primary issue before the Commission is whether Sea Land ha

met its burden ofestablishing a violation ofsection 18 a The Commi

sion s position concerning waivers or refunds based upon errors o

inadvertence in failing to file or incorrectly filing an intended rate ha

evolved considerably since 1961 Prior to 1965 the Commission freel

granted such requests in both the foreign and domestic trades Howev

er in 1965 a divided Commission decided that special docket relie

would not apply in foreign commerce because of the then existin

language of section 18b 3 Ludwig Mueller Co Inc v Peralta Shippin

Corp 8 F MC 361 1965 The Commission noted that special docke

relief applied only in domestic offshore commerce because in thos

cases it was empowered to direct the enforcement of a reasonable rat

pursuant to section 18 a Ludwig Mueller supra 8 F MC at 366 I

such cases the Commission would approve refunds of the differenc

between a rate that the carrier admits and the Commission fmds to b

unreasonable and therefore unlawful and a rate which the Commi

sion adjudges to be reasonable Ludwig Mueller supra The Commi

sion subsequently stated that questions of equity or justice were irrele

vant in special docket proceedings and that only the factual question

ofreasonableness or unreasonableness of a rate were relevant The Eas

Asiatic Co

Inc 9 F MC 169 172 1965

In 1968 Congress amended section 18b 3 P L 90 298 82 Sta

111 to empower the Commission to authorize common carriers b

water in the foreign commerce to make voluntary refunds to shipper

and to waive collection of freight charges where there was a clerica

error in a tariff or through inadvertence there had been a failure to fil

an intended rate See 46 U S C 817 b 3

The Commission continued however to take a narrow view of it

powers to grant refunds and waivers in the domestic commerce Se

eg

Davies Turner Co v Atlantic Lines Ltd 13 F MC 279 1970

Real Fresh Inc v Matson Navigation Co 16 S R R 553 1975 In fac

the Commission specifically stated that section 18 a unlike sectio

18b 3 does not contemplate refunds and waivers for errors in tari

23 F M C
SEA LAND SERVICE INC FOR THE BENEFIT OF STAR 257

KIST FOODS INC

filings Real Fresh 16 S R R at 554 Moreover in a case quite similar

to the instant proceeding the Commission held that a carrier s admis

sion standing alone is not sufficient to support a finding that the

applicable rate was unreasonable for purposes of section 18 a Pan

American Industries Inc v Sea Land Service Inc 21 FMC 747 1979

Because Sea Land has not affirmatively demonstrated that the rate in

effect at the time of the shipments was unjust or unreasonable or that

its negotiated rate with Star Kist was reasonable the Commission

agrees with the Presiding Officer that Sea Land s application must be

denied The Commission will therefore adopt the Initial Decision

THEREFORE IT IS ORDERED That the Exceptions filed by

Sea Land Service Inc are hereby denied and

IT IS FURTHER ORDERED That the Initial Decision in this

proceeding is adopted by the Commission and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Secretary

CommissionerTeige dissents

23 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 724

APPLICATION OF SEA LAND SERVICE INC FOR THE

BENEFIT OF STAR KIST FOODS INC

DISSENTING OPINION

Dissenting Opinion ofCommissioner Peter N Teige

In affirming the Administrative Law Judge s denial of this Specia

Docket application the majority perpetuates an inequity which ha

gradually developed in the Commission s Special Docket proceedings

whereby the benefits of these procedures are made readily available to

shippers in foreign commerce while they are effectively denied to

shippers in domestic offshore commerce Because Ibelieve that there i

no good reason in law or policy why this inequity should exist 

respectfully dissent

As the majority itself states prior to 1965 the Commission and its

predecessors had no difficulty in granting Special Docket applications

in the domestic trades Applications in both domestic and foreign com

merce were processed under former Commission Rule 6b of practice

and procedure which read in relevant part as follows

b Voluntary payment of reparation Carriers or other persons

subject to the shipping acts may file applications for the volun

tary payment of reparation or for permission to waive collec

tion ofundercharges even though no complaint has been filed

pursuant to rule 5b All such applications shall be made in

accordance with the form prescribed in appendix 11 5 herein

shall describe in detail the transaction out of which the claim

for reparation arose and shall be filed within the 2 year statu

tory period referred to in rule 5 c Such applications will

be considered the equivalent of a complaint and answer thereto

admitting the facts complained of If allowed an order for

payment will be issued by the Board

Ludwig Mueller Co Inc v Peralta Shipping Corp 8

F MC 361 362 1965 Emphasis supplied

However as the majority notes in 1965 the Commission held by a 3

2 vote in the Ludwig Mueller case supra that Special Docket relief did

not apply in foreign commerce because of the then existing language in

Section 18b 3 of the Shipping Act Later that same year by a

identical 3 2 vote the Commission held for the first time that based o

the language of Section 18 a of the Shipping Act 1916 and Section 

ofthe Intercoastal Shipping Act 1933 the application of a rate othe

258 23 F MC
SEA LAND SERVICE INC FOR THE BENEFIT OF STAR 259

KIST FOODS INC

than the one legally on file because of a misunderstanding or a

misconception of the carrier does not provide sufficient basis upon

which to rest the granting of relief in a domestic commerce special

docket application The East Asiatic Company Inc 9 F MC 169 172

1965 The majority went on to state that id

it is evident that our special docket technique requires that

all considerations of intention error misunqerstandings and

the like be discounted as irrelevant The question is not one of

inequity or injustice but rather one of fact namely the rea

sonableness or unreasonableness of the rates in question 1

Because the Commission had held in Ludwig Mueller that the Special

Docket procedure was unavailable to shippers in foreign commerce

Congress amended Section 18b 3 of the Shipping Act in 1968 P L

90 298 to empower the Commission to authorize common carriers by

water in foreign commerce to make voluntary refunds to shippers and

to waive collection of freight charges where there was a clerical error

in a tariff or through inadvertence there had been a failure to file an

intended rate Although the legislative history of P L 90 298 contains

few references to the question of Special Docket relief in domestic

commerce it does indicate that Congress thought it was providing

shippers in foreign commerce the same relief from tariff filing errors

which it assumed was already enjoyed by shippers in domestic com

merce See H R Rep No 920 90th Cong 1st Sess 2 1967 Certainly

it is most unlikely that Congress intended to grant shippers in foreign

commerce greater relief than shippers in domestic commerce Never

theless the Commission s decisions since 1968 have followed East Asiat

ic and have generally denied Special Docket relief to shippers in do

mestic commerce on the ground that the carrier applicant had failed to

prove that the rate it had mistakenly applied was unreasonable Real

Fresh Inc v Matson Navigation Co 19 F M C 215 1976 Pan Ameri

can Industries Inc v Sea Land Service Inc 21 F MC 747 1979 2

I believe that the decisions commencing with East Asiatic were

wrong and should be overturned The statutes permit the Commission

to find that a rate charged by a carrier in domestic commerce is unjust

or unreasonable 46 D S C 817 845a I see no reason why when a

carrier and a shipper negotiate a rate which through mistake or over

sight is never filed or is incorrectly filed and the shipper relying on

1

It should be noted that the opinion in East Asiatic gives no guidance to carriers orshippers as to

what quality or quantity of evidence must be adduced in order to permit the Commission to find that a

particular rate applied to aparticular shipment orgroup of shipments was unreasonable

2

The case law however is not as uniform as the majority opinion indicates In two recent cases

refunds to shippers in domestic commerce have been authorized on the basis of errorsin tariff filings

Fleetwood Aluminum Products v Sea Land Se11lice Inc 19 S R R 96 1979 Williams Clarke Co Inc

v Sea Land Service Inc 20 F M C 461 1978 Both of these cases are unreviewed decisions of Ad

ministrative Law Judges which became decisions of the Commission pursuant to 46 CF R 502 227

23 F M C
260 FEDERAL MARITIME COMMISSION

the new rate makes the shipment the Commission cannot permit carri

ers to admit facts showing that under the special circumstances attendant

in these cases the tariffed rate is unjust and unreasonable and the

intended rate is just and reasonable These words are in norma

human usage flexible terms of equity and fairness Where they arise in

isolated instances heavily charged with individual acts of inequity and

not in the context of ratemaking in the normal economic regulatory

sense the words should be given the broader equitable meaning they

have in everyday parlance

This approach would also give real meaning to Commission Rule o

Practice 92b 46 C F R 502 92b

which governs Special Docke

applications in domestic commerce Rule 92b has been in effect with

out change since 1968 when it was promulgated in arulemaking

instituted after the passage ofP L 90 298 See 33 Federal Register 14412

September 25 1968 It makes no reference to any requirement that a

carrier allege or prove that a rate is unreasonable but instead states

in language identical to the old rule 6b which governed all applica

tions before the Ludwig Mueller decision supra that Special Docke

applications by carriers in domestic commerce will be considered the

equivalent of a complaint and answer thereto admitting the facts com

plained of Under the procedure Ipropose a carrier would simply

admit facts showing that its tariffed rate was unjust and unreason

able and ask the Commission for permission to apply instead the

intended rate The Commission would then verify the bona fides ofthe

alleged transaction to be certain that the tariff requirements of the

Shipping Act were properly observed by the carrier By instead reaf

firming the holding in Pan American Industries supra that a carrier 

admission under these special circumstances is nevertheless not suff

cient proof that the substituted rate is just and reasonable in the

ratemaking sense the majority renders Rule 92b meaningless

Although the Commission has never corrected the failure ofthe Eas

Asiatic opinion to state how the question of reasonableness should b

addressed in a Special Docket case and does not do so in this case i

must be assumed that the majority would require a showing similar to

that necessary in general ratemaking investigations under Section l8 a

and Section 4 i e evidence showing that the tariffed rate resulted in a

excessive rate of return on rate base and that the application of th

intended rate would render an appropriate rate of return See e g

Matson Navigation Company Proposed Rate Increases in the US Pacifi

Coast Hawaii Domestic Offshore Trade 21 F MC 532 987 1978 Ob

viously that is not feasible in these types of cases However if the term

just and reasonable is interpreted more flexibly so that it has a les

technical meaning in these Special Docket cases than in general rat

23 F MC
SEA LAND SERVICE INC FOR THE BENEFIT OF STAR 261

KIST FOODS INC

investigations there would be no need for requiring such a formidable

presentation 3

In the present case Sea Land has admitted that Star Kist Foods was

mistakenly charged a higher tariffed rate for six shipments of frozen

eggs even though Sea Land and Star Kist had previously negotiated a

lower rate for those shipments In reliance on that agreement Star Kist

made a substantial change in its economic position and completed the

shipment with Sea Land Not to protect the shipper in these circum

stances would be highly inequitable These facts are more than suffi

cient for the Commission to find that the tariffed rate was unjust and

unreasonable and that the intended rate was just and reasonable

under Section 18 a ofthe Shipping Act 1916 4

3

In view of the narrow fact situations typically presented in Special Docket applications I cannot

conceive how adoption of this approach would damage the integrity of the Commission sgeneral rate

making powers in domestic offshore commerce Of course if an application were filed which did

present such athreat the Commission could always reject the application on that basis Ordinarily the

rate change involved in these casesdoes not possess the magnitude oreconomic significance that trig

gers arate investigation by the Commission

4

Ifreparation were to be granted as proposed herein the procedure customarily followed by the

Commission in reparation cases to prevent discrimination against other shippers would of course have

to be utilized

23 FM C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 724

APPLICATION 1

OF SEA LAND SERVICE INC FOR

THE BENEFIT OF STAR KIST FOODS INC

Charges of 23 161 86 which included 5 106 23 for wharfage arrimo transfer a

documentation on six shipments of frozen eggs from Houston Texas to San Jua

Puerto Rico were paid and borne as such by Star Kist Foods The carrier Sea La

admits the freight charge originally billed by it based on its rate legally in effect 

the time of shipment was unjust and unreasonable and therefore unlawful in vio

tion of section 18 a of the Shipping Act 1916 Sea Land believes that the rate upo

which this application is based is just and reasonable in all respects Sea Land see

permission to waive collection of a 1 885 51 portion of aggregate ocean charges 

19 941 14 so that aggregate ocean charges total 18 055 63 under ocean charg

sought to be applied and the shipper freed of the obligation to pay

Permission requested for the waiver must be and is denied The applicant under secti

18 a of the Act has to prove that the rate charged was in fact unreasonable or th

the rate sought to be applied is in fact reasonable in the same manner as if t

carrier were opposing the payment This the applicant carrier has failed to d

INITIAL DECISIONs OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Adopted September 24 1980

This proceeding involves transportation in the so called noncontig

ous domestic trades of six shipments of frozen eggs from Housto

Texas to San Juan Puerto Rico

This special docket application was received in the Commission o

June 6 1980 That is the filing date Violation of section 18 a

4

of th

1 Filed as Star Kist Foods Inc v Sea Land Service Inc by the latter

a

These additional charges are not in issue and they were paid in full by the shipper See Exh

No 10 at I attached to application

3

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227

Section 18 a of the Shipping Act 1916 46 US C 817 a provides Inter 0110

That every common carrier by water in interstate commerce shall establish observe and

enforce just and reasonable rates fares charges classifications and tariffs and that

no such carrier shall demand charge or collect a

greater compensation for such trans

portation than the rates fares and charges filed in compliance with this section except

with the approval of the Commission

The section further provides that

Whenever the Commission finds that any rate fare charge classification tariff regula

tion or practice demanded charged collected orobserved by such carrier is unjust or

unreasonable it may determine prescribe and order enforced a

just and reasonable max

imum rate fare or charge or ajust and reasonable classification tariff regulations or

practice

262 23 F MC
SEA LAND SERVICE INC FOR THE BENEFIT OF STAR 263

KIST FOODS INC

Shipping Act 1916 is admitted by the carrier applicant Sailing dates

for the shipments are given corroborated by applicable copies of Sea

Land s vessel portion bulletin Exhibit No 8 as June 18 and 24 1978

July 7 14 and 30 1978 and August 11 1978 The application filed

within two years after the cause of action accrued as to each of the six

shipments is timely as to all

The tariff applicable is that ofSea Land Service Inc TariffNo 273

FMC F No 40 from United States Gulf Ports to Ports in Puerto Rico

Prior to January 15 1978 the applicable rate on shipment of Eggs

frozen was 3 98 per 100 Ibs TL minimum 36 000 Ibs as published in

Item 10080 Original Page 280 effective November 12 1977 Effective

January 15 1978 the rates in Tariff 273 were increased by 104 as

provided for by Supplement No 1 Exhibit No 2 attached to applica

tion The 3 98 per 100 Ibs rate became 4 39 per 100 Ibs

Star Kist Foods was developing movements of frozen eggs from the

port of Houston Texas to Puerto Rico to be used in the manufacture

ofpet food In consideration of the value and load factor of the cargo

Star Kist deemed the current rate of 4 39 per 100 Ibs too high to

effect such movements As a result of negotiations between Star Kist

and Sea Land it was agreed to publish a rate of 3 96 per 100 Ibs

minimum weight 40 000 Ibs confirmed by letter dated March 22 1978

showing tariff effective date ofMarch 28 1978 Exhibit No 3

Publication of the new 3 96 per 100 Ibs minimum weight 40 000

Ibs was made in Item 10080 1st Revised Page 280 effective date

March 28 1978 The new rate was properly symbolized as a reduction

but failed to state the rate was not subject to Supplement No 1

Exhibit No 2 as was the intent

First Revised Page 280 was canceled by 2nd Revised Page 280

effective August 10 1978 Item No 10080 Eggs frozen TL minimum

40 000 Ibs shows rate of 437 per 100 Ibs to incorporate the 104

increase A new Item No 10115 Fish Tuna raw frozen whole loose

was added with a rate of 1 869 90 per trailer

During the period from June 18 to August 11 1978 a total of six

truckload shipments of frozen eggs were made by Star Kist from Hous

ton Texas To Mayaquez Puerto Rico via the Port of San Juan The

shipments were rated at the applicable rate of 4 37 per 100 Ibs 3 96

plus 104 In addition to the ocean charge assessorial charges for

Wharfage Rule 520 Arrimo Rule 540 Transfer Rule 310 and

Documentation Rule 440 were made This resulted in substantially

higher charges than would have been the case had Sea Land published

the rate that had been agreed upon

When paying the freight charges Star Kist reduced the ocean freight

to the basis of the 3 96 agreed to rate and complained about the

incorrect rate which was being assessed Upon investigating the com

plaint Sea Land s America s Pricing Department discovered that an

23 F M C
264 FEDERAL MARITIME COMMISSION

obvious administrative error had occurred in the preparation of th

proposal for the reduced rate and in not checking the published pag

for correctness as required by Pricing Policy The error was corrected

with the issuance of 3rd Revised Page 280 effective August 17 1978

Item No 10080 Eggs frozen TL minimum 40 000 Ibs rate 3 96 pe

100 Ibs

The applicant submitted the following statement of the ocean charge

for each shipment showing the charge as originally billed as paid b

the complainant and the amount to waive based on the agreed to rat

which has now been published and become effective Presented i

support are copies of bills of lading or freight bills together wit

applicable pages to support the assessorial charges copies omitte

here

Ocean Charge Ocean Charge Ocean Charge Ocean Charge

Freight BillNo Ori ina11y Paid by Sought to Be so htto be

Billed Shipper I Applied h

aived

961 8426678 4O OOOlbs 40 000 Ibs 40 000 Ibs

at 4 37 cwt at 3 96 cwt at 3 96 cwt

1 748 00 1 584 00 1 584 00 164 00

961 843974 40 330 Ibs 40 330 Ibs 40 330 Ibs

at 4 37 cwt at 3 96 cwt at 3 96 cwt

1 762 42 1 597 07 1 597 07 165 35

961 845661 80 360 Ibs 80 360 Ibs 80 360 Ibs

at 4 37 cwt at 3 96 cwt at 3 96 cwt

3 511 73 3 182 26 3 182 26 329 47

961 846607 44 430 Ibs 44 430 Ibs 44 430 Ibs

at 4 37 cwt at 3 96 cwt at 3 96 cwt

1 941 S9 1 759 43 1 759 43 182 16

961 848623 170 210 Ibs 170 2101bs 170 210 Ibs

at 4 37 cwt at 3 96 cwt at 3 96 cwt

7 438 18 6 740 32 6 740 32 697 86

961 838884 80 620 Ibs 80 620 Ibs 80 620 Ibs

at 4 39 cwt at 3 96 cwt at 3 96Icwt

3 539 22 3 192 55 3 192 55 346 67

Totals 19 941 14 18 055 63 18 055 63 1 885 51

Reference Marks

Cwt per 100 Ibs

8 Additional charl s not at issue assessed in the amount of 320 00 for wharfag

Ammo Transfer ocumentation paid in full by shipper

1 Me
SEA LAND SERVICE INC FOR THE BENEFIT OF STAR 265

KIST FOODS INC

Additional charges not at issue assessed inthe amount of 1 840 55 for ocean freight

on Cheese Pellets Item 10040 plus wharfage Arrimo Transfer paid in full by

shipper

e

Additional charges not at issue assessed in the amount of 63179 for wharfage

Arrimo Transfer Documentation paid in full by shipper

d

Additional charges not at issue assessed in the amount of 354 22 for wharfage

Arrimo Transfer Documentation paid in full by shipper

Additional charges not at issue assessed in the amount of 1 325 87 for wharfage

Arrimo Transfer Documentation paid infull by shipper

t

Error in rate in original billing applicable rate was 4 37 cwt Additional charges

not at issue assessed in the amount of 633 80 for wharfage Arrimo Transfer

Documentation paid in full by shipper

S

Payment based on rate agreed upon to be published

h

Based on EXHIBIT NO 9

In support of this application only the following is submitted by the

carrier applicant

Sea Land s failure to properly publish the reduced rate of

3 96 per hundred Ibs TL minimum of 40000 Ibs resulted in

an unintentional increase to the shipper which Sea Land does

not attempt to justify

The undersigned carrier hereby admits that the freight charge

originally billed based on its rate legally in effect at the time

ofshipment was unjust and unreasonable and therefore unlaw

ful in violation of Section 18 a of the Shipping Act 1916

It is Sea Land s belief that the rate as published and in effect

August 17 1978 and upon which this application is based is

just and reasonable in all respects Permission to waive collec

tion of 1 885 51 the amount in excess of that basis is request

ed

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

During the period from June 18 to August 9 1978 the applicable

rate for the shipment offrozen eggs as to five shipments those of June

18 and 24 July 7 14 and 30 was 3 96 per 100 Ibs minimum weight

40 000 Ibs as per Item 10080 1st Revised Page 280 effective date

March 28 1978 The applicable rate for the sixth shipment August 11

1978 was 4 37 per 100 Ibs as per Item 10080 2nd Revised Page 280

effective August 10 1978 Applicant admits its failure to properly

publish the reduced rate of 3 96 per 100 Ibs TL minimum of 40000

Ibs resulted in an unintentional increase to the shipper

Section 2 of the Intercoastal Shipping Act 1933 prohibits a carrier

by water in intercoastal commerce from charging a greater or less or

different compensation from that contained in the tariff on file with the

Commission

To find here that the application of a rate other than the one legally

on file was the result of a failure of Sea Land to properly publish the

negotiated reduced rate resulting in an unintentional increase to the

shipper does not provide sufficient basis upon which to rest the grant

ing of relief in this special docket application See Special Docket No

1 pur
266 FEDERAL MARITIME COMMISSION

382 The East Asiatic Co Inc Application lor Permission to Waiv

Collection o Undercharges 9 F MC 169 172 1965

The Commission said it is empowered to direct the enforcement of 

reasonable rate under section 18 a of the Shipping Act 1916 an

section 4 of the Intercoastal Shipping Act 1933 both of which relat

solely to the Commission sjurisdiction over common carriers in th

non contiguous domestic trades Ibid

Section 18 a has been set forth in the footnote above The Intercoas

tal Act section 4 authorizes the Commission whenever it finds 

particular rate unjust or unreasonable to prescribe and order enforced 

just and reasonable maximum or minimum rate

According to the Commission Ibid from the foregOing it is eviden

that our special docket technique requires that all considerations o

intention error misunderstandings and the like be discounted as irrele

vant The question is not one ofinequity or injustice but rather one o

fact namely the reasonableness or unreasonablenes

of the rates i

question

In 1965 the Commission chose Special Docket No 377 Ludwi

Mueller Co Inc v Peralta Shipping Corporation Agents 0 Torm Lines

and Special Docket No 378 Lykes Bros Steamship Co Inc Applicatio

to Refund Part Freight Charges Collected on Shipment Via SS Nanc

Lykes From Le Havre France to Galveston Texas 8 F MC 36

January 13 1965 for careful review in an effort to spell out clearl

Commission policy with respect to special docket proceedings Ibid a

362 No 377 Involved transportation of paprika from New York t

Algiers No 378 involved transportation of household thermometer

from Le Havre to Galveston The Commission after a painstakin

review was ofthe opinion with respect to special docket proceeding

in our foreign commerce that the dissent in the Swedish American Lin

case Special Docket No 371 8 F MC 142 143 1964 reached th

correct result The Commission adopted the position that strict adhe

ence to rued tariffs is mandatory p 364 The Commission asked wha

is the function of our special docket procedure and when may it b

used p366

It is a procedure whereby there is approved a refund from a

carrier to a shipper of the difference between a rate that the

carrier admits and the Commission finds to be unreasonable

and therefore unlawful and a rote which the Commission ad

judges to be reasonable

The Commission continued

It becomes immediately apparent therefore that only in those

cases where the Commission is empowered to direct the en

forcement of a reasonable rate is our special docket technique

applicable i

e those cases within the purview ofsection 18 a

of the Act and the provisions of Intercoastal Shipping Act

1C 1A
SEA LAND SERVICE INC FOR THE BENEFIT OF STAR 267

KIST FOODS INC

1933 Such cases of course relate solely to the Commission s

jurisdiction over common carriers in the so called non contig

uous domestic trades

On August 12 1965 the Commission in Special Docket No 396

Sea Land Service Inc Application to Waive Undercharges 8 F MC

641 stated inter alia the purpose of the special docket proceeding is

designed to reduce insofar as possible the time and expense of the

parties the Commission and its staff p 643

The applicant herein has disposed of which rate was unjust and

unreasonable as well as which rate was just and reasonable merely by

alleging same The only proper way that authorization can be granted

for deviation from the duly filed tariff and grant the waiver requested

in the present application is to grant that waiver upon a finding that the

tariff or legally applicable rate was unreasonable and a concomitant

finding that the rate actually charged is a reasonable rate See East

Asiatic case supra The rate charged was the rate on file There is no

showing that the rate charged was unreasonable and unjust See Special

Docket No 422 Davies Turner Co as Agents for Robert S Schlesin

ger Owner v Atlantic Lines Ltd Special Docket No 422 13 F MC

279 1970 Real Fresh Inc v Matson Navigation Company Special

Docket No 468 19 F MC 216 1976 Pan American Industries Inc v

Sea Land Service Inc Special Docket No 556 21 F MC 747 1979

Compare Williams Clarke Company Inc v Sea Land Service Inc

Special Docket No 489 20 F MC 461 1978 Fleetwood Aluminum

Products v Sea Land Service Inc Special Docket No 609 19 S R R 96

1979

Upon consideration of the above and the record herein the Presiding

Administrative Law Judge finds and concludes that the applicant has

failed to prove which rates are unreasonable and unjust or which are

just and reasonable Also that the record is not such as to which in the

final analysis such determinations can be made The application must be

denied

Wherefore it is ordered

A The application is denied

B This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

Washington D C

June 30 1980
1

FEDERAL MARITIME COMMISSION

DOCKET NO 77 13

FIRST INTERNATIONAL DEVELOPMENT CORPORATION

v

SHIP S OVERSEAS SERVICE INC

ORDER DENYING RECONSIDERATION

September 25 1980

By Petition filed July 30 1980 Ship s Overseas Service Inc SOS

asks the Commission to reconsider its decision served July 17 1980 

First International Development Corporation v Ship s Overseas Servi

Inc 20 S R R 209 1980 ordering SOS to pay reparation in t

amount of 53 484 71 to First International Development Corporati

FIDCO SOS also asks for a stay ofthe Commission s order and f

oral argument There were no replies to the petition for reconsid

ation

SOS maintains on reconsideration that the Commission failed to co

sider the arguments raised in SOS s brief of February 20 1978 1

esp

cially the question ofFIDCO s standing SOS contends that FIDC

was reimbursed for the transportation by OASIS and is not the pers

who bore the freight SOS maintains that the situation in this case 

identical to the that in Carton Print Inc v Austasia Container Expre

SS Co 20 F M C 30 1977 where the shipper was found to la

standing to claim reparation for overcharges the carrier had collect

from the consignee 11

SOS s reliance on the holding in Carton Print Inc supra is m

placed In that case the carrier collected directly from the consign

overcharges sought to be recovered by the shipper whereas in t

instance FIDCO paid the freight charges s

Applying the criteria esta

1

The brief was received at the Commission on February 21 1978

The hipper in that case admitted that it had uITered no lo ses and that in tiling the complai

had acted 8i an intel1Dedi ry for the consipee in Australia Here neither Qulf Consolidated In

national Inc which old the pipe to FIDCO norSOS had any dealing with OASIS the con ign

Clearly FIDCO could not be reimbursed had it not paid tho charges in th first place How

er in it February 21 1978 brief SOS imultaneou ly argue that OASIS reimbursed FIDCO and t

bore the transportation charges and that no proof was alTered as to what portion of the 

OASIS actually paid In fact SOS collected from FIDCO 23 l1S l4 in freight cliarge at a t

cargo spsce had not yet been booked and thebalance from the I price payable to FIDCO unde

escrow agreement apparently arranged by Charle Ragan under which FIDCO alae paid an additio

56 378 75 in insurance costs
FIRST INTERNATIONAL DEVELOPMENT V SHIP S 269

OVERSEAS SERVICE INC

lished by the Supreme Court 4

the Commission concluded that FIDCO

suffered cognizable injury when it paid freight charges found to be

unlawful 5Thus the question of FIDCO s standing to claim reparation

under section 22 of the Shipping Act 1916 was fully considered by the

Commission

In any event under Rule 261 ofthe Commission s Rules of Practice

and Procedure 6none ofSOS s arguments presents a basis for reconsid

eration of the Commission s decision in this proceeding The petition

for reconsideration and stay will therefore be denied

It is so ordered

By the Commission

8 JOSEPH C POLKING

Assistant Secretary

4

Adams v Mills 286 US 397 407 1932 News Syndicate Co v N Y Central R Co 275 US 179

1927 Louisville Nashville R R Co v Sloss Sheffield Steel Iron Co 269 U S 217 1925 Southern

Pacific Co v Darnell Taenzer Lumber Co 245 U S 531 534 1918 and Lehigh Valley R Co v

Meeker 236 U S 415 1915

fj First International Development Corp v Ship s Overseas Services Inc 20 S RR supra at 213

6 Rule 261 provides that

A petition will be subject to summary rejection unless it I specifies that there has been a

change in material fact or in applicable law which change has occurred after issuance of the

decision or order 2 identifies asubstantive error in material fact contained in the decision

ororder or 3 addresses afinding conclusion orother matter upon which the party has not

previously had the opportunity to comment orwhich was not addressed in thebriefs orargu

ments of any party Petitions which merely elaborate upon orrepeat arguments made prior to

the decision or order wUl not be received A petition shall be verified if verification of origi

nal pleading is required and shall not operate as a stay of any rule ororder of the Commis

sion 46 CP R 502 26 L

CommissionerLeslie L Kanuk dissents

171
FEDERAL MARITIME COMMISSION

DOCKET NO 80 8

SCHENKERS INTERNATIONAL FORWARDERS INC

v

I

I

SEA LAND SERVICE INC

I

NOTICE

September 25 1980

Notice is given that no exceptions have been tiled to the August 12

1980 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 JOSEPH C POLKING

Assistant Secretary

J

I

I

17 1IMr
FEDERAL MARITIME COMMISSION

DOCKET NO 80 8

SCHENKERS INTERNATIONAL FORWARDERS INC

v

SEA LAND SERVICE INC

Complainant has failed to meet its burden of proving under the circumstances herein the

violations of the Shipping Act 1916 alleged Complaint dismissed Proceeding dis

continued

Gerald H Ullman for Complainant

John M Ridlon for Respondent

INITIAL DECISIONl OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Finalized September 25 1980

The issue in this case according to the complainant is whether

the shipment of adhesive cement should have moved as refrigerated

cargo at a rate of 515 75 or as glue or adhesives at a rate of 209 50

May 30 1980 Complainant Brief at 5 The identity or characteristics

of the shipment adhesive cement is not in question the sole issue being

whether respondent was justified in moving the cargo under a con

trolled temperature rate That issue does not evolve around the ques

tion of the actual character of the cargo there being no dispute con

cerning same but rather the application or misapplication of Tariff

Rule 30 by Sea Land June 20 1980 Complainant s Reply Brief at 9

The respondent in its June 12 1980 Answer at 8 contends the

Complainant s entire evidentiary record with respect to section

18b 3 relates to the alleged instructions with respect to carriage

rather than the actual character of the cargo transported and its re

quirements with respect to temperature control Complainant in its

memorandum simply concludes without evidentiary basis that there

being no basis for Respondents assessment of the higher rate the

shipment was mis rated far from being no basis for assessment of

the rate charged Respondent had no alternative under the circum

stances ofthis

proceeding The applicable tariff herein is the North Atlantic Mediterranean

Freight Conference Freight Tariff No 12 FMC 7 French Section

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227
272 FEDERAL MARITIME COMMISSION

From North Atlantic Ports of the United States on the Hampto

Roads Eastport Maine range to Marseilles including Caronte Fo

Port De Bouc and Port St Louis de Rhone France only

The freight charges for transportation of the commodity the carrie

charged pursuant to the applicable Tariff page 241 Item No

931 0002 109 Refrigerator Cargo Cargo N O S Requiring Minimum

Maximum Controlled Temperature Stowage NOT applicable to ship

ments in bulk in Deep Tanks at 515 75 W M The complaint aIlege

in Paragraph 3 that Sea Land charged and Standard Transport o

France paid 14 475 30 based thereon stating the rate as 555 75 W

M The respondent s reply admits as to the 14 475 30 there is n

documentary proof submitted on any statement by Standard of i

having paid saying 3 With respect to paragraph 3 ofthe complain

except to the extent that the rate applicable is cited as 555 75 W M

admitted It is avered however that at the date ofshipment as show

by the attached Exhibit Athe applicable rate was in fact 515 75 W

M The complainant contends the correct charge was for glue o

adhesives at 209 50 May 30 1980 briefat 2 8 Respondent s June 1

1980 Answer Exhibit 13 pursuant to 11th Rev page 166 of tar

effective January 4 1979 Item No 569 5901210

The complaint alleges the respondent has assessed ocean freig

charges in violation of sections 16 First 17 18b 3 and 18b 5 ofth

Shipping Act 1916 The complaint seeks inter alia an order for th

respondent to cease and desist from the aforesaid violations and to pa

to the complainant by way of reparation the sum of 10 352 wit

interest

The complainant in its May 30 1980 Brief and Memorandum 

Facts as part of an introductory statement states that this proceedin

was initiated by the tiling with the Commission of a complaint date

December 31st 1979 against Sea Land Service Inc respondent fo

reparations in the sum of 10 352 97

BACKGROUND

The complaint in this proceeding signed by the Vice President 

Schenkers International Forwarders Inc was sworn to and subscribe

to before a notary public State of New York December 31 1979 Th

complaint with a covering letter dated January 31 1980 was receive

in the Office of the Secretary of this Commission February 4 198

Under date of February 5 1980 the Secretary sent the following lette

Reference is made to your complaint filed on behalf of

Schenkers International Forwarders Inc against Sea Land

Service Inc

Before your complaint can be processed it will be necessary

for you to furnish the assignment of the claim to Schenkers

1C U f
SCHENKERS INTERNATIONAL FORWARDERS INC V SEA 273

LAND SERVICE INC

from Standard Transport of France I will hold the complaint

pending receipt ofthe assignment

The complainant in a letter dated February 8 1980 received Febru

ary 12 1980 to the Secretary ofthe Commission wrote

In reply to your February 5 1980 letter concerning the com

plaint Ifiled in the above matter I

am enclosing herewith an

Assignment of Claim2 executed by Standard Transport of

France

The complaint in this proceeding was served February 20 1980

Notice of the filing of the complaint served February 21 1980 was

published in the Federal Register Vol 45 No 39 February 26 1980

page 12489

Respondent s reply to the complaint dated March II 1980 was

received in the Commission March 13 1980

A prehearing conference was held herein on March 25 1980 pursu

ant to notice served March 14 1980 The parties revealed they had

begun discussions toward a possible settlement the talks and investiga

tions were to continue the parties to submit a status report on or before

Tuesday May 6 1980

The status reports were filed indicating the parties were amenable to

this proceeding being conducted under the Shortened Procedure pursu

ant to Rule 181 of the Commission s Rules of Practice and Procedure

46 CF R 502 181 Use of the Shortened Procedure was approved and

a procedural schedule presented by notice served May 15 1980

The transcript and exhibits together with all papers and requests

filed in this proceeding constitute the exclusive record for decision

The requests of parties for findings of fact have been considered fully

and carefully such requests were granted granted in substance or

denied as indicated by the following findings of fact

FACTS

Standard Transport of France whose name does not appear on any

transportation documents in this proceeding is an ocean freight for

2

Assignment of Claim Know all men that Standard Transport of France with its principal

place of business at 4 Rue de Castiglione Paris France in consideration of One 1 00

Dollar paid to it by Schenkers International Forwarders Inc with its principal place of busi

ness at One World Trade Center New York NY herein caUed the assignee hereby as

signs to the said assignee all of its right title and interest inaclaim against Sea Land Service

Inc of Iselin New Jersey for overcharges arising under a Sea Land Service Inc bilI of

lading dated April 1 1979 with respect to a

shipment of adhesive cement in container

number 263403

In witness whereof we have hereunto set our hands and seal in the City of Paris France on

this 31st day of December 1979

Standard Transport of France

by Francis Arne Pres Directeur General

and by Jean Dazes Directeur General

Notarized January 11 1980

23 FMC
274 FEDERAL MARITIME COMMISSION

warder doing business at Paris France In the latter part of Januar

1979 Schenkers International Forwarders Inc a corporation engage

in ocean freight forwarding with its principal place ofbusiness in New

York N Y under FMC No 911 received instructions from Standar

Transport of France to arrange for the exportation in arefrigerated

container of one container of ciment golle an adhesive cement fo

discharge at the port of Nice for ultimate delivery to the purchaser S

Rhone Aquitaine Chemie

On March 12 1979 the assistant traffic manager of Schenkers Inter

national Forwarders Inc booked with Sea Land Service Inc 

common carrier by water in the foreign commerce of the United States

on a house to house3 basis carriage for approximately 30 000 lbs o

adhesive paste temperature control 400 on behalf ofMiracle Adhesiv

Sales Corporation ofNew Philadelphia Ohio USA for export to Nice

France Respondent s June 12 1980 Answering Memo Exh 2

On March 13 1979 Sea Land Service Refrigerated Container No

263403 was dispatched to Miracle Adhesive Sales Corporation in New

Philadelphia Ohio via the trucking company Motor Freight Express

Inc Ibid Exhs 34

Container No 263403 under Sea Land Service Inc B L No 74964

dated 3 31794 was said to contain 18 Palleys 792 Pails Cimen

Golle as per pro forma invoice dated 17th January 1979 Gros

Weight 41 983 lbs measurement 1069 cu ft Temp control maintai

400 Stamped correction approved The port of loading is Baltimor

on the vessel Sea Land Market for discharge at Nice The shipper i

Miracle Adhesive Sales Corp Bellmore New York The forwarding

agent Schenkers International Forwarders Inc FMC 911 New York

N Y

The parties admit the invoice value of the shipment was 8 71

Complaint p

2 Para 5 Answer thereto

Upon receipt on March 19 1979 of Container No 263403 by Sea

Land Service Seal No 499 on that container wasbroken and the carg

inspected The inspection showed a block stock type loading and wire

bound crate type packaging of the cargo that the container refrigera

Defined under Rule 30 of the applicable Tari Container tuTed by shipper and at the ship

per sexpense

Respondent s June 12 1980 Answerlng Memo E h 6 plainly shows perforations No 749640 fo

No of B L and 3 3179 for date On the copy of the BLthere is written the word adheaive an

Temperature COntrol Maintain 40 There is not correction stamp on this copy Stow und

Deck is inked out Complainant s Schedule Rule P attached to iti June 20 1980 Reply Brief show

Stow Under Deck j

it bears no date or correction The Complainant s May 30 1980 Bricf an

Memo Schedule C shows BLwith written date 4J 77 and Sea Land correction the Stow Unde

Deck w inked out It is noted that Rule 30 CI 1st Rev Page 40 eTective November 19 1976 o

the applicable tariff states Since it is necessary that Containers be stowed on or under deck at th

Member Line s

option Bill of Lading specifically claused to provide under deck storage will NOT b

issued

Ii No invoice was ever presented herein

23 FMC
SCHENKERS INTERNATIONAL FORWARDERS INC V SEA 275

LAND SERVICE INC

tion unit was set at 40 degrees the temperature was tested and read to

be 45 degrees and the cargo was pulped or tested and found to be at

45 degree temperature A new seal was affixed to the container bearing

the number 956665948 Respondent s Answer of June 12 1980 Exh

5

The Bill ofLading numbered 749640 and dated 3 3179 furnished by

the forwarder Schenkers International Forwarders Inc FMC 911

Complainant s June 20 1980 Reply Brief Schedule F and accompa

nying the cargo contained standard stamped instructions one ofwhich

was stow below deck but contained no instructions as to the temper

ature control required with respect to the cargo Sea Land Service

Inc deleted the phrase stow below deck and added a handwritten

notation Temperature Control Maintain 40 degrees Respondent s

June 12 1980 Answer Exh 6

From March 19 1979 when received by Sea Land Service Inc in

Baltimore until April I 1979 the loaded container continued to be

activated and a controlled temperature maintained On April 1 1979

the cargo at issue was moved by Respondent under the bill of lading

and applicable tariff

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

The complainant contends that it is clear beyond argument that the

cargo did not in fact require refrigeration May 30 1980 Brief p 6

The respondent replies Answer p

18 For Complainant to attempt to

allege and prove violations of 18 b 3 by Respondent on the basis of a

bare conclusion of fact without record support or legal precedent is

inadequate proof of its claim Respondent contends the Complainant

bears the burden of proving this allegation The Complainant in its

June 20 1980 Reply Brief argued p 9 the Respondent erred in regard

to burden of proof under section 18 b 3 of the Shipping Act The

Complainant asserts the two cases cited by the Respondent deal with

alleged errors in weight measurement or description and that this case

does not involve such matters

The Presiding Administrative Law Judge cannot agree with the

complainant that respondent erred in regard to the burden of proof

being upon the Complainant The two cases referred to above as cited

by the Respondent are I Johnson Johnson International v Venezuelan

Lines Docket Nos 71 46 and 71 67 16 F MC 84 1973 in which the

Commission stated at p

85 The proper test we have required is for

the claimant to sustain a heavy burden of proof Ocean Freight Con

sultants Inc v Italpacific Lines Docket No 71 81 served June 20 1972

15 F M C 312 2 United States of America v Farrell Lines Inc

Docket No 71 4 16 F MC 41 1972 in which Complainant U S of

A was denied reparation because it failed to adduce sufficient evidence

to indicate with reasonable certainty how a shipment of plastic pipe

tPMr
276 FEDERAL MARITIME COMMISSION

from Bayonne New Jersey to Freetown Sierra Leone should have

been rated

The Complainant argues May 30 1980 Brief at 6 that it is clea

beyond argument that the cargo did not in fact require refrigeration

and that it behooves respondent to justify a

refrigerated rate when the

cargo did not require the service Au contraire the complainant as th

moving party bears the burden of proving what the commodity moved

was Complainant says the proper rate of 209 50 should have bee

assessed for glue or adhesives Item 599 5 pursuant to page 166 ofthe

tariff Then as pointed out above posed the issue in this case a

whether the shipment ofadhesive cement should have moved as refrig

erated cargo at a rate of 515 75 or as glue or adhesives at a rate o

209 50

Sea Land Service Inc Bill of Lading 749640 submitted as Schedule

C to Complainant s May 30 1980 Brief is lated April I 1979 show

Container No 263403 I container said to contain 18 Palleys 79

Pails ciment golle as per pro forma invoice dated 17th January 1979

In writing really printing is Temp Control Maintain 40

A bill oflading is both a

receipt and a contract

In giving effect to provisions ofbill oflading conditions and circum

stances which evidence proves were known to parties and contemplat

ed by them in making it are to be taken into consideration Isthmian

S S Co v California Spray Chemical Corp 300 F 2d 41 1962 In the

instant case there are conditions and circumstances For example the

complainant the freight forwarder of the cargo on March 12 1979

ma le the booking with the respondent to dispatch and who did dis

patch a

refrigerated container to the shipper The refrigerated containe

was No 263403 The respondent received from the shipper loaded

refrigerated container No 26403 on March 19 1979 The refrigeration

unit was set at 40 degrees From March 19 1979 when received by

respondent in Baltimore Md until April 1 1979 the loaded contlline

continued to be activated Ilnd II controlled temperature maintained

The assistant traffic manager of the ocean freight forwarder com

plainant in his affidavit sworn to May 1 1980 states inter alia tha

about 3 or 4 days prior to the loading of the cargo he received a

telephone call from arepresentative of the respondent6 in Baltimore

and that he the assistant traffic manager in response to the question as

to what temperature the loaded refrigerated box should be maintained

said the container should be appropriately located in the vessel so tha

the adhesive cement not freeze

The complaint alleges para 3 and the respondent in its answe

admits ciment golle is an adhesive cement The respondent by such

6

Respondent in its June J2 1980 Answer at 7 said it has no record of any telephone can of th

sort alluded to

11 kMr
SCHENKERS INTERNATIONAL FORWARDERS INC V SEA 277

LAND SERVICE INC

admission raised no question as to what commodity was shipped Thus

there is no information in this record as to what classification by type7

this adhesive is

The parties not being concerned with classification of the adhesive

that was shipped attention is directed to the manner whethcr refriger

ated or not

Contracts such as bills of lading are to be interpreted from language

within the four corners of documents and any ambiguous language is

best resolved against the one who has prepared it In the present

instance the Bill of Lading apparently had stamped thereon Stow

Under Deck Schedule F of Complainant s June 20 1980 Reply Brief

The Stow Under Deck was overridden by inking out Schedule C

Complainant s May 30 1980 Brief Also there was a stamp Respondent

Correction there was lettered in TEMP CONTROL MAINTAIN

400

Rule 30 1st Rev Page 40 effective November 19 1976 of the

applicable tariff reads Since it is necessary that Containers be stowed

on or under deck at the Member Line s option Bill of Lading specifi

cally c1aused to provide under deck storage will NOT be issued This

Rule 30 would it seems justify an overriding stamp or inking out of

the Stow Under Deck Overriding stamp on printed bill of ladings is

to be considered as superseding printed form if there is a conflict

Singapore Nov Co S A v Mego Corp 540 F 2d 39 1976

The complainant is an ocean freight forwarder licensed by this Com

mission By an unconfirmed phone call by him to the carrier concern

ing commodity that has been in a refrigerated container as ordered by

the freight forwarder since March 1979 the freight forwarder who

knew or should have known of the carrier s tariff and Rule 30 as well

as the contract aspects of a bill of lading by parol direction with no

writing allegedly says to locate the container in the vessel so the

adhesive cement not freeze and despite the fact the commodity is in a

refrigerated container says no specific degree of temperature was re

quired and that the container should not have been transported under

refrigerated conditions

With no instruction in writing save the bill of lading the situation is

presented of a licensed ocean freight carrier attempting to use Stow

Under Deck without more as a direction of what to do with a

refrigerated container If the ocean freight forwarder complainant did

not want the commodity shipped in the refrigerated container he

should have specifically conveyed that direction not by indirection or

suggestion And under the circumstances herein the carrier could

7

The Condensed Chemical Dictionary 8th Edition Hawley 1971 p 17 defines Adhesive Any sub

stance inorganic ororganic natural or synthetic that is capable of binding other substances together

by surface attachment Types under inorganic and organic are listed

1C f r
278 FEDERAL MARITIME COMMISSION

hardly have handled the refrigerated container other than it did Th

complainant has not proved otherwise

The Complainant s Schedule E attached to its May 30 1980 Brie

Sea Land Bill of Lading No 956744158 6 dated January 6 1979 ac

cording to complainant shows a movement of identical cargo from th

same supplier to the same consignee did not require refrigeration Th

respondent disagrees pointing out that the Container No 20469 is 

refrigerated container that a move from Baltimore Maryland to L

Havre France would be one made pursuant to the terms and cond

tions of a different conference tariff than the tariff here at issue that is

the North Atlantic French Atlantic Freight Conference Tariff No 3

F MC No 4 applicable to carriage from U S North Atlantic Ports t

French Atlantic ports in the Bordeaux Dunkirk range The complainan

did not deny that a different conference was involved in its repl

complainant said its purpose in calling the January shipment to th

attention of the Commission was to establish that it had moved at th

commodity and not refrigerated rate

Upon consideration ofthe above and the record herein the Presidin

Administrative Law Judge finds and concludes that the complainant ha

failed to meet the burden of proving under the circumstances presente

in this case that the commodity was improperly charged or that th

respondent has violated section 18b 3 of the Shipping Act 1916

Also the showing of the bill of lading from another conference tha

that concerned herein did not provide complainant any help in meeting

its burden ofproof

Complainant argues that Stow Under Deck on the Bill of Lading

was an explicit instruction and can be read to mean that the initia

instruction of the complainant that the refrigeration was necessary wa

withdrawn that at the very least respondent had a

duty to inquire tha

for the respondent unilaterally to strike out the complainant freigh

forwarder s explicit instructions without checking was arbitrary an

capricious action constituting an unreasonable practice under sectio

17 Reply Brief p4 Using the complainant s words Reply Brief p

3

no authority is cited to support this contention and it is without meri

The complainant asserts it is not necessary to show an actual discrim

ination to support a finding of a violation of the second paragraph o

section 17 Reply Brief p7 He cites Rates Hong Kong United State

Trade Docket No 1083 11 F MC 168 176 1967 Interestingly in

the complainant s submission of its May 30 1980 Brief of 10 pages in

which not a single case is cited in support of any contentions and the

June 20 1980 Reply Brief of 12 pages the above is the only case cited

by the complainant in this proceeding On the cited page the Commis

sion pointed to the second paragraph of section 17 and said This

paragraph of the Act is directed at unjust or unreasonable regulation

as well as improper practices The complainant has not in this pro

1Jur
SCHENKERS INTERNATIONAL FORWARDERS INC V SEA 279

LAND SERVICE INC

ceeding proved any unjust or unreasonable regulation or improper

practices

The complainant has not proved the respondent violated section 16

First of the Act

As to allegations of violations of section 18b 5 of the Act the

complainant argues that the freight assessed was almost twice the value

of the merchandise The complainant asserts the respondent a few

months before had transported similar commodity at a lesser charge

but the complainant ignores that transportation was in a different con

ference and route Nevertheless the complainant says such difference is

detrimental to the commerce of the United States And adds that

respondent has engaged in an unreasonable practice in violation of

section 17 May 30 1980 Brief p9 In its June 20 1980 Reply Brief

the complainant says nothing about any 18 b 5 violation

Upon consideration of the above and the record herein the Presiding

Administrative Law Judge finds and concludes in addition to the find

ings and conclusions hereinbefore stated

I The claimant has failed to meet its burden of proving under the

circumstances presented in this case violations of sections 16 First 17

18 b 3 and 18 b 5 by the respondent as alleged

2 Reparation should be denied

3 The complaint should be dismissed

4 This proceeding should be discontinued

Wherefore it is ordered that

A Reparation is denied

B The complaint be and hereby is dismissed

C This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

Washington D C

August 12 1980

23 FMC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 699 1

GLADISH ASSOCIATES

v

SEA LAND SERVICE INC

I

i

ORDER PARTIALLYADOPTING DECISION

OF SETTLEMENT OFFICER

September 25 1980

This proceeding is before the Commission I1pon its determination to

review the decision of Settlement Officer Robert G Drew awarding

reparation to Gladish Associates for freight overcharges on three o

fourteen shipments of toothbrushes from Keelung Taiwan to Seattle

Washington

The Commission concurs with the Settlement Officer s conclusion

that with respect to the three shipments the carrier collected freigh

charges in excess of those provided in the applicable tariff in violation

of section 18b 3 of the Shipping Act 1916 46 U S C 817 The

Commission also agrees that with respect to the remaining shipments

Claimant has failed to meet its burden ofproof and that its request fo

reparations as to those shipments must be denied

The record reflects however that Claimant was not the shipper bu

rather served as customs broker freight forwarder and that it had paid

the ocean freight The Commission therefore directs Claimant to reim

burse within thirty days the shippers ofthe three shipments in questio

the portion of any freight charges awarded as reparation which th

shippers may have already paid to Claimant In addition any brokerag

fees Claimant may have received from the carrier on these shipment

must be adjusted to reflect the lower rates

THEREFORE IT IS ORDERED That the Decision of the Settle

ment Officer is adopted by the Commission to the extent indicated an

Three weeks after issuance of the Settlement Officer s Initial Decision Claimant submitted add

tional evidence consisting of copies of two letters and abox of toothbrushes in support of its clai

The Commisaion has accepted the evidence forconsideration in its review of this proceeding Howe

er Claimant s submissions remain inadequate proof of its claim and its burden still has not been m

with regard to these shipments

lln 2 F M C
GLADISH ASSOCIATES V SEA LAND SERVICE INC 281

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Assistant Secretary

1 ti 1 St

Chairman Richard J Daschbach did not participate
282 FEDERAL MARITIME COMMISSION

Separate Opinion ofChairman Oaschbach

I am not participating because Ido not believe that the Commissio

should review the decisions of Settlement Officers in informal docke

proceedings Under Subpart S of the Commission s Rules of Practic

and Procedure 46 C F R 502 301 parties consent to waive the right

and obligations associated with normal adjudicatory proceedings for th

express purpose of receiving prompt consideration of a small claim

Commission review precludes the inexpensive and expeditious handlin

of small claims which is the foundation of the informal docket process

The settlement officer s decisions in informal dockets do not hav

precedential value Commission review therefore imposes unnecessar

expense and delay in an arbitration process designed to settle mino

commercial disputes in a prompt and responsive manner

1 rI
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 699 1

GLADISH ASSOCIATES

v

SEA LAND SERVICE INC

DECISION OF ROBERT G DREW SETTLEMENT OFFICER

Partially Adopted September 25 1980

Reparation Awarded in Part

The claimant Gladish Associates Gladish is a corporation locat

ed at 1319 Second Avenue Seattle Washington It is engaged in the

business of customs brokerage and ocean freight forwarding

The claim involves fourteen 14 shipments of toothbrushes carried

by Sea Land Service Inc Sea Land from Keelung Taiwan to Seattle

Washington under the bills of lading indicated below The shipments

were assessed the rate for Brushes all kinds excluding plastic as

designated under Item 390 of Sea Land Tariff No 245 A FMC No

138 The shipments moved on a

freight collect basis and the freight

charges were paid by Gladish as evidenced by copies of cancelled

checks submitted by Gladish at the request of this Settlement Officer

The shipments involved in this claim are identified as follows

Rate

Rate Amount B LNo Vessel Voyage

S d

Claimed of Claim

I 970110536 S LExchange 61E 79 61 367 56

2 970119940 S LFinance 51E 79 61 118 08

3 970114714 S L Finance 50E 79 61 233 10

4 970117577 S LCommerce 59E 79 61 120 24

5 970125691 S L Finance 52E 84 65 561 12

6 970129735 S L Commerce 61E 84 65 252 13

7 970133652 S L Finance 53E 84 65 103 74

8 970135545 S LExchange 65E 84 65 12198

9 970133049 S LTrade 62E 84 65 116 09

10 970146049 S L Finance 55E 84 65 10172

II 970112043 S LMclean 96E 79 61 95 94

12 970112598 S LMclean 96E 79 61 114 12

13 970129771 S LCommerce 61E 84 65 13167

1 Both parties having consented to the informal procedure of 46 CP R 502 301 304 as amended

this decision will be final unless the Commission elects to review it within 30 days from the date of

servicethereof

2 F M C 7 In
284 FEDERAL MARITIME COMMISSION

B L No Vessel Voyage

Rate

As

sessed

Rate Amount

Claimed of Claim

14 970153583 SIL Finance 56E 89 65 148 08

Total amount claimed 2 585 57

With the exception of No 14 above each of the rates assessed wa

the Overland Common Point OCP rate for Brushes all kinds e

cluding plastic under Item 390 of Sea Land s Tariff No 24S A FMC

No 138 Shipment No 14 above was assessed the Local rate unde

Item 390 of the same Sea Land tariff Item 390 of the tariff exclude

plastic brushes for which it directs the reader to Item 2100 Item2loo 

described as Plastic Goods and Manufactures N O S including Plast

Inflatable Furniture and Plastic Dresser Sets Containing comb brus

and mirror

Gladish claims that To the best of our knowledge these tooth

brushes are PLASTIC and that the lower Item 2100 O C P rat

should apply Accordingly reparation in the amount of 2 585 57 

claimed

When Gladish filed this claim with Sea Land Sea Land refused t

honor the claim under Item 305 of Sea Land Tariff No 245 A FMC

No 138 which prohibits acceptance of a claim beyond six months o

the date of shipment However the claim herein under consideratio

was filed within the time limit specified by statute2 and it has bee

established by the Commission thatthe so called six month rule ma

not act as a bar to recovery of an otherwise legitimate overcharg

claim in such cases

The shipment identified as No 1 above is described on the bill o

lading as polypropylene toothbrushes and the shipment identified a

No 7 above is described as styrene toothbrushes The remainin

twelve 12 shipments were described on the bills of lading as tooth

brushes without indicating the material ofmanufacture Accordingly

the Settlement Officer requested Gladish to submit in the form o

packing lists commercial invoices or other such documentation ev

dence that the toothbrushes werein fact plastic

In reply to the Settlement Officer s

request Gladish submitted com

mercial invoices covering each of the tourteen 14 shipments Thes

commercial invoices describe the toothbrushes exactly as on the respec

tive bills of lading Only the shipments identified as Nos I and 7 above

are confirmed by the commercial invoices to be of polypropylene and

styrene manufacture The commercial invoices do not indicate the ma

terial of manufacture with respect to the remaining twelve shipments

46 C F R 502302 Th earliest hipment involved h r was carried aboard av 1 which aile

on January 9 1978 and the claim was filed on June 14 1979

21 F M C
GLADISH ASSOCIATES V SEA LAND SERVICE INC 285

The United States Department of Commerce Bureau of the Census

Schedule B classification publication 1978 edition includes under the

term plastics polypropylene and styrene

4

Accordingly I find that

the shipments identified as Nos I and 7 above were toothbrushes of

plastic manufacture and should have been rated under Item No 2100 of

Sea Land s Tariff No 245 A FMC No 138 However Ialso find that

with respect to the other twelve 12 shipments Gladish has not met the

burden of proving that those shipments were toothbrushes of plastic

manufacture and therefore the rates assessed by Sea Land were cor

rect

As previously indicated the shipment identified as No 14 above was

assessed the Local rate under Item 390 of Sea Land s TariffNo 245

A FMC No 138 Since this shipment was destined for Nashville

Tennessee it should have been rated at the ac p tariff rate of 84 per

cubic metre pursuant to Item 390 ofSea Land s TariffNo 245 A FMC

No 138 rather than the Local rate of 89 Therefore the overcharge is

calculated as follows

Ocean freight assessed

6 17 cubic metres 89 per cubic metre 549 13

Correct ocean freight

6 17 cubic metres 84 per cubic metre 518 28

Overcharge 30 85

Section 18b 3 of the Shipping Act 1916 makes it unlawful for a

carrier to retain compensation greater than it otherwise would be enti

tled under its tariff In addition since this claim was filed within the

time specified by statute see Footnote 2 the so called six month rule

of Sea Land s tariff cannot act as a bar to these overcharge claims

Accordingly based on the foregoing discussion and findings Gladish is

awarded reparation on the shipments identified as Nos I and 7 above

in the amounts of 367 56 and 103 74 respectively and in the amount

of 30 85 for the shipment identified as No 14 above The total amount

of reparations is 502 15 In addition twelve 12 percent interest per

annum is awarded to be calculated from the date that the ocean freight

was paid The claim with respect to the remaining eleven II ship

ments is denied

S ROBERT G DREW

Settlement Officer

June 26 1980

3

The Condensed Chemical Dictionary Eighth Edition 1971 defines polypropylene as a

synthetic

crystaUine thermoplastic polymer

4

The Condensed Chemical Dictionary Eighth Edition 1971 defines styrene as a

thermoplastic

synthetic resin

11 F M r
FEDERAL MARITIME COMMISSION

DOCKET NO 80 26

JUTE CARPET BACKING COUNCIL INC AND ITS MEMBERS

v

CALCUTTA EAST COAST OF INDIA AND

BANGLADESH U S A CONFERENCE AND ITS MEMBERS

NOTICE

October 2 1980

Notice is given that no appeal has been taken to the August 26 1980

dismissal of the complaint in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has

become administratively final

8 JOSEPH C POLKING

Assistant Secretary

Hl 1 FMr
FEDERAL MARITIME COMMISSION

DOCKET NO 80 26

JUTE CARPET BACKING COUNCIL INC AND ITS MEMBERS

v

CALCUTTA EAST COAST OF INDIA AND

BANGLADESH U S A CONFERENCE AND ITS MEMBERS

MOTION FOR LEAVE TO WITHDRAW COMPLAINT

GRANTED COMPLAINTDISMISSED

Finalized October 2 1980

The Jute Carpet Backing Council Inc and its members complain

ants in this proceeding have filed a motion requesting leave to with

draw their complaint Complainants explain that they have decided not

to proceed against respondent Calcutta East Coast of India and Ban

gladeshlU S A Conference at this time In reply to the motion re

spondent Conference filed their consent to the withdrawal of the

complaint

This case began with the filing of the complaint in which the Council

and its members importers ofjute carpet backing materials alleged that

the Conference had increased its rates on these commodities by means

of a general rate increase of 17 percent on April 10 1980 and had

allegedly also increased bunker surcharges The Council alleged that

these increases caused the rates on their commodity to be so unreason

ably high as to be detrimental to the commerce of the United States in

violation of section 18b 5 of the Shipping Act 1916 and asked the

Commission to find these rates to be unlawful issue a cease and desist

order and order an indeterminate amount of financial reparation The

Conference admitted certain rate increases but denied the central alle

gation ofviolation of section 18 b 5 ofthe Act

Had this case proceeded into litigation it would most likely have

entailed considerable expense with uncertain results Cases litigated

under section 18 b 5 have traditionally involved the development of

lengthy evidentiary records with results often not supporting the posi

tions of complainants or protesting shippers See e g Investigation of

Ocean Rate Structures 12 F MC 34 1968 Iron and Steel Rates

Export Import 9 F MC 180 1965 Outbound Rates Affecting Export

High Pressure Boilers 9 F MC 441 1966 Pacific Westbound Confer

ence Investigation of Rates Rules and Practices of Wastepaper 19 SRR

19 1979 Moreover it is well established that the Commission cannot

0
288 FEDERAL MARITIME COMMISSION

grant an award of reparation retroactively under section 18b 5 Se

Westinghouse Electric Corp v Sea Land Service Inc 19 SRR 1056

1979 and the cases cited therein Termination of the case at this time

would undoubtedly result in considerable savings to all parties con

cerned regarding costs of litigation Furthermore even though com

plainants have determined not to pursue the question of lawfulness o

respondent s present rates on the commodity which they import unde

the standards of section 18b 5 withdrawal of the complaint even i

construed to constitute a dismissal of the complaint does not ba

complainants from filing a complaint addressed to future rate increases

if they believe that relief is required Finally there are no exceptiona

circumstances which would preclude application of the general rule

that complainants have the right to chqose not to engage in litigation i

they believe it to be in their best interests to withdraw

Accordingly the motion for leave to withdraw the complaint is

granted The complaint is dismissed and the proceeding discontinued

subject to Commission review under Rule 227 b 46 C P R 502 227 b

S NORMAN D KLINE

Administrative Law Judge

August 26 1980
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 24 AMDT 1 DOCKET NO 80 32

PART 522 FILING OF AGREEMENTS BETWEEN COMMON

CARRIERS OF FREIGHT BY WATER IN THE FOREIGN

COMMERCE OF THE UNITED STATES

October 2 1980

Final Rule

The Federal Maritime Commission exempts agree

ments solely involving terminal facilities located in

foreign countries from the filing and approval re

quirements of section 15 of the Shipping Act 1916

DATE Effective October 8 1980

SUPPLEMENTAL INFORMATION

By notice filed in the Federal Register on May 27 1980 the Federal

Maritime Commission solicited comments on a

proposed rulemaking to

exempt pursuant to section 35 of the Shipping Act 1916 46 U S C

833a leases or arrangements solely involving terminal facilities located

in foreign countries from the filing and approval requirements of sec

tion 15 ofthe Act 46 U S C 814

Section 35 provides that the Commission upon application or on its

own motion may by order or rule exempt any class of agreements

between persons subject to the Act or any specified activity of such

persons from any requirements of the Act where it finds that such

exemption will not impair effective regulation by the Commission be

unjustly discriminatory or be detrimental to commerce

In the main comments expressed the view that leases or arrange

ments solely involving terminal facilities located in foreign countries are

not within the Commission s jurisdiction under the Shipping Act

The Commission has occasionally approved agreements involving

terminal facilities located abroad These agreements between two

vessel operating common carriers as defined in section 1 of the Ship

ping Act provided for joint use of a terminal in a foreign port which

necessarily involved a degree ofrationalization ofsailings and coordina

tion of schedules which could affect service and frequency at U S

ports The Commission considered these agreements to be within its

ACTION

SUMMARY

10
290 FEDERAL MARITIME COMMISSION

jurisdiction Therefore it can be said that some agreements involving

terminal property at a foreign port are subject to section 15 On th

other hand the Commission is not unmindful that international law

principles of comity and sovereignty the fact that these foreign term

nal operators have no direct contact with the United States and th

frequent lack of practical means to carry out any regulations militate

against the positive assertion of jurisdiction in many of these cases

However to separate those agreements which have such remote con

tacts with any area of regulatory concern as to compel a determinatio

that no jurisdiction exists from those within the jurisdiction of th

Commission is difficult in the abstract and unnecessary for the purpos

of this order The Commission is of the opinion that it should exemp

the entire class of these agreements rather than attempt to draw a

abstract jurisdictional line between them

Since terminals located in foreign countries have no significant con

tact with the commerce ofthe United States exemption of agreement

which solely involve such terminals will not impair effective regulatio

by the Commission be unjustly discriminatory or be detrimental t

commerce Therefore the Commission will exempt these agreements t

the extent of our jurisdiction from the filing and approval requirement

of section 15

NOW THEREFORE pursuant to sections 15 35 and 43 of th

Shipping Act 1916 46 U S C 814 833a and 84la and section 4 ofth

Administrative Procedure Act 5 U S C 553 IT IS ORDERED Tha

effective upon publication in the Federal Register Title 46 C F R Pa

522 is hereby amended by the addition of a new section 522 8 a

foIlows

Section 522 8 Exemption of Agreements Between Common

Carriers by Water in Foreign Commerce Solely Involving

Terminal Facilities

Authority Sections 15 35 43 Shipping Act 1916 46 U S C

814 833a 841a Section 4 Administrative Procedure Act 5

U S C 553

a Exemption To the extent the Commission has jurisdiction

agreements solely involving foreign terminal facilities are ex

empted from the filing and approval requirements of section

15 ofthe Shipping Act 1916

b Compliance with the Filing and Approval Requirements of

Section 15 Notwithstanding paragraph a of this section

persons who desire Commission approval ofagreements solely

involving foreign terminal facilities may file such agreements
EXEMPTION OF FOREIGN TERMINAL AGREEMENTS 291

with the Commission for section 15 consideration in accord

ance with ordinary filing procedures

By the Commission

8 JOSEPH C POLKING

Assistant Secretary

l F M r
FEDERAL MARITIME COMMISSION

DOCKET NO 80 6

SPECIFIC COMMODITY RATES OF FAR EASTERN

SHIPPING COMPANY IN THE PHILIPPINES U S

PACIFIC COAST TRADE AND U S GULF AUSTRALIA TRADE

Controlled carrier s

rates Buri ana Rattan Furniture from Cebu and Beer mine

water etc found to be unjust and unreasonable and are therefore disapprove

Steven B Chameides and John F Dorsey for Far Eastern Shipping Company

Polly Haight Frawley Alan J Jacobson and Paul J Kaller for Bureau of Heari

Counsel

REPORT AND ORDER

October 3 1980

BY THE COMMISSION RICHARD J DASCHBACH Chairma

THOMAS F MOAKLEY Vice Chairman JAMES V DAY Commi

sioner COMMISSIONER LESLIE L KANUK CONCURS IN THE RESUL

CoMMISSIONER PETER N TEIGE DID NOT PARTICIPATE

By Order served January 31 1980 the Commission 1 directed th

Far Eastern Shipping Company FESCO lto show cause why six 

its rates on three commodities in the PhilippineslU S trade and on

F A K freight all kinds rate in the U S Atlantic and Gu1flAustral

and New Zealand trades should not be disapproved and 2

suspende

those rates for 180 days pursuant to section 18 c 4 of the Shippin

Act 1916 46 U S C 817 c 4 pending the Commission s determin

tion of their justness and reasonableness The Philippines North Ame

ica Conference PNAC intervened but later withdrew from the pr

ceeding

This proceeding was assigned to Administrative Law Judge Charle

E Morgan for the expedited development of an evidentiary record O

May 30 1980 the Presiding Officer certified to the Commission 

record which consisted of 10 exhibits In addition all exhibits whic

were introduced in Docket No 70 104 Specific Commodity Rates ofFa

Eastern Shipping Company in the Philippines U S Pacific Coast Trad

1 FBSCO is a controlled carrier subject to regulation under the Ocean Shipping Act of 1978 P 

95 483 92 Stat 1601 which amended section I and 18 of the Shipping Act 1916 46 U S C 8

811 FESCO is directly orindirectly owned and controlled by the government of the US S R und

whose flag its vessels operate

S

See Attachment A

q 1 RM r
RATES OF FAR EASTERN SHIPPING CO 293

were incorporated by reference FESCO and the Commission s Bureau

of Hearing Counsel filed simultaneous opening and reply briefs

FESCO also filed a request for oral argument which was denied by the

Commission

POSITIONS OF THE PARTIES

FESCO first claims that its rates are the same as or similar to the

rates of other carriers in the same trades In doing so it relies upon

other carriers rates in existence on the date of the Commission s Order

initiating this proceeding and also on more current rates In addition a

portion of its rate comparison is based upon Military Sealift Command

rates of other carriers FESCO also contends that its slower and less

frequent service from the Philippines requires it to maintain lower rates

than two major carriers in the trade American President Lines and

Sea Land Service Inc Lastly FESCO argues that some ofits rates are

required to assure the movement of particular cargo buri furniture

Hearing Counsel initially asserts that FESCO s total charges on all

four subject commodities are lower than the total charges assessed by

its competitors However because four of the seven rates under consid

eration have not resulted in trade disruption injury to other carriers

from the capture of an unduly large portion of the market Hearing

Counsel finds them justified Hearing Counsel further contends that the

other three rates Buri and Rattan Furniture from Cebu Local and

OCP and Beer mineral water etc Local have disrupted the

market for their carriage and have not therefore been justified Final

ly Hearing Counsel does not agree that FESCO s rates on buri and

rattan furniture have been shown to be required to assure the move

ment ofthis commodity

DISCUSSION

Once a rate is questioned by the Commission under the Ocean Ship

ping Act of 1978 the burden is on the controlled carrier to demonstrate

that the rate is just and reasonable See 46 US C 8l7 c I For the

purposes of determining whether rates of a controlled carrier are just

and reasonable the Commission is permitted to take into account ap

propriate factors four of which are set forth in section 18 c 2

3

In

3

Section 18 c 2 states in part

the Commission may take into account appropriate factors including but not limited to

whether

i

the rates which haveheen filed are below alevel which is fully compensatory to

the controlled carrier based upon the carrier s actual costs orupon its constructive costs

which are hereby defined as the costs of another carrier other than acontrolled carrier

operating similar vessels and equipment in the same orasimilar trade

ii the rates are the same as orsimilar to those filed orassessed by other carriers in the

same trade

iiithe rates are required to assure movement of particular cargo in the trade or

1 f r
I

294 FEDERAL MARITIME COMMISSION

this particular proceeding FESCO has addressed only the second an

third ofthese factors Upon thoroughly reviewing the entire record an

the arguments of the parties the Commission finds that the rates o

two of the four commodities at issue are unjust and unreasonable an

they will therefore be disapproved 4

Footwear OCP and Local Beer Local and FA K Rates

FESCO s total charges on all four commodities are lower than thos

of other carriers in the same trades 5

See Attachments B through E

However FESCO did not move any beer or footwear under its OCP

rates in 1979 Exhibit 8 nor has it carried any F A K cargo from

Houston to Australia Exhibit 6

6

Moreover FESCO s local carriag

ofrubber sandals approximately 527 revenue tons in 1979 Exhibit 6

represents a minuscule portion of this market See Attachment F 

does not appear therefore that any of FESCO s rates for these com

modities have disrupted these trades or harmed other carriers Accord

ingly these rates will not be disapproved

Buri and Rattan Furniture from Cebu7

FESCO s total charges for buri and rattan furniture are about 1

percent less than PNAC s and range as high as almost 32 percent les

than that of Seatrain Pacific Services S A a major independent carrie

in the trade However FESCO s charges for this commodity are withi

4 25 percent of the charges assessed by Evergreen Line for local ca

riage See Attachment B This limited similarity between FESCO an

iv the rates are required to maintain acceptable continuity level orquality of common

carrier serviceto orfrom affected ports

In reaching this conclusion the Commission 1 considered only rate comparisons which em

ployed rates in effect at the initiation of this pracecdingj 2 considered any applicable charges relatin

to the subject rates which would affect the total transportation charge to a

shipper and 3 gave litt

weight to comparisons which used ratesavailable only to themilitary

Ii PESCO has offered a

study which purportedly proves that its slower and less frequent servi

justifies lower rates This theory is based upon the assumption that slower service results in increase

inventory and insurance costs to shippers However the levels of insurance and inventory costs 

they pertain to these particular commodities during the time in question have not been establishe

Moreover the transit times employed in PESCO s study are subject to dispute It appears that PESc

oITered a more frequent service from Cebu 3 times a montb than alleged In Its study bl weekly

Exhibit 9 In any event even if the differences due to transit time COlts are accepted they do n

justify thedilparity of rates between PESCO and its competitors

a

This F A K rate was PESCO s first such published rate between Houston and Australia Becau

it was suspended prior to its effective date there is no history of carriage under it Attachment 

indicates that Karlander Kangaroo Line is the only other carrier with alike rate but that Karlande

total charge is significantly higher than PESCO s The record does not reveal whether Karlander a

tually carries any cargo pursuant to its rate

T

The local and OCP rates for buri and rattan furniture from Cebu are merely two of several rat

published by FESCO under the general commodity description of furniture Much of the da

which has been introduced in this proceeding does not distinguish among these various rates Howe

er this data remains relevant because I86 percent of PESCO s

carriage from the Philippines orig

nates at Cebu Exhibit at 6 and 2 the rates on furniture from Cebu obviously contribute substa

tially to PESCO s overall market penetration for thecarriage of furniture

1I1 Uf
RATES OF FAR EASTERN SHIPPING CO

Evergreen is not controlling however because of the differences in

their service characteristics Unlike FESCO Evergreen does not serve

the Philippines by direct service but rather employs feeder vessels

Exhibit 7 at 6 In any event it is the effect of FESCO s rates on its

market share and the share of the other carriers which is particularly

relevant

Furniture is one of the seven major moving commodities in the

PhilippineslUnited States Pacific Coast trade and comprises 77 percent

of PNACs cargo Exhibit 7 at 13 Since 1977 PNAC has seen a

gradual decline in its carriage ofthis commodity during a period when

furniture exports in general from the Philippines were increasing Ex

hibit 10 at 4 Exhibit 14 at 4 and 5 Docket No 79 104 In 1979 the

only year for which FESCO provided data FESCO carried 50 847

revenue tons of furniture compared to 64 847 revenue tons for the

entire 17 member conference See Attachment F This amounted to

more than 44 percent of the total market for the carriage of furniture

Exhibit 10 at 5 During the last quarter of 1979 FESCO outcarried

PNAC Exhibit 10 at 5 No other independent carrier appears to have

carried any appreciable amount ofthis commodity 8

The affidavits offered by FESCO Exhibits 3 and 4 do not justify

FESCO s apparently low rates on furniture as being necessary to assure

its movement Two Philippine shippers generally assert that because of

the nature ofthe commodities they ship FESCO s low rates have been

an important factor in their businesses However these two affiants

make no claim to speak for the entire export furniture industry nor do

they unequivocally state that FESCO s particular rates in question are

necessary to assure the movement of all such cargo from the Philip

pines Even though FESCO has captured a

significant portion of the

market for the carriage of this commodity the Conference continues to

carry substantial amounts Accordingly these rates do not appear to be

necessary to assure the movement of burl and rattan furniture from

Cebu

Beer mineral water etc

Beer is also one of the seven major moving commodities from the

Philippines Exhibit 7 at 13 and FESCO s total charges for this

commodity are at least 18 percent less than the Conference and almost

33 percent less than Seatrain See Attachment C What data is available

indicates that FESCO carried 6 554 revenue tons of beer locally in

1979 while at the same time the Conference carried only 4 583 reve

nue tons both locally and OCP See Attachment F FESCO thus

outcarried the Conference by 43 percent While there is no data for

8

Census data for 1978 indicates that independents other than FESCO carried only 154 percent of

all the furniture Exhibit 7 at 17

1 PM r

295
296 FEDERAL MARITIME COMMISSION

FESCO s carriage of beer other than for 1979 the record does revea

that PNAC s carriage has decreased significantly from 1978 to 1979

14 8S7 revenue tons to 4S83 revenue tons See AttachmentF Again a

with furniture other independents have not played an important role i

the carriage of this commodity transporting only 2 7 percent of a

beer mineral water etc in 1978 Exhibit 7 at 17

The Commission finds therefore that FESCO has significantly pene

trated the market for the carriage of furniture and beer from th

Philippines due in large part to the past and present disparity betwee

FESCO s rates and those of its competitors The Commission furthe

concludes that the rates under consideration have not been adequate

justified by FESCO and because they are unjust and unreasonable

they will be disapproved

THEREFORE IT IS ORDERED That the rates of Far Easter

Shipping Company for Blriand Rattan Furniture from Cebu Loca

and OCP and Beer mineral water etc Local as listed in Attach

ment A are hereby disapproved as utijust and unreasonable and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Assistant Secretary

HPMC
RATES OF FAR EASTERN SHIPPING CO

ATIACHMENT A

Far Eastern Shipping Company

A FROM Ports in the Philippines

TO U S Pacific ports and Overland Common Points

DESCRIPTION

Furniture made of

From Cebu only

Special rate

Buri and Rattan Furniture only

Beer mineral water soft drinks and

spirits in cases cartons or pallets

Footwear viz

Rubber Sandals Flat Soles with thongs

B FROM U S Atlantic and Gulf

TO Australia and New Zealand

Freight All Kinds in containers

Special Rate from Houston only

1 fr

TAR

IFF

ITEM

480

480

100

100

470

470

RATE

SUSPENDED

Local 4100M

OCP 36 25M

Local 4150M

OCP 3850M

Local 43 00M

OCP 4150M

2800 2600PT 20

297

EFFEC

TIVE

DATE

2 3 80

2 3 80

2 8 80

2 8 80

2 8 80

2 8 80

2 1 80
298 FEDERAL MARlTIM COMMISSION

ATTACHMENT B

BURlAND RATTAN FURNITURE

PERCENT

BY WHICH

FESCO S

CEBU

TOTAL

BUNKER ARBI TOTAL CHARGE 

CARRIER RATE SUR TRARY CHARGE

LOWER

CHARGE CHARGE THAN

COMPETI

TORS

TOTAL

CHARGE

FESCO LOC 4100M 4 00 45 00

OCP 36 25M 4 00 40 25

PNAC BURl

LOC 45 00M 9 50 54 50 17 43

OCP 39 00M 9 50 48 50 17 01

RATTAN

LOC 5125M 9 50 60 75 25 92

OCP 46 75M 9 50 56 25 28 44

SEA BURl

TRAIN

LOC 4100M 8 00 9 50 58 50 23 07

OCP 35 00M 800 9 50 52 50 23 33

RATTAN

LOC 46 00M 8 00 9 50 63 50 29 13

OCP 42 00M 8 00 9 50 59 50 32 35

EVER LOC 39 00M 8 00 47 00 4 25

GREEN

1 Exhibit 7

2 Exhibit 2

1J fr
RATES OF FAR EASTERN SHIPPING CO

AITACHMENT C

BEER MINERAL WATER ETC

PERCENT BY

WHICH FESCO S

TOTAL

CARRIER RATE BUNKER TOTAL CHARGE IS

SURCHARGE CHARGE LOWER THAN

COMPETITOR S

TOTAL

CHARGE

FESCO LOC 4150M 4 00 45 50

OCP 38 50M 4 00 42 50

PNAC LOC 46 00M 9 50 55 50 18 02

OCP 43 00M 9 50 52 50 19 05

SEA

TRAIN LOC 59 75M 8 00 67 75 32 84

I Exhibit 7 FESCO has compared its local measurement rate for beer to Seatrain s

local per container rate for beer Exhibit 2 However since Seatrain also offers a local

measurement rate for this commodity FESCO s comparison is of considerably less value

than a measurement rate to measurement rate comparison

11 Plfr

299
300 FEDERAL MARITIME COMMISSION

ATIACHMENT D

FOOTWEAR VIZ RUBBER SANDALS

FLAT SOLES WITH THONGS

CARRIER RATE BUNKER

SURCHARGE

PERCENT BY

WHICH FESCO 

TOTAL

TOTAL CHARGE IS

CHARGE LOWER THAN

COMPETITOR 

TOTAL

CHARGE

FESCO LOC 43 00M 4 00 47 00

OCP 4UOM 4 00 45 50

PNAC LOC 48 00M 9 50 57 50 18 26

OCP 46 00M 9 50 55 50 18 02

SEA

TRAIN LOC 50 00M 8 00 58 00 18 96

OCP 47 00M 8 00 55 00 17 27

ZIM LOC 54 50M 9 50 64 00 26 56

OCP 510M 9 50 6 00 25 41

1 Exhibit 7

2 Exhibit 2

1IC r
CARRIER

FESCO

lKAR

LANDER

1 Exhibit 7

RATES OF FAR EASTERN SHIPPING CO

RATE

2 600 PIC 20

3 150 PIC 20

ATTACHMENTE

FREIGHT ALLKINDS

BUNKER

SUR

CHARGE

44100

23 F M C

CURREN

CY

ADJUST

MENT

FACTOR

TOTAL

CHARGE

94 50

2600 00

3685 50

301

PERCENT

BY WHICH

FESCO S

TOTAL

CHARGE IS

LOWER

THAN

COMPETI

TORS

TOTAL

CHARGE

2945
302 FEDERAL MARITIME COMMISSION

ATTACHMENT F

CARGO MOVEMENTS REVENUE TONS IN THE

PHILIPPINES U S PACIFIC COAST TRADE

COMMODl FESCO PNAC SEA

TY LAND

1979 Furniture 50 847 1994 TEU s x 25 5 cbm stow 64486 6 28

Beer 6554 257 TEU s x 25 5 cbm stow 4 583

Footwear 1581 62 TEU s x 25 5 cbm stow 24 985

1978 Furniture 66 782 7 5

Beer 14 857

Footwear 36 697

1977 Furniture 66 939 12 1

Beer 12 186

Footwear 4 762

I Exhibit 8 provides data in TEU s Stowage factors are available from Exhibit 2 at 

Beer and footwear data reflect local movements only because no OCP movemen

occurred

2 Exhibit 10 at 4

3 Exhibit 7 at 16

23 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 80 53

U S GULF NORTH EUROPE DISCUSSION

AGREEMENT NO 10178 1

DISCONTINUANCE OF PROCEEDING

October 21 1980

Respondents have filed a motion to discontinue proceedings in this

matter The motion demonstrates that proponents no longer wish to

pursue the agreement in question Inasmuch as the proponents have

withdrawn the agreement in question and the only issue ordered to be

heard was the approvability thereof under section 15 the motion to

discontinue should be granted It is so ordered

By the Commission

S FRANCIS C HURNEY

Secretary

23 FM C 303
FEDERAL MARITIME COMMISSION

DOCKET NO 69 7

AGREEMENT NO T 2336

NEW YORK SHIPPING ASSOCIATION

COOPERATIVE WORKING ARRANGEMENT

NOTICE CONCERNING SATISlfACTION OF REMAINING

VALID CLAIMS AND DISCONTINuANCE OF PROCEEDING

October 23 1980

On September 9 1980 we issued an order in this proceeding direc

ing New York Shipping Association Inc NYSA to satisfy within 

days of service of such order the outstanding claim for assessme

adjustments of Zim American Israeli Shipping Co Inc Zittl as we

as the other still remaining valid clai ls or to show cause why su

other claims should not be satisfied

On October 9 1980 we received notification from NYSA that th

outstanding claims of Zim and the other claimants which we ha

determined were still owed assessment adjustments had been satisfied 

the amounts set forth in our September 9th order by the extension 

full credits against assessments for carloes handled at the Port of Ne

York on or after October 9 1980 one of the methods of satisfactio

which we had prescribed in that order NYSA asks accordingly th

we now confl1 IIlits complete satisfaction of the claims release an

discharge it from any further liability with respect thereto and clo

this proceeding

We have only one observation to make with respect to the manner 

which NYSA has chosen to satisfy the claims As we have frequent

explained should a successful claimant cease to serve the Port of Ne

York credits will no longer be a satisfactory means of assessme

adjustments and cash refunds will be required to satisfy the remainin

liability See Agreement No T 2336 19 F MC 248 262 265 1976 aff

sub nom New York Shipping Ass n v FMC 187 U S App D C 28

292 571 F 2d 1231 1241 1978 Orders of December 27 1976 pages 

9 10 and April 3 1978 page 21 notice ofJuly 5 1978 pages 3 4 an

order of September 9 1980 page 6 We are thus unable to ho

definitively at the present time that cr dits will continue to be a prop

and sufficient method of satisfying the claims At the present tim

however we find NYSA in full compliance with our September 9

order directing complete satisfaction of the remaining valid claim

Should the method of satisfaction here recognized as proper at th

304 23 F MC
NEW YORK SHIPPING ASSOCIATION COOPERATIVE 305

WORKING ARRANGEMENT

present time become improper because a claimant ceases operations at

the Port NYSA is directed to satisfy the remaining portions of its

liability to such claimant by a cash refund

THEREFORE IT IS ORDERED That this proceeding be and it

hereby is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

23 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 79 82

PIER SERVICES INC

v

PORTSIDE REFRIGERATED TERMINALS

ORDER ADOPTING INITIAL DECISION

October 23 1980

This proceeding is before the Commission upon Exceptions filed b

Portside Refrigerated Terminals Inc to the Initial Decision of Admin

istrative Law Judge Joseph N Ingolia Replies to Exceptions have bee

filed by Pier Services Inc and the Commission s Bureau of Hearin

Counsel an intervenor

The proceeding was initiated as a result of a complaint filed by Pie

against Portside Respondent alleging that I a 10 per carton

inspection charge assessed by Respondent is unlawful under sections 1

and 17 ofthe Shipping Act 1916 46 U S C 815 and 816 and contrar

to the tariff filing provisions ofthe Commission s Rules General Orde

15 46 C F R Part 533 and 2 a partnership agreement entered int

between Respondent and Louis and Vincent D Annello to form Rob

deau Portside is in violation of section 15 ofthe Shipping Act 1916 4

U S C 814 because it was not filed with the Commission and 

otherwise unjustly discriminatory and unfair

The Presiding Officer found that Portside was an other person

within the meaning of section 1 of the Shipping Act and that it ha

violated sections 16 and 17 as well as the tariff filing provisions of Pa

533 He found that Portside violated section 16 by assessing a pe

carton charge against Pier that was not assessed against Pier s compet

itor and that the assessed charge was an unreasonable practice withi

the meaning of section 17 The Presiding Officer further found tha

Portside violated Part 533 and section 17 by failing to file a prope

tariff with the Commission and by charging rates other than as spec

fied in its tariff on file with the Commission Finally the Presiding

Officer determined that there was insufficient record evidence to sup

port a finding that the agreements in issue are subject to section 15 o

the Shipping Act No party took exception to the section 15 aspects o

the Initial Decision

306 1F M r
PIER SERVICES INC V PORTSIDE REFRIGERATED 307

TERMINALS

EXCEPTIONS AND REPLIES

Generally Portside argues that it is a warehouse and as such is

exempt from the Commission s terminal tariff filing requirements Ac

cordingly Portside submits that the Presiding Officer erred in finding

that it violated section 17 and Part 533 for failing to file a terminal

tariff Moreover because the services performed for Pier are allegedly

incidental to Portside s warehouse activities Portside argues that the

Commission lacks jurisdiction over the rates charged for such incidental

services as temporary removal from storage

Portside further contends that in any event it performed services for

Pier for which it should be compensated and that its charge is neither

unreasonable nor unduly preferential Finally Portside submits that its

arrangement with the Robideau Portside partnership justifies assessing

a different type ofcharge to the partnership than to Pier

Complainant and Hearing Counsel support the Presiding Officer s

Initial Decision They argue that Portside s warehouse services are

included within the scope of sections 1 16 and 17 of the Act because

these services are provided in connection with a common carrier by

water Moreover these parties submit that the exemption for tariff

filings provided in Part 533 does not apply to Portside because there is

no evidence in this proceeding that the services in issue are performed

for water carriers pursuant to storage agreements covered by issued

warehouse receipts On the contrary Hearing Counsel point out that

Portside s President has admitted that it does not have any contracts

with oceangoing carriers

Complainant and Hearing Counsel argue that Portside s practice of

assessing a 10 per carton charge is an unreasonable practice within the

meaning of section 17 because it is applied to all cartons whether they

are actually inspected or skipped and because the charge is not applied

to the Robideau Portside partnership Finally because this charge is

not assessed against the Robideau Portside partnership Hearing Coun

sel and Pier submit that the Presiding Officer also properly found a

section 16 violation

DISCUSSION

Portside s Exceptions and the record in this proceeding present the

Commission with no reason for disturbing the findings and conclusions

ofthe Presiding Officer s Initial Decision Indeed Portside s Exceptions

generally constitute nothing more than a restatement of arguments

presented to and properly considered and disposed of by the Presiding

Officer The record presented clearly supports the Presiding Officer s

findings that Portside is an other person within the meaning of

section 1 of the Act and that Portside violated Part 533 and section 17

by failing to file proper tariffs with the Commission and by charging

rates in excess of those rates which were currently on file with the

11 F M r
308 FEDERAL MARITIME COMMISSION

Commission Moreover the record supports the Presiding Office

findings that the charges assessed against Pier were unlawful and th

the assessment gave the Robideau Portside partnership an unreasonab

preference and advantage which resulted in an unreasonable prejudi

or disadvantage to Pier within the meaning of section 16

THEREFORE IT IS ORDERED That the Exceptions of Portsi

Refrigerated Terminals Inc are denied and the Initial Decision serv

in this proceeding on June 19 1980 is adopted as the decision of t

Commission and made a part hereof and

IT IS FURTHER ORDERED That in accordance with the pro

sions of the Commission s General Order IS 46 C F R 533 Portsi

Refrigerated Terminals Inc file a tariff with this Commission with

30 days of the date of this Order showing its current rates charge

rules and regulations and

FINALLY IT IS FURTHER ORDERED That this proceeding 

discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

B F M t
FEDERAL MARITIME COMMISSION

NO 79 82

PIER SERVICES INC

v

PORTSIDE REFRIGERATED TERMINALS INC

HELD

ISection 22 Shipping Act 1916 A complaint filed under section 22 does notrequire a

showing of direct or indirect injury or require a claim for reparations as a condition

to its filing and therefore the complainant has standing in this proceeding even

though it has not made a claim for reparations

2 Sections 1 16 and 17 Shipping Act 1916 Where the respondent carries on the

business of operating a

refrigerated warehouse as well as providing services incident

to such business in the Port of Philadelphia it is an other person within the

meaning of sections I 16 and 17 of the Shipping Act and is subject to the jurisdic

tion of the Commission

3 Section 17 Shipping Act 1916 Where the respondent undertakes to provide services

making impc rted frozen meat available to the importer or those acting on his behalf

for inspection required by the U S Depanment of Agriculture and where after the

inspection the meat is returned to the respondent swarehouse to be delivered to the

inland carrier orconsignee so that it may enter the commerce of the United States

the services are related to or connected with the receiving handling storing and

delivery of property within the meaning of section 17

4 Section 17 Shipping Act 1916 General Order IS Where the respondent initially

failed to file its rates in a tariff for services performed as a terminal operator and

where it did file rates in a tariff after being requested to do so by the Commission but

subsequently failed to file increases in those rates and finally where the respondent

adopted a package rate which it failed to file in a tariff with the Commission the

respondent violated section 17 and General Order IS The respondent also violated

section 17 and General Order 15 by assessing a 10 per carton charge against the

complainant which charge was not filed in any tariff with the Commission and was

an unjust and unreasonable practice related to or connected with the handling

storing and delivering of property

5 Section 16 Shipping Act 1916 Where the respondent assessed a 10 per carton

charge against the complainant where such charge was uncorrelated to the cost of

the services rendered where the facts of record indicate the charge gave an undue

and unreasonable advantage to a partnership favored by the respondent and subject

ed a competing pany to undue and unreasonable prejudice or disadvantage the 10

per carton charge violated section 16

6 Section 15 Shipping Act 1916 Where various agreements were entered into by

several entities regarding the lease and sub lease of property in the Port of Philadel

phia where the respondent was sub lessee of a

refrigerated warehouse in the Port

where a partnership agreement was executed regarding the providing of meat inspec

tion service on behalf of importers of frozen meat and where the facts of record

were insufficient to allow a determination as to the nature and effect of each of the

agreements such agreements need not be filed under section 15 However the

record does warrant further investigation and inquiry by the Commission or its staff

1p fr flO
310 FEDERAL MARITIME COMMISSION

to further develop the facts and surrounding circumstances should the Commission

deem such action feasible

Theodore W Flowers Michael H Malin and Ronald J Restrepo for complainant Pie

Services Inc

IsraelPackel for respondent Portside Refrigerated Terminals Inc

John Robert Ewers Aaron W Reese and Deana E Rose for intervenor Hearing

Counsel

INITIAL DECISION OP JOSEPH N INGOLIA

ADMINISTRATIVE LAW JUDGEl

Adopted October 23 1980

PRELIMINARY MATTERS

On August 6 1979 the complainant Pier Services Inc Pier filed a

complaint against respondent Portside Refrigerated Terminals Inc

Portside under section 22 ofthe Shipping Act 1916 as amended and

in accordance with the Rules ofPractice and Procedure ofthe Pederal

Maritime Commission Commission 2In its complaint Pier alleges that

IV

A That by reason of the facts stated in the foregoing paragraphs

Complainant has been subjected to liability to Respondent for

charges for alleged services at the rate of 10 per carton

which charges werewhen exacted and still are

1 unjust and unreasonable in violation of 46 V S C 8l6 3

2 illegal and improper under 46 V S C 8l6 because o

Portside s failure to file with the PMC such modification

to its tariff as required by 46 C P R 533 3 533 4

533 6b and d 6 and

3 unjustly discriminatory against Complainant in violation

of46 VS C 8l5 4

B By reason of the facts stated in Paragraph K above the lower

rehandling charge given by Respondent to importers who use

the services of Robideau Portside Services is unjustly prejudi

cial and discriminatory in violation of46 VS C 8l6

C Portside has contravened 46 V S C 8l6 and the regulations

promulgated pursuant thereto 46 C P R 533 l et seq by

assessing charges greater than those set forth in its most recent

tariff PMC TariffNo 2

1

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

Commission Rule 227 Rule of Practice and Procedure 46 CP R 502 227

Rule 62 Rules of Practice and Procedure 46 C P R 502 62

Section 17 Shipping Act 1916

Section 16 Shipping Act 1916

11 JMr
PIER SERVICES INC V PORTSIDE REFRIGERATED 311

TERMINALS INC

D The partnership agreement between Respondent and Louis

and Vincent D Annello Robideau Portside Services is unjust

ly discriminatory and unfair as between competing meat in

spection services and is in violation of 46 U S C 8145 be

cause it was not filed with the FMC Footnotes supplied

The complainant asks that the Commission order the respondent to

cease and desist from violations ofthe Shipping Act that it apply in the

future only such charges as the Commission determines are lawful and

that the respondent be required to submit to the Commission all agree

ments or understandings for the exclusive use or rental of Portside s

facility at the Packer Avenue Marine Terminal

On August 16 1979 the respondent filed a Motion to Dismiss alleg

ing in essence that the Commission lacks jurisdiction and that the

complaint fails to set forth a cause ofaction The motion was denied by

Order dated September 24 1979 Also Hearing Counsel filed a Motion

to Intervene on September 7 1979 which motion was later granted

In its reply of October II 1979 the respondent asks that the pro

ceeding be dismissed and denies any violation of the Shipping Act on

its part It specifically denies that I its activities with respect to Pier

are subject to the Shipping Act 2 it is required to file any agreement

it has entered into with others under section 15 ofthe Shipping Act 3

it is required to file tariffs relating to meat inspection services although

it admits that Portside is an other person within the meaning of

section I of the Shipping Act 1916 4 its 10 per carton charge is

illegal or predatory or contravenes its tariff

Concurrent with this proceeding the complainant filed a complaint

against the respondent in the United States District Court for the

Eastern District of Pennsylvania 6

seeking an injunction against the

collection of the 10 per carton charge pending the outcome of this

proceeding On agreement of both parties the District Court enjoined

the collection of the 10 per carton charge subject to the posting of a

bond by the complainant during the period the injunction is extant

On November 16 1979 the parties filed a stipulation of facts SF

together with various exhibits some of which have been included in

the Findings of Fact section ofthis decision Subsequently hearing was

held in Philadelphia Pennsylvania and original and reply briefs were

submitted At the hearing the parties submitted certain stipulated docu

ments7 which have also been incorporated into the Findings of Fact

section ofthis decision where necessary

5

Section 15 Shipping Act 1916

8 Pier Services Inc v Por side Refrigerated Terminals Inc CA 79 2394

7 Exhibit CIO

1 FM c
312 FEDERAL MARITIME COMMISSION

FINDINGS OF FACT

1 Pier Services Inc Pier is a Pennsylvania corporation with i

principal place of business at 126 Federal Street Philadelphia P

19147 Pier provides meat inspection services in the ports of Philade

phia New York and San Francisco on behalf of importers of contain

erized frozen meat products in order for those importers to comp

with the federal inspection requirements of 21 U S C 620 Regulation

of the United States Department of Agriculture USDA require th

importer to provide facilities and labor to assist the Meat Inspectio

Division MID ofthe USDA in its inspection ofimported frozen me

products Importers do not usually have such facilities and normal

have a

company such as Pier provide them as well as the necessa

labor or a

company associated with a warehouse or a warehouse itse

SF I Tr 27

2 Portside Refrigerated Terminals Inc Portside is a Pennsylvan

corporation with its principal place of business at Delaware and Packe

Avenues Philadelphia Pa 19148 It carries on the business of operatin

a refrigerated warehouse as well as providing services incident to tha

business SF 2 Tr 126 127

3 Portside operates the terminal refrigerated warehouse facility 

the Packer Avenue Marine Terminal under an arrangement with Penn

sylvania Refrigerated Terminals Inc PRT a Pennsylvania corpora

tion whose officers directors and shareholder ownership is identical t

that of Portside No memorandum of the arrangement has ever bee

filed with the Commission PRT is the sublessee of the refrigerate

warehouse facility under a sublease agreement with Lavino which i

turn is the lessee under a lease agreement with the City ofPhiladelphia

Neither the lease agreement nor the sublease agreement has ever bee

filed with the Commission SF 6

4 The sublease between Lavino and PRT was executed on July 29

1965 In pertinent part it provides

1 From and after the commencement of the term hereof

Sublessor hereby leases to Sublessee and Sublessee hereby

leases from Sublessor the exclusive use of all that certain

space marked in red on the site plan marked Exhibit A

attached hereto and made part hereof together with the re

frigerated warehouse building and appurtenant improvements

to be constructed in such space in accordance with subpara

graph 3 a and 3b of the Lease hereinafter referred to as

premises or demised premises to be used for the storing

and warehousing of goods wares and merchandise requiring

refrigeration primarily incoming and outgoing together with

the use in common with Sublessor its employees agents cus

tomers guests and invitees of the roadways and railway sid

ings indicated as common use facilities as shown on Exhibit

A by Sublessee its employees agents customers guests

PMC
PIER SERVICES INC V PORTSIDE REFRIGERATED 313

TERMINALS INC

and invitees provided that such use in common shall in no

way obligate Sublessee to repair and maintain such roadways

and railroad sidings or to contribute to the cost of any such

repair or maintenance

The demised premises shall be a part of the Packer

Avenue Marine Terminal to be erected concurrently herewith

by Landlord and or the General State Authority of the Com

monwealth ofPennsylvania hereinafter referred to as Marine

Terminal which Marine Terminal shall be laid out and com

prise the area designated therefor in Exhibit A and shall

include but is not limited to the buildings and other struc

tures parking areas sidewalks roadways railroad sidings

tracks lighting and sanitary deposit systems indicated therefor

in Exhibit A

11 Sublessee shall observe and comply with any and all

requirements of the constituted public authorities and with all

Federal State or local statutes ordinances regulations and

standards applicable to Sublessee or its use of the demised

premises including but not limited to rules and regulations

promulgated from time to time by Landlord s Port Division

and other authorities having jurisdiction over any phase of

operation in and about the terminal provided however that

Landlord shall be obligated to comply with such requirements

where they relate to matters involving structural integrity in

the building in the demised premises as required by the

LEASE

12 Neither Sublessor nor Sublessee except as to its obli

gations to pay rent or maintain insurance under all the provi

sions of this Sublease shall be deemed to be in violation of

this Sublease if it is prevented from performing any of its

obligations hereunder for any reason beyond its control in

cluding without limiting the generality thereof acts of God or

the public enemy the elements flood fire explosion any law

order or regulation of the Federal or State Government or

any agency thereof strikes lockouts or other work stoppages

or failure or delay ofperformance by suppliers or contractors

14 Sublessee agrees to permit any railroad tracks upon

the demised premises to be operated on the Belt Line princi

ple ie all railroads shall have the privilege to deliver and

receive cars to and from the premises

15 Sublessee agrees to be bound by all ofthe obligations

and conditions imposed upon Landlord by the terms of the

Lease between Landlord and the Department of Property and

Supplies of the Commonwealth of Pennsylvania relating to

their joint participation in the Marine Terminal to the extent

23 F M C
314 FEDERAL MARITIME COMMISSION

such obligations and conditions affect Sublessee and pertain to

the premises demised hereunder except for such obligations or

conditions which concern or affect the rent payable hereunder

or provisions with regard to maintenance

35 This agreement is conditioned upon the passage of an

authorizing ordinance to be enacted by the Council ofthe City

of Philadelphia and approved by the Mayor within three 3

months ofthe date ofthe LEASE

Exhibit C IO page 1

8

5 Imported frozen meat cannot enter the free flow of United State

commerce until it receives United States government approval 2

U S C 620 SF 1 Tr 71 124 126

6 Pier has been in the business of providing meat inspection service

since 1971 In October of 1975 Pier entereci into a partnership agree

ment with Portside Services Inc PSI a corporation whose owne

ship is essentially the same as that of Portside wherein each retained 

50 percent ownership In pertinent part the agreement is as follows

2 The purpose of Pier Services will be to engage in the

inspection services ofperishable foodstuffs or other perishables

that may be required by the U S Government or any agency

thereof prior to their entry into the commerce of the United

States through the ports of Philadelphia Pennsylvania or

Camden New Jersey Such items shall include but shall not be

limited to fresh frozen meats frozen cooked meats and canned

meats All such services which might be performed by either

of the parties hereto in the Philadelphia or Camden area shall

be performed by Pier Services and not by them individually or

in conjunction with others

4 The principal operations of Pier Services will be located

in the U S Department ofAgriculture Inspection Room locat

ed in the facilities of Portside Packer Avenue Philadelphia

Pennsylvania As may be needed by the partnership the simi

lar type of facility owned by Pier located at 126 Federal

Street Philadelphia Pennsylvania will be available to Pier

Services Norent as such will be charged Pier Services for the

use of such facilities

5 The day to day operations of Pier Services will be under

the supervision of Ray Tippett Tippett He shall be paid a

salary by Pier Services of approximately 420 00 per week in

addition to fringe benefits consisting of Blue Cross and Blue

Shield medical insurance Pier Services will also employ a

In using page numbers to Ex C IO disregard the first 3pages of the exhibit

23 F MC
PIER SERVICES INC V PORTSIDE REFRIGERATED 315

TERMINALS INC

secretary who will be paid approximately 150 00 per week

in addition to applicable fringe benefits Pier Services Inc

will pay Tippett and the secretary weekly and the partnership

will reimburse Pier Services Inc the gross amount of such

payroll including the employer s share of payroll taxes In

addition to those expenses Pier Services will be responsible

for and will pay the direct expenses incurred in its operations

including without limitation salary of a foreman other direct

labor all applicable fringe benefits and payroll taxes motor

vehicle rentals insurance light heat and power supplies

linens and daily maintenance offacilities

7 In the event of a termination of this partnership all

liabilities of the partnership shall be paid and the remaining

assets shall be distributed to the partners equally after adjust

ing the capital accounts so that each partner s capital account

will be equal At the time of such termination the use of the

name Pier Services will revert to Pier and the facilities and

equipment located in the premises of Portside at Packer

Avenue shall no longer be available for use by Pier or any of

its related operations Such facilities and related equipment

shall at that time be returned to Portside in the same condition

as when their use began by Pier Services normal wear and

tear excepted At that time the facilities of Pier at 124 Federal

Street shall no longer be available to Portside

SF Appendix

7 On April 17 1979 PSI entered into a partnership agreement with

Louis and Vincent D Annello to form Robideau Portside Services of

Philadelphia Robideau Portside The term of the agreement is four

years and the agreement is presently operative In essence the agree

ment is the same as the earlier agreement PSI had with Pier and on its

execution Robideau Portside became a competitor of Pier SF 12 Ex

C IO pages 35 39

8 Portside is the only refrigerated warehouse facility within the

Packer Avenue Marine Terminal area in the Port ofPhiladelphia and is

located 275 feet from the dock Its facility is the nearest refrigerated

warehouse facility to a dock in the Port of Philadelphia SF 3 4 Ex

C 9

9 Ships carrying containerized frozen meat products into the Port of

Philadelphia dock at the Packer Avenue Marine Terminal because

among other reasons containers can be unloaded into Portside sfacility

at less expense by means of forklift trucks Other refrigerated ware

houses or other distribution points are at such distance as to require

ordinary trucking SF 5

23 F M C
316 FEDERAL MARITIME COMMISSION

10 Containerized frozen meat unloaded at the Packer Avenue

Marine Terminal originates from Australia and New Zealand SF 18

Tr 48 72 91

11 At least 8S percent of the frozen meat unloaded at the Port o

Philadelphia is discharged at the Packer Avenue Marine Terminal Tr

33 34 314

12 Portside assumes custody of the frozen meat as a warehouseman

in the name of the owner of the cargo or whoever is storing it and

retains custody until the frozen meat is released to the consignee o

inland carrier The meats are conveyed to Philadelphia by common

carrier by water Tr 48 49 72 337 339

13 When an importer selects Pier to provide the necessary inspection

services for meats at Portside s warehouse Portside after due notice

makes arrangements and does the work necessary to move the meat ou

ofits regular storage and to move selected cartons to trucks in front o

its premises Pier then picks them up and transports them to 126

Federal Street for inspection by the MID inspector The MID inspecto

selects approximately IS to 18 cartons per container each containe

holds 600 cartons The cartons selected for inspection are then defrost

ed and inspected at Pier s establishment Thereafter Pier transports

them back to the front of Portside s premises and Portside moves them

back into storage Before the inspection process is completed the ca

tons not selected for inspection are stamped by Pier at Portside 

facility on the assumption that the samples will pass inspection The

stamps are removed if the samples are rejected SF 9 Tr 69 71 227

229

14 Whether Pier or Robideau Portside is used in the meat inspection

process by the importer Portside removes the cartons selected as sam

ples from storage and places them on a different pallet by forklift SF

10 Tr 69 71 228

IS Portside s removal of the samples to the loading dock for inspec

tion and their return to the warehouse is included in the MID Sample

Selection charge described as a ssessment by Terminal Operator fo

cost of ILA Labor involved in assisting in selection of frozen mea

samples by the Meat Inspection division of the United States Depart

ment ofAgriculture covering containerized product only The

charge appears in Portside Tariff No 1 at 11 per carton in Tarif

No 2 at 12 per carton and in Portside s October 1 1978 Explana

tion of Charges at 13 per carton Ex C lO pages 47 S9 and 63 FF

20 23 24 Tr 196 197

16 In 1979 the USDA instituted the skip system whereby the

MID inspector does not inspect any cartons of frozen meat coming

from a packing house with an historically low rejection rate Skipped

cartons are not taken to a meat inspection facility but are stampe

with an identifying number The skip system is employed for ap

23 FMC
PIER SERVICES INC V PORTSIDE REFRIGERATED 317

TERMINALS INC

proximately two thirds of all cartons of frozen meat entering the Port

ofPhiladelphia By letter dated February 27 1979 Portside notified its

customers that cartons which were skip inspected would be subject

to a 07 per carton charge rather than the 13 per carton charge

applicable to random sampling inspections SF 11 Ex C lO page

46

17 On May 17 1973 the Commission sent a letter to Portside

stating

Dear Mr Skelly

We have received inquiries concerning the scope of Portside

Refrigerated Terminals operations at Philadelphia and specifi

cally the handling of frozen meats discharged from water

carriers and placed in Portside s

facility for storage

It is our understanding that Portside assesses a charge to the

importer for the movement of frozen meat from dockside to

Portside s adjacent facility that 72 hours free time is allowed

on meat that after expiration of free time storage charges are

assessed and that a charge is assessed against the importer for

the pulling of samples for inspection by U S D A inspectors

In view ofthese services there is some question as to whether

Portside is performing marine warehousing services subject to

the jurisdiction of the Federal Maritime Commission

For your information we are enclosing a

copy ofthe Commis

sion s General Order 15 which pertains to the filing of tariffs

by terminal operators We suggest that you review the infor

mation in General Order 15 to determine whether a tariff

should be filed with the Commission setting forth the rates

rules and regulations pertaining to the handling offrozen meat

by Portside

We would appreciate your comments regarding Portside s op

erations including your views regarding the filing of a terminal

tariff

Ex C 13

18 On June 5 1973 Portside sent a letter to the Commission stating

in pertinent part

In answer to your letter of May 17 1973 the rate informa

tion requested by Pier Services has been supplied to them We

would also like to point out that Portside Refrigerated Termi

nals operates as a warehouse issuing warehouse receipts

Therefore Chapter IV Federal Maritime Commission Part

533 does not apply to our operation

Your attention to this matter is greatly appreciated

VERY TRULY YOURS

PORTSIDE REFRIGERATED TERMINALS INC

GERALD T SKELLY

Vice President

23 F M C
318 FEDERAL MARITIME COMMISSION

Ex C lO page 75

19 On August 9 1973 the Commission transmitted a letter to Por

side stating in pertinent part

Dear Mr Skelly

This refers to your letter of June 5 1973 regarding Portside

Refrigerated Terminals operations at Philadelphia

It is our informal opinion that Portside Refrigerated Termi

nals Inc is an other person subject to the Shipping Act

1916 inasmuch as it is carrying on the business of forwarding

or furnishing wharfage dock warehouse or other terminalfa

cilities in connection with a common carrier by water and

therefore subject to the jurisdiction and regulation ofthe Fed

eral Maritime Commission Emphasis added In view of the

foregoing it is requested that you furnish the information

previously requested in our letter of May 17 1973 regarding

Portside s operations as they relate to the receiving or deliver

ing of cargoes moving by water carrier in the foreign com

merce of the United States We are particularly concerned

with your operations as they relate to services performed for

or in conjunction with Pier Services Inc

With respect to the tariff filing requirements of this Commis

sion and the exemptions contained in General Order 15 for

warehouses issuing warehouse receipts we would appreciate

more detail regarding the issuance of such receipts For exam

ple to what extent are you regulated at the present time

Please also furnish a sample copy ofthe receipts issued

Upon receipt ofthis information we will advise you further as

to the need to file a terminal tariff

Ex C lO page 74

20 On September 25 1973 the Commission again contacted Portsid

as follows

Dear Mr Skelly

This refers to our correspondence of August 9 1973 copy

enclosed advising you of our informal opinion with respect to

Portside Refrigerated Terminals subjectivity to the jurisdic

tion ofthis Commission We also requested additional informa

tion to determine whether a tariff should be filed

As of this date we have received no response to our letter

and we would appreciate your attention to this matter

Ex C lO page 73

21 On July 3 1974 the Commission advised Portside in pertinen

part

Dear Mr Skelly

Since your letter of December 3 1973 we have reviewed the

information which you sent us as well as additional informa

23 FMC
PIER SERVICES INC V PORTSIDE REFRIGERATED 319

TERMINALS INC

tion received from Lavino Shipping Company concerning the

operations conducted by Portside

After reviewing this information it is our informal position as

previously stated in our letter ofAugust 9 1973 that Portside

Refrigerated Terminals Inc is an other person subject to

the Shipping Act 1916 As we have already pointed out

section 1 of the Act defines an other person as any person

not included in the term common carrier by water carrying

on the business of forwarding or furnishing wharfage dock

warehouse or other terminal facilities in connection with a

common carrier by water Emphasis added

The above conclusion concerning Portside was reached for

the following reasons

I Portside services cargo transported by common carriers by

water

2 Portside s facility is physically adjacent to a marine terminal

area and

3 Portside performs storage warehousing and related services

In addition Lavino Shipping Company upon our request

provided us with information which indicates that

I The number of comparable freezer facilities in the area is

limited thus the number ofalternatives open to the shipper is

correspondingly limited

2 Lavino prefers to move all frozen meat through Portside and

as such it operates under the premise that shippers prefer this

treatment and

3 Ifthe cargo were delivered ex dock Lavino itself would pick

the samples for the MID Inspection and effect delivery to

the trucker for the ultimate receiver

A copy ofLavino s letter dated March 18 1974 is enclosed It

appears that while Portside is performing services for the

importer such services are not always performed at the direc

tion ofthe importer In other words Portside provides certain

services including warehousing on cargoes moving through

the Port without direct authorization by the consignee This is

the type of service generally provided by a marine terminal

operator Under such circumstances the ability of the individ

ual shipper to dictate the manner in which this frozen meat is

handled through the Packer Avenue facility appears limited

For your information we are enclosing a

copy of General

Order 15 which requires the filing of tariffs by terminal opera

tors Your particular attention is directed to 533 6b which

includes a cold storage plant in the definition of a port

terminal facility

In view of the foregoing it is requested that you send us a

copy of the rates which you assess for your services as well

23 F M C
320 FEDERAL MARITIME COMMISSION

as any comments you may have with regard to our conclu

sions

Ex C IO page 69

22 Effective October 1 1974 Portside filed its Tariff No 1 F MC

No 1 as follows

PORTSIDE REFRIGERATED TERMINALS INC

EXPLANATION OF CHARGES EFFECTIVE OCTOBER 1 1974

ITEM 1 EXPEDITING 13 25 PER SHIPMENT An ex

pediting charge shall be assessed to the consignor for each

shipment delivered or released from his account The charge

shall include the preparation of an inland bill of lading sched

uling of carriers for straight time appointment picl ul and

returning of the signed inland bill of lading to the consignor

The charge will be applicable whether the consignor should

supply an inland bill oflading or not whether the product is

released to a carrier under a prepaid freight collect basis or to

an ex dock customer A charge of 10 00 per shipment shall

apply on any distribution change which requires reprocessing

of delivery ticketinland bill of lading in addition to initial

expediting charge

ITEM 2PARTIAL OR TAILGATE LOADING Partial or

Tailgate Loading is the service oftransporting cargo from the

freezer facilities to a truck tailgate In this instance the actual

truck loading is performed by the carrier s agent A

charge of

25 CWT will be assessed the shipper for this service

ITEM 3 FULL TRUCK LOADING Full Loading is the

service of transporting cargo from the freezer facilities into a

truck In this instance the actual truck loading is performed

by labor supplied by the terminal facility A

charge of 56

cwt will be assessed the shipper for this service

ITEM 4RAILCAR LOADING Railcar Loading is the

service of transporting cargo from the freezer facilities into a

railcar The railcar loading is performed by the terminal acting

as agent for the rail carrier A charge of 1111 PER TON

shall be billed directly to the railroad carrier for this service

ITEM 5MID SAMPLE 11 PER CARTON Assessment

for cost oflabor involved in assisting in the selection offrozen

meat samples by the Meat Inspection Division of the United

States Department ofAgriculture

ITEM 6HANDLING Handling is the service ofphysical

ly moving cargo into public warehouse facilities Rates for this

service will be made available upon request

These items are not subject to the fiUng requirements of General Order No 1 S This exemption i

granted by virtue of the fact that these tyPOS of services are performed in conjunction with a bona fid

public warehouse operation and pursuant to storage agreements covered by issued warehouse receipts

23 F MC
PIER SERVICES INC V PORTSIDE REFRIGERATED 321

TERMINALS INC

ITEM 7 STORAGE Storage is the service of providing

public warehouse facilities for the storing of cargo after the

expiration of free time Rates for this service will be made

available upon request

ITEM 8 WEIGHING The service of recording cargo

weights will be performed at a rate of 08 PER CARTON

ITEM 9BILL OF LADING The service of processing a

BILL OF LADING so that cargo may be released OUT OF

STORAGE will be performed at a rate of 6 25

ITEM IODELIVERY CHARGE The service of retrieving

cargo OUT OF STORAGE will be performed at a rate of

125

ITEM ll FREE TIME Free Time is the specified period

during which perishable cargo may occupy space assigned to

it on the terminal facilities free of terminal storage charges

subsequent to the discharge of such cargo off the vessel

A Free Time period of 72 hours shall be allowed on all

frozen cargo moving across the terminal facilities

Ex C IO pages 58 61

23 On November 28 1975 the Commission again contacted Portside

by letter It states

Dear Mr Skelly

Enclosed is a copy of a selfexplanatory letter received from

the Delaware River Port Authority The staff has not received

changes to Portside s Tariff No I currently on fIle except for

Supplement IA Supplement IA as you know states that All

charges are based on straight time labor rates When such

services are required during overtime periods and on Satur

days Sundays and holidays contained in ILA labor agree

ments for Port of Philadelphia prior arrangements must be

made and the difference in labor costs between straight time

and overtime will be charged to those responsible for authoriz

ing such overtime For your information we received Sup

plement IA on April 14 1975

You are reminded that if the rates rules or regulations in

Portside s tariff have or are currently undergoing further

changes such revisions should be promptly submitted in ac

cordance with General Order 15

It is requested that you review Portside s tariff and if neces

sary take immediate steps to see that any further adjustments

in the originally submitted tariff are reflected by appropriate

filings to this Office

Ex C IO pages 65 66

24 Portside replied on December 5 1975 as follows

In reference to your letter ofNovember 28 1975 Ishould like

to apologize for your not receiving your copy of our FMC

Tariff 2

23 F M C
322 FEDERAL MARITIME COMMISSION

Ihave contacted my personnel and we are under the opinion

that we had mailed one to you

Enclosed please fmd a new copy of Tariff 2 and please

forgive the delay

Ihave also at this time contacted people at the Port Author

ity and have brought them up to date

VERY TRULY YOURS

PORTSIDE REFRIGERATED TERMINALS INC

GERALD T SKELLY

Vice President and General Manager

Ex C IO page 67

25 Effective October I 1975 Portside filed its Tariff No 2 F MC

No 2 as follows

PORTSIDE REFRIGERATED TERMINALS INC

EXPLANATION OF CHARGES EFFECTIVE OCTOBER 1 1975

ITEM l EXPEDITING 1400 PER SHIPMENT An ex

pediting charge shall be assessed to the consignor for each

shipment delivered or released from his account The charge

shall include the preparation of an inland bill of lading sched

uling of carriers for straight time appointment pick up and

returning of the signed inland bill of lading to the consignor

The charge will be applicable whether the consignor should

supply an inland bill oflading or not whether the product is

released to a carrier under a prepaid freight collect basis or to

an ex dock customer A charge of 10 00 per shipment shall

apply on any distribution change which requires reprocessing

of delivery ticket inland bill of lading in addition to initial

expediting charge

ITEM 2 PARTIAL OR TAILGATE LOADING Partial or

Tailgate Loading is the service oftransporting cargo from the

freezer facilities to a truck tailgate In this instance the actual

truck loading is performed by the carrier s agent A charge of

28 cwt will be assessed the shipper for this service

ITEM 3 FULL TRUCK LOADING Full loading is the

service of transporting cargo from the freezer facilities into a

truck In this instance the actual truck loading is performed

by labor supplied by the terminal facility A charge of 63

cwt will be assessed the shipper for this service

ITEM 4RAILCAR LOADING Railcar Loading is the

service of transporting cargo from the freezer facilities into a

railcar The railcar loading is performed by the terminal acting

as agent for the rail carrier A charge of 12 23 PER TON

shall be billed directly to the railroad carrier for this service

23 FMC
PIER SERVICES INC V PORTSIDE REFRIGERATED 323

TERMINALS INC

ITEM U5 MID SAMPLE 12 PER CARTON Assessment

for cost of labor involved in assisting in the selection offrozen

meat samples by the Meat Inspection Division of the United

States Department ofAgriculture

ITEM U6 HANDLING Handling is the service ofphysical

ly moving cargo into public warehouse facilities Rates for this

service will be made available upon request

ITEM U7 STORAGE Storage is the service of providing

public warehouse facilities for the storing of cargo after the

expiration of free time Rates for this service will be made

available upon request

ITEM U8 WEIGHING The service of recording cargo

weights will be performed at a rate of 09 PER CARTON

ITEM U9 BILL OF LADING The service of processing a

BILL OF LADING so that cargo may be released OUT OF

STORAGE will be performed at a rate of 6 25

ITEM UJO DELIVERY CHARGE The service of retrieving

cargo OUT OF STORAGE will be performed at the rate of

125

ITEM Ul1 FREE TIME Free Time is the specified period

during which perishable cargo may occupy space assigned to

it on the terminal facilities free of terminal storage charges

subsequent to the discharge of such cargo off the vessel

A Free Time period of 72 hours shall be allowed on all

frozen cargo moving across the terminal facilities

Ex C IO pages 62 64

26 Effective October I 1978 Portside issued an Explanation of

Charges Effective October 1 1978 as follows

HANDLING 24 CWT Handling covers transportation of

all frozen meat moving through our facility from our delivery

platform to freezer protection with seventy two hours free

time beginning the following day after completion of the

vessel discharge on break bulk vessels Free time begins the

following day after stripping on container vessels The charge

will be billed directly and only to the Importer ofRecord and

will not be rebilled or handled in any other manner

EXPEDITING 16 00 PER SHIPMENT An expediting

charge shall be assessed to the consignor for each shipment

container delivered or released from his account The charge

shall include the preparation of an inland bill of lading sched

uling carriers for straight time appointment pick up and re

turning of the signed inland bill of lading to the consignor

The charge will be applicable whether the product is released

These items are not subject to the filing requirements of General Order No 15 This exemption is

granted by virtue of the fact that these types of services are performed in conjunction withabona fide

public warehouse operation and pursuant to storage agreements covered by issued warehouse receipts

F Mr
324 FEDERAL MARITIME COMMISSION

to a carrier under a prepaid freight collect basis or to an ex

dock customer A charge of 10 00 per shipment shall apply

on any distribution change which requires reprocessing of

delivery ticket inland bill of lading in addition to initial expe

diting charge

LOADING PARTIAL WORK ORDER 43 CWT Partial

Work Order consists of transporting product from our freezer

to the truck tailgate with loading by carrier s agent Charges

to be assessed to consignor or carrier as requested

LOADING FULL WORK ORDER 84 CWT Full Work

Order consists of transporting product from our freezer into

truck with loading by labor supplied by our facility Charges

to be assessed to consignor or carrier as requested

MJD SAMPLE SELECTION 13 PER CARTON Assess

ment by Terminal Operator for cost of ILA Labor involved

in assisting in the selection offrozen meat samples by the Meat

Inspection Division of the United States Department of Agri

culture covering containerized product only Charge will be

billed directly and only to the Importer of Record and will

not be rebilled or handled in any other manner

REHANDLING 84 CWT To be assessed if documents

are not available upon discharge of the vesselcontainer as

any product placed under freezer protection without necessary

MID documents will require upon receipt of such docu

ments rehandling from freezer to platform in order Meat

Inspection Division may select samples for Random Sam

pling Defrost Inspection Rehandling also to be assessed for

any requested operation which necessitates actual rehandling

ofproduct The charge for rehandling product due to unavail

able documents will be billed directly to the Importer of

Record and will not be billed rebilled or handled in any other

manner

OVERTIME LOADING 7600 PER HOUR Will apply in

addition to normal partial or full work order rates per cwt

assessed to the consignor at his request only The charge will

not be billed rebilled or handled in any other manner

30 DAYS 15 000 5 14999 UNDER

OVER 5 000

Handling 84 ewl 89 ewl 100 ewl

Slorage 53 ewl 68 ewl 71 ewl

10 DAYS

Handling 17 ewl 22 eWI 33 eWI

Storage 27 ewl 34 eWI 36 eWI

Handling 60 ewl 65 eWI 76 ewl

Slorage 27 ewl 34 eWI 36 eWI

Handling 84 ewl 89 eWI 100 ewl

Slorage 27 ewl 34 owl 36 ewl

PLUS 12 POWER SURCHARGE ON STORAGE

PM r
PIER SERVICES INC V PORTSIDE REFRIGERATED 325

TERMINALS INC

aLess Vessel Handling Loading

bLess Vessel Handling and Includes Loading

Includes Vessel Handling Loading

IN BOND STORAGE An additional 10 charge on handling

and storage will apply to cover cost for documentation and

United States Custom Inspector per hour entry and with

drawal charges

NOTE In the event product remains in warehouse after initial

10 DAY storage period an additional 30 DAY storage

period will automatically accrue

MINIMUM 15 00 DELIVERY 125 EA

CHARGE CHARGE

TAKING 13 PER CARTON BILL OF 6 50 EA

WEIGHTS LADING

TRANSFER 18 CWT Transfer covers transportation of all

frozen meat moving through our facility from the vessel s

berth at dock side to our delivery platform The charge will

be billed directly and only to the Importer ofRecord and will

not be rebilled or handled in any other manner This charge

will apply to Break Bulk vessels only

HOLIDAY CLOSINGS

New Year s Day

Martin Luther King Jr Birthday

Washington s Birthday

Good Friday

Memorial Day

Flag Day

Lincoln s Birthday

Richard Askews Birthday

Independence Day

Columbus Day

Labor Day

November Election Day

Veteran s Day

Thanksgiving Day

Christmas Eve Day

Christmas Day

Note Please check with order department for actual closing

dates

Neither the above Explanation nor the increased charges set forth in

it has been filed with the Commission although Portside has charged

the rates set forth Ex C IO pages 47 48

27 By letter dated April 19 1979 two days after PSI entered into a

partnership agreement with Robideau Portside notified Pier that Port

side would assess Pier a 10 per carton charge covering the total

number of cartons contained within each container for the purpose of

making meat products available to Pier for stamping and for deliver

ing loading checking and unloading samples plus if necessary over

time labor expenses The 10 charge would cover every container in

the importer s shipment and not merely the ones designated for defrost

23 FM C
326 FEDERAL MARITIME COMMISSION

ing and inspection This charge has not been listed in any tariff filed

with the Federal Maritime Commission SF 7 Ex C IO page 40

28 By letter dated May 9 1979 Portside informed Pier that the 1

per carton charge was based upon Portside s maintaining available

space on a year round basis and paying for a definite leased area

insurance taxes sewer water maintenance Wells Fargo Alarm System

all International Longshoremen Association personnel consisting of a

least one carloader and a fork truck SF 14 Ex C IO page 41

29 By letter dated May 25 1979 Robideau Distribution Cente

ROC gave notice of a 10 per carton charge to Pier in connectio

with meat inspection services to Pier at ROC s refrigerated warehouses

SF 19 Ex C IO page 43

30 In 1971 when Pier began trucking frozen meat samples from

Portside to its meat inspection facility at 126 Federal Street an

through 1974 Portside did not assess any charge against Pier for th

labor supplied by Portside in making samples available to Pier T

142

31 From some time in 1950 to 1975 Erb Strapping Strapping

offered meat inspection services in the Port of Philadelphia Durin

that period Strapping rented the inspection room located on Portside 

premises and paid Portside for labor hired for his use Tr 127 12

231 327

32 In 1975 immediately before PSI entered into a partnership agre

ment with Pier Portside began assessing a 045 charge per containe

to Strapping to pay Portside for removing meat products from the

freezer and loading onto and loading off of Strapping s trucks Subs

quently Strapping went out ofbusiness still owing money to Portsid

Tr 187 232 234

33 At the present time Pier and Robideau Portside are the only tw

meat inspection companies in the Philadelphia area offering their faci

ties and services to importers offrozen meat Tr 124 125

34 Between 1977 and 1979 Portside lowered its rates to becom

more competitive with the Port of New York and to help cove

expenses Portside assessed the partnership Pier Portside a 2 00 

carton charge on each carton the partnership handled Tr 119

35 Portside does not now assess the present partnership Robidea

Portside a 2 00 per carton charge Tr 341 343

36 As to Portside s 10 per carton charge against Pier Portsid

prepared no written cost studies to justify its imposition Portside 

President testified he prepared some notes which he threw away T

165

37 Portside does not assess a 10 per carton charge against th

Robideau Portside partnership Tr 346 347

38 In connection with warehousing and other terminal services an

facilities for containerized frozen meat the only additional service Po

23 FMC
PIER SERVICES INC V PORTSIDE REFRIGERATED 327

TERMINALS INC

side performs for Pier that it does not perform for the Robideau

Portside partnership is the loading and unloading of Pier s trucks when

samples are selected for inspection No services are performed for

skipped inspections Tr 352

39 The time required by Portside s labor to load 10 or 11 pallets

onto Pier s trucks and to unload the pallets off Pier s trucks is approxi

mately one half hour for each act of loading or unloading SF 10

40 Other refrigerated warehouses in the Philadelphia area i e

Northern Metals U S Cold Storage Camden Refrigeration and Hill

Creek Farms do not charge Pier for providing the necessary labor and

equipment to make cartons designated as MID samples available to Pier

so that Pier can perform the required meat inspection Tr 119

41 While Pier is not charged for picking up meat for inspection at

warehouses other than Portside the importer currently pays 18 per

inspected carton to the warehouse or to the pier The 18 tariff is

adhered to by the Philadelphia Marine Terminal Association and in

cludes assisting in the selection of cartons loading trucks returning

inspected cartons and returning them to the freezer or storage point

There is no charge to the importer for skip lots Tr 259 260 287

42 Pier charges the importer for the services it provides with respect

to the government inspection offrozen meat Pier charges the importer

7 45 per carton for meat that is defrosted and 4 75 per carton for

meat that is individually wrapped and does not require defrosting

Those charges are assessed only against the cartons actually inspected

and the charge includes stamping picking up samples at Portside and

other warehouses trucking the samples to the Federal Street facility

unloading the samples defrosting presenting the samples to the MID

inspector reloading the samples into cartons and reloading the truck

and returning the samples to Portside or other refrigerated warehouses

On skip lots Pier charges the importer 12 per carton for stamping

approved on the containerload of cartons Tr 72 73

43 On approximately October I 1979 Portside published and distrib

uted to its customers a form letter describing a complete new program

for the handling ofAustralian and New Zealand frozen meat containers

on a house to house basis effective October 19 1979 The charges

are based upon a package arrangement with an all inclusive per

container rate to cover stripping sample selection inspection stamping

immediate transfer to frozen protection expediting and outbound tail

gate loading and credit to importer and charge to ex dock customers

on ex dock deliveries These rates charges and services have not been

filed with the Commission Ex 14 Tr 176 330 331

44 Since it has begun the 10 per carton charge Portside has billed

Pier approximately 25 000 for May and June of 1979 11 000 for July

9 000 for August 6 700 for September and 3 900 for October Pier

has not paid any ofthe charges SF 13

11 F M r
328 FEDERAL MARITIME COMMISSION

45 There are currently pending before the National Labor Relation

Board two unfair labor practice proceedings styled International Long

shoremen s Association Local 1242 and Hill Creek Farms Case Nos 4

CC 1133 and 4CE 55 These cases charge the ILA Local 1242 wit

violations of the National Labor Relations Act section 8b 4 ii B

8 c and 2b and 7 In these proceedings the National Labor Rela

tions Board is challenging the legality ofRule 2B 4 ofthe CONASA

ILA9Containerization Agreement in effect between the Philadelph

Marine Trade Association and the ILA Section 2B 4 reads

Rule 2 Containers Not To Be Loaded or Discharged by

ILA Labor

Cargo in containers referred to below shall not be loaded or

discharged by ILA labor

B Import Cargo

4 Containers of a qualified consignee discharged at a bona

fide public warehouse within the eographic area which

comply with all ofthe following conditions

1 The container cargo is warehoused at a bona fide public

warehouse

2 The qualified consignee pays the normal labor charges in

and out and the normal warehouse storage fees for a mini

mum period ofthirty or more days and

3 The cargo being warehoused a in the normal course of

the business of the qualified consignee b title to such goods

has not been transferred from the qualified consignee to an

other

46 On June 12 1979 the court issued an injunction in Hirsch v ILA

Local 1242 C A No 79 2022 enjoining the enforcement of Rul

2b 4 Prior to the injunction almost all frozen meat cargo coming

into the Port of Philadelphia was stripped there because Lavino whic

operated the Port as well as providing stevedoring services discou

aged any other procedure Since the injunction containers of froze

meats as well as other cargo are being stripped outside the Port an

there has been at least an 80 percent drop in the Robideau Portsid

partnership s business Ex C 8 Tr 92 93 215

DISCUSSION

This proceeding raises six basic issues each of which wiII be consid

ered in turn by setting forth as is necessary the argument of each o

9 Council of North American Shipping Associations International Longshoremen s A88OCiation

1 011ro
PIER SERVICES INC V PORTSIDE REFRIGERATED 329

TERMINALS INC

the parties and arriving at a decision based on those arguments the

facts of record and the applicable statutory and case law

Issue No 1 Does the Complainant Have Standing to File a Complaint

and Seek the Relief Requested under Section 22 Shipping Act 1916

Section 22 of the Shipping Act 1916 as amended states

SEC 22 That any person may file with the board a sworn

complaint setting forth any violation of thi Act by a common

carrier by water or other person subject to this Act and

asking reparation for the injury if any caused thereby

It seems clear enough that by its terms the statute allows any person to

file a complaint without a showing of direct or indirect injury and

without a claim for reparations Ifthere was any doubt in this regard it

was resolved long ago in Isthmian S S Co v United States 53 Fed 251

S D N Y 1931 There in response to the petitioner s objection that

the complaint must be filed by a

person directly affected by the

alleged violations ofthe Act the Court stated

The statute contains no such limitation Section 22 46

USCA 821 provides that any person may file a sworn

complaint setting forth any violation of this Act by a common

carrier by water and asking reparation for the injury if

any caused thereby While it is evident that in order to

obtain reparation for injury a person must be directly

affected by the violation the words injury if any indicate

that the remedy does not necessarily include reparation but

may relate only to the prevention of unfair or discriminatory

rates in the interest of the public As was said in the analogous

interstate commerce case of Baer Bros Mercantile Co v

Denver R G R Co 233 U S at page 488 34 S Ct 641

645 58 L Ed 1055 The grounds of complaint may be joint

or separate and the very fact that they may sometimes be

separate shows that the presence ofboth is notjurisdictional

The Supreme Court in that decision likewise said that

Awarding reparation for the past and fixing rates for the

future involve the determination of matters essentially differ

ent One is in its nature private and the other public One is

made by the Commission in its quasi judicial capacity to meas

ure past injuries sustained by a private shipper the other in its

quasi legislative capacity to prevent future injury to the

public

The complainant and Hearing Counsel agree with the holding in

Isthmian supra Despite the clarity ofthe holding respondent clings to

the belief that some injury must be shown He attempts to obviate

Isthmian by asserting there was indirect harm ignoring the fact that the

court clearly held that the presence or absence of that fact made no

difference in resolving the issue The respondent then proceeds to cite

1lA ro
330 FEDERAL MARITIME COMMISSION

Federal Maritime Commission v Seatrain Lines 411 U S 726 790 1973

in support ofhis view quoting the language

Finding that the likelihood of any impact at all upon Sea

train s operations which might result from the approval of the

agreement is a matter of mere speculation the Commission

concluded that Seatrainhas no standing in this matter and

that its protest is without substance

A reading of Seatrain Lines indicates it is totally inapplicable to th

issue under consideration It does not involve section 22 but rather th

approval of an agreement under section 15 Furthermore the languag

quoted by the respondent is a recitation by the court of what th

Commission had done and omits a footnote that explains that since th

Supreme Court decided the Commission did not have jurisdiction ove

the agreement it was not passing on the question of whether or not th

Commission s decision that Seatrain was not entitled to a hearing woul

have been proper in a case where the Commission had properly asser

ed its jurisdiction

Finally respondent takes issue with complainant s citing of FMC 

Zim Israel Navigation Co 263 F Supp 618 621 S D N Y 1967

stating that since the complainants asked for a cease and desist orde

and reparations as well the language stating that complainants ma

seek relief whether or not they have been directly injured is dicta

The respondent is mistaken and indeed seems to have reversed what 

dicta and what is not For in Zim supra after citing Isthmian the cou

said

Their standing to file a complaint on the grounds alleged

and the Commission s jurisdiction to entertain the proceeding

does not stand or fail on whether the insurers can use the

proceedings before the Commission as a vehicle to recover

cargo claims which as Zim contends should be maintained in

the courts Whether or not the insurers are entitled to repara

tions in the proceedings before the Commission a question

Which need not be decided here they have standing to file the

complaint and the Commission has jurisdiction to entertain it

Cf Isbrandtsen MoIler Co v United States 300 U S 139 145

57 S Ct 407 81 LEd 562 1937

Here then it is held that Pier has standing to me a complaint unde

section 22 and to seek the relief requested

Issue No 2 Is the Respondent Portside an Other Person Within th

Meaning ofSections 1 16 and 17 ofthe Shipping Act 19161

Section 1 of the Shipping Act defines other person subject to thi

act as

any person not included in the term common carrier by

water carrying on the business of forwarding or furnishing
PIER SERVICES INC V PORTSIDE REFRIGERATED 331

TERMINALS INC

wharfage dock warehouse or other terminal facilities in con

nection with a common carrier by water

Section 16 of the Shipping Act provides in part

That it shall be unlawful for any common carrier by water

or other person subject to this Act either alone or in conjunc

tion with any other person directly or indirectly

First To make or give any undue or unreasonable preference

or advantage to any particular person locality or description

oftraffic in any respect whatsoever or to subject any particu

lar person locality or description of traffic to any undue or

unreasonable prejudice or disadvantage in any respect whatso

ever

Section 17 ofthe Shipping Act states in part

Every such carrier common carrier by water 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 deliv

ering of property

While consideration ofthe specific allegations of wrongdoing regard

ing sections 16 and 17 will be reserved for later portions of this

decision it should now be noted that it is obvious from the facts as

found that Portside is an other person within the meaning of sections

1 16 and 17 of the Shipping Act Indeed it has stipulated that Portside

carries on the business of operating a

refrigerated warehouse as well

as providing services incident to that business in other words that

Portside is a terminal operator

In its brief Pier argues that Portside is an other person citing

California v United States 320 U S 577 1944 United States v Ameri

can Union Transport Inc 327 U S 437 443 1946 and Baltimore and

Ohio Railroad Co v United States 201 F 2d 795 CA 3rd 1953

Hearing Counsel also cites California supra and relies heavily on the

holding in Investigation of Storage Practices 6 F MB 301 1961 He

notes that Portside is located in the Packer Avenue Marine Terminal

that it receives custody of frozen meat from common carriers by water

in the United States foreign commerce after the cargo is unloaded at a

dock or pier and that the operators of the Packer Avenue Marine

Terminal are agents of the common carrier by water for the purposes

of the carrier fulfilling its obligation to deliver cargo to the consignee

Further Hearing Counsel points out that Portside acts as a terminal

operator by providing free time for frozen meat cargo to fulfill the

carrier s obligation to its shippers since the carrier s tariff offers no free

time for refrigeration and that Portside maintains custody of the meat

in its warehouse at the Port until it relinquishes the meat to an inland

carrier or consignee noting that Portsides warehouse facility is favored

by carriers because of its advantageous location within the Port area
332 FEDERAL MARITIME COMMISSION

Insofar as can be ascertained Portside s argument apparently does n

deny that it is a warehouseman and terminal operator generally b

rather it seeks to characterize itself differently insofar as the activiti

involved in this proceeding are concerned That aspect of its argume

is discussed more fully in later portions ofthis decision

As has been noted the record compels a holding that Portside is 

other person within the meaning of sections 1 16 and 17 of t

Shipping Act In California supra where charges for wharf demurrag

and storage werein question the Court at page 568 stated

Whatever may be the limitations implied by the phrase

in connection with a common carrier by water which modi

fies the grant of jurisdiction for those furnishing wharfage

dock warehouse or other terminal facilities there can be no

doubt that wharf storage facilities provided at shipside for

cargo which has been unloaded from water carriers are sub

ject to regulation by the Commission

In Baltimore and Ohio Railroad supra it was found that water carrie

entering the Port of Philadelphia generally did not own piers b

rather used piers owned by others including railroads The Cou

concluded at page 797 that

If the railroads for their own business reasons provide the

facilities which it is the obligation of the water carriers to

furnish it becomes very clear to us that they are furnishing

wharfage in connection with a common carrier by

water It seems to us inescapable that they come within the

very terms of the Shipping Act

and further with regard to the fact that railroads might also be simult

neously subject to the jurisdiction of the Interstate Commerce Comm

sion that

All we are deciding about that point in this decision is that

these railroads who open their piers for a charge to truckers

to take away or bring cargo to or from sea going ships are

subject to regulation under the terms of the Shipping Act

Finally in Investigation of Storage Practices 6 F MB 301 1961 t

question arose as to the jurisdiction ofthe Commission where a

comp

ny TOA provided free warehousing in the Port of Stockton in ord

to induce carriers to use the Port TOA claimed the Commission h

no jurisdiction over it since the ocean transportation ended when TO

took possession of the goods at its warehouse The Commission rejec

ed the argument stating at page 314

The terminal character of the facilities furnished continues

until the inland ca ier takespossession The Board has assumed

jurisdiction up to this point The terminal aspect of

handling property is not complete at the time goods are deliv
PIER SERVICES INC V PORTSIDE REFRIGERATED 333

TERMINALS INC

ered by Stockton to the lessee of its assigned warehouse

space

In citing Investigation of Storage Practices with approval the Initial

Decision in Marine Terminal Practices of the Port of Seattle Docket No

70 50 issued September 15 1978 stated

The Port derides Hearing Counsels contention that until the

cargo is relinquished to an inland carrier the Port s services

still fall within the jurisdiction of the Shipping Act The Port

sees no significance to the time of transfer of cargo to inland

carriers since it believes the service in question relates to

inland dispatching and not ocean shipping The Port errs

It is elemental law that the obligations of a common carrier

by water do not terminate merely because it has discharged

cargo at a marine terminal The carrier through his agent or

contractor who is usually a marine terminal operator must

provide adequate terminal facilities for deposit of the goods

and allow a reasonable period of time for consignees or their

agents to pick up the goods at an accessible place

InMarine Terminal the Port was contesting the Commission s jurisdic

tion by alleging that the consolidation service it performed was a

totally separate independent service with no physical operational or

data connection with any other Port operation The Commission re

jected the Port s argument holding that

The Commission agrees that the consolidation service is

part of a broader marine terminal process to the extent that

the Port in providing it is furnishing terminal facilities in

connection with common carriers by water We also concur

that the service relates to the receiving handling and storage

or delivery of property 21 F MC 397 399

So here it is clear that Portside is a warehouseman providing a

terminal service that it is an other person within the meaning ofthat

term as used in the Shipping Act and that therefore Portside is subject

to the jurisdiction of the Commission

Issue No 3 Are the Services Provided By Portside in Connection With the

Inspection ofImported Containerized Frozen Meat Related to orCon

nected With the Receiving Handling Storing or Delivery of Property

Within the Meaning ofSection 17 Shipping Act 1916

Section 17 second paragraph provides that

Every such carrier and every otherperson subject to this act

shall establish observe and enforce just and reasonable regula

tions and practices relating to or connected with the receiving

handling storing or delivery ofproperty Emphasis supplied

It is well settled that the Shipping Act and other similar regulatory

statutes are remedial in nature and are to be broadly construed to

1 Plo f r
i

334 FEDERAL MARITIME COMMISSION

eliminate wrongdoing and carry out the remedies intended Reduced

Rates Atlantic Coast Ports to Puerto Rico 9 F MC 147 149 1965

Richland Development Co v Stapler 295 F 2d 122 128 5 Cir 1961

Gerusco Inc v Aulling 327 U S 244 260 1945 This legal tenet i

compatible with the Supreme Courts direction that an agency should

not construe a statute so narrowly as to frustrate the intent ofCongress

Volkswagenwerk v Federal Maritime Commission 390 U S 261 27

1968 United States v American Union Transport Inc 327 U S 437

457 1946

Here the facts as found indicate that Portside a

refrigerated ware

house takes frozen meat into its warehouse delivered to it by Lavino

stevedores In order to comply with a Department of Agriculture

statute which requires the importer to have the meat inspected and

provide meat inspection facilities Portside moves the meat from its

warehouse to a place from which it is delivered to an inspection facility

within the Port or to trucks which take the meat to an inspection

facility without the Port Once inspected the meat returns to Portside 

warehouse to be later delivered to an inland carrier or a consignee

Given the above facts and the law calling for a liberal interpretation

of the Shipping Act there should not be any difficulty in adding the

above activity to those the Commission has already held to be subjec

to its jurisdiction either because they are terminal related

i e independent contractors who transferred property be

tween railroad cars and the place ofrest on an ocean terminal

Status of Carloaders and Unloaders 2 US MC 761 1946

terminal operators engaging in practices regarding the pay

ments of penalties for truck detention Ametican Export Is

brandtsen Line Inc v Federal Maritime Commission 389 F 2d

962 D C Cir 1968 terminal operator imposing charges on

stevedores for the furnishing of water toilets telephones and

utilities Baton Rouge Marine Contractors Inc v Cargill Inc

18 FM C 140 163 1975 affd sub nom CargilL Inc v

Federal Maritime Commission 530 F 2d 1062 D C Cir 1976

a public grain terminal operator assessing an equipment rental

charge against stevedores using the operator s eqUipment Cali

fornia Stevedore and Ballast Co et al v Stockton Elevators Inc

8 F MC 97 1964 and a port furnishing bookkeeping con

solidation services Marine Terminal Practices of the Port of

Seattle Possible Violations of section 17 Shipping Act supra

and or because they constitute the operation of a terminal facility in

that they furnish an important link in the chain ofthe transportation o

goods

ie Status ofCarloaders and Unloaders supra Philippine Mer

chants Steamship Co Inc v Cargill Inc 9 F MC 155 163

1965 Shipping Association Inc v Port of Boston 10 F M C

409 414 1967 collateral appeal denied sub nom

Port of

1Ji r
PIER SERVICES INC V PORTSIDE REFRIGERATED 335

TERMINALS INC

Boston Marine Terminal Assn v Rederi Transatlantic 400 U S

62 1970 Marine Terminal Practices of the Port of Seattle

Possible Violations ofSection 17 Shipping Act 1916 supra

Portside s practices in connection with shipments of imported con

tainerized frozen meats like the practices considered in the above cited

cases furnish a vital link in the chain of transferring goods from the

common carrier by water to the inland carrier or consignee Certainly

they constitute practices relating to or connected with the receiving

handling storing or delivering of property within the meaning of

section 17 The facts clearly establish that the imported frozen meat

cannot enter the free flow of U S commerce without government

approval that Portside has a minimum 72 hour free time period that it

segregates the frozen meat to be inspected during that period that its

location at the Port gives it a favored position in that importers prefer

using facilities at the terminal that Portside or PSI operates the meat

inspection room at the terminal and that the room is supplied to a

partnership of which PSI is a member on a preferential basis that

Portside charges importers for selecting MID samples and that Pier

performs inspection services on behalf of the importers

Despite the above and despite the fact that it admits it operates a

refrigerated warehouse and is a terminal operator Portside would have

the Commission hold that it is not an other person within the mean

ing of sections 1 or 17 as applied to the facts of this case It cites no

case law whatsoever and states

If for example it PortsideJ discriminates against a common

carrier by water it could be subjected to Commission control

for such conduct

and further

Lavino or its affiliates did the stevedoring and also operated as

an independent terminal operator Stevedoring itself conceiv

ably might qualify as an agency relationship but as a terminal

operator it is not an agent of the common carrier by water

Portside received the meats just as would any other ware

house from Lavino as a completely independent operator and

did not receive the meats from the common carrier by water

and finalIy

The contention that inspection was a necessary link in the

transportation network misses the mark The record shows

that inspection was the concern of another agency of the

government Importers could provide their own inspection

facilities or look to others Warehouses like Portside could at

their option provide inspection services by themselves or by

permitting off sight inspections These voluntary operations

were no more a necessary link to justify commission regula
336 FEDERAL MARITIME COMMISSION

tion that services to effect local sales of the imported meats

would be

Certainly the fact that Portside is a terminal operator for som

purposes does not mean that everything it does must or should b

regulated by the Commission However here we are not considerin

ownership of some remote facility or the operation of an activi

unrelated to ocean transportation We are rather considering an activi

which we have found as a fact is related to or connected with th

receiving handling storing or delivering ofproperty That being so th

Commission cannot accept the respondent s own declaration of 

status Possible Violations of Shipping Acts 16 SRR 425 434 435 1975

and it must look to what the respondent does United States v Califo

nia supra Further where outward appearances interlocking owne

ship ofclose held corporations intervening partnerships do not prope

ly reflect the true nature of a business the Commission will look behin

the surface to pierce the ambiguity Lifschultz v United States 144 

Supp 606 611 SDNY 1956 Even more appropriately in this partic

lar case where the respondent seems to pick and choose how it wan

to characterize and charge for its services the Commission must ma

certain that a person subject to the Shipping Act is not segregating 

activities for the purpose ofavoiding lawful regulation and engaging 

discriminatory acts New Orleans Steamship Association v Bunge Corp 

F MC 687 695 1965 Agreement 9597 12 F MC 83 101 102 1968

In view ofthe above it is held that the services provided by Portsid

which are related to the inspection of imported frozen meats enterin

the commerce of the United States are services that are related to 

connected with the receiving handling storing and delivery ofprope

ty within the meaning of section 17

Issue No 4 Has Portside Violated Section J 7 of the Shipping Act a

General Order J 51

Section 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

handling storing or delivering of property Whenever the

Board Crods that any such regu1ation or practice is unjust and

unreasonable it may determine prescribe and order enforced a

just or reasonable regulation or practice

General Order 1510 provides in pertinent part

Section 533 2 Purpose The purpose of this part is to enable

the Commission to discharge Its responsibilities under Section

1 46 CP R 33 1 etseq
PIER SERVICES INC V PORTSIDE REFRIGERATED 337

TERMINALS INC

17 of the Shipping Act 1916 by keeping informed ofpractices

and rates and charges related thereto instituted and to be

instituted by terminals and by keeping the public informed of

such practices

Section 533 3 Persons Who Must File Every person

carrying on the business of furnishing wharfage dock ware

house or other terminal facilities as described in Section 533 1

including but not limited to terminals owned or operated by

states and their political subdivisions shall file in duplicate

a schedule or tariff showing all its rates charges rules and

regulations related to or connected with the receiving han

dling storing and or delivering of property at its terminal

facilities

The facts as found detail the history of how Portside filed tariffs

regarding the services it performed for importers in the selection of

frozen meat samples Initially it did not file any tariffs until the Com

mission notified it that it was a terminal operator and should do so Its

first filing effective October 1 1974 listed an 11 per carton charge

Its second filing which again was occasioned by Commission prodding

was made effective October 1 1975 raised the charge to 12 a carton

Later on October 1 1978 Portside raised the charge to 13 as

follows

M ID SAMPLE SELECTION 13 PER CARTON

Assessment by terminal operator for cost of ILA labor in

volved in assisting in the selection of frozen meat samples by

the Meat Inspection Division ofthe United States Department

of Agriculture covering containerized product only Charge

will be billed directly and only to the Importer of Record and will

not be rebilled or handled in any other manner Emphasis

supplied

While Portside collected the 13 charge from the importer it did not

file a new tariff with the Commission despite the fact that all the

correspondence between it and the Commission indicated it was re

quired to do so Further on October 19 1979 Portside sent a letter to

its customers instituting a complete new program for the handling of

Australian and New Zealand frozen meat containers on a House to

House basisas follows

23 FMC
338 FEDERAL MARITIME COMMISSION

TOTAL ALL INCLUSIVE RATE

1 TO 10 CONTAINERS u m m S2S 00 EACH

11 TO IS CONTAINERS SIS 00 EACH

16 AND OVERm SOO OO EACH

HOUSE TO HOUSE atPortside Refrigerated Terminals

Inc will include

STRIPPINO

SAMPLE SELECTINO

INSPECTION

STAMPINO

IMMEDIATE TRANSFER TO FREEZER PRO

TECTION

EXPEDITINO OUTBOUND TAILOATE LOAD

INO

EX DOCK DELIVERIES CREDIT TO IMPORT

ER

CHAROE TO EX DOCK CUSTOMER

As you know Portside Refrigerated Terminals Inc located

within seconds from dockside is by far the most advanced

freezer facility on the entire East Coast with such advan ges

as 1 500 000 cubic feet offrozen storage appointment loading

a complete meat inspection operation equipped with fully

automated conveyors and defrosting tank and automatic

strapping all performed under controlled refrigerated tempera

tures a U S D A consumer and Marketing Service office lo

cated directly within our building with the services of the

Animal Health Division the U S Customs Service and U S

Food Drug Administration within the terminal AII this

plus a MINIMUMof seventy two 72 hours free time avail

mg shippers and importers the additional time for processing

documents or conducting sales before the added expense of

warehousing unsold product which completely avoids the

necessity of restuffing charges

The House to House rates quoted above wereand are being charged by

Portside to custOmers although once again they have not been filed i

any tariff with the Commission Finally on February 27 1979 Portside

initiated a skip inspection charge of 07 per carton as opposed to th

13 charge made for what it termed random sampling inspection

The 07 charge has not been filed by Portside in any tariff with th

Commission

On the basis of the above facts alone it is clear that Portside ha

violated section 17 of the Shipping Act and General Order 15 No

only did it fail to file a proper tariff in the first instance but it has bee

charging a rate 13 per carton which differs from the rate set forth

23 F MC
PIER SERVICES INC V PORTSIDE REFRIGERATED 339

TERMINALS INC

with the tariff on file and instituted a 07 per carton charge for skip

inspection which it did not place on file with the Commission in any

tariff Further since October 19 1979 it has instituted a package deal

plan whereby it charges an all inclusive rate for the terminal services it

performs none of which has been made part of any tariff on file with

the Commission

When one moves to consideration of the 10 per carton charge

Portside seeks to assess against Pier the violation changes in character

from a failure to file a tariff or a failure to charge a proper rate to a

violation which constitutes an abuse of the regulatory process by the

use of unfair discriminatory acts In seeking to assess the 10 charge

against Pier Portside made no real attempt to correlate the charge for

the service it allegedly performed to the cost of the service rendered

No cost studies were made and although Portside s President testified

he prepared some notes which were thrown away the testimony at

tempting to justify the charge is weak and unconvincing For example

it fails to address the fact that Portside would apply the 10 per carton

or 60 00 per container 600 cartons x 10 charge on skipped car

tons even though it performs no services regarding them and even

though Pier receives only 72 per container from the importer for

stamping the cartons Obviously Portside s charge if allowed to stand

would effectively put Pier out of business Further given the fact that

the 10 assessment came within two days ofthe dissolution ofthe Pier

Portside partnership agreement and the creation of Robideau Portside

the fact that Portside s principal officer had made prior statements that

Portside would impose all kinds of costs on any meat inspection

company which had to get its meat from Portside the fact that it did

assess such a charge against a Pier Portside competitor Erb Strapping

which subsequently went out ofbusiness still owing money to Portside

and the fact that other warehouses did not charge Pier or other similar

businesses for picking up meat for inspection it is all too clear that the

10 per carton charge indicates that Portside has failed to adopt rea

sonable practices related to or connected with the use of warehouse

terminal facilities in the Port of Philadelphia

Perhaps the best way to understand what has transpired in this case

is to consider the arguments raised by the respondent on brief While

those arguments are somewhat vague they tend to emphasize just how

flagrant and basic the violations are The respondent argues that there

is an absence of maritime tariff control over incidental services of a

warehouse without bothering to define what it means by incidental

services and without addressing those cases cited in the preceding

section where a host of so called incidental services loading consoli

dating equipment rental charge penalties for truck detention charges

for water toilets etc have been held to come under section 17 In

citing State of California supra and City of Los Angeles v Federal

23 F M C
340 fEDERAL MARITIME COMMISSION

Maritime Commission 385 F 2d 678 DC C A 1967 for the proposi

tion that

as to warehouses there is no rate control unless and until

such control has been found necessary or desirable to effect a

remedy after it has been established that there was some viola

tion of the Act

the respondent misreads the import of the cases and simply begs the

question involved here In the California case for example the Cour

precisely delineates the difference between rate making and the powe

of the Commission to establish reasonable practices under section 17 1

The respondent also argues that the tariff ming requirement is only

for informational purposes citing 46 C F R 533 2

The purpose of this part is to enable the Commission to

discharge Its responsibilities under section 17 Shipping Act

1916 by keepin informed of practices and rates and charges

related thereto IDstitutedand to be instituted by terminals and

by keeping the public informed of such practices

Respondent also cites Alabama Great S R Co v Federal Maritime

Commission 379 F 2d 100 103 4th Cir 1967

where the court acknowledged with approval the Com

mission viewpoint that

The Commission s order is designed only to keep the

Commission fully informed concerning matters subject to its

jurisdiction

While the exact import ofthe respondent s argumentis unclear if it i

meant to convey the idea that the tariff filing requirement is informa

tional only as opposed to the use of such information to effect reason

able regulations and practices then it is in error and coptravenes the

clear language of the statute itself As to the case cited it involves 

Commission order asking for tariff information The petitioner contest

ed the order because he feared the Com l1ission would attempt to

regulate rates The court rejected the argument and allowed the orde

to stand thereby affirming the ommission s section 17 jurisdiction 12

11 The Court stated

We fully aaree that no ratemaldna power such as the Comml lonhas been slvenover

water carriers is conferred over other persons subject to the Shippina Act But the order of

the Commi88ion though it pertains to demurrage charges is not an exercise of conventional

rate maldllJ By 117 an thowho are subject to the Act are under aduty to establish ob

serye and enforce Jlllt and reasonable resulations and practices relating to orconnecltd with

the receiving handling storing or delivering of property When the CommiBfion finds a

breach of this duty the same section authorizes it to determine prescribe and order en

forced a

just and reasonable regulation orpractice I

The Court stated

What seems most to disturb the Petitioners is not that they are asked tosuppytariIT infor

mation butthat such data are called for in advance of the eITective date of the tarlITs As the

Petitioners seeit thecontested Order Ie thetirst step leading to Maritime Comml louesula

23 fMC
PIER SERVICES INC V PORTSIDE REFRIGERATED 341

TERMINALS INC

The respondent also argues that Portside did not violate section 17

by failing to file or correct its tariff because the regulation contains a

specific exception at 46 CF R 533 3 as follows

Provided however That rates and charges for terminal serv

ices performed for water carriers pursuant to negotiated con

tracts and for storage of cargo and services incidental thereto

by public warehousemen pursuant to storage agreements cov

ered by issued warehouse receipts need not be filed for pur

poses ofthis part

The respondent s argument was first made to the Commission in 1973

and was rejected 13 At that time it presented no documentary evidence

even when requested to do so and none is presented in the record of

this case despite the unsupported allegation that the undisputed evi

dence is that Portside is a public warehouse and it issues warehouse

receipts The fact is the respondent has not even requested the undis

puted fact be found as a fact Further even assuming that Portside

was a public warehouseman issuing warehouse receipts that fact alone

would hardly justify its failure to publish a tariff regarding the services

it performed in making available frozen meats for inspection Portside

itself apparently recognized that fact because when it filed its tariff it

specifically pointed to only two items directly related to warehousing

Item 6 Handling and Item 7 Storage which it noted were not

subject to the filing requirements of General Order No 15 The item

involving selection of MID samples Item 5 was not so delineated It

is clear that the filing exemption for public warehousemen contained in

General Order No 15 was meant to protect public warehousemen

from the unfair competition which might ensue from public disclosure

of their warehouse rates Certainly it was not meant to allow a public

warehouse to avoid publication of rates for services which did not

constitute warehousing and which are related to or connected with

the handling or delivery of property The respondent s attempt to do

so here is improper and invalid

The respondent further argues that the 10 per carton charge was

fair and reasonable It argues that the work for which Pier was charged

commenced after the original physical selection of samples to be

selected For the prior service the importer was charged The re

spondent then proceeds to cite testimony most of which is somewhat

tion of their rates rules and practices pertaining to facilities overwhich Petitioners claim the

Maritime Commission has no jurisdiction Although the Maritime Commission insists it is

only seeking information it points out that this information is necessary in advance to avoid

the possibility of deferring corrective action until after it is required We need not seek to

penetrate an background to ascertain some vague but unspoken Commission intent We take

the Orderat its face and view it inlight of what the Commission represents to the court as its

purpose and appraise theOrder in terms of the applicable statutes

U

Ex C IO

pages 69 74 7S

23 FMC
342 FEDERAL MARITIME COMMISSION

argumentative and unclear allegedly supporting the notion that wh

Portside did for the importer was something separate and distinct fro

what it did for Pier The respondent s arguments lack validity becaus

they ignore too many pertinent facts First of all when Portside firs

published its tariff in October of 1974 it or PSI was not a partner 

Pier The 11 per carton charge to the importer for the selection 

the MID samples did not limit the importer to the use of the Portsid

inspection facility and Pier whioh used its own facility was not a

sessed a charge by Portside for labor in making samples available 

Pier This seemS to indicate that Portside included in its charge to th

importer whatever labor was necessary to make the samples availab

for inspection and to place them back in the warehouse once th

inspection was completed It is also consistent with the idea that th

inspection of frozen meat was the responsibility of the importer unde

the law and whether or not Pier was an agent of the importer 

Hearing Counsel suggests certainly Pier was acting on behalf of th

importer in performing the inspection services The parties have stip

lated this fact Secondly the respondent s brief studiously avoids con

sideration of the fact that no other warehouse assessed a charge again

Pier or other inspection companies for making frozen meat available fo

inspection Instead an 18 per carton charge was assessed against th

importer for samples actually selected and no charge was made fo

skip shipments A comparison ofthe 18 charge withPortside s 1

charge for selected samples 07 charge for skipped lots which th

evidence indicates involved two thirds ofthe shipments of frozen mea

and 10 charge against Pier all unfiled in any tariff emphasized th

fact that Portside was improperly segregating its activities and service

as it saw fit

Finally the respondent argues that its dealings with Pier should b

contrasted and differentiated from its dealing with Robideau Portsid

because

there was an entirely different system of operations with

Pier in contrast to the operations with Robideau Portside

The record in this case indicates that rather than a different system o

operations Robideau Portside as did Pier Portside represents an a

tempt by Portside to use its favored position as arefrigerated war

houseman at the Philadelphia port to acquire some of the meat inspec

tion business that evolved as a result of the Agricultural Department 

requirements While this of itself might not be wrong the manipulatio

of the charges relating to the meat inspection which inspection wa

necessary before the meat could enter the commerce of the Unite

States and be delivered to the consignee was a violation of section 1

Here the facts show that Portside does have a favored position 

the Philadelphia Port and that a large percentage of frozen me

coming into the Port is handled by Portside When the Pier Portsid

23 FMC
PIER SERVICES INC V PORTSIDE REFRIGERATED 343

TERMINALS INC

partnership was entered into PSI with the same ownership as Portside

was a party to the partnership While the record contains no documen

tary evidence regarding the exact relationship of PSI to Portside it is

clear from the testimony that all of the parties consider Portside to be

the controlling entity Further while the partnership agreement talks of

the use of Portside s

inspection room apparently meaning PSI there

are several instances where the testimony indicates Portside considered

itself the owner As to the Pier Portside partnership agreement it does

provide that Pier will use Portside s

inspection room without charge

or Pier s

inspection room at 124 Federal Street with no rent to be

charged to the partnership for the use of either room The agreement

specifically provides that the partnership will

engage in the inspection services of perishable foodstuffs

or other perishables that may be required by the U S Govern

ment or any agency thereof prior to their entry into the com

merce ofthe United States Emphasis supplied

So given this factual background where Portside did not charge the

partnership for making samples available for meat inspection even

though they ostensibly were being inspected by a separate entity and

even though the inspection mayor may not have taken place at the

Packer Avenue Terminal Portside now seeks to justify a 10 per

carton charge against Pier by differentiating between what it did for

merly with the partnership and what it did once the partnership was

terminated Its attempt at that differentiation is invalid Actually

whether the first partnership or Pier or the second partnership per

formed the inspection service the actions of Portside should have been

the same It was required to move the samples from the warehouse to a

point where they could be made available for inspection and then after

inspection to move them back to the warehouse for delivery to the

consignees Ifthe partnership and Portside had a different arrangement

than did Portside and Pier that difference ought not to be allowed to

thwart and defeat the purpose of section 17 By manipulating the

partnership agreement the tariff filed with the Commission and the

10 per carton charge against Pier Portside is simply attempting to

compete in a discriminatory fashion Ultimately not only does it fail to

file a proper tariff of its charges to the importer but in attempting to

assess the 10 per carton charge against Pier it damages Pier and

favors the Robideau Portside partnership The 10 per carton charge is

ostensibly for services different from services connected with the selec

tion of the MID samples Actually the only conceivable difference is

the loading and unloading of Pier s trucks which consists of 15 to 18

cartons per container and which takes about an hour of labor Given

Portside s original tariff filing and its failure to initially charge Pier for

the same service it is held that the original tariff filing included the

loading and unloading service performed by Portside Even assuming

23 F MC
344 FEDERAL MARITIME COMMISSION

arguendo that it did not a 10 per carton charge is completely unre

sonable especially when one considers that it is levied on skipped

cartons where as has been noted Portside provides no services at a

Perhaps the best indioator of what Portside is attempting to do 

this matter is to note the fact that during the Pier Portside partnership

Portside had to lower its rates to become more competitive with th

Port of New York Portside forced the partnership to subsidize th

alleged loss by assessing the partnership a 2 per carton charge o

cartons the partnership handled As to RobideauPortside it does n

pay the 2 per carton charge and instead Portside absorbs it In effe

then while Portside implies that its rates are not compensatory despi

assessing the importer a multitude of charges for the services offered 

neglects to file proper tariffs reflecting fully compensatory rates an

instead picks and chooses how and where the charges will be mad

to its competitive advantage Its actions violate section 17

What Portside is attempting to do here is comparable to what tran

spired in California Stevedore Ballast Co ei aL v Stockton Elevat

Inc 8 F MC 97 1964 In Stockton the grain terminal operator em

ployed a company to perform its stevedoring exclusively and did n

assess its own stevedore an equipment rental charge for the use 

certain loading equipment However Stockton assessed outside steve

dores using its loading equipment a 15 per ton charge Other gra

elevators in the area did not assess any rental charge to the complainin

stevedores for the use of similar equipment Further there was n

evidence ofrecord giving cost figures justifying the 15 charge

The Commission found Stockton Elevators in violation of section 1

by engaging in an unreasonable practice ofassessing a charge designe

to exclude complainants and other stevedores from the terminlll area o

failing to assess the charges against the company which performe

Stockton s own stevedoring under exclusive contract and of assessin

the charge exclusively against the complaining stevedore

The Commission s

ruling in Stockton compels the same rmding in th

proceeding The facts are strikingly similar i e Portside a publ

warehouse terminal has entered into an agreement with Robideau v

PSI to perform all its own meat inspections Portside imposes a 1

per carton charge on Pier but none on the partnership other Philade

phia area refrigerated warehouses do not assess Pier a

charge fo

unloading Pier s trucks and even assess importers a different charg

than does Pier and there is a conspicuous absence in the record of co

data to justify the 10 charge 14

14 In its brief Portside arsues that the burden of proof is on Pier to show thatlhe 10 per car

charse is unreasonable The facts of record as discussed above show that Pier has sustained th

burden and that Portside has failed to refuteor rebut the facts of record presented by Pier

M
PIER SERVICES INC V PORTSIDE REFRIGERATED 345

TERMINALS INC

The favored position in the Port of Philadelphia of Portside its

attempts to orchestrate the charges it alleges should be assessed to its

own competitive advantage and the deleterious impact of the 10 per

carton charge on Pier warrants a finding that the 10 charge results in

an unreasonable and unjust practice under section 17 and it is so

held 15

Issue No 5 Has Portside Violated Section 16

Section 16 First Shipping Act 1916 provides that it shall be unlaw

ful for any common carrier or other person furnishing wharfage dock

warehouse or other terminal facilities

to make or give any undue or unreasonable preference or

advantage to any particular person or to subject any

particular person to any undue or unreasonable prejudice

or disadvantage in any respect whatsoever

Since the facts and surrounding circumstances involved in the pre

ceding issue section 17 overlap this issue they are incorporated in this

section by reference insofar as they are pertinent The facts in this case

clearly establish that the Robideau Portside partnership has been given

unreasonable preference or advantage by Portside and that conversely

Pier has been subjected to unreasonable prejudice or disadvantage

There is no real basis for the 10 per carton charge Portside seeks to

impose on Pier The service performed is either already included in the

rate charged the importer or if not is not justified on the basis of the

cost data presented The 10 charge is more a reflection of Portside s

attempt to destroy anyone in competition with the Robideau Portside

partnership performing meat inspection services rather than a good

faith attempt to publicize and record a justifiable rate for a necessary

service The evidence is clear that the 10 per carton charge is out of

all proportion to the service rendered and may well force Pier out of

business so that the shipping public will have no choice with respect to

meat inspection service

In A P St Philip supra the respondent terminal operator was found

in violation of section 16 for granting an exclusive right to one party

to furnish tugboat services to all vessels loading or unloading at a

public marine termina1 The Commission stated

15 See California Stevedore Balost CO Y Stockton Port District 7 F M C 75 1962 A P St Phil

ips Inc v The Atlantic Land and Improvement Company et al 13 F M C 166 1969 In the Matter of

Agreements Nos T 2455 T 2553 Between Philadelphia Port Corporation and De aware River Terminal and

Stevedoring Co IncLavino Shipping Company Respectively 18 F M C 115 1974 Berthing ofSealra n

Vessels in San Juan Puerto Rico 21 FM C 279 1978 GreaterBaton Rouge Port Commission v United

States 287 F 2d 86 5th Cir 1961 and Perry s Crane Service Inc v Port of Houston Authority of Harris

County Texas 19 F M C 548 1977 where arrangements which grant one party the exclusive right to

stevedore vessels or to perform other terminal reIated activities at apublic terminal are prima jacie

unjust in violation of section 17

1 Jf fr
346 FEDERAL MARITIME COMMISSION

The manifest purpose of section 16 of the Shipping Act is

to impose upon persons subject to this Act the duty to serve

the public impartially In no other area is this requirement of

equality of treatment between similarly situated persons more

important than in the terminal industry The reason is obvious

Terminals are for all practical purposes public utilities Cita

tion omitted Thus the operation of terminal facilities imposes

upon those who furnish them the same duties and obligations

as attached to any other public utility

InInvestigation of Free Time Practices Portof San Diego 9F MC 52

547 1966 the Commission held that unequal treatment among person

has no place in a regulated industry and that a marine termina

obligation to treat persons equally is absolute

So here it is held that Portside s action in imposing the 10 pe

carton fee on Pier demonstrates a partiality and inequality of treatmen

which cannot be condoned under section 16 The fee is unwarrante

and illegal It should neither be collected for past services nor should 

be imposed for future services on the basis of the facts present

available in the record

Issue No 6 Filing ofAgreements Under Section 15 Shipping Act 191

Section 15 ofthe Shipping Act provides that

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 complete 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 or fares giving or recetving

special rates accommodations or other special privileges or

advantages controlling regulating preventing or clestroying

competition pooling or apportioning earnings losses or traf

fic allotting ports or restricting or otherwise regulating the

number and character of sailings between ports limiting or

regulating in any way the volume orcharacter of freight or

passenger traffic to be carriell or in any manner providing for

an exclusive preferential or copperative working arrange

ment The term agreement in this section includes under

standings conferences and other arrangements

The facts in this proceeding indicate that initially Lavino leased th

Packer Avenue Marine Terminal which included a refrigerated Ware

house building from the City ofPhiladelphia Then Lavino sub lease

the refrigerated warehouse to PRT which in turn sub leased the facil

ty to Portside As to meat inspection services PSI entered into 

partnership agreement with Pier and after that agreement expired wit

Robideau

n
PIER SERVICES INC V PORTSIDE REFRIGERATED 347

TERMINALS INC

The complainant argues that Portside s sublease agreement with

Lavino and the Robideau Portside partnership agreement must be filed

with the Commission under section 15 The respondent replies that the

agreements need not be filed because there was no direct harm to

Pier because the lease was an ordinary real estate lease for the use of

the premises as a public warehouse without any continuing control

over operations and as to the partnership agreement because it was

not an exclusive preferential or cooperative working arrangement and

was similar to the Pier Portside partnership agreement which was not

filed Hearing Counsel take the position that there are insufficient facts

to make a finding as to these violations and that the parties to these

agreements except Portside were not named respondents in the com

plaint so that the Commission lacks personal jurisdiction over the

parties to these alleged violations

On the basis of the record made in this proceeding we agree with

Hearing Counsel that the facts are insufficient to warrant a definitive

holding that either the Lavino City of Philadelphia lease or the Robi

deau Portside partnership agreement is subject to section 15 Certainly

the nature of the lease would tend to indicate that it is subject to

section 15 but the facts are so sparse they do not warrant an affirma

tive holding at this time There is no copy of the Lavino City of

Philadelphia lease in the record and while the Lavino PRT sublease

which is in the record seems to involve the operation of a terminal

facility the factual development of the issue as to the Lavino PRT

sublease leaves much open to question As to the Robideau Portside

partnership agreement there is a host of questions not only regarding

the application of section 15 but as to other issues as well which

questions remain unanswered For example while the partnership

agreement ostensibly involves an entity different from Portside PSI

Portside itself speaks of PSI as its alter ego The record leaves doubt

as to just who has beneficial ownership of the inspection room so

that it is simplistic to accept the respondent s argument that its dealings

with the partnership are to be distinguished from its dealings with Pier

Questions arise as to whether or not the partnership can be preferred

over Pier by Portside a terminal operator in the use ofthe inspection

room and what effect that would have on the 10 per carton charge 16

In light of the above facts and discussion it is held that the various

agreements need not be filed under section 15 on the basis of the

present record However we would recommend that should the Com

mission deem it feasible a non adjudicatory investigation be instituted

under Rule 281 et seq 46 CF R 502 281 et seq whereby the Com

16 IfPier and the partnership had equal access to the inspection room it would be unnecessary to

ship the samples elsewhere so that evenwere one to adopt Portside s views the 10 charge would not

be necessary

I 1 ro
348 FEDERAL MARITIME COMMISSION

mission staff could assimilate all the necessary facts and evidence rela

ing to the agreements involved in this proceeding with a view 

ascertaining whether or not they are required to be rued under sectio

15 Such facts should include inquiry into the ownership of the variou

entities involved their relationshipa with one another and whether o

not Portside or any other person subject to the Commission s

juri

diction is using the agreements toengage in any activity which violate

any provisions ofthe Shipping Act

Wherefore in view ofconsideration of the above issues it is held tha

1 The complainant has standing to seek the relief requested

2 Portside is an other person within the meaning of sections 1 

and 17 ofthe Shipping Act 1916

3 Portside s services in making imported frozen meats available fo

inspection so that they could enter the commerce of the United State

are services related to or connected with the receiving handling sto

ing and delivery of property within the meaning of section 17 Shi

ping Act 1916

4 Portside violated section 17 of the Shipping Act by failing to fi

proper tariffs with the Commission and by charging rates in excess 

those rates on file with the Commission Furtber the 10 per carto

charge assessed against Pier is an illegal charge and cannot be collecte

by Portside for past services Further Portside is ordered to cease an

desist from making such a charge in the future

5 Portside violated section 16 of the Shipping Act by subjectin

Pier to undue and unreasonable prejudice and disadvantage through th

imposition of the 10 per carton charge on Pier and not on th

Robideau Portside partnership Portside is ordered to refrain from e

gaging in such conduct in the future

6 The agreements involved in this proceeding are not subject 

section 15 on the basis of the evidence in the record However furth

investigation of facts relating to this as well as other issues is warrante

should the Commission deem it feasible

S JOSEPH N INGOLlA

Administrative Law Judge

Washington D C

June 19 1980
FEDERAL MARITIME COMMISSION

DOCKET NO 78 29

SEA TRAIN GITMO INC AND

SEATRAIN INTERNATIONAL S A

v

PUERTO RICO MARITIME SHIPPING AUTHORITY AND

PUERTO RICO PORTS AUTHORITY

NOTICE

October 30 1980

Notice is given that no appeal has been taken to the September 17

1980 dismissal of the complaint in this proceeding and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the dismissal

has become administratively final

S FRANCIS C HURNEY

Secretary

ACl
FEDERAL MARITIME COMMISSION

DOCKET NO 78 29

SEATRAIN GITMO INC AND

SEATRAIN INTERNATIONAL S A

v

PUERTO RICO MARITIME SHIPPING AUTHORITY

AND PUERTO RICO PORTS AUTHORITY

DISMISSAL OF COMPLAINT

DISCONTINUANCE OF PROCEEDING

Finalized October 30 1980

On July 11 1980 the Complainants Motion to Stay the proceedings

herein until the United States Court of Appeals for the District o

Columbia issued its further decision in Nos 78 1950 78 1969 78 1970

and 78 1978 was granted

In a letter treated as a motion dated August 29 1980 Responden

Puerto Rico Ports Authority states This is to inform you that the

Court of Appeals has denied petitions for rehearing filed by Seatrain

Lines and the Federal Maritime Commission in Puerto Rico Ports Au

thority and Puerto Rico Maritime Shipping Authority v Federal Maritime

Commission and United States ofAmerica CA No 78 1950 78 1969 and

the mandate of the Court s

judgment has been issued Accordingly we

believe the time is now appropriate to dismiss the complaint filed in

Federal Maritime Commission Docket No 78 29

No party has replied orobjected to the above letter

In a letter treated as a motion dated September 3 1980 Responden

Puerto Rico Maritime Shipping Authority stated This letter supple

ments our response of July 10 1980 concerning the status of this

proceeding As you know the Court of Appeals for the District o

Columbia has denied the petitions for rehearing rued by the Seatrain

companies and the Federal Maritime Commission in CA Nos 78 1950

and 78 1969 Puerto Rico Ports Authority and Puerto Rico Maritime

Shipping Authority v Federal Maritime Commission and United States o

America Thus we recommend that the complaint of the Seatrain com

panies in this docket be dismissed

No party has replied orobjected to the above letter

Upon consideration of the above and the record herein the motions

to dismiss the complaint are granted

n
SEATRAIN COMPANIES V PRMSA P R PORTS 351

AUTHORITY

Wherefore it is ordered

A Complaint is dismissed

B Proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

September 17 1980

6r
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 720 1

3M

v

HAPAG LLOYD

ADOPTION OF DECISION OF SETTLEMENT OFFICER

November S 1980

Upon review of the record in this proceeding the Commission has

determined to adopt the decision of the Settlement Officer It is so

ordered

By the Commission

S FRANCIS C HURNEY

Secretary

li J111r
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 7200

3M

v

HAPAG LLOYD

Decision of Juan E Pine Settlement Officer1

Adopted November 5 1980

DISMISSAL OF PROCEEDING

Minnesota Mining and Manufacturing Company 3M c aimant by

informal docket claim filed Ju y 27 979 seeks recovery of alleged

overcharges of 3 358 44 in behalf of its Be gian subsidiary 3M Be

gium S ANV Zwivndrecht Belgium from Hapag Lloyd respond

ent Claimant is located in St Paul Minnesota and is engaged in

manufacturing of a multi product line including chemicals Respondent

is a common carrier by water subject to the provisions of the Shipping

Act 9 6 Claimant alleges that respondent is in violation of section

18 b 3 of the Shipping Act 1916 in charging rates in excess of the

lawfully published rate

This claim involves the movement of 1 container transported on

respondent s vessel LUDWIGSHAFEN from New Orleans Louisiana

to Antwerp Be gium on bill of lading No 27 00642 5 dated Ju y 20

1977 The bill oflading describes the shipment as

2

Compound Textile Processing or

Finishing NOS Item 599 74302 pits 4 830 bs 984 6 CFT

Door to Door Movement 12 drums

Hazardous Materia included in this Container

19 Pits at 38260 bs 74 drums 912 CFT

Resin Solution

F ammab e Liquid Labe

IMC F ashpoint 77 degrees

IMeO 3 UN 1866

Shipper s Load Stowage and Count

1 Both parties having consented to the informal procedure of Rule 19 a of the Commission s Rules

of Practice and Procedure 46 CP R 520 301 34 this decision will be final unless the Commission

elects to review it within 30 days from the date of servicethereof

2 Claimant advises that this description was taken from its biJI of lading master which was in stencil

foem to be used by its agent in New Orleans A

copy

of the bill of lading master is in the record

DlI rl lcl
354 FEDERAL MARITIME COMMISSION

Respondent assessed the following transportation rates and charge

on the movement

Synthetic Resin Liquid having a flashpoint 100 degrees or

below

Declared value per freight ton over 15008

91

0 CFT 22 8 MT 22125 5 044 50

Textile Processing or Finishing Compounds N O S

3570

2240 Ibs 159 WT 125 50 200 02 4

Total 5 244 52

Claimant alleges it should have been assessed

Textile Processing or Finishing Compound N O S Minimum

40 320 Ibs per container

4183

240 Ibs 18 67 WT 10100 1 886085

Amount of claim 3 358 44

In effect claimant states that it believes that the 19 pallets which 

described on its bill of lading master and on the actual bill of ladin

No 27 00642 5 as

Resin Solution

Flammable Liquid Label

IMC Flashpoint 77 degrees

IMCO 3 UN 1866

and on which the carrier assessed a rate of 22125 per measureme

ton of 40 cubic feet per Item No 5810004 229 of the subject tar

which covers Synthetic Resin Liquid having a flashpoint 100 degree

or below declared value per freight ton over 1500 should hav

moved at the lower rate of 125 50 per long ton of 2 240 pounds pe

Item No 599 7401 587 of the subject tariff which covers Textile Proc

essing orFinishing Compounds N O S

Ashipper or his agent must be charged with superior knowledge o

the proper description of commodities being shipped particular

where products having highly technical commodity designations suc

as chemicals are concerned Accordingly it is not unreasonable t

Gulf European Freight A aociation Agreement No 9360 3 Tariff No 3 FMC 3 3rd Revia

Page 148 Item No 5810004 229 Claimant s invoice value on the Synthetic Resin Liquid Descriptio

No 41 2700 3853 6 is 49 284 The bill of lading shows 912 CFT or 1

22 8 MT of this co

modity was hipped The actual value per freight ton is S2 16U8 Based on this valuatio

the carrier uaed the correct actual value over 1500 per freight ton in lS ing the rate of 221 

per MT Computing with the claimant alleged 886 8 CFT or 1

22 17 Mr results in 

slightly higher actual value per freight ton 4918 122 11 2223 However as the assessed fate 

22125 applies on any actual value in excess of 1 500 per MT the rate of S221 25 per MT would s

apply

Same tariff as in footnote 3 2nd Revised Page 152 Item No 599 7401000 TheSettlement Omc

compute this aecond rate ment as SI99 55 A this difference is less than SI00 responden

computation will not be changed

Same Tariff 2nd Revised Page 152 Item No 599 7401587 The Settlement Omcer comput

SI885 67 A this differenceis less than SI00 claimant computation willnot be changed
3 M V HAPAG LLOYD

attach a strong presumption of correctness to descriptive documenta

tion prepared by the shipper or his agent and a heavy burden of proof

to overcomethat presumption

Claimant states that the cargo does not require on deck stowage

per page 65 of R M Graziano s TariffNo 31 A review ofthe subject

page reveals that Resin Solution under either hazard class combustible

liquid or flammable liquid flammable liquid was typed on the bill of

lading master and bill of lading is flagged 1 2 with respect to the

authorized locations on board cargo vessels for shipments of said haz

ardous material The authorized locations are identified on page 24 of

Graziano s Tariff ie

I means the material may be stowed on deck subject to

requirements of 176 63b of this subchapter When both on

deck and under deck are authorized under deck should

be used if it is available

2 means the material may be stowed under deck in a

compartment or hold subject to the requirements of

I76 63 c When both on deck and under deck are au

thorized under deck should be used if it is available

While the rule does not require on deck stowage it is clear that Resin

Solution may be stowed on deck subject to specified requirements or

under deck in a compartment or hold subject to specified requirements

When both on and under deck stowage are available under deck

stowage should be used These are not regulations which apply to a

routine commodity

Claimant s belief and its reference to Graziano s Tariffis all that is

submitted in the claim proper However two letters appended to the

claim give every indication that respondent assessed the proper rate on

the 19 pallets Claimant s letter to respondent s agent of June 14 1979

states in part

However there are not two commodities in the container

but one The 19 pallets at 38260 LBS refers only to that

portion ofthe whole which carries hazardous labels It there

fore necessitated the hazardous description Resin Solution

Flammable Liquid LabeL

On June 26 1979 respondent s agent wrote to the Gulf European

Freight Association Chairman

to reduce the problem to a single sentence 3M has advised

us that the content of the entire container can be described as

Compound Textile Processing or Finishing NOS but to serve

Coast Guard requirements they had to break out the Resin

Solution and because of this requirement they feel they have

been penalized in the rating ofthe Bill of Lading claiming that

the entire shipment should have been rated as Compound

Textile Processing etc

355
356 FEDERAL MARITIME COMMISSION

The Commission has determined that where the goods have left th

custody of the carrier a complainant alleging IImisclassification and a

overcharge has a heavy burden of proof and must set forth sufficie

facts to indicate with reasonable certainty and defmiteness the validi

of the claim Claimant having furnished evidence which is unoerta

and indefinite or otherwise lacking in probative value has failed 

sustain this burden See Merck Sharp and Dohme v At antia Lines 

F MC 244 247 1973

As will be apparent in addressing claimant s allegation with respe

to a slight overstatement of cubic measurement by the respondent lat

herein neither the invoice or the packing list submitted by claima

refute the commodity description of the 19 pallets in question used b

claimant on the bill of lading master i e Resin Solution Flammab

Liquid Label IMC Flashpoint 77 degrees IMCO 3 UN 1866 Bo

claimant s invoice and packing list merely refer to the commodity o

the 19 pallets by its stock number i e 41 270038S3 6 Such a

identification in no way can raise any doubt as to the cargo descriptio

used in the bill of lading nor the rate assessed thereon by responde

In its letter of May 2 1980 submitting documentation requeste

claimant raised for the first time the question of a possible overcharg

based on measurement i e

Please note that our master indicates 21 pallets at 41 830

pounds at 968 3 cube It appears that someone has changed

the cube on the bill oflading to read 984 6 Our packing slips

support what is shown on our master bill of lading namely

968 3 cube

As the packing slip indicates the 21 pallets measure

2 x 40 10 818

18 x 46 8 840 0

I x 46 8 46 8

968 4

Clailllant s first paragraph above alleges the correct cube as 968 

and in the computations immediately below claimant llrrives at a cub

of 968 4 The latter cube will be verified from data obtained from 

packing list Obviously the concern is not 968 3 v 968 4 but claiman

concern is with the higher cube shown on the bill of lading of 984 

An analY8is of the packing list develops the cubic measurements 

the complete shipment

2 pallets Scotchguard Fluorechemical

3S L x 42 W x 48 D 70 5602

14112011728 8167 or 8118 CFT

18 pallets 41 27003853 6

4O L x 42 W x 48 D 80 64018

14 1620

1728 840 CFT
3 M V HAPAG LLOYD

I pallet Scotchguard Fluorechemical 41 2700 3853 6

4O L x 42 W x 48 D

80840

1728 46 67 or 46 8 CFT

Total is 967 16 or 968 4 CFT

Claimant s May 2 1980 allegation that the total cube on the bill of

lading is overstated is correct It is overstated by 984 6 minus 968 4

1612 cubic feet

However the two pallets of Scotchguard Fluorechemical which

measure 8118 CFT and weigh 3 570 pounds per claimant s computa

tions have been and should be assessed the rate of 125 50 per ton of

2 240 pounds i e

357

240 Ibs 159 WT 125 25 200 02 The

tariff description embracing this commodity is Textile Processing or

Finishing Compounds N O S and the tariff rate of 125 50 applies per

ton of 2 240 pounds The commodity is rated only on a weight basis

The fact that this portion of the shipment measures 8118 CFT is

academic as there is no measurement rate to apply The General Cargo

N O S rate is 22100 per ton of 2 240 pounds or 40 cubic feet which

ever produces the greater revenue As the two pallets weigh less than

two long tons and cube at greater than two measurement tons applica

tion of the General Cargo rate would result in a transportation charge

of 8166740 2 04 22100 450 84 The 200 02 assessed on this

portion ofthe shipment stands

Therefore from the total cube of 968 4 CFT developed from the

invoice must be subtracted the 8118 CFT covering these two pallets

resulting in a cube of 886 8 CFT for the remaining 19 pallets

It has been determined herein that the 19 pallets are subject to the

Synthetic Resin Liquid rate of 22125 per measurement ton of 40

cubic feet On this portion ofthe shipment respondent assessed

9110 CFT 22 8 MT 22125 5 044 50

The above analysis of the packing list reveals that the subject 19

pallets measure 886 8 CFT Thus on this portion of the shipment

respondent should have assessed

886 8 or

886667

40 CFT 22 17 MT 2215 4 905

Overcharge based on overstatement of cubic measurement

139 39

With respect to respondent s overstatement of the cubic measurement

of the 19 pallets of Synthetic Resin documentation submitted by claim

ant as indicated above develops that reparations of 139 39 would be

due claimant for same As indicated above of the total claim for

3 358 44 of claimant it has only sustained its burden of proof for

reparations of 139 39

However the claim must be dismissed inasmuch as the evidence

shows that it was filed by one other than the payer ofthe ocean freight

and no showing has been made that claimant has succeeded to the

357
358 FEDERAL MARITIME COMMISSION

claim by valid assignment or other means Such a

requirement has been

established in Trane Company v South African Marine Corp N Y 19

FMC 375 1976 Carton Print Inc v The Austasia Container Express

Steamship Company 20 FMC 31 1977 and recently upheld in Infor

mal Docket No 623 1 served February 26 1980 The freight here wa

paid by 3M Belgium S AN V and the claim was brought by 3M o

St Paul Minnesota

Neither could the claim now successfully be amended to name a new

claimant Amendments to complaints which do not merely add parties

but substitute different and indispensible parties are in reality new

complaints and must face the two year time limit on their own merits

A complaint cannot be amended to name the proper party nor can an

assignment of a claim be obtained after the two year time limit has

expired as here Trane v South African and Carton Print v Austasia

supra and Mine Safety Appliances Co v South African Marine Corp

Order on Review 18 SRR 1467 1978 Further the mere fact that the

claimant may be the owner of or related to the party paying the

freight without more does not confer standing to seek reparation

Trane v South African supra

The claim is hereby dismissed

S JUAN E PINE

Settlement Offlcer

August 20 1980
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 621 1

E S B INCORPORATED

v

SOUTH AFRICAN MARINE CORPORATION

ORDER ON REVIEW

November 6 1980

The proceeding is before the Commission upon its own Motion to

review the Settlement Officer s

ruling dismissing the complaint for

failure to name an indispensable party

The complaint filed by E S B Incorporated alleges freight over

charges by South African Marine Corporation a common carrier by

water and a member of the United States East and South African

Conference A copy of the complaint was mailed to the Respondent in

New York An answer was filed by the South African Marine Corpora

tion N Y which advised that it was not a common carrier but acted

solely as agent for the carrier and asked that the complaint be dismissed

for failure to name an indispensable party

DISCUSSION

The question presented here is whether South African Marine Cor

poration the name set forth in the complaint sufficiently identifies the

carrier whose full name is South African Marine Corporation Ltd

or whether it must be read to refer to the agent whose full name is

South African Marine Corporation N Y

l

The precedents cited in the answer and on the basis of which the

Settlement Officer dismissed the complaint Trane Company v South

African Marine Corporation N Y 19 F MC 314 1976 Caterpillar

Overseas SA v South African Marine Corporation N Y 19 F M C 315

1976 and Mine Safety Appliances Company v South African Marine

Corporation 18 S R R 1467 1978 may be distinguished from the

instant case In the Trane Company and Caterpillar cases the complaints

werebrought against the agent

1

In the Manhattan telephone directory South African Marine Corporation is listed at the same

address as South African Marine Corporation NY the agent Furthermore South African Marine

Corporation advertises its services as carrier in the Journal of Commerce Transportation Telephone

Tickler which promotes the fast regular service of Safmarine an abbreviation for South African

Marine Corporation and emphasizes that no other carrier sails to South Africa as often as Safmar

ine Transportation Telephone Tickler 1980 pp 452 453

1cn
360 FEDERAL MARITIME COMMISSION

InMine Safety Appliances as in the instant proceeding the complain

named as respondent South African Marine Corporation There a

here the complaint was mailed to the same address in New York I

the first instance the carrier South African Marine Corporation Ltd

answered the complaint whereas in this instance the agent Sout

African Marine Corporation N Y entered the case No explanation i

offered for the different actions taken by South African Marine Corpo

ration in these two cases

In any event while the complaint did not set forth the name of th

carrier in full nor for that matter that of its agent it was made

abundantly clear that the action was being brought against the ocea

carrier Service of the complaint in New York whether on the carrie

or its agent was sufficient notice t6 the carrier of the claim bein

brought against it International Shoe Company v Washington 326 U S

310 1945 Under the circumstances the filing of an answer by th

agent was inappropriate unless the agent was acting on behalf of th

carrier

In view of the foregoing the Commission has determined to vacat

the decision of the Settlement Officer dismissing the complaint and t

remand the proceeding to the Settlement Officer for such further pro

ceedings as the Settlement Officer deems appropriate including a dec

sion on the merits 2

It is so ordered

By the Commission

S FRANCIS C HURNEY

Secretary

A the bill of ladini indicates that freight was collect the Settlement Officer should as athres

old matler addreasthe issue of who paid freight charge and whether B S B has tanding with respe

to thesubject claim

The separate opinion of Chairman Richard 1 Oaschbach i attached

CO ro
E S B INC V SOUTH AFRICAN MARINE CORP 361

Separate Opinion of Chairman Daschbach

I am not participating because Ido not believe that the Commission

should review the decisions of Settlement Officers in informal docket

proceedings Under Subpart S of the Commission s Rules of Practice

and Procedure 46 C F R 502 301 parties consent to waive the rights

and obligations associated with normal adjudicatory proceedings for the

express purpose of receiving prompt consideration of a small claim

Commission review precludes the inexpensive and expeditious handling

of small claims which is the foundation of the informal docket process

The settlement officer s decisions in informal dockets do not have

precedential value Commission review therefore imposes unnecessary

expense and delay in an arbitration process designed to settle minor

commercial disputes in a prompt and responsive manner

1 0lLf r
FEDERAL MARITIME COMMISSION

DOCKET NO 79 69

RICHMOND TRANSFER AND STORAGE CO

D B A RICHMOND EXPORT SERVICE AND INTERNJTIONAL

CARGO SERVICES

POSSIBLE VIOLATIONS OF SECTIONS 16 FIRST AND 17

SHIPPING ACT AND GENERAL ORDER 15 46 C F R 533

ORDER ADOPTING INITIAL DECISION

November 7 1980

This proceeding is before the Commission upon its own determina

tion to review the Initial Decision of Administrative Law Judg

Charles E Morgan NoExceptions were filed

This proceeding was initiated by Order ofInvestigation and Hearin

served July 17 1979 pursuant to section 22 of the Shipping Act 191

46 U S C 821 to determine whether 1 the activities of Respondent

Richmond Transfer and Storage Co are those of an other person

subject to the Commission s

jurisdiction under section 1 of the Shippin

Act 1916 46 U S C 801 2 Respondent s failure to file a tariff as 

terminal operator is violative of the Commission sregulations Genera

Order IS 46 C F R Part 533 and section 17 of the Shipping Act 191

46 U S C 816 3 the free time practices of Respondent on expo

cargo are in violation of section 16 First or 17 of the Shipping Ac

1916 46 U S C 815 816 and 4 Respondent s practice of payin

commissions to some freight forwarders is contrary to sections 16 Firs

or 17 ofthe Shipping Act 1916

In his Initial Decision the Presiding Officer determiRed that Re

spondent which operates an off dock container freight station per

forms terminal services for oceangoing common carriers by water pur

suant to negotiated contracts as well as other terminal services i

connection with common carriers by water for the general shippin

public He concluded that the section 1 definition of other person

furnishing terminal facilities in connection with common carriers b

water does not require that these services be performed at the dock o

on the water s edge As a result the Presiding Officer found Respond

ent to be an other person within the meaning of section 1 of th

Shipping Act 1916 In addition the Presiding Officer found that Re

spondent had violated 46 C F R Part 533 and section 17 of the Ship

ping Act 1916 by failing to me a terminal tariff reflecting its service

and charges to the general shipping public However the Presidin

1 1 14 Uf
RICHMOND TRANSFER STORAGE CO POSSIBLE 363

VIOLATlONS

Officer found no evidence to support a

finding that Respondent s free

time and freight forwarder commission practices are in violation of

sections 16 First and 17 ofthe Shipping Act 1916

Upon review ofthe entire record in this proceeding the Commission

finds the Initial Decision to be proper and well founded and according

ly adopts it as its own Accordingly and consistent with the Initial

Decision affirmed herein Respondent is directed to file a tariff in

accordance with the provisions of46 C F R Part 533 within 30 days of

the date ofthis Order

THEREFORE IT IS ORDERED That the Initial Decision served

in this proceeding on July 16 1980 is adopted as the decision of the

Commission and made a part hereof and

IT IS FURTHER ORDERED That in accordance with the provi

sions of 46 C F R Part 533 Richmond Transfer and Storage Co

within 30 days ofthe date ofthis Order file a tariff with this Commis

sion showing all of its rates charges rules and regulations relating to

or connected with the receiving handling storing and or delivery of

property at its terminal facility and

FINALLY IT IS FURTHER ORDERED That this proceeding be

discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

CommissionerTeige concurring in the result and issuing aseparate opinion

23 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 79 69

RICHMOND TRANSFER AND STORAGE CO

D B A RICHMOND EXPORT SERVICE AND INTERNATIONAL

CARGO SERVICES

POSSIBLE VIOLATIONS OF SECTIONS 16 FIRST AND 17

SHIPPING ACT AND GENERAL ORDER 15 46 C F R 533

CONCURRING OPINION

Concurring Opinion ofCommissioner Peter N Teige

I concur in the result in this case The obligation imposed by Com

mission General Order 15 on marine terminals in the United States to

me tariffs showing their charges to the shipping public is in my

opinion of questionable regulatory value and Ihope the Commission

will soon undertake a re examination of the desirability of continuing

this requirement

Nevertheless until that occurs the requirements of General Order 1

and Section 17 of the Shipping Act must be enforced

64 23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 69

RICHMOND TRANSFER AND STORAGE CO

D BIA RICHMOND EXPORT SERVICE AND INTERNATIONAL

CARGO SERVICES

POSSIBLE VIOLATIONS OF SECTIONS 16 FIRST AND 17

SHIPPING ACT AND GENERAL ORDER 15 46 CF R 533

Activities of respondent an operator of an offdock container freight station found to be

those of an other person carrying on the business of furnishing warehouse or other

terminal facilities in connection with a common carrier by water and respondent s

failure to file a tariff as a terminal operator found to be in violation of General Order

15 and of section 17 of the Shipping Act

Alan F Wohlstetter and Edward A Ryan for respondent

John Robert Ewers and Aaron W Reese as Hearing Counsel

INITIAL DECISION OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

Adopted November 7 1980

The respondent Richmond Transfer and Storage Company RTS

doing business as Richmond Export Service RES also doing business

as International Cargo Services Inc ICS operates an off dock con

tainer freight station in Richmond California This container freight

station CFS is not adjacent to piers or vessel berths and is not located

within the port areas of San Francisco Oakland or Richmond The

respondent furnishes warehouse and other terminal facilities at its CFS

for ocean common carriers operating in and out ofthese three ports In

general the respondent provides terminal services the same as or similar

to those which a terminal operator located adjacent to piers or vessel

berths would provide for ocean carriers shippers and consignees

The Commission by its order of investigation and hearing served

July 17 1979 pursuant to sections 16 17 and 22 of the Shipping Act

1916 the Act instituted this investigation and hearing to determine if

the activities of the respondent are those of an other person subject

to the Commission s jurisdiction under section I ofthe Act

Also it was ordered that it be determined whether RTS s failure to

file a tariff as a terminal operator is violative of the Commission s

1 This decision wiJI become the decision of the Commission in the absence of review thereof by the

Commission Rule 221 Rules of Practice and Procedure 46 CP R 502 227

23 F M C 365
366 FEDERAL MARITIME COMMISSION

General Order 15 46 CF R Part 533 and is violative of section 17 

the Act whether RTS s practice ofpaying commissions to some freig

forwarders is violative of section 16 First or contrary to section 17 

the Act and whether RTS s alleged practice of allowing up to tw

weeks free time for outbound cargo is violative of section 16 First 

section 17 of the Act

With respect to RTS s practice of paying commissions to som

freight forwarders and with respect to RTS s practice of allowing fre

time for outbound cargo fJearing Counsel found no eviden to su

port findings that these practices were violative of section 16 First 

contrary to section 17 of the Act It was ascertained during the takin

ofdepositions that RTS did not pay commissions to all forwarders b

that those forwarders who had not been paid had not requested com

missions Upon request of a forwarder RTS pays commissions to th

forwarder for services rendered

Although the fact sheet distributed by RTS states that up to tw

weeks free time is allowed RTS ass rteclly allows free time only 

accordance with the free time provisions of the Poft of Richmond 

terminal tariff In accordance with this Port of Richmond tariff o

inbound cargo moving in the foreign trades a free time periOd of sev

days exclusive of Saturdays Sundays and holidays is allowed and o

outbound cargo moving in the foreign trades a free time period of te

days exclusive ofSaturdays Sundays and holidays is allowed The fre

time practices of RTS apparently conform to the free time practic

mandated by the Commission for the San Francisco Bay Area marin

terminals and by applicable conference tariffs Hearing Counsel foun

no information of any irregularities with respect toRTS s free tim

practices Nevertheless RTS hereby i cautioned to avoid any appea

ance ofencouraging possible improprieties with regard to free time an

accordingly RTS hereby is directed to delete from its fact sheet an

i

reference to the allowance of up to two weeks free time that is an

j reference to free time which is inconsistent with the applicable confe

ence tariffs and the Port ofRichmond tariff

There was no oral hearing but in lieu thereof both counsel f

respondent and Hearing Counsel agreed that certain responses to inte

rogatories certain stipulations and the deposition of Donovan Dan

Day Jr Chairman of the Pacific Westbound Conference would cons

tute the record herein as follows

Exhibit I

Exhibit IA

Exhibit 2

Exhibit 3

Stipulation ffied 09 17 79

Stipulation dated 11 27 79

Stipulation dated 11 19 79

Responses of RTS to Interrogatories of

Hearing Counsel sworn to by Al Burda

10 79

23 P MC
RICHMOND TRANSFER STORAGE CO POSSIBLE 367

VIOLATIONS

Exhibit 4 Responses of Hearing Counsel to Interroga

tories of RTS dated 09 19 79

Deposition of Donovan Daniel Day Exhibit 5 Jr

Hearing Counsel s proposed findings offact also propose a

finding of

fact their number 23 which is based in part on the testimony of

Witness Day Chairman of the Pacific Westbound Conference and in

part on the tariff of the Pacific Straits Conference as filed with the

Commission to the effect that Conference tariffs provide for the use of

off dock container freight stations and establish regulations pertaining

thereto The record will be deemed to include this finding 23

Proposed finding 19 of Hearing Counsel states that in addition to

RTS there are numerous other off dock container freight station opera

tors providing service on shipments transported by ocean carriers serv

ing the ports of Oakland Richmond and San Francisco Respondent

names five specific CFS operators which are listed in Exhibit 2 which

exhibit in its entirety is part of the record Respondent would add to

Hearing Counsel s proposed finding 20 the fact that these other CFS

operators perform services for ocean carriers identical to those per

formed by RTS Again this additional finding is part of the record

because it is in Exhibit 2

RTS also points out as shown in Exhibit 2 that none ofthe off dock

CTS operators specifically named in Exhibit 2 have filed marine termi

nal tariffs with the Commission pursuant to General Order 15 and that

the Commission s staff has not requested or directed such filings and

that it was agreed that the parties to this proceeding No 79 69 may

refer to all pleadings in No 73 30 American Warehousemen s Association

v The Port of Portland and to other matters such as are set out in

Exhibit 2 ofthe present proceeding including that the Commission and

its staff prior to this proceeding have not issued any statement and

have not suggested that the Commission has jurisdiction over off dock

CFS operators

Be that as it may presently the Commission has undertaken to

determine whether it has jurisdiction over RTS as an other person

furnishing off dock facilities As defined in the Act an other person

subject to the act means any person not included in the term common

carrier by water carrying on the business of forwarding or furnishing

wharfage dock warehouse or other terminal facilities in connection

with a common carrier by water

The additional findings of fact below are not in dispute RTS carries

on the business offurnishing warehouse and other terminal facilities for

common carriers by water Emphasis supplied Such carriers serve the

ports of San Francisco Oakland and Richmond California and operate

in the Pacific Westbound Pacific Straits Pacific Australia and East

23 F M C
368 FEDERAL MARITIME COMMISSION

bound land britlge routes Both conference and non conference carrie

by water designate RTS as theirCFS

The RTS facility CFS in Richmond consists of9 acres with 75 0

square feet of covered area it has depressed railroad sidings and it h

a lift capacity of up to 40 tons Generally the services performed 

RTS are in connection with less than container load LCL cargo

RTS holds itself out as a port facility although not located adjace

to piers or vessel berths

RTS publishes and distributes to steamship agents and common ca

ers by water a fact sheet Appendix A to Exhibit IA which describ

RTS s services and rate IlChedules This fact sheet with attachmen

consists of two cover pages and five pages of rates At the top of ea

rate sheet is the statement Used in the absence ofany other agreeme

or applicable tariff

RTS s fact sheet provides in part

Extended receiving time Cargo may be delivered to the neu

tral container freight station one working day prior to sailing

and as much as two wee s before without charge

Accessorial services Complete export packing and marking

services are available on premises Thus fragile cargo may still

be crated prior to vanning on request Warehousing and

bonded storage facilities are also available

Diversion capabilities When requirements arise shipments can

be withdrawn from sea routing and diverted to 8lr or what

ever is desired

Concusion Our purpose has been to service the transporta

tion industry not only as a port facility but to offer as many

connecting services as possible in order to take the burden off

the shipper and assure fast accurate and safe delivery to the

receiver at the lowest pssible cost to all concerned

The rate schedules of RTS attached to its fact sheet provide in pa

When booked for export Via Richmond CFS shipper s

pay

ment for services ends when cargo is unloaded and segregated

at the Richmond OffDock Pier Services from that point on

e incl ded in the Steamship rates reg dless ofshipSide loca

tion Richmond Oakland San FranCISCo If booked CY

loading charges and drayage are charged to the Shipper im

ports are the reverse

RTS states In its fact sheet that all cargo LCL loaded into contai

ers at the CFS ofRTS Is at the ocean carrier s count and that su

carrier assumes liability for the cargo when it is received at the RT

facility RTS consolidates LCLexport cargo loads It into containe

and transports the containers to the designated vessel

Common carriers by water deliver containers of LCL cargo to t

RTS CFS facility where the containers are unloaded and the car

made available to consignees

23 FMC
RICHMOND TRANSFER STORAGE CO POSSIBLE 369

VIOLATlONS

The services performed by RTS for common carriers by water

consignees and shippers include container loading and unloading termi

nal storage packing and crating cargo handling packaging and

drayage

Cargo delivered to the RTS facility is considered in transit and is

afforded all the privileges of a steamship pier with regard to absorption

of terminal charges and overland common point OCP freight rates

RTS s charges for loading and unloading containers and for drayage

of containers between vessel berth and the RTS facility are for the

account ofand paid by the designated ocean carriers

A terminal service provided by RTS is free time RTS s fact sheet is

silent as to the payment of commissions to independent ocean freight

forwarders

RTS has not filed a terminal tariff with the Federal Maritime Com

mission showing RTS s rates charges rules and regulations related to

or connected with the receiving handling storing and or delivery of

property at its terminal facility

The services performed by RTS for ocean carriers are part of the

transportation obligation of these carriers and are identical to the serv

ices performed by the ocean carriers or for the ocean carriers at

dockside container freight stations

Container freight stations at off dock locations such as the CFS of

RTS are necessary due to the lack of sufficient dockside property If

container freight stations were restricted to dockside locations the

resulting congestion would virtually bring CFS operations to a halt

This latter finding is supported by the opinion and conclusion of wit

ness Day

All member lines of the Pacific Westbound Conference have desig

nated RTS as one oftheir container freight stations

RTS provides free time at its CFS facility of seven days on inbound

cargo and of ten days on outbound cargo both exclusive of Saturdays

Sundays and holidays and both in accordance with the Port of Rich

mond s Terminal TariffNo 1

On both export and import cargo RTS assesses demurrage charges

at the expiration of free time at the rate of 13 per day or 167 per

month per ton W1M per 1 000 kilograms or I cubic meter whichever

produces the greater revenue Apparently the RTS demurrage charges

are the same as the wharf storage charges of the Port of Richmond

item No 480 of its tariff on merchandise n os Notice is taken of this

tariffitem 3rd revised page 27

RTS pays commissions to licensed independent ocean freight for

warders for referring business to RTS as well as for the performance

of various services such as the pickup delivery and copying of docu

ments necessary for custom clearances tracing shipments and assisting

23 F MC
370 FEDERAL MARITIME COMMISSION

with handling of claims for loss or damage Generally the commissio

is computed at the rate of 100 per ton weight or measuremen

RTS has entered into written agreements with ocean carriers relatin

to rates charges rules and regulations with respect to services pe

formed by RTS for such ocean carriers Since January I 1979 RTS ha

had such written agreements with members ofthe Pacific Westboun

Conference Transpacific Freight Conference Pacific Straits Confe

ence Pacific Australian Conference as well as with non conferenc

lines and other ocean carriers including Farrell Lines Sea Land Serv

ice Seatrain Lines and Lykes Bros Steamship Co

At present there are no tariffs on file with the Commission coverin

terminal services performed by off dock terminal operators and n

such tariff ever has been rued

The Pacific Westbound Conference member lines utilize the service

of off dock container freight stations in the San Francisco bay area a

provided by the Conference tariff This tariff requires members t

advise the Conference in writing of the locations of the containe

freight stations and any changes in container freight station location

prior to using the container freight stations

The services performed at the container freight stations ofthe Pacif

Westbound Conference include the traditional functions associated wit

the receipt ofcargo and performed by the ocean carrier for the shippe

such as issuance of receipts for the cargo measurement weighing

gathering together of the cargo packing or loading of the cargo int

containers and the transfer ofthe containerized cargo from the contain

er freight station to container yards or to shipside facilities

These services above are included as part of the ocean carriers

obligations to transport the cargo and the costs of these services ar

included in the overall ocean freight rates or as a container freigh

station receiving charge as an accessorial Charge

The ocean carrier assumes responsibility for the safe care and custo

dy of cargo at the time the cargo is received at the CFS by the ocea

carrier s agent the CFS operator

After less than continer Ioad cargo is containerized at the CFS th

CFS operator acting as the ocean carrier s agent arranges for th

movement of the container to the vesselspierside location and th

ocean carrier assumes the cost of such drayage

Official notice is taken according to Paoific Westbound Conferenc

Local and Overland Tariff No 11 FMC 19 that it is provided tha

there is aCFS receiving charge of 11 per mel lurement ton whic

includes the charges for packing of cargo into containers at the CFS

and the transferring of the containers from the CFS to shipside Rule

55 14 and 55 2 3b of the tarifl Ifthe containers are packed by th

shipper and delivered by the shipper to the ocean carrier s containe

yard within the port terminal area then the ocean carrier s CFS receiv

23 F MC
RICHMOND TRANSFER STORAGE CO POSSIBLE 371

VIOLAnONS

ing charge does not apply and a lower container yard CY receiving

charge of 6 50 per measurement ton is assessed Rules 55 113 and

55 2 3 a ofthe tariff

DISCUSSION AND CONCLUSIONS

Ocean common carriers must provide for shippers and consignees

certain services which require the use of terminal facilities The ocean

carriers may provide their own facilities or they may rely in whole or

in part on terminal facilities operated by other persons Where an other

person such as a port provides the only terminal facility or where an

ocean carrier itself does not provide any terminal facility but relies on

others clearly the port or other persons are the other person de

scribed in section I of the Act as furnishing terminal facilities in

connection with common carriers by water And in accordance with

section 17 of the Act and General Order No 15 of the Commission s

General Orders such other persons must file tariffs with the Commis

sion showing all rates charges rules and regulations relating to or

connected with the receiving handling storing and or delivering of

property at their terminal facilities

In the present situation ocean carriers serving the ports ofSan Fran

cisco Oakland and Richmond rely on the respondent to perform at

least in part certain terminal services If respondent had performed

these terminal services for these ocean carriers at the waterfront or

alongside the docks it clearly would be an other person furnishing

terminal facilities Also even though located away from the dock

respondent is an other person because it performs terminal services

for the ocean carriers

The advent of containerization and the lack of sufficient waterfront

property or property alongside docks in recent years has led to the

necessity for the performance of some traditional terminal services for

ocean carriers at locations away from the docks If all terminal oper

ations for containerized cargoes were performed at the docks presently

the resulting congestion might bring terminal operations to a halt at

some dock locations Apparently it has become financially feasible to

provide terminal services for ocean carriers in connection with contain

erized cargo at container freight stations away from the docks Wheth

er or not these terminal services are performed adjacent to or away

from the docks the services ofthe terminal operators in relation to the

shipping public are the same and equally should be and are subject to

regulation

The respondent RTS chose to engage in the business of furnishing

terminal facilities in connection with ocean common carriers at its

offdock facility in Richmond California Since it performs the same

service away from the docks as the ocean carrier or some other termi

nal operator would perform at the docks the respondent is subject to

0 6
i

372 FEDERAL MARITIME COMMISSION

regulation by the Federal Maritime Commission just the same as if 

had chosen to engage in the terminal business at water s edge

The definition of an other person subject to this Act in section 1 

the Act does not specify at the dock or at water s edge or away fro

the port area but in pertinent part refers to carrying on the business 

furnishing wharfage dock warehouse or other terminal facilities 

connection with a common carrier by water Emphasis supplied

A cursory reading ofrespondent s brief according to Hearing Cou

sel could convey the impression that RTS is engaged exclusively 

providing services for ocean carriers for which services RTS is fu

compensated by the ocean carriers and which charges are included 

the ocean freight rates At page 12 ofits brief the respondent argu

that in all cases in which cargo is received at the CFS facilities of RT

the ocean carrier s tariff expressly sets forth the charges to be assess

the shipper for the CFS services performed for the ocean carrier 

RTS This is true as far as it goes

The facts are that RTS performs other services for the shipper whi

are not performed for the ocean carrier by RTS but which are pe

formed for the shipper and paid for by the shipper These other se

ices are marine related and include storage labeling etc as shown 

Exhibit lA

RTS offers a wide range of marine terminal services and active

solicits the trade to utilize these services RTS provides free time RT

pays commissions to forwarders for referring business to RTS sfacilit

for the pickup and delivery and copying of documents necessary f

customs clearance tracing shipments and assistance with handling 

claims for loss or damage RTS distributes a fact sheet Exhibit lA

describing in detail its operation RTS offers many accessorial servic

to shippers including complete export and marking services crating 

fragile cargo and warehousing and storage facilities as wen as dive

sion capabilities with routing changes from sea to air The fact she

lists two pages 4 and S of Exhibit No lA ofcharges for accessor

services including container storage It isconoluded that RTS is n

merely a private contractor which performs terminal services for oce

carriers but also performs other terminal services in connection w

common carriers by water for the general shipping public

One contention of RTS sounds plausible but in reality is not pe

nent to the issues This contention is that no regulatory purpose wou

be achieved by requiring RTS and other CFS operators to me tari

setting forth the charges which the containerfreight station operators ass

the ocean carriers becaulle these charges are a matter of pri ate agre

ment between the CFS operators and the ooean carriers and because 

the ocean carriers elected to provide their own terminal facilities t

shippers would not be interested in the ocean carriers costs for oper

ing terminal facilities Also RTS contends that where the ocean ca

12C
RICHMOND TRANSFER STORAGE CO POSSIBLE 373

VIOLATIONS

ers elect to use the tenninal facilities of an agent such as RTS the

shippers have no interest in the financial arrangement between the

ocean carriers and their agents RTS is correct about these ocean

carrier costs but these are not the matters required to be filed under

General Order 15 The charges to be shown in the terminal tariff are

those to be charged to the shipping public and not the contract charges

agreed to between the terminal operator and the ocean carriers As

provided in General Order 15 the charges for terminal services per

fonned for ocean carriers pursuant to negotiated contracts need not be

filed

Also as seen the shippers are provided services by RTS in addition

to those services covered by the ocean carriers obligations

RTS further contends that the term other person in section I of

the Act excludes any person included in the tenn common carrier by

water and that while RTS does not operate as a common carrier by

water that RTS performs its services as an agent for common carriers

by water and that the services of RTS as a container freight station

operator are under the direction and control ofits principal or princi

pals which are common carriers by water and therefore that RTS is

included within the term common carrier by water which excludes

RTS from the definition of other person

This RTS argument is not valid for at least two reasons First RTS

does not perfonn all of its marine tenninal services as agent for ocean

carriers Second respondent s argument if followed would mean that

every marine terminal operator at every ocean and Great Lakes port

which provides or furnishes for common carriers by water any of the

ocean carriers marine terminal obligations would be excluded from the

tenn other person It is concluded that there is no basis for holding

that other persons should be included in the term common carrier

by water by virtue of the performance of certain tenninal services as

agents for common carriers by water Further if RTS and other CFS

operators are to be considered as ocean carriers for the purposes of

section I of the Act as RTS contends then RTS would have to file a

tariff as an ocean carrier in accord with section 18 of the Act Surely

RTS seriously does not believe that it is an ocean common carrier with

all the obligations of such a carrier including the common carrier s

tariff filing obligation

In its brief page 13 RTS states that the novel question presented in

this proceeding is whether RTS s charges for perfonning CFS services

for common carriers by water must be set forth in a tariff To repeat

this is not the issue in this proceeding but rather the central issue is

whether RTS s charges to shippers and consignees for its terminal

services must be set forth in a tariff For example RTS charges 13

cents per ton per day or 167 cents per ton per month on both export

and import cargo as a demurrage charge Exhibit 3 No 13 This is not

C I
374 FEDERAL MARITIME COMMISSION

in accordance with wharf demurrage rates in the Port of Richmond

tariff but rather apparently is in accordance with wharf storage rates in

that tariff Needless to say the shipping and receiving public is entitled

to know what demurrage rates are applicable at RTS s

facility and the

proper method is through tariffs filed with the Federal Maritime Com

mission in accordance with General Order 15 and section 17 of the

Act

Respondent contends that the Commission may not amend its Gener

al Order No 15 regulations sub silentio by an unauthorized administra

tive interpretation The respondent contends that the Commission

would be acting so by including off dock terminal operators under the

same tariff filing requirements as are provided for water s edge termina

operators The respondent s view is incorrect because no amendment o

General Order No 15 is needed or contemplated in this proceeding

The respondent and other off dock terminal operators have brought

themselves under the ambit of General Order No 15 and section 17 o

the Act by going into the business of furnishing warehouse or other

terminal facilities in connection with common carriers by water in the

foreign commerce ofthe United States

The respondent argues that the requirement for RTS and other off

dock CFS operators to prepare file and distribute tariffs will be unduly

burdensome on small businesses and contrary to the President s goal to

minimize the paperwork burden on persons outside the Federal govern

ment but there is no good reason shown why off dock terminal opera

tors should be afforded special and preferential treatment not available

to their dockside competitors

Itis ultimately concluded and found that the respondent RTS is an

other person carrying on the business of furnishing warehouse O

other terminal facilities in connection with common carriers by wate

in the foreign commerce ofthe United States and that RTS s failure to

file a tariff with the Commissioll is violative of General Order 15 and

ofsection 17 ofthe Shipping Act 1916

It is further concluded and found that no evidence has been shown to

prove that RTS s alleged practice of paying commissions to some

freight forwarders is violative of section 16 First or contrary to

section 17 of the Act and that no evidence has been shown to prove

that RTS s alleged practice of allowing up to two weeks free time fo

outbound cargo is violative of section 16 First or section 17 of the

Act

S CHARLES E MORGAN

Administrative Law Judge

Washington D C

July 16 1980

r
FEDERAL MARITIME COMMISSION

DOCKET NOS 78 35 78 42 78 43 78 48 78 55 79 44 AND

79 62

ALLIED CHEMICAL S A

ALLIED CHEMICAL INTERNATIONAL CORP

v

FARRELL LINES INC

PACIFIC AMERICA CONTAINER EXPRESS

ORDER ADOPTING INITIAL DECISION

November 10 1980

This proceeding was initiated by the filing of seven separate com

plaints alleging overcharges in violation of section 18b 3 of the

Shipping Act 1916 46 U S C 817 b 3 on shipments of polyamide

yarn transported from Charleston South Carolina and Norfolk Virgin

ia to Sydney and Melbourne Australia 2

Each shipment was made in

4O foot dry containers and was assessed on the basis of the U S Atlan

tic Gulf Australia New Zealand Conference s dual rate contract

schedule

Polyamide yarn is rated solely on a weight basis of 270 25 per long

ton 3

The determination of the correct weight against which to assess

this tariff rate is the crux of the dispute before the Commission This

determination is dependent upon the application vel non of Tariff

Rules 31 c 1 and 31 c 6 of the Conference s Freight Tariff No 3

F MC No 12 4Complainants argued both before the Administrative

Law Judge and the Commission that Rule 31 c 6 applies to each ship

ment and as a result serves to limit the lawful freight charges Re

spondents claim that this particular rule does not apply at all and that

Rule 31 c 1 is the sole basis for the computation of freight charges

1 The complainant in Docket No 78 35 is Allied Chemical S A The complainant in the remaining

six dockets is Allied Chemical International Corporation ACIC Both are wholly owned subsidiaries

of the International Division of Allied Chemical Corporation and shaU hereafter be referred to collec

tively as Allied when appropriate

The respondent in Docket Nos 7842 and 55 is Pacific America Container Express PACE The

respondent in the other fivedockets is Farrell Lines Inc

2

All seven complaints weresubsequently consolidated into the present proceeding

3

Item 3236 Tariff No 3 F M C No 12 15th revised page 306

4

Tariff Rules 31 c 1 and c6 are set forth in the Appendix to this Order

l F M r 375
376 FEDERAL MARITIME COMMISSION

I

i

In his Initial Decision Administrative Law Judge Seymour Glanze

1 held that Rule 31 c 6 was inapplicable to the shipments at issue 

held that ACIC was entitled to the contract rates which it had bee

charged by both carriers 3 denied reparations and 4 dismissed th

complaints Complainants filed Exceptions to the Initial Decision t

which Farrell and PACE replied

DISCUSSION

After thoroughly considering the basis ofAllied s arguments and th

entire administrative record the Commission mds that the Presidin

Officer was generally correct and accordingly adopts his conclusion

concerning the dillPuted tariff rules and ACIC s entitlement to contrac

rates

Applicability ofRule 31 c 6

Rule 31 c of the Conference Tariff sets forth the procedures for th

assessment offreight Subsection c 1 states that freight shall be paid o

the actual weight and or measurement of cargo in containers but in n

case less than 70 ofthe cubic or weight capacity This section ofth

Rule thus establishes a pricing floor and can be fairly termed a min

mum utilization rule Such a rule is especially appropriate for bulk

commodities like polyamide yarn which use up the cubic capacity of 

container well before its weight limit is met Pursuant to this provisio

of the tariff the Respondents freighted the subject shipments on 

weight basis of 70 of the weight capacity for 40 foot dry container

as stated in Note 1 ie on a basis of34 80 pounds

Subsection c 6 relied upon by Allied states

In no case shall the total ocean freight charges assessed for

either 20 or 40 equipment moving house to house or house to

pier be based on weight or measurement factors in excess of

either the inside cubic capacity or weight capacity as shown

on the manufacturer s plate affixed to the container

This rule however is simply a limit on the maximuni charges whic

can be assessed a shipper in those cases where the container capacities

as stated on the manufacturer s plate are actually exceeded Since th

weight ofeach container shipped was less than the weight capacity o

the container this section ofthe assessment rule does not apply to thes

shipments Allied s position that this section in conjunction with sec

tion c l limits freight charges to those based on the maximum weigh

of the commodity shipped that could be loaded into the container i

untenable To reach this position Allied has had to misconstrue certai

language and read additional language into these rules The resul

which requires a cumbersome computation on top of what is already 

complex process alters the clear intent of the framers of the rule The

Presiding Officer s conclusion that Rule 31 c 6 was inapplicable to th

shipments in question is therefore affirmed by the Commission

Mr
ALLIED CHEMICAL V FARRELL LINES PACE 377

Contract Rates

In 1964 Allied Chemical Corporation International Division signed

the Conference s Uniform Merchant s Rate Agreement Subsequently

in 1971 Allied Chemical S A was added to the contract as a related

company

5

ACIC was never similarly made party to this Agreement

However for 10 shipments which are part of this proceeding both

Farrell and PACE billed ACIC and collected from it freight charges

based on the contract rate schedule Neither carrier ever questioned

ACIC s qualifications for the contract rate until this proceeding was

instituted Now on Exceptions PACE raises the question of ACIC s

entitlement to contract rates The relevant Merchant s Rate Agreement

provides in part

2 a The term Merchant shall include the party

signing this contract and any of his present subsidiary or

related companies or entities who may engage in the shipment

of commodities in the trade and over whom he regularly

exercises direction and working control in relation to

shipping matters The names of such related companies

and entities all ofwhom shall have the unrestricted benefits of

this contract and be fully bound thereby are listed at the end

of this contract The party signing this contract as Merchant

warrants and represents that the list is true and complete and

that he will promptly notify the Carriers in writing of any

future changes in the list

Under the express terms of this agreement it would appear that the

Merchant Allied Chemical Corporation would have to notify the

carriers that ACIC was a related company in order for ACIC to take

advantage of the contract rates However it is clear that whether or

not a technically correct notification occurred ACIC was and is a

related company of Allied Chemical Corporation The fact that

Allied Chemical Corporation never notified the carriers in writing of

ACICs status does not defeat its entitlement to contract rates The

actions ofthe two Conference carriers presently before the Commission

indicate that they deemed ACIC acompany which had the unrestrict

ed benefits of this contract 6 Under principles of waiver or equitable

estoppel these carriers will be precluded from maintaining that ACIC

was not entitled to the contract rates which they assessed against it See

Cities Service International Inc v Lykes Bros Steamship Co Inc 19

F MC 128 1976 where the Commission awarded reparations not

The Wilputte Coke Oven Division of Allied Chemical Corporation was the only other related

company added to the agreement

6

Since Allied Chemical Corporation became asignater to the agreement all of its twelve sales and

marketing subsidiaries used conference vessels for their shipments

During 1978 these various subsidiaries were charged contract rates on 118 shipments carried by 6

different Conferencemembers

1 PMr
378 FEDERAL MARITIME COMMISSION

withstanding the fact that the shipper had not complied with a simila

related company notice requirement of a dual rate contract

Appropriateness ofReparation

Because it is unnecessary to do so in this proceeding the Commissio

takes no position on the Presiding Officer s holding that even if Rul

31 c6 were applicable to these shipments an award of reparations t

Allied would be inappropriate under the circumstances Initial Dec

sion at 22 24 As discussed above however the Initial Decision 

adopted in all other respects

THEREFORE IT IS ORDERED That the Exceptions filed b

Allied Chemical S A Allied Chemical International Corporation an

Pacific America Container Express are hereby denied and

IT IS FURTHER ORDERED That to the extent mentioned above

the Initial Decision is adopted by the Commission as its own an

IT IS FURTHER ORDERED That this proceeding is discontinued

i

By the Commission

S FRANCIS C HURNEY

Secretary

1 It Mt
40 000 lbs

38 500 lbs

38 500 lbs

40 000 lbs

39 500 lbs

49 400 Ibs

49 400 Ibs

49 400 lbs

49 400 lbs

36 512 lbs

49 400 lbs

ALLIED CHEMICAL V FARRELL LINES PACE 379

APPENDIX

Rule 31 c Assessment ofFreight

1 Freight shall be paid on the actual weight and or measurement of

cargo in containers but not less than

A Twenty 20 Foot Containers

1 Cargo freighted on measurement basis 70 ofthe inside

cubic capacity

2 Cargo freighted on weight basis 70 of the weight

capacity See Note 1

B Forty 40 Foot Containers

1 Cargo freighted on measurement basis 70 ofthe inside

cubic capacity

2 Cargo freighted on weight basis 70 of the weight

capacity See Note 1

C If both weight and measurement rates are involved freight

shall be assessed on the unused weight or cubic whichever is

smaller to meet the minimum utilization stated in Rule 31 c

A and B For purposes ofclarification aggregate cargo will be

rated on an individual basis as freighted In determining utili

zation requirements set forth in Rule 31 c IA and B either the

combined total cubic or combined total weight ofall cargo in

the container whichever is closer to the utilization require

ments of 70 for a 20 container or 70 for a 40 container

will be used to determine the additional cubic orweight neces

sary for minimum utilization The additional cubic or weight

necessary will then be rated at the level of the highest rated

commodity in the container Ifeither the total aggregate cubic

or weight of the commodities combined equals or exceeds the

utilization requirement no additional freight charges will be

assessed SEE NOTE 1

NOTE 1 For the purposes of this Tariff and the application of

rates in determining the utilization factors the containers shall

be considered to have the following capacity

TYPE LENGTH CUBIC WEIGHT

20 1100

20 1050

20 550

20 1017

20 940

40 2200

40 2300

40 1100

40 2200

20 816

40 1800

Dry

OT

HIH

Flat Racks

Insulated

Dry

OT

H

Flat Racks

Self Contained Reefer

Self Contained Reefer

23 F M C
380 FEDERAL MARITIME COMMISSION

6 In no case shall the total ocean freight charges assessed for eithe

20 or 40 equipment moving house to house or house to pier b

based on weight or measurement factors in excess of either the

inside cubic capacity or weight capacity as shown on the manufac

turer s plate affixed to the container

23 F MC
FEDERAL MARITIME COMMISSION

DOCKETS NOS 78 35 78 42 78 43 78 48 78 55 79 44 79

62

ALLIED CHEMICAL S A

ALLIED CHEMICAL INTERNATIONAL CORP

v

FARRELL LINES INC

PACIFIC AMERICA CONTAINER EXPRESS AK A PACE LINE

The complainants have failed to establish that they were overcharged on shipments of

polyamide yarn during 1976 and 1977 in violation of section 18b 3 of the Shipping

Act 1916

In computing the freight charges the respondents properly applied appropriate tariff

provisions to the shipments The shipments as pertinent to this proceeding were

governed by Tariff Item No 3236 and Rule 31 c l which together established a

pricing floor for the shipments based on constructive weights determined by a

minimum utilization rule Complainants arguments which would make Rule 31 c 6

of the Tariffapplicable to the shipments is without merit Rule 31 c 6 is a maximum

charge rule which becomes operative only when container capacities are actually

exceeded Patently the latter rules cannot be made to apply to shipments whose

charges are subject to the constructive weight determinations made in accordance

with the minimum utilization rule

There is no merit to the respondents contention that Allied Chemical International Corp

is not entitled to the Tariffs contract rates Although there was no formal written

notification given to the Conference that the Merchant intended that Allied Chem

ical International Corp be bound by the terms of the Merchants Rate Agreement

the course of conduct adhered to by the Merchant and the Conference s member

lines clearly shows that the parties to the Rate Agreement deemed its terms binding

on Allied Chemical International Corp

The complaints filed in the consolidated proceeding are dismissed

William Levenstein for Allied Chemical S A and Allied Chemical International

Corp complainants

Edward Aptaker and George J Weiner for Farrell Lines Inc respondent

John R Mahoney and Wade S Hooker for Pacific America Container Express ak a

Pace Line respondent

23 F MC 381
382 FEDERAL MARITIME COMMISSION

INITIALDECISIONlOF SEYMOUR GLANZER

ADMINISTRATIVELAW JUDGE

Adopted November 10 1980

This is a consolidated proceeding incorporating seven complain

severally filed by two wholly owned subsidiaries of Allied Chemic

Corporation against two members individually of the U S Atlant

and Gulf Australia New Zealand Conference hereafter the Confe

ence pursuant to section 22 ofthe Shipping Act 1916 46 U S C 821

Each complaint alleges an overcharge in violation of section 18b 3 

the Shipping Act 1916 46 U S C 817 b 3

a

arising from the transpo

tation ofhouse to house containers of polyamide yam from Charle

ton South Carolina or Norfolk Virginia to Sydney or Melbourne

Australia All ofthe shipments weretransported during the period fro

October 5 1976 through July 16 1977 and payment of the freig

charges took place between October 27 1976 and August 16 1977 

Each complaint asks for reparation and the issuance of a cease an

desist order

The complainant in Docket No 78 35 is Allied Chemical S A 

the other six dockets the complainant is Allied Chemical Internation

Corp ACIC I

In Docket Nos 78 35 78 43 78 48 79 44 and 79 6

1 This decision will become the decision of the Commiuion in the absence of review thereof by t

Commission Rule 227 Rulesof Practice and Procedure 46 CF R 02 227

Section 22 provides 88 pertinent

That any penon may file with the board asworn complaint settins forth any violation of

this Act by a common carrier by water or other person subject to this Act and asking repa

ration for the injury if any caused thereby The board shall furnish a

copy of the complaint

to such carrier or other perSOD who shalt within a reasonable time specified by the board

satisfy the complaint or answer It In writinS Ifthe complaint Is not satisfied the board shan

except 88 otherwise provided in this Act investiaate it in such manner and by such means

and make such order as It deems proper The board ifthe complaint Is filed within two years

after the cause of action accrued may direct the payment on orbefore a day named of full

reparation to the complaimint for the injury caused by such violation

s

Section 18b 3 provides as pertinent

No common carrier by water in Joreian commerce or conferences of such carriers shall

charge or demand or collect or receive a

sreater or less ordifferent compensation for the

transportation of property or for any service in connection therewith than the rates and

charses which are specified In its tarilTs on file with the Commission and duly published and

in effect at the timej nor shall any such carrier rebate refund orremit in any manner or by

any device any portion of the rates orcharles so specified nor extend ordeny to any person

any privile eorfacility except in accordance with such tariffs

Each complaint was filed within two years of the d te of payment of the freiaht charses Thu

none of the causes of action is time barred by the jurisdictional statute of limitations of section 2

Section 22 provides that reparation claims must be filed within two years after the cause of actio

accrue

s

l

It is well settled by Commission decisions that A cause of action arises under sectio

18bX3 of the Act upon delivery of the carso to the carrier orupon payment of the freisht 

whichever is later United States of America Y Hellenic Lines Limited 14 F M C 255 260 1971

Commercial Solnts Corporarlon International Inc Y MoareMcCcrmack Lines Inc 19 P M C 424 

3 1977 Sun Company Incorparated Y Lykes Bros Steamship Company Incarparated 20 P M C 67 

1977 Cf US eJC rei Louisville Cement Ccmpany Y lCC 246 U S 638 644 1918

IS As will be seen infra the respondents contend that ACIC is ineliaible for the Conferences co

tract ratesbecause ACIC did not become a

signatory to the Conference s Merchant Rate Agreemen

23 F MC
ALLIED CHEMICAL V FARRELL LINES PACE 383

the respondent is Farrell Lines Inc In Docket Nos 78 42 and 78 55

the respondent is Pacific America Container Express aka Pace Line 6

There is little or no disagreement regarding the facts Primarily the

dispute centers on the applicability of a particular tariff rule to the

shipments The complainants urge that Tariff Rule 31 c 67 applies to

each shipment while the respondents claim that it does not apply to

any of the shipments That rule is a maximum charge rule and provides

In no case shall the total ocean freight charges assessed for

either 20 or 40 equipment moving house to house or house to

pier be based on weight or measurement factors in excess of

either the inside cubic capacity or weight capacity as shown

on the manufacturer s plate affixed to the container

There is a second issue in the proceeding It derives from the pri

mary issue but applies only to ACIC shipments ACIC was billed for

and paid the freight charges for the shipments ofpolyamide yarn on the

basis of the Conference s contract rate schedule Contending however

that ACIC was not a signatory to the Conference s Merchant Rate

Agreement and therefore not entitled to the lower contract rates the

respondents argue that even if ACIC s position on the primary issue is

found to be meritorious the amount of reparation should be determined

by reference to the non contract rates in effect at the time of shipment

The case was submitted on stipulated facts 8

FACTS9

1 ACT and Farrell are common carriers by water within the mean

ing of the Shipping Act 1916 serving the trade from U S Atlantic

Coast ports to ports in Australia under the trade name Pace Line and

Farrell Lines respectively At all times here relevant ACT and Farrell

have been members of the U S Atlantic and GulflAustralia New Zea

land Conference the Conference in that trade

2 ACIC and Allied Chemical SA are wholly owned subsidiaries of

the International Division ofAllied Chemical Corporation

On July 6 1964 Allied Chemical Corporation International Divi

sion signed the Conference s Merchant s Rate Agreement Shippers

merchants signing that agreement become entitled to contract rates

which are lower than non contract rates when shipping with members

of the Conference 1o Under the express terms ofthat agreement Con

6

Pace Line s appearance in the proceeding was made in the style of Associated Container Trans

portation An tralia Ltd Trading a Pace Line AC1

7 U S Atlantic Gulf Australia New Zealand Conference Freight Tariff No 3 F M C No 12

3rd revised p

No 38 effective May 3 1976

8 Revised Joint Stipulation of Facts dated November 6 1979

9

Additional Facts appear in the Discussion and Conclusion portion of this decision

10 Merchant s Rate Agreement paragraph 6

23 F M C
384 FEDERAL MARITIME COMMISSION

tract rates on every commodity or class of commodities shall be lowe

than the ordinary rates set forth in the tariffby a fixed percentag

offifteen 15 per centum ofthe ordinary rates 11

Generally that agreement defines Merchant to include subsidiarie

or other related companies or entities of the shipper but requires th

shipper to list those related companies at the foot ofthe agreement an

to notify the Conference in writing of changes to be made in th

future 12 At the time the agreement was signed no related companie

were shown on the list Thereafter in accordance with the Internation

al Division s letter ofOctober 5 1965 Wilputte Coke Oven Division o

Allied Chemical Corporation was added Later Allied Chemical S A

11Id

18 As pertinent paragraph 2 of the Merchant s Rate Agreement provides

2 a The Merchant undertakea to ship or cause to be shipped all of ila ocean shipmenla

forwhich contract and non contract rates are offered moving in the trade on vessels of the

Carriers unless otherwise provided inthis agreement

The term Merchant shall include the party signing this contract and any of his parent

subsidiary orother related companies or entities who may engage in the shipment of com

modities in the trade covered by this contract and overwhom he regularly exercises direc

tion and watkins control as distinguished from the p088e88ion of the power to exercise such

directionand control in relation to shipping matters whether the shipments are made by or

in the qame of the Merchant any such related company or entity or an agent or shipping

representative acting on theirbehalf The names of such related companies and entities all of

whom shall have the unrestricted benefila of this contract and be fully bound thereby are

listed at the end of this contract The party signing this contract as liMerchant warrants and

represonla that the list is true and complete that he willpromptly notify the Carriers in writ

ing of any future changes in the list and that he has authority to enter into this contract on

behalf of the said related companiea and entitiesso listed

In agreeing to confine the carriage of ila their shipmenla to the vessels of the Carriers the

Merchant promises and declares that itis his their intent to do so without evasion orsubter

fuge either directly orindirectly by any means including the use of intermediaries orpersons

firms or entitiea affiliated with orrelated to theMerchant

The Carriers agree that they will not provide contract rates to anyone Dot bound by a

merchant s rate agreement with the Carriers The Merchant agrees that he will not obtain

contract rates for any person not entitled to them including related companiea not bound by

this contract by making shipmenla under this contract on behalf of any such person

b I Ifthe Merchant has the legal right at the tlme of shipmentlO select acarrier for

the shipment of any goods subject to this Agreement whether by the expreased or implied

terms of an aareement for the purchase sale or transfer of such goods shipment for his own

account operation of law orotherwise the Merchant shall select one ormoreof the Carri

ers

2 IfMerchant s vendor orvendee has the legal right to select the carrier and fails

to exercise that right orotherwise permits Merchant to select the carrier Merchant shall be

deemed to have the legal right to select thecarrier

3 II shall be deemed a breach onhis Agreement if before the time of shipment

the Merchant with the intent of avoiding his obligation hereunder divests himself or with

the same intent permila himselfto be diveated of the legal right lO select the carrier and the

shipment is carried by acarrier not a

party hereto

4 For the purposes of this Article the Merchant shall be deemed prima facie to

have thelegal right at the time of shipment to lielect thecarrier for any shipment

a with reapeet to which the Merchant arranged orparticipated in the arrangements

for ocean shipment or selected or participated in the selection of the ocean carrier

or

b with respeetlO which the Merchant s name appears on the bill of lading or expOrl

declaration as shipper orconsignee

23 F M C
ALLIED CHEMICAL V FARRELL LINES PACE 385

was added pursuant to International Division s letter of August 16

1971 No such formal written notification was sent by International

Division to the Conference concerning ACIC

3 The two proceedings against ACT involve four shipments of one

or more 4O foot dry containers of polyamide yarn carried on a

house to house basis by ACT from Charleston or Norfolk to Melbourne

or Sydney under bills oflading issued to ACIC In the chart below for

each bill of lading by docket number are the number and issue date of

such bill oflading the date of payment and total amount offreight paid

by ACIC to ACT under such bill oflading and the BIC code serial

number of the containers13 carried under such bill oflading

d

Payment

Dkt No B L No Issue Date Date Freight Paid BIC Code No s

UFCU203831 7

ACTU288342 7

UFCU207909 1

ACTU2881199 6

ACTU288036 7

ACTU2885306

UFCU204765 9

4 The five proceedings against Farrell involve shipments of forty

two 4O foot dry containers of polyamide yarn carried on a house to

house basis by Farrell from Charleston to Sydney and Melbourne under

bills of lading issued to ACIC or Allied Chemical S A In the chart

below for each bill of lading by docket number are the number and

issue date of such bill of lading the date of payment and total amount

of freight paid by ACIC or Allied Chemical S A to Farrell under

such bill of lading and the BIC code serial numbers of the contain

ers14 carried under such bill oflading

Docket B LNo Date Issued Payment Freight Paid

No Date

78 42

78 55

78 55

6255959

6257141

6257150

119176

12128176

12128176

12 6 76

12177

126 77

4 922 24

4 834 89

9 669 79

78 55 6257168 1228176 12177 14 504 68

78 35 615 10 5176 10 27 76 39 388 79

78 43 608

609

11 3 76 1129 76 4 922 25

113 76 1129 76 44 300 23

BIC Code No

FRLL 2014431 9

FRLL 2016703

FRLL 201332 4

FRLL 201639 1

CTIU 414276 5

INTU 428284P

ICSU 204157

CTIU 411712

CTIU 4114346

ICSU 212144 7

FRLL 201123 4

FRLL 201600 4

13 Appendix I is a

full listing of those containers showing their inside cubic capacity in cubic feet

according to the manufacturer s plate affixed to each container

14Id

23 F M C
386 FEDERAL MARITIME COMMISSION

Docket

No

Payment

Date BIL No Date Issued Freight Paid

610 11 3 76 11 29 76 4 273 88

78 48 604 1124 76 12 20 76 10 017 40

606 11124 76 12 20 76 10 017 40

608 11 24 76 12 16 76 15 0269

612 1211 76 1110 77 10 017 40

7944 605

Sydney 4 2277 5 2277 4 909 52

605

Melbourne 422 77 5 2277 554 004 78

79 62 605 7 16 77 8 1677 4 925 04

BIC Code No

INTU 423129 0

FRLL 201148 7

FRLL 201175 9

CTIU 200703

FRLL 201080 8

ICSU 209711

FRLL 201561 

FRLL 201451

FRLL 201379 3

FRLL 201302 6

FRLL 201131 6

FRLL 201220 4

FRLL 201016 

FRLL 201513 7

CTIU 292617 7

INTU 432394 6

FRLL 201108 6

FRLL 201157 4

FRLL 201001 1

FRLL 201259 1

FRLL 201032 5

CTIU 415157 7

FRLL 20 646

FRLL 201279 7

FRLL 201071 0

ICSU 220017 1

FRLL 201437 8

SSIU 219131 6

SSIU 219053 6

FRLL 201191 2

Approximate

5 The tariff applicable to the foregoing shipments is the Conference s

Freight Tariff No 3 F MC No 12 U

In accordance with applicable

provisions of that Tariff ACT and Farrell performed the following

computations to determine the amounts they billed for freight charges

Step 1

Since the rate under the commodity item applicable to polyamide

yarn Tariff 15th revised p 306 Item 3236 is on a weight basis 16

16 See n 7 supra

18 A8 pertinent Item 3236 provides foracontract rateof 270 25 and anoncontract rate of 317 75

per ton of 2240 pounds from Atlantic Ports to Australia for shipments measuring not morethan 100

23 FMC
ALLIED CHEMICAL V FARRELL LINES PACE 387

ACT and Farrell applied TariffRule 31 c IB providing that the freight

on a 4O foot dry container would be assessed on the basis of not less

than 70 percent of the weight capacity thereof specified in Note 1 to

Rule 31 c l ie on the basis of not less than 34 580 lbs 70 percent of

49 400 pounds 17 Since the actual weight of the contents of each

container was less than 34 580 pounds the freight was calculated there

after on the basis that the cargo carried under each bill of lading

weighed 34 580 pounds for each container

Step 2

Pursuant to the Note to Item 3236 specifying procedures for deter

mining the exact number of cubic feet per 2240 pounds for each bill of

lading the cubic measurement per 2240 pounds was calculated on the

basis ofthe number of cubic feet of cargo specified in the bill of lading

divided by the weight of the cargo ie 34 580 pounds determined

under Step 1 above multiplied by 2 240

Step 3

Pursuant to the contract rate specified in Item 3236 each bill of

lading was given a base commodity rate of 270 25 per 2240 pounds

except for Farrell Bill of Lading No 615 where in the belief that

Allied Chemical SA was entitled to the rate in effect prior to a

contemporaneous rate increase that bill of lading was given a base

commodity rate of 24150 per 2240 pounds is

Step 4

The additional commodity rate applicable to each bill of lading

pursuant to the provisions of Item 3236 was calculated on the basis of

2 80 per ton of2240 pounds except for Farrell Bill ofLading No 615

where it was calculated on the basis of 2 50 multiplied by the amount

cubic feet per 2240 pounds For shipments over 100 cubic feet per 2240 pounds 2 80 per ton of 2240

pounds for each cubic foot over100 cubic feet would be addedto the rate

17 Tariff Rule 31 c entitled Assessment of Freight appears at 2nd revised p36 1st revised p37

and 3rd revised p

38 of the Tariff Rule 31 c lB provides as pertinent

1 Freight shaU be paid on the actual weight and or measurement of cargo in containers

but not less than

B Forty 40 Foot Containers Cargo freighted on weight basis 70 of the weight

capacity See Note 1

Note 1 provides as pertinent

For the purposes of this Tariff and the application of rates in determining the utilization

factors the containers shall be considered to have the following capacity

Type Length Cubic Weight

Dry 40 2200 49 400 lb

Allowances will be granted on cargo meeting the requirements of Rule 31 c 1 as follows

House to House An allowance of 10 of the total ocean freight charge up to amaximum

of 13 00 per ton

18 Following an informal conference attended by all parties Farrell submitted a

recomputation of

the freight charges for Bill of Lading No 615 The recomputation utilized the methodology described

in paragraph 5 but was based upon a base rate of 270 25 instead of 24150 The freight charges

should have been 44 300 22 instead of 39 388 79 as shown in paragraph 4 In the light of the conclu

sions which follow Farrell should determine whether an adjustment in its billing is required

23 FMC
388 FEDERAL MARITIME COMMISSION

by which the cubic measurement per 2240 pounds i e the amount

derived under Step 2 above exceeded 100 cubic feet per 2240 pounds

Step 5

The total commodity rate applicable to the shipment was calculated

by adding the amounts obtained under Steps 3 and 4

Step 6

The total freight payable on each bill oflading under Item 3236 was

calculated on the basis of the total commodity rate multiplied by the

weight of the cargo i e 34 580 pounds determined under Step I

above divided by 2 240

Step 7

Pursuant to Note 1 to Rule 31 c l a house to house container allow

ance in the amount of 13 00 per 2240 pounds was subtracted from the

amount obtained under Step 6

Step 8

In the case ofthe containers shipped with ACT under the three bills

of lading dated December 28 1976 pursuant to Tariff Rule 27 a

negative currency surcharge in the amount of 34719 percent was sub

tracted from the balance obtained under Step 7 In the case of the

containers shipped with Farrell under two bills of lading dated Apri

22 1977 and one bill of lading dated July 16 1977 pursuant to Rule

27 a negative currency surcharge in the amount of 19820 percent and

16721 percent respectively was subtracted from the balance obtained

under Step 7

6 Under the steps described in paragraph 5 above the freight

charged on each bill oflading amounted to the following

Tariff 14th revised p27

8

Tariff 15th revised p27

Tariff 16th revised p27

23 F M C
ALLIED CHEMICAL V FARRELL LINES PACE 389

ACT Bills ofLading Numbers

6255959 6257141 6257150 6257168

Step I in Ibs 34 580 34 580 69 160 103 740

Step 2 incu ft per

2 240 Ibs 122 124 124 124

Step 3 in per 2 240

Ibs 270 25 270 25 270 25 270 25

Step 4 in per 2 240

Ibs 6160 67 20 67 20 67 20

Step 5 in per 2 240

Ibs 33185 337 45 337 45 337 45

Step 6 5 122 93 5 209 38 10 418 77 15 628 15

Step 7 200 69 200 69 401 38 602 06

4 922 24 5 008 69 10 017 39 15 0269

Step 8 173 80 347 60 52141

Total Freight 4 922 24 4 834 89 9 669 79 14 504 68

23 F MC
390 FEDERAL MARITIME COMMISSION

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ALLIED CHEMICAL V FARRELL LINES PACE 391

7 Itis beyond cavil that absent the presence of Rule 31 c 6 in the

tariff the freight charges shown in paragraphs 3 4 and 6 above

satisfied the Tarifrs requirements 22 Indeed complainants have no

quarrel with the carriers method of arriving at the total freight charges

to this point 23

8 However in the belief that the wording of Rule 3 I c 6 which

provides that the total ocean freight charges shall not be based on

weight or measurement factors in excess of either the inside cubic

capacity or weight capacity as shown on the manufacturers plate af

fixed to the container is a rule which serves to supersede and further

diminish the minimum utilization24 rule embodied in Rule 31 c IB the

complainants have constructed a different methodology to compute

freight charges The following chart shows how that method affects the

minimum utilization and reflects the amount of freight charges which

would result if their method were employed The chart also compares

their result with the respondents computations and shows the differ

ence between the two methods under the column heading entitled

Amount Claimed

22This finding assumes that ACIC was entitled to contract rates

23Complainant s letter to me dated November 9 1979 p 2

24 Rule 31 c 1 is aminimum utilization rule one part of which Rule 31 c lA deals with measure

ment utilization while the other part Rule 31 c

lB deaJs with weight utilization

t 11 6r
392 FEDERAL MARITIME COMMISSION

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ALLIED CHEMICAL V FARRELL LINES PACE 393

DISCUSSION AND CONCLUSION

I RULE 31C 6

A The Rule is a maximum charge and not a maximum utilization rule

and clearly does not undercut the minimum utilization rule

Each complaint was filed under that portion of the Commission s

Rules of Practice and Procedure dealing with Shortened Procedure 26

Among other requirements the Shortened Procedure Rules provide for

a memorandum of arguments to accompany the complaint at the time

the complaint is filed 27

As indicated in Fact No 8 the complainants case is predicated on

the theory that Rule 31 c 6 overrides the minimum utilization rule in

the Tariff The argument they make in support of this theory in the

memoranda attached to the several complaints e g Memorandum at

tached to Complaint in Docket No 78 43 at p

iii is that Rule 31 c 6

of the Tariff limits freight charges to those based on the maximum

weight of the commodity shipped emphasis supplied that could be

loaded into the container

By way of explanation of their belief that Rule 31 c 6 means that

the carrier will not collect freight charges for cargo in excess ofthose

for a fully loaded container of the commodity shipped emphasis sup

plied 28 complainants note especially that Rule 31 c 6 limits the

allowable charges when either the weight or the measurement capacity

of the container would be exceeded if the 70 utilization factor is

used 29 They go on to point out that Here the 70 weight utilization

factor is 34 580 lbs which is more than the weight of this commodity

as shipped that a 2200 cu ft 40 container could actually hold 30

From this they conclude that Accordingly the maximum charges

must be those computed on the basis of the theoretical fully loaded

weight ofthis commodity 31

Rules 181 187 46 CF R 502 181 187

27 Rule 182 46 CF R 502 182

28 Memorandum attached to Complaint in Docket No 78 43 at p iii

29 d p

iv

30Id

31 Id

The cited Memorandum attached to the Complaint also made two other observations in sup

port of complainants argument First it noted that Rule 31 c6 is shown in the Tariff as a

reduction It is implicit in their theory although they do not expJicitly say that it is areduc

tion of charges computed under Rule 31 c lB Second it noted that it was not relying on the

cubic capacity shown on the manufacturer s plate affixed to the container to compute dam

ages under its theory of the case because the shipper would not as apractical matter even

look at the manufacturers plate on the containerMemorandum attached to the Complaint at

p

iii This statement was apparently the justification for using the utilization factor of 2200

cubic feet shown in Note I of Rule 31 c in computing damages initially Now that com

plainants have learned the actual cubic capacity seeAppendix I

they have recomputed their

damages Therecomputation is included in thechart in paragraph 8 of the Facts

1 Ji f r
394 FEDERAL MARITIME COMMISSION

All of this means according to complainants that to determine

what weight of the commodity shipped the containers could hold we

must find out what each cubic foot ofthe commodity weiaped 32 Thi

calculation is done by perfo ming the exercise of dividing the tota

actual weight by the number ofactual cubic feet the shipment measured

and multiplying that result by the cubic feet shown on the manufactur

er s plate The result of that exercise provides the weight factor

which the complainants contend that Rule 31 c 6

says cannot be ex

ceeded 33 The entries under the heading Weight in the third column

of the chart in paragraph No 8 of the Facts reflect the application o

this exercise to the shipments involved in this proceeding

At the informal conference see n 18 supra I directed complainants

to amplify their argument by explaining their understanding of the

word factor as it appears in Rule 3 1 c 6 By letter dated Septembe

17 1979 they made the following answer

Staying solely within the tariff itSelf you will note that the

word factor appears in two places in Rule 31 c Note 1 on

pase 37 speaks of determing the utilization factor and Rule

31 c 6 speaks of weight or measurement factors In Note 1

there is one column showing cubic capacities for the listed

types of containers and a second collUlUl showing the weight

capacities of the same containers The tariff provides that

freight will be assessed upon not less than 70 of the weight

capacity of the container Since in our cases the containers

were all forty foot dry containers the utilization factor would

be 70 of49 400 pounds or 34 580 poun s That is the w ight

factor not an actual weight but an arbitrary figure specified

by the carrier which when multtplied by the dollar rate

would normally resultin the total freight charge

But Rule 31 c 6 specities that the charges so obtained rate

times weight factor shalt not exceed those obtained by use of

a weight factor in excess of the inside cubicCJlpllcity of the

container In each case excepting the shipment under bill of

lading 610 the weight factor obtained by taking 70 of

49 400 pounds or 34 580 would indeed exceed the cubic ca

pacity of the container Rule 31 c 6 limits charges to the use

of a weight factor which is fiot in excess of the cubic capacity

ofthe container In other words what weight ofthe commod

ity as shipped would fit into the container used to carry that

shipment How much polyamide yam as actually shipped

could a 40 foot container theoretically hold That weigltt is

the maximum factor that may be used to compute the charges

Since Rule 31 c 6 applies unless otherwise specifled to the

assessment of charges for all shipments in containers and since

1

Reply Memorandumof Complainanl pp 45

33 Id l p

S

11 1
ALLIED CHEMICAL V FARRELL LINES PACE 395

some rates and rate items apply on a measurement basis and

some as here apply on a weight basis the rule speaks of

weight or measurement factors Ifthe actual weight of a given

shipment exceeds 70 ofthe weight shown in the last column

of Note 1 charges would be computed on that weight and the

weight factor would be irrelevant In any event 70 of the

cubic capacity of a container is a measurement factor and 70

ofthe weight capacity is the weight factor

The argument thus made by complainants has a surface allure but its

infirmity lies in its dependence upon a contrived misreading of Rule

31 c 6 a rule which simply has no bearing on the minimum utilization

requirements of container shipments 34 Indeed the contrived misread

ing itself turns upon complainants unilateral injection of language into

Rule 31 c 6 which that rule neither contains nor was intended to

contain either expressly or inferentially

The weakness of the complainants contentions becomes apparent

when the role of Rule 31 c IB and its interplay with Item No 3236 of

the Tariffand the purpose ofRule 31 c 6 are understood Rule 3l c IB

is a minimum utilization rule which provides that with respect to cargo

freighted on a weight basis rates will be assessed on a minimum of 70

percent of the weight capacity of the container if the actual weight of

the shipment is below that level This minimum utilization provision

acts to reduce complainants shipping costs because it is applicable to

bulky commodities such as yarn which has a high measurement to

weight ratio Under TariffItem 3236 such commodities are rated on a

weight basis although they are subject to minimum utilization require

ments in view of the deadfreight represented by the unused weight

capacity ofthe container

Because the minimum utilization rule requires the shipper to pay

freight on a certain amount of unused weight capacity TariffItem No

3236 allows the shipper to make use of the unused capacity for which

he is charged in calculating the measure of cubic feet per long ton of

cargo Thus Item No 3236 provides that where the minimum utiliza

tion provision applies a weight equivalent to the minimum utilization

factor rather than the actual weight of the cargo will be used in

determining the cubic measurement per 2 240 pounds For example as

reflected in the bills oflading in Docket No 78 43 these shipments had

actual weights and actual measurements as follows

1 Bill of Lading 608 one container at 23 215 pounds 10 36 long

tons measuring 1 890 cubic feet 182 cubic feet per long

ton

34 See letter dated February 14 1978 from Farrell to Ocean Freight Consultants Inc in Docket

No 784 declining polyamide yam claims filed on behalf of Allied Chemical Corp See also letter

dated March 8 1978 from the Conference toOcean Freight Consultants in Docket No 784 regard

ing those claims
396 FEDERAL MARITIME COMMISSION

2 Bill of Lading 609 nine containers totalling 208 918 pound

93 27 long tons with an aggregate measurement of 17 01

cubic feet 182 cubic feet per long ton

3 Bill ofLadin 610 one container at 24 862 pounds 110 lon

tons measuring 1 649 cubic feet 149 cubic feet per lon

ton

In calculating the applicable rate Farrell used the minimum weig

utilization factor of 34 580 pounds per container for all II container

As a result the number of cubic feet per long ton was factored in 

122 Bill of Lading 608 122 Bill of Lading 609 and 106 Bill 

Lading 610 instead of the actual cubic feet per long ton as the Tar

required

The unadorned language of Rule 31 c 6 makes its twofold purpose

clear It is designed to discourage overloading of containers beyon

their stated capacities as shown on the manufacturer s plate and 

assure that the shipper is not required to pay more for the shipme

than he would for a shipment weighing or measuring the amou

shown as the container s capacity 86 For example an item such as 

sailboat might fill out the stated cubic capacity of a container but st

leave room for the stowage of spare parts under portions of the curve

keel or transom Thus if the outside dimensions of the boat measure

2200 cubic feet but empty space in the container allowed stowage 

another 800 cubic feet of parts it would not be fair to charge th

shipper for more than the stated capacity of the container By limitin

the basis for total charges to the measurement or weight capacity ofth

container as shown on the manufacturer s plate this result is accom

plished and by accomplishing this result Rule 31 c

6 causes a redu

tion of tariff charges separate and apart from the operative provision

ofRule 31 c IAor B

But despite this clarity of purpose the complaints have innovative

restructured Rule 31 c 6 converting it from a maximum charge rule 

a maximum utilization rule This is demonstrated by the sequence 

elaborate calculations superimposed on the cumbersome Rule 31 c 

computations which they engaged in to show that if the cubic capaci

of a 40 foot container were loaded with polyamide yarn the weight 

the containers e g

in Docket No 78 43 would have been 28 6

pounds Bill of Lading 608 29 314 pounds Bill of Lading 609 86 an

35 959 pounds Bill of Lading 610 Therefore the complainants co

tend that except for the container carried under Bill of Lading 61

none of the containers could have physically accommodated 34 5

pounds the minimum utilization factor of polyamide yarn Applyin

86 This accounts for the cumbersome arithmetical computations under the minimum utilization ru

ae There were nine containers in this shipment The figure of 29 314 is an average arrived at 

dividing the weigbt shown in the 3rd column of the chart in paragraph No 8 of the Facts by n
ALLIED CHEMICAL V FARRELL LINES PACE 397

those computations to their argument complainants conclude that the

shipments except for Bill ofLading 610 were charged for on the basis

of a weight factor of the commodity shipped in excess of the inside

cubic capacity ofthe container

This restructuring of Rule 31 c 6 by complainants is not warranted

Rule 31 c 6 simply bars the assessment of freight charges based on

measurement or weight factors respectively 37 in excess of either the

inside cubic capacity or weight capacity as shown on the manufactur

er s plate affixed to the container Manifestly complainants error in

reading of the commodity shipped into the rule stems from their

failure to differentiate between weight or measurement factors as

used in Rule 31 c 6 and the weight and measurement utilization fac

tors as used in Rule 31 c Note 1 Conveniently and selectively the

complainants treat those factors as being one and the same merely

because the word factor appears in two places in Rule 31 c

A further reason for complainants construction of Rule 31 c 6 seems

to lie in the mistaken belief that because the minimum utilization rule

allows for constructive weight Rule 31 c 6 should be deemed to au

thorize theoretical weights However Rule 31 c clearly states that

freight shall be paid on the actual emphasis supplied weight and or

measurement of cargo except in those circumstances in which the

minimum utilization rule governs No similar exception is provided for

Rule 31 c 6 which addresses only maximum charges and not minimum

utilization

There are certain well established principles which serve as guides to

construing tariffs Some of the more pertinent principles of tariff con

struction and interpretation are as follows 38

a The terms used in a tariff must be read in the sense in

which they are understood generally and accepted commer

cially All of the pertinent provisions of a tariff must be con

sidered together and the reasonable construction which results

from such consideration is controlling

b Tariffs must be considered as a whole Theirintent is not

to be defeated by reason of the uncertainty of any particular

item if some other item in the same tariff clearly indicates

how the item should be construed

c Neither carriers nor shippers can be permitted to urge

for their own purpose a strained and unnatural tariff construc

tion

37 The meaning of Rule 31 c6 is clear and not ambiguous even though the word respectively

does not appear This does not mean that the rule could not be improved grammatically by the inclu

sion of that word oraterm such as measurement orfreight factors as freighted But theabsence of

grammatical purity in this instance scarcely calls for adetermination of ambiguity or lack of clarity

38 See National Cable and Metal Co v American Hawaiian Steamship Company 2 U8 M C 470 473

1941 Docket No 37027F Scope Imports Inc v The Atchision Topeka and Santa Fe Railway Compa

ny Interstate Commerce Commission Decision Decided January 28 1980 Slip opinion at p 3

lJ1 Mi
398 FEDERAL MARITIME COMMISSION

The application ofthose principles to the tariff provisions involved in

this proceeding underscores the conclusion that complldnants interpre

tation of Rule 31 c 6 is tortured illogical and unfair This may be seen

from a brief examination of the shipment carried under Bill of Lading

No 609 in Docket No 78 43

The cubic measurement carried in each container was arrived at not

by the volume of the commodity shipped but by the volume of the

cartons in which the commodity was packed Each ofthe nine contain

ers held 108 cartons measuring 1 890 cubic feet However the weight

of those 108 cartons varied from 22 227 pounds to 23 640 pounds 59 I

does not take the wisdom of a Solomon to recognize that unde

complainants construction of Rule 31 c 6 a shipper could configure its

shipments in such a way that it could obtain transportation for a lowe

cost than it could under a minimum utilization rule even though it is

well known and understood that a minimum utilization rule is designed

as a pricing floor for the carriage of a container 40 It is just not

plausible to reason that the Conference introduced Rule 31 c 6 in its

tariff to subvert the minimum utilization rule Yet it would take just

such logic to give Rule 31 c 6 the meaning that complainants attribute

to it

While it is quite correct to say as complainants do that Tariffs are

to be interpreted according to the reasonable construction of thei

language neither the intent of the framers nor the practice of the

carriers controls for the shipper cannot be charged with knowledge o

such intent orwith the carrier s canons of construction National Cable

Metal Co v American Hawaii 8S Co 2 U S MC 470 473 It is the

meaning of express language employed in the tariff al1d not the unex

pressed intention which controls Aleutian Homes Inc v

Coastwise Line 5 F MB 602 608 it is inappropriate to conclude tha

those rules ofconstruction militate in favor of the complainants argu

ment In the context of the tariff as a whole Rule 31 c 6 clearly and

unambiguously expresses its framers intent It is not applicable to the

shipments in this proceeding 41

B Assuming Rule 31 c 6 does supersede the minimum utilization rule

reparation would be inappropriate

Moreover even if there were some merit to complainants theory

that Rule 31 c 6 does apply to the shipments because somehow despite

38 cr Docket No 784 in which the carton each measured 1 901 cubic feet but weighed anywhere

from 2O S77 pounds to 23S66 pounds

0

It is significant that theonly shipment carried in bales as opposed to cartons weighed morethan

34 S80 pounds It is th shipment under Bill of Ladin No 610 in Docket No 784 whioh complain

ants agree was not subject to its version of Rule31 0 6

Inasmuoh as it has been determined that Rule 31 06 is not applloable to any of the shipments in

this proceeding it is not necessary to ensage in adiscussion of subordinate contentions proffered by

respondents dealing with errors inmethodology in computins oharges under Rule 31 06

1 Mr
ALLIED CHEMICAL V FARRELL LINES PACE 399

a patent contrary intent the Conference drafted that rule in such a way

that it could only be construed to have created a new and lower

minimum utilization floor there has been no showing calling for the

exercise ofthe Commission s discretion in favor ofreparation

The complainants have not come forward with any evidence to

establish that they acted to their detriment in reliance upon a

rationally

formed belief conceived of prior to the shipments that Rule 31 c 6

applied to those shipments or that they were otherwise harmed 42 In

making this statement Iam mindful that the Commission has disavowed

equity theories generally in section 18 b 3 overcharge cases involv

ing misdescription of cargo or incorrect weights or measurements and

has awarded reparation without a showing of shipper reliance or

damage even where it was the shipper s fault that he was overcharged

because in those cases it is what was actually shipped that determines

the rate See e gThe Carborundum Company v Royal Netherlands

Steamship Company Antilles M v 19 F MC 431 435 436 1979 Pan

American Health Organization v Prudential Lines Inc 19 F MC 412

414 415 1976 Durite Corporation Ltd v Sea Land Service Inc 20

F MC 674 1978 Order on Reconsideration November 8 1978 unre

ported afrd without opinion sub nom Sea Land Service Inc v Feder

al Maritime Commission 610 F 2d 1000 D C Cir 1978

This is however neither a misdescription misweighing or mismea

surement case and is distinguishable in that respect It is well estab

lished that an award of reparation under section 22 is not a mechanistic

act dismembered from the judicial function In United States v Colum

bia Steamship Company 17 F MC 8 9 10 1973 the Commission

emphasized the discretionary nature of an award of reparation as

follows

This avenue of relief provided by section 22 however as

clearly stated and maintained is discretionary and permissive

and the mere fact that a violation of the Act has been found

does not in itself compel a

grant of reparation Consolo v

Flota Mercante Grancolombiana 783 U S 607 1965 Ballmill

Lumber v Port of New York et al II F MC 494 510 1968

In Columbia Steamship the Commission refused to award reparation

despite a finding that the carrier had overcharged a shipper in violation

of section 18b 3 The shipper and carrier had negotiated a rate which

was higher than the rate shown in the carrier s tariff but due to error

the carrier neglected to file the higher rate The carrier charged the

shipper the higher rate and the shipper paid In denying the prayer for

reparation the Commission stressed 17 F MC at 9

4Z The record merely shows that Ocean Freight Consultants Inc filed its claims on behalf of com

plainants long after the shipments took place There is no evidence that either respondent everapplied

Rule 31 c6 in themanner urged by complainants to shipments of any other shipper

1 J4 Mr
400 FEDERAL MARITIME COMMISSION

That application of the negotiated rate was a foregone

conclusion by both parties is clearly shown by subsequent

issuance ofrespondent s Bill ofLading No 1 and the payment

by complainant of the negotiated rate stated therein without

demurrer Further when the discrepancy was found pursuant

to audit six months after payment this error was not brought

to respondent s attention for an additional five months thereaf

ter

The circumstances in the case at bar bear a striking similarity to th

ones found to be controlling in Columbia Steamship even if Rule 3l c 

accomplishes what complainants say it does From October 1976 com

plainants had actual knowledge of the minimum utilization rule an

paid the charges computed under that rule for the first time on Octob

27 1976 They continued to place their shipments for the next nin

months through July 1977 in the certain knowledge that the minimum

utilization rule applied to those shipments and paid the charges compu

ed under that rule without protest during that time 43

II CONTRACT RATES

The argument made by the respondents which would deny to r

spondent ACIC its entitlement to contract rates seems to be a reflexiv

response to a lawsuit and is not well taken

Unquestionably Allied Chemical Corporation s International Div

sion did not fulm to the letter the requirements ofthe Merchant s Ra

Agreement by notifying the Conference in writing that ACIC shou

be added But the Merchant s Rate Agreement does not become mut

ally binding on the Conference s member lines and shippers solely b

the act of written notification Paragraph 2 a makes the agreeme

binding on the Merchant its subsidiaries and related companie

which engage in the shipment of commodities in the trade covered b

the Rate Agreement over whom the Merchant regularly exercises d

rection and working control in relation to shipping matters

In the first place it ill behooves the respondents to infer that th

charging of contract rates to ACIC was inadvertent or an oversight 

is patent that respondents never varied their practice of charging th

contract rates to ACIC because they considered ACIC to be as muc

bound by the Rate Agreement as Allied Chemical Corporation itse

Indeed Allied Chemical Corporation construed the Rate Agreeme

to be binding on all twelve sales and marketing subsidiaries which mak

up the International Division ACIC is one of those subsidiaries A

affidavit signed by Allied Chemical Corporation s Manager ofDistrib

43 Complainants offered no evidence to show when an audit of charges was made or when 

alleged error was discovered Neither does the record dl8close precisely when the alleged error w

brought to reapondent s attention although therecord does reveal that Farrell declined someclaims 

February 1978 See n 42

RUt
ALLIED CHEMICAL V FARRELL LINES PACE 401

tion Operations states that since becoming a signator of the Dual Rate

Agreement with the U S Atlantic and GulfAustralia New Zealand

Conference we have made our shipments between ports covered by

this agreement on conference vessels 44

A letter sent by that Manager to the Conference confirms the mutu

ality of the understanding 45 He wrote

We have heretofor considered Allied Chemical Corporation

International Division to be the merchant whose shipments

were covered by the contract regardless of which of its oper

ating subdivisions was shown as shipper The conference carri

ers have obviously agreed with our understanding since all

shipments were assessed the contract rates regardless of which

company was shown as shipper 46

The record is clear then that as a matter of custom and usage the

Conference considered ACIC bound by the Rate Agreement and enti

tled to contract rates and that Allied Chemical Corporation considered

itself bound to utilize the Conference s carriers for all ACIC shipments

Custom and usage cannot vary the terms of a tariff But custom and

usage as demonstrated by the actions of the carrier and shipper are

useful and reliable factors to be considered in determining the meaning

of a tariff item Cf Aleutian Homes Inc v Coastwise Line supra 5

F MB at 608 609 Here there is no room for doubt that both the

Conference s member lines and Allied Chemical Corporation consid

ered ACIC shipments to be governed by the terms of the Merchant s

Rate Agreement

SUMMARY

The complainants have failed to establish that they were over

charged on shipments of polyamide yarn during 1976 and 1977 in

violation of section 18b 3 of the Shipping Act 1916

In computing the freight charges the respondents properly applied

appropriate tariff provisions to the shipments The shipments as perti

44Affidavit dated February 9 1979 attached to Reply Memorandum of Complainant

45 Letter dated January 19 1979 The letter poses an intricate question to the Conference pointing

up the frivolous nature of the defense asserted by the respondent The question which remains unan

swered by the Conference reads as follows

OUf records indicate that notification to this conference of various subsidiaries which

change from time to time has not been made We win if necessary remedy this situation in

the near future Before doing so however please advise us if our failure to list aspecific

division places such divisions outside the coverage of the dual rate agreement for shipments

made in the subsidiaries name even if the controlling or parent company is the signator If

this is the case we could be in a position to list only afew subsidiaries and ship via non

conference or conference carriers at our discretion to all areas where we have agreements

46 An attachment to the Reply Memorandum of Complainant establishes that during 1978 the only

year for which records were available at the time the memorandum was prepared various Allied

Chemical Corporation s subsidiaries were charged contract rates for 118 shipments carried by 6 differ

ent member lines of theConference

21 F M C
402 FEDERAL MARITIME COMMISSION

nent to this proceeding were governed by Tariff Item No 3236 an

Rule 31 c 1 which together established a pricing floor for the ship

ments based on constructive weights determined by a minimum utiliza

tion rule Complainants argument which would make Rule 31 c 6 o

the Tariff applicable to the shipments is without merit Rule 31 c 6 is 

maximum charge rule which becomes operative only when containe

capacities are actually exceeded Patently the latter rule cannot b

made to apply to shipments whose charges are subject to the construc

tive weight determinations made in accordance with the minimum

utilization rule

There is no merit to the respondents contention that ACIC is no

entitled to the Tariffs contract rates Although there was no forma

written notification given to the Conference that the Merchant in

tended that ACIC be bound by the terms of the Merchants Rat

Agreement the course of conduct adhered to by the Merchant an

the Conference s member lines clearly shows that the parties to th

Rate Agreement deemed its terms binding on ACIC

ORDER

In accordance with the foregoing the complaints filed in the consol

dated proceeding are dismissed

S SEYMOUR GLANZER

Administrative Law Judge

Washington D C

July 24 1980

23 F MC
ALLIED CHEMICAL V FARRELL LINES PACE 403

APPENDIX I

Inside Cubic

Dkt No BLNo BIC Code No s Capacity in cu

ft

78 35 615 FRLL 2014431 9 2 385

FRLL 201670 3 2 385

FRLL 201332 4 2 385

FRLL 201639 1 2 385

CTIU 414276 5 2 362

INTU 428284 P 2 398

ICSU 204157 2 381

CTIU 411712 4 2 400

CTIU 411434 6 2 400

78 42 6255959 UFCU 203831 7 2 386

7843 608 ICSU 212144 7 2 313

609 FRLL 201123 4 2 385

FRLL 201600 4 2 385

INTU 423129 0 2 377

FRLL 201148 7 2 385

FRLL 201175 9 2 385

CTIU 200703 2 389

FRLL 201080 8 2 385

ICSU 209711 2 381

FRLL 201561 1 2 385

610 FRLL 201451 2 385

78 48 604 FRLL 201379 3 2 385

FRLL 201302 6 2 385

606 FRLL 201131 6 2 385

FRLL 201220 4 2 385

608 FRLL 201016 1 2 385

FRLL 201513 7 2 385

CTIU 292617 7 2 400

612 INTU 432394 6 2 378

FRLL 201108 6 2 385

78 55 6257141 ACTU 288342 7 2 360

6257150 UFCU 207909 1 2 398

ACTU 2881199 6 2 360

6257168 ACTU 288036 7 2 360

ACTU 288530 6 2 378

UFCU 204765 9 2 386

23 F MC
404 FEDERAL MARITIME COMMISSION

APPENDIX I Continued

Inside Cubic

DkNo BIL No BIC Code No s Capacity in cu

ft

7944 6OS Sydney FRLL 2011S7 4 2 38S

6OS Melboume FRLL 201001 1 2 38S

FRLL 2012S9 1 2 38S

FRLL 201032 S 2 38S

CTIU 41SIS7 7 2 400

FRLL 201S646 2 38S

FRLL 201279 7 2 38S

FRLL 201071 0 2 38S

ISCU 220017 1 2 460

FRLL 201437 8 2 38S

SSIU 219131 6 2 394

SSIU 219OS3 6 2 394

79 62 6OS Melboume FRLL 201191 2 2 38S

23 FMC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 774 F

EXIM LTD

v

KUEHNE NAGEL

ORDER

November 13 1980

This proceeding has been referred to the Commission by Administra

tive Law Judge Paul J Fitzpatrick while he holds in abeyance a

Motion to Dismiss filed by Kuehne Nagel The Presiding Officer

notes that the status of Kuehne Nagel S A and Kuehne Nagel

Overseas Corp is somewhat unclear and suggests that the Commis

sion s staff conduct an investigation to clarify this matter and take

appropriate action

The Commission agrees that the role of both Kuehne Nagel

S A and Kuehne Nagel Overseas Corp requires further explora

tion However a staff investigation is not necessary to answer the basic

question of whether the proper party is before the Commission It

would appear that the Presiding Officer has the authority and the

means under the Commission s Rules to explore these questions and

dispose of the matter before him Therefore the Commission is refer

ring this case back to the Presiding Administrative Law Judge for such

further proceedings as he deems appropriate

By the Commission

S FRANCIS C HURNEY

Secretary

23 F M C 405
FEDERAL MARITIME COMMISSION

DOCKET NO 79 104

SPECIFIC COMMODITY RATES OF FAR EASTERN

SHIPPING COMPANY IN THE PHILIPPINES U S

PACIFIC COAST TRADE

ORDER ON RECONSIDERATION

November 17 1980

Sea Land Service Inc has petitioned the Commission to reconsid

its Report and Order in this proceeding served on August S 1980 Se

Land requests review ofthat portion ofthe Report and Order declinin

to find rates of the Far Eastern Shipping Company FESCO o

Reefer Cargo other and Fruit Juice Concentrates unjust and u

reasonable in violation of section l8 c of the Shipping Act 1916 4

V S C 817 c FESCO and the Commission s Bureau ofHearing Cou

sel have filed replies in opposition to the Petition

In its Report and Order the Commission noted that FESCO s tot

charges for these commodities were significantly less than those of th

Philippines North America Conference and Seatrain Pacific Service

S A a comparable independent carrier in the trade Nonetheless th

Commission did not disapprove the subject rates finding that

these rates have also had a minimal impact on the trade because 

FESCO s failure to carry any cargo under them in 1979 See Exhib

IS Report and Order at 12

Sea Land contends that this finding is based on a substantive err

in material fact one of three acceptable grounds for a petition f

reconsideration See 46 C F R S02 261 a It maintains that FESC

could not have carried any reefer cargo under those rates in 19

because they were suspended by the Commission on December 2

1979 before they ever became effective Sea Land additionally fea

that if the perceived rationale for the Commission s decision is uphel

non controlled carriers will have to await injury in the form of r

duced market shares before a controlled carrier s lower rates are ev

disapproved This result claims Sea Land is contrary to Congres

intent in enacting the Ocean Shipping Act of 1978

FESCO and Hearing Counsel make essentially the same arguments 

opposition to Sea Land s Petition They note that Sea Land has take

one sentence out of the Commission s Report and Order in an effort 

establish a substantive error of material fact However these partie

assert that if this one sentence is viewed in the context of the enti

406 23 F M C
SPECIFIC COMMODITY RATES OF FAR EASTERN SHIPPING 407

co

Report and Order its meaning becomes clear and unambiguous In

addition Hearing Counsel argues that Sea Land has questioned this one

aspect of the Report and Order simply as a

pretext for challenging the

Commission s determination in this case that some sort of harm must

be evident before rates will be disapproved solely on the basis of rate

differentials

DISCUSSION

Sea Land is indeed correct that FESCO could not have carried any

fruit juice concentrate or reefer cargo under the subject rates because

they were suspended prior to their implementation Thus the statement

that these rates have also had a minimal impact on the trade because

of FESCO s failure to carry any cargo under them in 1979 may in

isolation be misleading However Exhibit 15 which was cited by the

Commission as its basis for this statement indicates that FESCO carried

no fruit juice concentrate or reefer cargo under any commodity de

scription in 1979 The point being made was that neither the subject

rates nor any predecessor rates for these particular commodities were

shown to have caused or could be expected to cause any identifiable

harm or injury to this trade When the finding to which Sea Land

objects is read in context the Commission s basis for not disapproving

these rates is abundantly clear Though FESCO s rates on Reefer

Cargo other and Freight Juice Concentrates were somewhat lower

than rates offered by relevant competitors the Commission was unable

to conclude on this record that they would have a detrimental impact

on the trade

Sea Land s broader argument concerning the Commission s reliance

on injury or harm in the form of market penetration is inappropriate

for a petition for reconsideration In any event Sea Land s position

that for rate comparison purposes the Commission should ignore the

impacts of a controlled carrier s rates on a given trade seems unwar

ranted The Commission has never stated that in all cases where rate

comparisons are employed it will require the sustaining of injury

before it disapproves a rate There may well be circumstances where a

controlled carrier s rate is so much lower than those offered by its

competitors that the Commission will find such rates unreasonable

solely on that basis However in cases like this one where the differen

tial in total charges is not extreme the Commission will examine inter

alia whether there will be or has been market penetration or other

injury to the trade as a result of the subject rate or its predecessors

before disapproving them Such considerations are clearly within the

realm of other appropriate factors which the Commission is permit

ted to consider under the Ocean Shipping Act of 1978 46 VS C

817 c

23 F M C
408 FEDERAL MARITIME COMMISSION

THEREFORE IT IS ORDERED That the Petition for Reconsid

eration filed by Sea Land Service Inc is hereby denied

By the Commission

S FRANCIS C HURNEY

Secretary

Chairman Richard J Daschbach dissenting and issuing a

separate opinion

2El l r
SPECIFIC COMMODITY RATES OF FAR EASTERN SHIPPING 409

co

Chairman Richard J Daschbach dissenting

I disagree with the majority s decision to deny Sea Land Service

Incs petition for reconsideration of the Commission s August 5 1980

Report and Order in Docket No 79 104 Specific Commodity Rates of

Far Eastern Shipping Company in the Philippines US Pacific Coast

Trade

Although I concurred in the issuance of the Commission s order in

Docket No 79 104 I believe that we made a mistake That order

reflects a serious misunderstanding of the purposes of the Ocean Ship

ping Act of 1978 P L 95 483 and the gravity of the threat that led to

its enactment Regardless of whether the Commission can or should

change its findings on the eight commodity rates in question it must

recognize the flaws in its reasoning in order to ensure strict and effec

tive administration ofthe controlled carrier statute in the future

In reaching its conclusion in this proceeding the Commission

1 Ignored the clear intent ofthe Congress to place the burden of

proof on state controlled carriers whose rates have been sus

pended under section l8 c ofthe Shipping Act

2 Went beyond the four factors enumerated in that law for

determining whether rates are just and reasonable despite the

fact that additional tests were not needed to make a finding on

the reasonableness ofFESCO s rates and

3 Established a

vague standard requiring the Commission to

determine whether a controlled carrier s rates cause harm to a

given trade This new test may prove impossible to effectively

apply in future rate proceedings under the controlled carrier

statute thus creating a major loophole in the law

In its December 28 1979 Order to Show Cause the Commission

stated that under the circumstances presented particularly since only

individual commodity rates are being considered the Commission be

lieves that the last three factors set forth in section l8 c 2 are those

most appropriate to its decision It reiterated that no statements here

should be construed to shift the burden of proof under section 18 c

which lies with the controlled carrier whose rates have been suspended

This direction to FESCO was consistent with the Commission s final

order in Docket No 79 10 Rates of Far Eastern Shipping Company

which found that the second and third factors set forth in section

18 c 2 of the Shipping Act are those most appropriate in determining

the justness or reasonableness of a controlled carrier s individual com

modity rates

The Commission therefore clearly delineated the factors under which

FESCO needed to satisfy its burden ofproof in order to show that its

rates werejust and reasonable
410 FEDERAL MARITIME COMMISSION

Did FESCO justify its rates by showing that they were the same 

or similar to those filed or assessed by other carriers in the same trade

section 18 c 2 ii

No

Did FESCO prove that its rates were required to assure moveme

of particular cargo in the trade section 18 c 2 iii

No

Did FESCO show that its rates were required to maintain accept

ble continuity level or quality of common carrier service to or fro

affected ports section 18 c 2 iv

No

FESCO thus failed to sustain its burden ofproof and the subject rate

should have been disapproved as unjust and unreasonable

It is disturbing that some consideration of equity apparently motiva

ed the Commission to provide FESCO with yet another means 

showing that its rates were just and reasonable

It is essential for the Commission to understand the rationale of th

Congress in empowering it to develop criteria beyond those provide

in the statute

The law authorizes the Commission to employ alternative factors 

order to give it optimal flexibility in controlled carrier rate proceeding

It is not intended to provide the carrier with another bite at the apple

when it has failed to justify its rates under criteria embodied in th

statute and speciticallydelineated in the Commission s Order ofSuspe

sion as the tests which must be met

Furthermore the criterion which the Commission chose to add to i

arsenal in enforcing the law a showing of harm to the trade or inju

to its participants establishes a troublesome precedent Although th

Congre811 clearly intended the controlled carrier statute to prevent har

caused by predatory rate cutting this new criterion would enable th

Commission to take action in controlled carrier rate proceedings on

after a showing that damage had already been done undermining th

basic purpose ofthe law

Finally any additional factors that we use to supplement those a

ready enunciated in the statute should be clear and precise Requiring 

showing of harm to a particular trade carries us into vague and amo

phous territory particularly in a volatile trade influenced by a varie

of political and commercial factors What constitutes actual harm

From whom do we obtain that information How do we establish 

i clear correlation between disruption that is found in an entire trade an

I the rate established by a single carrier in that trade on any given sing

commodity

This test inappropriately transfers the burden of proof from th

controlled carrier to the Commission and it frustrates our obligation 

provide the liner shipping industry with clear and precise regulation
SPECIFIC COMMODITY RATES OF FAR EASTERN SHIPPING 411

co

In reviewing our responsibilities under the controlled carrier statute

we must bear in mind the circumstances that distinguish our activities

under this law from other areas in which we exercise far more limited

rate regulation The Ocean Shipping Act of 1978 was not simply an

extension of our regulatory authority but an expansion ofthat authority

for the express purpose ofprotecting privately owned steamship lines

and the U S foreign commerce from the predatory rate cutting of

certain state controlled carriers

The Congress viewed the rate cutting of state controlled carriers as a

dangerous threat to our commerce The Commission must consider its

actions under the controlled carrier statute within the context of that

threat Before a misguided sense of equity encourages us to grant

controlled carriers opportunities for justifying their rates not contem

plated by our governing statute we should remember that it was

inequitable and unfair competition that led to enactment of the con

trolled carrier statute in the first place

Ibelieve that we have strayed from this realization in our final order

in Docket No 79 104 Iwould therefore grant Sea Land s petition for

reconsideration so that we might have the opportunity to reject the

new standard oftrade disruption we have created and nullify its poten

tial for interfering with our mandate to protect participants in the U S

foreign commerce from predatory rate cutting

Sea Land s petition is properly founded on a material error of law

The Commission s order of August 5 1980 specifically errs in creating

an unnecessary and ambiguous new factor for determining the reason

ableness of a controlled carrier s suspended rates which improperly

transfers the burden of proof for making that determination from the

carrier to the Commission The August 5 order also commits the larger

error of failing to diligently adhere to our strict legal obligation under

the Ocean Shipping Act of 1978 to vigorously combat unfair competi

tion
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 566 1

EXCAM INC

v

LYKES LINES AGENCY INC AND

COSTA LINE

DENIAL OF PETITION FOR RECON5IDERATION

November 18 1980

The Commission by order served August 29 1980 in this proceedi

determined that claimant had failed to prove its claim The Commissio

determined that the shipments in question were not shown to be oth

than as described on the bills of lading The bills of lading describ

them as firearms and rifles They were rated as firearms Claim

ant had sought a rating for replica arms The August 29 1980 ord

allowed claimant an additional opportunity to submit evic lence to su

port its contention

Claimant now has submitted various materials most of which dup

cate what was already in the recorc l The only new materials a

catalogues describing various products of claimant These catalogu

contain descri tions both of replica arms and of firearms The ca

logues are of no value in proving the claim because nothing has be

furnished to show that the pmicular items shipped match any partic

lar catalogue item If anything the invoice which was originally in t

record and resubmitted now would suggest that the items were n

replica arms because they describe the items as percussion rifle

Based on the foregoing it is determined that the petition for recons

eration should be denied It is 80 ordered

By the Commission

5 FRANCIS C HURNEY

Secretary

Commis ioner Teige not participating

Vice Chairman Kanuk dlssenttng

I believe that complainant has met its burden of proof and therefore I would affirm the

SettlementOfficer sdecision awardina reparation
FEDERAL MARITIME COMMISSION

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 23 REVISED DOCKET NO 80 34

PART 524 EXEMPTION OF CERTAIN AGREEMENTS FROM

THE REQUIREMENTS OF SECTION 15 SHIPPING ACT 1916

November 18 1980

Final Rule

The Federal Maritime Commission exempts from the

filing and approval requirements of section 15 of the

Shipping Act 1916 46 U S C 814 non exclusive

equipment interchange agreements between common

carriers by water

DATE Effective November 28 1980

SUPPLEMENTAL INFORMATION

On May 8 1980 the Commission instituted this proceeding to exempt

non exclusive equipment interchange agreements from the approval re

quirements of section 15 of the Shipping Act 1916 45 FR 35368

Section 35 of that Act 46 U S C 833a provides that the Commis

sion upon application or on its own motion may by order or rule

exempt any class of agreements between persons subject to the Act or

any specified activity of such persons from any requirements of the

Act where it finds that such exemption will not impair effective regula

tion by the Commission be unjustly discriminatory or be detrimental

to commerce

Equipment interchange agreements on file with the Commission gen

erally fall within these categories

1 container chassis and related equipment interchange agree

ments

2 agreements involving the management of the equipment as

well as the exchange of containers chassis and related equip

ment

3 agreements covering only the repair and maintenance of con

tainers chassis and related equipment and

4 interchange of LASH SEABEE barges

These types of agreements are generally approved by the Commis

sion

ACTION

SUMMARY
414 FEDERAL MARITIME COMMISSION

Except as hereafter noted commentators supported the rule on prin

ciple Some commentators argued however that the advance filing o

agreements for informational purposes substantially defeats the objec

tives ofthe proposal They contend that the advance filing requiremen

is burdensome in terms of carriers needs to act quickly to meet oper

ational requirements as they occur

One carrier urged that the exemption be expanded to include agree

ments between carriers and other persons subject to the Shipping Ac

to recognize the possible involvement of a terminal operator in routine

equipment interchange operations In addition it was suggested that the

format provision be deleted because it is optional except for the inde

pendent agent requirement which it believes is inappropriate unneces

sary and commercially frustrating This carrier would also include

loaded as well as empty containers within the exemption

Another carrier requests the Commission to continue full section 1

scrutiny over these agreements because the art of equipment inter

change is presently unsettled due to changes in railroad procedures fo

repositioning equipment which may substantially increase costs to wate

carriers Accordingly it is recommended that the matter be postponed

pending inquiry into the changed competitive circumstances brough

about by railroad repositioning plan modifications and their impac

upon ocean carriers

A port authority opposed the exemption because of concerns tha

such agreements if exempted could provide a means of discriminating

between ports shippers and classes of traffic or commodities by con

trolling the availability of equipment or by diverting equipment to

larger ports favored shippers or higher revenue yielding cargo As 

minimum the port authority requests assurances from the Commission

that the anti discriminatory remedies of sections 16 17 and 22 of the

Shipping Act will continue to be available

Based upon the comments the Commission has decided to exemp

equipment interchange agreements but without the advance filing the

independent agent and format requirements

With respect to the suggestions to include other persons within the

scope ofthe exemption and to extend the exemption to loaded contain

ers the Commission will study those suggestions further since it canno

now gauge the impact ofthe proposals and since they were not noticed

for comment

The proposal to defer the rule is not persuasive There is a demon

strable justification for the exemption now and if conditions change a

a result of railroad practices or other factors the Commission can

readily readdress the situation

Concerns that the exemption may be used in a discriminatory manne

will be met by specifically noting the continuing availability of the

Shipping Act s anti discrimination provisions The action here affects
EXEMPTION OF CERTAIN AGREEMENTS

section 15 requirements only and all other provisions of the Act will

remain fully applicable

Finally a clarifying change has been made to the existing definition

of nonexclusive transshipment agreement to indicate that a through

route and not a through rate is the substance of such an agreement This

exemption as modified will not substantially impair effective Commis

sion regulation of common carrier practices result in unjust discrimina

tion or be detrimental to commerce

NOW THEREFORE pursuant to sections 15 35 and 43 of the

Shipping Act 1916 46 D S C 814 833a and 841a IT IS ORDERED

That effective upon publication in the Federal Register Title 46 CFR

Part 524 is revised to read as follows No changes have been made to

section 524 1 Former sections 524 3 524 4 and 524 have been redes

ignated sections 524 4 524 5 and 524 6 respectively The section title of

former 524 3 now 524 4 has been revised as indicated below

PART 524 Exemption of Certain Agreements from the Require

ments ofSection 15 Shipping Act 1916

sec

524 1

524 2

524 3

524 4

524 5

524 6

524 7

524 1

524 2

Statement ofpolicy and purpose

Definitions

Exemption ofagreements

Conditions for exemption oftransshipment agreements

Form ofconnecting carrier agreements

Termination of approved transshipment agreements

Optional Section 15 approval

Statement ofpolicy and purpose

same

Definitions

a A nonexclusive transshipment agreement for the purpose of

this Part is an agreement between a carrier serving a

port of

origin and a carrier serving a port of destination to establish a

through route between such ports via an intermediate port at

which the cargo is transferred which agreement does not

prohibit either carrier from entering into similar agreements

with other carriers

b

Nonexclusive equipment interchange agreement is an

agreement between two or more common carriers by water

for the exchange of empty containers chassis empty LASH

SEABEE barges and related equipment which agreement

does not prohibit a carrier from entering into similar agree

ments with other carriers and which provides only for trans

portation of the equipment as required payment management

ofthe logistics oftransferring handling and positioning equip

415
416

524 3

524 4

524 5

524 6

524 7

FEDERAL MARITIME COMMISSION

ment use repair and maintenance damages and liability inci

dental to the interchange of equipment and no other subject

Exemption ofagreements

Agreements defined in section 524 2 shall be exempt from the

provisions of section 15 provided in the case of a nonexclu

sive transshipment agreement the conditions contained in sec

tion 524 4 and the form requirements of 524 5 are met

Conditions for exemption of transshipment agreements same

as present 524 3

Form of connecting carrier agreements same as presen

524 4

Termination of approved transshipment agreements same as

present 524 5

Optional section 1japproval Notwithstanding the provisions o

this section persons who desire approval ofagreements other

wise exempt under this Part may petition the Commission fo

section 15 determination in accordance with Part 522

By the Commission

5 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 79 94

ALL FREIGHT PACKERS FORWARDERS INC

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE APPLICAnON

ORDER DENYING PETITION FOR RECONSIDERATION

November 25 1980

On August 26 1980 the Commission issued an Order in this proceed

ing adopting the Initial Decision of Administrative Law Judge Joseph

N Ingolia holding that All Freight Packers Forwarders Inc was

fit willing and able to carryon the business of freight forwarding but

assessing a civil penalty of 5 000 00 for unlicensed forwarding activi

ties

All Freight has now filed a petition pursuant to Rule 261 of the

Commission s Rules of Practice and Procedure 46 C F R 502 261

seeking reconsideration of the Commission s Order Adopting Initial

Decision The Commission s Bureau of Hearing Counsel has filed a

reply in opposition to the petition

In its Petition All Freight states that it does not disagree with the

fmdings of the Commission concerning the violations of section 44 or

the fitness of the firm to carryon the business of freight forwarding

but seeks a reduction ofthe 5 000 civil penalty assessed against it AlI

Freight contends that the Commission should have given greater

weight to the loss of revenue sustained by the firm estimated to be

31 874 00 due to its inability to carryon forwarding activities during

the course of this proceeding This loss is allegedly severe in light of

the modest size of the firm 1

All Freight concludes that this potential

revenue loss is a more than sufficient penalty to deter freight forward

ers from engaging in the violations of section 44 and the Commission s

regulations

Hearing Counsel replies that the financial data submitted with the

Petition could have been submitted at earlier stages ofthe proceeding

and that in any event the instant Petition for Reconsideration merely

restates arguments previously considered and rejected in this proceed

ing

1

All Freight submitted a financial statement indicating net income of 34 845 15 for the last ten

month period

co I r Ill7
418 FEDERAL MARITIME COMMISSION

The Commission agrees with Hearing Counsel that AII Freight s un

derlying contentions have previously been addressed and found to b

insufficient to warrant reduction of the civil penalty imposed by th

Presiding Officer Nothing offered in the present Petition persuades u

to alter that determination

THEREFORE IT IS ORDERED That the Petition for Reconsid

eration ofAll Freight Packers Forwarders Inc is denied

By the Commission

S FRANCIS C HURNEY

Secretary

1 roo
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 681 F

SANRIO COMPANY LTD

v

MAERSK LINE

ORDER OF REPARATION

November 25 1980

On September 5 1980 the Commission issued an Order Adopting

Initial Decision in this proceeding holding that the Presiding Officer

had correctly determined that certain shipments transported by Maersk

Line for Sanrio Company Ltd had been misrated and denying the

Exceptions of the Trans Pacific Freight Conference of Japan Korea to

the Initial Decision The Commission also affirmed the fmding of the

Presiding Officer that the parties to the proceeding had not submitted

sufficient documentation with which the precise amount of reparation

due Complainant could be calculated and ordered Complainant to

submit a reparations statement pursuant to Rule 252 of the Commis

sion s Rules ofPractice and Procedure 46 C F R 502 252

Complainant has now filed a

reparations statement which has been

certified as correct by Respondent Based upon this documentation the

Commission has been able to compute the reparations due at 3 237 37

plus interest at 12 per annum from the date of payment of the

incorrect charges

THEREFORE IT IS ORDERED That Maersk Line pay Sanrio

Company Ltd reparations in the amount of 3 237 37 plus interest at

12 per annum from the date of payment of the incorrect charges

and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

The last ordering paragraph of the September 5 1980 Order inadvertently directed the consignee

Sancio Inc to submit areparations statement However as the correct Complainant filed the repara

tions statement this error was without consequence

OlA r 41Q
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 701

APPLICATION OF TRANS FREIGHT LINES INC

TO BENEFIT SOUTHERN PACIFIC MARINE TRANSPORT

ORDER OF ADOPTION

December 9 1980

On September 23 1980 the Commission undertook to review th

Initial Decision of Administrative Law Judge Seymour Glanzer in th

above captioned matter This decision granted the special docket app

cation of Trans Freight Lines Inc as to two of the three intermoda

shipments for which relief had been requested The application for th

third shipment was dismissed on the grounds that Trans Freight Line

tariff had not covered transportation between Richmond California an

Bremerhaven Germany at the time ofshipment

The Commission has examined the record assembled by the Admini

trative Law Judge and materials on file with the Office of Tariffs an

has concluded that Trans Freight Lines Inc Eastbound Joint Contain

er TariffNo 301 IC C No 301 F M C No 8 was tOo incomplete o

September 3 1979 to form a proper basis for special docket relie

Moreover Trans Freight s essentially untariffed operations on or abou

this time appear to violate sections l8b I 2 and 3 of the Shippin

Act 1916 46 U S C 817 a b and c and may be an appropriat

subject for civil penalty claims

THEREFORE IT IS ORDERED That the Initial Decision serve

August 21 1980 in this proceeding is adopted by the Commission an

made a part of this Order land

IT IS FURTHER ORDERED That this proceeding is terminated

By the Commission 2

S FRANCIS C HURNEY

Secretary

I The Initial Decision recommended that further inquiry be made into the routings used by Tra

Freight Line Inc for intennodal shipments from West Coast destinations to Europe The Commissio

has referred this matter to the Bureau of Investigation and Enforcement to take appropriate actio

with respect to any violations of aeotion 18b which may have occurred

Commissioner Peler N Teise dillentins and iasuins a

aeparale opinion Vice Chairman Leal

Kanuk concurs inCommissioner Teige s dissent

d n
TRANS FREIGHT LINES INC TO BENEFIT SOUTHERN 421

PACIFIC MARINE TRANSPORT

Dissenting Opinion of CommissionerPeter N Teige

Idissent Irecognize that the majority s decision to affirm the Initial

Decision ofthe Administrative Law Judge and deny the carrier permis

sion to waive collection of freight charges for one of the three ship

ments covered by its application will have no practical effect on the

shipper since the carrier will be unable to lawfully collect the charges it

sought to waive Nevertheless I disagree with the majority s overly

technical conclusion that the carrier s application must be denied be

cause its tariff was too incomplete as to description of routings on

September 3 1979 the time of the disputed shipment The tariff did

however despite its deficiencies state as a practical matter the total

charges applicable to this through movement In addition the correc

tive tariff amendment filed by Trans Freight on September 10 1979

stated the exact per container rate agreed upon by Trans Freight and

SPMT This amendment meets the requirement of Section 18b 3 of

the Act that the new tariff set forth the rate and is sufficiently clear

to enable us to measure the relief to be given the shipper The failure of

the original tariff and the new tariff filing to technically meet all ofthe

requirements of Section 18 b I should not prevent relief under the

provisions of Section 18b 3 so long as it is clear from all the circum

stances that the rates specified originally and as corrected by the new

tariff filing were to be applied to the cargo shipped
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 701

APPLICATION OF TRANS FREIGHT LINES INC FOR

THE BENEFIT OF SOUTHERN PACIFIC MARINE TRANSPORT

Application to waive a portion of freight charges dismissed in part and granted in par

John F Spangle for applicant Trans Freight Lines Inc

INITIAL DECISIONl OF SEYMOUR GLANZER

ADMINISTRATIVE LAW JUDGE

Adopted December 9 1980

By application filed January 15 1980 Trans Freight Lines Inc

TFL seeks permission to waive collection of portions of freight

charges claimed to be due it from Southern Pacific Marine Transport

SPMT in connection with three shipments of canned goods which

TFL carried from Savannah Georgia to the discharge ports of Bre

merhaven Federal Republic of Germany FRG Rotterdam The

Netherlands and Bristol England

All of the shipments were carried in intermodal service on the same

vessel and all originated at rail carriers terminals on the West Coast

Two ofthe shipments were carried aboard the Visurgis Voyage No 3

which sailed from Savannah on September 3 1979 One shipment was

carried on Voyage No 4 which sailed from Savannah on October 1

1979 2

The aggregate amount of the freight charges sought to be waived is

90 864 15

The proceeding was first assigned to Administrative Law Judge

Stanley M Levy and was reassigned to me on March 4 1980 upon

Judge Levy s retirement

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

Commission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

a

The application incorrectly atates that the dates of shipment sailins were 8 5n9 8 17 79

and 9 13 79 It is surmised that those dates were selected because they appear withinthe four cor

ners of an On Board stamp on the billsof lading issued by TFL However under the Commission s

Regulations governing special docket applications 46 CFR 502 92 the date of shipment which is the

date that starts the jurisdictional timetable for special docket relief seeDiscussion The Fourth Proviso

illfra is considered to be the actual date of sailing The date of issuance of an on boardbill of lading

is no longer deemed to be thedate of shipment See Docket No 78 12 Rules of Practice and Procedure

the Simplification of the Rules Governing Special Docket Applications for Permission to RefUnd or Waive

Portions ofFreight Cha11Ies 43 F R 18572 May I 1978 Final Rules 43 F R 38578 August 29 1978

A
TRANS FREIGHT LINES INC FOR THE BENEFIT OF 423

SOUTHERN PACIFIC MARINE TRANSPORT

Pursuant to Judge Levy s and my requests the application was sup

plemented by the filing ofadditional documentation

FACTS

After it decided to institute an intermodal service TFL issued an

intermodal tariff on June I 1979 The tariff was filed with the Commis

sion and became effective on July IS 1979 3

Section 4 of the tariff

contains the class and commodity rates for shipments from the West

Coast to Northern Europe Northern Europe is divided into four rate

groups under three column headings Groups 2 and 3 are combined

Because TFL was not entirely certain about the market when it issued

the new tariff it listed only about 25 commodity items in Section 4

Each of those commodities carried rates lower than Section 4 s class

rate for general cargo

4

The general cargo Cargo N O S Not Danger

ous rate from July IS 1979 to and including the dates of the three

shipments was 30000 WM5 to all four destination rate groups

6

During that same time period as pertinent the tariff also provided for a

bunker surcharge and a

currency adjustment factor 7

On July 30 1979 following negotiations for a commodity rate lower

than the Cargo N O S rate Mr T P McNamara Vice President West

Coast Alltrans International Inc TFLs

agent and Mr J D Burnett

Vice President and General Manager of SPMT agreed upon an all

inclusive rate including the bunker surcharge and currency adjustment

factor of 1 470 00 per 20 foot container for canned goods on move

ments from Los Angeles and OaklandlRichmond California and Port

land Oregon Seattle Washington to United Kingdom and North

Europe ports on a Container Yard to Container Yard basis When Mr

McNamara transmitted the terms of the agreement to TFLs office in

Secaucus New Jersey he requested that the tariff matter reflecting

those terms be published quickly because the traffic was ready to

move

8

Upon receipt of that request instructions were given to a TFL

Tariff Compiler to publish the rates agreed upon Due to a clerical

error the TariffCompiler failed to carry out those instructions prior to

the dates ofshipment 9

3

When the original tariff pages were filed the tariff was entitled Trans Freight Lines Inc East

bound Joint Container Tariff No 301 ICC No 30J F M C No 8 The same tariff now bears the

I CC identification numberIC C TFEI No 301

See affidavit statement of TFLs Pricing Manager South Atlantic attached to his letter to me

dated April 14 1980

IS W Weight of lOOO ldlos M Measurement of one cubic meter WM means W orM whichever

produces the greater revenue

TFLs Tariff original through 6th revised p362

1

Id original and 1st revised p

7 The tariff abbreviation for bunker surcharge is BSe and the

abbreviation for currency adjustment factor is CAF

8

See Mr McNamara s and Mr Burnett s affidavits attached to TFLs letter to me dated April 22

1980

1

See affidavit statement of the Tariff Compiler attached to TFLs Jetter to me dated April 14

1980

C
424 FEDERAL MARITIME COMMISSION

When the error was discovered TFL filed a corrective tariff effec

tive September 10 1979 containing the agreed rate 10 But due to

another clerical error the correction appeared only in the column for

Rate Groups 2 and 3 Rate Groups 2 and 3 covered the particular

Northern European discharge ports but not the United Kingdom dis

charge port involved in this proceeding 11 When the second error was

discovered another corrective tariff covering Rate Group I United

Kingdom destinations was filed effective October 4 1979 12

In the meantime that is between July 30 1979 and October 4 1979

the three individual shipments were placed in intermodaI service for

delivery to destination as follows

1 Shipment No 1 shown in the application as shipment a was a

movement of canned peaches weighing 180 306 kilograms and measur

ing 237 89 cubic meters shipped in ten 20 foot House to House Con

tainerslS bySPMT14 to a consignee in the FRG The shipment was

received at Richmond presumably on August 5 1979 when the on

board bill of lading was issued and was carried by rail from there to

Savannah where it was loaded on the Visurgis Voyage No 3 and

discharged at Bremerhaven FRO for delivery in Hamburg FRG The

bill of lading docs not disclose the identity of the rail carrier receiving

the shipment at Richmond butTFLs letter to me dated June 20 1980

attached as Appendix I states that the cargo moved via ATSF The

Atchison Topeka Santa Fe Railway Company a rail carrier partici

pating in the Tariff in accordance with concurrence FC2 No 122 in

Richmond Pandair Freight Inc F MC License No 1514 is shown

as the freight forwarder The shipment was rated as Cargo N O S on a

measurement basis and a bunker surcharge and currency adjustmen

factor were applied Total charges amounted to 86 05671 At the

agreed rate and if other tariff provisions permitted the charges on this

shipment shouIdhave been 14 700

2 Shipment No 2 shown in the application as shipment b was 

movement of canned tuna weighing 16 329 kilograms and measuring

23 79 cubic meters shipped in one 20 foot House to House Containe

by SPMT to a consignee in Rotterdam The shipment was received a

TFLs Tariff 6th revised p

362

11 Id orisinal throuSh 2nd revised p

11

lSM 11th revised p

362

18 Pursuant to Rule 23 of the TFL Tariff orisillal p36 Houto House and Container Yard t

Container Yard are interchanS08ble terms a Container Yard CY is afacility operated by the wat

or participstinS rail ormotor carrier for the rocoipt of loacled container

SPMTis anon v 1 operatins COdldlon carrier NVOCC w ich publi h

atariff applicable t

shipments of senoral merchandise botwoonspecified ports in the United States on the one hand and

on the othethand specified ports inspocitied forelsn countrie The oriSin and destination ports i

volved in this proceeding are within the scope of SPMTs Tariff Local FreiShl Tariff No 3 F M C

No 3 orisinal pp 7 8

See R 36 following Conclusion and Order infra

11 t ro
TRANS FREIGHT LINES INC FOR THE BENEFIT OF 425

SOUTHERN PACIFIC MARINE TRANSPORT

Los Angeles presumably on August 17 1979 and was carried by rail

from the Union Pacific UP a participating rail carrier rail terminal to

Savannah where it was loaded on the Visurgis Voyage No 3 and

discharged at Rotterdam The shipment was rated as Cargo N O S on a

measurement basis and a bunker surcharge and currency adjustment

factor were applied Total charges amounted to 8 606 04 At the

agreed rate and other tariff provisions permitting the charges for this

shipment should have been 1 470 00

3 Shipment No 3 shown in the application as shipment c was a

movement of canned salmon weighing 35 997 kilograms and measuring

45 30 cubic meters shipped in two 20 foot House to House Containers

by SPMT to a consignee in London England The shipment was

received at Portland presumably on September 13 1979 and was

carried by rail from the UP rail terminal to Savannah where it was

loaded on the Visurgis Voyage No 4 and discharged at Bristol for

delivery at Felixstowe England The shipment was rated as Cargo

N O S on a measurement basis and a bunker surcharge and currency

adjustment factor were applied Total charges amounted to 15 31140

At the agreed rate and other tariff provisions permitting the charges

for this shipment should have been 2 940 00

SPMT did not pay the charges as billed It remitted 19 110 00 the

amount it should have bean charged for the three shipments had the

clerical errors not occurred other provisions of the Tariff permitting

Under the circumstances TFL asks for a waiver of 71 356 71 for

Shipment No 1 a waiver of 7 136 04 for Shipment No 2 and a

waiver of 12 37140 for Shipment No 3

Other provisions ofthe Tariff which are pertinent to the issues in this

proceeding are as follows

1 The Scope of the Tariff insofar as these shipments are concerned

is set forth in Section 4 of Rule 1

15 As material it provides that the

rates in the Tariff apply from Rail Carriers Terminals in Los Ange

les CA Portland OR and Richmond CA 16

2 The identification of the Origin Rail Carrier Terminals appears

in Rule I00 of the Tariff 17 At all pertinent times this rule read as

follows

Whenever the term rail carrier s terminal s is used contain

er or trailer on flat car service will be performed at each

location by the following rail carrier s

16 TFLs Tariff 1st revised p

11

16 The same provisions are iterated at the beginning of Section 4 of the Tariff which it will be

recalled contains the rates forjoint intermodal shipments from the West Coast to Northern Europe

TFL Tariff original p

361

17 TFLs Tariff original p

60 This page was not changed until August 5 1960 when Ist revised p

60 was filed

1t P f r
426 FEDERAL MARITIME COMMISSION

TERMINALS

LOS ANGELES CA

OAKLAND CA

PORTLAND OR

SACRAMENTO CA

SEATILE WA

STOCKTON CA

SAN FRANCISCO

RAIL

CARRIER

ATSF

SP

UP

ATSF

SP

WP

BN

UP

SP

WP

BN

UP

ATSF

SP

WP

ATSF

TYPE OF

SERVICE

CY

CY

CY

CY

CY

CY

CY

CY

CY

CY

CY

CY

CY

CY

CY

CY

ADDRESS

HOBART YARD SHEILA

INDIANA ST CITY O

COMMERCE CA

N MISSION RD

4341 WASHINGTON BLVD

40THAND SAN PARLO

1410 MIDDLE HARBOR RD

1777 MIDDLE HARBOR RD

3930 NW YEON

2745 N W INTERSTATE

AVE

ATLANTIC BETWEEN YO

SEMITE AND tlERRY

ROSEVILLE CA

3500 24TH ST

12400 51ST PLACE SOUTH

ARGO YARD 4TH SOUTH

AND DAWSON STREET

FOOT OF DIAMOND ST

1010 E MARKET ST

833 E 8TH ST

74 MISSION ROCK

Richmond California is not listed under the column heading Term

nals Manifestly too the table does not identify any rail carrier type

ofservice or address at Richmond It was not until August S 1980 tha

Richmond was listed as follows

TERMINALS

CJ18 RICHMOND CA

RAIL

CARRIER

ATSF

TYPE OF

SERVICE

CY

ADDRESS

861 WHARF STREET

I

I

3 Similarly at all pertinent timls neither TFL nor any carrie

participating in the Tariff held out to perform a

transportation servic

over a through route originating at Richmond California Rule 107 o

the Tariff lists the service offered by the participating rail carriers from

West Coast ports and the Rail Water Interchange Point in Savannah

Ie mean Change in Wording whioh rOulw in neither an increO or a Reduction See Sym

bol and Reference Mora TFL Tariff original p 3

1 RMr
TRANS FREIGHT LINES INC FOR THE BENEFIT OF 427

SOUTHERN PACIFIC MARINE TRANSPORT

As pertinent to the carriage of 20 foot containers until November 1

1979 Rule 107 provided as follows 19

PARTICIPATING RAIL CARRIER S SERVICE AND DIVISION

OF REVENUE

A Participating Rail Carrier s service and Division of Revenue be

tween rail carrier s terminal listed below in Paragraph B Rail

Water Interchange Point in Charleston SC or Jacksonville FL or

Savannah GA for 40 Containers or 20 Containers applies via the

following Route Nos as shown in Section 5

B Rail Carriers Division ofRevenue Per Container or Trailer

Division

Route per Division Division No of 20

Rail Carrier s Terminals Nos Container Per 20 Per 2 240

Containers

or cft20 Ibs20

Trailer20

Los Angeles CA

Oakland CA

San Diego CA

Stockton CA 107 70100 25 49 60 96 1 40

Seattle WA 107 659 00 23 96 57 30 41 over

Tacoma WA

It was not until May 7 1980 that Richmond appeared under the

column heading Rail Carriers Terminals in Rule 107 21

4 Section 5 of the Tariffis the segment ofthe Tariffwhich describes

the routing of all movements from participating overland carriers ter

minals to the interchange termina1 22 As seen Rule 107 identifies the

route number for movements from West Coast rail terminals through

the interchange point of Savannah as Route No 107 But at all times

relevant to this proceeding Section 5 made no reference to a Route

No 107 There was however a Section 5 reference to a Route No

140 which does contain a

routing of movements from West Coast rail

terminals to Savannah 23 Among other things Route No 140 shows

Richmond as a rail carrier terminal and ATSF as the originating rail

carrier Until March 16 1980 however there was no routing provision

showing UP as an originating rail carrier at either Los Angeles and

Portland or any other West Coast port under Route 140 By a tariff

19 TFL sTariff original p 65

20 Reference to notes to Rule 107 deleted

21 TFL sTariff 3rd revised p

65

22 The interchange terminal is defined as the point of interchange between participating rail carrier

and water carrier TFLsTariff original through 2nd revised p 364

23 Effective July 24 1980 the information shown previously under Route No 140 appeared under

Route No 107 TFLs Tariff 3rd revised p

364

23 F M C
428 FEDERAL MARITIME COMMISSION

tiling which became effective March 16 1980 Union Pacitic wa

added to Route No 140 as an originating rail carrier 24

TFL carried no other shipments of the same or similar commodities

from West Coast origin ports to Northern European destinations from

July 30 1979 through October 3 1979

THE GOVERNING STATUTE

The Commission s authority to permit carriers to refund a portion o

freight charges collected from shippers or to waive the collection of a

portion of freight charges where it appears that there is an error in a

tariff of a clerical or administrative nature or an error due to inadvert

ence in failing to tile a new tariff is derived from the provisions o

section 18b 3 46 U S C 817 b 3

la After stating the requiremen

that common carriers by water in foreign commerce or conference o

such carriers charge only the rates and charges specified in tariffs on

tile with the Commission section 18b 3 provides as pertinent

Provided however That the Federal Maritime Commission

may in its discretion and for good cause shown permit a

common carrier by water in foreign commerce or conference

of such carriers to refund a portion of freight charges collect

ed from a shipper or waive the collection of a portion of the

charges from a shipper where it appears that there is an error

in a tariff of a clerical or administrative nature or an error due

to inadvertence in failing to file a new tariff and that such

refund or waiver will not result in discrimination among ship

pers Provided further That the common carrier by water in

foreign commerce or conference ofsuch carriers had prior to

applying for authority to make refund tiled a new tariff with

the Federal Maritime COmmission which sets forth the rate on

which such refund or waiver would be based Provided further

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 Commission may require which give

notice of the rate on which such refund or waiver would be

based and additional refunds or waivers as appropriate shall

be made with respect to other shipments in the manner pre

scribed by the Commission inJts order approving the applica

tion And provided further That applioation for refund of

waiver must be tiled with the Commission within one hundred

and eighty days from the date of shipment

TFLs Tariff 2nd revised p 364

The CommiilSion s

regulations implementing seotion 18bX3 appear in Rule 92a Rules of Prac

tice and Procedure See n 2 supra

23 FMC
TRANS FREIGHT LINES INC FOR THE BENEFIT OF 429

SOUTHERN PACIFIC MARINE TRANSPORT

DISCUSSION

The discussion which follows will be divided into two parts The

first part will consist of an analysis of the merits of the application

concerning all three shipments on the assumption that the filing of 6th

and 11th revised pp 362 corrected the inadvertent error of failing to

file rates which the carrier and shipper had agreed upon prior to the

shipments and that otherprovisions ofthe tariffpermit special docket relief

to be granted The second part will explain why in my judgment

Shipment No I does not qualify for special docket relief

In considering an application for waiver the Commission is obliged

to determine whether the criteria established by the four provisos of

section 18b 3 have been satisfied U S Department ofAgriculture v

Waterman Steamship Corporation 20 F M C 644 647 1978

PART I

THE FIRST PROVISO

The first proviso contains two requirements It must be shown that

the error qualifies for remediable action and that granting the relief

requested will not result in discrimination among shippers Both re

quirements have been met

The evidence demonstrates that after agreeing to publish a lower

rate TFL failed to do so because of inadvertent clerical error In

circumstances in which the carriers intent to publish a lower rate has

been communicated to the shipper and the shipper is then charged

more than he understood the rate to be special docket relief is warrant

ed and has been authorized U S Department ofAgriculture v Waterman

Steamship Corporation supra Union Carbide Corporation v GulfEurope

an Freight Association on Behalf of Sea Land Service Inc 18 SRR 1675

1979 administratively final per FMC notice served March 26 1979

During the relevant time period26 there were no shipments of the

same or similar commodity Thus approval of the application is not

likely to result in discrimination among shippers However as an added

precaution the order which follows contains additional safeguards in

the event there were other shippers similarly situated

THE SECOND PROVISO

The corrective or conforming tariff pages 6th and 11th revised pp

362 were filed and became effective September 10 1979 and October

4 1979 respectively Those pages set forth the agreed rate and were

filed before the filing ofthe application for tariff relief These new tariff

26 The relevant time period for the purpose of prevention of discrimination is the period from the

date of agreement to publish areduced rate to the date of filing the conforming tariff Boise Cascade

Corp v Sea Land Service Inc 18 SRR 1041 1047 1978 administratively final per FMC Notice

served November 13 1978 See also Application of Yamashita Shinnihon Line for the Benefit of Nisso

wa American Corporation 22 F M C 674 1980

23 F M C
430 FEDERAL MARITIME COMMISSION

pages set forth the rates on which waiver is based and were time

filed This meets the requirements of the second proviso Cf Munoz 

Cabrera v Sea Land Service Inc 20 F MC 152 1977

THE THIRD PROVISO

This application was filed pursuant to the revised Commission Rul

governing special docket applications Under the revised rules t

filing of the application meets the requirements of the third proviso 

THE FOURTH PROVISO

The fourth proviso requires that the application be filed within o

hundred eighty days from the date of shipment The shipments we

made on September 3 1979 and October 1 1979 The application w

filed on January 15 1980 I

find that the application was filed with

one hundred eighty days of the shipment This satisfies the requir

ments ofthe fourth proviso

PART II

Shipment No 1 does not qualify for special docket relief by way 

waiver because TFL did not have an effective tariff on file showin

rates and charges for through transportation from Richmond to foreig

ports as required by section 18b 1 of the Shipping Act 1916 

U S C 817 b 1

28 and the Commission s Regulations implementing th

statute 46 CFR Part 536

It is evident that TFL intended that its new intermodal tariff conta

rates and charges for a through transportation service from Richmon

but it failed to fashion a tariff to fit The in umity lies in the failure 

the tariff to hold out the performance of a through transportatio

Rule 92 aX4 46 CPR 02 92 a 4 provides

By tiling theapplicant s agrees that

I ifpermission is granted by theCommission

A an appropriate notice will be published inthe tariff or

B other steps will be taken as the ColQ I1ission JUay require which give notice of the

rate on which such refund or waiver would be based and

C additional refunds or waivers shalt be made With respect to other shipments in the

manner prescribed by the Commission s order approving the application

ii if theapplication is denied other steps wilt bfftaken as the Commission may require

Section 18bXI provides in pertinent part

From an after ninety days followi g enactment hereof every common carrier by water in

foreisn commerce and every conference of such carriers shall file with the Commission and

keep open to public inspection tarilTs showing all the rates and charges of such carrier or

conference of carriers for transportation to and from United States ports and foreign ports

between all points on its own rotite and on any through route which has been established

Such tariffs shall plainly show the places between which freight will be carried and shall

contain the classification of freight in force and shall also state separately such terminal or

other charge privilege or facility under the control of the carrier orconference of oarriers

which is granted or allowed and any rules orregulations which in anywise change affect or

determine any part or the aggregate of such aforesaid rates or charlles and shall include

specimens of any bill of lading contract of affreightment orother document evidencing the

transportation agreement

23 FMC
TRANS FREIGHT LINES INC FOR THE BENEFIT OF 431

SOUTHERN PACIFIC MARINE TRANSPORT

service from Richmond to a

foreign port and the failure therefore to

plainly show the places between which freight will be carried

Holding out is important not only because of the significance his

torically given to it Interstate Commerce Commission v AAA Car

Drivers Exchange Inc 340 F 2d 820 825 2 Cir 1965 but because of

the stress placed upon it by the Commission in its Regulations govern

ing intermodal tariffs containing through rates and through routes in

the foreign commerce of the United States In those regulations the

Commission has defined a participating carrier in an intermodal tariff

as Any carrier holding out to perform a transportation service over a

through route 29

It is true that Rule 1 Section 4 shows that the scope of the tariff is

from particular West Coast ports including Richmond to particular

foreign destinations including Bremerhaven But this hardly can be

construed as the requisite holding out contemplated by the Commis

sion s Regulations Indeed the Tariff itself confirms this conclusion

Sandwiched between a page entitled Participating Rail and Motor

Carriers 30 and TariffRule 1

31 showing the scope of the Tariff there

is an untitled page reciting that 32

This Section contains General Rules and Regulations Apply

ing to intermodal transportation of commodities moved herein

For specific provisions applying to Rail Carriers participation

herein see Rules 100 to 111

The unmistakable meaning of those words is that unless Rules 100

through 111 show a specified transportation service offered by a par

ticular rail carrier the tariff does not hold out that such service is

offered For example if Western Pacific Railroad Company WP a

participating rail carrier is not shown in Rule 100 as an offerer of a CY

service from a San Francisco terminal location and at a glance it may

be seen that it is not so listed manifestly there is no holding out of

such service over a through route by TFL in participation with WP

from San Francisco even though as Rule 100 also reveals TFL does

hold out a container yard service from San Francisco in participation

with ATSF Thus because ATSF is not shown in Rule 100 to offer a

CY service from its Richmond terminal location and because no provi

sion is made elsewhere in Rules 100 through 111 for such service or

even for division of revenue the tariff can scarcely be considered to

hold out or to authorize the performance of a transportation service

over a through route from Richmond to any foreign port Nothing said

herein concerning the failure ofthe tariff to hold out the service should

46 CFR 536 8

30 TFLsTariff p 6

31 Id Rule 1 begins at p 10 and continues on p11

32 Id original p 9

23 F M C
432 FEDERAL MARITIME COMMISSION

be construed to constitute a finding that TFL did not otherwise unde

take to provide such common carrier service

Iam mindful that the Routing Section ofthe Tariffdoes show wh

purports to be a routing from ATSF s terminal in Richmond to t

interchange point of Savannah But this routing even if correct

numbered to show its nexus with Rule 107 33 does nothing to alter t

fact that the Tariffs Rules which the Tariff user is directed to cons

to ascertain the service offered do not hold out an intermodal servi

from the ATSF terminal at Richmond Moreover the routing does n

hold out the particular service provided by TFL to SPMT a C

service

Two other matters remain to be considered in regard to shipme

No 1 In Appendix ITFL suggests that the failure to show an ATS

service at Richmond should not result in discrimination against t

shipper and that such failure could be stated as California points sin

same divisions of revenue payable to the rail carrier exist from 

California points and therefore by common points

Turning to the latter suggestion first the short answer is that wh

the Tariff could have stated the division of revenues as Californ

points the fact is that it did not

The suggestion concerning discrimination which is taken to me

that if the application is denied then a discrimination might result 

simply not well taken The application states that there were no oth

shipments of canned goods during the relevant time period In the lig

of TFLs entire presentation this must be COnstrued to mean that the

were no other shipments of canned goods except of course Shipme

No 2 from any West Coast port to Bremerhaven or any other Ra

Group 2 or 3 discharge port Under the circumstances a determinatio

that Shipment No 1 does not qualify for special docket relief by wa

ofwaiver could not result in discrimination amongst shippers

Moreover the dismissal ofthe application insofar as Ship1J1ent No 

is concerned is not likely to result in harm to SPMT The holding 

connection with Shipment No 1 is that there was no effective tariff 

file at the time of shipment authorizing through transportation 

88 Whatever couaequences the errors in thc Routinl SectiOD Section S of the Tariff may ha

those errors are not deemed material to any of the issues in this proceeding Thus the failure to sl

aRoute 107 In Section at any pertinent time and the fallure to include UP terminals in Route 

until March 16 1980 will not bar grantiag relief for Shipent Nos 2 and 3 March 16 1980 w

within 180 days of the date of shipment of Shipment No 3 but more than ISO days after tho date 

shipment of Shipment No 2 Noverthelesa if the falluro to includeUP terminals had been held to 

relief that result probsb1y would haveapplied to both shipments because the second proviso requ

that acorrective tariff be filed before the special docket appliestion ia filed and the Commission 

suggested that if supplemental corrections are filed after the appliestion ia med a new applica

within the ISlJday time period is necesaary See Application ofMa k Lln Ag ncy fo the B nefi

Nomura Am rlca Corporadon 22 F M C 249 2 0 nS 1979 Here of course no such new appl

tlon was timely filed

23 FMC
TRANS FREIGHT LINES INC FOR THE BENEFIT OF 433

SOUTHERN PACIFIC MARINE TRANSPORT

canned goods from a railroad terminal in Richmond to a foreign dis

charge port via the interchange point of Savannah The failure to have

an effective tariff on file at the time ofshipment has not been corrected

in accordance with the four provisos of section 18b 3 and the Special

Docket Rules 46 CFR 502 92 34 Thus the original condition still

prevails that is there is no tariff authorization for the movement

Consequently that portion of the application applicable to Shipment

No 1 is not susceptible to handling in this proceeding and must be

dismissed But the order which follows does not require TFL to collect

the balance of freight charges 35 because TFL may not collect

charges based on an untariffed rate Docket No 77 13 First Interna

tional Development Corporation v Ships Overseas Service Inc Report

served July 17 1980 slip opinion p

12 The upshot is that with regard

to Shipment No 1 vis a vis SPMT this decision leaves TFL in the

same position it was found before the filing ofthe application

Finally the question not addressed in this proceeding whether TFL

transported property in foreign commerce without a tariff on file in

violation of section 18b 1 ofthe Shipping Act 1916 is referred to the

appropriate office of the Commission s staff for investigation

CONCLUSION AND ORDER

The application for permission to waive collection of a portion of

freight charges on Shipment No 1 is dismissed

The application for permission to waive collection of a portion of

freight charges for Shipment Nos 2 and 3 is granted It is ordered

1 Trans Freight Lines Inc shall waive collection offreight charges

in the aggregate amount of 19 507 44 due it from Southern Pacific

Marine Transport in connection with two shipments of Canned Goods

Commodity Code No 053 0001 p

362 of TFLs Tariff No FM C 8

transported from Los Angeles California to Rotterdam The Nether

lands and from Portland Oregon to Bristol England on September 3

1980 and October 1 1980 respectively

2 Trans Freight Lines Inc shall publish and file the following

notice at the appropriate page in the tariff described in paragraph 1

above and at the page in the tariff where Cargo N O S is shown if

different

Notice is hereby given as required by the decision in Special

Docket No 701 that effective July 30 1979 and continuing

34 Inasmuch as Tariff Rules 65 and 60 were not changed until May 7 1980 and August 5 1980

respectively the corrections were not timely f1led for consideration in this proceeding

36 See e

g McCrory Stores v Sea Land Service Inc 18 SRR 911 Initial Decision served August 31

1978 administratively final Notice served October 12 1978 A E Staley Mfg Co Decatur Illinois v

Mamenic Line 20 FMC 385 642 1978 Application of Sea Land Service Inc for the benefit ofPana

sonic Co Division of Matsushita Electric Corp 19 SRR 757 Initial Decision served September 4 1979

administratively final Notice served October 17 1979

1
434 FEDERAL MARITIME COMMISSION

through September 9 1979 inclusive the rate on Canned

Goods Commodity Code No 053 0001 p 362 of TFLs Tariff

No F MC 8 for the purposes of refund or waiver of freight

charges is 1 47000 per twenty 20 foot container in contain

er yard to container yard service to discharge ports in Rate

Groups 1 2 and 3 such rate not subject to CAF or BFS but

such rate subject to all other applicable rules regulations

terms and conditions ofthe said rate and this tariff

3 Trans Freight Lines Inc shall determine whether an adjUljtmen

in brokerllge due freight forwarders is required in the light of th

decision and shall take such measures as are l1ecessary to effectuat

such adjustments

4 The waiver shall not affect the land portion of the through rate

5 Waiver ofthe charges and refund shall be effectuated within thirt

days of service of notice by the Commission authorizing the same an

Trans Freight Lines Inc shall within five days thereafter a notify th

Commission of the date and manner of effectuation of the waiver an

refund and b me with the Commission an affidavit ofcompliance wit

paragraphs 1 2 3 4and 5 a ofthis order

S SEYMOUR GLANZERs6

Administrative Law Judge

Washington p C

August 21 1980

Editor s Note Appendix Iis included in the official docket file for thi

proceeding

a

After the foreiolng Inilia1 Oecilion was completed end ready 10 b prinled I received a lette

froTFL oontainini a duplicate of ATSF concurrance The concurrence certin that ATSF r

end concurB in a1ll8 iff and upplellonla thereto Rlod by TFL In which ATSF la bown as a

partic

pant limited 10 TFL aTariff ICC TFBI 301 and 302 but only to the extont tbetluob tariff apply

Thus there la nothing in the concurrence 10 warrantcliffarent concluBlon than aet forth In the tex

above

C 11 1
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 741

SEATRAIN INTERNATIONAL S A TO BENEFIT

FLORISTS TRANSWORLD DELIVERY ASSOCIATION

ORDER ADOPTING INITIAL DECISION

December 12 1980

On October 29 1980 the Commission determined to review the

Initial Decision in the above captioned proceeding on September 26

1980 in which Administrative Law Judge William Beasley Harris

denied Seatrain International S A permission to refund freight charges

collected on eight containers of ceramic flower pots transported be

tween Lisbon Portugal and Oakland California Examination of the

record reveals that Seatrain s application was incomplete and was

therefore appropriately denied

The Presiding Officer was concerned with inconsistencies between

the U S Customs Declarations Bills of Lading and tariff materials

submitted in support of the application and wrote to Seatrain requesting

clarification ofthe intermodal routing involved When Seatrain failed to

furnish tariff materials demonstrating the applicability of Tariff No

FMC No 137 to the Lisbon Le Havre Galveston Oakland route used

to transport the eight containers in question the application was dis

missed

It is the responsibility ofthe applicant and not the presiding officer to

clearly demonstrate the tariff provisions in effect on the date of sailing

and the necessary correlation between the bargained for rate and the

corrected tariff pages Although it would defeat the basic shipper

protection purposes of P L 90 298 to demand exacting explanations of

every tariff rule affecting a special docket shipment the tariff basis for

intermodal routings used should be demonstrated with reasonable clar

ity before an application is granted

THEREFORE IT IS ORDERED That the Initial Decision served

September 26 1980 in this proceeding is adopted by the Commission

and incorporated into this Order and

23 F M C 435
436 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED That this proceeding is terminate

By the Commission

S FRANCIS C HURNEY

Secretary

Vice Chairman Leslie Kanuk dissenting and issuing a

separate opinion Commissioner Pete

Teige dissenting and issuing aseparate opinion

21 F M C
SEATRAIN INTERNATIONAL S A TO BENEFIT FLORISTS 437

TRANSWORLD DELIVERY

DISSENTING OPINIONS

DISSENTING OPINION OF COMMISSIONER PETER N TEIGE

I dissent Recently in Special Docket No 701 Trans Freight Lines

Inc to Benefit Southern Pacific Marine Transport I argued that the

failure of the carrier s tariff to meet all the requirements of Section

18b 1 of the Shipping Act should not prevent the Commission from

granting special docket relief under Section 18 b 3 so long as the

original and corrective tariffs state the charges applicable to the ship

ments with clarity sufficient to allow the Commission to measure the

relief to be given to the shipper My review of the record of this case

leads me to the same conclusion Seatrain s application and supporting

exhibits show that its original and corrective tariffs clearly stated the

charges to the Florists Transworld Delivery Association for the move

ment of these shipments of flower pots That being the case Seatrain s

application should have been granted particularly since unlike Special

Docket No 701 the shipper here has paid the freight and will therefore

suffer fmancial detriment as a result of the majority s decision The

question whether Seatrain violated Section 18b 1 by failing to include

in its tariff authority to route cargo from Portugal to France prior to

loading can be examined in a separate investiga ion

VICE CHAIRMAN LESLIE KANUK DISSENTING

I cannot agree with the majority s conclusion that the Initial Decision

should be affirmed I believe that the case should be referred back to

the Administrative Law Judge for the purpose of having a decision

reached as to whether the application was filed within the 180 day time

limit

The conclusion reached in the Initial Decision is that the application

should be denied because there is insufficient evidence of record to

determine whether it was filed in a timely fashion under the Commis

sion s rules The pertinent rule requires that an application for refund or

waiver be filed within 180 days from the date of shipment The date of

shipment is defined as the date the vessel sails from the port at which

the cargo was loaded 46 CFR 502 92 a 3

The cargo in question was loaded at Le Havre France and there is

evidence of record regarding sailing dates from Le Havre Thus con

trary to the conclusion reached in the Initial Decision there is informa

tion which permits a determination as to whether the application was

timely filed The concern expressed in the Initial Decision regarding the

necessity for having proof of sailing dates from Lisbon is unfounded

since there were no sailings from Lisbon Thus Lisbon is irrelevant for

the purpose ofdetermining whether there was a

timely filing

Once a determination has been made concerning timeliness offiling

appropriate disposition of the application should follow

0r
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 741

APPLICATION OF SEATRAININTERNATIONAL S A FOR 1

THE BENEFIT OF FLORISTS TRANSWORLD DELIVERY

ASSOCIATION

Permission denied to refund a 32 455 39 portion of aggregate freight charges of

58 880 72 collected

INITIAL DECISIONs OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Adopted December 12 1980

This is a special docket application under section 18b 3 of the

Shipping Act 1916 as amended and Rule 92 of the CommiSSion s

Rules of Practice and Procedure 46 CFR 02 92 The application

contains a certification that the application was mailed at Oakland

California August 13 1980 to the Secretary of this Commission Unde

Rule 92 a 3 the August 13 1980 date is the filing date of this

application

DISCUSSION

The application for refund or waiver must be tiled with the COm

mission within 180 days from the 4ate of shipment Date o

shipment shall mean the date of sailing of the vessel from the port a

which the cargo Wll8 loaded Ibid

The August 27 1980 letter referred to in the footnote above also

stated

Please supply the date of sailing and proof ther f for the

vessels Bremen V122 and Italy V 42 respectively from

Lisbon B L 30003 2 5 of Seatrain as yonoted is undated

but it accounts for two 40 Containers said io Cntain Ceram

In an AvgUlt27 1980 letler to Seauain Inlernational S A tile Preaidillg Adminiauativc Law

Judge wrOlc Inler all The Information lupplied In lbe applioatlon Indloatea payment for carriage o

the freight waa made by Harper Rdbinacn and Company However there ia no explanation why an

refund should be made to P1oriatB TranswQrld Delivery Assoclatlon ralhcr than to Hatpcr lloblnac

and Company

In a reply letler lPed by Carolyn J MUler FinanceAccounting daled September 12 1980 lKll

marked Wcchawkcn N J Scplember I 1980 received September 18 1980 Scatraln Inle1 latlonal

S A stated I

t a wl l

apoke with Ji Catrietj Harper Robinson Co San PranciscQ Californ

who staled they acled aa the local rcprcscntatlve for F T D He adviacd me that F T D reim

l

them all monlcs that were pald to Scatraln on behalf of F T D He atalcd they have no claim 

thll caac and rcqucalcd lbey not be involved If you have any qucalions you llIay reach him at 41

983 9600 durins the day

s

ThIs dccialon viUl bcccmc thedecision of the Commlulon In lbe absence of review thereof by th

Commiuion Ilule 227 Rlilof P actice and Procadurc 46 CFR 02 227

A10 C
SEATRAIN INTERNATIONAL S A TO BENEFIT FLORISTS 439

TRANSWORLD DELIVERY

ic Posy Pail Floral Containers being aboard the Bremen BL

3000362 1 dated Lisbon February 13 1980 accounts for six

40 Containers and one 20 Container of the commodity Ce

ramic Posy Pail Floral Containers being aboard the Italy These are the nine containers in the shipments involved in this

proceeding

It is respectfully suggested you get this information to the

undersigned promptly along with any other a review by you ofthe application may suggest should be sent

In its September 12 1980 reply referred to above Seatrain Interna

tional S A wrote

Ihave attached the copies of Seatrain International S A sail

ing schedules for January showing that the Bremen 22 was

scheduled to sail from Le Havre on February 9th and the

February schedule showing the Italy 42 was scheduled to sail

from Le Havre on February 21st The cargo originated in

Lisbon but was not physically loaded onto the vessel in

Lisbon The cargo was loaded onto the vessel at our port of

call in Le Havre We did not have Lisbon as a port of call for

the vessels Our tariff did allow us to give Lisbon as an origin

bill of lading port through to Oakland California Imay also

refer you to my exhibits A Band C in my original application

to you These exhibits are Customs Service Cargo Declaration

documents and do show the sailing dates

Exhibits A Band Care A B L No 30003525 for the Bremen V22

loading 440 containers ceramic posy pail floral containers at Le Havre

for Galveston and Oakland date of sailing 2 19 80 B B L No

3000362 1 for the Italy V42 loading 4 40 containers ceramic posy pail

floral containers at Le Havre for Houston and Oakland date of sailing

2 25 80 and C B L No 3000362 1 for the Saratoga V122 loading 2

40 containers I 20 container ceramic posy pail floral containers at Le

Havre for Houston and Oakland date ofsailing 3 8 80

Seatrain B L 30003525 Exhibit D undated shows two 40 Contain

ers ceramic posy pail floral containers for the Bremen V 22 loaded at

Lisbon for Galveston and Oakland Seatrain B L 3000362 1 Exhibit E

dated at Lisbon February 13 1980 shows 6 40 Containers and 1 20

Container ceramic posy pail floral containers for the Italy V42 loaded

at Lisbon for Houston and Oakland

There is no date or other information as to any of the cargo leaving

Lisbon The tariff involved is Seatrain International S A Westbound

Continental EuropelU S Pacific Coast Joint Container Freight Tariff

314 ICC STLV 314 formerly ICC No 44 FMC No 137 and is from

Portugal not France Thus there is no proof ofthe date ofsailing from

the port of Lisbon nor any citation of the part of the tariff which

allows the carrier to give as an origin bill of lading port or what

permits Le Havre France to be listed at which the Lisbon cargo was

D ro
440 FEDERAL MARITIME COMMISSION

loaded The critical date is 180 days prior to August 13 1980 the da

this application was filed to permit a proper determination as to whet

er this application was filed timely in regard to cargo leaving Portug

not France

The last paragraph of the September 12 1980 letter from Seatra

says If you have any further questions regarding this case pleas

contact Mr Harvey Flitter Seatrain Lines Inc Port Seatrain We

hawken New Jersey 07087 I am forwarding my entire file to M

Flitter who is the Vice President of Pricing and Regulatory Affairs

Under date ofSeptember 16 1980 Mr Flitter wrote

Please refer to the last paragraph of our Oakland California

office s letter of September 12 and direct all future communi

cations pertaining to the subject matter to my attention at the

following address

Seatrain Lines Inc

Container Division

Port Seatrain

Weehawken New Jersey 07087

Thank you for your cooperation

The Presiding Administrative Law Judge has by his letter of Augus

27 1980 provided Seatrain with opportunity to review its pplicatio

and supply information to make it more complete Seatrain has n

supplied the information that permits a proper determination as t

whether this application was filed timely and the Presiding Administra

tive Law Judge should not be required to point out again the need fo

certain information or to tell an applicant what else may be neede

after previously having communicated with the applicant Therefore

because ofthe inadequacy ofinformation and explanation the Presidin

Administrative Law Judge finds and concludes the application must b

denied

Wherefore it is ordered

A The application is denied

B This proceeding is discontinued

Washington D C

September 26 1980

S WILLIAM BEASLEY HARRIS

Administrative Law Judge
FEDERAL MARITIME COMMISSION

DOCKET NOS 78 15 78 17 78 18 AND 78 19

UNITED STATES LINES INC ET AL

v

MARYLAND PORT ADMINISTRATION

ORDER ADOPTING INITIAL DECISION

December 15 1980

This proceeding is before the Commission on the Exceptions of

Complainant United States Lines Inc and Respondent Maryland Port

Administration MPA to the Initial Decision of Chief Administrative

Law Judge John E Cograve which held that three ofMPA s terminal

tariff provisions violated section 17 of the Shipping Act 1916 46

U S csection 816 but not section 16 46 U S C section 815

BACKGROUND

The proceeding arose from an accident occurring at the Dundalk

Marine Terminal at the Port of Baltimore on March 21 1976 On that

date two ships SS American Legend and SS Albert Maersk owned

and operated by U S Lines and A S D S Svendborg and D S af 1912

A S respectively were berthed at the terminal and were in the process

of loading and unloading containers with the use of four rented MPA

owned container cranes A strong wind propelled the four cranes down

the pier two were blown into the water and the other two each struck

one of the two ships All four cranes and both vessels were damaged

In February 1977 MPA brought suit in the United States District

Court for the District ofMaryland to recover for damages to its cranes

Named as defendants were the two vessel owners US Lines and

Svendborg and the two stevedores hired to load or unload each ofthe

ships on the day in question ITO Corporation of Baltimore and John

T Clark Son ofMaryland Inc

One of MPAs grounds for recovery was that three of its terminal

tariff provisions exculpate it from liability arising from its furnishing the

cranes The Court in ruling on motions for summary judgment con

cluded that the Federal Maritime Commission should have the first

opportunity to rule on the validity of the tariff provisions in question

The Court noted

Accordingly this Court will not at this time decide questions

concerning the validity and construction ofthe contested tariff

provisions Ido not conclude as has been suggested that

2J F M C 441
442 FEDERAL MARITIME COMMISSION

the Court in this case is absolutely bound by any rulings ofthe

FMC What the Court wants is the FMC s interpretation of

these provisions The Court will then decide the legal ques

tions presented under the particular facts of this case There

fore those defendants who wish to press these questions are

instructed to file appropriate pleading with the FMC Mary

land Port Administration v SS American Legend 4S3 F Supp

S84 DC Md 1979

U S Lines Svendborg ITO and Clark then ftled the instant complaint

with the Commission alleging that the tariff provisions subjected the

to undue and unreasonable prejudice or disadvantage in violation o

section 16 First and constituted unjust or unreasonable regulations o

practices relating to or connected with the receiving handling storin

or delivering of property in violation of section 17 The Commission 

Bureau of Hearing Counsel and the California Association of Po

Authorities intervened

The tariff provisions in issue are as follows

Section VII LIABILITY Paragraph 2

The Terminal Operator accepts no responsibility for damages

or accidents occurring when its equipment and or operator or

employees are furnished to perform work for others

Section VII LIABILITY Paragraph 3

All persons to whom berths wharves transit sheds mechani

cal equipment or other facilities have been assigned shall be

responsible and liable to the terminal operator for any damage

occurring to such property during their tenancy occupancy

and or use without regard to whomsball cause the damage

Section VIII MISCELLANEOUS CHARGES Paragraph 4 B4

The terminal assumes no liability for claims losses or ex

penses by reason ofproperty damage personal Injury or death

which may result from the use of the crane except that caused

by structural or mechanical failure and not occasioned by an

act or omission on the part of the party renting the orane

The Presiding Officer concluded that the tariff provisions Were u

reasonable to the extent they relieved MPA from liability for its ow

negligence and that they were therefore violative of section 17 H

found however that Complainants failed to carry their burden o

establishing that the tariff provisions were unreasonably prejudioial o

disadvantageous in violation of section 16 First

EXCEPTIONS AND POSITIONS OF THE PARTIES

MPA excepts to the Presiding Officer s conclusion that its tari

violates section 17 and argues that this conclusion was based upon 

series of erroneous fmdings and the failure to make other appropriat

fmdings MPA contends that its insurance premiums reflect the exis

23 F M C
UNITED STATES LINES INC ET AL V MARYLAND PORT 443

ADMINISTRATION

ence of the exculpatory tariff provisions and that the savings resulting

from the exculpatory clauses are passed on to its users because MPAs

rates to its users are based upon analysis of its operating costs This

rate relationship between the exculpatory clauses and the rates

charged MPA argues justifies those provisions under Southwestern

Sugar Molasses Co Inc v River Terminals Corp 360 U S 411 1959

Thus MPA excepts to the Presiding Officer s conclusions that MPA s

rates and charges are dictated by competitive necessity and that any

savings realized by the port inure to the port s and not the users

benefit

MPA also excepts to the Presiding Officer s failure to rule on its

proposed findings of fact relating to the State of Maryland s costs in

subsidizing the port and its users ability to benefit from those facilities

without the necessity of making capital investments MPA argues that

these economic benefits derived from the use of the port facilities

constitute a quid pro quo which justifies the exculpatory clauses

MPA alleges that the Presiding Officer erred by considering irrele

vant MPA s requested findings of fact determining that both steamship

lines and stevedores are users of MPA s container cranes Such a

determination is relevant to this proceeding MPA argues and is sup

ported by the record According to MPA such findings would be

consistent with the Commission s decision in West GulfMaritime Asso

ciation v Port of Houston Authority 22 F MC 420 560 1980 in which

it was determined that vessel agents were properly considered users

under the tariffs in issue in that proceeding

Similarly MPA objects to the Presiding Officer s conclusion that

MPAs proposed findings of fact dealing with control over the loading

and unloading operations during use of MPA facilities and equipment

were not relevant to the issues in this proceeding The Presiding Offi

cer MPA contends could have considered the tariff provisions in light

of the evidence MPA presented that the users have control over the

cranes during the time the cranes are most subject to damage MPA

contends that the general rule against exculpatory provisions ex

pressed in Bisso v Inland Waterways Corp 349 U S 85 1955 by the

United States Supreme Court and applied to public terminals by the

Commission in West Gulf Maritime Association v City of Galveston

West Gulf 22 F M C 101 1979 22 F MC 401 1980 and Lucidi v

Stockton Port District 22 F MC 19 1979 is inapplicable to MPA

because MPA is not a public utility in a monopolistic situation MPA

states that reliance on West Gulf and Lucidi is not consistent with the

ruling in Southwestern Sugar

MPA also excepts to the Presiding Officer s failure to determine that

Complainants are able but unwilling to develop their own facilities in

Baltimore MPA argues that the imposition of the exculpatory tariff

items is reasonable because Complainants have chosen to benefit from

23 F MC
444 FEDERAL MARITIME COMMISSION

use of MPA s facilities MPA also excepts to the Presiding Officer 

granting of U S Lines Motion to Quash the deposition of a U S Line

official This deposition MPA contends would have established tha

U S Lines felt that it was profitable to operate in the Port of Baltimor

without choosing to risk its own capital by developing its own contain

er facilities MPA contends that the Presiding Officer agreed that th

information sought by MPA was relevant in that it would prove tha

MPA was not in a monopoly situation but that the Presiding Office

nevertheless granted U S Lines motion

U S Lines also filed an Exception and argues that the Presiding

Officer erred in finding that MPA did not violate section 16 U S Line

claims that MPA has applied the tariff provisions in issue inconsistently

and erratically and as proof offers that MPA s damage claim letter

normally do not make reference to the exculpatory clauses in its tarif

that in litigation MPA s complaints filed in court do not cite the tarif

as a ground for recovery that settlements of such claims have been fo

relatively small amounts and that MPA s claims for crane damage hav

usually been directed to stevedores and not to the steamship lines Thi

demonstrates according to U S Lines the benefit or preference be

stowed by the MPA upon those whom it chose to favor in litigation 

DISCUSSION AND CONCLUSIONS

The Commission is satisfied that the Presiding Officer properly de

fined the purpose and scope of this proceeding and that his rulings o

the Shipping Act questions raised by the tariff provisions in issue are

well founded by the record and are supported by Commission prece

dent For the reasons set forth below the Commission finds that the

Exceptions are without merit and the Commission adopts the Initia

Decision as its own

Many of MPA s exceptions are grounded on its position that the

Presiding Officer improperly limited the scope of the proceeding and

refused to make fmdings on relevant matters The Commission dis

agrees The purpose of this proceeding is to determine the validity

under the Shipping Act of three terminal tariff provisions not to

determine culpability for the crane accident That issue was properly

reserved by the district court in Maryland The matter of who main

tains control over the cranes is relevant to an estimate ofwhich parties

are theoretically more likely to be responsible and therefore liable fo

damage to the cranes The issue before the Commission however is

1 Complainants and Hearing Counsel filed Replies to MPA s Exceptions and generally support th

Initial Decision s

finding that the tariff provisions violate section17

Of the remaining Complainanls Svendborg baa belatedly adopted US Lines section 16 excep

tioDi Clark is silent on the 8eQtion 16 issue and ITO has indicated its uscneral asreement ith Judae

Cograve s decision Hearing Counsel and MPA state that the Initial Decision correctly concluded

that there was no violation of section 16

2l F M r
UNITED STATES LINES INC ETAL V MARYLAND PORT 445

ADMINISTRAnON

the reasonableness ofthe exculpatory language Itis irrelevant whether

a port caused or a user caused accident is the more likely the Presiding

Officer concluded and the Commission agrees that to the extent the

provisions exculpate the port from liability for its own negligence they

are unreasonable

Nor is a determination of who is a user of the facilities useful to

the interpretation of MPA s tariff provisions The provisions in issue

refer not to users but rather to persons to whom facilities have

been assigned the party renting the crane and others vis a vis

the Terminal Operator It is by no means unclear to whom these

provisions apply and their interpretation does not require a definition

of the term user In West Gulf on the other hand the Commission

ruled on the definition of user because the tariffs in issue used that

term in assigning and disclaiming liability One of the tariff items

challenged in that proceeding in fact was entitled USER DEFINI

TION OF 22 F M C at 102

The Presiding Officer s failure to make findings advancing MPA s

theory that Complainants enjoyment of economic gains justifies the

tariff was not erroneous There is no legal precedent or logical premise

for the notion that otherwise unreasonable tariff provisions are permissi

ble if a user subjects itself to them and is making a profit in spite of

their existence Moreover the validity ofthe tariffmust be adjudged as

applied to any user not merely on the basis of these particular parties

financial circumstances

Similarly the Presiding Officer s quashing ofthe U S Lines officials

deposition was premised on his opinion that the deposition would

unnecessarily broaden the scope of the proceeding MPA s argument

that the Presiding Officer agreed that the information sought was rele

vant is clearly based on a misreading ofhis Order MPA quoted out of

context a portion of the Order in which the Presiding Officer was

setting forth MPA s position on the deposition issue a position he later

rejected The Commission concurs that the information sought in the

deposition is not relevant and concludes therefore that the Presiding

Officer s rulings on the peripheral issues raised by MPA are consistent

with the specific and limited purpose ofthis proceeding

MPA s arguments regarding Commission and court precedent also

fail due to a strained interpretation ofthe cases cited In Bisso v Inland

Waterways Corp 349 U S 85 1955 the Supreme Court enunciated the

principle that release from negligence clauses are invalid as a matter of

law in both common carrier and contract carrier relationships The

Court explained the justification for the rule as being

1 to discourage negligence by making wrongdoers pay dam

ages and 2 to protect those in need of goods or services

from being overreached by others who have power to drive

hard bargains 349 U S at 91

lJiur
1j

446 FEDERAL MARITIME COMMISSION

The Commission applied that general principle in the West Gulf an

Lucidi cases finding disclaimers of responsibility and indemnificatio

requirements in two terminal tariffs to be unreasonable in violation 

section 17

MPA s arguments that Bisso does not apply to the instant situatio

and its suggestions that West Gulf and Lucidi were erroneously deci

ed are not convincing Although Bisso is not controlling on Shippin

Act questions the Commission cited that decision as a gauge for re

sonablenessln ruling on the lawfulness oftariff provisions In West G

and Lucidi and applied its rationale to the indemnification issues S

also Order on Reconsideration West Gulf 21 F M C 401 1980

MPA s attempts to distinguish itselffrom the towboat ownedn Bisso 

the terminal operators in West Gulf and Lucidi promote difference

without distinctions A public terminal operator such as MPA is clear

in a position such that exculpatory clauses in its tariff create an unre

sonable hardship upon those who would be consequently liable for th

port s own negligence See also Truck and Lighter Loading and Unloa

ing Practices at New York Harbor 9 F MC SOS 1966

The exception to the Bisso rule suggested in Southwestern Sugar do

not justify MPA s exculpatory provisions MPA s argument that it ha

established a ra relationship between its supposedly reduced insu

ance costs due to the exculpatory provisions and the rates charged 

users is not supported by the record Although there is sQme evidenc

that MPA s insurance costs reflect the tariffs exculpatory languag

there is no evidence thatMPA s rates for the use of its facilities wou

be any higher absent those provisions The recordincicates that MPA 

rate structure reflects what the traffic will bear subject to the influenc

of what its competitor ports are charging MPA has not shown that i

rates reflect savings derived from the existenpe of the exculpato

clauses and therefore the Southwestern Sligar exception to the Bis

principle has not been shown to be applicable toMPA s tariff

In conc ion MPA has failed to justify the exclusion of its tar

from the application ofthe Commission srulings that exculpatory tarif

of terminal operators are unreasonable to the extent they relieve th

terminal operators from liability for their own negligence MPA s e

ceptions will therefore be denied

The Commission also concludes that the Presiding Officer correct

resolved thescction 16 issue MPA s

strategy in asserting defendin

and settling damage claims does not provide a reliable indication th

MPA has enforced its tariff in an inconsistent mannoI nor hav

Complainants demonstrated how others have benefitted from MPA 

alleged preference or how Complainants have suffered prejudice More

over even if MPA had been shown to have preferred others in i

enforcement ofits tariff it does not appear that an appropriate remed

1C f
UNITED STATES LINES INC ET AL V MARYLAND PORT 447

ADMINISTRATION

would be to order stricken from the tariff the selectively enforced

provisions U S Lines exception will also be denied 3

THEREFORE IT IS ORDERED That the Exceptions of United

States Lines Inc and Maryland Port Administration are denied and

IT IS FURTHER ORDERED That the Initial Decision issued in

this proceeding is adopted by the Commission and

IT IS FURTHER ORDERED That Maryland Port Administration

amend and refile within 30 days its tariff section VII Paragraphs 2

and 3 and section VIII Paragraph 4 B4 to conform to this decision

within 30 days and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

a

Any exceptions not specifically addressed have nevertheless been fully reviewed and considered

and found to be without merit

23 F M C
FEDERAL MARITIME COMMISSION

NOS 78 105 78 17 78 18 AND 78 19

UNITED STATES LINES INC ET AL

v

MARYLAND PORT ADMINISTRATION

Sections VIl 2 VIl 3 and VIII 4 B4 of the Maryland Port Administration s Termin

Services Tariff No 3 FMC 4 found to be unjust and unreasonable in violation 

section 17 of the Shipping Act 1916

The Maryland Port Administration found not to have violated section 16 of the Shippin

Act 1916

Richard E Hull M Hamilton Whitman JrKieron F Quinn and Russell T Well f

complainant United Stales Lines Inc

R Roger Drechsler and J Paul Mullins for complainant John T Clark Son 

Maryland Inc

Donald A Krach for complainant I TO Corporation of Baltimore

Dovld W Skeen and Bert L Weinstein for complainants AIS DIS Svendborg and D

S af 1912

Robert L Ferguson JrRobert R Harrison Ill Scott Livingston and Frederick 

Savage for respondent Maryland Port Administration

Burt Pines Jack L Wells and Frank Wagner for intervenor California Association 

Port Authorities

Aaron W Reese and Polly Haight Frawley as Hearing Counsel

INITIALDECISIONl OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Adopted December 15 1980

These cases arise out of a major accident which occurred at th

Dundalk Marine Terminal in the Port of Baltimore on March 21 197

Briefly it appears that on that date two container ships the SS Amer

can Legend and the SS Albert Maersk were berthed or in the process o

being berthed in adjacent slips at the Dundalk facUity and were bein

unloaded or about to be unloaded through the use of two containe

cranes owned by the Maryland Port Administration At about 1 1

p

m two cranes assigned to the SS Albert Maersk were blown dow

the pier one crane striking the Albert Maersk and the other striking th

1 This decision will become the decision of theCommission in the absence of review thereof by t

Commission Rule 227 Rules of Practice and Procedure 46 CF R S02 227

448 23 FMC
UNITED STATES LINES INC ET AL V MARYLAND PORT 449

ADMINISTRAnON

American Legend There was substantial damage to the two ships and to

the two cranes that struck the ships and the total loss ofthe two cranes

that rolled into the water

In February 1977 the Maryland Port Administration MPA filed suit

in the United States District Court for the District of Maryland In its

amended complaint MPA named as defendants 1 the American

Legend in rem 2 United States Lines the owner of the American

Legend 3 ITO Corporation of Baltimore the stevedore hired by U S

Lines on the day of the accident 4 the Albert Maersk in rem 5 A S

D S Svendborg and D S af 1912 A S Svendborg the owners of the

Albert Maersk 6 Maersk Line Agency the ship s agent for the Albert

Maersk and 7 John T Clark Son of Maryland Inc the stevedore

hired to unload the Albert Maersk on the day ofthe accident

The filing of the complaint led to a series of counterclaims cross

claims and third party claims and at least one motion for summary

judgment by each ofthe parties

Count 1 of the complaint before the District Court sought recovery

under a theory of contract based on certain MPA tariff provisions

which MPA

argued in a motion for summary judgment exculpated

MPA from any and all liability arising out of its furnishing of terminal

facilities The defendants in the District Court argued that the tariff

provisions were void as against public policy MPA then countered by

raising the question of primary jurisdiction contending that any chal

lenge to the contested tariff provisions must be made before the Com

mission in the first instance

In Maryland PortAdministration v SS American Legend 453 F Supp

584 1979 Judge Harvey concluded that the Commission should have

the first opportunity of determining the validity and reasonableness of

the tariff provisions in question and went on to say

Accordingly this Court will not at this time decide questions

concerning the validity and construction ofthe contested tariff

provisions Ido not conclude as has been suggested that

the Court in this case is absolutely bound by any rulings of the

FMC What the Court wants is the FMC sinterpretation of

these provisions The Court will then decide the legal ques

tions presented under the particular facts of this case There

fore those defendants who wish to press these questions are

instructed to file appropriate pleading with the FMC

U S Lines Svendborg ITO and Clark each filed complaints against

MPA alleging that Section VII paragraph 2 and Section VIII para

graph 4 B4 of MPA s Terminal Services Tariff No 3 FMC No 4

effective November 13 1975 subjected complainants to undue and

unreasonable prejudice or disadvantage in violation of section 16 First

of the Shipping Act 1916 and constituted unjust or unreasonable

regulations or practices relating to or connected with the receiving

23 FM C
450 FEDERAL MARITIME COMMISSION

handling storing or delivering of property in violation of section 17 o

the Shipping Act

THE STIPULATION

The parties to this proceeding have entered into the following stipu

lation

1 Maryland Port Administration hereinafter MPA is an

agency ofthe State ofMaryland which pwns the port terminal

facilities at Dundalk Marine Terminal in the Port ofBaltimore

These facilities include Berths II and 12 which are designed

for handling of containerized cargo Four IHI Ltd manufac

tured container cranes are looated at Berths II and 12 The

attached drawing No PF Ill 170 Existing Facility Plan

Exhibit I of Maryland Port Administration Dundalk Marine

Terminal shows the location of Berths II and 12 and container

cranes 9 10 11 and 12 Berths 11 and 12 are adjacentpiers

running approximately east and west Container cranes run

parallel to the berth space on rails Cranes 9 and 10 are

located at Berth IICranes 11 and 12 are located at Berth 12

2 This case arises out of an accident that occurred at Dundalk

Marine Terminal on March 21 1976 On that date the SS

ALBERT MAERSK owned and operated by A S D S

Svendborg and D S af 1912 A S heremafter Svendborg was

docked at Berth No II and at the time of the accident was

in the process ofloading and unloading containers through the

U8e lf twoMPA container cranes 9 and 10 At the time ofthe

accident the SS AMERICAN LEGEND owned and operat

ed by United States Lines Inc was either berthed or In the

process of being berthed at adjacent BerthNp 12 and prep

arations were underway to begm operating crimes numbers II

and 12 for the purpose of lolldii1g or discharging cOntainers

from the AMERICAN LEGEND

3 The SS ALBERT MAERSK dooked at approximately 6 oo

a m on March 21 1976 and was schecluledto begin IOadin

and discharging cQJltainerized cargo at 8 oo a m At apprOXl

mately7 oo a m lPA employeesbeg Ul to untie and stlUlt up

cranes 9 and 10 at Berth 1180 they would be available for

loading andcdischargingthe ALBERT MAERSK beginning at

8 00 a m General agents for Svendborg Moller StelUlship

Co had contracted with John T Clark Son of Maryland

Inc as stevedore to load and disharge the ALBERT

MABRSK A copy of that contract is attached hereto as

Exhibit 2 Two ILA crane operators were employed by Clark

to operate cranes 9 and 10

4 United States Lines had contracted with IT O Corporation

of Baltimore as stevedore to load and discharge the S8

AMERICAN LEGEND A copy ofthat contract is attached

as Exhibit 3 Two ILA orane operators were employed by

IT O to operate cranes 11 and 12 ITO employee William

23 F MC
UNITED STATES LINES INC ET AL V MARYLAND PORT 451

ADMINISTRATION

Jarriel to operate crane no II and ITO employee Melvin

Jones to operate crane no 12 The SS AMERICAN

LEGEND was scheduled to arrive and dock at Berth 12 at

1 00 pm At approximately 12 00 pm employees of the Mary

land Port Administration began untying and starting up cranes

II and 12 At the time of the accident Melvin Jones was in

the operator s cab of crane no 12 William Jarriel had not yet

boarded crane no II MPA employees Wayne Bridges and

Chang Park were aboard cranes II and 12 respectively Their

exact position at the time of the accident is in dispute At the

time of the accident IT O personnel had boarded the vessel

and were either unlashing or preparing to u lash containers

although neither crane no II nor 12 had discharged any

containers To date MPA has not billed IT O for the use of

the container cranes on March 21 1976

5 At Dundalk Marine Terminal there are seven container

cranes and four Whirley cranes owned by MPA and used for

loading and discharging vessels The operation of container

cranes while loading and discharging is by ILA personnel who

are not MPA employees The operation ofthe Whirley cranes

while loading and discharging is by MPA crane operators

who are not ILA members

6 Normally MPA employees untie and start up the container

cranes position the crane adjacent to the vessel and lower the

crane boom over the hatch where cargo operations are expect

ed to begin

7 At approximately 1 15 pm on March 21 1976 cranes

numbers II and 12 were blown down the pier off the end of

the pier and into the water by a high wind At about the same

time cranes 9 and 10 were also blown down the pier Crane

no 10 struck the mast of the AMERICAN LEGEND and

crane no 9 struck the superstructure of the ALBERT

MAERSK Both vessels and the four cranes sustained physical

damage

8 The stevedoring gangs working the SS ALBERT

MAERSK had taken a break for lunch between 12 00 and 1 00

p

m These two gangs had started working the vessel again at

1 00 p

m

9 Although the SS AMERICAN LEGEND was scheduled to

berth at 1 00 p

m it was a few minutes late During berthing

four tugs were assisting the AMERICAN LEGEND At

about I 07 p

m the vessel was in position adjacent to Berth

No 12 where it was to be finally located By the time of the

occurrence the gangway was down all of the mooring lines

were out and all but one of the lines were secure to the pier

10 The Maryland Port Administration is an agency and in

strumentality of the State of Maryland created in 1956 by

enactment ofthe Maryland State Legislature

1 0 6r
452 FEDERAL MARITIME COMMISSION

11 The Maryland Port Administration owns and maintains

Dundalk Marine Terminal and several other pier and terminal

facilities in Baltimore

12 Dundalk Marine Terminal was on March 21 1976 the

only public container terminal facility in Baltimore The only

other container terminal facility in Baltimore on March 21

1976 was located at the Sea Land Terminal It is privately

owned by Canton Company and is privately operated by Sea

Land Service Inc

13 The history ofMPA Limitation of Liability Provisions and

Crane Rental Rates 1962 1976 applicable to Dundalk Marine

Terminal is attached hereto as Exhibit 4

14 The Maryland Port Administration filed with the Federal

Maritime Commission a document entitled Terminal Services

Tarrif sic No 3 effective November 13 1975 The three

tariff provisions under challenge in these proceedings are as

follows

Section VII LIABILITY Paragraph 2 reads as follows

The Terminal Operator accepts no responsibility for dam

ages or accidents occurring when its equipment and or op

erator or employees are furnished to perform work for

others

Section VII LIABILITY Paragraph 3 contains the follow

ing provisions

All persons to whom berths wharves transit sheds me

chanical equipment or other facilities have been assigned

shall be responsible and liable to the terminal operator for

any damage occurring to such property during their tenan

cy occupancy and or use without regard to whom shall

cause the damage

In Section VIII of the Tariff entitled MISCELLANEOUS

CHARGES Paragraph 4 B4 there is the following provi

sion with regard to liability for the use ofthe container cranes

The terminal assumes no liability for claims losses or ex

penses by reason of property damage personal injury or

death which may result from the use of the crane except

that caused by structural or mechanical failure and not occa

sioned by an act or omission on the part ofthe party renting

the crane

IS Terminal Service Tariffs applicable to MPA facilities be

tween 1962 and 1976 are filed herewith as Exhibit 5 Those

tariffs comprise the following

a MPA Terminal Services Tariff No 3 FMC T No 4 and

revisions thereto issued September 15 1975 effective Octobe

15 1975 postponed to November 13 1975
UNITED STATES LINES INC ET AL V MARYLAND PORT 453

ADMINISTRAnON

b MPA Terminal Services Tariff No 2 FMC T No 3 and

revisions thereto issued October I 1974 effective October 15

1974

c MPA Terminal Services Tariff No lA FMC T No 2 and

revisions thereto issued October 25 1972 effective Novem

ber 1 1972

d Maryland Port Authority Terminal Services Tariff No 1

FMC T No 1 and revisions thereto issued February I 1971

effective February 5 1971

e Baltimore Marine Terminal Association Terminal Services

TariffNo 1 FMC Agreement No T 1941 FMC T No 1 and

revisions thereto issued January I 1967 effective February I

1967

1 Maryland Port Authority Terminal Services Tariff No 1

FMC T No 1 and revisions thereto issued January 25 1962

effective February 1 1962

16 On March 21 1976 the Maryland Port Administration was

insured against legal liability to third parties with primary

insurance in the amount of 500 000 00 for bodily injury and

200 00000 for property damage with excess insurance avail

able up to an amount of 50 000 000 00 and was insured

against property damage to the container cranes at issue in the

amount of 7 920 000 00

A MPA s container cranes were insured against physical damage

on March 21 1976 under the following policies

POLICY

NUMBER COMPANY COVERAGE DEDUCTIBLE

EFFEC

TIVE

DATE

Commercial Union 11125 75

Insurance Co

U 281819 All risk I of the loss

or 1000

whichever is

the greater

amount

Federal 6291503 All risk Same 1125174 Insurance

Company

United States Fire and

Guaranty

Maryland Prop

Casualty

B MPA was insured against liability for injury and damage to

other persons on March 21 1976 under the following policies

SP 161622 All risk Same 11125174

CM 09911167 All risk Same 11 25175

23 FMC
454 FEDERAL MARITIME COMMISSION

Same

Same

Same

Same

Same

Same

Same

Terminal

Operators

Liability

17 The dates of acquisition completion of installation begin

ning of operation purchase price and value for property

damage insurance purposes for each container crane at DMT

is listed onExhibit 8

18 Ronald G Shock is and for the last ten years has been

Staff Executive Assistant with the Maryland Port Administra

tion and for that period of time has aote4 in the cacity of

insurance manager for the Muyland Port Administration with

responsibility within MPA for placement of insurance and

s4pervision of the insurance and claims program with respect

to third party liabilities and property damage on MPA equip

ment and facilities

19 The MPA does not directly negotiate its insurance with

insurers or brokers As part of his duties Mr Shock drafts

specifications for insurance coverage and forwards them to the

State Treasurer for submission to insurance agents and brokers

for bid Specifications drafted by Mr Shock for MFA s com

prehensive general liability insurance for the period January 1

1976 to January I 1979 are attached hereto as Exlu bit 8B

20 Mr Shock has never sought nor been quoted alternate

premium rates which would reflect the presence or absenCe of

any of the tariff provisions set out in paragraph 14 herein

21 No insurance company which insured MPA s container

cranes against physical damage or against liability to third

persons for the period including March 21 1976 provided the

MPA with financial data concerning insurance savings if any

resulting from the tariff provisions at issue

22 Mr Shock in ten years as insurance manager ofthe MPA

has never on request or on his own initiative made a study or

report ofthe effect of the tariff provisions set out in paragraph

COMPANY POLlCY

NUMBER COVERAGE

Hartford Accident

and Indemnity

Company

North River Ins Co

30C625312E General

Liability

X53500 Excess Liability

Lloyds 75120904

75120904A

75120904B

77010212

75120904C

75120904D

6CX0446

H203705

Admiral Ins Co

Royal Globe Ins Co

23 F MC

DEDUCTIBLE

None

Underlying

Limits

Same

Same

Same

Same

Same

Same

Same

10 000

EFFEC

TIVE

DATE

11

11

11

11

11

11

11

1 1

11

4 1
UNITED STATES LINES INC ET AL V MARYLAND PORT 455

ADMINISTRAnON

14 herein or their predecessors upon the premiums charged by

the MPAs

liability insurers in respect ofthe MPA s

liability to

third parties and he knows of no such study or report made by

any other person or entity

23 Mr Shock in ten years as insurance manager of the MPA

has never on request or on his own initiative made a study or

report ofthe effect ofthe tariff provisions set out in paragraph

14 herein or their predecessors upon the premiums charges

sic by the MPA s property damage insurers in respect of

damage to the MPA s container cranes and he knows of no

such study or report made by any other person or entity

24 Mr Shock did not draft and did not assist in drafting the

limitation provision contained in Section VIII 4 B4 of the

tariff referred to in paragraph 14 herein when the first con

tainer crane was installed in approximately 1969

25 Svendborg vessels have been operated in containerized

service in the Port of Baltimore since 1974 by Svendborg s

general agent Moller Steamship Co and Maersk Line Agency

who received a copy of MPA Terminal Services TariffNo 2

and were on MPA s mailing list of tariff subscribers for

changes and tariff reissues thereafter

26 Since the first receipt of MPA s tariff neither Svendborg

nor its agents have made any comments or complaint concern

ing the liability provisions now found in Sections VII 2

VII 3 and VIII 4 B4 ofMPA TariffNo 3

27 ITO Corporation of Baltimore and its predecessor Jarka

Corporation of Baltimore has been doing business as a steve

dore in the Port ofBaltimore since approximately 1925 and as

a terminal operator since the early 1960 s During the time that

it has operated in Baltimore it has received copies of MPA

tariffs and changes

28 United States Lines has been operating its vessels in the

Port of Baltimore since before 1962 and U S Lines received a

copy of MPA s Terminal Services Tariff and has received

copies of each tariff change and newly issued tariffs since that

time

29 Since its first receipt of MPA s tariff neither U S Lines

nor its agents have made any comments or complaints con

cerning the liability provisions now found in Sections VII 2

VII 3 and VIII 4 B4 ofMPA TariffNo 3

30 Each stevedoring company operating at Dundalk Marine

Terminal works for more than one ocean carrier

31 In the documents produced by the MPA in response to

U S Lines Request for Production as modified by the Stipu

lation between U S Lines Svendborg and the MPA regarding

that Request filed on or about September 26 1978 MPA has

not produced any internal communications or memoranda

interoffice memoranda interagency memoranda or communi

23 F M C
456 FEDERAL MARITIME COMMISSION

cation with any other state or federal agency which

contains references to a the rental rate for container cranes

or b wharfage charges or c dockage charges and which

specifically refer in any way to the three tariff provisions set

out in paragraph 14 above

In addition to the facts stipulated above the parties offer over two

hundred proposed findings of fact A good many of these proposed

findings are not contested and some are merely restatements of matters

covered in the stipulation At least two parties to the proceedin

consider the additional proposals irrelevant to the precise issues present

ed by these cases

As Hearing Counsel state

The voluminous record in this proceeding and the far

reaching approach of Respondent Maryland Port Administra

tion MPA on brief tend to obscure the limited and uncom

plicated issues raised by Complainants

The questions presented are the validity of the challenged tarif

provisions under sections 16 and 17 of the Shipping Act 1916 2

More

over there is a specific context in which these tariff provisions are to

be considered As noted earlier MPA in part based its court su

against the defendants the four complainants in these cases on the

ground that MPA s tariff relieved it of all liability arising out of its

furnishing terminal facilities It wasin this context that the Court unde

the doctrine of primary jurisdiction gave the complainants here a

opportunity to obtain from the Commission its interpretation of the

tariff provisions The Commission is not called upon to determine the

cause ofthe damages suffered by the respective parties as a result ofthe

incident at Dundalk nor is the Commission called upon to establish the

culpability ofany ofthe parties for as Judge Harvey said

What the Court wants is the FMC s

interpretation of these

provisions The Court will then determine the legal questions

under the particular facts ofthis case

Virtually all ofthe additional proposed findings that are contested go

to the question of whose negligence caused the incident at Dundalk

a question which the District Court has reserved to itself While Ihave

found nothing in the law ofprimary jurisdiction which would preclude

an attempt by me or the Commission to resolve this question I view

such an attempt as an unwarranted encroachment on territory clearly

reserved by the Court to itself 3The doctrine of primary jurisdiction

iiiOn complaint Clark and ITO level the broadsidecharge that the tariffprovisions violate section

814 through 817 of the Act On brief however the arguments are restricted to sections 16 and 1

3

This is the precise approach taken by the Commission in1 Charles Lucidl v Stockton Port Distric

22 F M C 19 1979

7l M r
UNITED STATES LINES INC ET AL V MARYLAND PORT 457

ADMINISTRATION

was established to allow an administrative agency such as the Commis

sion to bring to bear its expertise on questions which the agency is

better equipped to answer than are the courts The question of the

ultimate liability for the incident at Dundalk is not such a question

Accordingly except for a few findings made later which are relevant

to a particular argument made by one of the parties all of the other

proposed findings have been considered and found either not relevant

to the issues properly before me redundant to the facts stipulated or

not established by the record in these proceedings

DISCUSSION AND CONCLUSIONS

MPA s basic position is that once a user accepts an assignment

by MPA of a container crane a contract is formed and that contract

incorporates the rates charges and conditions of MPA s terminal serv

ices tariff including of course the exculpatory clauses at issue here It

is MPA s contention that as a general rule such exculpatory clauses

are valid as a matter of law that the burden is on complainant to

prove that special circumstances exist to qualify for an exception to

the general rule and that complainants have failed to sustain that

burden

Except for a somewhat belated attempt to distinguish the cases in its

Reply Brief MPA s argument virtually ignores the relevant precedent

which establishes the exception to MPA s general rule A review of

this precedent will allow the issues presented here to be viewed in their

proper light First however MPA s contentions with respect to the

individual tariffprovisions in issue will be dealt with

Section VII paragraph 3 ofthe tariff provides

All persons to whom berths wharves transit sheds mechani

cal equipment or other facilities have been assigned shall be

responsible and liable to the Terminal Operator for any

damage occurring to such property during their tenancy oc

cupancy and or use without regard to whom shall cause the

damage Emphasis added

It is this provision which in part at least affords the basis ofMPA s

claim for damages against complainants in the District Court Simply

stated it is the position of MPA that any person to whom it has

assigned berths wharves transit sheds mechanical equipment or other

facilities is absolutely liable for any loss of or damage to the assigned

facilities while so assigned without regard to fault even if the user is

not at fault in any respect or should the loss or damage be caused in

whole or in part by MPA itself

In the District Court action U S Lines Inc and Svendborg com

plainants in these cases are seeking to recover for damage to their

respective vessels resulting from the same incident in which it is alleged

that the property ofMPA was lost or damaged MPA as a defense to
1

I

458 FEDERAL MARITIME COMMISSION

I

these actions contends it has no liability pursuant to the provisions o

Section VII paragraph 2 and Section VIII paragraph 4 B4 of it

tariff which provide

Section VIr paragraph 2

The Terminal Operator will not be liable for any delay loss or

damage arising from strikes of any persons in their employ or

in the service of others nor for any causes arising therefrom

nor any causes unavoidable or beyond its control The Termi

nal Operator accepts no responsibility for damages or 7lccidents

occurring when its equipme11 and oroperators or employees are

furnished to perform workfor others Emphasis added

Section VIII paragraph 4B4

The Terminal assumes no liability for claims losses costs or

expenses by reason of property damage personal injury or

death which may result from the use ofthe crane except that

cllused by structural or mechanical failure and not occasioned

by an act or omission on the part of the party renting

the

crane

MPA contends that a user ofits facilities may not recover for and tha

MPA is not responsible for property damage personal injury or deat

even if such property damage personal inj uy

or deatlt is caused 

whole or in part by MPA

While it is true that parties are generally free to contract as the

wish imposing burdens and conferring benefits as they decide indemn

ty and exculpatory clauses will not be sustained by the courts whe

the parties are not on equal footing in the bargaining process or if on

of the parties is charged with the public interest 15 Williston on Co

tracts 1751 3rd Ed 1972 4

The Commission and the Courts have recognized the vital role 

terminal operators in the stream of transportation and the importance 

terminals to interstate and foreign commerce In The Boston Shippin

Association Inc v Port of Boston 10 F MC 409 414 1967 collater

appeal denied sub nom Port of Boston Marine Terminal Assoc v Rede

Transatlantic 400 U S 62 197 the Commission stated Termin

operators form an intermediate link between carriers and the shippe

or consignees

In American Export Isbrandtsen Lines Inc v FMC 444 F 2d 824 

829 the Court discussed the Commission s duties as to terminals sta

ing

For anumber of Instanoes in whlchbualncslea were found rJfected as public intot see Dlxl

Drilling Corp v Crf cent Touring SaIVOll Co 372 V S 697 1963 Boston Main R Co v Pi

236 U S 439 1918 Denver Co lIdat d EI Co v Lawl lnce 73P 39 1903 Northwest Alrlln I

v Alaska Airlines Inc 3 1 F 2d 2 3 9th elr 196 cen d nled 383 US 936 1966
UNITED STATES LINES INC ET AL V MARYLAND PORT 459

ADMINISTRATION

Because of the vital importance ofthese terminals to interstate

and foreign commerce Congress in the Shipping Act of 1916

provided for their regulation by the Federal Maritime Com

mission and authorized it to promulgate and enforce just and

reasonable regulations and practices related to or connected

with the receiving handling storing or delivering ofproperty

at harbor terminal facilities The power thus conferred is

to be used for the purpose of facilitating the free flow of

commerce by guaranteeing an efficient terminal system

In construing the role of marine terminals in the transportation of

goods in interstate and foreign commerce the Commission and Courts

have imputed to them the status of public utilities In Investigation of

Free Time Practices Port of San Diego 9 F MC 525 547 1966 the

Commission stated

In a

very real sense of the term terminals are public utilities

While not always specifically franchised they nevertheless are

engaged in the business of regularly supplying the public with

a service which is of public consequence and need and which

carries with it the duty to serve the public and treat all

persons alike This is the essence of the public utility concept

In American Export Isbrandtsen Lines Inc v FMC supra at 828 the

Court stated

The law for centuries has recognized that public wharves

eiers and marine terminals are affected with a public interest

LFootnote omitted These terminals stand athwart the path of

trade Efficiency of the manpower ships and vehicles is

dependent upon the prompt handling of such cargo and deter

mines whether the flow of interstate and foreign commerce is

obstructed or facilitated The public interest in their efficient

operation is unquestioned

However these cases notwithstanding MPA argues the MPA is not

a common carrier or a public utility This is because MPA says it does

not provide a public service rather it is a State agency that provides

facilities so that private companies may conduct their business These

facilities according to MPA are so provided for the secondary effect

on commerce and growth of the port 5In providing these facilities

MPA says it must protect the public interest in the facilities while they

are being used by a limited number ofprivate companies

Aside from the inconsistency inherent in MPA s statement just how

this argument overcomes the clear holdings in the San Diego and

Export Isbrandtsen cases supra is not apparent from the argument itself

and is not explained in any other way The Port of Baltimore and its

6

The argument that the tenninal facilities are provided primarily as an aid to private business and

only secondarily because of theireconomic benefit to the State of Maryland is dealt with below
460 FEDERAL MARITIME COMMISSION

terminals is a public utility within the meaning of the San Diego an

Export Isbrandtsen cases supra Moreover in West Gulf Maritime Ass

ciation v The City of Galveston 22 F MC 101 103 1979 West Gu

the Commission after declaring the Port of Galveston a public utilit

went on to say It is well established that exculpatory clauses a

invalid as a matter oflaw in common carrier and public utility relatio

ships In that case the Commission found II terminals exculpato

clause to be unreasonable in violation of section 17 However MP

contends that the West Gulf decision can be distinguished from the

cases and should not be applied here

MPA would distinguish West Gulf on the grounds 1 the Port 

Galveston s tariff applied to the entire port facility including the car

areas and back up facilities that are assigned on a long term basis 

port employees at the Port ofGalveston unloaded and stored the carg

3 the Galveston provisions in issue were only proposed and had n

been in effect for a long period of years and 4 there was no quid p

quo benefit conferred upon users in consideration of the tariff liabil

provisions Except for the last these are distinctions without diffe

ences

It of course makes no difference whether the tariff provision appl

to all or just a part of a terminal s facilities when the question is th

tariffs validity under section 17 of the Act Ifit did the Commissi

could be rendered powerless by the simple expedient of tailori

clauses so that they apply only to selected portions of the facilities 

result clearly not contemplated by Congress

It would appear that in its second attempt at distinguishing W

Gulf MPA is trying to set up some kind of estoppel against t

complainants and the Commission ie since complainants have for 

number of years consented to the exculpatory clauses they are p

cluded from challenging them now and the Commission cannot fi

them invalid 6 Whatever applicability such a theory may have in t

realm of purely private contract it has none here where the Comm

sion has a continuing duty to ensure those subject to its jurisdicti

under section 17 establish observe and enforce just and reasona

regulations The right to challenge those regulations before t

Commission cannot be barred by some vaguely expressed theory 

consent or estoppel

Thirdly MPA would distinguish West Gulf on the ground that th

Port of Galveston employees loaded and stored the cargo This distin

tion begs the question As already noted the questions of who was 

control of what equipment and who if anyone was negligent in 

incident at Dundalk have been reserved by the Court The issue here 

6

Itis by no means clear from the record that the actions of complainants constituted consen

the exculpatory provisions of the tariff
UNITED STATES LINES INC ETAL V MARYLAND PORT 461

ADMINISTRA nON

whetherthe provisions which MPA itself contends relieve itof liability

even for its own negligence are valid

Finally MPA argues that there was no quid pro quo in West Gulf

MPA contends that there is a benefit conferred upon users for their

assumption of the risk of loss or damage to MPA s facilities MPA

claims that it has shown that its tariff rates and insurance rates are

related and that MPA computes its rates with the expectation that the

tariff liability provisions will apply In order to deal with this conten

tion some exposition of the so called rate relationship is necessary

In Southwestern Sugar Molasses Co Inc v River Terminals Corp

360 U S 411 1959 the Supreme Court declined to extend automatical

ly the rule in Bisso v Inland Waterways Corp7 to a tariff filed with and

subject to the pervasive regulatory authority of an expert body the

Interstate Commerce Commission Instead the Supreme Court allowed

the Interstate Commerce Commission the first opportunity to rule on

the legality of a tariff exculpatory clause In doing so the Court

suggested that perhaps the towing rates in question reflected savings to

the users ofthe facilities which were derived from savings on insurance

premiums through the application of the exculpatory clause This came

to be known as the rate relationship

MPA was afforded an opportunity to bring its tariffprovisions within

the Southwestern Sugar case by showing a

relationship between the rates

charged users of the facilities and the exculpatory clauses in the tariff

On the second day of the hearing Judge Levy quite properly in view

of the nature of the evidence entered summary judgment ruling that

the proffered evidence did not approach the requisite rate relationship

even if all the proffered facts were true s Nevertheless MPA still

argues that its tariff rates and insurance rates are related 9

The

record however shows just the opposite That the rates and charges of

MPA are dictated by competitive necessity is clearly established by the

following excerpt from the verified testimony of W Gregory Halpin

Port Administrator found in Exhibit 37

Charges and assessments in the Port ofBaltimore today are in

keeping with those which are generally assessed by other port

agencies throughout the United States Para 34

Today Baltimore is a strongly competitive port which has

made significant inroads to cargo formerly handled through

the port ofNew York Para 35

The Port is healthy and competitive despite increasingly

strong competitive assaults and efforts by other ports Balti

7

In Bisso 349 US 85 1955 the Supreme Court invalidated acontract which relieved the owner

of atowboat of liability for its own negligence

8 MPAnever specifically challenges Judge Levy s

ruling

9

This relationship theory is expanded in its attempt to distinguish yet another Commission decision

which complainants and Hearing Counsel argue applies here and is thus dealt with yet again infra

1 ftAr
I

1

I

I

462 FEDERAL MARITIME qJMMISSlON

more s chief competitors have been and remain the Ports of

New York Philadelphia and Norfolk Para 35

the Maryland Port Administration was the logical organi

zation to lead in the promotion of the Port and to organize the

competitive plpgrams that would attract cargo to the Port of

Baltimore Para 36

The Administration shall attempt to recover the highest possi

ble return ofpublic investment in port facilities cOlsistent with

maintaining the competitive position of the port Where there

shall be a conflict between these two objectiveB the coII Peti

tive position ofthe port shall prevail Emphasis added Para

75

The Maryland Port Administration then tryii1 to achieve a

return on its investment looks at other competitive ports and

the rates which they have established This is done to make

certain that Maryland Port Administration does not improper

ly affect the competitive position of the Port of Baltimore

Para 77

At the present time some 16 container lines serve Dundalk

Marine Terminal Only by having a COmmon pool of cranes

sheds storage space and berths can these users be accommo

dated and can the port remain competitive para 83

Clearly then MPA s rate structure is pegged to what the traffic wi

bear in order to maximize return on investment subject however t

the controlling consideration that its rates and cnarges must be compet

tive Any savings realized by the port in its fixed costs inure to th

benefit of the port not to the users of the facUities Furthermore a

stipulated by MPA it has never sought nor been quoted alternat

insurance premium rates which would reflect theaQsence of any ofth

exculpatory clauses Nor has any company which insured MPA s con

tainer cranes against pl1ysical Aamage or agamst liability of third per

sons for the period inCluding March 21 1976 provided MPA wit

financial data concerning insurance savings if any resulting frQm th

tariff provisions in issue Indeed the record is devoid of evidence o

and MPA does not say just how its tariff rates and insurance rates ar

related MPA has failed to distinguish the West Gulfcaae

As noted there is yet another Commission case which MPA woul

distinguish in order to not have it applied in these cases l Charle

Lucidi v Stockton Port District 22c F M C 20 1979 initial decisio

servedJupe8 1979 10 InLucidi the Commission found that Item 85 i

Stockton s Terminal Tariff No 4 constituted an unreasonable regulatio

under section 17 ofthe Shipping Act 1916 Item 85 provided

The Port ofStockton shall not be responsible for any injury to

freight on or in its facilities by fire leakage evaporation

The Initial Decision became thedecision of theConunluion 22 F M C at 19

1 CJI r
UNITED STATES LINES INC ET AL V MARYLAND PORT 463

ADMINISTRATION

natural shrinkage wastage decay animals rats mice other

rodents moths weevils other insects weather conditions

sweat moisture the elements or discharge of water from

breakdown of plant machinery other equipment collapse of

building or structure insurrection war or shortage of labor

for delay loss or damage arising from riots strikes labor or

other disturbances of any persons or of any character beyond

the control ofthe Port ofStockton

The Commission concluded that to the extent that the provisions of

Item 85 exclude the Port from liability from damage to property caused

in whole or in part by fault ofthe Port and without a quid pro quoll of

any kind such provisions are unjust and unreasonable in violation of

section 17 of the Act The Commission went on to conclude that the

provisions of Item 85 were against public policy insofar as such policy

requires businesses affected with a public interest be precluded from

taking unfair advantage ofthose who by necessity must use the facili

ties of such business

MPA argues that it is clear from the decision in Lucidi that the Port

of Stockton not only failed to present evidence of rate relationship but

did not even contend that there were other benefits conferred upon the

users of the Port of Stockton in exchange for the exculpatory provi

sions in issue there MPA argues that the users of its facilities do have

benefits bestowed upon them which render the exculpatory provisions

of its tariff valid The benefits are said by MPA to be the following

The Maryland Port Administration expended huge sums of

public tax dollars to develop a modem container facility at

Dundalk Marine Terminal The Complainants and all users of

the MPA s facilities received the direct benefits having large

capital investments made in terminal facilities and equipment

that they needed in order to operate in the Port of Baltimore

without having to make that capital investment themselves

nor do they have to maintain that equipment and terminal

facilities in a constant state of readiness The users of the

equipment and facilities benefit directly from the investment in

them through the charges which they are able to impose on

the cargo which they handle While in some years the charges

assessed by the Maryland Port Administration for the use of

its facilities may cover operational costs the tremendous cap

ital investment made by the Port Administration still leaves it

with a deficit to the State Department of Transportation of

112 000000 00 Ex 34 p

6 The facts are the MPA facili

ties that are governed by its tariff are at the complete disposal

of the user from the time that the equipment or berth facilities

are assigned to the user The evidence in this case shows that

11 The quid pro quo referred to is the establishment of a role relationship of the kind discussed

above in connection with the West Gulf case
i

464 FEDERAL MARITIME COMMISSION

if not in every case certainly in the vast majority of cases

damage to MPA equipment or berth facilities or damage as a

result of the user of that equipment or berth facilities has

occurred while being operated by or for the direct benefit of

the user to which the facilities were assigned In exchange for

all of these benefits the Port Administration requires the user

to operate the equipment and use the facilities with reasonable

care and to assume the risk ofloss or damage to them for the

very short periods ofactual use This is a risk which users can

easily insure if they so desire

The economic argument made by the MPA simply stated is th

because the MPA has invested substantial amounts in the facilities 

Dundalk Marine Terminal users ofthose facilities should be absolute

liable to the MPA for any damage even damage caused by the MP

itself This argument appears to be grounded on the premise that th

investment by the MPA benefits the users and the users should ther

fore acknowledge absolute liability to the MPA In making this arg

ment the MPA has conveniently ignored the fact that the MPA w

established and its facilities were brought into being in order to bene

the economy ofthe state ofMaryland The massive economic impact 

the port facilities upon the state belies any attempt by the MPA 

argue that the benefits ofits investment accrue only or even primari

to entities which actually operate at or use the port facilities Furthe

more although the MPA attempts to paint a

sorry picture ofits fina

cial condition it should be kept in mind that the MPA was not create

to make money itself and further that the port facilities do in fa

generate substantial operating revenue which the MPA turns over 

the state Department ofTransportation

The policy and intent of the General Assembly of Maryland wi

regard to port facilities and commerce are set forth in Section 6 102 

the Transportation Article of the Annotated Code of Maryland 1977

which formerly appeared as Article 62B Section 1 of the Annotate

Code prior to revision The declarations of legislative intent and polic

contained in that section include the following

b Ports and harbors are valuable Stateassests The ports and

harbors ofthisState are assets ofvalue to the entire State The

residents of all parts of this State benefit directly from the

waterborne commerce that they attract and service Any im

provement to these ports and harbors that increases their

export and import commerce will benefit the people of the

entire State

c Increase of commerce 1 The purpose of this title is to

increase the waterborne commerce of the ports in this State

and by doing so benefit the people ofthis State

11 C ro
UNITED STATES LINES INC ETAL V MARYLAND PORT 465

ADMINISTRAnON

Pursuant to this legislative policy the MPA was given the power to

acquire construct and operate facilities and installations to support

commercial activity in the port

W Gregory Halpin the Maryland Port Administrator testified to

the economic impact of the port facilities at length and that testimony

demonstrates that far from being made for the benefit of users of the

Port the investment was made to produce jobs and revenue for the

State For example Mr Halpin stated

I would Dundalk Terminal represents a tremendous genera

tor of economy jobs and so forth It has also been a my

opinion I think that is shared by anyone else has been a

major factor in maintaining the competitive posture of this

port as we went into the container period Therefore it is

certainly it as such deserves a lot of credit for what it s

done not MPA but the terminal But you can t

you can t

take that figure and put it on top of the 0 figure Idon t see

how you can

Yes it generates four Iwould say I

guess you could say it

generates somewhere in the neighborhood of a hundred and

twenty million dollars worth of economic impact every year

maybe more When you put in the multiplier factors because

it handles four million tons you can multiply that by thirty

forty dollars per ton Id p

21

The MPA itself published in May 1975 a special report entitled The

Economic Impact of the Port of Baltimore on the Maryland

Economy Exhibit 161 This report was based on the University of

Maryland report for 1973 which Mr Halpin mentioned in his testimony

and a brief review ofthe figures contained in this special report shows

the substantial economic benefit which the Port of Baltimore including

the facilities invested in by the MPA brings to the State The graphic

representation on page 2 of the report shows that the total economic

impact of the Port of Baltimore on the Maryland economy in the year

1973 came to the enormous figure of 2 537 500 000 or 2 5 billion

dollars This amount represented nearly 10 percent of the overall gross

state product GSP Exhibit 161 p

4 The Port was found to be

responsible for more than 317 million in taxes which went to the state

and local governments of Maryland and to be the ultimate source of

nearly 170 000 jobs throughout the state Id p

3 Adjusted for

inflation a real annual growth rate of 3 18 percent was found for the

period 1966 through 1973 Id p

6

In light ofthe policy statements and economic impact figures which

the MPA itself has provided it is difficult to see how the MPA can

reasonably argue that the economic benefit of the investment at the

Port accrues solely or primarily to the entities which use and operate

the actual Port facilities to such an extent that those users should be

held responsible for any damage occurring to those facilities no matter

11 PM r
466 FEDERAL MARITIME COMMISSION

how caused That argument might conceivably have had some weigh

if the MPA could show a policy of carefully and finely calculatin

rates to the users in order to barely cover operating expenses and avo

charging users offacilities more than is absolutely necessary The real

ty ofthe situation however is just the opposite the MPA calculates i

rates based on what the market will bear by charging users of the Po

as much as it possibly can without charging so muchthat it jeopardize

its competitive position viz a viz other ports in other states

Again Mr Halpin s testimony is illustrative According to him It

the objective of this Agency to generate the highest possible return o

the public investment in Port facilities oonsistent with maintaining th

competitive position of the Port Exhibit 155 p

1 and of course t

put as much money as possible into the state treasury

It is clear from the record that the MPA is not some sort of eleemo

ynary institution created to benefit carriers stevedores and other use

of the facilities Moreover the fact that the MPA constructed i

facilities because no private interest was willing to do so is irrelevant 

the question of the presence or absence of a quid pro quo for th

imposition ofthe exculpatory clauses

Clearly then under the precedents ofthe West Gulfand Lucidi case

the MPA s tariff provisions here in question constitute unjust and u

reasonable regulations under section 17 However MPA offers y

another argument which it contends renders its exculpatory clause

valid Itis based upon the contention that complainants have misrea

West Gulf and Lucidi as well as the Supreme Court s decision in Bisso 

Inland Waterways Corp 349 U S 85 1955 MPA claims that th

complainants arguments are based upon the proposition that Bisso We

Gulf and Lucidi create a presumption that exculpatory clauses a

invalid This according to MPA simply is not a valid reading 

these cases or the authorities upon which these cases are based

In Bisso the Supreme Court struck down a contract exempting a to

boat owner from liability for its own negligence In doing so the Cou

found its precedent in towage cases including The Steam rSyracuse 7

U S 167 1871 and The Wash Gray 227 U S 66 1928 buHhe Cou

characterized the rule accepted and reaffirmed by it as

merely a particular application to the towage business of a

general rule long used by the Courts and legislatures to pre

vent enforcement of release from negligencecontracts in many

relationships

According to the Court

The two main rellons for the creation and application of the

rule have been 1 to discourage negligence by making wrong

doers pay damages and 2 to protect those in need of goods

or services from being overreached by others who have

power to drive hard bargains The dangers of modern

2 F M C
UNITED STATES LINES INC ET AL V MARYLAND PORT 467

ADMINISTRA nON

machines make it all the more necessary that negligence be

discouraged And increased maritime traffic of today makes it

not less but more important that vessels in American ports be

able to obtain towage free ofmonopolistic compulsions

MPA concentrates mainly on the second reason cited by the Court

and argues that it is not in a position to drive a hard bargain 12

Again MPAs argument is bottomed on the proposition that the com

plainants were not interested in investing capital and developing their

own container facilities To avoid the risk of misinterpreting MPA s

argument I have indulged in the somewhat lengthy quote set out

below

There has been no evidence offered that the Maryland Port

Administration in any way hindered these Complainants or

any other users in the Port of Baltimore from developing their

own facilities In fact it is the Port Administration s

legislative

mandate to encourage private developers to develop their own

facilities in the Port of Baltimore Perhaps the best encourage

ment that the Port Administration gives to private developers

is through the Port Aqministration s Trade Development

office The Port Administration expends large sums of money

through the Trade Development office which has offices all

over the world and whose sole function is to promote the Port

of Baltimore and encourage shippers to ship their cargo

through the Port of Baltimore Tr 738 This operation inures

to the benefit ofall operators in the Port ofBaltimore wheth

er they use Dundalk Marine Terminal or whether they operate

their own facilities The intent of the Trade Development

office is to encourage cargo to use the Port of Baltimore The

Complainants readily admit that as a matter ofeconomics they

prefer to use the Port Administration s facilities no matter

what the cost rather than to develop their own facilities in the

Port of Baltimore Others have taken the view that they

would rather develop and or operate their own facilities in the

Port of Baltimore Two prime examples of private operators

utilizing their own facilities are Sealand which owns and

operates a facility in the Port of Baltimore and Atlantic and

Gulf Stevedores which operates the South Locust Point

Marine Terminal on a long term lease with the Maryland Port

Administration

The Complainants assertions of unequal bargaining position

and MPAs monopoly of container handling facilities in the

Port of Baltimore are artificial and they are largely a product

of their own corporate decision making process which caused

them to fully decide to accept the benefits conferred by the

12 MPA goes to some lengths to show that other courts have restricted Bisso to towage contracts

This argument ignores the Commission s decisions in West Gulf and Lucidi perhaps because MPA

feels it had distinguished those cases

lPUr
468 FEDERAL MARITIME COMMISSION

Maryland Port Administration s investment in port facilities

rather than developing or leasing their own facilities

If this argument were accepted no cartel could be accused of mo

nopoly because it could always say that the accuser was free to start hi

own business As one of the complainants says on the basis of th

argument electric power companies do not occupy monopoly position

because any user ofelectricity is free to buy his own winclmill MPA

cites no authority to support its freedom of choice argument and 

have found nOne It is irrelevant how the MPA arrived at its presen

position and that it is in a position to drive a hard bargain is clea

from the record

The only container facilities available to complainants at Oundalk ar

those owned by MPABy its own admission any user of those facilitie

is subject to the provisions ofthe applioable MPA tariff a tariff whic

is promulgated by MPA Although MPA urges that complainants ar

free to go to other ports if they do not like the terms offered by MPA

one can easily imagine MPA s reaction were oomplainantsto do this 1

The argument ofMPA is without merit That MPA is in a position t

drive a hard bargain is established by the record here

On the basis of the foregoing I oonclude that to the extent tha

section VII paragraph 3 section VIII paragraph 4 b4 and sectio

VII paragraph 2 would relieve the MPA of liability for damage from

its own fault or negligence they constitute unjult and unreasonabl

regulations under section 17 of the Shipping Act 1916

In its reply brief MPA for the first time suggested an alternativ

interpretation 14 As a prelude to its alternative interpretation MPA

propo es two alternative rmd gs of fact

1 If the Federal Maritime Commission does not accept th

Maryland Port Administration s propoed tinding of fact No

16 the Maryland Port Administration requests the followin

alternativetinding of fact A orane is assigned to a steamshi

lin and a stevedore for loading or di8Char ng the ves1 Th

tanff applies as soon as the assignment begins The assllJl1men

begins as soon as the crane has been positioned by the Mary

land Poit Administration and the boom has been lowered

Exhibit lS4 pgs lS 16 T 622

18 MPA I contention iJ nores its own statements concerntna the reason for conatru ting the facU

ties They were con trucled Ie attract carso Ie the Port of Baltimore and iUhe cargo Is lIie th

carriers will call All of thi was with the aim of increasing job and revenues MPA cannot now 

heard Ie uggest that having achieved thi goal their uperior bargaining po ition i

irrelevant 

comp1alnan1l could have con tructed their own facilities

Since the alternative interprelltion was olTeled forthe first time on a

reply brief Ie which th

other parties had no opportunity Ie respond I allowed the l1Iing ofoupplemental brier

1112 fr
UNITED STATES LINES INC ET AL V MARYLAND PORT 469

ADMINISTRAnON

2 From the time that the assignment is made the stevedore and

steamship lines have actual control of the container crane

Exhibit 21 Nos 2 9

Originally MPA s position on when an assignment occurred was

found in its proposed finding No 16

A crane is assigned to a steamship line and a stevedore for

loading or discharging a vessel The tariff applies as soon as

the assignment begins The assignment begins with the startup

of the crane and its removal from the tie down position

Transcript pages 632 634 Exhibit 37 pp 24 25

According to MPA this new interpretation of the term assignment

is supported by the fact that once the boom is lowered the crane is

completely available to users to begin the loading and unloading proc

ess and from that point actual control is in the hands of the users

While MPA is considerably less than clear as to just which of the three

provisions the new interpretation would apply it would appear that

MPA would have it go to all three Thus MPA argues that it is not

unreas mable for it to exculpate itself from liability to third parties once

the cranes are turned over to the users This argument apparently

applies to section VIII b 4 and VII 2 because MPA offers a specific

alternative to interpretation for VII 3 which MPA now argues the

Commission can read as applying only when there is no negligence on

the part ofMPA or when there is concurrent negligence on the part of

the users It may be that MPA is attempting to prove too much

In Matson Navigation Company v PortAuthority of Guam 20 F MC

50S 511 12 1978 the Commission laid down the principles for the

construction oftariffs

When dealing with the proper application of the definition of

wharfage in a terminal tariff the Commission in Sacramento

Yolo Port Dist v Fred V Noonan Co Inc 9 F M C 551

1966 laid down the following general principles

It is a basic principle in the law of tariff construction

that tariffs must be clear and unambiguous to avoid possible

discrimination among users of tariff services When a tariff is

clear on its face no extrinsic evidence may be used to vary

its plain meaning Tariffs are moreover drawn unilateral

ly and must therefore be construed in the case ofambiguity

against the one making and issuing the tariff and it is the

meaning of express language employed in the tariff and not

the unexpressed intention which controls Aleutian

Homes Inc v Coastwise Line 5 F MB 602 608 9

F MC at 558

Although I have not found a case which specifically states

that the same principles of construction apply to terminal

tariffs as well as carrier tariffs the Sacramento case supra and

others make it clear that they do

1
470 FEDERAL MARITIME COMMISSION

Section VII 3 provides

All persons to whom berths wharves transit sheds mechani

cal equipment or other facilities have been assigned shall be

responsible and liable to the terminal operator for any datnage

occurring to any such property during their tenancy occupan

cy or use without regard to whom shall cause the damage

Emphasis added

The phrase without regard to whom shall cause the damage is cle

and unambiguous and no extrinsic evidence such as who has contr

of the equipment may be used vary its plain meaning Matso

Navigation Co v PortAuthority of Guam supra Moreover complai

ants contest MPA s alternative interpretation of the term assignme

and as Hearing Counsel suspects the question ofwhose cranes a

assigned to whom and when an assignment takes place may be a fact

in the actions pending iii the District Court Hearing Counsel urge

and for the reasons already stated Iagree those questions should be le

to the Court

MPA s alternative interpretation is equally invalid when applied 

sections VII 2 and VIII 4B4 Those two sections do not even conta

the word assignment and their application is in no way depende

upon when an assignment takes place

Section VII 2 reads

The Terminal Operator accepts no responsibility for damages

oraecidents occUDring when its equipment and or operator Or

employees are furnished to perform work for others

Section VIII 4 B4 provides

The terminal assumes no liability for claims losses or ex

penses by reason ofpl Operty damage personal injury or death

which may result from the use ofthe 11ane except that caused

by mechanical failure and not occasiOned by an act or omis

sion on the part ofthe party renting the crane

These provisions are not conditioned upon the absence ofnegligence 

the part of MPA and to interpret them to be So conditioned wou

be to rewrite the provisions The provisions are clear By their pla

meaning they relieve MPA of liability for its own negligel1ceand 

amount of extrinsic evidence can be used to alter the language of t

provisions or to add words not in them Initially Isuggested that MP

may be trying to prove too much By thafImeant if MFA would b

an interpretation of the exculpatory clauses work such a dras

alteration in the apparent meaning MPA can only be admitting that t

provisions are fatally ambiguous and invalid under section 17 for th

reason However the language of the provisions in question is n

susceptible to the interpretation suggested by MPA and even if it we

1
UNITED STATES LINES INC ET AL V MARYLAND PORT 471

ADMINISTRA nON

to the extent that they would still relieve MPA for liability for its own

negligence they would remain invalid 15

Complainants also argue that enforcement of the tariff provisions

against them in these cases would constitute a violation of section 16

First ofthe Act which declares it unlawful for other persons subject to

the Act

To make or give any undue or unreasonable preference or

advantage to any particular person locality or description of

traffic in any respect whatsoever or to subject any particular

person locality or description of traffic to any undue or

unreasonable prejudice or disadvantage in any respect whatso

ever

While some variations on the theme are offered there are three basic

grounds offered for this allegation 1 Over the years in specific cases

MPA has not been consistent in its reliance on the tariff provisions 2

In claims involving damage to MPA equipment including container

cranes and spreaders MPA has failed to follow a consistent pattern as

to what party is the user of the equipment for purposes of seeking to

make that party liable for damage and 3 Despite the presence of the

tariff provisions purporting to grant absolute immunity from liability or

to make other parties absolutely liable for damages the MPA has

compromised and settled numerous claims

Each complainant seems to see a slightly different form of prejudice

arising from these asserted actions ofMPA U S Lines citing a number

of cases in which the Commission has imposed upon terminals what

U S Lines calls the highest duty to serve the public equally and

impartially it goes on to argue that it would grossly violate the

absolute equality and impartiality provisions of section 16 First to

permit the MPA to rely upon its tariff provisions to impose a

6 000 000 judgment against U S Lines and to excuse its liability in the

counter claim against it by U S Lines

Clark views the alleged actions as resulting in the fact that the

MPA by the tariff provisions has given itself an unfair advantage

which violates Section 16 First

Svendborg among other things says that because in other instances

MPA did not consider the shipowner to be user of equipment it is

prejudicial to Svendborg for MPA to do so in these cases In short it is

Svendborg s position that to the extent that other shipowners have not

15 An example of why questions of who was negligent are best left to the Court is provided by the

argument of U S Lines that MPA s new interpretation is invalid because itis unable to impose liabil

ity upon assignees in situations of comparative negligence US Lines views the MPA interpretation

as imposing full liability upon the assignee even if MPA is 90 at fault and the assignee only 10

Tort questions of comparative negligence and the like are not within the peculiar expertise of the

Commission

1Ji Mr
472 FEDERAL MARITIME COMMISSION

been sued as users in crane damage cases in the past thoseshipown

ers have been given an undue and unreasonable preference 16

Aside from the cases cited to show a terminal operator s duty to trea

similarly situated persons equally complainants refer to no authorit

which treats the question of section 16 s applicability to charges that 

terminal s

inconsistency in handling claims and lawsuits 17 Howeve

two of the arguments can be dismissed at the outset

The argument is made that MPA has preferred itself thlough th

exculpatQry clauses inits tariff hQwever the Commission has express

found that section 16 does not apply to self preferences Anglo Canad

an Ship Co Ltd v Mitsui SS Co 4 F MB 535 1955 Next it 

contended that MPA by settling some claims for less than the fu

amount has failed to apply the exculpatory provisions uniformly o

consistently Apparently the argument is that since the tariff frees MPA

from all liability for damage to its facilities it cannot settle a claim fo

anything less than the full amount MPA calls this position ludicrous

and it certainly isn tfar from it Apparently complainants w9uld hav

MPA go to trial on a claim even if it cost more to litigjlte the claim

than the total claim was worth even tho gh the other party waswillin

to reach a reasonable settlement in the matter The law does n

demand such an absurd result One cannot help but wonder what th

complainants reaction would be if the MPA offered to open settleme

negotiations in their cases

Complainants also assert that MPA has been capricious in its relianc

on the exculpatory clause when asserting or defending against claim

This charge is based in part on some letters written over the years b

one Ronald Shock who was for approximately 12 years involved in th

handling of claims for MPA These letters it is argued demonstrate th

failure of MPA to establish propet policies and guideHnes and that th

lack of guidance within the MPA and between the MfA and it

insurers and legal representatives hasresultell in concrete violations o

the duty to treat all users of the facility in an equal fair and eve

handed fashion To buttress the argument a number of instances o

berth damage are cited some in which the notice letter made n

reference to the tariff and some involving litigation in which the com

plainants made no reference to thetariff

By now the difficulties inherent in these charges should be apparen

The absence of any retCrence to the tariff in a letter noticing a claim

does not mean that MPA would not invoke the tariffshould it becom

necessary to do so at some later stage The failure to specifically cit

the tariff in a

complaint would ofcourse depend upon the nature of th

18 lTO concentrates on its position BI aIInon user also

A similar aII SSlion was made in J Charl Lucldl Stockton Port Dlatrct supro butth ohar

was dismissed forlack of vid noo No di80U88ion of tho appli08bility of tho aeolion was had

C I
UNITED STATES LINES INC ET AL V MARYLAND PORT 473

ADMINISTRATION

incident forming the gravamen of the complaint it could be that

damage to a berth occurred in such a way that there could have been

no question of MPAs negligence and thus no need to raise the exculpa

tory clauses or the pleadings may have been so broadly drafted as to

allow the exculpatory clauses to be offered in defense or as part ofthe

claim 1 8

It is obvious that any finding of a section 16 First violation on the

grounds argued by complainants requires among other things the

second guessing or a critique ofthe workof counsel representing MPA

It certainly requires more evidence than is to be found in this record

But a more significant difficulty presents itself a difficulty which is

inherent in the intended purpose of section 16 itself

Section 16 was intended to prohibit the disturbance of existing com

mercial relationships through the granting by carriers or other persons

subject to the Act of arbitrary preferences or advantages to one person

but not the other Thus in the vast bulk of cases the question presented

was whether a particular rate allowed one shipper a competitive advan

tage over another shipper in a common market place 19 Normally the

cases required a competitive relationship between the allegedly pre

ferred shipper and the allegedly prejudiced shipper However there is

another line of cases in which a competitive relationship between the

parties is not necessary to a finding of a violation of section 16 See

e g Investigation of Free Time Practices Port of San Diego 9 F MC

525 546 1966 New York Foreign Freight F B Assn v FMC 337 F

2d 289 1964 In these and other like cases the alleged preference or

prejudice involved rates or charges which were not dependent upon

the particular commodity shipped 20 However even if a competitive

relationship is not necessary a complainant must show that the alleged

prejudice has in some quantifiable way worked not only to his disad

vantage but resulted in a positive advantage to another identifiable

interest See e gPhila Ocean Traffic Bureau v Export SS Corp 1

U S MC 538 1936 Household Goods supra Here each of the com

plainants relies only upon the assertion that they have been prejudiced

while others whom they assert have not had the exculpatory clauses

18 In acomplaint and answer attached to its brief US Lines makes much of the fact that MPA did

not specifically raise the tariff provisions as a defense against a claim for damage caused by acrane

dropping apontoon on acontainer MPA does assert that the incident was entirely due to the negli

gence of others and raises as an uaffirmative defense a breach of contract by another party to the

suit Whether or not this defense would allow MPA to raise the exculpatory clauses is of course a

matter forthe Judge of the District Court However in this day of liberal construction of pleadings

such aresult would not appear probable

See North Atlantic Med Frght Conf Rates on Household Goods 11 F M C 202 1967 for a

review of casesarising under section 16

20 In the New York case supra the Court said Transportation orwharfage charges are dependent

upon the particular commodity involvedj the cost for shipping orstoring bananas bears no relationship

to the fees levied forheavy industrial equipment 337 F 2d at 299
i

i

1

474 FEDERAL MARITIME COMMISSION

invoked against them have been preferred The only monetary figur

alluded to is the 6 000 000 00 asserted involved in the District Cou

suit But there is simply nothing in the record which allows an

comparison between this preliminary figure and the extent to whic

those allegedly preferred were benefited if they were benefited at al

Again the evidence ofrecord fails to sustain the allegation

Moreover there is a problem in the relief requested by the complain

ants i e that the exculpatory clauses be found in violation ofsection 1

and therefore null and void Put another way complainants woul

have the Commission forbid the MPA to apply the exculpatory clause

against them Complainants have in actuality confused two separat

issues On the one hand there is the question of the validity of the tar

provisions themselves On the other there is the question ofthe mann

in which the MPA has applied the provisions to users of its facilities 

we can assume for the moment that the provisions in question are val

the inappropriateness of the relief requested becomes apparent

A terminal tariff once it is published and rued with the Commission

fIXes the terms conditions rates and charges applicable to users of th

terminal facilities and as complainants themselvesargue they must b

applied to everyone using the terminal The fact that they may no

have been applied to some in the past cannot as a matter of law wor

to prevent tleir application in the present or the future By law th

terminal is bound to apply them Ifa terminal s past practices in apply

ing the provisions ofits tariffs violate section J60f the Act the remed

is not a prohibition against the present or future application of othe

wise valid provisic ns

Finally there remains the contention that MPA s failure to be con

sistent in its determination as to who is the Jim f its equipment ha

resulted in a violation of section 16 First The argument here can be

be summed up in the words of U S Lines wpich after summarizipg th

evidence in the record states

If all this evidence shows any pattern that pattern is in the

fact that the MPA has tended to hold the stevedore liable as

the assignee and user under Section VII 3 of the tariff for

damages to container cranes Yet MFA in this proceeding

claims the right to pursue both stevedores and ocean carriers

as assignees and users of container crl lles pursuant to the

tariff

This says US Lines is a transparent attempt to apply the dracon

an provisions of the tariff against the deep pockets ofthe carrie

because of the large dollar amounts at iSSllCl And this attempt clear

shows why this practice should be declared to be in violation of sectio

16 First of the Shipping Act

MPA says and there is evidence in the record to show that it ha

always considered both the carrier and the stevedore as users of th
UNITED STATES LINES INC ET AL V MARYLAND PORT 475

ADMINISTRATION

cranes However MPA says because most of the carriers had arrange

ments with their stevedores under which the stevedores paid MPA s

charges under the tariff it simply billed the stevedores for all charges

arising under the tariff The record does not establish that MPA has

violated section 16 of the Act in this regard Since these terms are

inextricably interwoven with questions of control and negligence they

belong properly in the District Court

ULTIMATE CONCLUSIONS

Sections VII 2 VII 3 and VIII 4 B4 are unjust and unreasonable

regulations and are violative of section 17 of the Shipping Act 1916

MPA has not violated section 16 First of the Shipping Act 1916

S JOHN E COGRAVE

Administrative Law Judge

Washington D C

August 11 1980
FEDERAL MARITIME COMMISSION

I

DOCKET NO 80 68

U S CARGO OVER CANADA PETITION FOR DECLARATORY

ORDER

DISCONTINUANCE OF PROCEEDING

December 19 1980

This proceeding was instituted by the filing of a petition by Sea Lan

Service Inc seeking the issuance of a declaratory order by the Com

mission with respect to the movement ofUnited States cargoes throug

Canadian ports A number of replies were received in response to th

notice of ftling ofthe petition

Sea Land has now withdrawn the petition stating in pertinent pa

that it would not be in the best public interest to press fo

such an order on anything less than the most complete record poss

ble The withdrawal is made without prejudice to the right of Sea

Land to further petition the Commission

Inlight of the foregoing this proceeding is discontinued

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 78 6

ADEL INTERNATIONAL DEVELOPMENT INC

v

PUERTO RICO MARITIME SHIPPING AUTHORITY

AND STAR LINES INC

ORDER ADOPTING INITIAL DECISION

December 30 1980

This proceeding is before the Commission on the Exceptions of Adel

International Development Inc to Chief Administrative Law Judge

John E Cograve s Initial Decision dismissing its complaint The com

plaint alleged that Puerto Rico Maritime Shipping Authority and its

agent Star Lines Inc violated sections 16 17 18b 3 and 18b 5 of

the Shipping Act 1916 46 U S C 815 816 817 b 3 and 817 b 5

with regard to a shipment of 20 mobile homes from Baltimore to

Dammam Saudi Arabia on a PRMSA vessel

BACKGROUND

J S Connor Inc a freight forwarder acting on behalf of Adel and

Star Lines Inc PRMSAs booking agent negotiated a rate for the

shipment of mobile homes for the lump sum amount of 240000 1 The

agreement was confirmed in writing on a Coniine Booking Liner

Booking Note dated November 22 1976 The Coniine note describes

20 mobile homes at abt 133 330 eft to be transported for 12 000

each or 240 000 lump sum berth terms The contract also states

cargo on wheels for benefit of carrier and cubic to be based on

without wheeled measurement At this time no PRMSA tariff cover

ing mobile homes was on file with the Federal Maritime Commission

On December 17 1976 the Star Lines booking agent who entered

into the Coniine agreement arranged the filing of a PRMSA tariff

covering mobile homes at the rate of 180 cft This calculates to

approximately 240 0002 when applied to the 133 330 cubic foot meas

urement of the homes without wheels and hitches On December 21

1976 the vessel sailed with Adel s shipment aboard

1 PRMSAat this time had operated in the Baltimore Persian Gulf trade PRMSAs Mid East serv

ice terminated in May of 1977

2

The exact calculationjs 239 994 or 6 less than the lump sum amount

A 7
478 FEDERAL MARITIME COMMISSION

In January 1977 PRMSA billed Adel 345 600 for the shipment at

which point Adel through Connor protested that there had been an

agreement with Star Lines on a lump sum figure of 240 000 and tha

the 180 cft tariff rate was to be applied to the cargo as if knocked

down or without hitches and wheels PRMSA noting that under the

terms of its filed tariff the rate applies to the cargo with wheels and

hitches continued to press its claim for the 105 600 difference between

the 240 000 which Adel has paid and the 345 600 which is due

pursuant to the tariff and tiled suit against Adel on September 13 1977

in the U S District Court for the Northern District of Texas for the

additional freight Adel tiled this complaint on March 30 1978 On

September 26 1979 the court granted Adel s motion to stay the pro

ceedings pending the Commission s decision in this proceeding

The Initial Decision served July 11 1980 concluded that PRMSA

violated no provisions of the Shipping Act and that its tariff rate mus

apply The Presiding Officer dismissed Adel s contention that section

18b 3 bound PRMSA to tile in its tariff the lump sum rate negotiated

by its agent Nor did he accept Adel s contention that PRMSA s failure

to tile a special docket application

0

for permission to apply retroactively

the lump sum rate violated section 18b 3 The Presiding Office

stated that there is no obligation for a carrier to seek a waiver o

charges and that even if PRMSA had flled a special docket applica

tion it could not have met the statutory requirements 3 He also deter

mined that section 18b 3 does not give the Commission discretionary

power to award equitable relief

The Presiding Officer concluded that the record did not support 

finding that Adel was in competition with any particular shipper o

mobile homes which received a preference from PRMSA to the preju

dice or disadvantilge ofAdel Thus he found that Adel had not proven

a violation of section 16 of the Act Similarly he determined that Ade

had not shown that PRMSA carried other shipments of mobile homes

Adel argue that Star Lines filing oC the 180 eft PRMSAtariff was based on aStar Lines em

ployee s interpretation oC PRMSA Tariff rule 17 which he had read to provide that moaaurement o

the mobile homes would be calculated without inoludlng the wheels and hitches That rule reads 

Collows

Speclol Condition for RolRo 0130 On completely set up RoiRo Unita which are driven

under their own power onto the vessel and on whloh the shipper could present unlta to the

carrier in Semi Knocked Down CQndition blt electi for carriers cQnvloience to present

same unlta in acompletely setup RolRo condition the Ocean Rate will be calculated on the

Cubic moaaurement oC the Semi Knocked DownCondilion Such unita will notbe subject to

special Lash Charge

PRMSAcontends that Rule 17 clearly does not apply to Ades mobile homes because they canno

be driven under their own power Adel argues that even iC PRMSA is correct in asserting that Ru

17 is inapplicable then Star Lines misinterpretation of the rule was the type of clerical or administr

tive error which would have been aproper ground Cor aspecial docket application Tho idln

Officer rejected this arlument noting that amisreading of a tariff is not aaround for awaiver und

section 18b

3
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 479

STAR LINES INC

under the same transportation circumstances and conditions as the ship

ment in issue and therefore failed to establish a violation of section 17

ofthe Act

Finally the Presiding Officer dismissed Adel s section 18b 5 claim

because that section is prospective in nature and is violated only if the

carrier continues to charge unreasonable rates after the Commission has

formally determined them to be unreasonable He also found that Adel

did not establish that PRMSAs tariff rate was so unreasonably high as

to be detrimental to the commerce ofthe United States

EXCEPTIONS AND POSITIONS OF THE PARTIES

Adel excepts to the Initial Decision on a number of grounds It

protests that the Presiding Officer did not specifically rule on its 83

proposed findings of facts Adel states that although perhaps it is true

that an administrative decision need not rule upon each proposed find

ing if the rulings are evident from the findings and conclusions in the

decision the Initial Decision is confusing and misleading

Although Adel states that there is except for certain irrelevancies

no dispute over the essential facts Adel goes on to raise 12 alleged

instances offactual omissions or errors in the Initial Decision 4Adel

also excepts to what it calls a number of apparent irrelevancies in the

Initial Decision and argues that the Presiding Officer did not explain

how the discussion of these topics affects the ultimate conclusion 5

Adel s final exception entitled Legal Conclusions states that the

Presiding Officer slegal analysis contains three fatal flaws in that he

failed to recognize that I Star Lines was PRMSA s exclusive agent

2 when the Coniine note was signed PRMSA had no tariff item

covering mobile homes and 3 PRMSA was guilty ofbad faith in not

4

The factual findings which the Presiding Officer allegedly did not make include the following

1 certain facts about Star Lines and its relationship with PRMSA

2 the background and history of Connor Adel s

freight forwarder

3 the fact that PRMSA had heavy competition among carriers in the Mid East trade

4 aspecific version of the negotiating process between PRMSAs and Adel s

agents

5 that there is a custom and usage that when acarrier enters a

lump sum contract with a

shipper which does not conform to the tariff on file it is the responsibility of the carrier to

amend its tariffto conform to the contract

6 that Star Lines honestly attempted to file a tariff rate effectuating the lump sum agree

ment and

7 that PRMSA repudiated the Star Lines Adel rate agreement

Adel alleges that the Presiding Officer made factual errors in that

1 he did not explain that the Coniine note form was commonly known to Star Lines and

Connor

2 he did not find that Adel did not benefit from the wheels and hitches

3 he found that the mobile homes weredifficult to load

4 he made what Adel acknowledges to be atypographical error in using the figure 905 600

instead of 105 600 and

5 he found that Adel would make aprofit on theshipment at the tariffrate

6

Adel lists some examples of irrelevant topics as I who initiated the booking 2 who insisted

upon the wheels and hitches and 3 whether the Coniine Note is widely used
480 FEDERAL MARITIME COMMISSION

correcting Star Lines error in filing the tariff at 180 cft Adel then

summarizes its arguments that section 18b 3 was violated when

PRMSA did not amend its tariff to correct Star Lines administrative

error that 18b 3 authorizes the Commission to afford equitable

relief that PRMSA subjected Adel to a comparative disadvantage in

violation of section 16 because PRMSA routinely honored other ship

pers booking contracts that PRMSA subjected Adel to unreasonable

prejudice by not filing a corrector reflecting the Coniine note rate

that Adel was discriminated againsHn violation of section 17 in tha

PRMSA has shipped other shippers mobile homes for less than tha

charged Adelj and that PRMSAs tariff rate was so unreasonably high

as to violate section 18b S

In its Reply PRMSA generally supports the Initial Decision in its

entirety

DISCUSSION AND CONCUJSIONS

The Commission finds that the Presiding Officer properly disposed o

the issueJ raised in this proceeding and that his fmdings and conclusion

are well supported by the record Acxordingly for the reason set forth

below the Commission concludes that the Exceptions of Adel are

without merit and adopts the Initial Decision as its oWn

Adel protests the Presiding Officer s failure to rule individually o

each of its 83 proposed findings of facts The Presiding OtT1cer stated

It is not necessary to make fmdings of fact upon all items of

evidence submitted nor even necessarily to answer each and

every contentioll me4e by the contestallts to the hearing but

rather to inakef gs wlrlch are suft1cient to resolve the

material issues 23 RM C at 484

Because so many of the proposed fmdings of both parties were no

relevant to the material issues the Presiding OtT1cer s findings did no

address each proposed tinclg specifically He also added

Any proposed fmding not made or disoussedabove and not

s ecifica1ly dealt with below was considered and found

either to be argUlnent 1otsupported by tile evidence or

irrelevant to the issues 23 F M C at 494

Adel has not shown how indiviliual rulin On eaCh proposed fmding o

fact would have affected the outcome of this proceeding The Commis

sion is satisfied that the Presiding OtT1cers manner of rulin g

on th

findings of fact was appropriate and Adel s exception on this point is

therefore denied

Although Adel itself states on several occasiQns that the parties agre

on the critical facts its exceptions primarily deal with factual matters

many of which involve issues which even Adel concedes are irrelevan

to the outcome of this proceeding Several ofthe factual errai llalleged

ly made by the Presiding Officer eg

his failure to find that the home
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 481

STAR LINES INC

were difficult to load and his failure to find certain facts illustrating

Connor s history and expertise are of as uncertain consequence as

those matters acknowledged to be irrelevant by Adel Other alleged

errors e gthe failure to find that Star Lines wasPRMSA s agent and

that PRMSA refused to enforce the Coniine agreement were matters

which if not specifically noted as a finding of fact were clearly

acknowledged and relied upon by the Presiding Officer

Adel excepts to findings of fact which do not support its version of

matters such as which of the parties initiated the negotiations over this

booking whether the Star Lines employee who computed the tariff

rate had attempted to approximate the lump sum amount and whether

the Coniine booking form was commonly used The relevance of these

factual disputes turns on Adel s

theory of recovery on equity

grounds Adel cites United States v Columbia SS Co Inc 17 FMC

8 1973 as authority for the proposition that the Commission has

discretionary power to afford equitable relief under section 18b 3

The Commission finds that case to be inapposite and Adel s argument

unconvincing

In Columbia S S Co the Commission found a section 18b 3 viola

tion but exercised its discretion under section 22 not to award repara

tions because of the particular circumstances in the proceeding This

does not support Adel s contention that the Commission has discretion

under section 18 b 3 to award reparations on equity grounds inde

pendently of any findings of violations of the Shipping Act It is only

by fmding violations of the Shipping Act that the Commission can

award reparations Thus many of Adel s proposed facts intended to

establish PRMSAs deliberate bad faith or unconscionable conduct

have not been shown to be relevant to Shipping Act considerations

The Commission concludes that there was no error by the Presiding

Officer in his treatment of these factual matters These matters may be

relevant to a breach of contract action but the Commission is not the

proper forum for such claims

The Presiding Officer is also correct in noting that section 18 b 3

does not impose the obligation to file a special docket application 6

In

fact for PRMSA not to have charged the rate in its tariff and to

enforce instead the Coniine note amount would have been a violation

6

Even had an application for waiver of tariff charges been filed it is not apparent that PRMSA

could have met the statutory requirements Adel has not established that the 180 eft tariff rate was

intended to effectuate the lump sum amount of the Coniine note in fact there is some evidence that

Star Lines had no intention of effectuating that agreement Star Lines entry into the booking sheet

sent to PRMSA was based on measurement ton made no mention of thelump sum rate orthe Coniine

note and would have resulted in charges of 20 520 per mobile home substantially morethan both

the Coniine price and the tariff rate Thus the evidence fails to support Ade1 s contention that the

ruing of the tariff rate was a clerical or administrative error as prescribed in section 18b 3 as

grounds forwaiver of the tariff rate
482 FEDERAL MARITIME COMMISSION

ofsection 18b 3

7

The Commission agrees with the Presiding Office

that the facts of this proceeding do not reveal a violation of sectio

18b 3

The Initial Decision is also correct in finding that the evidence doe

not indicate that Adel was in competition with any particular shipper o

mobile homes which received a preference resulting in prejudice t

Adel nor that the services rendered to the various shippers of mobil

homes to Dammam were identical in terms and conditions to thos

rendered to Adel Thus Adel has failed to prove its section 16 claim a

well as its allegation of a section 17 violation there is no evidence tha

other shipments of mobile homes carried by PRMSA moved under th

same transportation circumstances and conditions as Adels shipment

Finally Ade1 s allegation that PRMSA violated section 18b S i

unfounded Adel has failed to establish that PRMSAs tariff rate was s

unreasonably high as to be detrimental to the commerce ofthe United

States Moreover regardless of Adels failure of proof it is doubtfu

that section 18b S could serve as the basis for reparation here Onl

after the Commission has determined a particular rate to be unreason

able under section 18b S may a carrier s continued assessment oftha

rate be considered a violation of section 18b S for which reparation

may be awarded Federal Maritime Commission v Caragher 364 F 2d

709 2d Cir 1966 Valley Evaporating Co v Grace Line Inc 1

F MC 16 1970 Section 18b S does not afford a

remedy with

regard to rates which have not already been found to be violative o

the Act and which are no longer in effect 8

THEREFORE IT IS ORDERED That the Exceptions of Ade

International Development Inc are denied and

IT IS FURTHER ORDERED That the Initial Decision issued in

this proceeding is adopted by the Commission and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

1 Moreover the Coniine note itself is confusing The note specifies what to include in calculating

the cubic measurement of the cargo but it als o prescribes a

lump sum amount of 12 000 per unit A

plain interpretation of lump sum suaesta that the measurement of the c

go should be irrelevan

8

Alel also protesla tbat the pr sidins Qfficer s attitude was unacceptable and susgesla that he

was biased against it and in favor of PRMSA It does not appear however that Adel s rhetoric o

thispoint is intended to constitute an exception Atany rate the Commission fmds no evidence of bia

orpredisposition toward thefacts of the case On thepart ofthe Presiding Officer

Commissioner JamesV Day did not participate
FEDERAL MARITIME COMMISSION

DOCKET NO 78 6

ADEL INTERNATIONAL DEVELOPMENT INC

v

PUERTO RICO MARITIME SHIPPING AUTHORITY AND

STAR LINES INC

The obligation of a common carrier by water to charge the rates specified in its published

and filed tariffs cannot be altered by a separate agreement between the carrier and

the shipper or between their agents

Complainant has failed to establish that respondent s rate on a shipment of mobile homes

violated sections 16 17 18 b 3 or 18 b 6 of the Shipping Act 1916

The complaint is dismissed

Richard W Kurrus James N Jacobi Diane M WilIkens and Margaret Chao for

complainant Adel International Development Inc

Amy Loeserman Klein Morris R Garfinkle Kathleen Mahon and David P Street for

respondent Puerto Rico Maritime Shipping Authority

John E Sprizzo for respondent Star Lines Inc

INITIAL DECISION1 OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Adopted December 30 1980

This case arises out of the efforts of the Puerto Rico Maritime

Shipping Authority PRMSA to collect 105 600 in freight charges on

a shipment of twenty mobile homes by Adel International Inc from

Baltimore Maryland to Dammam Saudi Arabia on PRMSAs vessel

the 88 Puerto Rico on December 22 1976

Before dealing with the merits of the case a word on a specific

request ofAdel is necessary Adel on brief offers a series ofproposed

findings of fact which it believes to be the essential basic or constitu

tive findings offact and requests that in accordance with section 8 b

of the Administrative Procedure Act that the Initial Decision show

the ruling on each finding presented

Ifby this Adel is requesting a specific discussion and ruling on each

and everyone of the 83 findings of fact proposed by it the request

goes far beyond the spirit intent and purpose of section 8 b of the

APA 5 U S C 557 b It is sufficient if an administrative decision

1 This decision wilt become the decision of the Commission in the absence of review thereof by the

Commission Rule 227 Rules of Practice and Procedure 46 GFR 502 227

Al1
484 FEDERAL MARITIME COMMISSION

makes those findings sufficient to furnish the parties the Commissio

and any reviewing court with a sufficiently clear basis for understand

ing the premises used in preparing the conclusions of law and applyin

them to the findings made Gi bertvi l Trucking Co v U S 196 F

Supp 351 D C Mass 1961 revd on other grounds 371 U S 115 It 

not necessary to make findings of fact upon all items of evidenc

submitted nor even necessary to answer each and every contentio

made by the contestants to the hearing but rather to make finding

which are sufficient to resolve the material issues Raye Co Tran

ports v U S 314 F Supp 1036 D C Mo 1970

Not much imagination is needed to see how long this decision woul

be were it necessary to explain the rejection or adoption of each or 

part of each of Adels 83 proposed findings For example PRMSA 

its Opening Brief devotes some 50 pages to a discussion of only 

portion of the evidence The request is denied However the diffe

ences between the findings of fact as proposed by each side do warran

some discussion before the actual findings of fact are made To mak

the discussion meaningful it is necessary to provide some narrativ

framework within which to view the areas of basic conflict The narr

tive which follows is taken from the Prehearing Statement of Ade

Petitioner Adel International Development Inc Adel is a

corpo

ration incorporated in the State of Texas with its principal place o

business at 7616 LBJ Freeway Suite 204 Dallas Texas 75251 Adel 

an exporter and in that capacity is a shipper within the meaning ofth

Shipping Act of 1916 as amended 46 U S C Section 801 et seq th

Act and at all times relevant to this action was engaged in th

business ofexporting mobile homes to Saudi Arabia

Respondent Puerto Rico Maritime Shipping Authority PRMSA

is a corporation and was engaged in the common carriage of goods b

water including limited operations in the foreign commerce of th

United States between the ports of Baltimore and ports in the Persia

Gulf at all times relevant to this controversy and at all such times wa

subject to the provisions of the Act PRMSA s address in the Unite

States is that of its agent Puerto Rico Marine Management Inc

PRMMI 2700 Broening Hwy Baltimore Maryland

Respondent Star Lines Inc Star Lines is a corporation engage

as a shipping agent for ocean common carriers and is subject to th

provisions of the Act At all times with respect to this controversy

Star Lines acted as the exclusive booking agent for PRMSA St

Lines principal office is 25 Broadway New York New York 1001

On November 18 1976 pursuant to a request received from Joh

Ade1 T Connor Spigelmire Spigelmire Manager of the Charterin

Department of John S Connor Inc Connor made several phon

calls to carriers and agents to secure rates and conditions for th

transportation oftwenty 20 mobile homes to Dammam Saudi Arabi
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 485

STAR LINES INC

Specific price quotations were received from Central Gulf Lines Inc

Central GulP Star Lines and Kuwait Boulder Shipping Kuwait

Boulder as follows Central Gulf offered I3 OOO unit for a total

charge of 260000 lump sum berth term on a RolRo vessel the S S

Arizona Star Lanes offered 12 000 unit for a total charge of 240000

lump sum berth term on a Ro Ro vessel the SS Puerto Rico Kuwait

Boulder offered 000 per unit but this transportation would have

involved less desirable carriage on a bulk carrier vessel

All negotiating contacts between Spigelmire and Star Lines were

with Mr James Murray Murray an employee of Star Lines

Both officials at Central Gulfand Murray of Star Lines made clear

to Spigelmire that neither carrier was interested in this particular ship

ment unless the cargo was to be placed on wheels at Adel s expense

The reason for insistence by the carrier that the units be on wheels

were well understood to be

I To facilitate loading by the carrier

2 To reduce the loading costs for the carriers

3 To permit the carrier to adapt the cargo for shipment in a Rol

Ro vessel and

4 Most importantly to facilitate dispatch and unloading at the

Port ofDammam

In addition severe congestion existed at the Port of Dammam and

RolRo vessels were being given preferential berthing and discharging

privileges

On November 22 1976 Spigelmire acting as agent for Adel entered

into a contract with PRMSA acting through its booking agent Star

Lines wherein PRMSA agreed to ship via the S S Puerto Rico on or

about December 14 1976 twenty 20 mobile homes twelve 12 feet

long by sixty 60 feet wide from Baltimore Maryland to Dammam

Saudi Arabia for a price of 12 000 each or a total of 240000 freight

prepaid Baltimore

The contract between PRMSA and Adel was confirmed by a written

agreement called a ConIine Booking Liner Booking Note dated

November 22 1976 The booking note was assigned Contract No 7

DAM 10 8 B and was executed by Star Lines as exclusive booking

agents for PRMMI and John S Connor Inc as agents via phone

authority for Adel International

At all times relevant to this controversy PRMSAs tariff on file with

the FMC was one prepared and filed by Murray After correctly

computing the carriage of the mobile homes under the PRMSA tariff

Murray communicated his price quotation to PRMSA officials in

Puerto Rico whereupon the correctness of the tariff quotation was

confirmed and their desire to accept the business was stated
486 FEDERAL MARITIME COMMISSION

The booking with PRMSA was made on a berth term lump sum

basis

At all times relevant herein there has existed and now exists a

custom and usage in the foreign oceanborne commerce of the United

States oflong standing and wide acceptance to the effect that when a

common carrier enters into a berth term lump sum contract with ship

per and if at that time the carrier s tariff does not permit shipment in

accordance with the contract it is the responsibility of the carrier to

file promptly with the Federal Maritime Commission an amendment to

its tariff so as to cover the contract in question This custom usage and

practice is so well accepted that it is not necessary that the parties

negotiating such a contract even discuss the point

As evidenced by a letter from W E Huresky of PRMMI to Dr

Yurom Almogy of Star Lanes PRMSA through its agent PRMMI

knew as early as January 17 1977 of the agreement between Murray

and Spigelmire and that its tariff had not been specially amended fo

this shipment of mobile homes in accordance with Contract No 

DAM 10 8 B

Notwithstanding the terms ofthe lump sum agreement between Ade

and PRMSA and notwithstanding the obligation of PRMSA to file 

special tariff request with the Federal Maritime Commission evidencing

this agreement PRMSA deliberately decided to violate its contractua

obligation and to proceed with a claim for additional revenue agains

Adel

PRMSA and its agent PRMMI were fully aware of the agreemen

between Star Lines and Connor well within the 180 day period fo

filing a special docket application with the Federal Maritime Commis

sion under section 18b 3 ofthe Act However the decision wasmade

by PRMSA and Star Lines to disavow the contractual agreement an

to proceed with an attempt to collect the rate charges in accordanc

with the tariff on file with the Commission as applied to a with wheels

and hitches measurement

During the negotiations between Murray and Spigelmire with respec

to the shipment here involved Murray advised Spigelmire that in ligh

of the fact that the port ofDammam was giving preferential berths t

vessels having roll on roll off cargo at that time and because of prio

damage experience with cargo of this nature PRMSA did not want th

shipment of mobile homes unless it was to be a roll on roll off ship

ment that is with wheels and hitches attached It was at the carrier 

insistence and for its convenience that the wheels and hitches re

mained on the mobile homes The contract of affreightment as ev

denced by the Coniine Booking Liner Booking Note contains a state

ment which reads as follows Cargo on wheels for benefit of carrie

and cubic to be based on without wheeled measurement
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 487

STAR LINES INC

The cargo arrived in a timely fashion at the pier of Baltimore in

December and was thereafter loaded aboard the SS Puerto Rico

Sometime on or about January 27 1977 John S Connor Inc ren

dered a check to PRMMI as agent for PRMSA in the amount of

228 000 as payment in full for freight as per the berth term lump sum

contract

Rule 6 on the tariff provided that all freight rates would be based on

the actual overall measurement of each freight unit and would be

computed in accordance with Tweeds Accurate Cubic Tables and

further that in determining the cubical contents of any irregular piece

orpackage the three greatest dimensions shall be measured

Rule 17 of the tariff superseded Rule 6 in measuring RolRo cargo

and provided in pertinent part

Special Conditions for RolRo Cargo On completely set up Rol

Ro Units which are driven under their own power onto the

vessel and on which the shipper could present units to the

carrier in Semi Knocked Down Condition but elects for car

riers convenience to present same units in a completely setup

RolRo condition the Ocean Rate will be calculated on the

Cubic measurement of the SemiKnocked Down Condition

Such units will not be subject to special Lash Charge

The cubic measurement of the mobile homes calculated without

including the wheels and hitches in accordance with Rule 17 was

133 330 cubic feet

On March 31 1977 Spigelmire informed Brunelle by return letter

that Connor s Chartering Department had negotiated a berth term

lump sum rate of 240 000 with Star Lines New York as agent for the

SS Puerto Rico and that Brunelle s letter dated March 24 1977 was in

error concerning the freight calculations regarding the Bill of Lading

Spigelmire suggested that Brunelle should contact Mr James Murray in

New York who had made the arrangement for PRMSA and disclaimed

responsibility for filing tariffs concerning lump sum negotiations

Since the date of the shipment was December 21 1976 the one

hundred and eighty day time limitation contained in section 18b 3 of

the Act for the filing by PRMSA of an application with the FMC to

waive the collection of the portion of the charges for the shipment

wherever it appears that there is an error due to inadvertence in

failing to file a new tariff and that such refund or waiver will not result

in discrimination among shippers did not run until June of 1976

On April 21 1977 Brunelle by written correspondence informed

Spigelmire for the first time that the subject rate based on the berth

term lump sum basis was never published validated in PRMSA s

tariff and that as a result PRMSA was insisting on an additional pay

ment in the alleged amount due of 105 600
488 FEDERAL MARITIME COMMISSION

The above represents Adels version of the controversy prior to th

hearing in this case As the 83 findings offact proposed by Adel o

brief demonstrate the evidence adduced at the hearing has not cause

Adel to deviate from that version in any significant way There ar

several crucial areas however where the evidence contradicts or 

least casts more than considerable doubt on that version ofthe contro

versy These are dealt with below

1 THE INITIATION OF THE BOOKING

Inhis written direct testimony John Adel stated

On November 18 1976 I engaged freight forwarder John S

Connor Inc Connor in Baltimore Maryland to arrange

for the shipment of the twenty mobile homes to Saudi Arabia

Ispoke with Mr Timothy Spigelmire head of the charter

ing department and indicated my desire to have the mobile

homes shipped as soon as possible under a competitive

freight rate Spigelmire indicated that he would make several

inquiries concerning freight rates and get back to me

The clear implication here is that Adel made the first overture t

Connor however on cross examination at the hearing Mr Adel wa

asked why after arranging thirteen consecutive shipments with Mohe

gan as his forwarder he called Spigelmire He answered

I think John S Connor came to us with a telex making

this offer knowing we had the cargo on the dock

Ithink that good merchandising perhaps John S Connor saw

the merchandise at the docks in Baltimore and decided they

would throw their hatin the ring Tr 39

Mr Spigelmire in his written direct testimony stated

My involvement in this matter commenced on November 18

1976 when Mr John Adel President of Adel requested in a

telephone call to me that our fmn make arrangements for the

shipment oftwenty 20 mobile homes from the United States

to Dammam Saudi Arabia

On cross examination Mr Spigelmire stated

To the best of my recollection and I could be in error I

believe that Adel made the call But it certainly is not incon

ceivable at all that Mr Ikramullal brought this to my atten

tion and Imade the call to Mr Adel as opposed to Mr Adel

making the call to me Tr 272

I Mr Iktamulla is an assistant to Mr Spigelmire and the record indicates that Mr Jim Murray 

Star Lines had discussed the mobile homes with Mr Ikramullah in mid November 1976
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 489

STAR LINES INC

Other evidence of record suggests that contrary to the written direct

testimony ofMr Adel and Mr Spigelmire it was Connor who contact

ed Adel and when that contact was made Adel already had rate

quotations from Central Gulf and Kuwait Boulder

2 THE CONTROVERSY OVER THE WHEELS AND HITCHES

In his written direct testimony Mr Spigelmire stated

From the outset of my discussions with Central Gulf and

Mr Murray of Star Lines they made it clear to me that

neither carrier was interested in this particular shipment unless

the cargo was to be placed on wheels at Adel s expense The

reasons for this insistence by the carriers that the units be on

wheels were 1 to facilitate loading by the carrier 2 to

reduce the loading costs for the carrier 3 to permit the

carrier to adapt the cargo for shipment in a RolRo vessel and

4 most importantly to facilitate dispatch and unloading at

Dammam where severe congestion existed and where RolRo

vessels were given preferential berthing and discharging privi

leges provided that the discharging cargo was on wheels It

was absolutely immaterial and unimportant to Adel how the

cargo was loaded on or carried on the vessels it was at the

carriers insistence that the wheels and hitches be provided at

Adel s expense

The clear import of all this was that because of PRMSAs insistence

that the units be on wheels Adel was put to additional expense which

it would not otherwise have incurred However Mr Adel s testimony

at the hearing paints a different picture Mr Adel when questioned

about the wheels and hitches stated that on all the shipments in the

record the mobile homes arrive at the port with the wheels and hitches

attached that he purchased the homes FOB at port that in most

instances he desired the homes to have the wheels and hitches at

tached and that having the wheels and hitches attached facilitates

Ade1 3Tr 61 65

3 THE CONLINE NOTE

Mr Spigelmire in his written direct testimony stated that the Con

line Note is a universally utilized form of contract constituting a

binding commitment of both the shipper and the carrier that the cargo

will be carried at precisely the rates terms and conditions specified

therein However at the hearing a decidedly less clear picture of the

3

It is clear from the record that the homes are placed on wheels with the hitches attached in order

that they may be hauled overthe road from the factory to the port of destination When asked

how would these mobile homes have arrived at the port of loading from the manufacturing site with

out wheels and hitches Mr Adel answered They could have been put on a flatbed truck When

asked ifhe had everseen this done Mr Ade1 said No
490 FEDERAL MARITIME COMMISSION

function of the Coniine Note was formed Some of the salient fac

developed were

1 PRMSA did not know of the Coniine Note until after th

litigation began

2 Mr Huresky then Director of PRMSAs Mid East Ope

ations with eleven years experience in the steamship industr

had never seen such a document used either in the Mid Ea

or elsewhere

3 Mr Adel did not know that a Coniine Note had been used o

this shipment until this litigation began

4 That the primary purpose of a Coniine Note was for use wit

tramp vessels

Other inconsistencies in the testimony of Mr Spigelmire lead inevita

bly to the conclusion that far from being the normal way to confirm 

booking with a common carrier in the United States trades the use of 

Coniine Note was unusual

4 THE NATURE OF THE AGREEMENT BETWEEN ADEL

AND PRMSA

Mr Spigelmire in his direct testimony characterizes the agreeme

between Star Lines and Connor as a contract to ship at a lump su

rate of 240 000 and measurement based on cubic less wheels Th

inconsistency here is obvious if the rate is a lump sum rate th

cubic measurement of the cargo is of no concern it is irrelevan

The Coniine Note itself describes the shipment consisting of 2

REDMAN MOBILE HOMES ABT 325 000 Ibs abt 133 330 cft Als

under the headiilg Description ofgoods there is the notation carg

on wheels for benefit of carrier and cubic to be based on witho

wheeled measurement Under Freight rate there appears 12 000 0

ea 240 00000 LUMP SUM BERTH TERMS Again the inconsis

ency is obvious Ifthe rate is 12 000 per unit the cube oftIle indivi

ual unit is unnecessary and if the total lump sum is 240 000 th

overall cube ofthe 20 homes is also irrelevant

On cross examination Mr Spigelmire said that it was apparent th

he and Mr Murray had different ideas as to how the deal was to b

worked out but that itwould be worked out

Mr Murray was not called as a witness however his affidavit an

deposition are in the record Mr Spigelmire s

testimony that PRMS

knew about the agreement he and Mr Murray had reached is baSe

upon statements made to him by Murray that Murray had communica

ed the price quotation to PRMSA officials who had confirmed th

correctness of the tariff quotation and their desire to get the business 

hisaffidavit Murray states

After entering into a verbal booking agreement with Connor I

returned to New York and entered the agreement on a book
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 491

STAR LINES INC

ing sheet The booking sheet always includes a statement of

the agreed upon tariff rate Ex 20 p3

The booking sheet however describes the shipment as 20 mobile

homes Housetrailers with each unit weighing 18 000 Ibs and

measuring 8640 cubic feet The dimensions of each unit are given as

60 X 12 X 12 and the rate is quoted as 95 00 NSS Mr Huresky

testified that from this booking sheet the shipment was fairly good

paying cargo He says

In fact the booking control sheet received from Star Lines for

this shipment clearly shows 20 mobile homes at 8 640 cu

ft each with a rate of 95 00 per measurement ton not subject

to surcharges The dimensions on the booking sheet are 60 X

12 X 12 which includes the dimensions of the wheels but not

the hitches From the booking sheet the trailers would yield

20 520 per unit 8 640 cu ft divided by 40 cu ft X 95 00

per measurement ton Exhibit 23 p 7

The booking sheet contains no reference to a lump sum rate of 240 000

or a unit rate of 12 000 It contains no indication that the cubic was to

be measured on a without wheeled basis

There are other equally troublesome inconsistencies in the evidence

presented by Adel but the above affords arepresentative sample ofthe

difficulties presented by the record in this case The findings of fact

presented below are based upon my examination ofthe exhibits and my

observation of the demeanor of the witnesses Where inconsistencies

exist the inferences made are drawn from the entire record and repre

sent my best judgement as to what the record establishes

FINDINGS OF FACT

Adel was incorporated in Texas in 1976 and is an exporter in the

foreign commerce of the United States engaged in the business of

exporting mobile homes to Saudi Arabia

J S Connor Inc was established in 1917 Connor performs freight

forwarding services under FMC License No 496 Connor also operates

a Chartering Department with T Connor Spigelmire as its manager In

addition Spigelmire is the director of Connors General Agency De

partment which acts as general agents for marketing and managing

ships

The Puerto Rico Maritime Shipping Authority is a corporation and

was engaged in the common carriage ofgoods by water and is subject

to the Shipping Act of 1916 During the period here relevant PRMSA

operated a common carrier service from Baltimore to Dammam Saudi

Arabia Puerto Rico Maritime Management Inc PRMMI is a Dela

ware corporation is a subsidiary of PRMSA and was during the

relevant period the management company and agent in the United
492 FEDERAL MARITIME COMMISSION

States of PRMSA One Walter Huresky was Director Mid East Oper

ations during the time in question

PRMSA s sole venture into the foreign commerce of the United

States was its service to the Persian Gulf from Baltimore which began

in January of 1976 and concluded in May of 1977 During this period

PRMSA used the short form bill of lading it had utilized in its oper

ations in the offshore domestic trade On one occasion PRMSA used

Marine Transport Service Inc bill oflading

The relationship between PRMSA and PRMMI on the one hand an

Star Lines on the other was somewhat less than harmonious Mr

Huresky frequently experienced difficulty with the rate negotiatio

practices of Star Lines While PRMSA made attempts to acquaint th

shipping public with itrt difficulties with Star Lines in general and Jim

Murray in particular Mr Spigelmire was well aware of the reputatio

ofStar Lines Mr Spigelmire s use of the ConIine Note in this instanc

was due in part to his lack of confidence that a handshake wit

Murray would have been sufficient to close the deal

In mid November Jim Murray of Star Lines visited Connor solicit

ing cargo It would appear that it was at this time the shipment i

question was discussed Mr Spigelmire contacted Adel with Star Lines

offer of 12 000 per unit for a total charge of 240 000 Other quota

tions received by Adel were Central Gulf offering 13 000 per unit an

Kuwait Boulder offering 11 000 per unit ona breakbulk vessel During

his negotiations with Spigelmire Murray apparently represente

PRMSA as being extremely desirous of obtaining this piece of business

The Coniine Note as executed by Spigelmire and Murray describe

the cargo of 20 Redman Mobile Homes weighing about 325 000 lbs

and measuring about 133 330 cubic feet This measurement was withou

the wheels and hitches The ConIine Note contained the notatio

cargo on wheels for benefit of carrier and cubic to be based o

without wheeled measurement The rate agreed to by Murray an

Spigelmire and set out in the Coniine Note was 12 000 00 ea

240 00000 LUMP SUMIBERTH TERMS FREIGHT PREPAID

BALTIMORE Stowage was to be under deck

The Coniine Note used to confirm the verbal booking made b

Conner with Star Lines is not widely or even frequently used in th

U S liner trades No totally adequate explanation ofits use in this eas

appears in the record except for Spigelmire s apprehensions concernin

Murray

Although the Conline Note states that the mobile homes were o

wheels for benefit of the carrier the record shows tliat the unit

were purchased FOB Billtimorewith wheels and hitches already a

tached and that this fallicated Adel s handling of the total transac

tion There was no additional expense incurred by Adel by leaving th

units on wheels for loading aboard the SS Puerto Rico Moreover 
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 493

STAR LINES INC

was not irrelevant to Adel that the homes had the wheels and hitches

attached

At the time the Coniine Note was executed PRMSA had no rate for

mobiles to Dammam After the verbal booking was entered into

Murray returned to New York and entered the agreement on a

booking sheet The actual entry made by Murray on the booking sheet

was for 20 mobile homes measuring 8640 cubic feet each with a rate of

95 00 per measurement ton which would have resulted in a per unit

rate of 20 520 The booking sheet entry made no reference of a per

unit rate of 12 000 or of a lump sum rate of 240000

The rate ultimately filed for PRMSA by Trans World Tariff and

Research Service Inc and on Murray s instruction was 180 per

cubic foot Based on a measurement of 133 330 cubic feet the measure

ment of the homes without wheels and hitches the total rate would

have been 239 666

The homes were loaded aboard the 88 Puerto Rico with some

difficulty and the ship sailed on December 21 1976 On December 30

1976 Connor received an unrated receipt bill of lading for the ship

ment There was nothing in this bill of lading to indicate that there was

any misunderstanding over the rate applicable to the shipment

In mid January 1977 Spigelmire received a bill of lading on which

the units were described as motor homes with a total freight charge

of 456000 The bill was accompanied by a claim of an additional

216 000 Adellater paid the 240 000 Spigelmire telephoned PRMMI

to advise them of the error and asked that a corrector be issued

reflecting the 240 000 rate 4

On January 17 1977 Mr Huresky then PRMMls Director of Mid

East Operations wrote to Star Lines stating that until J S Connor had

called that day he was unaware of any agreement between Star Lines

and Connor that the 180 rate was to be applied to the mobile homes

as if they had been received knocked down ie without wheels and

hitches Huresky said that no corrector would be issued until some

further explanation was given by Star Lines

Correspondence over the correct amount of freight to be applied to

the shipment continued between the various parties until Adel on Sep

tember 6 1977 filed with the Commission a petition requesting the

issuance of an order declaring that Adel was not obligated to pay the

905 600 demanded by PRMSA About a week later on September 13

1977 PRMSA brought suit against Adel in the U S District Court for

the Northern District ofTexas for the additional freight

In its reply to Adel s petition for declaratory order PRMSA sought

its dismissal on the ground that the issues raised in the petition were

4

The cPdim was subsequently reduced to 105 600 on the basis of the proper description and a 5

percent commission paid to Connor

Lr
494 FEDERAL MARITIME COMMISSION

before the U S District Court and there was no need to decide them

Hearing Counsel in its reply took the position that the declarato

order should not issue because Adel was wrong on the merits After th

replies were in Adel withdrew its petition and some six months lat

filed this complaint

On August 24 1978 I withheld ruling on a motion of PRMSA 

dismiss this case and stayed further proceedings to allow the Distri

Court I to rule on a motion of PRMSA s for summary judgment an

2 to rule on a motion by Adel that the Court stay its proceeding

pending a decision by the Commission in this case It was not un

September 26 1979 that the Court in two one page orders ruled on th

motions The Court denied PRMSAs motion for summary judgme

and granted Adels motion that the Court proceedings be stayed pen

ing the Commission s decision here

Proceedings were resumed hearing was held and briefs have be

filed

Any proposed finding not made or discussed above and not spec

cally dealt with below were considered and found either to be arg

ment not supported by the evidence or irrelevant to the issues

DISCUSSION AND CONCLUSIONS

Adel charges PRMSA with violations of sections 18b 3 18b 

17 and 16 of the Shipping Act 1916 Basically Adel states the speci

actions of PRMSA which resulted in these violations as I PRMSA 

failure to file the special lump sum berth term rate and its failure 

make an application to filea corrected tariff which it could have don

within one hundred and eighty days from the date of shipment cons

tutes a violation of section 18b 3 and 2 PRMSA s ex post fac

assessment of a total freight charge of 17 280 per unit or 345 6

lump sum subjects Adel to undue and unreasonable prejudice 

violation of Section 16 of the Act is an unjustly discriminatory an

prejudicial rate in violation ofSection 17 ofthe Act and such rate is 

unreasonably high as to be detrimental to the commerce of the Unite

States The arguments are dealt with below in the order they we

presented by Adel on brief

1 THE SECTION 18 B 3 VIOLATION

Adels argument here would appear5 to be grounded upon the bas

premise that PRMSA is bound by the actions of its agent Murra

6

Adel spends the first 10 or so pages of its argument on the law rehashing and summarizing 

proposed findings of fact and spends agoodly amount of space dealing with PRMSA s decep

practicesll the use of short form bill of lading when no long form existed which are simply irre

vant to the issues here Indeed the major portion of Adel s discussion of the taw of the case 

nothing morethan arestatement of matters covered in its proposed findings
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 495

STAR LINES INC

From this Adel argues it follows 1 that PRMSA was bound to file

the rate quoted by Murray or 2 failing that it wasPRMSAs duty to

accept Murray s alleged interpretation of Rule 17 and base the 180

rate on the mobile homes measured as if the wheels and hitches were

not attached to the homes or 3

failing both ofthese it was PRMSAs

obligation to file a Special Docket application for permission to retroac

tively apply the lump sum rate Anyone of the above is said to

constitute a violation of section l8 b 3 Adel cites no legal authority

in support ofits theory 6

Setting aside for the moment the question of PRMSAs obligation to

file a Special Docket application Adel s case if it is to have any

validity at all hinges on the meaning of Rule 17 This is so because

Murray filed a rate of 180 per cubic foot which when applied to the

knocked down measurement of the mobile homes would have resulted

in total freight charges of about 239 996 4 00 less than the 240 000

quoted by Murray Rule 17 provides

Special Conditions for Ro Ro Cargo On completely set up Rol

Ro Units which are driven under their own power onto the

vessel and on which the shipper could present units to the

carrier in SemiKnocked Down Condition but elects for car

rier s convenience to present same units in a completely setup

Ro Ro condition the Ocean Rate will be calculated on the

Cubic measurement of the Semi Knocked Down Condition

Such units shall not be subject to special Lash Charge

Adel s argument for applying Rule 17 to the shipment in question is

stated as follows

It is undisputed that Murray applied Rule 17 to the Adel

shipment when stating that the cubic would be based on a

without wheels and hitches measurement This was Murray s

position from the time the Booking Contract was executed

throughout the duration of the rate dispute begun in

January 1977 PRMSA has offered no evidence to indicate

that Murray did not apply Rule 17 in good faith stating only

that Murray s interpretation was erroneous Record references

omitted

Adels premise is that Murray as the preparer or drafter of the tariff

was in the best position to know what its provisions were intended to

mean

7

but Murray s actions prior to his reliance on Rule 17 cast

All of the cases cited by Adel go only to 1 the proposition that aprincipal is bound by the acts

of its agent 2 the proposition that the Coniine Note was a binding contract 3 the standard for

filing and obtaining Special Docket relief and 4 the proposition that the Commission has the equita

blepower to afford reliefin this case

1

However abasic principle of tariffconstruction is that it is not what the writer intended but what

the words actually say that controls

23 F MC
496 FEDERAL MARITIME COMMISSION

considerable doubt on the good faith of Murray s

interpretation 

the Rule

First Murray quotes Connor a rate of 12 000 per mobile home wit

a lump sum of 240 000 He then returns to New York and makes a

entry on a booking sheet which is intended to inform PRMMI of th

agreement made with CQnnor However the entry on the bookin

sheet shows a rate of 95 00 per measurement ton which would hav

resulted in a rate of 20 520 per mobile home Finally Murray instruc

the tariff filing agent Trans World Tariff and Research Service Inc 

file a rate of 180 per cubic foot

It is only when asked by Mr Huresky of PRMMI to explain th

agreement for the 240 000 total freight charge that Murray falls ba

on Rule 17 8

Murray s action can only lead one to conclude that for whitev

reason Murray foresaw a problem in getting PRMSA to accept th

rate he had negotiated and set about to present PRMSA with a fa

accompli However Murray s motives are irrelevant to the question 

whether Rule 17 applies to Adel s shipment

On its face the Rule applies only to Ro units which are drive

under their own power onto the vessel In his written direct testim

ny Mr Spigelmire stated

The cargo arrived in a timely fashion at the Baltimore pier in

December having been placed on hitches and wheels at

Adels expense as required by the carrier The cargo was

loaded immediately Since it was on wheels it was easily

rolled on board powered by its attached cabs Emphasis

mine 9

The clear implication of Mr Spigelmire s statement is that the mob

homes moved on board the ship under their own power their a

tached cabs Captain Taylor who supervised the loading of the home

on the SS Puerto Rico testified that the mobile homes were move

aboard the ship by a yard hustler or tractor trailer which w

hitched to a mobile home and the home was then pulled up the ram

into the hold On cross examination the following colloquy took plac

between counsel for PRMSAand Mr Spigelmire

Q Now when you go on and say powered by its attached cabs

by cabs you mean hustlers

A By cabs Imean a piece of equipment that is capable ofpullin

this type of cargo on and off a ship

Aders only other reference in support of Murr y

s Sood faith is to the direct le8t1mony of Spia

mire where he states that in January 1977 I telephoned PRMMI to explain th t an incorrect calcu

tion had been made and to ask that corrector be issued reDecting lump sum r te of 240 000 ba

on the without wheel measurement as negotiated by their aaent Mr Murray

Later on cro8IIIlin tion Mr Spiaelmlre admitted that h had not obaerved the loadina a

that he meant the homes were loaded in thenormal course of events not immediately

23 F MC
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 497

STAR LINES INC

Q Commonly called hustlers

A Commonly called whatever you want to call them It

could be done with a tractor

Q Why did you use the word its In what sense were they its

attached cabs

A They were not its That was not meant to be possessive from

the cargo point of view It was only possessive when they

were hooked up

Q Once they were hooked up they were its cab

A That is correct

Q But the minute they split it was over

Q That is correct

Despite Mr Spigelmire s strained use of the word its it is patently

clear that the provisions of Rule 17 do not apply to Adels mobile

homes The meaning of the phrase units driven under their own power

onto the vessel is unambiguous It requires that the equipment or

engine be either an integral part of the unit or that it be an attached

part that remains with the unit It does not apply to a unit for which

the power unit is supplied by either the carrier or the terminal

PRMSAs refusal to apply the Rule here is proper and does not consti

tute a violation of section 18b 3

Although I stated earlier that Iwould take up the alleged violations

in the order they were presented by Adel this appears the best time to

discuss the allegation that Rule 17 violates section 16 of the Act

Although Adel flatly asserts that PRMSAs

interpretation of Rule 17

prefers RolRo cargo and prejudices all other cargo such as Adel s

mobile homes there is no reference to the record or argument on brief

to support the charge The record shows that the Rule is for the

carrier s convenience and it exchanges a reduced rate in return for the

elimination of the need to use the carrier s stevedoring power units To

take the case at hand the mobile homes required the use of a yard

hustler and a forklift truck to get the units aboard the ship and properly

positioned in the hold This may be contrasted with cargo such as

bulldozers and road graders for instance which are relatively easily

driven aboard the ship under their own power

The record here does not establish that Rule 17 unduly prefers Rol

Ro cargo orunduly prejudices other cargo

Adel says that PRMSA was obligated to file a corrected tariff and

to make a special docket application for waiver of additional charges

under section 18b 3 of the Shipping Act But aside from some

cases which Adel says show that such an application by PRMSA

would have obtained the permission to waive the charges Iam cited to

no authority which stands for the proposition that PRMSA s failure to

1 Ji fr
i

498 FEDERAL MARITIME COMMISSION

file a special docket application constituted a violation of sectio

18b 3

PRMSA counters Adel s argument by saying that the circum

stances of this case make it clear that PRMSA could not have ob

tained a waiver under the terms ofthe statute even had it attempted t

do so IlUll inclined to agree with PRMSA

Section 18b 3 permits the Commission in its discretion to allow 

carrier to waive the collection of a portion ofthe freight charges unde

narrowly circumscribed conditions where there is all error of acler

cal or administrative nature or an error due to inadvertence in failing t

file a new tariff The specific error which Adel alludes to as suppor

ing its argument that this was a case for waiver is stated by Adel a

follows

Assuming for argument s sake that PRMSAs

interpretation of

the tariff was correct and that Murray had made an error as

Huresky contends PRMSA was obligated to file a corrected

tariff and tel make a special docket application

The err o Adel is referring to is Murray sinterpretation of Rule 17 a

applying to the mobile homes 1o A misreading of the tariff is not 

ground for awaiver under 18b 3 Farr Co v Seatrain Lines 20FMC

411 663 1978 See also Capita Trading Co Inc v Sea Land Servic

Inc 20 FMC 315 1977 misquotation of rate Application o Sea Lan

Service Inc 19 SRR 432 1979 unauthorizec t representations made t

shipper

I can find no authority which imposes upon PRMS under the fao

of this case an obligation to file a sPCQialdocket application and m

examination of the precedents leads me to conclude that even 

PRMSA had med such an application it could not have met th

statutory requirements

Ultimately Adel s request forrelieCdepends on a rather ill derme

conception of some equity power of the Commission but before dea

ing with it it is necessary to deal with that enormous body of law

which AdeLhasstudiously ignored thrQughout jts argument

In some ways the law embodied inseetion Ub 3 and statutes like 

can be considered harsh andhas in a number of cases worked hardshi

on those who have run afoul of it But from ihe beginning both th

agencies and the courts have uniformly consistently and virtuall

without fail strictly construed and nforced the prohibition again

collecting or charging rates difterent from those in itllpub ished an

filed tariffs A few excerpts from some representative opinions offe

examples of the strictness ofthe prohibition

10 The record shows that there was no clerical or administrative error Nor Was there an inadve

ent failure to file a new rate Murray Intended to and did m the rate of S180 per cubic foot

11 RM r
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 499

STAR LINES INC

Once a tariff is established by the carrier and approved by the

Federal Maritime Commission the tariff binds both the shipper

and the carrier with the force of law The statutory policy

behind the strict enforcement of federally approved tariffs is

so strong that the rate must be charged and paid regardless of

mistake inadvertence or contrary intention ofthe parties Gil

bert Improved Hardwoods Inc v 245 Packages of Guatambu

Squares More or Less 508 F 2d 116 1120 21 5th Cir 1975

citations omitted

Binding contracts between the parties cannot work to alter the tariff

rate As the Supreme Court said in 1924

The amount of the freight charges legally payable was deter

mined by applying this tariff rate to the actual weight Thus

they were fixed by law No contract of the carrier could reduce

the amount legally payable or release from liability a shipper

who had assumed an obligation to pay the charges Nor could

any act or omission of the carrier except the running of the

statute of limitations estop or preclude it from enforcing pay

ment of the full amount from the person liable therefor Louis

ville N R Co v Central Iron Co 256 U S 59 65 1924

Emphasis mine

Citations could easily be multiplied and as an example respondent

PRMSA offers the following

e e g Dayton Coal Iron Co v Cincinnati New Orleans

exas Pacific Ry 239 U S 446 1915 Louisville Nashville

Ry v Maxwell 237 U S 94 1915 Louisville Nashville Ry v

Mottley 219 U S 467 1911 Texas Pacific Ry v Mugg

Dryden 202 U S 242 1906 New York New Haven Hartford

Ry v ICC 200 U S 361 1906 Gulf Colorado Santa Fe

Ry v Hefley Lewis 158 U S 98 1895 United States v

Associated Air Transport Inc 275 F 2d 827 5th Cir 1960

United States v Pan American Mail Line Inc 359 F Supp 728

S D N Y 1972

All of these cases stand four square for the proposjtion that a carrier

cannot charge compensation other than that in its published tariff

It is against this background that Add asserts that PRMSAs actions

demand that equity be done Adel says

PRMSA unilaterally and without notice overruled a reasona

ble tariff interpretation by Star Lines PRMSA unilaterally

determined that the agreed rate of 240 000 lump sum was

insufficient in view of the total billed revenue for the voyage

And PRMSA unilaterally decided not to publish a corrected

tariff and seek a waiver application under Section 18 b 3

These unilateral actions demand that equity be done

What Adel seems to be arguing is that PRMSAs actions estop it from

collecting the additional freight However the Courts have dealt with

1 11 M r
500 FEDERAL MARITIME COMMISSION

this argument before Estoppel cannot be invoked against a commo

carrier to avoid a tariff provision

Neither the intentional or accidental misstatement ofthe appli

cable published rate will bind the carrier or the shipper The

lawful rate is that which the carrier must exact and that which

the shipper must pay It is clear that no act or omission of

the carner can estop or preclude it from enforcing payment of

the full amount of the tariff charges and equitable consid

erations may not serve to justify failure of the carrier to

collect or retention by the shipper of any part of the lawful

tariff charges U S v Associated Air Transport Inc 275

F 2d 827 833 5th Cir 1972

Even fraudulent misrepresentations by the carrier will not work esto

pel In Feraco Inc v Georgia Pacific Corp 313 F Supp 66 D D

1970 a shipper sought to defend an action by the carrier for th

balance ofthe rate due on the ground that the carrier had fraudulent

induced it to ship with the carrier The court cited with approval th

following language from Arctic Roofings Inc v Travers 32 A 2d 55

Del Sup Ct 1943

The Act being primarily for the public good the principles of

estoppel will not defeat the carrier srights though he inten

tionally misquoted the scheduled rate to the shipper before the

delivery of the goods for transportation and material losses

were incurred thereby Nor can there be any real

distinction between a mere unintentional representation and a

fraudulent misrepresentation 11

Adel however insists that the Commission has equitable powers i

herent under section 18b 3 to find that Adel has paid the enti

freight rate for which it was responsible For this proposition Ad

cites United States v Columbia SS

Co

Inc 17 FMC 8 1973 

Columbia the shipper the General Services Administration negotiate

a rate on some unboxed trucks of 1 150 50 per vehicle with Wa

Shipping Company However due to a clerical error the rate actua

tiled was 1 000 00 per vehicle The GSA paid the 1 150 50 rat

however some eight months later an audit discovered the error an

some five months after the audit the government tiled a complaint wi

the Commission alleging a violation of 18b 3 and seeking reparatio

11 Again thecitations can be multiplied and again PRMSA otTers afew

See alSQ Southern Pacific Co v Miller AbQttolr Co4S4 F 2d 3S7 3S9 6O 3d oir 1972 Silent

Sioux Corp v Chicago North Western Ry 262 F 2d 474 47S 76 81h Clr 19S9 Armour

Co v Atchison Topeka Santa Fe Ry Co 2S4 F 2d 719 723 24 71h Clr cert denied 3S8

us 840 19S8 Bernstein Bras Pipe Machinery Co v Denver R G wR Co 193 F 2d

441 444 lOth Cir 19S1 Bull S S Lines v Thompson 23 F 2d 934 944 Slh Cir 1941 cert

denied 31S us 816 1942 Central Warehouse Co v Chlctgo Rock Island Pacific Ry Co

20 F 2d 828 81h Cir 1927 Prince Line Ltd v AmericiznPaper Exports Inc 4S F 2d 242

S D N Y 1930

71 PMr
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 501

STAR LINES INC

of 10 384 50 The Commission found that the carrier had violated

section 18b 3 but failed to award reparation to the government To

Adel the facts ofthe Columbia case are remarkably similar to the facts

of this case and though finding that the respondent the carrier had

charged and accepted payment of a rate other than the one on file the

Commission denied reparations

Adel would have it that the discretion exercised by the Commis

sion was that given it under section 18 b 3 It was not and there are

crucial distinctions between what the Commission did in Columbia and

what Adel is asking it to do here The Commission was very careful to

make it clear that the discretion it was exercising was that granted it by

section 22 ofthe Act It said at pages 9 10

Complainant here prays that it be awarded reparation Pursu

ant to section 22 of the Act the Commission is authorized to

award this avenue ofrelief and may direct the payment

of full reparation to the complainant for the injury caused

by violation ofthe Act

This avenue of relief provided by section 22 however as

clearly stated and maintained is discretionary and permissive

and the mere fact that a violation of the Act has been found

does not in itself compel a grant of reparations In this

case and limited strictly to the peculiar facts of this case it is

our determination that an award of reparation is not warrant

ed

The first crucial distinction is that unlike Columbia where the carrier

charged a rate other than that on file here PRMSA is attempting to

collect the published and filed tariff rate 12 It is obligated by section

18 b 3 to do so Secondly there is no violation of section 18 b 3 to

be found here upon which to base the exercise of discretion under

section 22 of the Act Indeed the Commission was quite explicit in

dealing with the violation question it said at page 10

Our action does not nor can it excuse a party the carrier

from any statutory penalties to which he may be subject but

simply indicates our disinclination to award reparation in light

ofthe compelling facts ofthis case 17 FMC at 10

PRMSA points out that were the Commission to order it to cease and

desist from its collection of the published tariff rate the Commission

would be compelling PRMSA to violate section 18 b 3 and simulta

neously subjecting it to statutory penalties Considering the uninter

rupted construction of statutes like section 18b 3 beginning with the

12 It is always necessary but at times difficult to keep in mind the Congressional policy of protect

ing the shipping public by requiring strict adherence to the published tariff rates Contracts agree

ments understandings orwhatever cannot alter that rate See pages 498 500 above
502 FEDERAL MARITIME COMMISSION

Interstate Commerce Act well over fifty years ago it is hard to di

agree with PRMSA s

logic 13

On the basis of the foregoing I conclude that there has been n

violation of section 18b 3 established on the record in the cas

2 THE SECTION 16 VIOLATION

As noted above Adel in its complaint alleged that PRMSA s Rule 

gave an undue and unreasonable preference or advantage to self pr

pelled Ro Ro cargo and prejudiced cargo that was not self propelle

Adel now appears to have shifted its ground Adel now maintains th

PRMSA has violated section 16 by 1 failing to honor its bookin

contract or to seek a waiver of freightchargesj 2

refusing to issue 

corrector and 3 failing to make refunds of overpayments by oth

shippers on the same voyage

Adels argument on PRMSA s alleged violation is one of its lea

coherent statements Adel seems reluctant to come to grips with th

essential element of its charge against PRMSA All of the acts 

omissions of PRMSA cited by Adel had the same result the applic

tion ofthe 180 per cubic foot rate to Adels mobile homes and unle

that rate subjected Adel to undue prejudice or disadvantage there ha

been no violation of section 16 But before dealing with that question 

is necessary to deal with Adels assertion that it is unnecessary to sho

competition between Adel and any other shipper to establish a violatio

of section 16 Adel places its main reliance on the Commission s dec

sion in Valley Evaporating Co v Grace Line Inc 14 FMC 16 1970

probably the most misconstrued case in the Commission s history

The Valley case involved two shipments of dehydrated apples o

which it was alleged that the rate charged violated section 16 of th

Act For six years prior to the two shipments the Conference ha

maintained a specific commodity rate on dried fruit including dehydra

ed apples Just prior to the two shipments the rate was 52 per lon

ton It had reached that level by a process of gradual increases from 

rate of 44 established in 1962 Every year since 1962 complainant ha

shipped on a gradually increasing scale somewhere between 100 an

275 long tons ofdehydrated apples

In November 1967 the Conference agreed to further general ra

increases to become effective in March and April of 1968 In compilin

the new tariff the Conference Secretary had prepared lists of commo

ities moving in sufficient quantities to warrant retention of specif

commodity rates The aim was to eliminate paper rates on no

moving commodities Dehydrated apples had moved in sufficient qua

13 As a practical matter however it is unlikely that PRMSA would be actually prosecuted 

penalties Nevertheless a decision as requested by Adel would not only Oy in the race of the ov

whelming precedent but it would condone aviolation of theAct
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 503

STAR LINES INC

tities to meet the Conference s criteria for the retention of a specific

commodity rate However due to some oversight the dried fruit

commodity rate was omitted and the two shipments ofapples moved at

an N O S rate of 88 per measurement ton more than triple the

previous commodity rate Complainant alleged that the rate violated

section 16 Respondent defended against the charge by pointing out

that complainant had failed to show the necessary existing and effec

tive competitive relationship between the prejudiced and preferred

shipper In dealing with the question of competition the Commission

began by saying

while an effective competitive relationship is a necessary

part of liability under section 16 in situations where the alleg

edly preferential or prejudicial rates or charges are geared to

transportation factors or the differing characteristics of commod

ities it is not required where the carrier s obligation to render a

particular service is absolute and not dependent upon such

factors 14 FMC at 21 Emphasis mine

The Commission went on to point out that in its effort to delete paper

rates the Conference applied only a single criterion that the commodi

ty move in sufficient volume to warrant retention of a commodity rate

On the use ofthe criterion the Commission went on to say

Having once established the sufficient volume criteria using

whatever factors were warranted respondents in determining

what commodity rates were to be discarded were then re

quired to apply them in a totally fair and impartial manner At

this point the single question involved was whether a given

commodity moved in sufficient volume or not Questions as to

the characteristics inherent in the particular commodity in

volved were irrelevant as were questions of whether the par

ticular commodity competed with any other commodity 14

FMC at 22

Insupport of its rationale in the Valley case the Commission cited New

York Foreign Frgt F B Ass n v Federal Maritime Commission 337

F 2d 289 1964 Indulgence in a rather long quote from that opinion

will show why the rationale of the Valley case does not apply here

The forwarders argue that a Section 16 First violation is

shown only when 1 two shippers are given unequal treat

ment 2 the shippers are competitors and 3 the preference

to one or disadvantage to the other is the proximate cause of

an injury these prerequisites they urge are not supported by

the Commission s record We hold however that the substan

tial evidence that forwarders in random fashion charge ship

pers disguised markups of widely varying amounts for no

apparent reason suffices to establish discrimination in violation

of Section 16 First In urging that all three prerequisites must

be met the forwarders rely upon cases involving alleged dis

1t lAr
504 FEDERAL MARITIME COMMISSION

crimination in transportation or wharfage charges See e g

Agreement 8765 GulflMediterranean Trade 7 F MC 295

1963 Wharfage Charges and Practices at Boston Mass 2

U S MC 245 1940 We find those cases not apposite Trans

portation or wharfage charges are dependent upon the particu

lar commodity involved the cost for shipping or storing ba

nanas for example bears no relation to the fees levied for

heavy industrial eqJ1ipment To find an unlawful discrimination

in transportation charges thus quite properly requires a show

ing ofcompetitive relationship between two shippers who are

charged different prices But forwarders render substantially

the same service to all shippers in procuring insurance or

arranging for cartage the commodity being shipped has little

or nothing to do with the reasonableness of the fee exacted for

the forwarder s service The very practice of charging ship

pers disguised markups of widely varying amounts on substan

tially identical services without justification seems to us to be

prima facie discriminatory in aregulated industry

At issue here is just such a transportation charge which the cou

found requires a showing of a competitive relationship between tw

shippers who are charged different prices

Adel however in the alternative believes that a competitive re

tionship exists with other shippers which warrants a

finding th

PRMSA has subjected Adel to preferential or prejudicial rates a

practices which are not justified by differences in competitive factors

As the only support for the existence of the necessary competiti

relationship Adel offers the following testimony ofMr Adel

Q How would a

freight rate ofC 17 280per mobile hom

how would that rate have affected the sale of these homes 

Saudi Arabia 14

A Well it would have priced us out of the market and wou

not have allowed for a legitimate profit We were at that tim

under severe pressure by overland transportation fro

Europe and it was sold on the basis of square footage The

knew no other mentality elcept how many square feet can 

get for X number ofReYaI SIC And we were under seve

severe pressure from the Europeans Tr 119 120

Adel then cites three other shipments of mobile homes on two voyag

of the SS Puerto Rico one in May 1976 and one in June 1976 that 

alleges moved at lower rates and goes on to say

Services rendered the various shippers of mobile homes to

Dammam by PRMSA were identical as Were the terms and

14 Th 17 280 por unit rat was th rosult of applying tho tariff rat of 180 par cu ft to 

mobile home measured with wheels and hitches
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 505

STAR LINES INC

conditions of shipments ie lump sum with wheels and hitch

es

Finally Adel concludes

The record reflects that there was close competition in the

market and that the marketability of mobile homes depended

on the ultimate freight rate

Inasmuch as Adel was not afforded equal treatment with re

spect to the tariff rate charged or PRMSAs underlying acts

a finding is warranted that PRMSA acted in violation of

Section 16

In North Atlantic Med Frgt Con Rates on Household Goods a case

cited by Adel the Commission discussed the criteria necessary to estab

lish a violation of section 16 The Commission pointed out that the

purpose ofthe prohibitions of section 16 are designed to deal with two

or more competing shippers or localities receiving different treatment

by a carrier which is not justified by differences in competitive or

transportation conditions II FMC at 209 The Commission went on

to say

Since the section is intended to prevent unlawful favoritism

among competitors in the same marketplace the allegedly

preferred shipper must ordinarily be in competition with the

allegedly prejudiced shipper 15

The only competition testified to by Mr Adel was that from the

Europeans using overland transportation No explanation is offered

as to how PRMSA s actions were responsible for the preference seem

ingly enjoyed by the Europeans overland rates There is simply no

evidence in the record that Adel was in competition with any particular

shipper of mobile homes which received a preference from PRMSA

which resulted in prejudice to Adel

Despite Adel s assertion that the services rendered the various ship

pers of mobile homes to Dammam were identical in terms and

conditions on the shipments cited by Adel the sizes of the various

mobile homes differed both from each other and from Adel s

Adel has failed to show that PRMSA has violated section 16 of the

Act

3 THE SECTION 11 VIOLATION

As Adel itself states in order to find a violation of section 17 there

must be two shippers of like traffic over the same line between the

same points under the same circumstances and conditions Adel again

points to the fact that PRMSA had made three other shipments of

mobile homes on two prior voyages and says that no mobile home was

15 The qualifying ordinarily obviously refers to those cases involving other than transportation

charges where the carrier s

duty is absolute
506 FEDERAL MARITIME COMMISSION

ever carried by PRMSA at an effective rate of 17 280 per unit An

here again Adel ignores the question ofthe characteristics ofthe oth

mobile homes carried by PRMSA It simply states

A total ofeight homes moved on the veyage of May 22 1976

all with wheels and hitches attached six homes for one

shipper and two homes for a second shipper however the

rates charged were inexplicably different 12 000 per unit

for the six homes and 11 000 per unit for the two homes

the rates applied were lump sum rates and were not based on

cubic footage

PRMSA s second shipment of mobile homes involved six

house trailers The tariff rate was 9 200 per unit

To Adel it is clear that all ofthe units for these two shipments shou

have moved at the same unit rate since the rate was not based on 

cubic measurement Adels

logic is flawed to say the least This kin

of reasoning could require the same per unit rate for a Fiat as for 

roadgrader Furthermore Adel makes an assumption it has not esta

lished on the record that the several units were identical There is n

evidence of record from which to infer this much less establish it as 

fact Indeed Adel simply makes the assertion without a single citatio

to the record 18

Adel has failed to establish that the other shipments of mobile home

carried by PRMSA moved under the same transportation circumstance

and conditions as the shipment is ql lestion Adel has failed to establi

that PRMSA has violated section 17 of the Act

4 THE SECTION 18 8 5 VIOLATION

According to Adel a violation ofsection 18b 5 is established if it 

proved 1 that the rate is unreasonably high and 2 the unreasonab

rate would be detrimental to United States commerce Adel argues th

it has established a prima facie case by showing I that the rat

charged for the same commodity moving in the same trade are sl lbstan

tially lower than the rate PRMSA seeks to impose and 2 that th

mobile home market in Saudi Arabia would not have borne an oce

freight rate of 17 280 per Init Before dealing with the argument it 

necessary to consider an argument by PRMSA that the Commissio

cannot find a violation of section 18b S in this case That sectio

provides

18 The only citation to the record in Adel s entire discussion of the two shipments is to PRMS

revised tarltTpage B which how the per unit rate of 9 200 for the July 22d hipment of six hou 

trailers PRMSA tates that docamenla furni hed Adel during discovery make it perfecily plsin that 

the May 22d shipment the cubic measurements of each of the six units which moved under 

12 000 rate were ubstantially greater than that of each of the two ued mobile home that moved 

11 000 each One can readily ee why these document were not made part of the record by Adel 

have not been cited to them nor have I been able to find them among the several hundred pages 

exhibits
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 507

STAR LINES INC

The Commission shall disapprove any rate or charge filed by a

common carrier by water in the commerce of the United

States or conference of carriers which after hearing it finds

to be so unreasonably high or low as to be detrimental to the

commerce ofthe United States

It is PRMSAs position that the Commission cannot find a violation

of section 18 b 5 if the rate in question is no longer in effect Indul

gence in yet another somewhat long quote from Valley Evaporating

supra will demonstrate the rationale ofPRMSAs position

This section is purely prospective in nature and as the court

explained in Federal Maritime Commission v Caragher 364

F 2d 709 717 1966

simply reflects Congress s awareness that whether a

certain rate is unreasonable is often a close question and

that consequently a

regulated carrier should be liable for

penalties only ifit continues to charge unreasonable rates after

the Commission has determined they are unreasonable Em

phasis added

We see no reason to distinguish the situation where an allega

tion of unreasonableness under section 18 b 5 forms the

basis for a request for reparation rather than a suit for penal

ties Therefore we find that the court s rationale in the Car

agher case supra applies with equal force to the present situa

tion and conclude that only after the Commission has deter

mined a particular rate to be unreasonable under section

18 b 5 may a carrier s continued assessment of that rate be

considered a violation of section 18b 5 for which reparation

may be awarded Complainants reliance on the provisions of

section 18 b 5 in this proceeding is therefore clearly misplaced

Since the alleged unreasonable rate is no longer in effect the

Commission has nothing before it to consider for disapproval

under the provisions of section 18 b 5 14 FMC at 26 27 em

phasis added footnote omitted

As in Valley Evaporating there is nothing here to disapprove since

PRMSAs rate which is here challenged by Adel is no longer in effect

Thus since there is nothing to disapprove and since PRMSAs 180

rate was never before disapproved by the Commission there can be no

violation of section 18b 5

17

11 Adel argues that since it is not seeking reparation the cases cited by PRMSA are inapposite

This is really a distinction without adifference Had Adel paid the additional freight charges and

brought this suit to recover them the clear precedent would bar that recovery The prospective intent

of the statute cannot be avoided by the simple expedient of refusing to pay the freight charges and

then filing a complaint asking that the carrier be ordered to cease and desist its attempts to collect

them Finally Adel cites United Nations Children s Fund v Delta Steamship 16 FMC 423 1972 as

support forits position In that case the Commission found the rate in question to be unreasonable

under section 18b 5 and concluded that it was all right for the carrier to make avoluntary refund n

a

decidedly different situation than the case here
508 FEDERAL MARITIME COMMISSION

PRMSA however perhaps out of an excess of caution argues th

even werePRMSA s rate now before the Commission the evidence 

record would not support a finding that the rate was so unreasonab

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

therefore could not in any event be disapproved by the Commissio

Adels entire case under section 18b 5 consists ofthe argument th

Adel has never paid and PRMSA has never charged except in this o

instance a rate as high as 17 280 per mobile home It says th

PRMSA cannot justify its tate on the basis of exceptional servic

terms or conditions because 1 no such circumstance existed in 

service 2 the offer made to Adel was not based on exception

services but was upon the same terms and conditions as the Centr

Gulf offer and 3 the rate offered and accepted was 12 000 n

17 280 Finally Adel argues that it has established a prima facie ca

for a violation of section 18b 5 because 1 the rates charged for t

same commodity moving in the same trade are substantially lower tha

the rate PRMSA seeks to impose and 2 PRMSA s rate would ha

priced Adell out of the market and thus the units would not ha

moved in U S commerce

First the mere existence of a disparity between rates in and ofitse

does not establish that a rate is so unreasonably high as to be 

violation of section 18b 5 Investigation of Ocean Rate Structures 

FMC 34 58 1968 affd sub nom American Export Isbrandtsen Line

Inc v FMC 417 F 2d 749 DC Cir 1969 Outbound Rates Affectin

Exportation of High Pressure Boilers 9FMC 441 457 1966 Iron a

Steel Rates Export Import 9 FMC 180 191 1965

Secondly the argument that the mobile homes would not hav

moved at the 17 280 rate is based solely on the testimony of Mr Ad

that the rate would have priced us out of the market and wou

not have allowed us a legitimate profit Emphasis niine But havin

asserted that a legitimate profit was an element in its case Adel see

to dismiss evidence introduced by PRMSA Exhibit 8 as amended b

Exhibit 70 which shows that Adel made a profit at the 17 280 rate 

totally irrelevant tB

18 In arguing that profit is irrelevant Adel cites cases which were decided more than 2S ye

before section 18b 5 w8 5enacted and which deal with aditTerent sectionof the Act
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 509

STAR LINES INC

Adel cannot have it both ways and on the record before me Adel

has failed to establish that PRMSAs rate was so unreasonably high as

to be detrimental to the commerce of the United States in violation of

section 8 b 5

The complaint is dismissed

S JOHN E COGRAVE

Administrative Law Judge

Washington D C

Ju y980
FEDERAL MARITIME COMMISSION

FORMAL DOCKET NO 699 1

GLADISH ASSOCIATES

v

SEA LAND SERVICE INC

ORDER ON RECONSIDERATION

December 30 1980

This proceeding is before the Commission upon receipt of a lette

from Gladish Associates constituting a petition for reconsideration o

the Commission s September 25 1980 Order Partially Adopting Deci

sion of Settlement Officer The Commission denied Complainant s re

quest for reparations on a number of shipments of toothbrushes on th

ground that it had failed to meet its burden ofproof

Complainant requests re examination of the documentation hereto

fore presented and argues that its submission of evidence establishe

that the shipments in question were plastic toothbrushes Complain

ant s petition does not meet the criteria for reconsideration set forth i

section 502 261 of the Commission s Rules This rule provides that 

petition for reconsideration will be summarily rejected unless it

1 specifies that there has been a change in material fact or in

applicable law which change has occurred after issuance of

the decision or order

2 identifies a substantive error in material fact contained in

the decision or order or

3 addresses a finding conclusion or other matter upon which

the party has not previously had the opportunity to comment

or which was not addressed in the briefs or arguments of any

party 46 C F R 502 261 a

Complainant merely reargues its position which was already rejected

by the Settlement Officer and the Commission as insufficient to prov

the exact nature of the commodities in question Accordingly Com

plainant s petition will be denied
GLADISH ASSOCIATES V SEA LAND SERVICE INC 511

THEREFORE IT IS ORDERED That the Petition for Reconsid

eration ofGladish Associates is denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

Chairman Richard J Daschbach did not participate
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 683

FLOMERCA LINE TO BENEFIT THE

U S DEPARTMENT OF AGRICULTURE

ORDER ADOPTING INITIAL DECISION

December 31 1980

The Commission has before it the Exceptions of Flomerca Line to

the October 7 1980 decision of Administrative Law Judge Seymour

Glanzer denying Flomerca s special docket application This decision

was largely based upon Flomerca s failure to furnish the supplementary

information required by the Commission s July 3 1980 Order o

Remand 20 S R R 131

Flomerca now contends that the confusion which resulted from its

June 1 1979 change in steamship agents constitutes good cause fo

granting it special permission to file a lower rate for Corn in Bags

upon less than the 30 days notice prescribed by 46 U S C 8l7 c 3

Flomerca also claims it carried no other shipments of bagged corn

between July 2 and October 9 1979 so that the inclusion of a 500 ton

minimum requirement in Flomerca s corrective tariff tiling was an im

material deviation from the terms of the Flomerca USDA booking

contract

Flomerca s

tardily presented contentions provide an insufficient basi

for granting special docket relief and clearly do not meet the standard

set forth in the Commission s Order ofRemand 20 S R R at 135 n 13

It would be particularly inappropriate if a controlled carrier wer

allowed to rely upon the same inadvertent conduct which created the

need for a special docket application in the tirst instance to establis

good cause for waiving the 30 day notice requirement of section

l8 c 3

THEREFORE IT IS ORDERED That the October 7 1980 dec

sion in this matter is adopted and the Exceptions ofFlomerca Line are

denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 683

APPLICATION OF FLOMERCA LINE FOR THE BENEFIT

OF U S DEPARTMENT OF AGRICULTURE

A S C S COMMODITY OFFICE

Pursuant to directions contained in Order of Remand the application is denied for

inadequacy of proof

ON REMAND FURTHER INITIAL DECISION

OF SEYMOUR GLANZER ADMINISTRATIVE LAW JUDGE

Adopted December 31 1980

This matter is before me in accordance with the Commission s Order

ofRemand served July 3 1980

On February 7 1980 I issued an initial decision denying Flomerca

Line s application for permission to waive portions of freight charges

due it from the United States Department of Agriculture in connection

with two shipments of corn transported from Galveston Texas to

Puerto Cortez Honduras The application sought a waiver in the ag

gregate amount of 25 415 03 for the two shipments

The initial decision set forth two separate grounds for denial of the

application One was bottomed on what has come to be known as the

Munoz y Cabrera doctrine 2The second was a determination that con

trolled carriers 3

operating in cross trades are not eligible for special

docket relief

In denying the application among other things Iordered Flomerca

Line to take appropriate action to collect the balance of freight charges

due it from the United States Department ofAgriculture

No exception was filed but on its own initiative the Commission

undertook to review the initial decision 4

On review the Commission held that controlled carriers are eligi

ble to file special docket applications but that in addition to the need to

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

Commission Rule 227 Rules of Practice and Procedure 46 CF R 502 227

2

It is well settled that acorrective tariff must conform to the tariff originally intended Munoz y

Cabrero v Sea Land Services Inc 20 F M C 152 1977 Application of Sea Land Service Inc for the

Benefit of New Era Shipping as Agent for Central National Corporation Order on Remand 22 F M C

270 1979 ServedNovember 21 1979

3 Carriers subject to regulation under the ControJled Carrier Act section 18 c of the Shipping Act

46 US C 817 c

4

See Notice of Determination to Review Served March to 1980 20 S R R 131

Cl l
514 FEDERAL MARITIME COMMISSION

meet the usual requirements for special docket relief controlled carrier

must also demonstrate that the intended rate was not unreasonable o

or about the date ofshipment a condition which would have warrant

ed the grant of a timely filed special permission request to implemen

an intended rate 6

In the light of its reversal of the initial decision s holding on th

eligibility of controlled carriers to file special docket applications an

for other reasons the Commission determined that a limited remand

should be ordered On the controlled carrier issue the remand wa

fashioned to provide F10merca with an opportunity to demonstrate tha

the intended rate was not unreasonable on or about the date of ship

ment On the Munoz y

Cabrera issue the remand was fashioned t

provide Flomerca Line with the opportunity to establish that the co

rective tariff did not differ from the intended rate or alternatively

whether any deviation in those rates was material 7

Incorporating thos

concepts in formal terminology the Commission ordered the proceed

ing remanded to determine

1 Whether there wereconditions which existed on or about Jul

2 1979 which would have warranted granting Flomerca spe

cial permission to file a 42 00 rate on less than 30 days

notice

2 Whether any shipments of bagged corn other than the tw

USDA shipments were transported by F10merca from U S

points specified in its Tariff FMC No 17 between July 2 197

and October 9 1979 and if so the weight and other transpo

tation characteristics ofeach such shipment 8

To simplify Flomerca Line s undertaking on remand the Order o

Remand explained the nature ofthe evidence the Commission require

on the enumerated issues and specified the manner in which the ev

dence was to be furnished to the Presiding Officer on remand 9

Aware however that F10merca Line s prosecution ofthe applicatio

earlier in the proceeding did not exemplify diligence the Commissio

stressed that the application was at risk if the additional evidentiar

material were not timely riled The Commission put it this way Orde

ofRemand 20 S R R at 135

The Presiding Officer previously encountered difficulties in

obtaining complete and verified information from Flomerca If

Orderof Remand 20 S RR at 135

Controlled Carriers tariff filings may not become effective within less thail thirty 30 days fo

lowing the date of Rling with the Commission unless special permisaion of the Commisaion is soug

and granted See Initial Decision t9 S RR 1383 text and n15

Order of Remand 20 S R R at 133

Order of Remand 20 S R R at 135

Id

B See eg Orderof Remand 20 S RR at 135 n 13
FLOMERCA LINE TO BENEFIT THE U S D A 515

Flomerca fails to produce the information requested by this Order

in a timely fashion the Presiding Officer should issue a brief

further decision describing the procedures followed and denying

the application for inadequacy ofproof Ifadditional evidence is

provided the Presiding Officer should prepare findings of fact

on the issues specified in this Order and refer the matter to the

Commission for final decision Emphasis supplied

Three months have gone by since the Order of Remand was served

Ihave received no written or oral communication from Flomerca Line

or anyone authorized to act on its behalf

Accordingly I

find that Flomerca Line has failed to produce the

information requested by the Order of Remand in a timely fashion and

deny the application for inadequacy ofproof

ORDER

Itis ordered that the application for permission to waive portions of

freight charges for the benefit of the U S Department of Agriculture

in connection with two shipments of corn from Galveston Texas to

Puerto Cortez Honduras be denied It is further ordered that Flomerca

Line take appropriate action to collect the balance of freight charges

due under its tariff rates in effect on July 6 1979 It is further ordered

that within 30 days of service of notice by the Commission that this

decision has become administratively final that Flomerca Line shall

notify the Commission of the steps taken to effect compliance with this

order

S SEYMOUR GLANZER

Administrative Law Judge

Washington D C

October 7 1980
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 757

APPLICATION OF HAPAG LLOYD FOR THE

BENEFIT OF GENERAL FOODS INTERNATIONAL

ORDER ADOPTING INITIAL DECISION

December 31 1980

This proceeding was instituted pursuant to section l8b 3 of th

Shipping Act 1916 46 U S C 817 upon the application of Hapag

Lloyd Aktiengesellschaft for permission to refund 7 329 00 of th

applicable freight charges collected from General Foods Internationa

on a shipment of goods rated as Foodstuffs N O S transported from

New York to Limassol Cyprus

Administrative Law Judge William Beasley Harris served his Initia

Decision on October 24 1980 granting Hapag Lloyd s application N

exceptions were filed but the Commission on its own motion dete

mined to review the Initial Decision

Upon determining that the application should be granted the Presid

ing Officer noted that this action would have the effect ofreducing th

amount of compensation that should have been paid to Rapid Worl

Forwarders the forwarding agent in the transaction and accordingly

directed the forwarder to refund to the shipper any excess brokerag

compensation resulting from the grant ofthe application 1

Because the freight forwarder Rapid World Forwarders is not 

party to this proceeding the Commission cannot order it to remit an

excess payments herein However in order to preclude the forwarde

from retaining excess compensation as a result of the grant of th

application in this proceeding the Commission is directing the carrie

Hapag Lloyd to collect any such excess compensation from the fo

warder and to advise the Commission of its collection efforts with

thirty days of service ofthis Order

1

On October 30 1980 the Presiding Officer issued an IOErrata to his Initial Decision which 8ubs

tuted carrier for shipper as the entity to whom a refund should be made and corresponding

modified the discussion of the excess brokerage compensation noting that brokerage is paid by 

common carrier by water to an ocean freigbt broker for performance of functions specified n 

C P R 510 21 Despite these corrections the Initial Decision fails to adequately distinguish betwe

freight forwarder compensation and brokerage These terms are defined in our regulations a

should be used to prevent confusion Compensation is payment to alicensed freight forwarder by 

carrier for rendering specific forwarding services 46 CP R 510 21 h Brokerage is payment by 

common carrier by water to an ocean freight broker for marketing that carrier s

transportation se

ices 46 C P R SIO 21 i
HAPAG LLOYD FOR THE BENEFIT OF GENERAL FOODS 517

INTL

With these modifications the Initial Decision is determined to be

proper and well founded and is adopted by the Commission

It is so ordered

By the Commission

8 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 757

APPLICATION OF HAPAG LLOYD FOR

THE BENEFIT OF GENERAL FOODS INTERNATIONAL

Permission granted to refund 7 329 00 portion of aggregate freight charges of 10 557 8

collected because of error due to inadvertence in failing to file a new tariff t

comply with agreed upon rate

INITIAL DECISIONl OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Adopted December 31 1980

This is a proceeding under section 18b 3 of the Shipping Act 1916

and Rule 92 of the Commission s Rules of Practice and Procedure 4

C F R 502 92

The instant application contains certification that it was mailed a

New York September 25 1980 to the Secretary of this Commission

Under Rule 92 a 3 and such circumstances the date so certified is th

date of filing of the application The date of sailing of the shipmen

involved on the vessel Stuttgart Express from New York is given a

August 30 1980 The filing of the application being within 180 days o

the sailing date is timely

Hapag Lloyd Aktiengellschaft Hapag Lloyd Bill of Lading No

17393162 dated August 29 1980 describes the packages and goods as 

20 ft House to House Container said to contain

60 ctns cooked cereal

10 ctns bran cereals

III ctns cooked cereal

30 ctns rice cereal

500 ctns coffee roasted

Gross weight 17 453 lbs Measurement 939 cu ft Rate 440 00 M

234 75 X 4 40 10 329 00 228 88 tariff bunker charge

10 557 88 Total freight charges to be prepaid 10 557 88 The carg

loaded as indicated above was shipped by General Foods Internationa

to Limassol Cyprus via Hamburg to consignee Cosmos Trading Ltd

The freight charges of 10 557 88 were paid by the shipper Genera

Foods International

1 This decision will become the decision of the Commission in the absence of review thereof by t

Commission Rule 227 Rules of Practice and Procedure 46 C P R 502 227

0
HAPAG LLOYD FOR THE BENEFIT OF GENERAL FOODS 519

INTL

The tariff applicable is that of Hapag Lloyd FMC 108 an independ

ent service which is not a member of any conference from Hampton

Roads Philadelphia Baltimore New York Boston and Portsmouth to

ports in the Med Sea Benghazi Libya Spanish Morocco via ports in

the United Kingdom or Bordeaux Hamburg Range

On August 10 1980 Hapag Lloyd quoted the shipper General

Foods with a lump sum rate for 20 ft containers of Foodstuffs N O S

from New York to Limassol Cyprus for the amount of 3 000 plus the

applicable tariff bunker surcharge

On August 25 1980 General Foods booked 1 X 20 ft container from

New York to Limassol Cyprus ofFoodstuffs N O S for the Stuttgart

Express Voy 939 036 which sailed New York on August 30 1980

FMC 108 the applicable tariff did not contain the entry or rate for

Foodstuffs N O S therefore the general cargo entry had to apply and

the bill was rated at 44000 W1M plus the applicable tariff bunker

surcharge total freight charge of 10 557 88 The new tariff page

31st Revised Page 12 effective September 20 1980 was filed by

Hapag Lloyd for Foodstuffs N O S at a lump sum rate of 3 000 00

The rate of 3 00000 plus tariff bunker surcharge of 228 88 totals

3 228 88 to be subtracted from the 10 557 88 collected leaving

7 329 00 to be refunded

The application states the failure to file with this Commission the

proper rate of 3 000 00 for Foodstuffs N O S as agreed upon by the

shipper General Foods and the line Hapag Lloyd was due to an

administrative oversight at the time ofthe agreement

No information is supplied as to whether there are other special

docket applications or decided or pending formal proceedings involving

the same rate situation Nor is information supplied as to whether there

are shipments of other shippers of the same or similar commodity

which a moved via applicant during the period of time beginning on

the day before the effective date ofthe conforming tariff and b moved

on the same voyage of the vessel carrying the shipment described

above

DISCUSSION

The instant application was filed September 25 1980 and the effec

tive tariff setting forth the rate on which refund was based was effec

tive September 20 1980 Thus the Commission received the effective

tariff before the application was filed in conformity with Rule 92 Too

the application was filed timely

The application speaks only of this one shipment Ifthere are others

appropriate notice ofthis proceeding published in the appropriate tariff

should enure to the benefits of any similarly situated

Rapid World Forwarders Inc FMC No 624 are shown as the

forwarding agent herein Consistent with Commission policy the
520 FEDERAL MARITIME COMMISSION

freight forwarder is required to refund a proportionate percentage o

brokerage compensation it has received for the shipment Application o

Sea Land Service Inc for the Benefit of BDP lnternational Inc a

Agent for Champion International Export Corporation 20 P MC 22

1979

Upon consideration of the above the Presiding Administrative Law

Judge finds and concludes the applicant has pointed out satisfactoril

and explained the error due to inadvertence in failing to file a new tari

to comply with the rate quoted the shipper on August 10 1980 so tha

along with other factors warrants the conclusion that this application

under section 18b 3 ofthe Shipping Act 1916 and Rule 92 should b

granted

Por the reasons given the Presiding Administrative Law Judge find

and concludes in addition to the findings and conclusions hereinbefor

stated

1 The application should be granted

2 The freight forwarder ofthe shipment Rapid World Forwarders

Inc FMC No 624 shall refund to the carrier brokerage is paid by 

common carrier by water to an ocean freight broker for performance o

functions specified 46 C F R Sto 21 the excess brokerage compensa

tion it has received by virtue of the adjusted freight charges and the

said freight forwarder shall certify to the Commission that such refund

has been made

3 The refund will not result in discrimination as between shippers

Wherefore it is ordered that

A The application be and hereby is granted

B Applicant carrier Hapag Lloyd is granted permission to refund

to the shipper General Foods International a 7 329 00 portion o

aggregate freight charges of 10 SS7 88 collected

C Appropriate notice shall be published by the applicant in the

appropriate tariff

D Freight Forwarder Rapid World Forwarders Inc FMC No

624 shall refund to the carrier the excess brokerage compensation i

received by virtue of the adjusted freight charges and the freigh

forwarder shall certify to the Commission that such refund based on a

percentage ofthe freight charges has been made

Washington D C

October 24 1980

S WILLIAM BEASLEY HARRIS

Administrative Law Judge
FEDERAL MARITIME COMMISSION

DOCKET NO 80 51

MISSOURI PACIFIC RAILROAD COMPANY

v

GULF EUROPEAN FREIGHT ASSOCIATION ET AL

NOTICE

January 2 1981

Notice is given that the time within which the Commission could

determine to review the November 17 1980 order ofdiscontinuance in

this proceeding has expired No such determination has been made and

accordingly that decision has become administratively final

8 FRANCIS C HURNEY

Secretary

Cll
FEDERAL MARITIME COMMISSION

DOCKET NO 80 S 1

MISSOURI PACIFIC RAILROAD CO

v

GULF EUROPEAN FREIGHT ASSOCIATION ET AL

JOINT MOTION TO DISCONTINUE PROCEEDING GRANTED

Finalized January 2 1981

On November 10 1980 received November 13 1980 the Missou

Pacific Railroad Company Complainant and the Gulf Europea

Freight Association Lykes Bros Steamship Co Inc Oulf Europe

Express Hapag Lloyd AG Sea Land Service Inc United State

Lines Inc and Seatrain International S A

l

Respondents served thi

motion to discontinue this proceeding In support of the motion it i

stated

1 The complaint challenged the validity of the Railroad Usag

Surcharge imposed by Tariff No 4 FMC 4 pages 6 a through 6 j

inclusive This surcharge has been cancelled as of November 7 1980

by all participating steamship lines Seatrain International S A resigned

from the Gulf European Freight Association on October 8 1980 and

did not participate in this cancellation

2 This cancellation renders moot all issues involved in this proceed

ing The Commission can accord to Complainant no relief that has no

already been provided by its cancellation ofthe tariff surchllrge

3 The Complainant and Respondents agree that this requested dis

continuance will not prejudice Complainant s continuing right to chal

lenge before the Federal Maritime Commission any subsequently pub

lished Railroad Usage Surcharge

I On November 1980 the appearance of Neal M Mayer and Peter J King of Cole Ooertne

was tiled as separate counsel for respondent Seatrain International S A forthe limited purpose of th

submission of amotion to dismiss Seattain International S A 81 a

respondent in this proceeding Th

motion to dismiss complaint as to Seatrain was filed November S 1980 Time to respond has not ex

pired
MISSOURI PACIFIC R R CO V GULF EUROPEAN FRT 523

ASSOC ET AL

Wherefore upon consideration of the above and the record herein it

is ordered

A The motion is granted

B The proceeding is discontinued

November 17 1980

8 WILLIAM BEASLEY HARRIS

Administrative Law Judge
FEDERAL MARITIME COMMISSION

DOCKET NO 80 64

CUTTER LABORATORIES OVERSEAS CORPORAnON

v

MAERSK LINES

NOTICE

January 6 1981

Notice is given that the time within which the Commission coul

determine to review the November 21 1980 order of discontinuance i

this proceeding has expired No such determination has been made and

accordingly that decision has become administratively final

8 FRANCIS C HURNEY

Secretary

I

I
FEDERAL MARITIME COMMISSION

DOCKET NO 80 64

CUTTER LABORATORIES OVERSEAS CORPORATION

v

MAERSK LINES

Eugene Simonalie Assistant Corporate Counsel of Cutter Laboratories Inc for

Complainant

Robert B Yoshi omi of Lillick McHose Charles for Respondent

I SETTLEMENT AGREEMENT APPROVED

2 MOTION TO WITHDRAW COMPLAINTGRANTED

3 PROCEEDING DISCONTINUED WITH PREJUDICE

Finalized January 6 1981

This proceeding was instituted by a complaint served September 19

1980 under section 22 of the Shipping Act 1916 alleging the respond

ent Maersk Lines has violated sections 17 18 a and 18b 3 of the

Shipping Act 1916

An unopposed motion to enlarge time for answer to the complaint

was served October 10 1980 by the respondent By Order served

October IS 1980 the motion was granted extending time to answer the

complaint to and including November 19 1980

On October 13 1980 the complainant served an unopposed motion

for leave to amend its complaint by adding an additional ground on

which relief is due by adding the following language at the bottom of

page 5 ofthe complaint

Cutter alternatively alleges that the parenteral solutions

shipped by Cutter during the period in controversy the first

nine months of 1979 were misrated During this period the

correct rating should have been

Parenteral solutions for human use put up in measured

doses or in forms for packings of a kind sold in retail

Ordinary stowage

In support it was stated that after the filing ofthe complaint Cutter

and Respondent Maersk conferred to discuss the merits of Cutter s

claim Maersk agrees that relief is due on the additional ground set

forth and it is expected the parties will shortly reach a settlement

The unopposed motion for leave to amend the complaint was granted

by Order served October 21 1980

1 PMr iJ i
526 FEDERAL MARITIME COMMISSION

I

I

On November 11 1980 the complainant served its motion to with

draw the complaint setting forth inter alia the parties have entere

into a settlement agreement which is to be submitted to the Presidin

Officer for approval that if the settlement agreement is approved the

Maersk will pay to Cutter the amount which the parties have agreed t

in the Settlement Agreement as settlement for the claim Then th

complaint should be withdrawn and the proceeding should be dismisse

with prejudice

Under date of November 10 1980 respondent sent a letter receive

November 17 1980 which states in part

Cutter s Complaint as amended alleges that certain of its

cargo carrie l

in 1979 by Maersk from California to Hong

Kong was misrated Upon a review of the pertinent bills of

lading export declarations packing lists and other locuments

Maersk agrees that the cargo was inadvertently misrated A

review of the thirteen shipments in controversy results in

twelve adjustments in favor of Cutter and one adjustment in

favor ofMaersk On this basis the parties have agreed subject

to your approval to settle this claim

Accor lingly the enolosed Settlement Agreement contains a

stipulated statement of facts as well as references to anlat

tachment of the pertinent shipping documents As you will

see Exhibit 2S to the Settlement Agreement contains a recal

culation of the freight for each ofthese shipments We have

attempted to state the factual basis for the settlemelitin a

simple yet complete manner sufficient to show what the cargo

was and correct freightpayment should have been While we

believe that these freight calculations are self explanatory

should you need alditional information we of course stand

ready to provide whatever you may require

Enclosed was the following Settlement Agreement the exhibits a

tached have been filed in thedocket in this proceeding

SETTLEMENT AGREEMENT

THIS AGREEMENT is made as of the 10th day of No

vember 1980 by and between Cutter Laboratories Overseas

Corporation Cutter and A P Moller Maersk Line known

as Maersk Line Maersk

WIT N ESSE T H

WHEREAS during the period January through September

1979 Cutter shipped certain cargoes of parenteral solutions

and disposable intravenous equipment on Maersk vessels from

Long Beach and Oakland California to Hong Kong

WHEREAS in regard to these shipments Cutter has filed a

Complaint against Maersk with the Federal Maritime Commis

1 CO A r
CUTTER LABORATORIES OVERSEAS CORP V MAERSK 527

LINE

sion FMC designated as Docket No 80 64 alleging that

the freight rates charged to and paid by Cutter were contrary

to the terms of the Shipping Act 1916 as amended and

therefore Cutter was harmed

WHEREAS Cutter has filed an Unopposed Motion to

Amend its Complaint to allege inter alia that all of the sub

ject cargo was misrated and this motion has been granted

WHEREAS Cutter and Maersk have conferred for the

purpose of discussing Cutter s claim and of attempting to ne

gotiate a settlement thereof consistent with their respective

commercial positions as well as the requirements of the Ship

ping Act

WHEREAS the parties seek to avoid the great expense and

inefficiency necessarily involved in litigation

NOW THEREFORE the parties agree to settle Cutter s

claim as follows

1 The parties stipulate to the following statement of facts

a During the period in controversy January through Sep

tember 1979 Maersk served the trade from Long Beach and

Oakland California to Hong Kong as a member of the Pacific

Westbound Conference PWC The PWC is a conference

of carriers authorized by the FMC which serves the out

bound trades from the Pacific Coast of the United States

including California and Canada to the Far East including

Hong Kong

b Effective January 1 1979 the PWC reconstituted its

tariffs and in particular its tariff governing the local move

ments from California to Hong Kong This tariff was designat

ed No 11 FMC 19 TariffNo 11

c During the first nine months of 1979 Cutter shipped

cargoes of parenteral solutions and disposable intravenous

equipment and certain other cargoes not germane to this

controversy on Maersk vessels from California to Hong

Kong These cargoes were shipped on thirteen separate voy

ages with one bill of lading for each such voyage Copies of

these bills of lading are attached hereto and designated Exhib

its 1 through 13 respectively

d Although some of these voyages carried both of the

subject cargoes parenteral solutions and disposable intrave

nous equipment through inadvertance not all of the bills of

lading for such voyages reflect the actual cargoes Therefore

the other pertinent transit documents such as export declara

tions inland drayage receipts packing lists etc are attached

as Exhibits 3A through 3F 7A through 7C 8A through 8D

9A through 9C and IIA and lIB to identify the cargo actually

carried

e The freight rate applied to all of the parenteral solutions

including the disposable intravenous equipment erroneously

J J1 Mr
528 FEDERAL MARITIME COMMISSION

grouped with it on certain bills oflading was the local rat

Hong Kong for

Preparations affecting electrolytic caloric and water 

ance except diuretics preparations for human use put u

measured doses or in forms or packings of the kind sol

retail Ordinary Stowage

This description is listed on page 421 of Tariff No 11 an

assigned PWC commodity item number 442 4900 00 

freight monies calculated under this rate were paid by Cu

to Maersk

f Regarding theparenteral solutions the bills oflading s

this cargo to be listed as parenteral solutions The pa

agree that it was misrated and for those cargoes listed 

Exhibit 1 through 12 that the correct rate should have b

the local rate to Hong Kong for

Parenteral solutions for human use put up in measu

doses or in forms or packings of the kind sold at re

Ordinary Stowage

This description is listed on page 423 of TariffNo 11 an

assigned PWC commodity item number 442 8500 30

g

For the disposable intravenous equipment the bills 

lading and other transit documents show this cargo to be lis

as disposable intravenous equipment The parties agree 

it was misrated and that the correct rate is the local rate 

Hong Kong for

Bougies Catheters Drains and Sondes and Parts Th

of

This description is listed on page 681 of Tariff No 11 an

assigned PWC commodity item number 709 0900 20

h During the period January 1

through September 27 1

the rates pertaining to these three tariff categories were 

follows

Effective

Pre arations

affecling

see

le above

Parenteral

solutions see

1fabove

Bougies s

Ig above

Jan I 1979 160 00WIM 11100 WIM 88 00 WIM

Apr I 1979 170 00 W1M 121 00 W1M 97 00 W1M

1 The tariff pages reflecting these rates are attached hereto as Exhibits 

16

2 The tariff pages reflecting these rates are attached hereto as Exhibits 

19

3 The tariff pages reflecting these rates are attached hereto as Exhibits 

22

i Review of the traffic which is the subject of Cutt

claim also reveals a misrating in favor ofCutter Exhibit 1

a bill oflading for cargo including some parenteral solutio

all of which was refrigerated oas evidenced by the refere

11 1i ur
CUTrER LABORATORIES OVERSEAS CORP V MAERSK 529

LINE

Chill Room in the bill of lading Therefore this movement

should have been rated under the tariffcategory

Refrigerated Rule No 58

This description is listed on page 410 ofTariff No II and is

assigned PWC commodity item number 004 0300 03 The bill

of lading for this shipment is dated September 15 1979 and

the pertinent freight rate on this date was 258 00 W1M as

evidenced by the pertinent tariff pages attached hereto and

designated as Exhibits 23 and 24

j

Based on the foregoing the table attached hereto and

designated as Exhibit 25 contains a calculation of the freight

rate paid by Cutter as well as the freight rate which it should

have paid Additionally Exhibits I

through 13 also contain

certain handwritten supporting calculations Based on these

calculations the net amount of 13 116 41 is due and owing to

Cutter from Maersk as excess freight paid

k Effective September 28 1979 TariffNo II was amended

to add a category entitled

Parenteral solutions affecting electrolytic caloric and

water balance for human use

This description is contained on page 421 of Tariff No II

and is assigned PWC commodity item number 442 4900 30

See 4th Revised page 421 Exhibit 16 hereto Once this cate

gory was added to the PWC tariff it wasthe one under which

the parenteral solutions should be and now correctly are

rated Prior to that time however the correct rating for

parenteral solutions was as stated above

2 This Settlement Agreement shall promptly be submitted

to the presiding Administrative Law Judge for his approval

3 At least seven days before Maersk s Answer to the Com

plaint is due which is now November 19 1980 Cutter shall

file a Motion to Withdraw its Complaint and dismiss the

proceeding with prejudice conditioned upon acceptance of

the Settlement Agreement by the presiding Administrative

Law Judge and if it reviews the matter the Commission

4 Ifthe settlement is accepted and the Complaint is with

drawn and the proceeding is dismissed with prejudice then

Maersk shall pay to Cutter within fifteen days thereafter the

amount of 13 116 41 in settlement ofthis claim

5 Upon such payment Cutter releases Maersk its succes

sors assigns and agents from all claims whatsoever known

or unknown arising out of the transportation litigation or

other transactions which are or could be the subject matter of

F MC Docket No 80 64 Cutter understands that this is a

general release and it waives the benefit of California Civil

Code section 1542 or any other comparable provision under

any law which states as follows
530 FEDERAL MARITIME COMMISSION

A general release does not extend to claims which the

creditor does not know or suspect to exist in his favor at the

time of executing the release which if known must have

materially affected his settlement with the debtor

6 Each of the parties shall use its best efforts consistent

with the requirements and spirit ofthis agreement to promote

acceptance ofthis Settlement Agreement

7 Ifthe settlement is refused then at such time each party

is no longer bound by any aspect of this Settlement Agree

ment

Cutter Laboratories Overseas Corporation

By

Treasurer

A P Moller Maersk Line

By

Jens J Raun Attorney in fact

DISCUSSION

The settlement agreement is silent as to and thus negates any admis

sion of violation of law and if the settlement agreement is approved

there will be no finding of violation of law The law of course

encourages settlement and every presumption is indulged in which

favor their fairness correctness and validity generally General Discount

Corp v Shram 47 F Supp 845 0

Ct E D Mich 1942 Florida

Trailer Equipment Company v Deal 284 F 2d 567 571 CA 5 1960

The Presiding Administrative Law Judge finds and concludes that the

settlement agreement is a bona fide attempt to terminate the controver

sy and not a device to circumvent the requirements oflaw The settle

ment agreement reflects a rational valid and fair solution of the dispute

and obviates the need for further extensive and expensive litigation

The settlement itself is proper and does not violate any provision o

law

Wherefore it is ordered

A The Settlement Agreement is approved

B Motion to Withdraw the Complaint is Granted

C This proceeding is discontinued with prejudice

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

November 21 1980

1 C ft rI
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 724 1

COTTON IMPORT AND EXPORT CO

v

SEA LAND SERVICE INC

ORDER ON RECONSIDERAnON

January 6 1981

On August 11 1980 the Commission reversed the Decision of the

Settlement Officer and denied Cotton Import and Export Cos

request

for reparation on the ground that it had failed to meet its burden of

proof Specifically the Commission cited several inconsistencies and

unanswered questions in Complainant s case

1

This proceeding is now before the Commission upon receipt of a

letter from Complainant constituting a petition for reconsideration of

the Commission s August 11 Order2

Complainant s

request does not meet the criteria for reconsideration

pursuant to the Rules of Practice and Procedure Rule 261 provides

that a petition for reconsideration will be summarily rejected unless it

1 specifies that there has been a change in material fact or in

applicable law which change has occurred after issuance of

the decision or order

2 identifies a substantive error in material fact contained in

the decision or order or

3 addresses a finding conclusion or other matter upon which

the party has not previously had the opportunity to comment

or which was not addressed in the briefs or arguments of any

party 46 C F R 502 261 a

Complainant alleges neither error nor change in material fact but

rather offers explanation and proofwhich were previously requested of

it and which were not forthcoming until the case had been decided

Thus none ofthe criteria for reconsideration under the Rules has been

met

1 Clarification of several of the problem areas had been sought from Complainant on two occasions

prior to issuance of the Commission s decision by the Settlement Officer on September 18 1979 and

by the Commission s Secretary pursuant to the Commission s instructions on May 19 1980 On both

occasions Complainant s

response was unsatisfactory and the Commission s August 11 Order denying

reparation ensued

2

The Jetter dated September 9 1980 was addressed to then Vice Chairman Moakley

lPMr i 1
532 FEDERAL MARITIME COMMISSION

THEREFORE IT IS ORDERED That the Petition for Reconsid

eration ofCotton Import and Export Co is denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

Vice Chairman Kanuk concurs in the result

11lMr
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 720 1

3M

v

HAPAG LLOYD

ORDER DENYING RECONSIDERAnON

January 8 1981

By Petition filed December 5 1980 Complainant 3M requests that

the Commission reconsider its order of November 5 1980 adopting the

Settlement Officer s decision issued August 20 1980 1

3Ms Petition for Reconsideration must fail unless it meets the criteria

set forth in Rule 261 of the Commission s Rules 2

3M s Petition essen

tially consists of a restatement of arguments already considered by the

Settlement Officer and properly disposed of by him 3

The Petition

therefore must be denied

It is so ordered

By the Commission

S FRANCIS C HURNEY

Secretary

1

The Commission adopted the decision of the Settlement Officer

upon reviewing it on its own

motion

2

A petition will be subject to summary rejection unless it 1 specifies that there has been a

change

in material fact or in appJicable Jaw which change has occurred after issuance of the decision or

order 2 identifies asubstantive error in material fact contained in the decision or order or 3 ad

dresses a finding conclusion orother matter upon which the party has not previously had the oppor

tunity to comment or which was not addressed in the briefs or arguments of any party Petitions

which merely elaborate upon or repeat arguments made prior to the decision or order will not be

received A petition shall be verified if verification of original pleading is required and shan not oper

ate as a

stay of any rule ororder of the Commission 46 CP R 502 261

33Ms

explanation that it has the policy of filing claims worldwide in its own name does not war

rantadifferent conclusion Such apolicy does not in the absence of avalid assignment confer stand

ing upon 3M to seek reparation for freight overcharges it has not paid

Chairman Richard J Oaschbach did not participate

H 1i Ar 1
FEDERAL MARITIME COMMISSION

46 C F R 503 DOCKET NO 80 48

APPEALS OF DENIALS OF REQUESTS FOR INFORMATION

January 9 1981

Discontinuance of Proceeding

The Commission has determined to discontinue th

proceeding without issuing a rule A change in t

present system of processing of appeals from denia

of requests for information under the Freedom 

Infotmation and Government in the Sunshine Acts 

considered unnecessary

DATES Effective January 14 1981

SUPPLEMENTARY INFORMATION

ACTION

SUMMARY

By notice published in this proceeding 45F R 48172 July 18 198

the Federal Maritime Commission proposed to amend its rules regar

ing appeals from a denial by the Secretary ofcertain requellts submitte

pursuant to the Freedom of Information and Government in the Su

shine Acts At present section 503 34 of 46 C F R provides that su

appeals are made to the Chairman The proposed amendment wou

have the appeals addressed to the entire Commission where they i

volve a request for transcripts of closed Commission meetings a

other documc ts which have been prepared through joint action 

effort of a quorum ofCommissioners

In response to the notice comments were received from The Adhe

ence Group a number of conferences in the North European trade

the 8900 Lines a number of conferences in the Latin America

trades Sea Land Service Inc and the firm ofKominers Fort Schief

and Boyer

The Commission has considered the comments in this proceeding an

reviewed its experience over the years with respect to appeals 

denials of requests and concluded that a change in the current proc

dure is unnecessary Appeals are made in relatively few circumstance

and appeals of the type contemplated in this proposed rulemakinga

extremely rare The present procedure of appeal to a single authorit

ClA 11i Mr
APPEALS OF DENIALS OF REQUESTS FOR INFORMATION 535

viz the Chairman ofthe Commission is efficient and fair Accordingly

this proceeding is discontinued

By the Commission

8 FRANCIS C HURNEY

Secretary

Dissenting Opinion of Vice Chairman Kanuk is attached
536 FEDERAL MARITIME COMMISSION

Vice Chairman Leslie Kanuk dissenting The majority bases its dec

sion to discontinue this proceeding on grounds that appeals of the typ

involved in this rulemaking are rare and that in any event the prese

appeal process is efficient and fair In my opinion neither of thes

rationales forms a basis for the result reached

The fact that the appeals involved may occur infrequently is certai

ly not grounds for refusing to institute a rule to deal with them whe

they do occur Furthermore the proposed rule would be a more appr

priate and certainly a fairer way to handle appeals which involv

requests for documents resulting from actions taken by the Commissio

as a collegial body The Commission itself pointed out in its notice 

proposed rulemaking published July 18 1980 that each ofthe Com

missioners should have an equal voice in decisions relating to th

release of transcripts recordings or minutes of sessions during whic

the Commissioners jointly conduct the agency s official business 

addition the Commission stated that each Commissioner has an equ

interest in whether to release other sensitive agency documents whic

are the product ofjoint effort or action ofthe Commission Implicit 

the proposed rule was the intent to remove any basis for an allegatio

of bias which can arise if one Commissioner alone is deciding 

appeal

It appears to me as it appeared earlier to the rest ofthe Commissio

that there is a sound basis for adopting the rule In addition all of t

parties ming comments with one exception support its adoptio

Therefore in light of the Commission s own statements and pub

support for the proposed rule Icannot agree with the majority s late

conclusion that the current system is fair and should remain u

changed
FEDERAL MARITIME COMMISSION

DOCKET NO 80 5

DYNAMIC INTERNATIONAL FREIGHT FORWARDER INC

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE

APPLICATION AND POSSIBLE VIOLATION OF

SECTION 44 SHIPPING ACT 1916

The terms dispatching and carrying on the business of forwarding are interchange

able terms referring to services performed for shippers in connection with the

movement of cargo to port for ocean carriage

Respondent violated section 44 a of the Shipping Act 1916 by engaging in unlicensed

forwarding Respondent is found unfit to be licensed and is fined 2 500 in civil

penalties

Richard N Sharood of Wilcox and Sharood for Respondents

Joseph C Slunt Deana E Rose and John Robert Ewers for the Commission s Bureau

of Investigation and Enforcement

REPORT AND ORDER PARTIALLY

ADOPTING INITIAL DECISION

January 16 1981

BY THE COMMISSION RICHARD J DASCHBACH Chairman JAMES

V DAY THOMAS F MOAKLEY AND PETER N TEIGE Commission

ers LESLIE KANUK Vice Chairman CONCURRING IN PART AND

DISSENTING IN PART

This proceeding was instituted by Order of Investigation and Hear

ing served January 23 1980 to determine

1 Whether Dynamic International Freight Forwarders Inc

Dynamic violated section 44 a Shipping Act 1916 by en

gaging in unlicensed forwarding activities

2 Whether civil penalties should be assessed against Dynamic

International Freight Forwarders pursuant to 46 D S C 831 e

for violations of the Shipping Act 1916 and if so the amount

of any such penalty which should be imposed taking into

consideration factors in possible mitigation of such a penalty

and

3 Whether in light of the evidence adduced pursuant to the

first issue together with any other evidence adduced Dynam

ic and its corporate officers possess the requisite fitness within

the meaning of section 44b Shipping Act 1916 to be li

censed as an independent ocean freight forwarder
538 FEDERAL MARITIME COMMISSION

On June 16 1980 Administrative Law Judge William Beasley Harr

served his Initial Decision wherein he found that

1 The respondent had engaged in unlicensed forwarding ac

tivities in violation of section 44 a ofthe Act

2 A 2 500 civil penalty should be assessed against respond

ent for violating the Shipping Act 1916 and that payment of

said penalty is a condition precedent to the issuance of the

respondent s license and

3 Upon payment of the civil penalty respondent will possess

the requisite fitness within the meaning of section 44b

Shipping Act 1916 to be licensed as an independent ocean

freight forwarder

The Commission s Bureau of Investigation and Enforcement BIE

formerly Hearing Counsel and Dynamic filed Exceptions to the Initia

Decision Both parties filed Replies to Exceptions

BACKGROUND

The facts in this proceeding as stipulated by the parties and found b

the Presiding Officer are essentially as follows

1 Dynamic a Michigan corporation applied for a freight forward

er s license on January 18 1979 Evelyn Siegel is the President an

qualifying officer ofthe applicant

2 On January 25 1979 Mrs Siegel advised the Commission s Offic

of Freight Forwarders by telephone that Dynamic had engaged 

some ocean freight forwarding which she considered permissible 

long as no compensation was received from the ocean carrier Sh

further indicated that Dynamic had received 120 in documentatio

fees for forwarding services on four shipments

3 Mrs Siegel was warned on August 31 1978 January 25 1979 an

January 30 1979 about unlicensed freight forwarding On March 

1979 Mrs Siegel in response to Commission staff inquiries advise

that no further forwarding work will be performed until the comp

ny is licensed

4 Autoliner Inc agent for Hoegh Ugland Auto Liner HUAL

provided 13 HUAL bills of lading covering the period September 2

1979 through February 2 1980 on which Dynamic s name appeared 

freight forwarder

5 Motorship Inc agent for Wallenius Line provided 24 bills 

lading dated between July 28 1979 and October 13 1979 on whic

Dynamic s name appeared as freight forwarder On an additional 4

Wallenius bills of lading issued during the period November 1 197

through February 3 1980 Dynamic s name appeared in the forwarde

box although the carrier s freight statement provides that no fo

warder was involved in the shipments Motorship advised that D
DYNAMIC INT L FREIGHT FORWARDER LICENSE 539

APPLICATION

namic appeared as forwarder on all of these shipments at its request

The request was made for accounting purposes

6 By affidavit of May 21 1980 Mrs Siegel attested that Dynamic s

name appeared on the Wallenius and HUAL bills of lading to note that

the credit arrangements had been made through Dynamic She further

advised that the documentation services were performed either without

charge or for a nominal fee

7 Autos International was the shipper on virtually all of the above

referenced bills of lading Autos did not pay nor was it billed by

Dynamic for its service although Autos was invoiced by Dynamic for

ocean freight charges advanced by Dynamic

8 In connection with the subject shipments Dynamic prepared the

bill oflading or the export declaration advanced ocean freight charges

or was extended credit by the carrier or its agent on the shipper s

behalf Dynamic did not seek nor was it paid brokerage by the carrier s

agents Autoliners and Motorship

9 Robert Hunter a shipper from Mission Viejo California furnished

four Dynamic invoices dated September 9 1979 through December 4

1979 which listed charges for inland transportation estimated ocean

freight insurance documentation telexes and mail

POSITIONS OF THE PARTIES

Dynamic excepts to the Presiding Officer s finding that it violated

section 44 a Dynamic contends that the Presiding Officer side

stepped its argument that carrying on the business of forwarding as

that term is used in section 1 of the Act l

requires both the dispatching

ofshipments which Dynamic interprets to include booking cargo space

and ordering cargo to port and the handling ofthe formalities incident

to such shipments which Dynamic interprets to include preparing or

processing ocean bills oflading preparing or processing export declara

tions or arranging for trucking or lightering 2

Dynamic submits that

Commission General Order 4 upon which both BIE and the Presiding

Officer rely unlawfully merges the two distinct provisions of section 1

into a unified concept of freight forwarding service or dispatching of

shipments 46 C F R 51O 2 c

BIE supports the Presiding Officer s

finding that Dynamic had en

gaged in unlicensed forwarding within the meaning of sections 1 and 44

of the Act It points out that the term carrying on the business of

1 Section 1 Shipping Act 1916 provides in pertinent part

The term carrying on the business of forwarding means the dispatching of shipments by

any person on behalf of others by oceangoing common carriers in commerce from the

United States to foreign countries and handling the formalities incident to such ship

ments

2

The Initial Decision does not clearly address this issue The Presiding Officer couched the viola

tions only in terms of unlicensed forwarding activities
I

540 FEDBRAL MARITIME COMMISSION

forwarding was first addressed in Docket No 621 Port ofNew Yo

Freight Forwarder Investigation 3 U S MC IS7 1949 where the Com

mission delineated the scope of forwarding services and noted that 

forwarder engages ina wide range of activities any one of whic

constitutes freight forwarding In so doing the Commission described 

wide range of activities performed by forWarders and noted that thes

services may vary from shipment to shipment BIE submits that sectio

1 as subsequently enacted reflects the Commission s

reasoning 

Docket No 621 and that any forwarding service set forth in Gener

Order 4 46 C P R SI0 2 c constitutes the carrying on the business 

forwarding 3

BIB therefore concludes that the Commission s

longstanding inte

pretation of section 1 as reflected in section SI0 2 c ofGeneral Order 

is correct and consistent with the statute s

legislative history and th

Commission s regulatory policy In this regard BIE points out that 

construction given to a statute by the administrative agency whose du

it is tocarry out its provisions is entitled to great weight and shou

not be overruled unless clearly unlawful

BIE disagrees however with the Presiding Officer s

finding th

Dynamic is fit to be licensed as an independent ocean freight forward

because the unlicensed forwarding activities were performed in goo

faith on the advice of counsel It contends that dynamic did not reta

counsel until October 1979 and that Dynamic had engaged in un

censed forwarding on at least 32 instances prior to that date 4

BI

therefore urges the Commission to find Dynamic unfit and assess a civ

penalty of 10 000 for past violations of the statute and the Commi

sion s Rules

Section 10 2c1 of O nral Ofd r 4 ribea rvlcea similar to the services d tailed in Doc

No 621 That s ction provid s

The ferm llfrei l1t forwarding service or dispatchioa of shipments means aservice rendered

by an Independent ocean freishtforwarder on b halfofoth r persons inth proc ordis

patohins or faciUtatins an export shipment authori by such p rson Such service in

cludes but is Ifot lImlle jto the following XlIIlIlnlngc Instructions and documents r

c iv d

from hipper ordorins carso to port pteparlnS or proeeaslns xport declarations booking

cargo space pr panns orprooesslns delivery ofdersand dock receipts preparins Instructions

to truckm n or Iishterm n or arrangins for or the fumiahlng of trucks and lIsht f8 pr par

Ins and proeessins ocean bills of ladins preparing or procesalng consular dOcumelfl8 and ar

ranslns for theiroertlllcation arransins for or furnishins warehouse storaS wh n n

c

y

arranslns forinsuranc when 8l

instructed clearin shipmonts In acccrdance with United

States iov mm nt r

gulations preparing advanc advice notice of shipm nts and ndlng

copies thereof to banks shippers orconsipees as required sending completed documents to

shippers banks or consianees as directed advancin necessary funds in connection with the

for going providing supervision In the coordination of services rendered Ie shipments from

origin to vessel renderina special services on UDuau l shipments or when difficultiesintransit

ariSCj and giving expert advice to exporters as regard letters of credit licenses and ins

tion

In reponse to BIE s Exceptions Dynamic advises that it retained counsel in August 1979 and 

Octob r 1979 also that Mrs Si S I prior to the ret ntion of counsel p

rformed services on 9 sh

ments rather than 32
DYNAMIC INT L FREIGHT FORWARDER LICENSE 541

APPLICATION

DISCUSSION

I THE DEFINITION OF CARRYING ON THE BUSINESS OF

FORWARDING

Dynamic s Exceptions to the Initial Decision raise the following

issues

I Does carrying on the business of forwarding within the mean

ing of sections I 44 a and 44 e of the Act require a person

to both dispatch and handle the formalities incident to such

shipments

2 What does the term dispatching shipments include

Section I of the Act defines carrying on the business of forwarding

as

T he dispatching of shipments by any person on behalf of

others by oceangoing common carriers in commerce from the

United States its Territories or possessions to foreign coun

tries or between the United States and its Territories or pos

sessions or between such Territories and possessions and han

dling the formalities incident to such shipment Emphasis sup

plied

Section I of the Act would on first impression require both dis

patching and handling the formalities incident to such shipments in

order for an activity to constitute carrying on the business of forward

ing Section 44 a prohibits a person from carrying on the business of

forwarding without a license Dynamic argues that it did not carryon

the business of forwarding because it did not dispatch any shipments

as it construes that term but merely handled certain formalities

incident to such shipments Fundamentally Dynamic s argument rests

upon the conjunctive language of section I There is no legislative

history nor has Dynamic attempted to cite any which clearly defines

dispatching or handling the formalities 5 Moreover nowhere in the

Shipping Act are the terms dispatching and handling the formali

ties defined However while the term handling the formalities does

not appear anywhere in the body ofthe freight forwarder legislation set

forth in section 44 of the Act the term dispatch appears three times

once in section 44 a and twice in section 44 e

IfDynamic is correct section 44 a which uses the term dispatch

would have to be interpreted in a manner clearly inconsistent with the

Ii As support for its position Dynamic states

Respondent readily acknowledges that this analysis is based not upon explicit statements of

legislative history tracing the development of the law which are simply non existent but

rather upon areading of the English language and grammatical usage coupled with the factu

al development of these bi1ls which evolved over aperiod of five years prior to enactment of

the Public Law Respondent s Submission in Response to Notice of Further Procedural

Schedule at 9
542 FEDERAL MARITIME COMMISSION

Act and the intent of Congress The proviso clause of section 44 a

reads

That a person whose primary business is the sale of merchan

dise may dispatch shipments of such merchandise without a

license Emphasis added

It is beyond dispute that Congress intended to allow shippers to for

ward their own shipments without a license This suggests that dis

patch and forward have the same meaning However if Dynamic is

correct in arguing that dispatching and handling the formalities

were intended to refer to separate and distinct activities a shipper who

both dispatched and handled the formalities of his own shipment

would be required to be licensed because section 44 a would only

exempt his dispatching functions

Section 44 e reads in part

A common carrier by water 1Jlay compensate a person carry

ing on the business of forwarding to the extent of the value

rendered such carrier in connection with any shipment dis

patched on behalf of others when and only when such person

is licensed hereunder and has performed with respect to such

shipment the solicitation and securing ofthe cargo for the ship

or the booking of or otherwise arranging space for such

cargo Emphasis added

Under this section a carrier may grant compensation to a

licensee who

performs certain enumerated services The laIl8uage cleatlysuggests

that dispatching is a service which is performed for a person other

than a CQmmon carrier by water i e for the Shipper As previously

indicated handling the formalities incident to such shipments is omit

ted

Handling the formalities is also omitted from the provisoc1ause of

section 44 e in which the term dispatch again appears

The legislative history also strongly indioates that the terms dis

patching and carrying on the business of forwarding are inter

changeable terms referring to services performed for shippers in con

nection with the movement of cargo to port for ocean carriage In

passing H R S068 it waS said on the floor ofthe House

The bill provides for the licensing of a person engaged in the

business of dispatching shipments on behalf of other persons

An exporter who forwards hill own goods or that of a subsidi

ary or affiliate as an incidental activity ofhis main occupation

is not engaged in the business of forwarding S ince the

goods he forwards are his own he is not dispatching ship

ments on behalf of others 106 Congo Rec 16073 19S9 Re

marks ofRep Tollefson

Two years later the Senate Committee on Commerce reporting out

essentially the same bill said
DYNAMIC INT L FREIGHT FORWARDER LICENSE 543

APPLICATION

Section 43 a

6 would provide that a

person must hold a license

issued by the Commission to carryon the business of for

warding but would permit a person whose primary business is

the sale of merchandise to dispatch shipments of such mer

chandise without a license S Rep No 691 87th Congo 1st

Sess 2 1961

BIE correctly points out that Respondent has failed to identify a

source for its categories of activities which constitutes dispatching

and those which constitute handling the formalities BIE s Reply to

Exceptions at 2 As BIE further points out the definition of freight

forwarding in section I originated from the Commission s decision in

Port of New York Freight Forwarder Investigation 3 U S MC 157 1949

There the Commission said

We are ofthe opinion that any person carrying on the business

of dispatching shipments by ocean going vessels and of

handling the formalities incident thereto is a forwarder within

the provisions of the Shipping Act 1916 3 U S MC at 163

Earlier in the same decision the Commission said

A forwarder in foreign commerce in many instances furnishes

a necessary link in preparing shipments for export These serv

ices are diverse in character and may vary as to almost every

shipment 3 U S MC at 159

In that decision the Commission listed several services performed by

forwarders 3 U S M C at 159 note 2 All of the services listed in the

Commission s decision now appear virtually verbatim in the Commis

sion s current rules and regulations 46 C F R 510 2 2

From the very outset of its investigation of ocean freight forwarding

Congress fully understood that the definition of carrying on the busi

ness of forwarding originated in the Commission s Port of New York

decision supra See Investigation Into the Activities of Foreign Freight

Forwarders and Brokers H R Rep 2939 84th Cong 2nd Sess 5 7

1956 The definition of freight forwarding as conceived by the Com

mission in 1949 survived without significant alteration and is embodied

in section 1 ofthe Act and the Commission s rules and regulations The

terms dispatching and handling formalities have been treated as a

single concept to describe a range of activities anyone of which may

constitute forwarding from the inception of their use by the Com

mission in 1949 through approximately six years of Congressional in

vestigations and hearings and for the past twenty years since enactment

of section 1

6

Section 43 a is now section 44a which reads in part

That a

person whose primary business is the sale of merchandise may dispatch shipments of

such merchandise without alicense
544 FEDERAL MARITIME COMMISSION

The Commission concludes that the rules and regulations contained

in Part 510 are not inconsistent with section 1 of the Act The terms

dispatching and handling formalities are separate and distinct only

in grammatical construction The term handling the formalities has

never been ascribed any meaning and has been deleted from use in

connection with the term dispatch elsewhere in the Shipping Act the

legislative history and the Commission s rules and regulations Dis

patch is interchangeable in meaning with forwarding and describes

the activities set forth in the Commission s

regulations at 46 C P R

510 2 c

II DYNAMIC S FITNESS TO BE LICENSED

Under the analysis set forth above a freight forwarding license is

required for anyone who proposes to engage in any of the forward

ing or dispatching activities described in the Commission s

regula

tions at 46 C P R 510 2 c A review of the record in this proceeding

shows that the Presiding Officer was correct in holding that Dynamic

engaged in one or more of these activities on numerous occasions

without a license and therefore violated section 44a of the Shipping

Act

Mrs Evelyn Siegel Dynamic s president and qualifying officer was

first warned by the Commission s staff not to engage in unlicensed

forwarding in a letter dated August 31 1978 which accompanied a

license application form she had requested The same letter also advised

Mrs Siegel of the civil penalties and prejudice to the issuance of a

license which might result from unlicensed forwarding

On January 18 1979 Dynamic applied for a freight forwarder s

license The description of Mrs Siegel s experience as a qualifying

officer which was submitted in connection with Dynamic s application

stated that she had worked for three freight forwarders since 1970 and

had engaged in a wide variety of forwarding activities during the

course of her employment

On January 25 1979 Mrs Siegel admitted to a member of the

Commission s staff that Dynamic had engaged in some unlicensed for

warding activities It was later developed that Dynamic had provided

documentation services on four shipments during January 1979 The

provision of services relating to the preparation or processing ofdocu

ments such as export declarations bills of lading and dook receipts are

specifically included in the range of forwarding activitiesdescribed in

the Commission s

regulations

On January 30 1979 the Commission s staff ilgain warned Dynamic

in a letter to Mrs Siegel not to engage in unlicensed forwarding and o

the possible adverse consequences ofsuch activity

By letter dated March 7 1979 to the Commission Mrs Siegel ac

knowledged that Dynamic had violated the Shipping Act by engaging

in forwarding without a license She contended that these violations
DYNAMIC INT L FREIGHT FORWARDER LICENSE 545

APPLICATION

were not wilful and that no further freight forwarding would be

performed by Dynamic until it was licensed

Despite Mrs Siegel s promise and despite the repeated warnings

given to her by the Commission s staff the facts of this case summa

rized above which Dynamic does not dispute show that Dynamic

continued to engage in unlicensed forwarding through February 3

1980 On 13 shipments carried by Hoegh Ugland Auto Liner from

September 28 1979 through February 2 1980 and on 66 shipments

carried by Wallenius Line from July 28 1979 through February 3

1980 Dynamic performed documentation services or advanced ocean

freight charges for the shipper or was extended credit by the carrier or

its agent on the shipper s behalf 7Like documentation services the

extension of credit by a forwarder to a shipper either directly or from

the carrier is specifically included within the range of forwarding

activities set forth at section 51O 2 c of the Commission s

regulations

Ultimately the issue to be determined by the Commission is whether

Dynamic in view of the above described activities possesses the requi

site fitness to be licensed as an independent ocean freight forwarder

We believe it does not

Section 44 b of the Shipping Act 1916 46 U S C 841 b limits the

issuance of a forwarder license to those applicants found by the Com

mission to be fit willing and able properly to carryon the

business of forwarding and to conform to the ptovisions ofthis Act and

the requirements rules and regulations of the Commission issued there

under

In Harry Kaufman Independent Ocean Freight Forwarder 16 FMC

256 271 1973 the Commission enunciated the standard of conduct

required of an applicant seeking a license

It is crucial to his fitness that it appears that the applicant

intends to and will in good faith adhere to such high stand

ard of conduct and that he intends to and will obey the

Commission s rules and policies for the conduct of licensed

freight forwarders Citation omitted

The Commission has emphasized its responsibility in maintaining and

preserving high standards for the licensing of ocean freight forwarders

The profession of ocean freight forwarding is a highly respon

sible one requiring honorable conduct by all its practitioners

W e can make our influence felt only by establishing and

maintaining high quality standards of access to licenses Inde

7

On at least four of the shipments carried by Wallenius Line Dynamic s activities were moreex

tensive As noted above Robert Hunter ashipper from Mission Viejo California furnished four Dy

namic invoices dated September 9 1979 through December 4 1979 which listed charges for inland

transportation estimated ocean freight insurance documentation telexes and mail
546 FEDERAL MARITIME COMMISSION

pendent Ocean Freight Forwarder License Application James J

Boyle 10 F M C 121 127 1966

The existence of past Shipping Act violations by an applicant for 

freight forwarder license is highly pertinent to the issue of whether t

applicant intends to or will obey the U S shipping laws

The Commission in denying a freight forwarder license applicati

in Concordia International Forwarding Corporation Independent Oce

Freight Forwarder Application and Possible Violations of Section 44 Sh

ping Act 1916 21 F MC 587 1978 emphasized that disregard of t

shipping statutes would not be tolerated The Commission said

In determining whether an applicant possesses the requisite

fitness a past violation of the Shipping Act militates against

the issuance of a license 21 F MC at 592

In Concordia the Commission rejected the applicant s excuse for viol

ing section 44b ofthe Shipping Act 1916 i e that it was acting as 

good samaritan by forwarding without a license and found that whe

violations were committed by persons who by their own adm

sions had many years of experience in ocean freight forwarding t

attempt to justify their unlawful activities must be viewed wi

extreme skepticism The appliCant knew or should have known that 

activities werein violation ofthe Shipping Act Id

Likewise Evelyn Siegel has been actively involved in the oce

shipping industry since 1970 during which time she was employed b

three licensed ocean freight forwarders The Commission is justified 

expecting from an individual with her experience in the forwardin

industry knowledge or at the very least awareness of the laws an

regulations governing the business in which she elects to operate

Despite numerous warnings by the Commission to Mrs Siegel 

refrain from unlicensed forwarding activity and despite Mrs Siege

assertion to the Commission that she would cease all future unlicense

ocean freight forwarding there is substantial evidence that Dynam

continued to engage in its unlawful activity s

The integrity ofthe U S shipping laws must be preserved in order 

effectuate their intended purpose and to protect the public interest Th

activities of Dynamic do not constitute the standard of conduct the la

imposes upon those seeking to be licensed as an independent ocea

freight forwarder Section 44 of the Shipping Act requires th

Commission to make qualitative judgments concerning the integri

of the forwarder applicants before issuing a license Concordia supr

at 591 The record fully supports a finding that Dynamic havin

8

The fact that Dynamic did not collect ocean freight compeol8tion payments from ocean carriers 

irrelevant to the issue of whether section 44a of the Act was violated The prohibition against car

ing on the business of forwarding without alicense is absolute and cannot be avoided by not collecti

ocean freight compensation Concordia supra
DYNAMIC INT L FREIGHT FORWARDER LICENSE 547

APPLICATION

Evelyn Siegel as its qualifying officer has failed to meet this burden of

demonstrating the requisite character qualifications and fitness to oper

ate as a freight forwarder and to conform to the provisions of the

Shipping Act Dynamic s application for a license is therefore denied

There is one final matter requiring discussion The Bureau of Investi

gation and Enforcement takes exception to the Administrative Law

Judge s conclusion that a civil penalty against DYlamic of 2 500 is

appropriate in the circumstances of this case and urges a penalty of

10 000 Upon consideration of the record and particularly the evi

dence that Dynamic played a

relatively small forwarding role in the

shipments involved here and received little or no compensation for its

activities the Commission agrees with the ALJ that a civil penalty of

2 500 is appropriate

CONCLUSION

For the foregoing reasons the Commission finds that Dynamic is at

this time unfit to be awarded a freight forwarder license

THEREFORE IT IS ORDERED That the application of Dynamic

International Freight Forwarder Inc for an independent ocean freight

forwarder license is denied and

IT IS FURTHER ORDERED That Dynamic International Freight

Forwarder Inc is hereby assessed a civil penalty of 2 500 and

IT IS FURTHER ORDERED That this proceeding is discontinued

SEPARATE OPINION OF VICE CHAIRMAN LESLIE KANUK

While I

agree with the majority s assessment of the 2 500 civil

penalty I disagree with the conclusion that Dynamic is unfit and its

application for a license should be denied Based on the de minimis

nature of the violations involved Iwould find Dynamic fit and grant

its application

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 5

DYNAMIC INTERNATIONAL FREIGHT FORWARDERS INC

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE

APPLICATION AND POSSIBLE VIOLATION OF SECTION 44

SHIPPING ACT 1916

Applicant found to have engaged in unlicensed forwarding activities However 

respondent appears to have acted in good faith upon the advice of counsel Draco

action of denying the application is not taken Nevertheless the Commission can

countenance flagrant disregard of the statutes it is charged with enforcing A c

penalty of 2 SOO is assessed to the applicant pursuant to section 32 e of 

Shipping Act 1916 Payment by the applicant of the civil penalty is a conditi

precedent to the issuing of the license applied for Failure to meet the condit

precedent the application is denied

Upon payment of the civil penalty imposed upon the applicant and applicant notify

the Secretary of this Commission thereof and filing with the Secretary originals 

copies of all pertinent documents the Secretary is to record Dynamic Internatio

Freight Forwarders Incs application granted

Richard N Sharood of Wilcox Sharood for respondent

Joseph B Slun Deana E Rose and John Robert Ewers Director Bureau of Hear

Counsel for Commission s Bureau of Hearing Counsel

INITIAL DECISIONl OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Partially Adopted January 16 1981

This is a proceeding pursuant to sections 22 32 and 44 46 U S 

821 831 and 841 b of the Shipping Act 1916 and section 510 8 oft

Commission s General Order 4 46 C F R 510 8 instituted to det

mine

1 Whether Dynamic International Freight Forwarders Inc violat

section 44 a Shipping Act 1916 by engaging in unlicensed f

warding activities

2 Whether civil penalties should be assessed against Dynamic Int

national Freight Forwarders Inc pursuant to 46 U S C 831 e 

violations ofthe Shipping Act 1916 and if so the amount of a

such penalty which should be imposed taking into considerat

factors in possible mitigation of such a penalty

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227
DYNAMIC INT L FREIGHT FORWARDER LICENSE 549

APPLICATION

3 Whether in light of the evidence adduced pursuant to the first

issue together with any other evidence adduced Dynamic Interna

tional Freight Forwarders Inc and its corporate officers possess

the requisite fitness within the meaning of section 44 b Shipping

Act 1916 to be licensed as an independent ocean freight forward

er

The Commission s Bureau of Hearing Counsel is a party in this

proceeding by Commission Rule 42 46 C F R 502 42

BACKGROUND

The January 23 1980 Order of Investigation and Hearing assigning

this proceeding for hearing before an Administrative Law Judge of the

Commission s Office of Administrative Law Judges provided inter alia

that the hearing shall include oral testimony and cross examination in

the discretion of the presiding officer only upon a proper showing that

there are genuine issues ofmaterial fact that cannot be resolved on the

basis of sworn statements affidavits depositions or other documents or

that the nature of the matters in issue are such that an oral hearing and

cross examination are necessary for the development of an adequate

record The Presiding Administrative Law Judge under the circum

stances of this proceeding in which the respondent agreed to all find

ings of fact proposed by Hearing Counsel finds and concludes there has

been proper regard to due process of law and in his discretion could

not do other than also to find and conclude that oral testimony and

cross examination was not necessary under the circumstances and did

not have to be included in this proceeding The respondent in its March

20 1980 opening memorandum of law admitted all 15 of Hearing

Counsels proposed findings of fact While the opportunity to cross

examine is regarded as of great importance and may usually be insisted

upon the requirement is not enforced as rigidly in administrative pro

ceedings As has been pointed out with the admission of the facts

herein there is no need for cross examination Further the respondent

was fully advised of all matters to which to respond with ample and

sufficient time to respond thereto Thus this proceeding was conducted

upon memoranda oflaw and affidavit of facts submitted herein

By notice served February 8 1980 the Presiding Administrative Law

Judge had advised the parties of the following schedule to which they

would and did adhere in this proceeding

Thursday February 28 1980 Opening Memorandum of Law Re

quest for Penalty and Affidavits ofFact from Hearing Counsel

Thursday March 20 1980 Opening Memorandum of Law and

Affidavits of Fact from respondent

Thursday April 10 1980 Reply Memorandum of Law and Affida
550 fEDERAL MARITIME COMMISSION

On or before Thursday April 24 1980 which is two weeks follo

ing the Reply Memorandum of Law of Hearing Counsel the part

will submit written statements identifying any unresolved issues of f

and specifying the type of procedure they feel is best suited to reso

them and why

Following the above submissions and his careful reading ofthem 

April 3 1980 the Presiding Administrative Law Judge served 

following Notice ofFurther Proeedural Schedule

Hearing Counsel served and filed an opening memorandum

of law request for penalty and affidavits of fact on February

28 1980 The Respondent Cln March 20 1980 served and filed

an opening memorandUm of law and no affidavits ofits own

The Respondent used the affidavits supplied by Hearing Coun

seland other attachments but noamdavit to present Respond

ent s proposed findings of fact which opens with the state

ment P 3 Since all IS of Hearing Counsels proposed find

ings of fact are admitted subject only to inferences to be

drawn therefrom Respondent will number its proposed find

ings of fact commenc1ngwith number 16 for ease of refer

ence The Respondent then lists proposed findings of fact 16

through 28

Hearing Counsel on April 10 1980 served and filed a

reply

to the Respondent s opening memorandum saying inter alia

that w1 llle the Respondent admits the activities it performed

involved handling the fOl Illalities incident to sh pments the

Respondent denies that it dispatched those ship ents Thus

Hearing Counsel contends that the Respondent failed to estab

lish that the activities admittedly performed constitute only

handling formalities of shilments as opposed to acts which

constitute dispatching

In a statement regarding outstanding factual issues and rec

ommended procedure served and filed April 24 1980 the

Respondent contends the evidence introduced y Hearing

Counsel not only fails to impute any violation of law but

rather affirmatively disproves any violation The Respondent

says There is no factual issue to be resolved by an evidentia

ryhearing That is possible

NeitherHearin Cunsel nor the Respondent has s pplied

any cases or legIslatIve hIstory anentcthe interpretatIon of

section 1 of the Sbipping Act 1916 as to dispatching of

shipments and handling the fOl Illalities incident to such ship

ments

Hearing Counsel in its statement regar cling further procedur

al scheduling served and ftled April 22 1980 stated inter alia

There still remains unresolved the following issues

whether the activities performed by Dynamic International

constitute dispatching and to what extent these activities have

been perfol Illed Hearing Counsel continues In order to
DYNAMIC INT L FREIGHT FORWARDER LICENSE 551

APPLICATION

elicit facts related specifically to these issues we intend to

commence discovery pursuant to Rule 201 46 C F R

502 201 thereafter we request an evidentiary hearing be sched

uled Suffice it to say that the Order of Investigation and

Hearing instituting this proceeding was published in the Feder

al Register Vol 45 No 21 on Wednesday January 30 1980

page 6836 and that under Rule 201 discovery shall be com

menced no later than 30 days after the date of publication in

the Federal Register of the Commission s order instituting the

proceeding Rather than discovery a legal brief by each party

on the issue should be submitted

The Respondent in its April 24 1980 statement regarding

outstanding factual issues contends that Hearing Counsel ac

knowledges that a violation of section 44 a depends upon a

finding that Respondent both dispatched and handled the for

malities incident to each of the shipments identified through

the various affidavits and attachments Respondent says fur

ther that the burden is upon Hearing Counsel to proffer suffi

cient evidence of both acts constituting the offense before

there is any burden upon Respondent to go forward with

evidence to overcomea showing of violation

However it must be faced that the Respondent as an

applicant for an Independent Ocean Freight Forwarder li

cense has the burden ofproof in this proceeding Independent

Ocean Freight Forwarder Application Lesco Packing Co Inc

Docket No 74 31 19 F MC 132 136 1976 To date the

Respondent applicant has not presented any evidence to sup

port that burden The Respondent shall submit in writing as

hereinafter directed its direct case

The Respondent also has ignored the possibility of the as

sessment against it of civil penalties Hearing Counsel has

suggested the imposition against the Respondent of a civil

penalty of 25 000 however asked that all possible factors in

mitigation be considered Again the Respondent has not

touched on this area

Receipt of the materials enumerated in this further proce

dural schedule may obviate need for evidentiary oral hearing

as it is hoped to do

Upon consideration of the above and the record herein it is

ordered that on or before Monday May 12 1980

A the parties shall clearly state in writing severally or

jointly those facts therein upon which they agree

B The parties each shall submit a brief and documents on

the issue as to the interpretation of section 1 of the Shipping

Act 1916 as to dispatching of shipments and handling the

formalities incident to such shipments

C Hearing Counsel is denied the use of discovery under

Rule 201 not having commenced same within time Each
552 FEDERAL MARITIME COMMISSION

party is briefing issue 8 provided in B above Parties are not

precluded from consulting and stipulating where possible

0 The Respondent having the burden of proof in this

proceeding shall submit in writing its direct C8e

E The Respondent shall respond to Hearing Counsels

suggestion 8to civil penalties herein

Counsel for rtlfpondent on May 8 1980 moved for an enlargement o

time to me its brief and other matter requ4ed by the April 30 1980

Notice of Further Procedural Schedule Hearing Counsel on May 9

1980 filed a response to said motion stating that Hearing Counsel ha

no objection and t t grant of motion would provide an opportunit

for counsel to discuss possible stipulations of fact The motion wa

denied by notice served May IS 1980 for re8ons stated therein

Hearing Counsel and respondent filed statements on May 22 1980

required by the April 30 1980 notice Hearing Counsel entitled 

Brief of Hearing Counsel the respondent entitled it Respondent 

Statement Regarding Outstanding Factual Issues and Recommende

Procedure

In the absence of oral testimony and cross examination in this pro

ceeding there is no transcript oftestimony The exhibits together with

all papers and requests med in the proceeding constitute the exclusiv

record for decision Rule 169 46 C F R S02 169

Hearing Counsel proposed IS findings of fact The respondent wrot

March 20 1980 opening memorandum of law p3 and respondent 

May 22 1980 submission p

2 AIl lS of Hearmg Counsel sproposed

fmdings of fact are admitted subject only to inferences to be drawn

therefrom

The addition by the respondent of subject only to inferences to

be drawn therefrom does not alter the agreement with or admis

sion of the proposed findings offact When a pleader intends in good

faith to deny oJily a

part or a qualification of an averment he sha

specify so much of it as is true and material and shall deny only the

remainder When not so denied the averments are admitted The re

spondenthaving admitted Hearing Coun lil s IS proposed fmdings o

fact the IS compared by the undersigned with the record references

are found as facts as hereb1after indicated

Respondent proposed 13 findings of fact in its March 20 1980

Opening Memorandum of Law

Hearing Counsel in its May 22 1980 Brief agreed with most o

Respolldent s 13 numbered 16 through 28 proposedfmdings of fac

Hearing Counsel did not agree with numbers 17 24 and 28 The

Presiding Administrative Law Judge reviewed carefully the disputed

proposed findings offact the exhibits reputed to be in support and the

arguments and has made adjustments accordingly Numbers 17 and 24

were as proposed continued substantially but more in accord with the
DYNAMIC INT L FREIGHT FORWARDER LICENSE 553

APPLICATION

language of the reference Number 28 was denied as it was drafted as a

conclusion which conclusion is the province of the Presiding Adminis

trative Law Judge and upon which he must rule relative to respond

ent s and Hearing Counsels positions as to definitions of terms of ocean

freight forwarders found in section 1 of the Shipping Act 1916 and

supports proffered

FACTS

Upon the consideration of the record herein and the above the

Presiding Administrative Law Judge finds these facts herein

The following facts proposed by Hearing Counsel and agreed to by

the parties are found

1 Dynamic International applicant for a freight forwarder license is

a Michigan corporation with its place of business at 19400 West Ten

Mile Road Suite 103 Southfield Michigan 48075 Evelyn Siegel Dy

namic International President is the qualifying officer ofthe applicant

Klapouchy Affidavit Para 4

2 By letter of August 31 1978 Evelyn Siegel received a warning

not to engage in the business of forwarding without a license and of

possible penalties and prejudice to the issuance of a license as a result of

unlicensed forwarding This warning accompanied the license applica

tion form which Mrs Siegel had requested from the Office of Freight

Forwarders Klapouchy Affidavit Para 3

3 Mrs Siegel has worked in the field of ocean freight forwarding

since 1970 during which time she developed extensive experience while

in the employment of three licensed ocean freight forwarders Kla

pouchy Affidavit Para 5

4 On January 25 1979 following the Office of Freight Forwarder s

January 18 1979 receipt ofDynamic International s application Robert

James Klapouchy of the Commission s Office of Freight Forwarders

discussed the application with Mrs Siegel Mrs Siegel advised Mr

Klapouchy that Dynamic International engaged in ocean freight for

warding and believed that such unlicensed activity was permissible

because she did not collect compensation from the ocean carrier Mr

Klapouchy told her that Dynamic International may not perform ocean

freight forwarding prior to receiving a license Klapouchy Affidavit

Para 6

5 On January 30 1979 the Office of Freight Forwarders sent two

letters to Mrs Siegel the first letter a follow up to Mr Klapouchy s

conversation with Mrs Siegel described in PFF 4 above requested

detailed description of Dynamic Internationals

forwarding activities

and the second letter acknowledged receipt ofDynamic Internationals

application again reiterating the statutory requirement of a license and

the possibility ofpenalties and prejudice to the issuance of a license as a

result of unlicensed forwarding Klapouchy Affidavit Para 7
554 FEDERAL MARITIME COMMISSION

6 By letter of March 7 1979 to the Office of Freight Forwarders

Evelyn Siegel advised that Dynamic International had performed for

warding services with respect to four shipments receiving a total o

120 00 in documentation fee s and that as a result ofthe telephone

conversation with Mr Klapouchy discussed in PFF 4 above Mrs

Siegel said that Dynamic International ceased performing any forward

ing work Subsequently the Office of Freight Forwarders received

documentation supplied by Evelyn Siegel covering Dynamic Interna

tional forwarding activities Klapouchy Affidavit Paras 8 and 9 and

Attachments E l

through E 4

7 On October 16 1979 Alfred J Stretz President of Autoliners

Inc Agents for Hoegh Ugland Auto Liners HUAL advised Inves

tigator Christopher M Kane of the Commission s Atlantic Distric

Office that Dynamic International s name was appearing in the space o

box which calls for the name of the freight forwarder on certain

HUAL bills of lading but that Autoliners neither paid Dynamic Inter

national ocean compensation nor was Autoliners invoiced by Dynamic

for compensation Kane Affidavit Paras 3 and 4

8 On October 17 1979 Kenneth J Campbell Outward Traffic

Manager ofMotorships Inc Agents for Wallenius Line Wallenius

provided Christopher Kane with data freight receipts covering two

separate vehicle movements to Europe under data freight receipt Nos

W80005 and W80006 both dated October 13 1979 On these docu

ments the name Dynamic International was written in the space or box

which calls for the name of the freight forwarder Kane Affidavi

Para 6 Ex A l and A 2

9 Motorships Inc and Autoliners Inc SUbsequently provided 

combined total of thirty bills of lading or data freight receipts twenty

four Wallenius plus six HUAL covering shipments during the perio

July 28 1979 through October 13 1979 in which the Dynamic Interna

tional name appeared in the freight forwarder box Kane Affidavi

Paras 9 and 10 Ex B 1 through B 31

10 Evelyn Siegel maintained frequent contact with Motorships Inc

continuing into February 1980 and the name Dynamic Internationa

continued to appear in the freight forwarder box on bills of ladin

dated after October 13 1979 and Motorships Inc was extendin

ocean freight credit to Dynamic International on prepaid shipment

where Dynamic International s name appeared as forwarder and Auto

International an exporter of automobiles appeared as the shippe

Kane Affidavit Para 12

11 Motorships Inc supplied 42 additional Wallenius bills of ladin

or data freight receipts covering shipments dated November 1 197

through February 3 1980 on which the Dynamic International nam

appeared in the freight forwarding box and Autos International ap
DYNAMIC INT L FREIGHT FORWARDER LICENSE 555

APPLICATION

peared as the shipper Kane Affidavit Paras 12 and 13 Ex D l

through D 43

12 Autoliners Inc supplied nine additional HUAL bills of lading

dated January 23 1979 through February 2 1980 on which the Dy

namic International name appeared as the forwarder Included in this

group ofnine bills of lading were two previously furnished thus result

ing in a total of thirteen HUAL bills of lading on which Dynamic

International appeared as forwarder covering the period January 23

1979 through February 2 1980 On six of these thirteen HUAL bills of

lading Autos International was shown as the shipper Kane Affidavit

Para 14 Ex E l

through E 8

13 Dynamic International s name began appearing as freight for

warder on bills of lading for Autos International shipments about the

end of September 1979 and continued to appear until the beginning of

February 1980 Dynamic International did not prepare the bills of

lading and export declarations for Autos International shipments to

Europe even though Dynamic International appeared in the freight

forwarding box on the bills of lading covering these European ship

ments However payment of the ocean freight on all Autos Internation

al prepaid shipments including European was made by Dynamic Inter

national With respect to Autos International shipments to the Middle

East Dynamic International prepared the documentation including the

ocean bills of lading and export declarations Kane Affidavit Paras 15

16 and 17

14 Dynamic International advanced ocean freight charges on behalf

of Autos International on shipments covered by 42 Wallenius bills of

lading or data freight receipts On five Autos International Middle

Eastern shipments via HUAL Dynamic International prepared export

documentation including bills ofladings and export declarations Kane

Affidavit Para 18

15 On February 20 1980 Commission Investigator Michael A

Murphy obtained from Robert Hunter Mission Viejo California four

invoice statements by Dynamic International Freight Forwarders to

Robert Hunter dated September 9 1979 through December 4 1979

which list charges for inland transportation estimated ocean freight

insurance documentation telexes and express mail Murphy Affidavit

Para 2

The following facts proposed by respondent and agreed to by the

parties are found

16 The Commission received Dynamic s application on January 18

1979 and received a response to its inquiries regarding forwarding

activity by letter dated March 7 1979 Klapouchy Affidavit Paras 4

and 8

17 Following receipt of the March 7 1979 letter from Dynamic

there was no communication from the Commission staff in Washington

l FM r
556 FEDERAL MARITIME COMMISSION

D C until Christopher M Kane a Commission investigator during

the course of an unrelated investigation on October 16 1979 deter

mined that Dynamic was appearing as forwarder on bills of lading of

Autos International Inc Kane Affidavit Paras 2 3 and 7 Adjust

ment made as indicated above

18 By letter dated October 17 1979 the Commission was advised

that Dynamic had retained legal counsel in the matter of its pending

application Attachment 2

19 By letter dated November IS 1979 counsel to Dynamic submit

ted to the Managing Director of the Commission samples of Wallenius

Line bills of lading and explained the basis for Dynamic s name appear

ing as forwarder Attachment 3

20 Notice of intent to deny the Dynamic application was given by

the Commission Secretary by letter dated December 10 1979 and the

Commission acted on the matter January 17 1980 one year after the

application wasfiled Attachments 4 5 and 6

21 After its letters of January 30 1979 acknowledging receipt of an

application and requesting information regarding forwarding activity

the Commission staff in Washington D C did not communicate fur

ther with Dynamic regarding its application until advised that counse

had been retained and then communicated with counsel beginning on

October 24 1979 Klapouchy Affidavit and Attachment 7

22 Autoliners Inc agents for HAUL sic HUAL Hoegh Ugland

Auto Liners did not pay compensation to Dynamic nor did Dynamic

seek compensation Kane Affidavit Para 4

23 It is not alleged that Motorships Inc agents for Wallenius Lines

paid compensation to Dynamic nor that Dynamic sought compensation

a d Motorships Inc knew Dynamic was npt licensed Kane Affidavit

Para 13

24 Motorships Inc 2

requested Dynamic to appear so that Motor

ships would be able to know who the forwarder was and who could be

billed for ocean freight No credit was extended to Autos International

but Motorships extellded credit to Dynamic on prepaid shipments

where Dynamic appeared as the forwarder and Autos Internationa

Counsel for respondent in aletter dated lune 5 1980 requested the following affidavit to be en

tered as a late tiled e hlbit Affidavit is signed by Kenneth 1 Campbell Outward Traffic Manage

Motorships Inc Sworn to by Notary Msy 13 1980

February 5 1980

Towhom itmay concem

Re Dynamic International

PI be advised that Dynamic International placed thdr name on the bill of lading in the

space reserved forfreisht forwarders at the request of our office This was requested in order

to use identification for our accounting purposes

The ocean freight statement prepared by our offiCe always indicated NO Forwarder and

brokerage was not billed to us by Dynamic International nor was it everpaid out toDynam

ic International

111 i Vr
DYNAMIC INT L FREIGHT FORWARDER LICENSE 557

APPLICAnON

appeared as the shipper Kane Affidavit Para 12 Adjustment made

as indicated above

25 Autos International Inc was not charged by Dynamic for for

warding services but handled payment of freight on prepaid shipments

On certain shipments documentation was prepared by Dynamic on

behalf of Autos International Kane Affidavit Paras 15 16 and 17

26 Based upon affidavit of Investigator Kane and supporting exhib

its Dynamic either advanced freight money and or provided certain

documentation services to shippers at no charge to either shipper or

carrier These shipments involve 55 Wallenius and five HAUL sic

HUAL shipments Kane Affidavit Paras 15 and 18

27 Based upon Investigator Murphy s affidavit Dynamic advanced

freight and insurance money and provided documentation services on

four shipments for Mr Robert Hunter at a charge of 60 00 per ship

ment for documentation There is no evidence offered that Dynamic

sought forwarder compensation from any carrier with respect to these

shipments Murphy Affidavit and Attachments

Additional facts found are

A Dynamic International Freight Forwarders Inc was established

November 28 1978 It s application for a license as an independent

ocean freight forwarder dated January 5 1979 was received in the

Commission January 18 1979

B The stock in Dynamic International is held 33 by Evelyn

Siegel who is its President Treasurer 33 by Kenneth Peter who is

its Financial Vice President and 33 by Walter Baker who is its

Vice president Secretary Evelyn Siegel is the proposed qualifying offi

cerofthe applicant

C Evelyn Siegel after forming Dynamic International continued to

work with shippers of automobiles by preparing documentation and in

some instances enabling them to secure credit through her credit stand

ing with the carriers respondent s Exhibit No I page I attached to its

May 22 1980 submission The documentation work she performed

was for a very nominal charge or at no charge She did this work to

maintain a relationship with people she hoped to serve if licensed

Ibid p 2

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

Hearing Counsel in presenting this proceeding served on February

28 1980 the affidavits ofRobert James Klapouchy who is employed in

the Office of Freight Forwarders of this Commission as a Transporta

tion Industry Analyst Christopher M Kane who is employed as a

District Investigator in the Commission s Atlantic District Office in

New York City and of Michael A Murphy who is employed as the

Supervisory Investigator in the Pacific District Los Angeles Office of

the Commission Evelyn Siegel President Treasurer of the applicant

1 Ji fr
558 FEDERAL MARITIME COMMISSION

corporation has examined the affidavits of Mr Kane and Mr Murp

and the exhibits submitted by Hearing Counsel Siegel affidavit of M

21 1980 attached as Exhibit 2 to respondent s May 22 1980 subm

sion

It is the position of Hearing Counsel that Dynamic Internation

performed unlicensed forwarding activities on at least 79 instances 

violation of section 44 of the Act and absent mitigating factors D

namic International should be found unfit to be licensed as an indepen

ent ocean freight forwarder pursuant to section 44 Shipping Act 19

Hearing Counsel s February 28 1980 Opening Memorandum of La

pp 2 and 3

Hearing Counsel says Mrs Siegel acknowledged that Dynamic Int

national conducted unlicensed forwarding evidenced by her letter 

March 7 1979 to the Office of Freight Forwarders and by her sub

quent submission of documentation covering 4 shipments she advis

werethe ones forwarded by Dynamic International Ibid p

8

Hearing Counsel also says while the appearance of the Dynam

International name on the bill oflading freight forwarder box does 

conclusively establish Dynamic International as performillg the freig

forwarding function incident to each of these 79 shipments it raise

strong presumption of unlicensed forwarding This box is intended 

the insertion of the name of the person performing as freight forwar

on each shipment ie dispatching the shipment and handling the f

malities incident thereto Ibid p

11

The fact that Dynamic International did not collect ocean frei

compensation payments from ocean carriers according to Hear

Counsel is irrelevant to the issue of whether section 44 a of the A

was violated The prohibition against carrying on the business of f

warding without a license is absolute and cannot be avoided by 

collecting ocean freight compensation Ibid p

12

Hearing Counsel points to section 510 2 of the Commission s Gene

Order 4 46 C F R 510 2 for definition ofthe term freight forward

service or dispatching of shipments as a service rendered by 

independent ocean freight forwarder on behalf of other persons in 

process of dispatching or facilitating an export shipment as authoriz

by such persons Hearing Counsel argues that Mrs Siegel ackno

edged that Dynamic International conducted unlicensed forwardi

evidenced by her letter of March 7 1979 to the Office of Fre

Forwarders and by her subsequent submission of documentation cov

ing four shipments she advised were the ones forwarded by Dynam

International Ibid p

8 Also Hearing Counsel comparing this sit

tion to that in the case of Concordia International Corp Independ

Ocean Freight Forwarder Application and Possible Violations ofSection 

Shipping Act 1916 21 F MC 587 1978 argues that Evelyn Siegel 

been actively involved in the ocean shipping industry since 1

l1 1O lfr
DYNAMIC INT L FREIGHT FORWARDER LICENSE 559

APPLICATION

during which time she was employed by three licensed ocean freight

forwarders that the Commission is justified in expecting from an indi

vidual with her experience in the forwarding industry knowledge or at

the very least awareness of the laws and regulations governing the

business in which she elects to operate

The respondent in its March 20 1980 opening memorandum oflaw

p 6 contends that the undisputed facts established by the Commis

sion s investigation ofDynamic s alleged unlicensed forwarding activity

reveals that Dynamic either acted as a credit source on prepaid ship

ments prepared various shipping documents or both According to the

respondent the admitted activities of Dynamic involve handling the

formalities incident to shipments and not the dispatching thereof It is

urged by the respondent that the Commission s rules and regulations

governing the licensing and activities of independent ocean freight

forwarders General Order 4 46 C F R Part 510 creates a new term

not found in the Shipping Act 1916 freight forwarding service or

dispatching of shipments 46 CF R 51O 2 c Ibid p 7

46 C F R 51O 2 c according to the respondent is arbitrary capri

cious an abuse ofdiscretion and otherwise not in accordance with law

and in excess of statutory authority all within the meaning of 5 D S C

705 Ibid p8

Hearing Counsel in its April 10 1980 reply memorandum of law

contends that the respondent failed to establish that the activities which

it admittedly performed constitute only handling formalities of ship

ments as opposed to acts which constitute dispatching

The respondent in its May 22 1980 submission says its position is

simply that the definition of carrying on the business of forwarding

within the meaning of the Shipping Act 1916 consists of two acts By

mathematical analogy the definition may be stated as one plus one

equals two not one or one equals one The respondent continues that

While this is essentially an exercise in English grammar the statute

does support this interpretation p 4

The respondent s counsel in his November 15 1979 letter Attach

ment 3 to respondent s March 20 1980 opening memorandum of law

to the Managing Director of this Commission had advanced that Car

rying on the business offorwarding by statute means the dispatching

of shipments and handling the formalities incident to such ship

ments

Respondent in its May 22 1980 submission argues that the Commis

sion s General Order 4 46 C F R 51O 2 c merges the terms dispatch

ing and handling the formalities incident to such shipments into a

single agency created open ended term freight forwarding service or

dispatching of shipments coupled with a list of activities which is

broad in the extreme but not inclusive The respondent then gives

FM r
560 FEDBRAL MARITIMB COMMISSION

dictionary definitions of and as well as or and discusses use of t

semicolon

Purporting to delve into the legislative history of the freight forwar

er licensing question Ibid p

6 the respondent asserts that H R 83

85th Cong 1st Session introduced by Mr Boykin a Member 

Congress from the State of Alabama defined independent forei

freight forwarders and attached as respondent s Exhibit No 2 the t

of the bill

Hearing Counsel in its May 22 1980 brief p 2 contends the te

dispatching of shipments and handling the formalities incident to su

shipments originated in the Commission s decision in Docket No 62

Port of New York Freight Forwarder Investigation 3 U S M C 157 1

1949 wherein the Commission stated

We are of the opinion that any person carrying on the

business of dispatching shipments by ocean going vessels in

foreign commerce and domestic commerce with or between

our territories and possessions and of handlingthe formalities

incident thereto is a forwarder within the provisions of the

Shipping Act 1916

Hearing Counsel aSSerts Ibid p

4 that ill the same decision 

Commission also established that a freight forwarder engages in a w

range of activities any of which constitutes freight forwarding a

none of which are as respondent c1a s assignable into distinct categ

ries of dispatching shipments or handling formalities incident to su

shipments

The Presiding Administrative Law Judae has considered the abo

positions and arguments oethe parties Hew noticed that the respo

ent in its exercise in English grammar did not define dispatching a

handling Little wonder that Hearing Counsel in its April 10 19

Reply Memorandum of Law qys that while Dynamic Internatio

admits that the activities it performedinvo1ve d handling the formalit

incident to shipments it denies that if dispatched those shipme

Resp Op Mem at 7 We contend that Dynamic International fai

to establish that the activities which it admittedly performed constit

only handling formalities of shipments as opposed to acts which con

tute dispatching

Perhaps respondent s exercise in English grammar should have c

sidered also Bastard enumeration and otiosity The Presiding Admin

trative Law Judge is not persuaded by the respondent s exercise 

English grammar The respondent s

legislative history stops with 19

The respondent did not tie bill H R 8382 with bills H R 2488 or 

1368 S 1368 to Amend Shipping Act 1916 to provide for licens

independent freight forwarders and for other purposes was passed 

the House in lieu of H R 2488 Approved Public Law 87 254 sig

by President September 18 1961

11 r
DYNAMIC INT L FREIGHT FORWARDER LICENSE 561

APPLICATION

The respondent does not explain whether what it did was dispatching

or handling

It is deemed by the Presiding Administrative Law Judge that the

respondent engaged in unlicensed forwarding activities in violation of

section 44 a Shipping Act 1916

Counsel for respondent advised Mrs Siegel that in my opinion

she has done nothing illegal in attempting to perform minor services for

shippers to maintain contact with them while her application is being

processed Attachment 3 to respondent s March 20 1980 Open

ing Memorandum of Law Under agreed Fact 4 above Mrs Siegel

advised that Dynamic International engaged in ocean freight forward

ing and believed that such unlicensed activity was permissible because

she did not collect compensation from the ocean carrier Under Fact 6

above Mrs Siegel advised that Dynamic International had performed

forwarding services with respect to four shipments receiving a total of

120 00 in documentation fee s Under Fact 27 above Dynamic Inter

national advanced freight and insurance money and provided documen

tation services on four shipments for Mr Robert Hunter at a

charge of

60 00 per shipment for documentation Under Fact 13 above with

respect to Autos International shipments to the Middle East Dynamic

International prepared the documentation including the ocean bills of

lading and export declarations

Under most circumstances willful violations of law of the nature set

forth above would be sufficient standing alone to deny respondent s

application for a forwarder license However the record establishes the

respondent appears to have acted in good faith upon the advice of

counsel While the activities of respondent are violations of section

44 a Shipping Act 1916 nevertheless the Presiding Administrative

Law Judge is disinclined at this point to deny respondent a license

when respondent appears to have acted in good faith upon the advice

of counsel See Bo ton Mitchel Inc lndependent Ocean Freight For

warder License No 516 Docket No 70 9 15 F MC 248 255 1972

It seems clear that respondent admits it was performing such services

with consideration for future of the Dynamic International corporation

Section 44 of the Shipping Act requires the Commission to make

qualitative judgments concerning the business expertise and integrity of

forwarding applicants before issuing a license The Commission cannot

countenance a flagrant disregard of the statutes it is charged with

enforcing The functions performed herein are looked upon as an at

tempt to evade regulation See Concordia case cited above An attempt

to evade regulation under different circumstances than here is a signif

icant act of unfitness Because as already stated the respondent ap

peared to have acted in good faith upon the advice of counsel such

draconic action is not applied
562 FEDERAL MARITIME COMMISSION

There must be however resort to imposition upon the applican

Dynamic International a civil penalty under section 32 ofthe Shipping

Act 1916 Hearing Counsel in its February 20 1980 Opening Memo

randum of Law p

15 urges that the Presiding Administrative Law

Judge find that Dynamic International has carried on the business o

forwarding without a license on at least 79 shipments Hearing Counse

recommends a penalty in the amount of 25 000 be assessed Dynami

International based upon the flagrancy of its unlawful activities an

that Dynamic International having Evelyn Siegel as its President an

qualifying officer be found unfit for licensing and its application for a

independent ocean freight forwarder license be denied In its May 22

1980 brief p 6 Hearing Counsel revised the statement by adding i

the absence of mitigating factors that a penalty of 25 000 00 be as

sessed the respondent be found unfit for licensing and the applicatio

be denied

Respondent in its May 22 1980 submission asserts that Hearin

Counsels suggested penalty assessment is clearly extreme in light of th

evidence in this proceeding that ifrespondent is found to have violate

section 44 of the Shipping Act 1916 a nominal penalty is the most tha

the circumstances might justify

Mrs Siegel in her affidavit sworn to May 21 1980 and attached a

Exhibit No 1 to respondent s May 22 1980 submission states 13 p 

of Exh No 1 Ihave no means of paying a fine if the Commissio

rules that Ihave violated the law Ihave been precluded from earnin

a living as an independent ocean freight forwarder and have consume

my resources awaiting the opportunity to engage in compensato

work a Mrs Siegel appears to forget that this appiication is for 

license for Dynamic International a corporation and that she own

only 33Va of the corporation stock that two others also hold 33

each ofthe stock

Great consideration already has been shown for the applicant havin

acted upon the advice of counsel Counsel for applicant also com

plained of amount of time between the receipt ofthe application by th

Commission on January 18 1919 and urged the time interval as 

mitigating factor It is not a mitigating factor under the circumstance

ofthis case

The imposition of a nominal civil penalty under the circumstance

herein is another great consideration given to the applicant Therefor

the payment of the civil penalty by the applicant should be made 

condition precedent to the granting of the application Failure of th

a The inatantapplication dated January S 1979 and aiSned by Mrs Siesel sives her employme

from 1976 with A F Burstrom Son Inc from 1976 77 with S H Moultor Co and fro

1977 to present with Air Sea Palt Co Ev01yn Siesel will be leavins this company to devote her f

time toworking for the applicant should this license be granted
DYNAMIC INT L FREIGHT FORWARDER LICENSE 563

APPLICAnON

applicant to pay the civil penalty as a condition precedent is denial of

the application

The Presiding Administrative Law Judge finds and concludes that

civil penalties should be assessed against Dynamic International pursu

ant to section 32 a of the Shipping Act 1916 and that payment ofthe

civil penalty is a condition precedent to issuing the license The unpaid

civil penalty causes the violations for which impsed not yet expunged

and those violations preclude finding applicant to have requisite fitness

within the meaning of section 44 b of the Act The amount of such

civil penalty under the circumstances shall not be 25 000 as proposed

by Hearing Counsel but a nominal penalty the payment of which by

applicant is a condition precedent4 to issuance of license applied for

since the applicant does not now qualify for a license That nominal

penalty the Presiding Administrative Law Judge determines shall be

2 500 00 Dynamic International Freight Forwarders Inc therefore is

assessed a civil penalty for violations of section 44 a of the Shipping

Act 1916 by engaging in unlicensed forwarding activities and payment

of the civil penalty of 2 500 is a condition precedent to granting a

license herein

Upon consideration ofall the aforesaid the Presiding Administrative

Law Judge finds and concludes in addition to the findings and conclu

sions hereinbefore stated

I Dynamic International Freight Forwarders Inc violated section

44 a Shipping Act 1916 by engaging in unlicensed forwarding activi

ties

2 Civil penalties in the amount of 2 500 should be assessed against

Dynamic International pursuant to section 31 e of the Shipping Act

1916 and that payment of the civil penalty of 2 500 shall be and is a

condition precedent to the issuance of a license herein

3 Upon payment of the civil penalty of 2 500 and notice thereof

given to the Secretary ofthis Commission with original or copies of all

documents involved Dynamic International Freight Forwarders Inc

should then be found to possess the requisite fitness within the meaning

of section 44b Shipping Act 1916 to be licensed as an independent

ocean freight forwarder and the Secretary shall note in the record the

application is granted and shall issue same

Wherefore it is ordered subject to review by the Commission as

provided in the Commission s Rules of Practice and Procedure that

4

Perhaps the procedure should be as the Commission did in Docket No 66 17 Independent Ocean

Freight Forwarder License Application No 552 Reskel Saleh Doing Businss as Eastern Forwarding Serv

ice 10 F M C 281 288 1967 Deny the application postpone the effective date of the denial to

enable the applicant to comply wlth conditions in which event the denial order would not be entered

In the above the decision was made February 14 1967 and denial of application was postponed

until August I 1967

It is the view of the Presiding Administrative Law Judge that either procedure is acceptable
S64 FEDERAL MARITIME COMMISSION

A Dynamic International Freight Forwarders Inc applicant re

spondent herein is found to have violated section 44 a Shipping Ac

1916 by engaging in unlicensed forwarding activities

B Civil penalties in the amount of 2 500 be and hereby are assesse

against Dyna111ic International Freight Forwarders Inc pursuant t

section 31 e ofthe Shipping Act 1916 and that payment of said civ

penalty of 2 500 be and hereby is a condition precedent to the issuanc

of a license herein

C Upon compliance with the said condition precedent to issuanc

of a license herein by the applicant the applicant shall give notic

thereof jlnd copies of all pertinent documents to the Secretary of th

Commission Dynamic International Freight Forwarders then sha

having met the condition precedent be found to possess the requisit

fitness within the meaning of section 44b Shipping Act 1916 to b

licensed as an independent ocean freight forwarder The Secretary o

the Commission shall note in the records that the application is grante

and shall issue the license to applicant

D Failure ofcompliance by applicant as set out above the license 

denied

S WILlIAM BEASLEY HARRIS

Administrative Law Judge

Washington D C

June 16 1980

I

i

C IIl
FEDERAL MARITIME COMMISSION

DOCKET NO 80 31

BILLIE lONE CRTALIC VIRGO INTERNATIONAL

CORPORATION AND MERCURY INTERNATIONAL

CORPORATION POSSIBLE VIOLATIONS OF SECTION 44 A

BILLIE lONE CRTALIC INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE APPLICATION

REPORT AND ORDER

January 19 1981

The Commission initiated this proceeding by Order of Investigation

and Hearing on January 17 1980 to determine

1 Whether Respondents Billie lone Crtalic Virgo International Cor

poration and Mercury International Corporation engaged in unli

censed freight forwarding in violation of section 44 a of the Ship

ping Act 1916 and 46 C F R 51O 3 a 2 and if so whether civil

penalties should be imposed and

2 Whether Billie lone Crtalic should be licensed as an independent

ocean freight forwarder

The proceeding was assigned to Administrative Law Judge William

Beasley Harris for hearing Prior to the submission of opening memo

randa Billie lone Crtalic withdrew her application for a freight for

warder s license and together with Virgo entered into a stipulation of

facts with the Commission s Bureau of Investigation and Enforcement

BIE which was submitted together with a proposed settlement

agreement to the Presiding Officer Under the terms of this agreement

Virgo would pay 1 900 and Billie lone Crtalic 2 500 in full compro

mise of the claims against them

On September 24 1980 the Presiding Officer issued an Initial Deci

sion in which he declined to approve the proposed settlement and

suggested that any additional settlement proposal meet certain stated

concerns and assess penalties equally against Crtalic and Virgo Re

spondents filed Exceptions to the Initial Decision and BIE filed a

reply

POSITIONS OF THE PARTIES

Respondents and BIE argue that their negotiated settlement should

have been accepted and approved by the Presiding Officer They con

tend that based upon the circumstances ofthis proceeding the amounts

agreed upon serve aregulatory purpose The parties advise that they

1 nr t
566 FEDERAL MARITIME COMMISSION

considered a variety of factors in arriving at the settlement amounts

including 1 the number of alleged violations 2 the percentage o

violations committed after receipt of a written warning 75 3 th

termination of activities after a second oral warning 4 the coopera

tion of Respondents in disclosing information and also entering int

settlement negotiations 5 the withdrawal of Crtalic sfreight forward

er s application and 6 the nature ofCrtalic s conduct 1

Based upon these considerations BIB initially determined that th

proper settlement amount against both Respondents should be 15 00

Crtalic agreed to pay 2 500 ofthis amount even though her percen

age ofshipments might have warranted a lesser amount 27 out of 30

The remaining 12 500 was deemed to be Virgo s obligation Howeve

because Virgo I has only 1 901 in assets 2 received only 1 516 ne

profit and 3 is presently inactive BIB doubted its ability to pa

more than 1 900 and therefore accepted that amount as appropriate 

DISCUSSION

Pursuant to the Commission s rules proposed settlements of civ

penalties must be submitted to the presiding officer for approval an

are therefore subject to disapproval at his discretion 46 C F R 505 

However it is also important to recognize that negotiated settlemen

are encouraged by the Commission as an expeditious and equitab

means of resolving proceedings before it See Consolidated Internation

Corporation v Concordia Line 18 F MC 180 183 1975

The Commission has been mindful of these sometimes conflictin

principles in its assessment of the instant appeal It has thorough

reviewed the proposed stipulation of facts arid settlement agreemen

along with the briefs of the parties Although a settlement totallin

15 000 against both Respondentswould generally be apPropriate in 

case such as this because ofthe special fmancial circumstances presen

ed the Commission concludes that thesettletnent amounts recommen

ed by BIB are not unreasonable and therefore approves this settl

ment

I Bocause Virgo waa alegitimate corporation thepartiea agreed that the responsibility for forwa

ing activilies after its incorporation should faU upon Virgo alone Mercury International CQrporati

was never Cormany incorporated The shipments forwarded under that name have therefore been 

tributed to Ma Crtalic

a

Respondents also argue that the PrCliding Officer erred in finding them in violation of the Sh

ping Act and Oeneral Order 4 and in piercing Virgo s

corporate veil BIB responds by stating t

such arguments are without merit at this stage of the proceedina Theae issues are indeed witho

merit The Preaiding Officer did not make nndings that Respondents violated the Shipping Act 

rejection of the proposed selllement waabaaed upon the stipulation of facts aubmilted by the partiea 

no settlement were aubaequently approved Reopondents would have their opportunity for a hearing 

contest the al1csed violations Nor has the Presidin Officet Itpierced the corporate veiltl by concl

ing that Virgo and Ms Crtalic should be d equal penalti Ifanything he has simply arrived 

this conclusion without clearly articulating his reasons therefor
FORWARDER LICENSE APPLICATION

THEREFORE IT IS ORDERED That the settlement agreement

jointly proposed by Respondents and the Bureau of Investigation and

Enforcement is hereby approved and

IT IS FURTHER ORDERED That Respondents comply with the

terms of said agreement within 30 days of the date of this Order at

which time this proceeding will be dismissed

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 31

BILLIE lONE CRTALlC VIRGO INTERNATIONAL

CORPORATION AND MERCURY INTERNATIONAL

CORPORATION POSSIBLE VIOLATIONS OF SECTION 44 A

BILLIE IONE CRTALlC INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE APPLICATION

Proposed settlement of civilpenalties notapproved

Respondents Crtalic and Virgo assessed civil penalties pursuant to section 32 e of 

Shipping Act 1916 which are to be against each equally

Charles C Hunter Joseph B Slunt Janet G Speck and Paul J Koller Acti

Director of the Bureau of Hearing Counsel for Commission s Bureau of Hearing Cou

sel

Carlos Rodriguez for Respondents

INITIALDECISIONl OFWILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Finalized January 19 1981

This is a proceeding instituted May 21 1980 pursuant to sections 2

32 and 44 46 U S C 821 831 and 841 b of the Shipping Act 191

and action 510 8 of the Commission s General Order 4 46 C F 

510 8 to determine

1 Whether Billie lone Crtalic and or Virgo International Corpor

tion and or Mercury International Corporation violated sectio

44a of the Shipping Act 1916 and section 510 3 of the Comm

sion s General Order 4 by engaging in unlicensed forwardin

activities

2 Whether civil penalties should be assessed against Billie lone Crt

lie and orVirgo International Corporation and or Mercury Inte

national Corporation pursuant to section 32 and Part 505 3 of th

Commission s

regulations 46 C F R 505 3 for violations of th

Shipping Act 1916 and section 510 3 ofthe Commission s Gener

Order 4 and if so the amount of any such penalty which shou

be imposed taking into consideration factors in possible mitigatio

of such a penalty and

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

Commission Rule 227 Rules of Practice and Procedure 46 CF R 502 227
BILLIE lONE CRTALIC POSSIBLE VIOLATIONS FREIGHT 569

FORWARDER LICENSE APPLICATION

3 Whether in light of the evidence adduced pursuant to the forego

ing issues together with any other evidence adduced Billie lone

Crtalic possesses the requisite fitness within the meaning of section

44 b Shipping Act 1916 and section 510 5 of the Commission s

General Order 4 to be licensed as an independent ocean freight

forwarder

Under date of July 14 1980 Billie lone Crtalic through her counsel

withdrew her application for a license as an independent ocean freight

forwarder July 24 1980 Prehearing Conference TR 3 That action

eliminates from the proceeding the issue of possession by her of the

requisite fitness within the meaning of section 44b Shipping Act

1916 and section 510 5 of the Commission s General Order 4 to be

licensed as an independent ocean freight forwarder TR 4

The parties herein entered into the following stipulation

STIPULATION

Pursuant to Rule 162 ofthe Commission s Rules of Practice

and Procedure 46 C F R 502 162 Respondents and Hearing

Counsel the only parties to this proceeding hereby file this

joint stipulation

1 Billie lone Crtalic had been employed by Darwin Liao d

b a Pegasus International Corporation Pegasus holder of

Independent Ocean Freight Forwarder License No 1500 as

office manager for Pegasus for approximately five and one half

years Ms Crtalic left Pegasus in late July 1978

2 Thereafter Ms Crtalic established another office

3 Respondents forwarded more than 300 ocean freight ship

ments without benefit of an independent ocean freight for

warder license during the period July 1978 through July

1979 In forwarding these shipments Respondents utilized

Pegasus name and FMC license number

4 During the period July 1978 through September 1978

Ms Crtalic conducted activity under the name of Mercury

International Corporation Mercury In September 1978 it

was discovered that she could not incorporate as Mercury

because that name had been registered with the California

State Department of Corporations by another firm Ms Crta

lie during this period forwarded twenty seven ocean freight

shipments Ms Crtalic owned 50 of the stock in Virgo and

served as its President and Chairman of the Board On July

24 1979 she resigned as President and Chairman ofthe Board

and transferred her holdings in the corporation

5 Although respondents received freight forwarding fees

from their shipper principals they did not receive a share of

the compensation paid by ocean going common carriers

6 On April 19 1979 the Commission s Office of Freight

Forwarders received an application for an Independent Ocean
570 FEDERAL MARITIME COMMISSION

Freight Forwarder License from Ms Crtalic The application

wasdated March 26 1979

7 By letter dated April 19 1979 and signed by Charles L

Clow Chief Office of Freight Forwarders the Commission s

Office of Freight Forwarders acknowledged receipt of Ms

Crtalic s application This letter contained the following lan

guage

Your attention is specifically directed to Section 44 Ship

ping Act 1916 which prohibits any person from engaging

In carrying on the bUliness offorwarding unless such person

holds a license issued by the Federal Maritime Commission

to engage in such business Carrying on of forwarding is

defmed under Section 510 2 of the enclosed General Order 4

and Section I Shipping Act 1916

8 Virgo forwarded approximately 75 ocean freight ship

ments after the receipt of the letter referred to in section 8

above

9 On July 15 1979 Eleanor V Navickas District Investi

gator Los Angeles Office advised Ms Crtalic that it was

unlawful for Virgo to utilize the name and FMC license

number of a licensed independent ocean freight forwarder to

engage in carrying on the business of ocean freight forward

ing

10 Thereafter Virgo ceased all ocean freight forwarding

activities in July 1979

11 Ms Crtalic withdrew her application for an ndependent

Ocean Freight Forwarder License by a letter dated July 14

1980

RESPECTFULLY SUBMITIED

Carlos Rodriguez

Counsel for Respondent PAUL J KALLBR ACTING DIRECTO

Bu au ofHearing Counsel

JOSllPH B SLUN

Hearing Counsel

CHARLES C HUNTE

Hearing Counsel

The parties submitted the following

PROPOSED SETTLEMENT OF CIVIL PENALTIES

This Proposed Settlement has been entered into between the

Bureau of Hearing Counsel and Respondents Billie lone Crta

lic and Virgo International Corporation Respondents It is

submitted to the Presiding Officer for approval pursuant to

Rule 162 of the Commission s Rules of Practice and Proce
BILLIE lONE CRTALIC POSSIBLE VIOLATIONS FREIGHT 571

FORWARDER LICENSE APPLICATION

dure 46 C F R 502 162 and section 505 3 ofthe Commission s

General Order 30 46 C F R 505 3 and is to be incorporated

into the Final Order in this proceeding if so approved

Whereas by Order of Investigation and Hearing dated May

21 1980 the Commission instituted the present proceeding to

determine whether the Respondents had violated section 44 a

of the Shipping Act 1916 46 D S C 84Ib a and section

510 3 of the Commission s General Order 4 46 C F R 510 3

and whereas that Order includes the issue of whether civil

penalties should be assessed for any violations of Section 44 a

of the Shipping Act 1916 and section 510 3 of the Commis

sion s General Order 4 46 C F R 510 3

Whereas the Order of Investigation alleges that the Re

spondents may have violated section 44 a of the Shipping

Act 1916 and section 505 3 of the Commission s General

Order 4

Whereas the Respondents have stipulated that they have

engaged in specified activities which may be violative of sec

tion 44 a of the Shipping Act 1916 and section 505 3 of the

Commission s General Order 4

Whereas the parties in order to avoid the delays and ex

pense which would be occasioned by further litigation of the

issues specified in the Order of Investigation and Hearing are

desirous of expeditiously settling the issue ofthe amount of the

appropriate civil penalty to be assessed against Respondents in

accordance with the terms and conditions of this agreement

Whereas section 32 e of the Shipping Act 1916 D S C

831 e authorizes the Commission to assess or compromise

all civil penalties provided for by the Shipping Act 1916 and

Whereas the Respondents have terminated all ocean freight

forwarding activities and have instituted and have indicated

their willingness and commitment to maintain measures de

signed to eliminate discourage and prevent future violations

of the Shipping Act 1916 and the Commission s General

Order 4

The undersigned Respondents hereby agree to pay to the

Federal Maritime Commission the following sums in accord

ance with the designated terms of settlement

1 In compromise of all civil liability which may have been

incurred by Billie lone Crtalic between July 1978 and July

1979 under the Shipping Act 1916 and the Commission s

General Order 4 Ms Crtalic agrees to pay to the Federal

Maritime Commission the sum of Two Thousand and Five

Hundred Dollars within 30 days from the date ofthe approval

by the Commission ofthis Proposed Settlement

2 In compromise of all civil liability which may have been

incurred by Virgo International Corporation between July

1978 and July 1979 under the Shipping Act 1916 and the
572 FEDERAL MARITIME COMMISSION

Commission s General Order 4 Virgo International Corpora

tion agrees to pay to the Federal Maritime Commission the

sum of One Thousand Nine Hundred Dollars within 30 days

from the date of the approval by the COmmission of this

Proposed Settlement

3 In consideration of the payment of the civil penalties

agreed upon by the parties and approved by the Presiding

Administrative Law Judge and the COmmission the com

mencement ofany civil or administrative action for the recov

ery of civil penalties from the Respondents which would be

based upon activities engaged in by Respondents between

July 1978 and July 1979 shall be barred and

4 Itis expressly understood and agreed that this Agreement

is not to be construed as an admission by Ms Crtalic orVirgo

International Corporation or its omcers directors or employ

ees of the violations alleged in the Order of Investigation and

Hearing

Carlos Rodriguez

Counsel for Respondents PAUL J KALLER ACTING DIRECTOR

Bureau ofHearing Counsel

JOSEPH B SLUNT

Hearing Counsel

CHARLES C HUNTER

Hearing Counsel

Hearing COunsel and spondents submitted on August 29 198

memoranda in support ofthe proposed settlement Hearing Couns

pointed out in its memorandum inter alia that during the period Jul

1978 through July 1979 Respondents forwarded oVer 300 ocea

freight shipments without benefit ofalicense issued by the Commissio

that of these 300 shipments Ms Crtalic was responsible for the fo

warding oftwenty seven and Virgo was responsible for forwarding th

remainder that only seventy five of the shipments for which Virgo 

responsible were forwarded after the receipt of a written warning th

unlicensed ocean freight forwarding activity is unlawful Upon th

receipt of a sccond such warning Virgo ceased all such activitie

The Respondents in their memorandum Tefer inter alia to 300 a

leged violations that the acts of Respondent s may not be characte

ized as knowing and willful conduct within the strict meaning of th

terms and precedes such references with The facts of the case suppo

the provisions of the proposed settlement They are not the facts 

the proceeding

The Respondents and Hearing COunsel urge approval ofthe settl

ment
BILLIE lONE CRTALIC POSSIBLE VIOLATIONS 8 FREIGHT 573

FORWARDER LICENSE APPLICATION

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

The parties to this proceeding stipulated that from July 1978 through

July 1979 Respondents forwarded over 300 ocean freight shipments

without benefit of an independent ocean freight forwarder license The

Respondent Virgo International Corporation according to its financial

statement herein dated August 18 1980 was incorporated May 28

1975 licensed to do business in California The corporation has no

Profit and Loss Statement or Balance Sheets The financial statement

shows Virgo s income for the last taxable year of

17 565 00 gross income

15 749 00 expenses fixed current

1 716 00 grossprofit

1 516 00 net profit after taxes

The corporation is presently active according to its financial form yet

Hearing Counsel says Virgo is apparently an inactive corporation at

this time Both Hearing Counsel and Respondents refer to Virgo show

ing assets of only 1 900 00 neither mentions Virgo s gross income of

17 565 for the year in which it engaged in unlicensed ocean freight

forwarding activities however Hearing Counsel in saying the net

profit was only 1 516 00 tacitly recognized the gross income

As to Respondent Ms Crtalic who had been employed as office

manager of another licensed Independent Ocean Freight Forwarder

License No 150 for approximately 5 years until late July 1978

Ms Crtalic owned 50 of the stock in Virgo and served as its Presi

dent and Chairman of the Board and didn tresign and transfer her

holdings in the corporation until July 24 1979 She was involved in

these violations from July 1978 Her experience as office manager

should have taught her better There is no financial data submitted as to

Ms Crtalic who agreed to payment in settlement of a greater civil

penalty than Virgo

Under the circumstances presented it appears to the Presiding Ad

ministrative Law Judge that the proposed settlement accepting a net

profit of 1 516 from gross income of 17 565 tends to condone the

activities herein of violation of the Act as though the violators are

persons who have not violated the provisions ofthe Shipping Act The

stipulation herein is to more than 300 ocean freight shipments without

benefit of an Independent Ocean Freight Forwarder License during the

period July 1978 through July 1979 utilizing the name and FMC

license number ofanother in so doing

Under section 32 e of the Shipping Act 46 U S C 831 e there is

authority to assess civil penalties under section 32 a thereof violators

are subject to a civil penalty not to exceed 5 000 for each such

violation under section 32 c thereof violation of any order rule or

regulation of the Federal Maritime Commission made or issued in the
574 FEDERAL MARITIME COMMISSION

exercise of its powers duties or functions are subject to a civil penal

of not more than 1 000 for each day such violation continues Thus 

is seen 300 violations at 5 000 or I

year at lOOO per day could res

in assessments herein of a civil penalty of ome magnitude The Pres

ing Administrative Law Judge cannotjind and conclude that the settl

ment proposed should be approved under the circumstances of th

case The current status of Respondent Virgo as a corporation is ambi

uous as reflected in this proceeding There is no reflection of t

financial status of the Respondent Ms Crtalic Under the propose

settlement Ms Crtalic agrees to pay 2 500 and Virgo agrees to pa

1 900 for a total assessment in this proceeding of 4 400 Such settl

ment tends to treat the 17 565 gross income of Virgo as presente

above as the income from a non violator of the Shipping Act 191

which the Presiding Administrative Law Judge jinds and concludes 

not acceptable

The matter of mitigation is regarded in the cooperation of the partie

herein in resolving this proceeding

Upon review of the situation and record herein the gross income 

17 565 obtained during the period as to settlement of civil penalties 

the opinion of the undersigned should not be regarded the same 

income brought in under a period free from such cloud because 

violator of the Shipping Act could then possibly profit from su

violations The Presiding Administrative Law Judgejj1ds and conclud

that while Ms Crtalic and Virgo International Corl Oration lave ea

expressly un rstood and agreed the proposed settlement is not to b

construed as an admission of having violated section 44 a of the A

and section 510 3 of the Commission s General Order 4 or of engagin

in unlicensed forwarding activities that the Jituationprescntedhere

warrants assessment of civil penalties against the Respondents conside

ing mitigation to disabuse any show of gains possible were the

violations Pursuant to section 32 e of the Shipping Act it is deeme

such assessment should be made that because of the circumstances th

assessment be against Ms Crtalic and Virgo equally in an amou

higher than that in the proposed settlement which is not approve

Wherefore upon consideration ofthe above it is ordered

A The Settlement of Civil Penalties proposed by the parties here

is not approved
BILLIE lONE CRTALIC POSSIBLE VIOLATIONS FREIGHT 575

FORWARDER LICENSE APPLICATION

B Civil Penalties in a renewed settlement proposal should provide

for the concerns expressed herein and be assessed against Billie lone

Crtalic and Virgo International Corporation equally

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

Washington D C

September 24 1980
FEDERAL MARITIME COMMISSION

DOCKET NO 76 34

TARIFF FMC 6 RULE 22 OF THE CONTINENTAL

NORTH ATLANTIC WESTBOUND FREIGHT CONFERENCE

DOCKET NO 76 36

TARIFF RULES CONCERTEDLY PUBLISHED DEFINING

PRACTICES OF CONFERENCES AND RATE AGREEMENT

MEMBERS REGARDING THE ACCEPTANCE AND

RESPONSIBILITY FOR SHIPPER OWNED OR SHIPPER LEASED

TRAILERS OR CONTAINERS

ORDER ON REMAND

January 27 1981

On November 18 1980 the United States Court of Appeals issued it

decision in D C Cir No 79 1194 Interpool Ltd v FMC vacating th

Commission s Report and Order in these consolidated dockets an

remanding the case to the Commission

The issue before the Court was whether the Commission correctl

held that certain conferences of shipping lines were authorized by the

approved section 15 agreements to publish tariff rules which effectively

shifted responsibility for the rental costs associated with the use o

leased or neutral containers from the conference member lines to th

shippers using such containers The Court held that the Commissio

erred in failing to consider the competitive effect of the tariff rule

before determining whether the rules concerned a type of ratemakin

activity authorized under the relevant conference agreements

Although the Court remanded these dockets for further proceedings

the purpose and direction to be taken by this Commission instituted

investigation as opposed to a private party complaint is presentl

unclear There is reason to believe that certain facts and litigation

positions have changed since the Commission first acted in this matte

All but one ofthe participating conferences have seemingly abandoned

any present interest in implementing container use practices of the typ

prescribed by the tariff regulations which were the subject of th

proceeding

Except forthe Pacific Coast European Conference PCEC the original tariff rules were ca

celled shorUy after the Conunisaion s Show CauOrder was issued in 1976 The PCEC rule pre
NEUTRAL CONTAINER RULES

Accordingly in order for the Commission to fashion an appropriate

vehicle for examining the remaining issues in these dockets interested

parties and especially the container leasing companies should state

whether they believe further proceedings are necessary and if so to

describe in detail the evidentiary issues which require determination

and the appropriate procedures for resolving such issues Based on

these submissions the Commission will provide an opportunity to par

ticipate in further proceedings of such nature and extent as may be

warranted In any further proceedings those persons alleging competi

tive harm caused by container use practices would have an opportunity

to adduce evidence of such harm The Commission would also wel

come comment from interested parties as to whether it might be desira

ble to approach the general question of container use practices and

allowances from a broader perspective including both conference and

nonconference carriers

THEREFORE IT IS ORDERED That interested parties file with

the Commission on or before February 27 1981 a statement which

describes any further administrative proceedings believed to be neces

sary and the exact issues which would be developed in such proceed

ings

By the Commission

S FRANCIS C HURNEY

Secretary

existed the others and may reflect the absence of a

neutral container system on the West Coast

Thus in any further proceeding involving the PCEC rule it will be necessary to develop evidence as

to whether such a system exists on the West Coast and if so the effect if any of the rule on that

system

Vice Chairman Kanuk dissents

11 F M C

577
578 FEDERAL MARITIME COMMISSION

Vice Chairman Leslie Kanuk dissenting

I can not agree with the majority s approach to the Court s remand

in this case The majority states that the purpose and direction of a

Commission investigation are presently unclear and suggests in

effect that this proceeding may be moot The problem with this ap

proach is that the Court 1 specifically found that a justiciable contro

versy does exist regarding the correctness of the Commission s prior

decision and 2 set out the issue to be addressed on remand

In its opinion the Court vacated the Commission s prior order and

remanded the case for further proceedings in accordance with this

opinion Interpool Ltd v Federal Maritime Commission No 79 1194

Slip Op at 18 D C Cir Nov 18 1980 The Court found that the

Commission had misapplied the appropriate legal standard in making its

decision since it failed to consider how the involved neutral container

rules would affect competition The Court pointed out that the Com

mission itself had in its 1976 Show Cause Order raised serious antitrust

questions about the effects ofthe rules The Court noted however that

in its subsequent report the Commission merely concluded that the

neutral container rules did not require separate approval under section

IS because they were routine implementations ofauthority contained in

the carriers basic conference agreements Interpool Ltd v FederalMari

time Commission supra at 9 Therefore the Court directed the Commis

sion on remand to reconsider the rules in terms of their effect on

competition

I cannot understand how the majority can now conclude that the

purpose and direction of further proceedings are unclear The Court s

instruction seems clear to me The Commission is to consider the actual

competitive effect of the involved rules In addition the majority s

suggestion that the case may be moot is clearly untenable If the

majority is basing this suggestion on the grounds that all but one ofthe

involved conferences have cancelled the neutral container tariff rules in

issue the relevance of this fact is not clear since the tariff rules were

cancelled well before the Commission issued its Report in 1978 In

point of fact these rules were cancelled shortly after the Show Cause

Order was issued in 1976 Despite this fact the Commission found in

its 1978 Report that the case was not moot and proceeded to reach a

decision on the merits Furthermore the Court itself concluded that

since the Commission s decision allowed the conferences to implement

the neutral container rules and since the container leasing companies

argued that the Shipping Act prohibits their implementation a justicia

ble controversy exists regarding the Commission s final decision Inter

pool v Federal Maritime Commission supra at 9 n 9

Thus at this point it appears to me that the Commission has no

choice but to re examine the involved rules taking into consideration

23 F M C
NEUTRAL CONTAINER RULES

their anti competitive effects if any The Commission should not be

asking interested parties to describe any further proceedings believed to

be necessary since the Court has concluded that further proceedings

are necessary and has set out the specific issue to be addressed in such

proceedings

579
FEDERAL MARITIME COMMISSION

DOCKET NO 80 39

UNION CARBIDE CORPORAnON

v

THE SHIPPING CORPORATION OF INDIA LIMITED

NOTICE

January 27 1981

Notice is given that no exceptions have been filed to the Decembe

16 1980 initial decision in this proceeding and the time within whic

the Commission could determine to review that decision has expired

No such determination has been made and accordingly that decisio

has become administratively final

8 FRANCIS C HURNEY

Secretary

nn
FEDERAL MARITIME COMMISSION

DOCKET NO 80 39

UNION CARBIDE CORPORATION

v

THE SHIPPING CORPORATION OF INDIA LIMITED

Reparation granted

Warren Wytzka for complainant

T Ciminelo for respondent

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Finalized January 27 1981

Union Carbide Corporation in the business of marketing chemical

products charges the Shipping Corporation of India with the assess

ment of a higher rate than was properly applicable to a shipment of its

products Reparation of 19 628 98 is sought Respondent has agreed to

the use of the shortened procedure provided in Subpart S of the

Commission s Rules ofPractice and Procedure

Complainant contends that the shipment in question consisted of 520

drums pallets consisting of 220 bags of Polyethylene Resin Non

Hazardous and should have been so classified under Item 1270 of

respondent s Tariff No 14 2

Respondent classified the shipment as

Chemical N O S The only issue presented is that ofthe proper classifi

cation ofthe commodity shipped

On the bill of lading the shipment was described as Chemicals N O S

On the shipper s Export Declaration it was described as LOW DEN

SITY POLYETHYLENE Chemicals N O S On the Dock Receipt the

cargo was described as 520 drums Insulation Compound and 5 pallets

Insulation Compound Finally on an unnamed document ofUnion Car

bide the cargo was variously described as INFILLED XLPE COM

POUND HFDE 4201 SEMICONDUCTlNG XLPE INSULATION

COMPOUND HFDA 0580 BLACK and FILLED XLPE INSU

LATION COMPOUND HFDA 5630 Complainant submitted an

1

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227

2 Third revised page 233 item 1270 Tariff No J4 FMC NO 3 of the India Pakistan Bangladesh

Ceylon and BurmaOutward Freight Conference Synthetic Resin Non Hazardous Polyethylene

Ill
582 FEDERAL MARITIME COMMISSION

overcharge claim to respondent which rejected it on the ground that it

was untimely filed under Rule 20 of the Conference Tariff which

requires that claims involving changes in description of the cargo be

filed before the cargo leaves the custody ofthe carrier

Complainant s contention is that the export declaration and Union

Carbide s Chemical Brochure page 70 submitted with the complaint

establish that the commodity shipped was in fact Polyethylene Resin

Respondent s answering memorandum actually a one page letter

simply asserts its belief that complainant has failed to sufficiently prove

that the commodity description was erroneous particularly when the

bill of lading listed the goods Chemicals N O S and the Dock Receipt

described the goods as insulation Compound

Polyethelene Resin is generically described as Synthetic Resin The

Schedule B number 444 1610 shown on the Export Declaration is

applied to Polyethylene Low and Medium Density with specific grav

ity not over 0 9jj Thus the shipment was classified as Polyethylene

Resin on the Export Declaration Page 70 ofUnion Carbide s Brochure

under the overall heading ofPolyethylene Resins lists Semiconductive

Shielding HFDA 0580 Black 55 Primary Vulcanizable Insulation

HFDE 4201 Natural and weatherproof Vulcanizable Insulation

HFDA 5630 Black The numbers following the description of the

three commodities coincide with the numbers on the previously men

tioned unnamed document which would appear to be some kind of

Union Carbide order form or more probably packing list

In Western Publishing Company v Hapag Lloyd A G the Commission

said

The description on the bill of lading is not the single con

trolling factor in cases of this nature overcharge cases

Rather the test is what claimant can now prove based on all

the evidence as to what was actually shipped even if the

actual shipment differed from the bill of ladmg description In

rating a

shipment the carrier is not bOl1d by the shipper s

misdescription on the bill of lading Likewise claimant is loot

bound at least where the misdescription results from uninten

tional mistake or inadvertence

In order to sustain a claim the complainant must set forth sufficient

facts to indicate with reasonable certainty and definiteness the validity

of the claim Merck Sharp Dohme v Atlantic Lines 17 F M C 244

245 1973 The decision must be based on all the evidence ofrecord

with no single document or piece of evidence necessarily being control

ling Kraft Foods v Moore McCormack Lines Inc 19 F MC 84 85

1976

On the basis of the record as a whole I conclude that the shipments

should have been classified under Item 1270 as Synthetic Resin Non

Hazardous Polyethylene with total freight charges in the amount of

1
UNION CARBIDE CORP V SHIPPING CORP OF INDIA 583

14 646 90 The freight charges actually paid under the Cargo N O S

classification were 34 275 88 Reparation is awarded in the amount of

19 628 98 3

S JOHN E COGRAVE

Administrative Law Judge

Washington D C

December 16 1980

3

See Appendix
S84 FEDERAL MARITIME COMMISSION

APPENDIX

Below are all Pertinent data concerning this shipment

Total freight

Paid by

520 Drums 5 Pallets consisting of 220

bags Polyethylene Resin Non Hazard

ous

6607 cubic feet

157880 Ibs

New York

Bombay

Vishva Nayak

126

March 9 1979

148 75 per 40 cu ft plus 4 Suez Transi

Surcharge plus 30 50 per 40 cu ft

Bunker Surcharge plus 15 Bombay

Port Detention Surcharge

34275 88

Union Carbide Corporation

Our shipment consisted of

Our shipment measured

Our shipment weighed

Shipment s origin

Shipment s destination

Name of Vessel

Billof Lading No

Bill of Lading date

Freight rate assessed

The amount herewith claimed as over 19628 98

charged is

Correct Total freight

Polyethylene Resin as Synthetic Resi

Non Hazardous

149 00 per 2240 Ibs plus 4 Suez Trans

Surcharge plus 30 50 per 2240 Ibs

Bunker Surcharge plus 15 Bomba

Port Detention Surcharge

14646 90

Correct BIL description

Correct freight rate
FEDERAL MARITIME COMMISSION

DOCKET NO 80 58

LATIN AMERICA PACIFIC COAST STEAMSHIP CONFERENCE

v

CIA SUD AMERICANA DE V APORES

NOTICE

January 27 1981

Notice is given that no appeal has been taken to the December 17

1980 dismissal of the complaint in this proceeding and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the dismissal

has become administratively final

5 FRANCIS C HURNEY

Secretary

l1 p fr iR
FEDERAL MARITIME COMMISSION

DOCKET NO 80 5 8

LATIN AMERICAPACIFIC COAST STEAl 1SHIP CONFERENCE

v

CIA SUD AMERICANA DE VAPORES

SETTLEMENT APPROVED COMPLAINT DISMISSED

FinaliJed January 27 1981

This case began with the service af a camplaint an August 29 198

Camplainant Latin America Pacific Coast Steamship Canference a

leged that resl1otidentCia Sud Americana de Vapares Chilean Line

had an threeacCasians in February and March af 1980 carried fru

fram Chile to Long Beach ar Los Angeles Califarnia as a cammO

carrier by water withaut having first filed a tariff with the Commission

thereby vialating sectian 18b af the Shipping Act 1916 46 U S C

817 b Complainant alleged furthermare that respandent s failure t

file a tariff subjected complainant s member lines ta unjust and undu

prejudi and unlawful campetitian and caused damages in an amaun

nat ascertainable at the time af filing the camplaint Respandent admi

ted that it had aperated three ships fram Chile ta Califarnia during th

time mentianed in the camplaint but denied that it had acted as 

camman carrier by water ar that it had been required ta file a tarif

Afterthe issue had been jained respandent cammenced discavery a

September 29 1980 by serving a detailed set af interragataries an

requests far praductian af dacuments Shartly before this time hawev

er the parties had begun ta cansider passible settlement which waul

avaid the expense af litigatian a prablem aggravated by the distanc

between respandent in Chile and camplainant in Califarnia In arder t

permit settlement discussians ta cantinue the parties requested permis

sian ta defer the narmal discavery schedule a request which Igranted

Relieved afthe burden af cantinuing with discavery and litigatian th

parties continued with their discussians which ripened inta a settlemen

I

On December 4 1980 the parties filed mailed a request that the

I settlement be appraved and that the camplaint be dismissed

In their papers describing their settlement and urging its apprava

the parties describe the terms af their settlement which are rathe

simple 1 The camplainant Conference recagnizes the extreme difficult

I The papers embodying the settlement were received by the Commission Secretary on Decemb

S 1980 They consist of athree paie request for approval of the settlement with explanation signe

I RI It C U t
LATIN AMERICA PACIFIC COAST S S CONFERENCE V 587

CIA SUD AMERICANA DE VAPORES

of proving the amount of damages which its member lines allegedly

suffered as a result of respondent s three sailings from Chile many

months ago Of course it would also have been necessary for complain

ant to prove that respondent had operated as a common carrier by

water subject to the tarifffiling requirements of the Shipping Act since

respondent denies that it had operated as such Ifcomplainant had been

able to prove everything it alleged and in addition had been able to

develop some type of formula and evidence proving financial injury

complainant might have obtained all that it had asked in its complaint

namely an order requiring respondent to file a tariff if it resumed

carriage in the future as well as reparation By the terms of the settle

ment however complainant is willing to resolve its controversy with

respondent on condition that respondent file a tariff if it resumes car

riage and complainant agrees to forego the difficult task of proving

damages and violations of law for past sailings In return respondent

promises to file a tariff in case of future sailings in which it may carry

fresh fruit from Chile to United States West Coast ports without admit

ting that it had violated the law in the past Both parties therefore

believe that it is more beneficial to their respective interests to settle on

such a basis rather than to attempt to vindicate such interest at great

expense associated with litigation Since a continuation of litigation in

this case would undoubtedly entail further discovery possibly with

complications because of the distant location of respondent and re

spondent s records in Chile and the difficulties of proving damages and

the exact status ofrespondent when it operated the three ships in early

1980 it appears that the settlement is far more economical to each side

than protracted litigation

DISCUSSION AND CONCLUSIONS

Itis well settled that both the law and Commission policy encourage

settlements and engage in every presumption which favors a finding

that they are fair correct and valid See OldBen Coal Company v Sea

Land Service Inc 21 F M C 505 1978 and the many cases cited

therein See also Commission Rules 91 and 94 46 CF R 502 91 502 94

and the Administrative Procedure Act on which Rule 91 is based 5

U S C 554 c I

2

The general policy favoring settlements is summa

by counsel for both parties and aone page letter dated November 26 1980 signed by respondents

General Manager My ruling describes thecontents of these documents

The APA 5 V S C 554 cXl provides

The agency shall give all interested parties opportunity for

1 The submission and consideration of facts arguments offers of settlement orproposals of

adjustment when time the nature of the proceedings and the public interest permit

The courts view this provision and its legislative history as being of the greatest importance to

the functioning of the administrative process Pennsylvania Gas Water Co v Federal Power Commis

sion 463 F 2d 1242 1247 D C Cir 1972 Congress encouraged agencies to make use of settlements

and wished to advise private parties that they may legitimately attempt to dispose of cases at least in

11loA r
588 FEDERAL MARITIME COMMISSION

rized in the following passage drawn from a

recognized authority

which language was adopted by the Commission in the Old Ben Co

Company case cited above 21 F M C at 512

The law favors the resolution ofcontroversies and uncertain

ties through compromise and settlement rather than through

litigation and it is the policy of the law to uphold and enforce

such contracts if they are fairly made and are not in contra

vention of some law or public policy The courts have

considered it their duty to encourage rather than to discourage

parties in resorting to compromise as a mode of adjusting

conflicting claims The desire to uphold compromises and

settlements is based upon various advantages which they have

over litigation The resolution of controversies by means of

compromise and settlement is generally faster and less expen

sive than litigation itresults in a saving of time for the parties

the lawyers and the courts and it is thus advantageous to

judicial administration and in turn to government as a whole

Moreover the use of compromise and settlement is conducive

to amicable and peaceful relations between the parties to a

controversy 15A American Jurisprudence 2d Edition pp

777 778 1976 Footnote citations omitted

Consistent with these policies the Commission has in recent yea

approved a wide variety of settlements and discontinued numerou

complaint cases under various provisions of the Shipping Act 1916 Se

list and description of settled cases recited in Del Monte Corporation 

Matson Navigation Company 22 F MC 364 368 369 1979 As e

plained in Old Ben cited above 21 F MC at 512 the Commissio

recognizes the advantages to settlements but exercises some judgmen

before approving them Mainly the Commission is concerned that th

settlement not contravene any law or public policy for example that 

not be the result of fraud duress or mistake that it not constitute 

discriminatory device or consummate a desire to contravene any prov

sion of the Shipping Act or if a certain type of agreement that it b

filed for approval under section 15 ofthat Act

The present settlement seems fully consistent with all the principle

cited above that favor its approval It represents the considered judg

ment ofboth partes that it is an amicable solution to a controversy tha

is far preferable to the uncertainties and expense ofprotracted litigation

It gives complainant the assurance that respondent will file a tariff if 

carries fruit in the subject trade in the future and relieves complainan

of the burden of trying to prove damages as well as violations of law

It also relieves respondent of the expense of showing that it had no

operated as a common carrier in connection with the past sailings 

part through conferences agreements orstipulations Senate Judiciary Committee APA Legislati

History S Doc No 248 79th Cong 2d S

at 24

1 1ftf r
LATIN AMERICA PACIFIC COAST S S CONFERENCE V 589

CIA SVD AMERICANA DE VAPORES

question Regardless ofwhich party might have prevailed on the merits

had the case proceeded to conclusion both parties apparently believe

that the cost of protracted litigation would outweigh the benefits of

ultimate vindication

The present settlement shows every sign ofbeing a traditional ami

cable resolution of a controversy which as noted the law has long

encouraged Moreover it shows no indication ofviolation ofany prin

ciple or policy 3 Hence I find it deserving of approval Accordingly

the settlement is approved the complaint is dismissed and the proceed

ing is terminated

S NORMAN D KLINE

Administrative Law Judge

December 17 1980

3

This settlement is not affected by the complications relating to settlements reached under section

18b 3 of the Act concerning alleged tariff overcharges nor is the settlement an anticompetitive

agreement among carriers falling under one of the seven categories of section 15 of the Act The set

tlement merely means that respondent Chilean Line will file a tariff in accordance with section

18b 1 of the Act if it resumes carriage of fresh fruit in the subject trade an act which the law would

require anyway ifthe Chilean Line operates as acommon carrier

PM r
FEDERAL MARITIME COMMISSION

DOCKET NO 76 59

AGREEMENT NOS T 3310 AND T 3311

NOTICE

January 28 1981

Notice is given that no exceptions have been tiled to the Decembe

18 1980 initial decision in this proceeding and the time within whic

the Commission could determine to review that decision has expired

No such determination has been made and accordingly that decisio

has become administratively final

5 FRANCIS C HURNEY

Secretary

tail 1 JiM r
FEDERAL MARITIME COMMISSION

DOCKET NO 76 59

AGREEMENT NOS T 3310 AND T 3311

The Indiana Port Commission and Ceres Inc found not shown to have violated section

16 First and section 17 of the Shipping Act Proceeding discontinued

Theodore LSendak William E Daily Timothy J May RichardA Earle and John V

E Hardy Jr for respondent Indiana Port Commission

Warren C Ingersoll for respondent Ceres Inc

Paul J Koller Joseph B Slunt and Deana E Rose as Hearing Counsel

INITIAL DECISIONl OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

Finalized January 28 1981

The subject proceeding originally encompassed a number of issues

but now is concerned only with the alleged violations by the Indiana

Port Commission Port Commission of sections 16 First and 17 of the

Shipping Act 1916 the Act and the alleged violation by Ceres Inc

Ceres 2of section 17 of the Act The subject proceeding also includes

an investigation of whether Ceres violated section 16 First but Hear

ing Counsel state that they do not believe that the record supports a

rmding against Ceres under section 16 First and this issue will not be

considered further herein

The alleged violations are said by Hearing Counsel to have resulted

from the Port Commission s alleged grant to Ceres of exclusive control

of every berth at Burns Waterway Harbor Portage Indiana Burns

Harbor adequate in size for serving ocean vessels thereby precluding

a competing stevedore Lakes and Rivers Transfer Corporation

LRTC from access to all berths at Burns Harbor suitable in size to

serve ocean vessels section 16 First and by the alleged failure of the

Port and Ceres to adopt reasonable rules or practices regarding a

public

terminal section 17

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

Commission Rule 227 Rules of Practice and Procedure 46 CP R 502 227

Z Ceres Inc owns 100 percent of Calumet Harbor Terminals Inc Calumet Ceres and Calumet

own 100 percent of Ceres Marine Terminals Inc Ceres Marine Ceres Marine was formerly known

as Tri State Terminals Inc Ceres Ceres Marine and Tri State Terminals Inc have operated oropec

ate terminal facilities and have performed or perform stevedoring services at Burns Waterway

Harbor Portage Indiana For convenience these three entities will be referred to as Ceres orCeres

Inc and where leases and agreements were made at Burns Harbor with Tri State Terminals orwith

Ceres Marine they will be referred to as ifmade with Ceres
592 FEDERAL MARITIME COMMISSION

To put the above remaining issues in this proceeding into prop

perspective it is appropriate to go into the history of this proceed

and into what has taken place in a related proceeding No 76 22 Lak

and Rivers Transfer Corporation v The Indiana Port Commission

Burns Harbor also known as the Port of Indiana is a manmade p

located on the south shore of Lake Michigan It consists of a brea

water on the north and west which protects a turning basin runni

east and west and it consists of two harbor arms running north a

south known as the West Harbor Arm and the East Harbor Ar

The west wall of the West Harbor Arm and adjacent property 

owned by the National Steel Corporation and the east wall and on

half of the south wall of the East Harbor Arm and adjacent prope

are owned by the Bethlehem Steel Corporation These facilities of t

two steel companies are not in issue herein

The issues are concerned with the inner walls of the two Harb

Arms that is the east wall ofthe West Harbor Arm and the west w

of the East Harbor Arm and the south walls ofboth Arms except t

half of the south wall on the East Harbor Arm owned by Bethlehe

Steel The Port Commission owns the land beneath Burns Harbor a

about 500 acres immediately south ofBurns Harbor

The Port Commission s facilities at the time ofthe close of hearin

in Docket No 76 22 on October 21 1976 on the West Harbor Ar

consisted of a selfunloaded area with mooring dolphins berth No 5 

the south end of the West Harbor Arm a berth at the south end oft

east wall of the West Harbor Arm berth No I which was 250 fe

long and three 500 feet long berths on the east wall of the We

Harbor Arm Berths Nos 2 3 and 4 The Port Commission s faciliti

on the East Harbor Arm at that time consisted of a 688 feet long be

on the west side of the East Harbor Arm Berth No 6 and a 360 fe

long berth on the south wall of the East Harbor Arm Berth No 

Berth No 5 does not have a dock and its use is limited to ships wi

self unloading equipment of a type used for bulk cargoes in the Gre

Lakes Berths Nos 1 and 7 are limited by their size to barges and la

vessels and cannot accommodate large ocean going vessels

Ceres then Tri State and the Port Commission on March 1 197

entered into an agreement for the lease of Transit Shed No 1 and 

outside storage area immediately adjacent and agreed for the exclusi

use of the wharfage and trucking concourse adjacent to Transit Sh

No 1 and the outside storage area all located on the West Harb

Arm This agreement No T 2602 was filed with the Commission 

March 2 1972 and approved on March 6 1973

Ceres and the Port Commission entered into an agreement dat

April I 1975 by which Ceres leased Transit Shed No 2 and w

granted exclusive use ofthe adjacent wharfage and trucking concour
AGREEMENT NOS T 3310 AND T 3311

areas all located on the West Harbor Arm This was Agreement No

T 331O

Ceres and the Port Commission entered into another agreement dated

May I 1975 by which Ceres leased Outside Storage Area No 2 and

the adjacent wharfage and trucking concourse areas all located on the

East Harbor Arm This was Agreement No T 3311 The exclusive use

ofthis area was subject to a concurrent right ofthe Levy Corporation

to use the premises until the Port Commission made other wharfage

and dockage facilities available to Levy elsewhere at Burns Harbor

Levy has a plant west ofthe main road going into Burns Harbor where

it processes steel mill slag for road building materials and other aggre

gate substitutes

Both Agreements Nos T 331O and T 3311 were filed with the Com

mission on May 25 1976 which was after they had been entered into

and effectuated

The subject proceeding No 76 59 is the second of two related

proceedings concerning these lease agreements at Burns Harbor In this

second proceeding No 76 59 the Commission ordered an investiga

tion and hearing to determine whether Agreements Nos T 331O and T

3311 are unlawful and should be approved disapproved or modified

pursuant to section 15 of the Shipping Act 1916 the Act whether

these two agreements had been implemented prior to their approval

whether these agreements constituted the parties complete understand

ing with respect to the use of the facilities covered thereunder or

whetherthere wasimplementation ofunfiled agreements whether these

two agreements resulted in undue or unreasonable preference or advan

tage or in undue or unreasonable preference or disadvantage to any

person in violation of section 16 First of the Act and whether these

two agreements resulted in unjust or unreasonable practices relating to

or connected with the receiving handling storing or delivering of

property in violation of section 17 of the Act This second proceeding

No 76 59 was consolidated with the first proceeding No 76 22 As

early as December 7 1976 the Administrative Law Judge in his denial

of a first motion for a cease and desist order had suggested that LRTC

and the Port Commission negotiate the lease of new berthing space and

in effect resolve their own problems

As of November 24 1976 the Port Commission advised that it had

contracted at a cost of 1 465 24102 to extend by 600 feet the berth on

the East Harbor Arm estimating completion of the additional berthing

space by April 22 1977 one week after the opening of the 1977

shipping season on the Great Lakes The construction of a new berth

was intended to enlarge the Port s facilities and such increased facilities

were intended to provide adequate facilities for any and all stevedores

who might use them However construction was delayed by adverse

weather and other problems On May 2 1977 the Administrative Law

n J1 Mr

593
594 FEDERAL MARITIME COMMISSION

Judge in response to a second or renewed motion for a cease and desis

order recommended that a cease and desist order be issued against th

Port Commission regarding Agreements Nos T 331O and T 3311 s

that the parties could make other arrangements to serve LRTC

Two orders were served by the Commission on August 9 1977

requiring the Port Commission and Ceres to cease and desist implemen

tation of Agreements Nos T 3310 and T 331The parties thereb

were required to cease and desist from carrying out all terms of these

agreements and otherwise were required to cease providing for th

exclusive or preferential use of any facilities at Burns Waterway

Harbor

In its cease and desist orders the Commission found that Agreements

Nos T 33l0 and T 3311 were subject to section IS ofthe Act and had

been implemented without prior approval of the Commission In its

order regarding No T 3311 the Commission stated that by virtue o

Agreements Nos T 2602 T 3310 and T 3311 Ceres had exclusive con

trol of every berth at Burns Harbor capable of receiving a vessel large

than a barge or small lake vessel and that LRTC was precluded from

access to all berths which could be used to service customers using

ocean vessels

In time LRTC and the Port Commission settled all their differences

largely through the construction of new facilities at Burns Waterway

Harbor and the execution of new lease agreements filed with and

approved by the Commission

In particular on July 19 1979 the Administrative Law Judge ap

proved a settlement agreement No T 3762 between the Port Com

mission and LRTC and also approved six other agreements namely

No T 3763 between the Port Commission and LRTC regarding Out

side Storage Area No 2 etc No T 3764 between the Port Commis

sion and LRTC regarding 6 36 acres for storage ofbulk cargo etc No

T 376S between the Port Commission and Ceres regarding Outside

Storage Area No 3 etc No T 3766 between the Port Commission

and Ceres regarding Transit Shed No 2 etc No T 3767 between the

Port Commission and Ceres regarding Transit Shed No 1 etc and

No T 3768 between the Port Commission and Ceres regarding a freez

er facility etc

The lease agreement between the Port Commission and LRTC pro

vided for the lease of Outside Storage Area No 2 formerly leased to

Ceres under Agreement No T 331l and for the preferential use o

Berth No 6 and of the wharfage and trucking concourse adjacent to

the berth initial term to expire September 30 1980 with a five yea

renewal option

The preference granted above to LRTC for the use of Berth No 6 is

applicable only to ships longer than 360 feet So long as LRTC notifies

the Port Commission two days in advance of when one of its ships

1Rlfr
AGREEMENT NOS T 331O AND T 33

longer than 360 feet is to arrive at Burns Harbor LRTC can utilize

Berth No 6 but otherwise Berth No 6 is an open berth available on a

first come first serve basis by any stevedore licensed at Burns Harbor

The above settlement agreement and the six lease agreements re

solved all the disputes in both Docket Nos 79 22 and 79 69 between

the Port Commission and the complainant LRTC a stevedore of bulk

cargoes and any related disputes with Ceres a stevedore mainly of

general cargoes On August 28 1979 the Commission determined not

to review the approval of the above seven agreements No T 3762

through T 3768 inclusive and noted that these agreements stood ap

proved

By ruling and order served October 24 1979 the Administrative

Law Judge among other matters ruled that the complaint in No 76 22

had been withdrawn and that the proceeding in No 76 22 was termi

nated By notice served November 28 1979 the Commission deter

mined not to review the dismissal of the complaint in No 76 22 and

noted that the dismissal became final

The settlement agreement No T 3762 provided for the withdrawal

of the complaint in No 76 22 and for the withdrawal of LRTC s

protests of Agreements Nos T 331O and T3311 in Docket No 76 59

in consideration for which and for other considerations the Port Com

mission agreed to give LRTC a certain preferential use of Berth No 6

at Burns Harbor and the exclusive use of Berth No 7

subject to the

stevedoring needs of the Levy Corporation and subject to other condi

tions as well as the lease and rental of certain other facilities to LRTC

During the course ofthese proceedings the facilities at Burns Harbor

have been expanded by the construction of more dock space and berths

at very considerable costs to the Port Commission and the State of

Indiana The Port Commission is an agency of the State of Indiana

As a result of the approval of the above settlement agreement and

approval ofthe six related agreements Agreements Nos T 331O and T

3311 have been replaced and approval of these two agreements is no

longer sought

The parties remaining in the proceeding now are the respondents

Ceres and the Port Commission on the one side and Hearing Counsel

as the only litigant on the other side

Presently as stated by the Port Commission It is not clear precisely

what interest of the public is being vindicated by Hearing Counsel

inasmuch as the Port Commission assertedly has acted reasonably in

accordance with its responsibilities to both the shipping public and the

State ofIndiana

It appears to the Administrative Law Judge that this proceeding now

has become a case particularly in its present stage following the

various approved agreements and settlement above where there should

be no further regulation merely for the sake of regulation This is so

595
596 FEDERAL MARITIME COMMISSION

considering that the Port Commission as an agency of the State

ostensibly at all times acted in what it believed to be the interests ofthe

shipping public and the State ofIndiana Nevertheless Hearing Counse

take the position that the Indiana Port Commission violated sections 16

First and 17 of the Act by the carrying out of Agreements Nos T

3310 and T 331l thereby granting Ceres exclusive control at the Port

of Burns Harbor Indiana over all berths in the port suitable in size for

the handling ofoceangoing ships as distinguishable from berths suitable

for the handling of self unloader ships lake barges and river boats

Hearing Counsel also take the position that Ceres violated section 17 o

the Act and that the Indiana Port Commission violated section 17 by

failing to adopt reasonable rules or practices regarding a public termi

nal by establishing a stevedoring monopoly

Contrariwise it is the position of Ceres that the Port of Burns

Harbor was in competition with the Port ofChicago that Ceres could

not have provided desirable service to regularly scheduled liner opera

tors without being able to guarantee berthing space for the prompt and

efficient discharge of ocean cargo and that no anti trust violations were

committed either by Ceres orby the IndianaPort Commission

The Indiana Port Commission takes the position that it entered into

the subject two agreements in the belief that they were crucial to the

financial survival ofBurns Harbor and that they would benefit both the

shipping public and the people of the State of Indiana and that no

stevedoring or other monopoly was created at Burns Harbor as a

consequence ofthe said two agreements or their implementation

Burns Harbor is about 70 miles from the commercial center ofChica

go It is a relatively new port somewhat removed from the established

shipping lanes of the Great Lakes When Burns Harbor was opened in

1970 it had great difficulty in obtaining stevedores to compete with

the Port of Chicago and other Great Lakes ports Only Ceres actually

Ceres subsidiary Tri State Terminals Inc was interested in coming to

Burns Harbor in 1971 and 1972

Burns Harbor was not known to foreign shippers nor to domestic

shippers The new port s problems were discussed with Mr Chris

Kritikos the principal officer of Ceres and a man long experienced in

the shipping and stevedoring businesses Ceres since 1958 has bee

engaged in stevedoring catgoesat various ports including Chicago Ill

Duluth Minn Toledo Ohio Hamilton and Toronto Ontario Montre

al Quebec and Baltimore Md among others At the listed pOrts

Ceres has stevedored general cargoes Ceres is considered to be the

largest stevedoring and terminal operating company from Montreal and

west in the area of the Great Lakes In 1975 Mr Kritikos acted a

Chairman ofthe Great Lakes Association of Stevedores for the negoti

ation of the master agreement with the International Longshoremen 

Association Mr Kritikos also is a member from Illinois appointed by
AGREEMENT NOS T 3310 AND T 3311

the Governor of the Great Lakes Commission which consists of five

Commissioners one from each Great Lakes state

Ceres specializes in the stevedoring ofgeneral cargo It began operat

ing out of Burns Harbor under the name of Tri State Terminals in

1972

Mr Jack Fitzgerald the Port Director and Chief Executive Officer

of the Indiana Port Commission so employed since 1969 came to

Burns Harbor when the port was under construction Dredging was not

yet finished and there was only one berth which was at the south end

of the West Harbor area Very little road system existed the railroad

loop was not in place and there were no transit sheds An ore ship

made the first call in 1969 delivering material to Bethlehem Steel

The first ship which came to the public part of the port came in

1970

The Indiana Port Commission was faced with the problem ofgetting

the port started Mr Fitzgerald discussed the ports problems with Mr

Kritikos who advised that Ceres or its predecessor had to have exclu

sive rights at its berths in order to generate business at a new port

The Port Commission accepted the views of Mr Kritikos and grant

ed him the exclusive use of Transit Shed No 1 The Port Commission

recognized that it needed an experienced stevedore which could draw

business from the Port ofChicago and elsewhere The first lease agree

ment between the Port Commission and Ceres was Agreement No T

2602 which was approved by the Federal Maritime Commission

As Ceres business at Burns Harbor grew it sought further leases

The Port Commission was able to consider Ceres proposals only be

cause of the financial commitment Ceres had made to the Port Ceres

and the Port agreed to enter Agreements Nos T 331O and T 3311

when no other general stevedore had expressed any interest in operat

ing at Burns Harbor When these two latter agreements were entered

into the Port inadvertently neglected to submit them to the Federal

Maritime Commission although it had earlier submitted No T 2602 for

approval The Deputy Attorney General for the State of Indiana as

sumed the blame for this failure to file stating that he was unaware of

section IS of the Shipping Act and that he was the second successor

Deputy Attorney General having appropriate duties since the first of

two prior Deputies filed Agreement No T 2602 for approval

This third Deputy never discussed with the Port whether such a

filing was necessary and in May 1976 immediately upon realizing that

there existed unfiled leases which might constitute section IS agree

ments counsel for the Port submitted Agreements Nos T 331O and T

3311 for approval by the Federal Maritime Commission

In contrast to Ceres LRTC in 1976 was a stevedore of bulk com

modities with no prior experience Because oflack ofguaranteed berth

ing space LRTC was unable to attract or lost certain bulk cargoes

597
598 FEDERAL MARITIME COMMISSION

Luria Brothers a dealer and processor of iron and steel scrap w

unable to use the services and facilities of LRTC because LRTC w

unable to provide Luria with dock space to accommodate ocean ve

sels Luria instead did business at the Port of Milwaukee Stainle

Processing Company an exporter of stainless steel and copper b

barges would have brought ocean vessels to Burns Harbor if LRT

had the space

Ceres as a stevedore of general commodities was not interested 

bulk commodities such as those which LRTC proposed to handl

However Ceres was not disposed to encourage any rival stevedor

such as LRTC at Burns Harbor when such a stevedore in time mig

seek to handle general commodities LRTC proposed to handle sla

coal scrap metal road de icing salt etc LRTC had a written licen

from the Indiana Port Commission to stevedore coal and verbal a

thorization to unload other bulk cargoes

Ceres at Burns Harbor was in direct competition with other stev

dores of general commodities located at the Port of Chicago Notic

was taken previously that at the Port of Chicago there were lea

provisions which generaUy gave the Chicago stevedores a type 

exclusive use of terminal facilities These noticed facts were confirme

by testimony at the last hearing Ceres points out that its leases at Bur

Harbor were procompetitive particularly in the sense that they e

abled Burns Harbor to compete with the Port of Chicago Obvious

the competition of Burns Harbor with the Port of Chicago was the f

more important factor rather than the factor of the exclusivity oft

leases to Ceres ofcertain facilities at Burns Harbor In other words 

substantial nucleus of business was generated for Burns Harbor by t

leases without which Burns Harbor probably could not have gott

established

It was the practical and sensible thing for a new port such as Bur

Harbor to encourage competition with the Port ofChicago rather th

to place undue emphasis on potential competition between two or mo

stevedores of general commodities at Burns Harbor when in fact on

one stevedore of general commodities had expressed any interest 

serving Burns Harbor Ceres concludes that under the circumstances 

lease agreements were neither unjust or unreasonable In fact it 

concluded that while the two leases in issue were anti competitive 

far as LRTC was concerned on the other hand viewing the over 

competitive picture and competition with the Port of Chicago the tw

leases were predominately pro competitive

Hearing Counsel rely on the testimony of Mr Jack Fitzgerald P

Director and Chief Executive Officer ofthe Indiana Port Commissio

that there existed sufficient business at Burns Harbor for two stevedo

to operate as of October 1976 Hearing Counsel misunderstand 

testimony The testimony was amplified by Mr Fitzgerald to mean th
AGREEMENT NOS T 3310 AND T 3311

he thought there was room for both Ceres and LRTC in that they were

complementing each other in their operations because Ceres was han

dling general cargo containers and breakbulk whereas LRTC had

shown interest only in bulk cargo There is no record proof that in

1976 there had been developed sufficient business at Burns Harbor for

two stevedores ofgeneral commodities

At all times Ceres engaged in general cargo stevedoring and LRTC

in bulk stevedoring

The hearing ofJanuary 15 1980 sheds very considerable light on the

remaining issues herein Three witnesses testified at that time They

were officials of Kerr Steamship Company Inter Ships Incorporated

and Beam Shipping Inc all steamship agents

The Port ofChicago in the period of 1975 1976 had about five or six

stevedores and there were other ports on the Great Lakes that had

only one stevedore Cleveland may have had two stevedores at the

time Kenosha Wisc Milwaukee Wisc and Green Bay Wisc each

have one stevedore

For a shipping line to make a stop at the Port of Indiana or at the

Port of Chicago certain factors would be considered For liner oper

ations the factors considered would be accessibility or availability of

cargo availability of space in a terminal guaranteed berthing rates

equipment the stevedore and the general record of the performance of

the stevedore among other factors

Should the facilities including guaranteed berthing space be not

available for example at the Port of Indiana it would be feasible for a

steamship line to call at the Port of Chicago

With a liner service in particular the steamship agent has to know

that a berth is there to take care of its vessel when it arrives in a

port

because for economy it is necessary to get as many sailings of a vessel

as is possible If a berth is not available at a

port the vessel is delayed

and its turn around time is lengthened Usually a designated area is

necessary for containers and that means an exclusive area dedicated to

the container operation

Therefore the steamship agent negotiates a contract with the steve

dore to make sure that the stevedore commits himself to giving a berth

to the steamship line when its ship calls In the Great Lakes area for

the most part stevedores have the ability to guarantee a berth in

advance and to do this the stevedore must have exclusive use of

certain terminal facilities

If a steamship agent were to be confronted with a situation where its

ship were forced to wait two or three days for a berth it would be the

recommendation of the agent to find another stevedore and another

terminal

One ofthe steamship agents first used Burns Harbor as an emergency

solution to a

problem at Chicago which resulted from a work stoppage

r 1 1 roo

599
600 FEDERAL MARITIME COMMISSION

or crane problem The agent continued to use Burns Harbor because 

had clear clean space for containers and the space was not congeste

However the geographical positionS of Burns Harbor the Port 

Indiana is not as good as is the Port of Chicago and therefore it 

necessary that Bums Harbor offer at least equal or better services a

terms and conditions compared with the Port of Chicago for Bur

Harbor to attract general cargo One of these terms or conditions is 

assured berth

From the steamship agent s point of view it is highly undesirable f

a stevedore to handle bulk commodities at the same facilities at whi

are handled liner cargoes Open top containers and half height conta

ers are subject to contamination which must be avoided Flat and cle

surfaces are essential for containers If a facility is used for both bu

stevedoring and general cargo stevedoring this would be unsatisfa

tory

Stevedores at the Port of Chicago can guarantee berths because t

stevedore has exclusive use of the berth and the stevedore at the Po

ofChicago is also the terminal operator

As of January IS 1980 the Port of Indiana had under contract t

construction of two additional berths These will be public berths n

under exclusive arrangement or exclusive lease to anyone These tw

additional berths will be sufficient in size to handle any ships whi

may navigate the St Lawrence Seaway

GENERAL CONCLUSIONS AND FINDINGS

Considering the record as a whole particularly the testimony of t

witnesses at the last hearing as to the competitive situation between t

Port of Bums Harbor and the Port of Chicago it is concluded a

found that the actions of the Port Commission of the Port of India

were reasonable under all the circumstances and in fact the agreemen

entered into by the Port Commission Nos T 331O and T 3311 w

Ceres were pro competitive and necessary in view of shipping custom

and practices in the Great Lakes area particularly at the Port 

Chicago

Agreements Nos T 331O and T 3311 have in time been canceled a

new agreements in lieu thereof have been entered into and approved 

the Federal Maritime Commission All the parties at interest sa

Hearing Counsel are satisfied and contend that no violations of t

Shipping Act are shown

Ceres promoted competitiop in the Great Lakes area by agreeing 

serve and by serving Bums Harbor

S The Port of Chicago is located closer to the center of the commercial zone than is the Por

Indiana Many moretruck lines servicethe Port of Chicago than service the Port of Indiana

1 T7
AGREEMENT NOS T 3310 AND T 3311

The State of Indiana through its Port Commission did what was

necessary to establish a new port The result was more competition

than heretofore existed in the Great Lakes area Agreements Nos T

3310 and T 3311 were necessary and crucial to the operation of Burns

Harbor at the time The Port of Indiana at very considerable expense

has expanded its facilities so that if enough business in general cargo is

developed there will be room for more than one stevedore of general

commodities to serve ocean vessels at the same time These expanded

facilities also provide room for stevedores of bulk commodities using

ocean vessels

Itis concluded and found that it has not been shown that there was

any violation by the Port Commission of section 16 First or section 17

ofthe Act nor has it been shown that there was any violation of these

same sections of the Act by Ceres The proceeding in No 76 59 is

discontinued

S CHARLES E MORGAN

Administrative Law Judge

Washington D C

December 18 1980

601
FEDERAL MARITIME COMMISSION

DOCKET NO 79 97

QUALITY FOOD CORPORATION

v

TROPICAL SHIPPING CO LTD

NOTICE

January 28 1981

Notice is given that no appeal has been taken to the December 1

1980 dismissal of the complaint in this proceeding and that the tim

within which the Commission could determine to review has expire

No such determination has been made and accordingly the dismiss

has become administratively fmal

5 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 79 97

QUALITY FOOD CORPORATION

v

TROPICAL SHIPPING CO LTD

SETTLEMENT APPROVED COMPLAINT DISMISSED

Finalized January 28 1981

PRELIMINARY FACTS

On November 28 1979 Quality Food Corporation Quality filed a

complaint against Tropical Shipping Co Ltd Tropical alleging that

Tropical had violated sections 14 and 16 of the Shipping Act 1916

respectively and requesting reparations of 1 000 000 with interest and

costs attorney s fees a permanent restraining order appropriate fines

and such other relief as the Commission deems just and proper

Quality is a corporation duly organized and existing under and by

virtue ofthe laws ofthe U S Virgin Islands with its principal office in

St Thomas It is engaged in the business of wholesale food supply

Tropical is a common carrier by water serving the trade between West

Palm Beach Florida and St Thomas Virgin Islands In its complaint

Quality alleged that Tropical discriminated against it by denying serv

ice to Quality while at the same time preferring Quality s competitors

by making services available to them Tropical denies that it subjected

Quality to any undue prejudice or discrimination or that it has accord

ed any unfair preference to competitors of Quality Further Tropical

makes the affirmative defense that Quality detained refrigerated con

tainers for an inordinate amount of time and refused to pay demurrage

charges set forth in the carrier s tariff

During the pendency of this proceeding there was extensive discov

ery and several procedural motions all of which were disposed of in

timely fashion A prehearing conference was held and in accordance

with the time limitation set forth in the Commission s Notice of Hear

ing the taking of oral testimony was set for May 22 1980 Before the

hearing began the parties submitted an offer of settlement which they

requested be approved concurrently with the dismissal of the com

plaint with prejudice While the settlement agreement was satisfactory

for the most part it did contain one provision which was objectionable

This conclusion was conveyed to the parties and after much negotiation

rN
604 FEDERAL MARITIME COMMISSION

they agreed to and submitted a second final offer in settlement acop

ofwhich is attached hereto

The settlement agreement clearly sets forth what the parties inten

and the meaning of each provision will not be belabored or repeate

here However some clarification and explanation is warranted as 

certain portions ofthe agreement and it is set forth below

Paragraph I at page 3 ofthe settlement agreement refers to Quality 

claim for cargo damage as to certain shipments not here in issue a

provides that the claims shall be submitted to binding arbitration Bo

parties agree that this provision relates to matters not within the Com

mission s jurisdiction in this proceeding

Paragraph 6 at pages 4 and 5 of the settlement agreement provide

that Tropical will draft and file with the Commission as part ofits tar

a forward booking arrangement whereby shippers will ship on a week

basis and book refrigerated container space in advance Both parti

have agreed that Tropical will in good faith undertake to amend 

tariff filing with the Commission staff but that Tropical is not comm

ting itself to defend the filing in a hearing if a formal investigation 

ordered

Finally paragraph 10 at page 8 of the settlement agreement is 

savings clause which provides that in the event the settlement agre

ment is disapproved by the Commission or is approved upon con

tions which are unacceptable to either party then the agreement sh

be null and void ab initio and of no effect whatsoever for any purpose

The parties agree that as to any provision in the settlement agreeme

which does not come within the jurisdiction ofthe Commission such 

paragraph I which deals with arbitration by another authority th

recourse as to any difficulty arising as the result of the operation oft

provision shall be resolved by the parties in a separate court action a

does not come within the purview of the savings clause in paragrap

10 Likewise the parties agree that the failure of the Commission 

accept the new tariff filing described in paragraph 6 of the settleme

agreement does not come within the purview of the savings clause 

paragraph 10

DISCUSSION AND CONCLUSIONS

It is well established that settlement of administrative proceedings 

favored by the Congress the Courts and the administrative agenc

themselves Section 5 b 1 of the Administrative Procedure Act 

U S C 554 c 1 provides

The agency shall give all interested parties opportunity for

I The submission and consideration offacts arguments offers 

settlement or proposals of adjustment when time the natu

ofthe proceedings and the public interest permit
QUALITY FOOD CORP V TROPICAL SHIPPING CO LTD 605

In Pennsylvania Gas Water Co v Federal Power Commission 463 F2d

1242 1247 D C Cir 1972 the Court noting its legislative history l

referred to the above provision as being ofthe greatest importance to

the functioning of the administrative process and stated

The whole purpose of the informal settlement provision is to

eliminate the need for often costly and lengthy formal hearings

in those cases where the parties are able to reach a result of

their own which the appropriate agency finds compatible with

the public interest

Finally the Commission has by rule encouraged settlements and has

often favorably looked upon them as a matter ofpolicy 3

So here in light of the above discussion and the entire record in the

proceeding it is held that the settlement agreement attached hereto is in

the public interest and is approved It is

Ordered that

1 Tropical will not unfairly or unjustly discriminate against Quality

in the future and will not accord undue or unreasonable preference or

advantage to any shipper or consignee to the undue or unreasonable

prejudice of Quality in violation of any section of the Shipping Act

1916 particularly as regards the booking of refrigerated cargo contain

ers

2 Quality will pay all demurrage bills as provided in Tropical s tariff

no later than 10 days following receipt of such bills

I Senate Judiciary Comm Administrative Procedure Act Legislative History S Doc No 248

79th Cong 2d Sess 203 1945 In considering the settlement provision in S 7 79th Cong 1st Sess

1945 which ultimately became Section 554 c of the Administrative Procedure Act see note 5

supra the Senate Judiciary Committee stated

Subsection b now Section 554 c of the Administrative Procedure Act provides that even

where formal hearing and decision procedures are available to parties the agencies and par

ties are authorized to undertake the informal settlement of cases in whole or in part before

undertaking the more formal hearing procedure Even courts through pretrial proceedings

dispose of much of their business in that fashion There is much morereason to do so in the

administrative process for informal procedures constitute the vast bulk of administrative ad

judication and are truly the lifeblood of the Administrative process The statutory recog

nition of such informal methods should both strengthen the administrative arm and serve to

advise private parties that they may legitimately attempt to dispose of cases at least in part

through conferences agreements orstipulations It should be noted that the precise nature of

informal procedures is left to development by the agencies themselves

S Doc No 248 supra at 24

2 Rule 91 of the Commission s Rules of Practice and Procedure 46 C F R 502 91 provides in perti

nent part Where time the nature of the proceeding and the public interest permit all interested

parties shall have the opportunity for the submission and consideration of facts argument offers of

settlement orproposal of adjustment

3

In furtherance of this policy the Commission has authorized settlements of administrative pro

ceedings on the basis of acompromised reparation payment absent admissions orfindings of violation

of the Shipping Act Foss Alaska Line Inc Proposed General Rate Increase Between Seattle Washington

and Points in Western Alaska Docket No 79 54 1979 Com Co Paper Stock Corporation v Pacific

Coast Australasian TariffBureau Docket No 71 83 1978 Robinson Lumber Co Inc v Delta Steam

ship Lines Inc Docket No 75 22 1978 Old Ben Coal Co v Sea Land Service Inc Docket No 78

13 1978 Organic Chemicals v Atlanttrafik Express Service Docket Nos 78 2 78 3 1979
606 FEDERAL MARITIME COMMISSION

3 Quality will pay all demurrage bills currently outstanding in favor

ofTropical

4 Quality does not owe Tropical any monies for damage that may

have occurred to Tropical s

refrigerated container 6210

5 Tropical will draft and file with the Commission to become part

of its tariff a Forward Booking Agreement in accordance with para

graph 6 ofthe settlement agreement

6 Tropical will appoint an account executive to be responsible for

liaison with Quality with respect to all matters relating to the cargo

which it ships via Tropical including advance notice of any tariff

changes and Quality will appoint II representative who will be respon

sible for communication with Tropical on such matters

7 Tropical will pay Quality two thousand one hundred and fifty

dollars 2 150 00 without admitting thereby any liability for any o

the allegations set forth in the complaint

8 The claim for reparations by Quality is deemed withdrawn and or

satisfied

9 This proceeding is terminated with prejudice and is hereby discon

tinued It is

Further Ordered that within thirty 30 days after this order becomes

final the parties file an affidavit of compliance with the terms of the

settlement

5 JOSEPH N INGOLIA

Administrative Law Judge

December 11 1987
QUALITY FOOD CORP V TROPICAL SHIPPING CO LTD 607

SETTLEMENT AGREEMENT

Agreement made this 28th day of November 1980 by and

between TROPICAL SHIPPING AND CONSTRUCTION

COMPANY LTD Tropical a common carrier by water

serving inter alia the trade between West Palm Beach Flori

da and St Thomas U S Virgin Islands and QUALITY

FOOD CORPORATION Quality a consignee of cargo

via Tropical in said trade

WHEREAS Quality has filed a complaint before the Feder

al Maritime Commission docketed as No 79 97 alleging that

Tropical has violated certain sections of the Shipping Act

1916 by unreasonably and unduly discriminating against Qual

ity in favor of certain shippers with which it competes

WHEREAS said complaint seeks reparations in the amount

of 1 000000 for damages allegedly incurred by Quality by

reason of such discrimination

WHEREAS Tropical has answered said complaint denying

any liability with respect to the matters alleged therein

WHEREAS Quality and Tropical desire to terminate this

controversy without resort to further litigation and to settle

certain outstanding grievances of both parties as described

hereinafter

WHEREAS Quality has certain claims against Tropical for

damage to refrigerated cargoes carried by Tropical under bill

of lading 10 voyage 208 bill of lading 10 voyage 1407 and

bill of lading 1 voyage 1418 which damage Quality alleges to

be the result of a malfunction of the refrigeration units fur

nished by Tropical

WHEREAS Tropical has to date neither admitted nor

denied liability for said cargo damage claims

WHEREAS Tropical has a claim against Quality for

damage to its container number 6210 which Tropical alleges

to be the result of mis treatment of the container while in

Quality s possession

WHEREAS Quality has denied liability for the damage to

container number 6210

WHEREAS Tropical and Quality desire to eliminate the

mutually disagreeable relationship which has heretofore exist

ed between them and to foster a harmonious and mutually

beneficial and proper relationship in future business transac

tions

NOW THEREFORE in consideration of these premises

and the mutual undertakings hereinafter set forth it is agreed

as follows

1 The parties agree that Quality s claims for cargo damage

shall be submitted to binding arbitration under the rules ofthe

American Arbitration Association through its New York City

office or such other arbitration association as the parties may
608 FEDERAL MARITIME COMMISSION

mutually agree upon Said arbitration shall be conducted upon

written and oral presentation to be held in St Thomas U S

Virgin Islands by asingle arbitrator who the parties agree

shall be a person knowledgeable concerning the business of

wholesale distribution ofrefrigerated food and the shipment of

perishable refrigerated cargo by ocean carrier and shall be

selected by the process of alternate eliminations from a list of

qualified arbitrators provided by the arbitration association or

such other method as the parties may agree upon To facilitate

a prompt resolution of the matter Tropical will deliver to

Quality copies of the G A B survey reports on the dama e to

cargoes carried under bill of lading I

voyage 1418 and bill of

lading 10 voyage 1407 within one week following theexecu

tion hereof The arbitration process shall be commenced

within 30 days following the submission by Quality of a com

pleted claim for the latter two incidents or upon the date of

approval hereof whichever is later and the parties agree that

the arbitrator s decision and payment of any award of the

arbitrator shall be expedited to the fullest extent permissible

under the prevailing rules The costs of the arbitration includ

ing the arbitrator s fees and a court reporter but not including

attorneys fees shall be borne by the prevailing party or in

the event that a pretrial award is made shall be apportioned

accordingly

2 Without admitting that it has committed any violations in

the past Tropical warrants represents and agrees that it will

not unfairly orunjustly discrimmate against Quality or accord

undue or unreasonable preference or advantage to any shipper

or consignee to the undue or unreasonable prejudice of Qual

ity in violation of any section of the Shipping Act 1916

particularly as regards the booking of refrigerated cargo con

tainers

3 Quality agrees that it will henceforth pay all demurrage

bills as provided in Tropical s taritT promptly and in no case

later than 10 days following receipt of such bills

4 Quality agrees that it will pay all demurrage bills current

ly outstanding in favor ofTropical

5 Tropical hereby withdraws from its contention that the

damage to its refrigerated container 6210 resulted from the

fault of Quality and will make no claim against Quality for

reimbursement therefor

6 Tropical agrees that it will draft and tilewith the Federal

Maritime Commission to become part of its taritT a Forward

Booking Agreement embodying the following principles

a The agreement shall apply to the carriage of refriger

ated cargo containers in the trade betweett West Palm

Beach Florida and St Thomas and St Croix U S Virgin

Islands
QUALITY FOOD CORP V TROPICAL SHIPPING CO LTD 609

b It shall provide for the forward booking of refrigerat

ed containers for carriage in such trade on a

regular weekly

basis

c It shall provide for such forward booking with respect

to a stated number of twenty and forty foot containers per

week which number shall constitute a reasonable propor

tion of the total number of such containers normally avail

able for carriage in such trade but in no event more than 60

percent or less than 40 percent

d It shall be offered to all shippers on an equal basis and

in the event of oversubscription the specified number of

containers available for forward booking shall be prorated

among the applicants therefor

e It shall contain a force majeure clause and shall pro

vide that where for reasons beyond the control of Tropi

cal an insufficient number of containers is available the

containers which are available shall be apportioned in ac

cordance with a specified priority wherein the shippers

having the most containers booked under agreement would

forego a container first

f

It shall require that the shipper party confirm by tele

phone its booking or bookings thereunder for the following

week each Friday between the hours of 9 00 and 10 00 a m

E D T or E S T as appropriate Any container not so

confirmed shall be available for booking by other shippers

during the regular booking period on Friday

g

It shall provide that the shipper may cancel a con

firmed booking at any time prior to 4 00 p

m E D T or

ES T as appropriate on the same Friday Thereafter if a

confirmed container is not utilized by the shipper he shall

pay to the carrier dead freight in a stated amount equal to

the carrier s average revenue for the size of refrigerated

container booked less 10 percent

h The tariff filing shall be effective for an initial experi

mental period of 90 days and if workable from a practical

operational standpoint it shall thereafter be renewed on an

annual basis so long as workable

i Tropical undertakes to pursue and defend such tariff

filing in good faith before the Federal Maritime Commission

staff Itdoes not however commit itself to defend the filing

in a hearing if a formal investigation is ordered

7 Tropical will appoint an account executive to be responsi

ble for liaison with Quality with respect to all matters relating

to the cargo which it ships via Tropical including advance

notice of any tariff changes and Quality will appoint a

repre

sentative who will be responsible for communication with

Tropical on such matters the mutual intent of the parties
610 FEDERAL MARITIME COMMISSION

being to eliminate the misunderstandings which have occurred

between them in the past

8 Tropical shall pay Quality the sum of 2150 00 two

thousand one hundred fifty dollars but without admission of

liability for any of the allegations set forth in the complaint

9 Quality hereby withdraws its claim against Tropical for

reparations as described above and docketed as number 79 97

acknowledges that the same has been satisfied and consents

that it be dismissed with prejudice

10 This agreement shall be submitted to the Federal Mari

time Commission for approval In the event that it is disap

proved or approved upon conditions which are unacceptable

to either party it shall be absolutely null and void abinitio and

of no effect whatsoever for any purpose Nor shall it be

admissible before the Commission or any court or agency as

evidence with respect to any matter contained herein

IN WITNESS WHEREOF the parties have caused this

agreement to be executed by their authorized representatives

this 24th day ofNovember 1980

Witness

TROPICAL SHIPPING AND

CONSTRUCTION COMPANY LTD

By

Witness

QUALITY FOOD CORPORATION

By
FEDERAL MARITIME COMMISSION

DOCKET NO 80 45

AGREEMENT NOS 10386 AS AMENDED 10388 10382 AS

AMENDED AND 10389 CARGO REVENUE POOLING EQUAL

ACCESS AGREEMENTS IN THE UNITED STATES ARGENTINE

TRADES

ORDER DENYING MOTION TO TERMINATE

VACATING THE STAY OF PROCEEDINGS AND

APPROVAL OF AGREEMENT NOS 10388 AND 10389

January 29 1981

This proceeding was initiated by Order of Investigation and Hearing

and Conditional Pendente Lite Approval Order served June 30 1980

to determine the approvability of certain cargo revenue pooling agree

ments in the United States Argentine trades filed with the Commission

pursuant to section 15 of the Shipping Act 1916 46 US c 814 1

On October 20 1980 Moore McCormack Lines Inc Mooremac a

party to Agreement Nos 10382 and 10388 filed a Motion to Terminate

the Proceeding Or in the Alternative Suspend Proceedings Pending

Receipt ofCertain Evidence Responses were filed by the Commission s

Bureau of Investigation and Enforcement BIE Companhia de Nave

gacao Lloyd Brasileiro Companhia Maritima Nacional Delta Steam

ship Line Inc and A S Ivarans Rederi The Commission on Novem

ber 6 1980 stayed the proceeding pending resolution of the Motion to

Terminate

Mooremac s

request to terminate this proceeding is based on the

Deposition of Samuel B Nemirow 2 which it views as resolving the

principal issues raised in this proceeding Lloyd Nacional and Delta

generally support Mooremac s Motion Ivarans takes the position that

while there may not be a need for a full evidentiary hearing to resolve

the issues raised in the proceeding the Commission should consider

1 Agreement Nos 10382 as amended and 10386 as amended provide respectively for cargo reve

Due pooling in the northbound trades from Argentina to United States Gulf and Atlantic Coast ports

Agreement Nos 10388 and 10389 establish respectively a cargo revenue pooling agreement in the

southbound trades from United States Gulf and Atlantic Coast ports to Argentina The aforemen

tioned Agreements are collectively referred to herein as the Agreements

2 Mr Nemirow is Assistant Secretary of Commerce for Maritime Affairs His deposition was taken

at BIE s

request All parties to this proceeding were afforded an opportunity to examine Mr Ne

mirow
612 FEDERAL MARITIME COMMISSION

other evidence in making its decision a

BIB opposes the discontinuanc

of the proceeding as it relates to the investigation of the northboun

Atlantic agreement Agreement No 10386 as amended

The Motion and Responses reflect some misconception concernin

the principal focus of the Commission s June 30th Order initiating th

proceeding As the Agreements are per se violative of the antitru

laws it must be shown that they are required by a serious transport

tion need necessary to secure important public benefit or in furthe

ance of a valid regulatory purpose of the Shipping Act Federal Ma

time Commission v Svenska Amerika Linien 390 U S 238 243 1968

Proponents submitted supporting statements with the Agreement

However as the Commission stated in its Order initiating this procee

ing these submissions and the protest which was later withdraw

raise factual and legal issues that require further examination Ord

at page 12 These factual and legal issues relate primarily to t

third flag section of the Agreements The concern here was with t

Agreements restrictive features and the apparent circumstances su

rounding them which appear to run counter to that part ofthe pub

interest reflected in the antitrust laws favoring free and open compe

tion Order at 15 Specifically these matters concern 1 the divisio

of the 20 share allocated to third flag carriers 2 the impact of t

Blackwell Guevara Memorandum of Understanding and 3 the role 

the Argentine Government in the circumstances which led to the ex

cutionof these Agreements

Mr Nemirow s Deposition does not squarely address or resolve t

basic issues raised in this proceeding Mr Nemirow s Deposition p

marily addresses the narrow issue

Whether the facts surrounding the negotiation and execution

of these Agreements indicate conduct inconsistent with the

provisions of the United States Argentine Memorandum of

Understanding the so called Blackwell Guevara Agreement

of March 31 1978 providing for commercial agreements

Order at page 20

The substance of Mr Nemirow s responses is that Argentina agre

that there would be commercial agreements in these trades th

would delineate the details of the cargo sharing arrangements and th

the Agreements in issue are consistent or not on their face inconsi

ent with the Blackwell Guevara Memorandum of Understanding Th

testimony does not however address or resolve issues relating to 

the justification for the specific third flag shares provided for in the

Agreements and 2 whether the role of the Argentine Government 

s

Ivarans sugesta that the Commission should have the benefit of the Answers of Mr Eric Hol

Sorensen to BIE s Written Interrogatories as well as the transcripts of the May 1980 pool meeti

dealing with the negotiations of Agreement No 10386 8S amended

1
CARGO REVENUE POOLING EQUAL ACCESS AGREEMENTS 613

the circumstances which led to the execution of these Agreements

particularly with respect to third flag shares caused these Agreements

not to be commercial agreements as required by the Memorandum of

Understanding 4

Given the apparent misunderstanding as to the focus of this proceed

ing the Commission is amending its June 30th Order to expressly

delineate the specific issues that should be addressed in this proceeding

These issues are set forth in the Appendix to this Order and are

incorporated herein by reference

Accordingly Mooremac s Motion to Terminate this proceeding will

be denied and the November 6 1980 Order staying this proceeding will

be vacated As a result of the delay in the proceeding occasioned by

the stay the Commission will extend the date by which the Presiding

Officer shall serve his Initial Decision

There is one final matter to be addressed As heretofore mentioned

this proceeding includes the investigation of the two southbound agree

ments Nos 10388 and 10389 There are no third flag carriers party to

these Agreements apparently because various Argentine laws decrees

and resolutions generally restrict the carriage ofArgentine import car

goes exclusively to Argentine flag vessels except where there is a gov

ernment or commercial arrangement with the exporting nation or its

flag carriers allocating no less than 50 of the earned freight revenues

to Argentine flag carriers 5

Similarly certain United States controlled

cargoes in the southbound Argentine trade are restricted to United

States flag vessels except where the importing nation does not discrimi

nate against United States flag vessels and permits access to their gov

ernment controlled cargoes In such event similar to Argentine law

the United States will permit the recipient nation s vessels to carry

up to 50 of such United States controlled cargo

Because the principal focus of this proceeding relates primarily to

third flag issues it is appropriate to discontinue the investigation ofthe

southbound Agreements Nos 10388 and 10389 providing they are

otherwise approvable under the standards enunciated in section 15

Shipping Act 1916 Examination of the statements filed in support of

these Agreements as well as the Nemirow Deposition leads the Com

mission to find that these Agreements meet the standards for section 15

approval

The southbound Agreements provide the means for increased shipper

service with respect to government controlled cargoes in these trades

by permitting United States and Argentine flag carriers equal access to

4 Mr Nemirow was not in attendance at the meetings where these Agreements were negotiated nor

did he receive daily reports orclosely monitor these meetings orthe circumstances surrounding them

Nemirow Deposition at pages 46 47 and 48

5 Docket Nos 78 51 and 78 52 served June22 1979
614 FEDERAL MARITIME COMMISSION

these otherwise restricted cargoes Moreover these Agreements facili

tate the free flow ofthe United States foreign commerce with Argenti

na In the absence of these Agreements Argentine import cargoes

would be subject to the 30 day pre waiver requirements of Argentine

Resolution 507 6

Agreement Nos 10388 and 10389 are not found to be unjustly dis

criminatory or unfair as between carriers shippers exporters import

ers or ports or between exporters from the United States and thei

foreign competitors detrimental to the commerce of the United States

contrary to the public interest or otherwise violative of the Shipping

Act 1916 Moreover the extent of the anticompetitive impact ofthese

Agreements is not sufficient to outweigh the benefits found and warrant

disapproval

THEREFORE IT IS ORDERED That Moore McCormack s

Motion to Terminate this Proceeding is denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

as to Agreement Nos 10388 and 10389 and that Agreement Nos 10388

and 10389 are approved pursuant to section 15 Shipping Act 1916 7

and

IT IS FURTHER ORDERED That the November 6 1980 Orde

staying this proceeding is vacated and

IT IS FURTHER ORDERED That the fourth ordering paragraph

of the June 30 1980 Order initiating this proceeding be amended to

include the issues set forth in the Appendix to thisOrder and

FINALLY IT IS ORDERED That the eighth ordering paragraph

of the June 30 1980 Order initiating this proceeding be arpended to

read The Presiding Administrative Law Judge shall issue his Initia

Decision in this proceeding on or before July 31 1981

By the Commission

8 FRANCIS C HURNEY

Secretary

8 Resolution S07 requires that Argentine flag carriers be given the right of first refusal on all Argen

tine imports controlled by Arientine Law 18 250 These argoes amount to asubstantial portion of th

southbound trade and can only be carried on non Argentine vessels if the consignee applies for an

receives awaiver from the reservation laws 30 days in advance of shipment These pre waiver require

ments do not apply to cargoes carried by parties to agreements such as Agreement Nos 10388 an

10389 See Docket Nos 78 51 and 78 52 aerved June 22 1979

The styling of this proceeding in all future pleadings and documents shnuld not refer to the ap

proved Agreements

Vice Chairman Kanuk and Commi ionera Day and Teige concur in that portion of the Orde

which denics the Motion toTerminate and amends the Order of Investigation Vice Chairman Kanu

and Commissioner Telge dissent to the approval of Agreement Nos 10388 and 10389 and will issu

separate opinions Chairman Daschbach and Commissioners Day and Moakley concur in the approva

of Agreement Nos 10388 and 10389 ChainnanDaschbach and Commi ioner Moak1ey diaaent to tha

portion of the Orderwhich amends the Order of Investigation Chatrinan Daschbach and Commission

erMoaktey would approve rather than investigate Agreement No 10382 and would limit the 8cope

the investigation of Agreement No 10386 to that contained in the June 30 Order of Invcstigation
CARGO REVENUE POOLING EQUAL ACCESS AGREEMENTS 615

APPENDIX

Whether fixed individual shares for third flag carriers in these trades

are necessary to meet serious transportation needs to achieve important

public benefits or to fulfill valid regulatory purposes of the Shipping

Act and if so whether the specific third flag shares fixed by these

Agreements are unduly discriminatory or unfair between carriers

whether they are based on valid commercial considerations and wheth

er they are the result of direct or indirect coercion by the Government

ofArgentina or any other person

Whether the facts surrounding the negotiations and execution of

these agreements indicate conduct inconsistent with the provisions of

the United States Argentina Memorandum of Understanding of March

31 1978 requiring that the mechanisms and procedures necessary to

the implementation of the Memorandum be determined by commer

cial agreement either by showing imposition of the will of the Gov

ernment of Argentina directly or indirectly or coercion by any other

party

Whether the provisions ofthe Agreements providing for penalties for

overcarriage and undercarriage unnecessarily restrict competition

among third flag lines within the 20 percent share to these lines and if

so whetherthose provisions should be amended

Whether the provisions of the Agreements giving third flag carriers

who are parties to the Agreements control over the cargo shares

assigned to any new third flag parties are unnecessarily restrictive or

unduly discriminatory among carriers and if so whether those provi

sions should be amended

Inaddressing these issues the parties to this proceeding should devel

op information in response to the following specific questions They

should not however consider the proceeding limited to these questions

if circumstances indicate other areas ofinquiry

1 Does Argentine law require fixed third flag shares and if so does

it specify the size ofany such shares

2 Is there any evidence that the decision to renegotiate Agreements

Nos 10346 and 10349 to provide for fixed third flag shares resulted

from requests to do so by non Argentine carriers

3 Are executives of the involved Argentine carriers Government

officials If not were they appointed to their positions by the Argentine

Government or can they be disciplined or discharged by the Argentine

Government

4 Are there transcripts available of the negotiations for third flag

participation in the northbound trades

5 What are the carryings by shares of total revenue tons of all

third flag carriers in the northbound trades for the period from January

1 1975 through the most recent date for which such information is

available
616 FEDERAL MARITIME COMMISSION

6 Have any of the third flag parties to these Agreements accepted a

significantly larger or smaller share ofthe pooled cargo than its histori

cal share Ifso what is the basis for the new share

7 Did the divisions ofthird flag shares in the northbound Argentine

trades under these Agreements arise from any agreement or understand

ings formal or informal between the Argentine Government and any

other third flag government

8 Is the current fixed share of northbound pool cargo held by the

Argentine flag lines in the BrazillU S trades the result of an agreement

or understanding formal or informal between the Governments o

Brazil and Argentina

9 Did open competition among third flag lines under Agreements

Nos 10346 and 10349 result in overtonnaging unstable rates rebating

or any other malpractices in the northbound trades

10 Were any third flag lines discouraged from participating in the 20

percent open competition share required by the Commission unde

Agreements Nos 10346 and 10349 by any actions of the national flag

lines or the government of Argentina

11 Is the United States a signatory to any treaties on maritime

matters with any of the countries under whose flags the third flag

carriers participate in the northbound trades If so would approval by

the Federal Maritime Commission of fixed third flag shares conflic

with the United States obligations under those treaties

12 Have any carriers withdrawn from the northbound trades or bee

unable to enter them during the period January 1 1978 through Sep

tember 30 1980 If so what were the circumstances surrounding such

occurrences

13 What will be the short term and long term effect ofthese Agree

ments if they are approved on U S importers in these trades

14 Maya carrier national or third flag who is not a party to these

Agreements obtain cargo in the northbound trades If not what is the

mechanism which excludes such a carrier from obtaining cargo
CARGO REVENUE POOLING EQUAL ACCESS AGREEMENTS 617

DISSENTING OPINION

Dissenting Opinion ofCommissioner Peter N Teige

Idissent from the majority s conclusion that the southbound agree

ments Agreement Nos 10388 and 10389 should be approved without

further investigation and hearing Aspects of these Agreements the

southbound U SArgentina trades in which they operate and their

relationship to the agreements proposed for the northbound Argentina

U S trades raise issues which should not be decided on the basis of the

record before us and which therefore require further investigation

before approval can be granted

At the time these Agreements were filed with the Commission for

approval there were also filed cargo revenue pooling and equal access

agreements which would apply to the northbound trades from Argenti

na to the U S Gulfand Atlantic Coasts FMC Agreements Nos 10382

and 10386 respectively The Commission has determined that these

northbound Agreements raise a number of serious and substantial issues

which require that they be subjected to a full investigation and hearing

before the question of their approvability can be resolved Despite this

action however the majority has also concluded that the agreements

which will operate in the reciprocal southbound trades may be segre

gated from this investigation and summarily approved I cannot agree

with this approach

This case raises fundamental policy questions affecting our interna

tional ocean commerce Under heavy pressure from the Argentine

Government including threats in part carried out of preventing U S

flag vessels from carrying cargo between the United States and Argen

tina our Government in 1978 entered into a bilateral agreement on

ocean transport between the two countries The agreements in this case

arise from that bilateral

As bilateral agreements on ocean transport appear likely to become

more commonplace in the years ahead it will be essential for the

Commission to develop some general guidelines for dealing with the

supplementary commercial agreements that arise from these agree

ments It would be appropriate to do that briefly here in view of the

disagreement among members of the Commission on the significance of

the agreements before us

The Federal Maritime Commission does not determine whether our

Government should enter into bilateral agreements This is a policy

decision to be made by the Executive Branch It would be preferable if

these sensitive agreements affecting as they do not only our merchant

marine but our shippers our trade our relations with other maritime

countries and with the trading partner entering into the agreement
618 FEDERAL MARITIME COMMISSION

were so complete as to make supplemental agreements to such bilaterals

unnecessary Typically these bilateral agreements have had as a princi

pal goal assuring participation by the U S flag carriers in the trades

concerned If the manner in which this is to be done is not fully

delineated in the bilateral the gaps must be filled by supplementa

agreements among the carriers It is these agreements that come before

the Federal Maritime Commission under our responsibility to examine

agreements between carrier competitors that would violate our U S

antitrust laws unless receiving our approval under Section 15 of the

Shipping Act 1916

Our authority in examining such agreements is very restricted Most

importantly we are prohibited from approving agreements that dis

criminate unfairly between carriers Section 15 1916 Act Thus we

normally are prohibited from favoring any country s carriers over those

of another even U S carriers An exception to this prohibition would

be a supplemental agreement that is clearly carrying out the specific

intention ofthe bilateral Speaking in general terms there would appea

to be four alternatives open to the Commission in dealing with these

supplemental agreements 1 The Commission it seems to me has 

clear responsibility to approve commercial agreements between carriers

implementing a bilateral agreement if freely arrived at that are clearly

ofthe type contemplated by and are consistent with the bilateral under

standings entered into by the Executive Branch To do otherwise

would make a mockery of the bilateral agreement process and the

orderly performance of our nation s international obligations 2 Simi

larly and for the same reasons commercial agreements between carr

ers that are directly inconsistent with the clear intent of a bilatera

agreement should be disapproved by our Commission 3 Where the

terms of a carrier agreement purporting to implement a bilateral agree

ment deal with issues whioh the bilateral does not require to be covered

or provides that certain issues should be dealt with by the carriers bu

does not indicate what the resolution of the issues should be th

Commission should consider the supplemental agreement under th

same principles it applies to other Section 15 agreements coming befor

it with the fact it is related to the bilateral agreement simply being on

of the elements to be considered in reaching a decision on the matter

4 Finally if an agreement whioh purports to be a commercial agree

ment between carriers in implementation of a bilateral agreement is in

fact one dictated unilaterally by the foreign government signatory t

the bilateral the Commission should neither disapprove nor approve

the agreement but instead refuse to take jurisdiction passing th

matter back to the Exeoutive Branch for renewed negotiation of th

matter with the other country under the continuing negotiation prov

sions contained in most bilaterals The Commission s jurisdiction is ove
CARGO REVENUE POOLING EQUAL ACCESS AGREEMENTS 619

commercial agreements between carriers not agreements unilaterally

forced upon carriers by a foreign government

These general principles are easy to state but not always simple to

apply

The Commission in this case has in effect found that the northbound

agreements may not fit into the first two categories set forth above and

that they must therefore be investigated further to determine their

status and to aid the Commission in its decision on the approvability of

the agreements With this conclusion Iam in complete accord

The southbound agreements present a somewhat less clear situation

These agreements provide that substantially all of the liner cargo

moving to Argentina from the United States Atlantic and Gulf Coasts

will be divided between one U S flag carrier and two Argentine flag

carriers in each of the two trades on a fifty fifty national flag basis

There are no third flag carriers Apparently the third flag carriers that

were in the trade have withdrawn primarily because virtually all ofthe

liner cargo moving to Argentina has been designated government

cargo by the Argentine Government and hence is not available to

third flag vessels

The fifty fifty division between the U S and Argentine carriers re

sults from the agreements executed by these carriers which we are

considering not the bilateral agreement That legal document is silent

as to the division to be made of the southbound traffic or the north

bound traffic for that matter or the mechanics to be followed in the

southbound division except to state that the two governments will

enter into an understanding providing for access to government con

trolled cargoes in accord with the appropriate legislation in each coun

try The meaning of this provision is obscure There is nothing in the

record to indicate that such an intergovernmental understanding has

been reached permitting virtually all southbound cargo to be treated as

government controlled cargo by unilateral edict of the Argentine

Government One must conclude from the record presently before the

Commission that the United States has not agreed with the Argentine

Government to this apparently broad definition that appears to turn

cargo that in most ocean trades would be ordinary commercial liner

cargo into government controlled cargo Ifthat has not been agreed

to in the bilateral or otherwise by the United States these supplementa

ry agreements between the U S and Argentine carriers which by their

very nature accept this arbitrary unilateral definition would appear to

be the operating force that perpetuate the exclusion of third flag carri

ers which would normally be active on important sea routes of this

kind While such discrimination might conceivably be in the policy

interests ofthe United States and hence be something a bilateral might

agree to the absence of such approval here would appear to present

the Commission with agreements that on their face at least are not
620 FEDERAL MARITIME COMMISSION

consistent with the statutory restrictions under which the Commission

operates

The record covering these agreements and their predecessors is re

plete with indications of unilateral activity by the Argentine Govern

ment activity which appears to have inhibited the normal competitive

activities of ocean carriers The Commission has a

responsibility under

the Shipping Act to disapprove agreements that unjustly discriminate

between carriers This obligation covers not only agreements specifical

ly discriminatory by their terms but also agreements where the entire

setting in which they arise inhibits carriers from participating at all in

the trades in question Thus in these U S Argentine trades there are

third flag carriers operating in the northbound trades none of whom

are in the southbound trades This is not a normal pattern of ocean

shipping

This possible sub silentio exclusion of carriers is one of the bases for

my position that these southbound agreements require investigation I

the very subject matter ofthe agreements has been unilaterally defined

by the Argentine Government so as to exclude formal participation by

third flag carriers as may be the case here we cannot under the

Shipping Act give these agreements our stamp of approval unless they

reflect the execution of specific provisions of the bilateral agreement

involved In fact if this is what has happened here such agreements

would appear to be beyond our jurisdiction and they would have to be

dealt with in intergovernment negotiation 8S was apparently contem

plated by the bilateral It should also be pointed out that the bilatera

agreement here appears to contemplate the participation of third flag

carriers in the southbound trades Paragraph I of the Memorandum

states

Each Party recognizes the intention of the other Party in

carrying a substantial portion ofits liner trade in vessels of its

own flag in accord with appropriate legislation in each coun

try This provision established in the light ofthe reciprocal

interests ofthe two countries does not affect the rights of flag

vessels ofthird parties to carry goods between the ports of the

two Parties

Thus in addition to being contrary to ordinary commercial practice

the failure of these Agreements to provide for participation by third

flag carriers may not only be unauthorized specifically by the bilatera

but it may exceed the restrictions on prevention of competition in the

Argentine trades negotiated by the United States

In taking this position on these agreements I am not passing on the

wisdom of the division of virtually all of the liner cargo between one

U S flag carrier and two Argentine carriers in each of these two

important southbound trades But such a fundamental decision affect

ing as it dpes our exporters our foreign trade and ultimately ou
CARGO REVENUE POOLING EQUAL ACCESS AGREEMENTS 621

economy as well as the economic position of the us carriers in

volved should be negotiated by the Executive Branch using its broad

est authority It should not be made by the Argentine Government

alone or by the carriers without the sanction of bilateral approval of

the two governments Without such bilateral approval it would not

appear to be an action which this Commission could properly take

under the statutory constraints against discrimination that govern the

Commission Nor can we hope to work out a reasonable solution by

negotiation We are a quasi judicial body operating under strict due

process requirements The normal informal give and take ofthe negoti

ating process is not available to us

These southbound agreements appear to be deficient in another re

spect They contain provisions that seem to prevent any new us

carrier from entering these trades without getting the approval of the

incumbent U S flag carrier in each trade affected and ofthe Argentine

Government If this is their effect it is difficult to believe that our

negotiators intended a foreign government to be able to exclude a U S

flag carrier from one of our trade routes or to permit one U S carrier

to veto the competition ofanother

The undercarriage provisions also appear to be potentially unfair and

need investigation

For all ofthe foregoing reasons these agreements require the further

scrutiny of a thorough investigation Such an endeavor has been dis

couraged in a rather obvious fashion by the maritime authorities of

Argentina Strong suggestions have been made to the Federal Maritime

Commission the State Department and the Maritime Administration

that our failure to approve these agreements promptly would lead to

the resumption of harassment of our carriers This has made the US

carriers involved understandably uneasy and it has been suggested that

the Commission must approve the agreements without further ado

because of these thinly veiled threats We cannot shirk our statutory

responsibilities on such a basis however much we may dislike such

tactics and have concern for U S flag carriers

It is also said by some that agreements of this kind should not be

investigated ordisapproved but instead should be approved perfunctori

ly because of the principle of comity While as a civilized country we

try to avoid unnecessary conflict with other nations it does not mean

that the Commission can ignore the statutes of the United States under

which we operate simply to accommodate the unilateral wishes of

another country Should after an investigation our decision lead to

disapproval ofagreements ofthe kind before us in this case the Execu

tive Branch may undertake intergovernment negotiations with the other

country on the issues at stake and if the United States Government is

of the view that comity requires acceptance of the other country s

views after consideration of the totality of its impact on our economy
622 FEDERAL MARITIME COMMISSION

and our carriers it can accede to those wishes If on the other hand 

does not feel that the other country s position is consistent with U 

interests our negotiators too have bargaining tools that would n

leave us defenseless in such a situation tools that would be used o

would hope fairly but vigorously

We are also told that these agreements should be forthwith approv

because they are advantageous to the two U S flag carriers in the

trades As stated above our statutory authority does not give us t

right to discriminate in favor of any carrier U S or otherwise Nor 

we play the role in our governmental structure of the promoter of o

merchant fleet That worthy goal is for others to perform Our task 

regulation of international shipping where many foreign nations fe

we are impinging on their sovereignty is difficult enough witho

adding the complication of national flag favoritism Instead our role 

to seek to maintain a balance in our commercial sealanes betwe

completely unfetterec competition and a market with some restraints 

such competition such as is common in most of the maritime countr

with which we share these sealanes We must meet our statuto

obligations and deal with the broad economic effect on our forei

commerce and not simply the impact on a few U S carriers howev

much we may have personal concern for their economic wellbein

Any harm flowing from such restraint on our part can always 

corrected by negotiations by our Executive Branch with the oth

country involved

I must stress that Ihave not made up my mind whether the nor

bound agreements in this case should be approved and I cannot do 

until the results of the investigation we have ordered are at hand 

would have liked in the case ofthe southbound agreements to have h

a similar opportunity for a reasoned decision based on a more comple

record than we have now before us Inshort the anatomy ofthe ent

U S Argentine ocean trade in both directions is at issue here T

northbound and southbound agreements are inextricably intertwine

The question of the possible unilateral interference by the Argent

government in these agreements and the background from which th

spring permeates the entire ocean transport structure between the

two countries That Government s role and the economic impact of

resultant terms of all of these agreements both northbound and sou

bound require closer scrutiny if we are to fulfill our statutory respon

bilities
FEDERAL MARITIME COMMISSION

DOCKET NO 80 3

CONTINENTAL FORWARDING INC

INDEPENDENT OCEAN FREIGHT FORWARDER APPLICATION

AND POSSIBLE STATUTORY VIOLATIONS

Application No B 349 denied

Civil penalty of 17 500 assessed for repeated and wilful violations of section 44 of the

Shipping Act 1916

Joseph B Slunt Charles C Hunter William Weiswasser and Paul J Kaller Bureau of

Hearing Counsel

Car os Rodriguez for Continental Forwarding Inc

ORDER PARTIALLY ADOPTING INITIAL DECISION

February 2 1981

This matter comes before the Commission on Exceptions to the

Initial Decision of Administrative Law Judge William Beasley Harris

filed by Continental Forwarding Inc A Reply to Exceptions was

submitted by the Commission s Bureau of Hearing Counsel Upon

review of both parties arguments and the assembled record the Com

mission has determined that the findings and conclusions ofthe Presid

ing Officer were for the most part sound and correct The Initial

Decision will therefore be adopted except to the extent it assesses a

civil penalty in excess of 17 500 and is otherwise inconsistent with the

following discussion ofthe case

BACKGROUND

Continentals license to operate as an independent ocean freight for

warder was revoked on December 2 1978 along with those of 134

other forwarders for failure to obtain and file with the Commission the

surety bond required by section 44 c of the Shipping Act 1916 46

U S c 841b c and section 510 9 of the Commission s Rules 46

C F R 510 9

1 The Order of Revocation was published in the January

1 Section 44 c states in pertinent part that

no license shall be issued or remain in force unless such forwarder shall have furnished a

bond orother security approved by the Commission in such form and amount as in the opin

ion of the Commission will insure financial responsibility

The Commission amended section 510 9 on July 24 1978 to require a 30 000 rather than a 10000

surety bond following rulemaking proceedings which sought and obtained numerous comments from

the forwarding industry Report and Order in Docket No 77 53 20 F M C 892 19 S RR 723 43 Fed

Reg 32 776 1980 No appeal was taken of this decision by Continental orany other interested party

21 FM C 621
624 FEDERAL MARITIME COMMISSION

3 1979 Federal Register 44 Fed Reg 953 and mailed to each affect

licensee including Continental 2 On January 19 1979 a follow 

questionnaire was also sent to the 135 persons named in the revocat

order

Petitions for reconsideration could be filed under the Commissio

Rules of Practice and Procedure 46 C F R 502 261 until February 

1979 but no such petition was filed by Continental February 2 19

was also the deadline for appealing the Commission s December I 19

revocation action to the United States Court of Appeals under 

U S c 2344 an action Continental also did not take

Sometime in early March 1979 Franz Zinssmeister the Preside

and 99 owner of Continental telephoned the Commission s Office 

Freight Forwarders and inquired as to the steps necessary to regain 

license He was told that a new application was required 3Applicati

materials which contained a form letter warning applicants agai

engaging in the business of forwarding before a license is issued w

sent to Continental on March 22 1979 4 On March 9 1979 Continen

was issued a 30 000 bond with retroactive coverage to December 

1978 by the Investor s Insurance Company ofAmerica 5

Continental did not tender an application until June 18 1979 a

then only in incomplete condition A revised application was submit

July II 1979 together with a statement that Continental had be

continuously operating as an unlicensed freight forwarder since Dece

ber 1 1978 The application was finally completed on August 6 19

when the Commission received a statement that Mr Zinssmeister h

read and understood the Commission s Freight Forwarder Regu

tions 46 C F R Part 510 6 On August 14 1979 Continental was ag

sent a form letter which cautioned it against unlicensed forwardi

A Commission field investigator met with Mr Zinssmeister 

August 16 and 17 1979 and advised Continental to cease freight f

2

Prior to December 1 1978 the Commission had mailed circular letters to each affected licen

advising it of the need to obtain a 30 000 bond Circular Letter Nos FF 1 78 and FP 2 78 Au

and November 1978 respectively These circular letters were summarized in asubsequent Fe

Register notice publi hed November 13 1978 43 Fed Reg 2 19 Affidavit of RobettG Drew d

February 28 1980 and exhibits thereto

a Drew affidavit Affidavit of Franz Zinssmeister dated August 21 1979 Me Zinssmeister was 

told that Continental s

application was likely to be granted even if Continental had engaged in u

thorized forwarding since December I 1978 Zinssmeister affidavit supra See aso Affidavit of C

Rodriquez dated March 31 1980 Thesediscussions betwecn

representatives of Continental and re

sentatives of the Office of Freight Forwarders were limited to an informal evaluation of Continen

past conduct There is no basis in the record for finding that Continental was advised that cont

unlicensed forwarding past March 1979 was in any way acceptable to the Commission

4 Drew affidavit and exhibits

6

Letter of Carlos Rodriguez to Charles Claw dated June IS 1979 The Commission received n

thatthi hand had been issued on March 13 1980

8 Drew affidavit and exhibits

7 F M C
CONTINENTAL FORWARDING INC

warding operations immediately 7

This advice was not followed Short

ly after Continental received the Commission s December 10 1979

Letter of Intent to Deny an arrangement was instituted whereby

Continental continued to serve its forwarding clients and receive ship

per handling fees by using the license and an employee of Pracht

International Inc another licensed forwarder At least 107 shipments

were handled in this manner until the scheme was uncovered by a

Commission investigator 8

Continental describes two events which allegedly contributed to its

neglect of the surety bond requirements and its unauthorized forward

ing operations prior to March 1979 The first of these is the fact that

Mr Zinssmeister injured his hand during a visit to Germany in August

1978 for which he was hospitalized for an unspecified period 9 He

returned to the United States and his office at Continental in Septem

ber 1978 where he was able to work sporadically and at reduced

levels lo No further information concerning the nature or extent of

Mr Zinssmeister s disability between August 1978 and June 1979 has

been provided and the record similarly fails to describe the arrange

ments if any made to assure responsible administration ofContinental s

activities during Mr Zinssmeister s absences from the freight forward

ing business 11

Continental also states that its failure to meet the increased bonding

requirements was due to its customary reliance upon a former bonding

company s practice of automatically renewing the various bonds re

quired by Mr Zinssmeister s business l2 There is however no indica

tion that the December I 1978 increased coverage deadline coincided

with the renewal period ofContinental s previous surety bond More

over Continental changed bonding companies before the December 1

1978 compliance date and presumably had an opportunity to review its

7

Affidavit of Joseph M Henderson dated February 26 1980 Continental handled 365 shipments

between December 1 1978 and August 31 1979 for which shipper fees totalling 14 862 00 and carrier

compensation of 5 24100 were received Affidavit of Franz Zinssmeister dated August 31 1979

8

Stipulation of the Parties dated July 3 and Appendix II thereto Another four shipments were

handled directly by Continental between September 1 and December 19 1979 for which Orient Over

seas Container Line paid brokerage to Continental Henderson affidavit and Exhibits 12 15 thereto

9

The injury is described by Respondent s counsel as the near loss of a hand necessitating sur

gery which included bone transfers Letter of Carlos Rodriguez supra However Mr Zinssmeister

testified that he had hurt a finger on a farm in Germany and came back and it was operated

here Transcript at 2l

10 Additional surgery was performed in theUnited States in September 1978 Id

11 Mr Zinssmeister returned to Germany from December 18 1978 to late February 1979 and again

from sometime in April until May 28 1979 Additional treatment was performed during these visits

Letter of Carlos Rodriguez supra Transcript at 21

12 Mr Zinssmeister is also engaged in customhouse brokering and other import export related busi

ness for which he requires over 20 different bonds Letter of Carlos Rodriguez supra Continental

letterhead found in exhibits to Henderson affidavit The freight forwarder portion of the business is

much smaller than the import portion Only 10 of Continental s 50 60 clients are engaged in export

activities requiring forwarder services Transcript at 20

625
626 FEDERAL MARITIME COMMISSION

bonding needs and procedures with the newly retained company at th

time 13 Again details which might establish that Continental wa

unfairly overcome by circumstances beyond its reasonable control ar

absent from the record

POSITION OF THE PARTIES

Continental contends that the Initial Decision is erroneous because

1 the Commission s failure to conduct an evidenti lry hearing befor

revoking licenses for noncompliance witl t the December 1 1978 bond

ing deadline violated Continental s constitutional right to due process o

law 2 arbitrary unpublicized and prejudiCial standards were em

ployed by the Commission in handling relicensing requests by person

named in the January 3 1979 Order of Revocation 3 mitigatin

factors which bear upon Continental s fitness to be licensed and its civ

penalty liability were given inadequate consideration by the Presidin

Officer and 4 the imposition of a 35 000 civil penalty was arbitrar

and unreasonable

Hearing Counsel in turn claims that 1 the validity ofContinenta

December I 1978 license revocation is irrelevant 2 the Commissio

did not employ impermissible standards for evaluating relicensing r

quests arising from the December I 1978 bonding violations 3 th

Commission s procedures for handling relicensing requests had no a

verse impact upon Continental and 4 Continental s wilful violation

of section 44 were not sufficiently offset by mitigating circumstances 

warrant a finding of fitness or a reduction of civil penalty liabilit

below 17 500 Hearing Counsel joins Continental in excepting to th

Presiding Officer s rejection of the proposed 17 500 civil penalty se

tlement negotiated by the parties

DISCUSSION

THE PRIOR REVOCATION

The validity of the Commission s Order of Revocation is relevant 

the present proceeding especially with regard to possible civil penal

assessments Although Continental due process argument cannot 

disregarded this contention has slight substantive merit and is presente

in a mannerwhich accentuates rather than minimizes the impropriety 

Continental s conduct during the period running roughly from Augu

I 1978 through June 30 1980 14

Generally speaking license revocation does require a prior opport

nity to be heard on disputed aJld material questions of fact or law 

principle which is reflected in section 44 ofthe Shipping Act 1916 

13 Transcript at 21 23

14 Continental has yet to institute administrative orjudicial proceedings to affirmatively reinstate 

prior license Instead it attempts to use perceived due process deficiencies as an ongoing exemp

from the requirements of the Shipping Act and theCommission s

regulations
CONTINENTAL FORWARDING INC

V S C 84Ib Yet exceptions to this general rule can and do occur

when a valid governmental interest is at stake which justifies postpon

ing the time or altering the manner of hearing 15 One such governmen

tal interest is the maintenance of a

surety bond by freight forwarder

licensees to protect the financial interests of their shipper clients By

enacting Shipping Act section 44 c which makes adequate bonding an

express precondition to the issuance or retention of a

freight forwarder

license Congress created an exception to the more broadly worded

section 44 d and authorized immediate license revocation for failure to

maintain a surety bond 16 This action was taken following extensive

legislative hearings which among other things uncovered longstanding

abuses in the forwarding industry 17

The automatic revocation procedures in section 510 9 of the Commis

sion s Rules merely reflect the statutory requirement of section 44 C

18

Continental s true complaint therefore lies against section 44 c itself

and to that extent is beyond this agency s authority to adjudicate 19

Moreover Continental was given an opportunity to be heard which

was meaningful under the circumstances Notice of the 30 000 bond

requirement was twice mailed to Continental before the December I

1978 deadline and twice published in the Federal Register Following

service of the Commission s January 3 1979 revocation order and the

January 19 1979 follow up questionnaire licensees wishing to challenge

the factual basis for the action taken against their license could do so

upon filing a timely petition for reconsideration 20 Even licensees

us Calero Toledo v Pearson Yacht Leasing Co 416 U S 663 678 680 1974 R A Holman Co v

Securities and Exchange Commission 299 F ld 127 131 132 DC Cir 1962 cert den 370 U S 911

1962 Cf Boddie v Connecticut 401 Us 371 378 379 1970 Section 558 c of the Administrative

Procedure Act 5 D S C 558 c imposes prior notice and opportunity for compliance requirements in

license revocation proceedings which exceed those necessitated by due process These statutory proce

dures are inapplicable however in casesof wilfulness or those in which prompt action is required

by public health interest orsafety Although the notices sent to Continental were sufficient to have

satisfied section 558 c under the circumstances the wilfulness and public interest exemptions both

apply to revocations based upon the lapse of asurety bond

16 Note 1 supra contains the pertinent portion of section 44 c The requirement that no license

remain in force without abond being on file with theCommission supercedes section44 d s hearing

requirements

17 See e g Providing for Licensing and Compensation of Independent Ocean Freight Forwarders Sen

Report No 691 87th Cong 1st Sess 1961 statement of Senator Yarborough in Hearings before a

Subcommittee of the Senate Committee on Commerce 87th Cong 1st Sess July 27 1961 at 1 2

18 Section 51O 9 s

proviso clause was adopted on June 12 1967 32 Fed Reg 8523 corrected 32

Fed Reg 9170 Objections to the rule based on an alleged right to aprior hearing were denied by the

Commission at that time No appeal was taken

19 SeePublic Utilities Commission v United States 355 U S 534 539 540 1958

20 Possession of avalid bond in the higher amount was the only issue which could have been exam

ined in a

prior hearing Licensees which subsequently demonstrated that they were in compliance on

December I 1978 were successful in obtaining orders vacating the Commission s January 3 1979

Orderof Revocation It is undisputed that Continental did not possess a 30 000 bond on December 1

1978

627
628 FEDERAL MARITIME COMMISSION

which were without the necessary bond on December 1 1978 wer

granted reinstatement if they obtained a retroactive bond and petitioned

the Commission by February 2 1979 For reasons yet to be adequatel

explained Continental neglected to take advantage of this opportunity

USE OF UNLAWFUL PROCEDURAL STANDARDS

Continental finds fault with the relatively lenient procedures ex

tended to forwarders named in the January 3 1979 Order of Revoca

tion which sought license reinstatement on or before February 2 1979

Under this arrangement licenses were reinstated if a 30 000 bond wit

coverage retroactive to December 1 1978 was obtained and a reques

for reconsideration was made by February 2 1979 21 No inquiry wa

made into possible unlicensed forwarding activities by persons whic

met these standards Forwarders seeking reinstatement after February 

1979 or which failed to obtain a retroactive bond were required t

submit a new license application pay a 125 application fee and unde

go the background investigation routinely conducted in the case of new

applicants Continental now states that these practices were arbitrar

and unfair and have adversely affected Continental

Continentals assertions pertaining to the procedures applied to i

relicensing efforts and to those of former forwarders which acted in 

more timely and conscientious fashion are difficult to follow Th

insidious secret calendar allegedly employed by the Commission wa

anything but arbitrary The February 2 1979 cut off date was the en

of the standard 30 day reconsideration period specified in sectio

502 261 of the Commission s Rules The failure to publicize the ava

ability of a grace period for unlicensed forwarding activities cou

not have injured Continental in light ofits admitted unresponsiveness 

its licensing problem until late February 1979 22 Therefore Cont

nental s complaint of discriminatory treatment seemingly boils down 

the following notion the Commission by excusing possible unlicense

activities by former forwarders which were properly bonded befo

February 3 1979 cannot consider the unlicensed activities of a forme

forwarder which did not meet the new bonding standards until Marc

13 1979 neglected to tender an application until June 18 1979 an

refused to cease forwarding operations when advised of the need to d

so

23

at The possibility of securing reinstatement by obtaining aretroactive bond before February 3 1

originated with the Bureau of Certification and Licensing and was subsequently endorsed by the Co

mission

22 Affidavit of Franz Zinssmeister supra Although Continental only states th t Mr Zinssmeis

was unaware of the license revocation it must be assumed that any other Continental employees 

thorized to obtain 8higher bond or to seek license reinstatement would have been as immobile 

response to the public announcement of a6Oday grace period 8S they were to the Commission s ot

public and private notices in this matter See Transcript at 23 24

as Mr Zinssmeister was informed by Office of Freight Forwarder personnel in early March t

it was too late to obtain reinstatement by petition and that Continental must submit a new lice
CONTINENTAL FORWARDING INC

Although there were procedural irregularities in the Commission s

treatment of the large number ofreinstatement requests received during

the period immediately following the December I 1978 revocations 24

Continental has failed to demonstrate a single instance where substan

tially similar applicants were treated differently in any material manner

Only three of the cases listed in the Stipulation of the Parties dated

June 17 1980 even suggest the presence of unjustified discrimination

Examination of these cases reveals that they are readily distinguishable

from the current controversy

Pouch Forwarding Corporation and Apollo International Company

were former forwarders which contacted the Commission s staff by

telephone before February 3 1979 but did not obtain bonds until after

the cut off date They also failed to arrange for retroactive coverage

Both were required to submit new applications However both appli

cants also ceased all forwarding activities immediately upon receiving

oral warnings from the Office of Freight Forwarders so that less than

60 days ofunlicensed forwarding was involved

Ibertresa U S A Inc obtained reinstatement of its license without

filing a new application despite its failure to request such relief until

June 19 1979 Although in letter form Ibertresa s written request was

treated as a petition for extraordinary relief See 46 CF R 502 69 and

was granted on October 17 1979 There were sufficient differences

between Ibertresa s situation and Continental s to account for the fact

that Continental was required to file a new application rather than to

proceed by petition Furthermore the procedures followed were not

determinative the application of different procedures would not have

led to a different result in either case

Ibertresa alleged that it possessed 30 000 bond coverage on Decem

ber I 1978 by virtue of having paid the requisite premium to its

bonding company on November 8 1978 but that the bonding company

had failed to complete the necessary paperwork The bonding compa

ny s admission of error and other extenuating circumstances led the

Commission to grant Ibertresa s

request to vacate the order revoking its

license 25 Unlike Ibertresa Continental was never alleged to have been

properly bonded before March 9 1979

application Transcript at 25 A complete application was not filed until August 6 1979 and no attempt

was made to petition the Commission for relief from proceeding by application or for expedited con

sideration of Continental s cause even though Continental was apparently represented by counsel at

least as early as May 1979 Affidavit of Carlos Rodriquez dated March 31 1980

24 The most noticeable of these irregularities was the failure to require the submission of pleadings

which met the formal requirements of 46 CER Part 502 Even oral requests may have been accept

ed SeeDeposition of Charles LClow dated April 29 1980 at 48 52

26 Ibertresa subsequently withdrew from the forwarding business and surrendered its license See

Order of Revocation served December 15 1980

629
630 FEDERAL MARITIME COMMISSION

Makeweight as Continentals claims of prejudicial treatment appe

to be it is fair and appropriate that Continental be allowed the sam

uncritical acceptance of its continued forwarding activities prior 

February 3 1979 that was given other former licensees Accordingl

no civil penalties will be asses led for conduct which occurred befo

that date 28

MITIGATING FACTORS

Continental complains that the Presiding Officer gave insufficie

weight to certain of the mitigating factors recognized by proposed U 

Customs Services guidelines applicable to violations of 19 U S 

1592 27 These factors are prior good behavior contributing 

error cooperation with investigators and immediately takini remed

action Although the relevance of Customs Service practices to t

instant controversy has not been established each of these factors h

been considered by the Commission On balance they provide no ba

for excusing Continental from civil penalties for violations of section 

or for finding Continental fit to perform the duties of an independe

ocean freight forwarder

Continental claims it did not deliberately continue forwarding aft

December I 1978 The evidence plainly establishes that the contra

is true Notice of the Commission s license revocation action was r

ceived by Continental but was ignored by the person regularly entru

ed with handling the freight forwarding aspects of Continenta

import export business u Even if Mr Zinssmeister rather than t

Continental corporation were the licensee there can be no doubt th

he knowingly wilfully and deliberately continued to operate as 

freight forwarder after he discovered the license revocation In fa

Mr Zinnsmeister went so far as to arrange for Continental s surrep

tious use ofanother forwarder s license

Continental further contends that Mr Zinssmeister s unawareness 

the revocation action until late February 1979 is itself grounds f

mitigation Under the circumstances this fact only underscores an a

28 The August 31 1979 affidavit of Franz Zinssmeister state that Contin ntal hanc lled 365 exp

shipments between December I 1978 and August 31 1979 but this statemeilt is supported by do

mentafY evidence detailing only 10 representative shipments See Henderson affidavit supra and 

hibits thereto Six of the documented shipments apparently did occur after February 2 1979 

rather than remand this matter to develop further proof concerning shipments which may have b

unlawfully handled by Continental after the 6Oday December 1978 through January 1979 sr

period afforded other forwarders the Commission has determined to consider norie of the initial 

hipments for civil penalty purpaPenaltie will be e sed only on the III hipment which 

curred after Continental was personally visited n and plainly cautioned by investigator Henders

d

Theseguidelines appear at 45 Fed Rell 62954 1980 and apply to the varying penaltie provi

for the three type of cu tam offenestabU hed by 19 U S C 1592 conduct ba ed upon fraud gr

negligence and negligence

ll8

Transcript at 23 24
CONTINENTAL FORWARDING INC

parent failure on the part of Continental s officers and directors to

properly administer and control their employees and to make reasona

ble arrangements for receiving and replying to Commission communi

cations In Lesco Packing Co Inc 19 F M C 132 136 137 1976

where a forwarder application was denied On fitness grounds the Com

mission stated that licensees have a duty to possess read understand

and meticulously follow agency regulations and to respond to agency

communications in a timely responsible fashion Continental has offered

nO plausible excuse for its failure to take appropriate action in response

to the Commission s Order of Revocation or the oral and subsequent

written statements ofthe Office ofFreight Forwarders 29

Continental argues that its continued forwarding operations were not

deliberate because Mr Zinssmeister believed the Commission would

relicense Continental just as it relicensed other former forwarders

which obtained retroactive bonds A belief that a timely filed license

application would eventually be granted and a belief that it was permis

sible to operate unlawfully until such time as the applicant deemed it

appropriate to stop are two quite different beliefs Continental was

advised that continued forwarding was unlawful at each stage of its

dealings with the Commission s staff and was expressly advised that its

application was deficient by the Commission s December 10 1979

Letter of Intent to Deny Yet the violations continued until June

1980

The Commission committed no errors which contributed to the

duration or extent of Continentals unlicensed forwarding activities

Instead the record indicates that Continental knowingly assumed the

risks of ignoring the Order of Revocation based upon r Zinssmeis

ter s personal evaluation of the circumstances The longer Continental

waited to file a

complete application the larger grew the risk oflicense

denial Consequently when the Commission was presented with Conti

nental s application in November 1979 it did not see an applicant

which had striven to extricate itself from unlicensed forwarder status in

a timely and straightforward fashion but rather an applicant content to

drag its feet at the expense of the regulatory scheme mandated by

section 44 ofthe Shipping Act Most matters presented to the Commis

sion involve questions of degree In deciding how much unlicensed

29 During the oral hearing Mr Zinssmeister indicated that aMr Alfred Chestnut had been entrust

ed with managing Continental s

forwarding business during late 1978 and 1979 that the Commission s

revocation notices were received by Continental and that these notices were probably seen by Mr

Chestnut Transcript at 23 24 Continental cannot avoid responsibility for its inaction simply by throw

ing Mr Chestnut into the fire It mustoffer some justification for its decision to leave Mr Chestnut

who had achronic health problem during this period nin charge of the forwarding business without

meaningful supervision Moreover Continental still lists him and Mr Zinssmesiter in its application as

two of three individuals which qualify Continental as fit willing and able to operate as a licensed

forwarder Transcript at 23 24 Exhibit No 9to Drew Affidavit

631
632 FEDERAL MARITIME COMMISSION

forwarding was too much the Commission reasonably concluded tha

the seven months which elapsed before Continental perfected its appl

cation was a period of sufficient length to establish doubt that th

applicant had acted in good faith and was otherwise qualified fo

licensing 30

Continentals efforts to obtain a retroactive bond within two or thre

weeks after Mr Zinssmeister learned ofthe license revocation does no

constitute remedial action The offense Continental has committed 

unlicensed forwarding It can only be remedied by obtaining a vali

license or by halting forwarder operations Although proper bonding 

a necessary step in the licensing process Continental was less tha

diligent in filing the necessary application and did not stop its forward

ing activities until June 1980 In short Continentals failure to tak

remedial action speaks against mitigation ofthe penalties prescribed fo

the unlicensed forwarding which occurred after August 31 1979 3

Another of Continental s mitigation arguments is its alleged willing

ness to cooperate with the Commission s investigation of its activitie

but Continental has not established that this cooperation consisted o

anything more than that required ofall licensees under section 510 24 

of the Commission s Rules 32 Moreover Continentals failure to tak

remedial action until June 1980 and its affirmative efforts to continu

forwarding activities during the first half of 1980 are inconsistent with 

finding that Continental warrants any special consideration for coop

erativeness in this matter 33

Continental s fmal plea in mitigation is that its previous record as 

freight forwarder both before and after its licensing under section 44 

1965 is completely free of regulatory violations or even allegations o

such violations 34 This factor was recognized by the Presiding Office

ID at 17 and will be given appropriate consideration by the Commi

sion

PENALTY ASSESSMENT AND FITNESS TO BE LICENSED

The Commission has deCided to reduce the penalty assessment 

17 500 for two reasons The primary basis for this action is the fa

that penalties are being assessed only for the III violations of sectio

so See also pages 11 15 supra regarding the procedural errorsalleged by Continental

31 See note 25 supra

46 CP R 5241 provides that

Each licensee shall make available promptly all records and books of account in connection

with carrying on the business of forwarding forinspection or reproducing orother official

use upon the request of any authorized representative of theCommission

33 Continentals use of Pracht s license was discovered in June 1980 as aresult of third party 

quiry by aCommission investigator Transcript at 43 49

34 Continental first registered as afreight forwarder on March 24 1958 under Commission regu

tions which preceded the freight forwarder licensing legislation enacted in 1961 P L87 254 75 S

522
CONTINENTAL FORWARDING INC

44 a which occurred after August 31 1979 A

secondary consideration

is Continentals prior good behavior as an ocean freight forwarder

Finally it is concluded that Continental is not fit to be licensed as an

independent ocean freight forwarder Except for its attempt to create

the false appearance that its forwarding activities had stopped in De

cember 1979 no single act of Continental s may have been egregious

enough to require denial of the application Taken altogether however

the picture that appears is one of consistent dereliction of the duty to

respond to official communications and to control the activities of its

agents A person proven to be unresponsive to such fundamental regu

latory interests as adherence to a widely publicized industry wide

change in bonding amount a license revocation order and requests to

stop unlawful forwarding activities is unfit to be licensed This result is

consistent with the Commission s action in similar instances ofprotract

ed and deliberate unlicensed forwarding by applicants Cargo Systems

International 22 F MC 56 71 72 1979 Concordia International For

warding Corp 21 F MC 587 592 1978 Alvarez Shipping Co Inc 16

FMC 78 81 1973 Harry Kaufman 16 F MC 256 271 1973 See

also Fast International Forwarding Corp 21 F MC 1076 1080 1081

1979

THEREFORE IT IS ORDERED That the independent ocean

freight forwarder application of Continental Forwarding Inc No B

349 is denied and

IT IS FURTHER ORDERED That Continental Forwarding Inc

pay to the Federal Maritime Commission a civil penalty of 17 500 in

accordance with the proposed agreement entered into by Continental

and the Bureau ofHearing Counsel in June 1980 and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

633
FEDERAL MARITIME COMMISSION

DOCKET NO 80 3

CONTINENTAL FORWARDING INC INDEPENDENT

OCEAN FREIGHT FORWARDER LICENSE APPLICATION AND

POSSIBLE VIOLATIONS OF SECTION 44 SHIPPING ACT 1916

Application denied

Civil Penalty assessed Respondent pursuant to section 32 e of the Shipping Act 1916 

the amount of 35 000

Joseph B Slunt Charles C Hunter William Weiswasser and Paul J Kaller Actin

Director Bureau of Hearing Counsel for Commission s Bureau of Hearing Couns

Carlos Rodriguez for Respondent

INITIAL DECISION1 OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Partially Adopted February 2 1981

The Commission by its Order of Investigation and Hearing 2 serve

January 17 1980 instituted this proceeding pursuant to sections 22 an

44 46 U S C 821 841 b of the Shipping Act 1916 and section 510 

of the Commission s General Order 4 46 C F R 510 8 to determine

1 Whether Continental Forwarding Inc violated section 44 a

Shipping Act 1916 by engaging in unlicensed forwarding a

tivities

2 Whether Continental Forwarding Inc violated section 44 

of the Shipping Act 1916 by falsely certifying to ocean carr

ers that it was licensed as an independent ocean freight fo

warder and entitled to receive ocean carrier compensatio

after its license was revoked and or by accepting ocean carr

er compensation it was not qualified to receive for shipment

forwarded after its license was revoked

3 Whether civil penalties should be assessed against Continent

Forwarding Inc pursuant to 46 U S C 831 e for violation

of the Shipping Act 1916 and if so the amount of any suc

penalty which should be imposed taking into consideratio

factors in possible mitigation of such a penalty

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227

Published in Federal Register Vol 45 No 16 Wednesday January 23 1980 Pages 5394 539
CONTINENTAL FORWARDING INC

4 Whether in light ofthe evidence adduced pursuant to the first

and second issues together with any other evidence adduced

Continental Forwarding Inc and its corporate officers pos

sess the requisite fitness within the meaning of section 44 b

Shipping Act 1916 to be licensed as an independent ocean

freight forwarder

BACKGROUND

Continental Forwarding Inc Continental or Respondent was li

censed as an independent ocean freight forwarder License No 457

until its license was revoked effective December 2 1978 for failure to

file with the Commission a surety bond in the amount of 30 000

pursuant to the decision in Licensing of Independent Freight Forwarders

Docket No 77 53 20 F M C 892 served July 24 1978 3The instant

application by Continental dated May 30 1979 seeks a license as an

independent freight forwarder

During the course of the Commission s

investigation ofContinental s

application it was learned that the firm apparently had engaged in

ocean freight forwarding after the revocation of its license 4

By letter

dated December 10 1979 the Commission notified Continental of its

intent to deny its application for a license unless the applicant requested

a hearing 5

In a letter dated December 31 1979 Continental requested that it be

given a hearing on the intended denial 6

On Friday April 11 1980 the parties to this proceeding requested

and were granted an informal prehearing conference which was held

in the office of the Presiding Administrative Law Judge At said pre

hearing conference it was revealed the parties had begun discussion of

the issues 7It was agreed the parties would file a status report on or

before Friday May 9 1980 The status report was submitted May 9

1980 jointly by the parties additional time to draft stipulations and

review depositions taken was sought to June 6 1980 and was granted

Ifhearing is necessary it was set to begin on June 17 1980 Hearing in

this proceeding began and concluded on Tuesday June 17 1980 The

parties agreed I to file simultaneous opening briefs on or before

Thursday July 24 1980 and 2 to file simultaneous reply briefs on or

before Thursday August 7 1980 The briefs werefiled timely

Each party to this proceeding submitted

I Opening Memorandum ofLaw

2 Opening Brief

3

Instant Order of Investigation and Hearing served herein January 17 1980 page L

4

Ibid

Ibid

p 2

6

Ibid

7 Memorandum of Prehearing Conference served April 14 1980

635
636 FEDERAL MARITIME COMMISSION

3 Reply Brief

Hearing Counsel in its Opening Memorandum of Law served March

3 1980 proposed 30 findings of fact in its Opening Brief served July

24 1980 8

proposed 20 supplemental findings of fact These total 5

proposed findings offact

The Respondent in its Opening Memorandum ofLaw served March

31 1980 proposed 14 findings offact in its Opening Brief served July

24 1980 proposed 18 findings of fact and in its Reply Brief served

August 7 1980 proposed 1 supplemental finding offact These total 3

proposed findings of fact Of these 33 proposed findings of fact by th

Respondent Hearing Counsel disputed 6 Numbers 10 11 12 13 an

14 of those in Respondent s Opening Memorandum and No 10 in

Respondent s Opening Brief

All proposed findings of fact total 83

The Presiding Administrative Law Judge has considered all ofthe 8

proposed findings of fact and the disputation to 6 of them by Hearing

Counsel After consideration the proposed findings of fact have bee

granted granted in substance or denied as shown by the facts herein

after set forth In compliance with Rule 169 referred to above and wit

consideration of the entire record herein the Presiding Administrativ

Law Judge finds the facts in this proceeding as follows

FACTS

Continental Forwarding Inc Respondent or Applicant formed i

1958 has been a freight forwarder since March ofthat year On May 3

1965 Respondent was issued FMC Independent Ocean Freight For

warder License Number 457 effective as ofApril 30 1965

Respondent s License No 457 was revoked automatically on Decem

ber 2 1978 Respondent had failed to file with the Commission a

required a surety bond in the increased amount of 30 000 bearing a

effective date of December 1 1978 on or before December 1 1978

The parties stipulated the Commission issued a Notice of Revocation

published in the Federal Register on January 3 1979 wherein notic

was given of the independent ocean freight forwarders who failed t

file with the Commission a surety bond bearing an effective date o

December 1 1978 in the amount of 30 000 and whose licenses wer

revoked effective December 2 19789 Exhibit No 1 Stipulation No 1

Prior to the December 2 1978 revocation of Respondent s license

the Respondent was clear ofany complaints as to possible violations by

8

At page 3 purports to list the material of which the record consists in this proceeding The Pr

siding Administrative Law Judge in accordance with Rule 169 of the Commission s Rules of Practic

and Procedure 46 C P R 502 169 asserts the transcript of testimony and exhibits together with a

papers and requests tiled in the proceeding constitute the exclusive record for decision

S The affidavit of Robert M Drew has attached to it a

copy of the Revocation Notice Exhibit 

containing atotal of 148 licensees among which is listed the Respondent
CONTINENTAL FORWARDING INC

it of any of the laws applicable to independent ocean freight forward

ers Only after the December 2 1978 revocation of Respondent s

license did questions oflaw violations arise

On March 13 1979 the Commission s Office of Freight Forwarders

received notice of the issuance of a surety bond in the amount of

30 000 bearing the effective date of December I 1978 which covered

Respondents ocean freight forwarding activities Affidavit of Robert

M Drew page 4 para 15

On May 30 1979 the Respondent applied for an Independent Ocean

Freight Forwarder License That application on June 19 1979 was

returned to Respondent as incomplete The application was resubmitted

on July 11 1979 with a covering letter from Respondent s counsel

stating inter alia that the Respondent had not interrupted its forward

ing service Affidavit of Robert G Drew Attachment Exhibit No

12

The parties stipulated that the Commission s Bureau of Certification

and Licensing recommended that Continental Forwarding Inc be

issued a new license and that the apparent unlicensed forwarding activi

ties be the subject of a civil penalty claim The Commission decided

instead to issue a letter ofintent to deny Continental s application Exh

No I

page 5 Stipulation No 10 of Parties

On July 11 1979 District Investigator Joseph M Henderson of the

Commission s Atlantic District Office was assigned to investigate Con

tinental Forwarding Inc to ascertain whether Continental had contin

ued to engage in carrying on the business of ocean freight forwarding

after revocation oftheir Independent Ocean Freight Forwarder License

Number 457 effective December 2 1979 Investigator Henderson made

trips to the offices of Respondent on August 16 and 17 1979 and each

time advised Respondent s President Franz Zinssmeister that Respond

ent should cease its ocean freight forwarding activities immediately

In an affidavit subscribed and sworn to August 31 1979 Franz

Zinssmeister President Continental Forwarding Inc stated inter alia

that Continental has since December 1 1978 to the present August 31

1979 completed three hundred sixty five 365 shipments for export

that for these shipments approximately 14 862 00 has been billed for

forwarding fees and approximately 5 24100 brokerage has been col

lected Affidavit of Joseph M Henderson Attachment Exhibit 1

The stipulations 1 and 10 referred to above are part of 11 contained

in Stipulation received in evidence herein as Exhibit No 1 The other

stipulations provide substantially as follows No 2 that 8 licensees

were erroneously listed in the Notice of Revocation as they met all

bonding requirements prior to December 1 1976 No 3 that 36

licensees who secured valid surety bonds in the amount of 30 000 on

or before December 1 1978 were listed in the Notice ofRevocation as

the bonds werenot submitted to the Commission by December 2 1978

637
638 FEDERAL MARITIME COMMISSION

The Notice of Revocation as it pertained to those 36 licensees was

vacated based upon evidence that the 30 000 bonds were in effect

continuously from December I 1978 No 4 that 2 licensees had their

licenses reinstated after they filed the prescribed 30 000 surety bonds

with effective dates on or before December I 1978 No 5 that 7

licensees obtained surety bonds in the amount of 30 000 after Decem

ber I 1978 with effective dates on or before December I 1978 and

submitted them prior to February 2 1979 The Commission issued a

Notice Vacating Revocation ofthose licenses No 6 that 4 licensees

had their licenses reissued having secured a 30 000 surety bond effec

tive respectively January 24 1979 Febtuary 22 1979 March 16 1979

and January I 1979 All of these had contacted the Commission prior

to February 1 1979 about having the license reinstated No 7 that no

investigation was conducted to determine if any of the 57 forwarders

referred to above had engaged in any unlicensed forwarding activities

They were not required to file new applications If a former licensee

whose license was revoked for failure to file a 30 000 surety bond did

not contact the Commission prior to February 2 1979 it was required

to file an application in order to obtain a new license No 8 that 2

licensees have had new licenses issued using their old FMC number

Both submitted applications and investigations were conducted to deter

mine if they had performed any forwarding after the revocatiort of their

licenses Both were issued new licenses after it was determined that

they had not performed any unlicensed forwarding No 9 that 1

Notice ofRevocation as it applied was vacated on September 17 1979

based upon evidence that its failure to submit the 30 000 surety bond

was primarily the fault of the surety That forwarder submitted a bond

on June 29 1979 with coverage retroactive to December I 1978 No

investigation was conducted as to whether that forwarder had per

formed unlicensed forwarding No 11 that the depositions of Robert

Drew and Charles Clow taken in connection with this proceeding may

be offered in evidence 1 0

The parties at the June 17 1980 Hearing agreed to enter into further

stipulations covering certain activities that have been carried on by

Continental since the filing of Mr Henderson s affidavit Tr 15 On

July 3 1980 the parties filed a joint stipulation in which it is stipulated

1 The documents included in Appendix Iattached hereto

evidence twenty six 26 of the one hundred and seven 07

ocean freight shipments which are referred to on pages fifteen

15 ad sixteen 16 ofthe transcript of the hearing held in this

docket on June 17 1980 and discussed on pages f1fty two 52

through fifty five 55 of that transcript

10 Parties agreed that Drewand Claw depositions are part of this record Tr 6S 68
CONTINENTAL FORWARDING INC

2 The documents included in Appendix II attached hereto

are the signed statement and a

subsequent clarification thereof

referred to on pages sixty one 61 and sixty two 62 of the

transcript of the hearing held in this docket on June 17 1980

Investigator Henderson conducted further investigation of the Re

spondent since February 1980 On June 5 1980 he contacted Velco

Enterprises one of the Respondent s customers and discovered Re

spondent was still being used by them as a forwarder Tr 45 Velco

and other export clients were advised of Respondent s

arrangements

with Pracht International Inc holder of Independent Ocean Freight

Forwarder License Number 1880 Exhs 3 and 4

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

Hearing Counsel contends that the Respondent by engaging in car

rying on the business of ocean freight forwarding after its independent

ocean freight forwarder license had been revoked violated section

44 a Shipping Act 1916 and by accepting compensation during the

period violated section 44 e of the Act Hearing Counsel cites the

August 31 1979 affidavit of Respondent s President and 99 stock

holder Franz Zinssmeister that during the period December 2 1978

through August 31 1979 Respondent had forwarded 365 ocean freight

shipments that subsequent to August 31 1979 Respondent forwarded

at least 4 ocean freight shipments H C Opening Memo of Law pp

11 12 Hearing Counsel points to the July 3 1980 stipulation to 107

violations by the Respondent and asks they be found to have been

made during the period December 1977 through early June 1980

Opening Brief p

12

The Respondent in its March 31 1980 Opening Memorandum of

Law July 24 1980 Opening Brief ofAugust 7 1980 Reply Brief has

difficulty in coming to grips directly with Respondent having carried

on the business of ocean freight forwarding without a license after

December I 1978 11 Instead the Respondent submits that the Commis

sion is estopped 12 from denying a license to the Respondent and from

applying sanctions civil penalties for forwarding without a license

after December I 1978 Respondents Opening Memo p5 Respond

ent contends its license was revoked permanently without benefit of a

hearing and without opportunity to demonstrate that once its principal

11 Tr 4 Attorney for Respondent as far as activities are concerned there are some activities

that we have admitted to by Mr Zinssmeister s affidavit however the legal consequences of these

activities we reserve till we briefagain on the legal point that perhaps there was no initial revocation

Tr In my admissions were admitting activities rather than violations But as the activities

that Mr Zinssmeister continued forwarding that we haveadmitted to in Mr Zinssmeister s affidavit

12 The Presiding Administrative Law Judge Tr 7 could not and does not find estoppel an appro

priate issue under thecircumstances of this proceeding

639
640 FEDERAL MARITIME COMMISSION

had actual notice ofits inadequate bonding steps were taken that both

corrected the deficiency and provided the desired protection of the

public against loss that had a hearing been held prior to revocation

Respondent s property interest would have been accorded their requi

site due process protection Respondent s Opening Brief p

17

The Respondent asks that a finding be made that the initial revoca

tion of the license was unlawful Respondent s Reply Brief p

3

Hearing Counsel in its Reply Brief p 10 say it will not address the

legal merits of Respondent s assertion that Respondent was denied

procedural due process in the manner in which its license was revoked

as Hearing Counsel takes the position the issue so raised is both moo

and not encompassed within the scope of this proceeding also that i

would be improper to consider the lawfulness of the revocation o

Continentals license in this proceeding Ibid p11

Consideration ofwhat procedures due process may require under any

given set of circumstances must begin with a determination of the

precise nature of the government function involved as well as of the

private interest that has been affected by the government s action

Goldberg v Kelly 397 U S 254 25 L Ed 2d 287 90 S Ct 1011

1970

The Presiding Administrative Law Judge finds authority for the

Commission s revocation of Respondent s license in section 510 9 46

C F R 510 9 which provides inter alia

That no license shall remain in force unless a valid surety bond is maintained on file with the Commission A license will

be automatically suspended or revoked without hearing or

other proceeding for failure of a licensee to maintain a valid

surety bond on file

Thus it is seen that the Presiding Administrative Law Judge thinks it

not improper to consider in this proceeding the lawfulness of the

revocation of the Respondent s license The record herein reflects tha

the Respondent was afforded the fundamental requisite of due process

of law the opportunity to be heard the hearing was at a meaningful

time and in a meaningful manner Goldberg v Kelly supra Thus the

Respondent has been afforded Constitutional due process The Presid

ing Administrative Law Judge finds and concludes the initial revocation

ofRespondent s license was lawful

The Respondent Opening Brief argues that it should be clear that it

made no deliberate decision to continue forwarding without a license

after December 1 1978 that the decision to continue forwarding after

March 1979 was not one taken lightly by it but one taken in calculated

and good faith anticipation ofreinstatement by the Commission retroac

tive to the revocation date p 10

Hearing Counsel Reply Brief p

3 answers that as to Respondent s

activities prior to February 1979 although Continental may not have
CONTINENTAL FORWARDING INC

undertaken such conduct deliberately that conduct was occasioned by

a gross neglect of its responsibilities as a licensee Hearing Counsel

argues that a licensee cannot merely elect to ignore Commission actions

and then plead that its unlawful conduct was unintentional that Conti

nental s protestations ofgood faith do not conform with the evidence in

the record

Hearing Counsel also argues that the Respondent took a calculated

risk by engaging in carrying on the business of ocean freight forward

ing in the hope that the reaction of the Commission to its conduct

would not be adverse The Commission issued a letter of intent to deny

the license Ibid p4

In considering the above the Presiding Administrative Law Judge

also considered that the Respondent stipulated Exhibit No 1 the

Notice of Revocation herein was published in the Federal Register on

January 3 1979 that independent ocean freight forwarders who failed

to file with the Commission a surety bond bearing an effective date of

December I 1978 in the amount of 30 000 on or before December I

1978 those licensees licenses were revoked effective December 2

1978 The Respondent attached as an exhibit to its March 31 1980

Opening Memorandum a copy of the August 31 1979 affidavit of

Franz Zinssmeister President of the Respondent which said inter alia

the Respondent since December I 1978 to date August 31 1979

completed three hundred sixty five 365 shipments for export A copy

of the same August 31 1979 affidavit referred to is included as an

attachment Exhibit No I to the Affidavit of Commission Investigator

Joseph M Henderson The Respondent and Hearing Counsel in a

joint

stipulation July 3 1980 stipulated to an additional one hundred and

seven 107 shipments handled by Respondent since Commission Inves

tigator Henderson s affidavit February 26 1980

The Presiding Administrative Law Judge under the circumstances

herein affidavit stipulation and the record deems he is bound to find

and conclude that the Respondent whose independent ocean freight

forwarder license had been revoked properly on December 2 1978

continued to carryon ocean freight forwarding without a license

Respondent subscribed and swore to 365 as well as stipulating to 107

transactions a total of 472 possibly 4 more all in violation of section

44 a of the Shipping Act 1916 that No person shall engage in

carrying on the business of forwarding as defined in this Act unless

such person holds a license issued by the Federal Maritime Commission

to engage in such business

The Presiding Administrative Law Judge also finds and concludes

that Respondent by accepting compensation in the admitted amount of

5 24100 Franz Zinssmeister August 31 1979 Affidavit from ocean

going carriers after Respondent s license had been revoked violated

section 44 e of the Shipping Act 1916 that A common carrier by

641
642 FEDERAL MARITIME COMMISSION

water may compensate a person carrying on the business of forwardin

to the extent of the value rendered such carrier in connection with an

shipment dispatched on behalf of others when and only when sa

person is licensed hereunder

Hearing Counsel contends that Respondent by repeatedly engaging i

conduct violative of the Shipping Act 1916 has evidenced a lack o

the requisite fitness to be licensed as an independent ocean freigh

forwarder Opening Memo p

13 According to Hearing Counse

weighing even more heavily against Respondent s fitness to be license

as an independent ocean freight forwarder is the continuation by Re

spondent of its illegal activities despite warnings issued by the staff o

the Commission that such conduct is forbidden by the Shipping Ac

1916 Ibid p18 Hearing Counsel submits that Respondent s

repeated

willful and knowing violations ofthe Shipping Act 1916 would appea

to constitute conduct unsuited to the profession and therefore to neces

sitate swift action to remedy the misconduct by denial ofRespondent 

application for a license Ibid p

20

Respondent contends that mitigating circumstances warrant conclu

sion that alleged violations do not impact on Respondent s fitnes

Opening Brief p

8 The Respondent argues the singular fact which 

is alleged impacts on respondent s fitness to carryon the business o

forwarding is that Respondent continued to forward after its licens

had been automatically revoked on December 2 1978 to this Respond

ent added footnote The issue ofthe lawfulness of an automatic revo

cation is discussed elsewhere in this brief but in the alternative fo

purposes of considering issues offitness and mitigation only it will b

accepted that Continentals license was revoked for not havin

timely obtained and filed an appropriate bond

The Respondent argues that the President of Respondent did no

immediately become aware that its underwriter had not issued th

requisite bond the President first became aware of the problem in lat

February 1979 while he was in Germany continuing treatment for an

convalescense from the near loss of his hand and the subsequent su

gery Continental had in the past relied on the surety company an

broker to renew the bond automatically Continental obtained a suret

bond in the required amount of 30 000 which was filed with th

Commission on March 13 1979 with a retroactive effective date o

December 1 1978 Opening Brief pp 8 9

Hearing Counsel Reply Brief counters that the Respondent blithely

dismisses the massive number of willful violations of section 14 of th

Act that the mitigating circumstances cited by the Respondent clearl

do not justify its numerous willful violations of the Act p2 Also

says Hearing Counsel the absence of a corporate officer cannot absolv

the corporation ofits duty to abide by pertinent statutory or regulator

authority Ibid p

3 that Respondent s failure to direct the bondin
CONTINENTAL FORWARDING INC

company to issue a bond in the required amount is a failure for which

Respondent alone is responsible

The Respondent argues that circumstances of mitigation in this pro

ceeding are

IThe amount of surety bond required ocean freight for

warders was increased from 10 000 to 30 000 effective on or

before December I 1978

2 Mr Zinssweister did not become aware that the firm s

bond underwriter had not issued the requisite bond until late

February 1978

3 Respondent was severely impaired in his ability to keep abreast of the needs of his business by the near loss ofhis hand

and the concomitant extensive medical treatment which re

quired hospitalization on several occasions subsequent to his

accident

4 Respondent had in the past relied on his surety company

and broker to renew the bonding requirement automatically Unbeknownst to respondent such was not the policy of the

underwriter whom he retained in December 1978 Transfer of

all Continental Shipping s bonding requirements from one

company to another at the critical period resulted in the inad

vertent failure to increase the requirement to the statutory

amount

5 Respondent sought to correct the deficiency as soon as it

came to his attention by giving the Commission notice that

bond for 30 000 has issued to be effective December I 1978

a date within the deadline established by the Commission

Respondent s Opening Memo of Law p

13 Opening Brief

pp 8 9

Such arguments by the Respondent as to mitigating circumstances

the Presiding Administrative Law Judge finds and concludes do not

overcome the activities admitted to by the Respondent and also finds

and concludes that those activities were in violation of sections 44 a

and 44 e of the Shipping Act 1916 They reflect on the Respondent s

fitness to be licensed as an independent ocean freight forwarder

Hearing Counsel submit that Respondent s

repeated willful and

knowing violations of the Shipping Act 1916 would appear to consti

tute Conduct unsuited to the profession and therefore to necessitate

swift action to remedy the misconduct by denial of Respondents

application for a license Opening Memo p

20 citing Independent

Ocean Freight Forwarder Application Guy G Sorrentino 15 F MC 127

128 1972 Hearing Counsel urge that Respondent does not possess the

requisite fitness to be licensed as an independent ocean freight forward

er Reasserted in its Opening Brief p 13 and Reply Brief p 21

The Respondent argues that the Respondent s obtaining and filing

with the Commission on March 13 1979 a surety bond in the required

643
644 FEDERAL MARITIME COMMISSION

amount of 30 000 with a retroactive effective date of December 

1978 is significant in several ways It highlights the purely technica

aspect of Continentals original infraction i e not filing the bond in 

timely fashion The ease with which the matter was corrected is com

pletely in keeping with the principles which relate to Section 4

Shipping Act 1916 It is well established that the emphasis is o

correcting abuses in the industry and not on punishment Application fo

License 8 F MC 109 117 118 1964 Hugo Zanelli v Federal Maritim

Commission 500 F 2d 1000 5th Cir 1975 The public interest wa

made whole with the bond which provided continuous coverage o

Continentals

forwarding Opening Brief p

9 Opening Memo p12

The latter part of the argument as to the emphasis being on correc

ing abuses in the industry and not on punishment was made in the cas

ofIndependent Freight Forwarder License No 1321 Ikeda Internationa

Corporation 22 F M C 803 1980 Initial Decision Partial Adoption o

Initial Decision 22 F MC 799 1980 The Presiding Administrativ

Law Judge and the Commission in Ikeda did not find support for th

contentions of Hearing Counsel and the Respondent as to section 44 o

the Act being remedial as opposed to punitive or that the Zanelli cas

supports those contentions The Commission did make the statement

administrative sanctions should not however be blindly or automa

cally imposed and even in cases where the violation is clear evidenc

ofmitigation will be considered in tailoring the sanction to the facts o

the specific case Section 44 and its regulations are based on an underly

ing remedial public interest purpose citing the Dixie Forwarding C

case Docket No illS 8 F M C 109 1964 and the sanction impose

must serve such a purpose and not be punitive in character Independen

Ocean Freight Forwarder License E L Mobley Inc 21 F MC 845 847

An underlying remedial public interest purpose does not equate t

the view that sanctions are to be corrective and not punitive

The Respondent argues further that its fate is in astonishing contras

to that of several other forwarders who were re licensed by the Com

mission without obtaining retroactive bond coverage to December 

1978 leaving the public interest in their operations unprotected Open

ing Brief p

9

Hearing Counsel in its Reply Brief p

5 says Respondent seems t

imply that it Was for some unstated reason singled out and subjecte

to harsher treatment than other freight forwarders who were allegedl

similarly situated Hearing Counsel says the fallacy in Continental 

assertion is that other forwarders the revocation ofwhose licenses wa

vacated or whose licenses were reissued either with or without th

submission of new applications were not similarly situated

The Presiding Administrative Law Judge deems the observation o

Hearing Counsel that the Respondent has not shown it and othe

forwarders were similarly situated is correct and that perhaps is on
CONTINENTAL FORWARDING INC

reason why Hearing Counsel stipulated to Exhibit No IIt cannot be

said that the Commission is bound by anything that appears before it to

deal with all cases at all times as it has dealt with some that seem

comparable The Commission must be satisfied that the public interest

will be served by issuing or renewing a license FCC v WOKO 329

U S 223 91 L Ed 204 1946 The number of violations by the

Respondent and the period of time from December 2 1978 through

June 1980 they covered takes away any technical aspect and becomes

flagrant violations leading the Presiding Administrative Law Judge to

find and conclude that at this point the Respondent cannot be found fit

to be licensed as an independent ocean freight forwarder

For the many violations herein of the Shipping Act the Respondent

should be assessed a civil penalty pursuant to section 32 e 46 U S c

831 e ofthe Act

The Commission s Bureau of Hearing Counsel and Continental For

warding Inc have proposed a settlement of civil penalties The Re

spondent agrees to pay to the Commission the sum of 17 500 to be

made in four equal installments of 4 375 First payment within 30 days

from final approval of the settlement agreement and other installments

4 8 and 12 months from date of final approval of the settlement

agreement Interest on unpaid balance shall be paid with each install

ment at the rate of 12 per annum

The Respondent in its August 31 1979 affidavit of its President

Franz Zinssmeister subscribes and swears that since December I 1978

to August 31 1979 the Respondent completed three hundred sixty five

365 shipments for export that for these shipments approximately

14 862 00 has been billed for forwarding fees and approximately

5 24100 for brokerage has been collected These two figures

14 862 00 and 5 24100 total 20 103 The proposed settlement is

17 500 The record does not indicate what was realized by the Re

spondent from the 107 shipments after August 31 1979 In any event in

this proceeding there are at least 472 shipments by the Respondent after

revocation of its license all in violation of section 44 of the Shipping

Act Section 32 e gives authority to the Commission to assess or

compromise all civil penalties provided in this chapter Violations of

section 44 of the Act subjects one to a civil penalty not to exceed

5 000 for each such violation section 32 a violations of any order

rule or regulation ofthe Federal Maritime Commission made or issued

in the exercise of its power duties or functions subjects one to a civil

penalty of not more than 1 000 for each day such violation continues

section 32 c The Respondent has since December 1978 to June 1980

continued forwarding without a license that is a

period of about 18

months or 540 days

Upon consideration of the above and the proposed settlement ofcivil

penalties submitted for approval the Presiding Administrative Law

645
646 FEDERAL MARITIME COMMISSION

Judge finds and concludes that the amount of settlement is insufficien

and because it is the settlement should not be approved Approval o

the proposed settlement is denied On the other hand if the civi

penalty under the circumstances of this proceeding was doubled to

35 000 it is the opinion of the Presiding Administrative Law Judge

such a settlement should be approved when entered into by the parties

In a recent case before the Commission Rene Lopez and David

Romano d b a United Dispatch Service Independent Ocean Freight For

warder License No 1381 22 F MC 522 524 n4 1980 pointed out

Sanctions under section 44 must be tailored to the facts ofeach individ

ual case In that case Respondent admits collecting approximately

2 000 in freight compensation for 82 shipments handled by Foreign

Freight Forwarders Inc under Respondent s name and license

number In view of Respondent s six year violation free history the

Commission said it was satisfied that a six month suspension will serve

a remedial interest purpose and that a more severe sanction is unneces

sary to achieve this end in thisparticular case

In the instant case the Respondent has been a freight forwarder since

1958 licensed since 1965 The Respondent had a 20 year 13 yea

licensed violation free history followed by the spate ofviolations ove

40 in this proceeding over a period of approximately 18 months

In the opinion of the Presiding Administrative Law Judge the Re

spondent can be the catalyst in determining how quickly the Respond

ent will be in a position to make another application for an independen

ocean freight forwarder license The Respondent should meet with

Hearing Counsel again as to the settlement of civil penalty in the

amount of 35 000 which amount the Presiding Administrative Law

Judge approves Upon payment of the civil penalty in the whole

amount or first installment as may be provided in the settlement the

Respondent may apply to the Commission for an independent ocean

freight forwarder license

Upon consideration of the above and the record herein the Presiding

Administrative Law Judge finds and concludes in addition to the find

ings and conclusions hereinbefore stated

I The Respondent violated section 44 a Shipping Act 1916 by

engaging in unlicensed forwarding activities

2 Respondent violated section 44 e of the Shipping Act 1916 by

accepting ocean carrier compensation it was not qualified to receive fo

shipments forwarded after its license was revoked

3 The Respondent at this point is not found fit to be licensed as an

independent ocean freight forwarder

4 Civil penalties should be assessed against Respondent pursuant to

section 32 e 46 U S c 83I e for violations of the Shipping Act

1916 in the amount of 35 000
CONTINENTAL FORWARDING INC

5 The proposed settlement arrived at between Hearing Counsel and

Respondent in the amount of 17 500 is not approved

6 Hearing Counsel and Respondent should remake the settlement as

to Civil Penalty in the amount of 35 000 with the same schedule of

payment When that is done and the civil penalty of 35 000 is paid or

the first installment as may be provided the Respondent may apply to

the Commission for an independent ocean freight forwarder license

Wherefore it is ordered that

I The application of Respondent for an independent ocean freight

forwarder license is denied

2 The Respondent pursuant to section 32 e 46 D S C 831 e of

the Shipping Act 1916 is assessed a civil penalty of 35 000 which is

approved to be the settlement agreement ofthe Civil Penalty to be set

forth in documents similar to those presented herein wherein the settle

ment agreement was for 17 500 but was not approved by the under

signed

3 The Respondent upon payment of the civil penalty of 35 000 or

first payment as may be provided in its settlement agreement may apply

for a license as an independent ocean freight forwarder

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

Washington D C

September 18 1980

647
FEDERAL MARITIME COMMISSION

DOCKET NO 80 47

LUIGI SERRA INC

v

SEA LAND SERVICE INC

NOTICE

February 2 1981

Notice is given that no exceptions have been filed to the Decembe

9 1980 initial decision in this proceeding and the time within which th

Commission could determine to review that decision has expired N

such determination has been made and accordingly that decision ha

become administratively final

5 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 47

LUIGI SERRA INC

v

SEA LAND SERVICE INC

Reparation denied

Richard L Furman for the Complainant

M Ridlon forthe Respondent

INITIAL DECISION OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Finalized February 2 1981

Complainant Luigi Serra Inc International Freight Forwarders

charges respondent Sea Land Service Inc a common carrier by water

in the foreign commerce of the United States with violations of sec

tions 17 18 a and 18b5 of the Shipping Act 1916 and asks for an

award of reparation in the amount of 38 089 21 Serra s complaint is

grounded on the theory that the rates charged by Sea Land on the

shipments in question were unjustly discriminatory unjust and unrea

sonable and so unreasonably high as to be detrimental to the commerce

ofthe United States

On May 31 1979 Serra booked with Sea Land a movement of four

35 foot containers of cargo consisting ofempty steel ammunition boxes

to be transported from Jacksonville Florida to Leghorn Italy Three

of the containers moved under Sea Land Bill of Lading No 971

780024 dated June 4 1979 and the remaining container moved under

Sea Land Bill ofLading No 971 780313 dated June 10 1979

The four containers were carried by Sea Land pursuant to the terms

of 11th revised page 80 of the South Atlantic Spanish Portuguese

Moroccan and South Mediterranean Rate Agreement No 10261

Freight Tariff No I FMC I Section I effective February 21 1979

The tariff contained no specific commodity rate for empty steel ammu

nition boxes and the shipment was rated at the Cargo NOS rate

21150 W M Total freight charges including a bunker surcharge

were 44 034 38 The shipment moved on a freight collect basis and

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R502 227
650 FEDERAL MARITIME COMMISSION

during a period when the consignee La Metal1i Industriale S pA

refused to pick up the shipment demurrage charges of 2 334 83 ac

crued 2

Sea Land became a member of Rate Agreement No 10261 o

August 15 1977 when it was formed Approved Conference Rate Inter

conference and Joint Service Agreements and Selective Cooperation Work

ing Arrangements of Steamship Lines in the Foreign Commerce of th

United States p

4 122 The Rate Agreement consists ofeleven carriers

Prior to Sea Land s entry into the Agreement the trade in question wa

covered by Sea Land s individual Tariff No 168 B FMC 73 which

wasin effect in June 1977

DISCUSSION AND CONCLUSIONS

Section 18 a provides in relevant part

That every common carrier by water in interstate commerce

shall establish observe and enforcejust and reasonable rates

fares charges classifications and tariffs Emphasis mine

Since the shipments in issue here were in the foreign commerce o

the United States section 18 a is not applicable to them and no viola

tion ofthat section can be found in this proceeding

Section 17 ofthe Act provides

That no common carrier by water in foreign commerce shall

demand charge or collect any rate fare or charge which is

unjustly discriminatory between shippers or ports or unjustly

prejudicial to exporters of tbe United States as compared with

their foreign competitors Whenever the board Commission

finds that any such qtte fare or charge is demanded chargecl

or collected it may alter the same to the extent necessary to

correct such unjust discrimination or prejudice and make an

order that the carrier shall discontinue demanding charging or

collecting any such unjustly discriminatory or prejudicIal rate

fare or charge

To establish a violation of this section a complainant must show tha

the rate in issue unjustly discriminates between shippers or ports or that

the rate is unjustly prejudicial to exporters of the United States as

compared to their foreign competitors The essential element in each

instance is a comparison ofthe rates charged one shipper with compa

rable rates charged another shipper which comparison shows that one

shipper s rates wereunjustly discriminatory orunjustly prejudicial to an

American exporter No such showing has been made here In the

absence of any facts indicating the existehce ofother shippers ofsimilar

traffic over the same line under substantially the same circumstances

2

La Metalli protested what it considered the exorbitant rate and refused to pay Sea Land until

Serra agreed to reimburse La Metalli AIl outstanding frDight and demurrage charges have been paid

to Sea Land by LaMetalli
LUIGI SERRA INC V SEA LAND SERVICE INC 651

who paid different more advantageous rates no unjust discrimination

in violation of section 17 can be found North Atlantic Mediterranean

Freight Conference Rates on Household Goods 11 FMC 202 1967

Similarly no evidence exists that a foreign competitor of an exporter

from the United States received a rate which prejudiced the latter A

showing of different treatment to another similarly situated person is a

prerequisite to a finding of a violation of section 17 Commodity Credit

Corp v Lykes Brothers Steamship Co 18 FMC 49 1974

Complainant Serra stheory is grounded on what can be termed an

historical tracking of the rates applied to empty ammunition boxes

Serra points out I

that in June of 1977 Sea Land had a rate of 44 50

per 40 cubic feet on steel ammunition boxes from U S South Atlantic

and Gulf ports to ports in France and Italy 2 that at the time of the

shipments in question the rate was 211 50 W1M and finally 3 Sea

Land s present rate on empty ammunition boxes is 130 00 per 2 240

pounds From this Serra submits that a variety of inferences can be

drawn the most important of which is that the general cargo rate is

uncompetitive and excessive

Actually the reasons for the fluctuation of the rates are easily

found from the record In 1977 Sea Land had its own tariff which

contained a specific commodity rate applicable to empty ammunition

boxes However when it joined the Rate Agreement it was bound to

apply the Rate Agreement Tariff which did not have a specific com

modity rate for the boxes and it was compelled to apply the higher

Cargo NOS rate Finally the present rate of 130 00 per 2 240 pounds

was put into the Rate Agreement Tariff at the specific request of Mr

E Torres of Luigi Serra An additional inference which can be drawn

from the record here is that sometime prior to Sea Land s entry into

the Rate Agreement Serra shipped some boxes under Sea Land s indi

vidual tariff and then some two years later booked the present ship

ments assuming the rate had remained the same if true a dubious

assumption indeed 3

In any event section 17 simply does not address

itself to excessive or unreasonable rates Any attempt to use the

provisions of section 17 to sustain an allegation that the rates of a

carrier are unreasonable would be an attempt to have the Commission

prescribe reasonable rates for foreign commerce a power the Commis

sion does not possess Heavy Lift Practices and Charges of Hapag Lloyd

21 F MC 637 1979

Section 18b 5 provides

The Commission shall disapprove any rate or charge filed by a

common carrier by water in the foreign commerce of the

United States or conference of such carriers which after hear

3 Serra received no rate quotation from Sea Land at the time the present shipments were booked
652 FEDERAL MARITIME COMMISSION

ing it finds to be so unreasonably high or low as to be

detrimental to the commerce ofthe United States

While not specifically addressed to the provisions of section l8b 5

complainant s entire argument would seem to be in its two assertions

that it is difficult to imagine how the rates under discussion could be

justified and that this narrow segment of commerce could not exist i

freight rates bore a percentage value to the goods as calculated by

complainant 4Unfortunately the record contains no evidence of the

elements of an l8b

5 violation which complainant itself citing Ocean

Rate Structures 12 FMC 34 1968 admits is necessary to its case Bu

even if Serra had put in any evidence the remedy it seeks reparation

is not available under section 18b 5 with the case in its presen

posture

The language of l8b 5 does not initially prohibit any conduct by

carriers It simply requires that the Commission make the requisite

finding that a rate is so high or low as to be detrimental to commerce

and to order the offending rate discontinued This order of the Com

mission is a prerequisite to any sanctions under the section Federa

Maritime Commission v Caragher 364 F 2d 709 717 2d Cir 1966

And until a violation of that order of the Commission is found no

reparation may be awarded Pacific Westbound Conference Investigation

of Rates Pertaining to Wastepaper 21 F MC 834 1979 Commodity

Credit Corp v American Export IsbrandtsenLilles Inc 15 FMC 171

191 1972 Valley Evaporattng Company v Grace Line Inc 14 FMC 16

26 27 1970 Here there is no order of the Commission requiring the

discontinuance of the rate in issue thus no reparation can be awarded

Finally a word needs to be said about complainant s reliance upon

Volkswagonwerk Aktiengesellschaft v Federal Maritime Commission 390

U S 261 1968 and Wolftburger Transport Gesellschaft m b h v Federa

Maritime Commission 562 F 2d 827 1977 Serra argues that these cases

stand for the proposition that the reasonableness of a rate is whethe

the charge levied is reasonably related to the service rendered What

ever the validity of complainant s analysis the cases are inapposite

They are representative of a distinct line of cases which deal with

situations which do not involve the freight rates of an ocean carrier and

they are not applicable to cases such as this one See e g

Free Time

Practices Port of San Diego 9 FMC 525 1966 at pages 545 547

4

Complainant says that the freight charges on the shipment of three containers represents 64 o

the FAS value of the goods and that the freight charges on the singJe container shipment represen

6S of the value of lhe goods
LUIGI SERRA INC V SEA LAND SERVICE INC 653

For the foregoing reasons Complainant has failed to show that

respondent has violated sections 17 18 a and 18 b 5 The complaint is

dismissed

8 JOHN E COGRAVE

Administrative Law Judge

Washington D C

December 9 1980
FEDERAL MARITIME COMMISSION

DOCKET NO 79 59

STUTE INTERNATIONAL INC INDEPENDENT OCEAN

FREIGHT FORWARDER APPLICATION

ORDER ADOPTING INITIAL DECISION

February 5 1981

The Commission has before it the Exceptions of Stute Internationa

Inc to the Initial Decision of Chief Administrative Law Judge Joh

Cograve served October 14 1980 in the above captioned matter A

Reply to Exceptions was filed by the Commission s Bureau of Inves

tigation and Enforcement

Stute alleges error in the following aspects of the Initial Decision 1

it failed to find that a shipper would actually exercise direct or indirec

control over Stute s

forwarding operations and the mere possibility o

shipper control should not disqualify an applicant and 2 it applied 

standard of absolute licensee shipper separation which has been dis

credited by the Eighth Circuit Court of Appeals and abandoned by th

Commission The Bureau of Investigation and Enforcement dispute

these contentions and argues that the Initial Decision is correct in a

respects

Examination ofStute s exceptions and the remainder of the record 

this proceeding reveals that Stute is merely rearguing points raise

before and fully resolved by the Presiding Officer The critical questio

in dispute is one of law that is whether the statutory prohibitio

against licensing persons directly or indirectly controlled by 

shipper refers to 1 the legal right to control or 2 the actu

exercise of control over the applicant s forwarding policies and activ

ties I The Presiding Officer carefully examined prior Commission dec

sions on this subject and concluded that a person subject to a shipper 

legal right to control lacked the independence required for licensing 

an independent ocean freight forwarder under 46 U S C 841b Th

Commission believes this conclusion to be correct and consistent wit

established precedent and will therefore deny Stute s application an

adopt the Presiding Officer s decision as its own Norman G Jense

Inc v Federal Maritime Commission 497 F 2d lOS8 8th Cir 1974 

inapplicable to Stute s situation because in that case the court foun

See the definition of independent ocean freight forwarder contained insection 1 of the Shippi

Act 1916 46 U S C 801

P
STUTE INTERNATIONAL INC FREIGHT FORWARDER 655

APPLICATION

that the challenged ownership interest was not an interest in a ship

per In this instance it is undisputed that shipper status is properly

attributable to Stute s parent organization

THEREFORE IT IS ORDERED That the Exceptions of Stute

International Inc are denied and

IT IS FURTHER ORDERED That the application of Stute Inter

national Inc for an independent ocean freight forwarder license is

denied and

IT IS FURTHER ORDERED That the Initial Decision served

October 14 1980 in this proceeding is adopted by the Commission as its

own and made a part ofthis Order and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 79 59

STUTE INTERNATIONAL INC INDEPENDENT OCEAN

FREIGHT FORWARDER APPLICATION

Application for independent ocean freight forwarder license denied

Kenneth L Everett for the Respondent

Paul J Koller Joseph B Slunt and Deana E Rose Hearing Counsel

INITIALDECISIONl OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Adopted February 5 1981

The Commission initiated this proceeding to determine whether Stut

International Inc Stute is an independent ocean freight forwarde

and is otherwise qualified to be licensed as required by section 44 ofth

Shipping Act 1916 46 U S C 841b and section 510 8 of Gener

Order 4 promulgated thereunder

The order instituting this proceeding states that Stute acting as 

forwarder may be connected through intercorporate relationships wit

Chemie Mineralien KG Chemie a consignee of shipments in th

foreign commerce of the United States Additionally it is alleged tha

Chemie was involved in shipments in the foreign commerce of th

United States on which it received rebates

STIPULATED FACTS2

Stute is a Delaware corporation with its principal place of business i

New York City and is a wholly owned subsidiary of Stute Verkehr

GmbH Stute has four employees and is engaged in the business o

handling import shipments to the United States and acting as a consult

ant for export shipments Heinrich A Joost a Deputy Managing Direc

tor ofVerkehrs is president ofStute The Board ofDirectors ofStute 

wholly composed of officers or employees of Verkehrs In 1978 Stut

1 This decision will become the decision of theCommission in the absence of review thereof by th

Commission Rule 227 Rules of Practice and Procedure 46 CF R 02 227

2

For clarity and brevity the entire stipulations entered into by Hearing Counsel and Stute have n

been repeated verbatim here Only those facts which are relevant and materiaJ to the issues presente

and the resolution are set forth The full stipulation which is hereby made a

part of this decision 

contained in the Appendix The attachments and exhibits referred to in thestipulation are of course 

part of therecord
STUTE INTERNATIONAL INC FREIGHT FORWARDER 657

APPLICATION

had gross billings of 1 040 000 and during the first nine months of 1979

it had billings of 988 915

Verkehrs has its principal office in Bremen Germany and is among

other things an ocean freight forwarding company which is engaged in

worldwide importexport trade In addition to its ocean freight for

warding activities it also provides warehousing trucking ship charter

ing and customs clearance services in Germany It also acts as a freight

traffic consultant Verkehrs is also the sole owner of subsidiaries operat

ing as freight forwarders in London and Paris and is a 50 owner of a

subsidiary which operates as a

freight forwarder in Sharjah United

Arab Emirate Verkehrs has approximately two hundred employees and

its gross sales in 1978 were approximately 150 million Deutschmarks

DM or approximately 75 million dollars Verkehrs is an organization

known under German Law as a GmbH which is a

company with its

liability limited to the extent ofits capitalization Verkehrs is capitalized

at one million DM The Managing Directors of Verkehrs are Heinrich

A Joost Dieter Wurmehl and Gunter Holsing Holsing and Joost are

also directors of Stute The three Managing Directors of Verkehrs are

totally responsible for all its operations

Kloeckner Co is a multinational holding and trading company

with its principal place of business in Duisburg Germany Fifty three

companies in which Kloeckner owns more than a 5 interest are

located in Germany and sixty two companies in which Kloeckner owns

more than a 5 interest are located outside Germany Kloeckner is the

sole owner of Verkehrs Kloeckner is a partnership of three individuals

who are general partners and a limited partner which is the Kloeckner

family trust The capitalization ofKloeckner is 265 million DM 99 of

which is contributed by the Kloeckner family trust and the remaining

I is contributed by the three partners who unlike the family trust

have unlimited personal liability In 1978 Kloeckner has gross sales of

over 7 billion DM Kloeckner and its subsidiaries are active in trading

in steel products metals ores chemicals coal solid and liquid fuels

heating equipment machine tools and construction materials and equip

ment The day to day operations of Kloeckner are conducted by the

Board ofManagement In addition there exists a Partners Supervisory

Committee which acts as adviser and consultant to the Board This

committee is comprised of persons who are not employees or partners

or managers ofKloeckner

Chemie is a trading company located in Bremen Germany which

purchases pumice stone common ground clays and additives for indus

trial oils from sources all over the world and sells these products in

Europe Its gross international sales are approximately 15 million DM

per year Its form of organization is that which approximates a limited

partnership in the United States It has two partners one of which is

Kloeckner and the other is Deutzer Oel K G Kloeckner owns 98
658 FEDERAL MARITIME COMMISSION

of Chemie Deutzer which is affiliated with Kloeckner owns th

remaining 2 interest in Chemie Chemie s operation is run by it

Managing Director L F W Luksemburg who is not an officer

director partner manager or employee ofKloeckner

Stute is a wholly owned subsidiary of Verkehrs Its president is 

Managing Director ofVerkehrs and its Board ofDirectors is made u

solely of employees or Managing Directors of Verkehrs Verkehrs in

turn is wholly owned by Kloeckner However none of Kloeckner 

officers or employees are officers or employees of either Verkehrs o

Stute and none of the officers or employees of Stute or Verkehrs are

officers or employees of Kloeckner The two directors of Chemie are

the Executive Officer of Kloeckner Dr Gunther Meyer and L F W

Luksemburg Dr Meyer is not a partner or member of the Board o

General Management or the Partners Supervisory Committee o

Kloeckner

The business operations of both Stute and Verkehrs are managed

independently from Kloeckner including personnel management In

both cases supervision ofthe business by Kloeckner is minimal Chemie

makes a monthly report to Dr Meyer in which the monthly sales o

Chemie both in dollars and tonnage values is stated and an estimate o

the gross and net proceeds made Dr Meyer as a director of Chemie

visits the Chemie office once a year Chemie maintains its own bank

accounts and has independent lawyers Kloeckner does not provide

Chemie with any services except its books are audited annually by

Kloeckner The Managing Directors ofVerkehrs function independent

ly from K1oeckner They have separate authority over their personne

and may commit the company to bank loans Verkehrs furnishes com

plete financial and activity reports on a monthly basis to one of the

members of the Board of General Managers of Kloeckner Kloeckne

audits Verkehrs books on an annual basis and provides Verkehrs with

computer services for which it is charged K1oeckner in the case o

Verkehrs retains veto power over the use of Verkehrs funds for

investments in or acquisitions of new businesses Both Chemie and

Verkehrs retain all their receipts during the year and turn over their

profits to Kloeckner at the end of each calendar year During the year

either Chemie or Verkehrs if it has a surplus in its bank account may

lend all or part ofthe surplus to Kloeckner and be paid interest on the

loan Conversely either of them may during the year borrow money

from K10eckner and if they do they are then charged interest on that

loan Kloeckner takes no part in the day to day operations of either

Chemie or Verkehrs Verkehrs in some instances has acted as a freight

forwarder in Germany for Kloeckner In those instances which

amount to approximately 28 of Verkehrs gross billings this figure

includes truck rail and air forwarding activities as well as ocean

freight activities Verkehrs has submitted bids to Kloeckner for the
STUTE INTERNATIONAL INC FREIGHT FORWARDER 659

APPLICATION

business in competition with other freight forwarders Verkehrs has

never provided forwarding services to Chemie and has no connection

with Chemie nor does it have any knowledge of or control over

Chemie s business activities Neither Chemie nor Verkehrs have any

employees officers or directors in common Stute and Chemie have no

officers directors oremployees in common

Chemie purchases common ground clays and oil additives from sup

pliers in the United States and sells these products throughout Europe

It purchases approximately 7 000 tons of ground clays per year and of

these purchases approximately 500 to 700 tons per year are made for

its own account This tonnage is stored in public warehouses in Germa

ny and used as inventory for sale in spot markets in Germany Except

when Chemie purchases for its own account no purchases of common

ground clays are made without there first being an order given to

Chemie by one of their customers in Europe In the case of oil addi

tives all purchases are made only after a customer s order has been

received by Chemie In the normal course of business the common

ground clays are sold to Chemie fa s a designated vessel in a port in

the United States Chemie s supplier is listed as the shipper on the bill

of lading and the consignee is to the order of shipper The party

designated in the bill of lading as the notify party is either a freight

forwarder designated by Chemie or the customer Chemie sells the

goods to its customers outside Germany on a cif basis with the

exception of customers in Portugal who are sold on either the c Lf or

free factor basis In the case of 90 to 95 of Chemie s imports of

clays from the United States the goods are delivered directly to Che

mie s customer Chemie purchases oil additives only after first receiving

a customer s order In some instances Chemie will purchase for its own

account an amount required to fill a container if a customer s order is

for less than a full container Chemie purchases approximately ten full

containers of oil additives per year from its supplier in the United

States These containers are shipped on an f

o b basis by the supplier

In the case of the common ground clay shipments Chemie employs an

American ocean freight forwarder to handle the shipments It has

employed this forwarder for more than 25 years At no time has it

employed Verkehrs or Stute as a freight forwarder and it has no

intention ofdoing so

In 1973 a representative of Paul Gunther GmbH Co acompany

located in Bremen Germany which acts as agent for Sea Land Serv

ice Inc approached Chemie in order to interest Chemie in using its

ocean freight services In the course of his sales call the representative

offered to make up part of the inland freight differential which would

occur if Sea Land Service was used by Chemie by paying Chemie 25

per container for each full container shipped via Sea Land Chemie

which had no knowledge of the United States laws agreed to the offer

lFMr
660 FEDERAL MARITIME COMMISSION

in order to give it more frequent service Such an offer is not illeg

under German law Chemie admits that it received payment of the 

fee per container on shipments of approximately 49 full containers ov

a three month period during the latter half of 1973 and the first fe

weeks of 1974 The total amount received by Chemie was 1 500 Non

of the money received by Chemie was returned to the Shipper in t

United States In fact it was kept in a separate fund by Chemie an

used to purchase Christmas presents for substantial customers 

Chemie Neither Kloeckner nor Verkehrs had any knowledge of t

payments received in this mannerby Chemie

DISCUSSION AND CONCLUSIONS

The threshold issue here is whether the common ownership b

Kloeckner of a consignee of goods and through a subsidiary of r

spondent Stute destroys the independence from shippers or consigne

necessary to the grant of a freight forwarder license under section 44b

ofthe Shipping Act 1916 46 U S C 844

Section 44b ofthe Shipping Act provides

A forwarder s license shall be issued to any qualified applicant

therefor if it is found by the Commission that the applicant is

or will be an independent ocean freight forwarder as defined in

this Act and is fit willing and able properly to carryon the

business offorwarding Emphasis mine

Section 1 of the Shipping Act defines an independent ocean freig

forwarder as

a person carrying on the business of forwarding for a

consideration who is not a

shipper or consignee or a seller or a

purchaser ofshipments to foreign countries nor has any bene

ficial interest therein nor directly or indirectly controls or is

controlled by such shipper or consignee or by any person

having such a beneficial interest

In a line of cases beginning with Application for Freight Forwardin

License Louis Applebaum 8 F MC 306 1964 the Commission h

held that there were no exceptions to the prohibition against shipper 

consignee connection and that the prohibition wasabsolute

In Freight Forwarding License Wm V Cady 8 F MC 352 1964

Cady was an employee ofA E Chew Co Inc a shipper in foreig

commerce Cady in an effort to avoid the prohibition against shipp

connection said he would confine his forwarding activities to shi

ments in which Chew was neither seller shipper consignee nor pu

chaser The Commission said

The present intentions of Cady and his employer are immateri

al since the statute makes licensing depend upon the existence

ofcontrol and not upon its exercise 8 F MC 360

C r
STUTE INTERNATIONAL INC FREIGHT FORWARDER 661

APPLICAnON

The question of control arose again in Application for Freight Forwarding

License York Shipping Co 9 F M C 72 1965 Here again the appli

cant was an employee of a shipper The examiner in his initial decision

granted the license because the record before him contained no evi

dence anyone had actually exercised any control over the applicant

The Commission overruled the examiner and denied the license quoting

the above language from Cady

In License No 790 North American Van Lines 14 FMC 215 1971

North American the holder of a forwarder s license was purchased by

the PepsiCo Co Inc PepsiCo owned stock in Pepsi Cola and Frito

Lay corporations both shippers in U S foreign trade North American

argued that notwithstanding Commission precedent the prohibition

against shipper connections was not absolute and the Commission

should exercise its discretion and permit North American to retain its

license subject to appropriate restriction i e North American could

not forward for PepsiCo Pepsi Cola or Frito Lay The Commission

rejected the argument that the prohibition was not absolute citing

Applebaum Cady and York supra In arguing that the Commission had

the discretionary power to amend or modify the license so as to

permit North American to retain its license despite its shipper connec

tion North American sought to distinguish between licenses already

issued and new or initial licenses The Commission rejected the distinc

tion and again stated that the law contained no proviso exempting

from the ban on licensing shipper controlled forwarders who do not

forward shipments for the shipper employees 14 F MC 222

Stute concedes that up to and including the decision in North Ameri

can the cases hold that the prohibition against shipper connection was

absolute 3 However Stute argues that beginning with the decision of

the Eighth Circuit Court of Appeals in Norman G Jensen Inc v

Federal Maritime Commission 497 F 2d 1058 8th Cir 1974 the stand

ard ofabsolute inaependence has been so modified as to permit Stute to

be licensed notwithstanding Stute s

intercorporate relationship with

Chemie

In Norman G Jensen Inc Independent Ocean Freight Forwarder

License No 800 16 FMC 370 1973 the Commission found that the

licensee Jensen was through its relationship with International Traders

Counselors shipper connected and could retain its license only if it

severed all connections with ITC Jensen appealed the Commission s

decision to the Eighth Circuit Court of Appeals which reversed that

decision Stute argues that the Court in reversing the Commission so

3

Stute does however attempt to distinguish the factual situation in those cases from its own The

attempt however depends for its validity upon its argument that subsequent decisions have modified

theconclusion that the prohibition against shipper connection is absolute
I

662 FEDERAL MARITIME COMMISSION

changed the concept of control as to permit indeed require th

licensing ofStute

On appeal the Court stated the issue as whether Jensen i

sufficiently independent to come within the definition of independen

ocean freight forwarder set forth in 46 U S C 801 Since there was n

doubt that Jensen was engaged in the business of forwarding and ther

was in fact a connection between Jensen and ITC 4

the only questio

remaining was whether ITC was a shipper The Court found that ITC

functions as a service enterprise for primarily only four

clients The services performed by ITC consist of making

arrangements for transportation to port preparing export dec

larations consular invoices and related documents translating

documents receiving purchase orders and payments preparing

commercial invoices and inventory reports investigating

credit and selecting freight forwarders Whenever any of

lTCs clients need the services of an ocean freight forwarder

ITC selects Jensen unless its client or consignee has some

contrary preference ITC is paid for its services either as a fee

on a retainer basis an amount equal to 10 ofthe price of the

goods shipped or a transactional service charge plus the 10

fee

The Court concluded that ITC was not a shipper as that term wa

commonly understood i e the owner or person for whose accoun

the carriage of the goods is undertaken Compagnie Generale Transa

lantique v American Tobacco Co 31 F 2d 663 2d Cir cert denied 28

U S 555 1929 Since ITC was not the owner of the shipments in

volved the York Cady and Applebaum cases supra were clearly distin

guishable and the Court concluded that ITC was not a shipper as use

in section 801 of the Shipping Act The Court next rejected the Com

mission s contention that ITChad a beneficial interest in the shipment

of its clients The Commission s argument was two pronged I Sinc

ITC was compensated for its services on the basis of a percentage 

the value or proceeds of the goods exported ITC had a benefici

interest in the shipments and 2 The authority given to ITC by i

shipper clients in the handling of their shipments was a proprietar

right which also constituted a beneficial interest

4 When the Commission began its investigation Jensen s 150 shares of stock wereowned as follow

NarmanG Jensen 74 shares Gordon W Jensen and wife 74 shares Bent Jensen unrelated to 

other shareholders 2 shares Jensen s officers were Gordon W Jensen President and Treasurer a

Bent Jensen Vice President and Secretary ITC was owned 50 by Bent Jensen and wife and 50

by Gordon Jensen Bent Jensen was president and Director of ITC and Gordon W Jensen aDirec

and its Secretary and Treasurer Subsequently these relationships altered so that the only remaini

connection between Jensen and ITC was via Bent Jensen Bent Jensen became the sole shareholder 

ITC He also retained the two shares of Jensen and continued to serve as an Officer and Director 

Jensen
STUTE INTERNATIONAL INC FREIGHT FORWARDER 663

APPLICATION

The Court concluded the proscribed beneficial interest was only that

interest in a shipment which could give rise to an indirect rebate e g

where a forwarder acquires by purchase or otherwise the right to share

in the profit from a shipment and at the same time receives a brokerage

fee from the carrier The Court found that lTCs

relationships with its

clients were not such as could give rise to an indirect rebate and

therefore that ITC had no beneficial interest in its clients shipments

Since the Court concluded that ITC was neither a shipper nor had a

beneficial interest in its client s shipments it found it unnecessary to

review the Commission s conclusion that Jensen controlled or was

controlled by ITC

Stute contends that the Court in Jensen rejected the Commission s

standard ofabsolute independence and held that in a common owner

ship situation one of the parties may be shipper connected Moreover

Stute says that the Commission itself has recognized this in its report in

Independent Ocean Freight Forwarder Application Sequoia Forwarders

Company 19 F MC 182 1976

In Sequoia the Commission concluded that neither the language of

section I its legislative history nor judicial interpretations of that sec

tion require that an applicant for a forwarder s license be free of all

shipper connections The Sequoia case involved the common owner

ship of an applicant and a licensed produce broker which acted as a

purchasing agent for American Foods A B a

consignee and purchaser

of shipments moving in foreign commerce The question presented was

whether the broker Cal West because of its relationship with Ameri

can Foods was a shipper consignee or a person with a beneficial

interest in shipments to be forwarded by the applicant The Commission

concluded that Cal West was not Cal West was clearly not a shipper

or a consignee and the Commission found that Cal W st s

relationship

with American Food A B the shipper etc in question was not such

as to give rise to a beneficial interest in American Foods shipments

Finally the Commission concluded that American Foods did not di

rectly or indirectly control Cal West 5

Stute contends that the rationale of Jensen and Sequoia is such that

the only question to be answered is whether Stute directly or indirect

ly is controlled by a consignee Since Jensen did not even take up the

question of control one might at first blush wonder why Stute

lavished so much attention to the case on brief A closer examination of

Stute s rationale of its position in this case reveals that Jensen is a

necessary ingredient of Stute singenious attempt to mix two distinct

principles of law and in the mixing have a portion of one of the

principles blend so well that it disappears

Ii Cat West and American Foods neither have employees in common nor do they own stock or

have aproprietary interest in oracorporate connection with one another 19 F M C 188
664 FEDERAL MARITIME COMMISSION

To Stute when Jensen rejected the Commission s standard of abs

lute independence it established in its place the principle that not 

shipper connections are prohibited ie it is only those connectio

which lead to indirect rebates which are proscribed Stute goes on 

say

Thus on the basis of Jensen respondent would argue that the

Shipping Act will permit shipper connected or consignee con

nected affiliations so long as those connections do not lead to

forwarder situation of illegal rebate which the Shipping Act

was intended to preclude

So far so good In dealing with Sequoia Stute sets up something in t

nature of a syllogism First the Commission adopted the rationale 

Jensen saying that the independence requirement was intended to p

hibit only those categories ofrelationships which give rise to an illeg

rebate Second the Commission based upon its interpretation of t

legislative history concluded that it is the conduct of the particu

person or entity involved and not its mere characterization as purcha

ing agent which raises the statutory bar 6Still so far so goo

However Stute goes on to supply their Rationale of Jensen a

Sequoia which is

Thus the conclusion that can be drawn from the two cases

is that a shipper connected applicant may qualify as an inde

pendent ocean freight forwarder if it complies with the re

quirement of independence as defined in the statute The stat

ute established the independence requirement to prohibit those

categories of relationships which in and of themselves could

be presumed to give rise to an illegal rebate Thus if the

applicant does not fall within one of the prohibited categories

it is presumed without more to satisfy the independence re

quirements of the statute The prohibited categories are ship

pers consignees sellers or purchasers of shipments to foreign

countries or persons having any beneficial interest therein or

persons directly or indirectly controlled by a shipper consignee or

by a person having a beneficial interest in shipments to foreign

countries Emphasis mine

Having thus analyzed Jensen and Sequoia Stute says that since it Stut

is not a shipper consignee seller purchaser of shipments or a perso

having a beneficial interest in those shipments The only question 

be answered is whether respondent directly or indirectly is controlle

by a consignee The progression from analysis to conclusion is 

artfully done that it is quite easy to overlook the fatal flaw in th

8

This dealt with an argument that simply as purchasing agent American Foods was shipper co

nected
STUTE INTERNATIONAL INC FREIGHT FORWARDER 665

APPLICAnON

reasoning To reveal this flaw it is necessary to take up Stutes rationale

step by step

Jensen did not deal with the question of contro Stute itself admits

this What Jensen did deal with was the question of what relationship

was necessary to establish a beneficial interest in shipments in foreign

commerce The Court concluded that the relationship had to be one

which would give rise to an illegal rebate From this it naturally

followed that all shipper connections were not prohibited to forward

ers

7 With this principle firmly in hand Stute shifts its attention to

Sequoia and it is here that Stute blurs an essential distinction Sequoia

dealt with both beneficial interest and contro

Cal West was obviously not a shipper consignee or purchaser of the

goods shipped so the question became whether Cal West had a benefi

cial interest in a shipper etc It was in resolving this question that the

Commission made the statement cited by Stute that it is the conduct of

the particular person or entity and not its mere characterization

which raises the statutory bar The question ofcontrol was dealt with

separately and exclusively in terms of corporate relationships 8

The

question was not treated as one involving control and a course of

conduct which demonstrated that the control had never been exercised

But this is really what Stute is attempting to establish as a principle i e

that control if not exercised is not a bar to licensing Stute has confused

what it takes to establish the proscribed relationship with what are the

consequences ofthat relationship once it is established

Itis not enough to name somebody a shipper consignee or a

person with a beneficial interest What is required is that the person

named actually engage in conduct which makes him in fact a shipper

etc However once it has been established that the person is a

shipper

the question of control over the forwarder does not depend upon a

course of conduct whether it be actual past conduct or intended future

conduct It is the possibility of control that raises the statutory bar

and there is no jump high enough to clear that bar See Application for

Freight Forwarder License Louis Applebaum 8 F MC 306 1964

Freight Forwarding License Wm V Cady 8 F M C 352 1964 Applica

tion for Freight Forwarding License York Shipping Co 9 F MC 72

1965 and License No 790North American Van Lines 14 FMC 215

1971

Stute would distinguish these cases by arguing that in each of them

the possibility of control was a probability based upon facts or admis

sions showing actual contro According to Stute these cases stand

for the proposition that once there is a finding or admission ofcontrol

I

It should be remembered however that Jensen dealt not with the forwarder itself but with lTC

the manin the middle standing between the forwarder and theshippers

8 See footnote 5 supra
666 FEDERAL MARITIME COMMISSION

of an applicant by a shipper or consignee the statute does not perm

the granting of a qualified or conditional license allowing an applican

to operate as an independent ocean freight forwarder only in thos

situations where he is free from shipper contro The obverse of th

argument is of course that where control even though possible has no

been actually exercised the possibility of future control does not pre

clude licensing

To read these cases as Stute does is to make a shambles of th

statutory scheme for licensing forwarders The principle Stute advance

when carried just one step further would allow the licensing of th

clearly proscribed dummy forwarder All a shipper would have to d

is create a corporation which could operate as a broker then apply fo

a forwarder s license and simply refrain from actually exercising th

power which it clearly possesses to control its own corporation Unde

Stute s theory since actual control could not be shown the licens

would have to be granted The consequences are easily foreseen Wit

license in hand control is exercised and the shipper begins receivin

illegal rebates from its dummy forwarder The point need not be la

bored Neither the statute nor the Commission s decisions can be rea

to allow such an absurd result 9

The question then becomes whethe

there exists the possibility ofthe control of Stute by Chemie

As Stute concedes the control would have to be exercised throug

Kloeckner ie that Kloeckner and Co exercises control in such 

manner over Chemie Mineralien and Verkehrs and Verkehrs in turn

exercises control over Stute in such a manner that the activities o

Chemie Mineralien control the activities of Stute It is Stute s positio

that such control would not be exercised because If it were th

concept ofsubsidiary companies of a multinational conglomerate ope

ating as independent profit centers would be obliterated

This somewhat simplistic view of multinational conglomerates glosse

over the purpose ofholding companies like Kloeckner Thus

The dominant characteristic of a holding company is the

ownership of securities by which it is possible to control or

substantially to influence policies of one or more operating

companies in a particular field of enterprise North American

Company v Securities and Exchange Commission 327 U S 686

1946

The interrelationship here is much like that at issue in the Nort

American Van Lines case supra There PepsiCo a holding compan

9

The lengths to which Stute finds it necessary to go to construct its theory are illustrated by 

analysis of the North American Van Lines case There Stute had to go to the briefs where for t

purpose of argument North American admitted that Pepsi Co was ashipper and that North Ame

canwas controlled by PepsiCo In fact the Commission found that since thepurchase of North Ame

can by PepsiCo North American had refrained from forwarding activity until the potential contl

posed by theaffiliation with PepsiCo was resolved
STUTE INTERNATIONAL INC FREIGHT FORWARDER 667

APPLICATION

owned North American the forwarder and Pepsi Cola and Frito Lay

both shippers and the Commission had no difficulty in finding that

North American is or can be controlled by Pepsi Co 14 F MC

221 Here Kloeckner can just as readily control both Stute through

Verkehrs and Chemie This possibility precludes the licensing of Stute

as an independent ocean freight forwarder and the application is denied

An additional issue raised in the Commission s order instituting this

proceeding was whether the receipt by Chemie of rebates rendered

Stute unfit to be licensed The facts as stipulated show the following

At the suggestion of a U S flag carrier s agent in Germany Chemie

entered into an agreement whereby the agent paid Chemie 25 per

container for every full container carried Chemie agreed to the propo

sition because it gave Chemie more frequent service from the United

States At that time the price of goods purchased by Chemie in the

United States was based upon delivery to the pier in Savannah Geor

gia The carrier did not call at that port and the payment was intended

to make up part of the increase in price due to delivery of the goods to

ports other than Savannah There were 49 payments made over a three

month period during the latter half of 1973 and the first days of 1974

for a total of 1 500 No entity in the United States received any ofthe

payments

10 Neither Kloeckner nor Verkehrs knew of the payments

Stute s argument is that since Stute s connection with Chemie is such

that Stute has the independence necessary to be licensed the actions of

Chemie cannot be imputed to Stute In Stutes view The question of

fitness is moot On this issue Hearing Counsel agrees more or less with

Stute They contend that since Stute fails to meet the required standard

of independence the question of rebates need not be reached However

if the Commission finds that Stute and Chemie are not so closely

related as to bar licensing Stute then Hearing Counsel contends the

activities of Chemie have no bearing on the fitness of Stute I

agree

The only circumstances under which the rebates to Chemie can

become a real issue would be if it was determined that Stute was

independent of Chemie That finding would it seems to me preclude

imputing the illegal conduct to Stute for the purpose of rendering Stute

unfit for licensing

10 Stute questions the application of section 16 of the Shipping Act to the payments made to

Chemie but does not make any argument on the question
668 FEDERAL MARITIME COMMISSION

On the basis of the above I conclude that 8tute fails to meet th

standard of independence required for licensing as a freight forward

and that the license should be denied

8 JOHN E CoGRAVE

Administrative Law Judge

Washington D C

October 14 1980
STUTE INTERNATIONAL INC FREIGHT FORWARDER 669

APPLICATION

APPENDIX

STIPULATION BETWEEN HEARING COUNSEL

AND STUTE INTERNATIONAL INC

This stipulation is entered into between Hearing Counsel and Stute

International Inc Stute the only parties to this proceeding

I The sole issues presented in this proceeding are as follows

a whether Stute is independent of shipper connection in

view of the relationships between Stute and Kloeckner

between Stute and Chemie Mineralien K G Chemie

and between Kloeckner and Chemie

b whether Stute is otherwise fit to be licensed as an inde

pendent ocean freight forwarder because of the accept

ance by Chemie of payments totalling 1 500 during the

latter half of 1973 until the first days of 1974

2 The facts in regard to the above issues Le the control exercised

by the parent company Kloeckner Co whether there exist inter

locking officers and or directors among Stute and Kloeckner and

Chemie current shipping activities conducted by Chemie and the pos

sible involvement of Chemie and or Kloeckner with regard to the

question of rebating are contained in the accompanying affidavits of

LF W Luksemburg and Heinrich A Joost with the exception of the

additional fact set forth in paragraph 3 below

3 Kloeckner Co Kloeckner is a multinational conglomerate

having affiliate concerns throughout the world and a parent company

located in Germany A listing of the Kloeckner parent and affiliate

companies is attached hereto
670 FEDERAL MARITIME COMMISSION

AFFIDAVIT OF LF W LUKSEMBURG

FREE STATE OF BREMEN

ss

FEDERAL REPUBLIC OF GERMANY

LF W LUKSEMBURG being duly sworn depose and say as fo

lows

1 I am the Managing Director of Chemie Mineralien K G

Chemie which is located in Bremen Germany

2 I am personally familiar with the history and operations o

Chemie The facts set forth in this affidavit are based on person

knowledge and are true and correct to the best of my knowledge an

belief

3 Chemie s form of business organization is that which is know

under German law as a Kommanditgesellschaft KG which I a

informed and believe is somewhat comparable to a limited partnershi

in the United States In Chemie there are two partners The partne

with unlimited liability is Kloeckner Co and the limited partner 

Deutzer Oel K G Deutzer Kloeckner Co is located in Duis

burg Germany and Deutzer in Cologne Germany The capital contr

bution of Kloeckner Co to Chemie is 18 000 DM and that o

Deutzer is 2 000 OM Oeutzer is a

company affiliated with Kloeckne

Co

4 Kloeckner Co purchased a 100 interest in Chemie in 1958 an

in 1973 changed the organization of Chemie from that of acompan

with limited liability GmbH to that of a limited partnership In orde

to comply with German law which requires a K G business organiza

tion to have at least two partners Oeutzer became a partner and mad

a nominal capital contribution to the company At the time tha

Kloeckner purchased Chemie Ibecame general manager The compa

ny prior to purchase had been privately owned by one individual H

sold the business to Kloeckner Co because he wasin illhealth and 

who was the assistant manager continued on as general manage

5 Chemie has a total of IS employees including bookkeepers recep

tionists and secretaries It has seven 7 operating employees It is 

trading company which buys pumice stone common ground clay

additives for special fuels such as rocket fuel and colorants for variou
STUTE INTERNATIONAL INC FREIGHT FORWARDER 671

APPLICATION

industrial oils from sources all over the world and sells them in Europe

Its gross annual sales are approximately 15 million DM per year

6 In the course of its business Chemie purchases a

portion of its

requirements of common ground clays and a small quantity approxi

mately 120 tons per year of oil additives from suppliers in the United

States and sells them throughout Europe Chemie s source ofsupply for

common ground clays purchased from the U S is from processors

located in the State of Georgia U S A represented by Engelhard

Minerals of Chemicals Corp Engelhard Chemie has done business

with Engelhard for 50 years or more and Engelhard is its only source

of supply in the United States for common ground clays Chemie

purchases approximately 7 000 tons of common ground clays per year

from Engelhard Of the purchases of common ground clays approxi

mately 500 700 tons per year are made for Chemie s account This

tonnage is stored in public warehouses in Germany and used as inven

tory to supply the spot market in Germany Chemie does not own

lease or operate any warehouse The inventory on hand in Germany

varies at anyone time from 300 to 700 tons

7 Except in those cases where Chemie is purchasing common

ground clays for sale in the spot market no purchases of common

ground clays are made in the United States without there first being an

order given to Chemie by one ofits customers in Europe In the case of

the oil additives all purchases are made only after the customer s order

has been received In the normal course of business the common

ground clays are sold by Engelhard to Chemie fa s a

designated vessel

in the ports of Jacksonville Florida or Savannah Georgia The shipper

on the Bill of Lading for these shipments is Engelhard The consignee

on the Bill of Lading is to the order of shipper and the party

designated in the Bill of Lading as the Notify Party is either a

freight forwarder designated by Chemie or the customer The freight

forwarder in each instance is a

freight forwarder in Europe who has

received orders from Chemie as to the ultimate destination of the

goods Chemie sells the goods to its customers outside Germany on a

cif basis with the exception of customers in Portugal who are sold

on a fo b basis Customers in Germany are sold on either a ci

f or

free factory basis Thus on the transactions which constitute approxi

mately 90 95 of Chemie s

imports from the United States the

goods are delivered directly to Chemie s customer In no instance

including those instances when Chemie purchases for its own account

is Chemie the end user ofthe product It acts in every instance only as

a trading company

8 In the case of the oil additives Chemie s purchases are made only

after a customer s order has been received If the customer s order is

for an amount less than a full container Chemie will purchase the

amount required to fill the container for its own account and store it in
672 FEDERAL MARITIME COMMISSION

a warehouse for sale in small lots Chemie purchases 10 full container

per year of oil additives from its supplier Ethyl Corporation The

containers are shipped on a fob basis by Chemie s supplier The

freight forwarder on these shipments is employed by the supplier

9 Chemie employs an American freight forwarder Amersped Inc

located in New York City to handle the shipments of common ground

clays after they have been delivered to the pier by Engelhard It ha

dealt with Amersped for 25 years or more It employs various freigh

forwarders in Europe but it has never at any time employed Stute

Verkehrs GmbH as a freight forwarder in Europe and has no intentio

ofdoing so either in Europe or in the United States

10 Chemie does not have officers such as a president or vice

president as it has been explained to me exist in an American corpora

tion I am the managing director or general manager of Chemie I am

not an employee officer or director of K10eckner Co All of its

operations are managed and overseen by me including the hiring firing

and promotion of employees I am authorized to act on behalf of the

company in all respects My assistant Horst Martin has limited author

ity to act on behalf of Chemie under my direction and only in the

ordinary course of Chemie s business Dr Gunther Meyer the execu

tive officer of Kloeckner Co in charge ofK1oeckner s chemical and

oil division is the only other director of Chemie I make a monthly

report to Dr Meyer in which Igive him the monthly sales of Chemie

both in OM value and in tonnage and an estimate ofthe gross and ne

profit Dr Meyer visits the Chemie office in Bremen once a year and a

that time we discuss the company s past performance and its prospects

Chemie maintains its own bank accounts and has independent lawyers

Chemie does not utilize any Kloeckner personnel to provide any serv

ices except that its books are audited annually by Kloeckner Co A

the end ofeach year the profit that Chemie has made during the year is

turned over to Kloeckner Co Chemie has never had a loss Pursuant

to arrangements with Kloeckner Co Chemie may borrow money

from Kloeckner and if it does so it is charged interest on the loan

Conversely Chemie ifit has a surplus in its account at any time prior

to the end of the year may lend that surplus to Kloeckner Co and

be paid interest on that loan Kloeckner Co serves as a guarantor on

a 100 000 OM line of credit which Chemie maintains with a loca

Bremen bank This line of credit was opened ten years ago and has

never been used All day to day operations of Chemie are managed by

me without reporting to Kloeckner Co which serves as a silen

owner of the business This is so because the business is an esoteric one

which demands a highly specialized knowledge of the products its

sources of supply and of the market No one at Kloeckner Co has

this specialized knowledge or experience
STUTE INTERNATIONAL INC FREIGHT FORWARDER 673

APPLICATION

11 I have read the letter dated February 26 1979 addressed to

Stute International Inc and signed by Mr Arthur Pankopf Managing

Director Federal Maritime Commission in which Me Pankopf on

behalf of the Commission notified Stute International Inc ofthe Com

mission s intent to deny Stute s application for an independent freight

forwarder s license In that letter Mr Pankopf states that Chemie may

have received rebates from an ocean going common carrier in violation

ofSection 16 Shipping Act 1916

12 Chemie is a German company having its only place ofbusiness in

Bremen Germany It has no offices in the United States Nor does it

have any representatives agents or employees in the United States In

fact Chemie s business in the United States is wholly done by telex

telephone or mail I visit the United States on the average of once

every two years to visit our suppliers and exchange sales and product

information Since Chemie has no place ofbusiness oroperations in the

United States it is difficult for me to see how the provisions of the

Shipping Act can be applied to Chemie

13 At the request of Stute International Inc I and my assistant Mr

Horst Martin have reviewed the documents which were given to Stute

International by representatives ofthe Federal Maritime Commission It

is my understanding that these documents were obtained by the Com

mission during the investigation of the Sea Land Service Inc Sea

Land It is also my understanding that the Commission s claim that

Chemie took rebates from Sea Land is based upon these documents I

would like to set forth the facts and circumstances relating to those

documents

14 In 1973 there was a large surplus of containers available for the

shipment of goods from the United States to Europe Sometime during

that year a

representative of Paul Gunther GmbH Co Gunther a

German company which acts as agent for Sea Land in Bremen ap

proached either me or Mr Martin He was making a sales call and was

trying to interest us in using Sea Land which at that time operated

from Charleston South Carolina or Jacksonville Florida for our ship

ments We told him that Engelhard s price for the common ground

clays ordered by Chemie from the United States varied in accordance

with the port from which the goods were shipped because ofthe inland

freight differential At that time the purchase price was increased if the

goods were shipped from any port other than Savannah Georgia Sea

Land did not call at Savannah Georgia but did call at Jacksonville

Florida and Charleston South Carolina Recognizing the problem the

Gunther representative offered to make up a part of that inland freight

differential by paying Chemie 25 dollars per container for every full

container shipped via Sea Land from Jacksonville or Charleston

Chemie agreed to the proposition in order to give Chemie more fre
674 FEDERAL MARITIME COMMISSION

quent service Such an offer is not illegal under German law Of course

we had no knowledge ofthe United States law

15 A review of our files shows that we were paid the 25 dollar fe

on shipments of approximately 49 full containers over a three month

period At that time Chemie was importing approximately 50 contain

ers per month

16 The representative of Gunther told us that for Gunther s book

keeping purposes he wanted Chemie to bill Gunther in the amount o

25 dollars per container for services rendered by Chemie in returnin

the empty container from Chemie s customer to the container por

This charge was normally included in the shipping charge Chemi

complied with Gunther s instructions

17 This practice continued during the latter half of 1973 until th

first days of 1974 when suddenly because ofthe oil crisis there came 

great shortage in the supply of containers and no containers wer

available for low tariff goods such as those classified with the commo

ground clay tariff Because of the shortage of containers Gunther wa

no longer interested in soliciting Chemie s business for Sea Land I

fact Chemie has not used the Sea Land service since 1974 except fo

some shipments made from the United States to its customers in th

Mediterranean Area

18 The last payment of 25 dollars for a container was made b

Gunther to Chemie in January 1974 The money which was receive

by Chemie from Gunther representing the aforementioned payment

was kept in a separate fund by Chemie and used to purchase Christma

presents for substantial customers of Chemie At no time was any ofth

money returned to the United States At no time until Iread the lette

of Mr Pankopf did Iknow or understand that the payments made b

Gunther to Chemie were in violation of United States law Kloeckne

Co had no knowledge of the payments because the payments we

deposited in a special account unknown to Kloeckner Co to be use

for the aforementioned purpose and because Kloeckner Co did no

then and does not now participate in the management or operations o

Chemie
STUTE INTERNATIONAL INC FREIGHT FORWARDER 675

APPLICAnON

AFFIDAVITOF HEINRICH A JOOST

FREE STATE OF BREMEN

ss

FEDERAL REPUBLIC OF GERMANY

HEINRICH A JOOST being duly sworn deposes and says as

follows

1 I

am the president of Stute International Inc the applicant in the

above entitled proceeding Iam also deputy managing director of Stute

Verkehrs GmbH

2 I am personally familiar with the history and operation of Stute

International Inc and Stute Verkehrs GmbH as well as the general

organization and operations of Kloeckner Co The facts set forth in

this affidavit are based on personal knowledge and are true and correct

to the best of my knowledge and belief

3 Stute International Inc is a Delaware corporation having its prin

cipal place ofbusiness at 405 Lexington Avenue New York N Y It is

a wholly owned subsidiary of Stute Verkehrs GmbH which has its

principal office in Bremen Germany

4 Stute International Inc has four employees It is engaged in the

business of handling import shipments from foreign countries to the

United States and acting as a consultant for export shipments In 1978 it

had gross billings of 1 040000 Dollars and during the first nine months

of 1979 it had gross billings of988 915 Dollars

5 I am the only officer of Stute International Inc who is also

employed in the management of Stute Verkehrs GmbH The Board of

Directors of Stute International is composed of three persons myself

Gunter Holsing managing director of Stute Verkehrs GmbH and Ru

diger Dettmann a prokurist and employee of Stute Verkehrs GmbH

6 Stute Verkehrs GmbH the parent company of applicant is a

freight forwarding company operating out of Bremen Germany in

worldwide importexport trade It is active as a rail air truck and

ocean freight forwarder It was organized in 1957 as J A C Stute

GmbH and its name was changed in 1971 to Stute Verkehrs GmbH In

addition Stute Verkehrs GmbH provides warehousing trucking ships

chartering and customs clearance services in Germany and acts as a

freight traffic consultant It is the sole owner of subsidiary companies
676 FEDERAL MARITIME COMMISSION

operating as freight forwarders in London and Paris and the 50

owner of a subsidiary which operates as a freight forwarder in Sharjah

United Arab Emirate Stute Verkehrs GmbH has approximately 20

employees Its gross sales in 1978 were approximately 150 million OM

7 The business organization of Stute Verkehrs is known as a GmbH

and is that of a limited liability company Under German law the

business organization known as a GmbH has its liability limited to the

extent of its capitalization The capitalization ofStute is I million OM

8 Stute Verkehrs GmbH is wholly owned by Kloeckner Co

whose activities will be described below It operates however inde

pendently and separately from Kloeckner Co The management o

Stute Verkehrs GmbH consists of three persons Myself and Oiete

Wurmehl are deputy managing directors and Gunter Holsing is the

managing director All three of us are wholly responsible for all Stute

Verkehrs GmbH operations and either one of us has authority to act in

all respects on behalf of the company None of us is an employee

officer or director of Kloeckner Co and none of us have an

authority for or on behalf ofKloeckner Co

9 Kloeckner Co is a holding and trading company with its head

office in Ouisburg Germany Kloeckner Co was founded in 1906 I

is active in trading in steel and steel products metals ores chemicals

coal solid and liquid fuels heating equipment and construction materi

als It also has a subsidiary which finances turn key construction

projects

10 Kloeckner Co is a partnership in which the general partners

with unlimited liability are Messrs Peter Henle Jorg A Henle and

Karl A Thoelke The limited partner with limited liability is the

K10eckner family trust Peter K1oeckner Familien stiftung The capital

ization of K10eckner Co is 265 Mill OM 99 of the capital is

contributed by the K10eckner family trust and the remaining I by the

three individual partners who have unlimited personal liability

11 In the year 1978 Kloeckner Co had gross sales of 7 798 billion

OM Attached hereto as Exhibit Iis a concise statement ofthe financia

structure of Kloeckner Co

12 The general partners as the owners of Kloeckner Co are

responsible for overseeing the general operations of Kloeckner Co

All three of the general partners together with Messrs Otmar Franz

Heinz Wolf and Georges Grumieaux are members of the Board o

General Management which is responsible for all day today operations

ofKloeckner Co Messrs Franz Wolf and Grumieaux are employees

of Kloeckner Co and not partners in the company In addition

Kloeckner Co has a Partners Supervisory Committee which acts as

an advisor and a consultant to the partners This Committee is made up

of four persons none of them are employees or partners of Kloeckner

Co None of the partners and none of the members of the Board o
STUTE INTERNATIONAL INC FREIGHT FORWARDER 677

APPLICATION

General Management or Supervisory Committee are officers managers

or directors ofStute Verkehrs GmbH or Stute International Inc

13 The managers or directors of Stute Verkehrs GmbH function

independently from Kloeckner Co They gave the authority to hire

fire and promote employees and may commit the company to bank

loans Kloeckner Co does however retain veto power over use of

Stute funds for investment in or acquisition of new businesses Stute

Verkehrs GmbH furnishes complete financial and activity reports to

Georges Grumieaux a member of the Board of General Management

of Kloeckner Co As in the case of Chemie Mineralien Stute Ver

kehrs GmbH turns over its profit at the end of each calendar year to

Kloeckner Co Since it was founded in 1957 Stute has never had a

loss Stute has the same arrangement with Kloeckner Co as Chemie

Mineralien in that it may borrow money from Kloeckner Co and it

may lend the money to Kloeckner In each instance interest is charged

on the loans Kloeckner Co does not guarantee a bank line of credit

on behalf of Stute International Inc Kloeckner audits Stutes books on

an annual basis and provides Stute with computer services for which

Stute is charged The books and records ofStute International Inc are

audited by Joseph Graf Co Certified Public Accountants 1212

Avenue ofthe Americas New York New York

14 In some instances Stute Verkehrs GmbH acts as a freight for

warder for Kloeckner Co Approximately 28 of Stute Verkehrs

GmbH gross billings are for freight forwarding services rendered to

Kloeckner or its affiliated companies Since Stute is a full line freight

forwarder this percentage figure includes truck rail and air forwarding

activities as well as ocean freight activities In order to be employed as

a freight forwarder by Kloeckner Co Stute must submit bids to

Kloeckner Co in competition with other freight forwarders Each

department or subsidiary of Kloeckner Co is free to employ any

freight forwarder it wishes

15 As can be seen from the facts stated above the statement in the

memorandum dated May 21 1979 to the Federal Maritime Commission

from Arthur Pankopf Managing Director of the Commission that I am

a joint officer director ofKloeckner Co and Stute International Inc

the applicant herein is erroneous

16 Although Stute Verkehrs GmbH and Chemie Mineralien KG are

located in the same city in Germany Stute Verkehrs GmbH has never

acted as a freight forwarder for Chemie Mineralien and has no connec

tion with that company and neither I nor any of my colleagues who

comprise the management of Stute have any knowledge of or control

over Chemie s business activities
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 744

APPLICATION OF SEA LAND SERVICE INC FOR THE

BENEFIT OF STONE AND DOWNER CO

Application for permission to refund a portion of freight charges collected in the amoun

of 617 15 granted

Frank A Fleischer for Sea Land Service Inc

REPORT AND ORDER

February 6 1981

BY THE COMMISSION RICHARD J DASCHBACH Chairman

LESLIE KANUK Vice Chairman JAMES V DAY THOMAS F

MOAKLEY AND PETER N TEIGE Commissioners

Pursuant to Rule 92b of the Commission s Rules 46 C F R

502 92b Sea Land Service Inc filed an application for permission to

refund 617 15 to Stone and Downer Co This amount represents ra

yard RY service charges of 100 per revenue ton on three shipments

of vinyl luggage transported from Kaohsiung Taiwan to Boston Mas

sachusetts SeaLand alJeged that it intended to delete this RY delivery

charge from its tariff prior to these shipments but that because of a

administrative clerical error in the preparation of the applicable tari

page the page was initialJy rejected by the Commission thereby result

ing in the previous page containing the RY charge being applicable 

Administrative Law Judge William Beasley Harris issued an Initia

Decision in which he denied Sea Land s application on two separat

grounds First he found that the deletion of the RY charge wa

conditioned on a prior event Sea Land s resignation from certai

conferences but that the record did not reveal whether this ha

occurred In addition the Presiding Officer found nothing in the recor

from which to conclude that the carrier had advised the shipper of it

intention to file the reduction

Sea Land has filed Exceptions to the Initial Decision stating that th

Presiding Officer erred in finding that the record failed to reveal that

the shipper was charged more than he understood the rate to be

1 The tariff page which was submitted by Sea Land contained both increases and decreases inclu

ing the RY charge It was rejected because the intended increases were not made effective 30 da

from the date of issue Upon learning of the rejection Sea Land published anew page which becam

effective March 29 1980
SEA LAND SERVICE INC FOR THE BENEFIT OF STONE 679

AND DOWNER CO

Sea Land claims that its decision to delete the RY charge was a mar

keting decision and as that term is used in the transportation industry

it connotes prior carrier and shipper negotiations and shipper awareness

of the intended rate In addition Sea Land claims that various ship

pers had been advised of its intention to delete the RY charge but

offers no evidence that this particular shipper was aware of the intend

ed change

DISCUSSION

With respect to the Presiding Officer s first basis for denying Sea

Land s application it does not matter whether the record contains

evidence concerning Sea Land sresignation from certain unspecified

conferences This was not a condition precedent for the deletion of

the RY charge but rather related to other anticipated rate changes

The tariff in question is Sea Land s independent intermodal tariff

F MC No 148 The tariff page which contained the deletion of the

RY charge was clearly intended to become effective on a date certain

February 22 1980 irrespective of Sea Land s membership vel non in

various ocean conferences

The more difficult question is whether in all cases there must be

shipper reliance on a carrier s intention to charge a lesser amount to

warrant relief under section 18b

3 The Presiding Officer answered

this question in the affirmative while finding that there was no evidence

that the shipper was charged more than he understood the rate to

be or that the carrier advised the shipper of the carrier s intention to

file a reduced rate and therefore failed to file the reduced rate with the

Commission Initial Decision at 5 Our review of the legislative

history of section 18b 3 leads us to a somewhat different conclusion

with regard to the necessity for showing shipper reliance

The purpose of section 18 b 3 is to permit common carriers by

water to make voluntary refunds to shippers or waive the collection of

a portion offreight charges in two specific situations 1 where there is

an error in a tariff of a clerical or administrative nature or 2 where

through inadvertence there has been a failure to file a tariffreflecting

an intended rate S Rep No 1078 90th Cong 2d Sess 1 1968 Both

the legislative history of section 18 b 3 and subsequent Commission

precedent indicate that there must be shipper reliance in the latter

situation As the House Report accompanying the 18 b 3 legislation

makes clear Congress was there concerned that through a bona

fide mistake on the part ofthe carrier the shipper is charged more than

he understood the rate to be H R Rep No 920 90th Cong 1st Sess 4

1967 underscoring added see also Munoz Y Cabrero v Sea Land

Service Inc 20 F M C 152 153 1977 However there are other

situations where shipper knowledge of and reliance on a carrier s inten

tion is not critical These are generally situations where there has been
680 FEDERAL MARITIME COMMISSION

an error in a tariff of a clerical or administrative nature Two illustra

tions are provided in the Senate Report 1 a typographical error eg

transposing an intended 37 rate to 73 and 2 the unintentiona

deletion of a specific commodity rate resulting in the imposition of a

higher cargo N O S rate S Rep No 1078 supra at 4 In neither case

is there shipper awareness of the carrier s intention but in both cases

Congress intended that relief would be granted

The present case is yet another example of an error in a tariff of a

clerical or administrative nature Sea Land s failure to state that the

increases contained on its relevant tariff page were to become effective

in thirty days was an error in Sea Land s tariff publishing procedures o

an administrative nature As a result the unrelated deletion of the RY

charge which otherwise would have been immediately effective was

postponed

Sea Land s application meets all statutory and regulatory require

ments and its approval will not result in discrimination among shippers

Under the circumstances Sea Land could properly refund to Stone and

Downer that portion of the charges collected representing RY

charges

of 617 15

THEREFORE IT IS ORDERED That permission is granted to

Sea Land Service Inc to refund to Stone and Downer Co a portion o

the freight charges in the amount of 617 15 and

IT IS FURTHER ORDERED That Sea Land Service Inc publish

the following notice in its Hong Kong TaiwanAtlantic Gulf

Coast Joint Container Freight Tariff No 325 F MC No 148

Notice is hereby given as required by the decision of the

Federal Maritime Commission in Special Docket No 744 that

from February 22 1980 to March 29 1980 paragraph 2 of

Rule No 130 Destination Services Charges shall not apply

This Notice is effective for purposes of refund or waiver of

freight charges on any shipments affected by this provision

during the specified periOd oftime and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 752

COORDINATED CARIBBEAN TRANSPORT INC

TO BENEFIT MORISAENZ S A

ORDER OF REMAND

February 6 1981

On November 24 1980 the Commission determined on its own

motion to review the Initial Decision of Administrative Law Judge

William Beasley Harris in the above captioned matter This decision

denied special docket relief because the carrier applicant failed to fur

nish sufficient information to establish that the July 13 1980 shipment

of 11 motor vehicles from Miami to Manta Ecuador was affected by a

clerical or administrative tariff error or an inadvertent failure to

file a new tariff within the meaning of 46 U S C 817 b 3 or that the

requested relief would not result in discrimination between shippers

Upon examination of the record the Commission concludes that the

Presiding Officer sfindings regarding the application s

insufficiency

under 46 C F R 502 92 were correct Nonetheless given the nonadver

sarial remedial nature ofthe special docket process it would have been

appropriate that this special docket applicant be provided at least one

opportunity to correct perceived deficiencies before final judgment was

rendered It does not appear that the Presiding Officer made such a

request for further information Accordingly the matter will be re

manded for the purpose of developing a full and complete picture of

the arrangements between the carrier and shipper which led to the

filing of the July 14 1980 project rate relied upon in the application

including the nature of the project which qualified the subject ship

ment of motor vehicles for carriage at a rate other than that stated for

other Passenger Automobiles at Third Revised Page 46 of Coordinated

Caribbean Transport Incs Tariff FMC No 14 Of course if Appli

cant fails to respond within a reasonable period oftime to a request for

further information it would be appropriate for the Presiding Officer

then to deny the special docket application

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 4200

STOP AND SHOP COMPANIES INC

BRADLEES DIVISION

v

BARBER BLUE SEA LINE AND

BARBER STEAMSHIP LINES INC

ORDER REMANDING PROCEEDING

February 11 1981

This proceeding is before the Commission upon its determination to

review the Decision of Settlement Officer James S Oneto denying

Stop and Shop Companies Incs request for reparation under section

18b 3 of the Shipping Act 1916 46 U S C 817 The basis of the

Settlement Officer s decision is that Complainant s submissions present

ed contradictory evidence of the weight and measurement of the ship

ment in issue and that it had therefore failed to meet its burden o

proof

While the Commission agrees that Complainant s presentation does

not support an award of reparation the Complainant nevertheless

should have been afforded especially in an informal proceeding of this

kind an opportunity to explain or correct the inconsistencies in its

submissions The Commission therefore remands this proceeding to the

Settlement Officer with instructions to give Stop and Shop a reasonable

opportunity to clarify this information and then to issue an appropriate

decision

THEREFORE IT IS ORDERED That this proceeding is remand

ed to the Settlement Officer for further action consistent with this

Order and for issuance of a supplemental decision within 4S days of

the date of this Order

By the Commission

S FRANCIS C HURNEY

Secretary

Chairman Daschbach did not participate and issues a

separate statement
STOP AND SHOP COMPANIES INC BRADLEES DIVISION 683

V BARBER BLUE SEA LINE AND BARBER STEAMSHIP

LINES INC

Separate Opinion of Chairman Daschbach

I am not participating because I do not believe that the Commission

should review the decisions of Settlement Officers in informal docket

proceedings Under Subpart S of the Commission s Rules of Practice

and Procedure 46 C FR 502 301 parties consent to waive the rights

and obligations associated with normal adjudicatory proceedings for the

express purpose of receiving prompt consideration of a small claim

Commission review precludes the inexpensive and expeditious handling

of small claims which is the foundation of the informal docket process

The settlement officer s decisions in informal dockets do not have

precedential value Commission review therefore imposes unnecessary

expense and delay in an arbitration process designed to settle minor

commercial disputes in a prompt and responsive manner
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 13 REVISED AMENDMENT NO 6

DOCKET NO 80 33

PART S36 PUBLISHING AND FILING TARIFFS BY COMMON

CARRIERS IN THE FOREIGN COMMERCE OF THE UNITED

STATES

February 12 1981

Final Rule

Tariff material covering the through movement o

cargo between foreign countries transshipped at 

U S port is not required by Part 536 ofthe Commis

sion s Rules This action was taken in response t

requests for clarification of Part 536 s scope and i

intended to lessen the regulatory burden on ocea

carriers

DATE Effective February 18 1981

SUPPLEMENTAL INFORMATION

The Federal Maritime Commission solicited comments on a propose

rule to exempt the through transportation of cargo from one foreig

country to another which is merely transshipped at a U S port from

the tariff filing requirements of46 C F R Part 536 1 The transshipmen

could be from one ocean vessel to another including vessels of th

same carrier or from an ocean vessel to an inland carrier by rai

motor water or air

The comments mainly expressed the view that the movement o

foreign to foreign cargoes is beyond the jurisdiction conferred upon th

Commission under sections 1 and 18b of the Shipping Act 1916 4

U S C 801 817 b

2

ACTION

SUMMARY

1 Section 3 of the Shipping Act 1916 46 V S C 8330 provides that the Commission may by ru

exempt activities of common carriers by water in the foreign commerce from statutory and administra

tive requirements provided the exemption would not impair effective regulation by the Commissio

be unjustly discriminatory orbe detrimental to commerce

2

Sea Land Service Inc urged the Commission to identify precisely the types of foreign ta foreig

transportation which would be exempted under the rule In Sea Land s view athrough moveme

which involves aUnited States inland point of origin ordestination and contact with aUnited State
TARIFF FILING EXEMPTION

The threshold question is whether a carrier s status as a

person

subject to the Shipping Act when carrying U S trade cargo is suffi

cient when coupled with the physical presence of the foreign to for

eign cargo at a U S port to establish jurisdiction over the foreign to

foreign transportation for purposes of section 18 b This question is

best answered in the negative Careful review of the legislative history

of section 18b has led the Commission to conclude that section

18 b I was intended to have the same general geographic scope as

section 1 and does not require the routine filing of tariffs for foreign to

foreign cargo transshipped at United States ports

3

Accordingly the Commission will adopt a rule which states for the

sake of clarification that Part 536 does not cover foreign to foreign

transportation

THEREFORE pursuant to sections 18 b and 43 of the Shipping

Act 1916 46 U S c 817 and 841a and section 4 of the Administra

tive Procedure Act 5 U S C 533 IT IS ORDERED That effective

upon publication in the Federal Register Title 46 Code of Federal

Regulations section 536 1 is amended as follows

Part 536 1 Exclusion and Exemptions

Present paragraphs a and b are redesignated as paragraphs b

and c

respectively

A new paragraph a is added which states that

a This part does not apply to transportation of cargo be

tween foreign countries including that which is trans

shipped from one ocean carrier to another or between

vessels of the same carrier at a U S port or transferred

between an ocean carrier and another transportation mode

at a U S port for overland carriage through the United

States where the ocean carrier accepts custody of the

cargo in a foreign country and issues a through bill of

lading covering its transportation to a

foreign point of

destination

By the Commission

S FRANCIS C HURNEY

Secretary

port should not be exempted from the Commission s tarifffiling requirements The Commission agrees

and the instant proposal does not deal with cargo originating in ordestined to points within the United

States but covers only those situations where cargoes move through the United States from aforeign

origin to another foreign destination underthe continuous custody of the carrier s issuing the shipping

documents

Matson Navigation Company suggested that nonexclusive transshipment agreements pertaining to

the subject cargo movement be completely exempted from regulation Whatever the merits of this sug

gestion it is beyond the scope of this proceeding

3

This conclusion does not preclude the Commission from exercising regulatory authority over for

eign to foreign traffic under other sections of the Shipping Act inappropriate circumstances however

1 Jafr

685
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 13 REVISED AMENDMENT NO 7

DOCKET NO 80 40

PART 536 PUBLISHING AND FILING OF TARIFFS BY

COMMON CARRIERS IN THE FOREIGN COMMERCE OF THE

UNITED STATES

February 13 1981

Final Rule

These final rules implement certain provIsIons o

Public Law 95 483 92 Stat 1607 which provide fo

the regulation of the rates and charges of certain

state owned or controlled carriers operating as cros

traders in the United States foreign commerce

These rules amend the foreign tariff filing require

ments to provide for the publication filing justifica

tion and suspension ofcontrolled carrier tariff matter

DATE Effective March 23 1981

SUPPLEMENTAL INFORMAnON

The Commission previously gave notice 46 F R 42721 24 that it

proposed to amend 46 C F R 536 to prescribe the technical require

ments for the publication filing justification and suspension of con

trolled carrier tariff matter The amendments are necessary to imple

ment portions of the requirements of section 18 c of the Shipping Act

1916 which took effect November 17 1978 pursuant to the Ocean

Shipping Act of 1978 Pub L 95 483 92 Stat 1607 Comments from

the public were invited with respect to the proposed rules and one set

of comments was received from Baltic Shipping Company Black Sea

Shipping Company Far Eastern Shipping Company and Murmansk

Shipping Company Baltic The following is a section by section analy

sis of the commentator s position on specific sections of the proposed

rules

1 Section 536 1

Baltic states generally that the exemptions proposed in the rules differ

from the statute Baltic specifically asserts that paragraph c l iii is

ACTION

SUMMARY

ISlI FMC
CONTROLLED CARRIER TARIFFS

more restrictive than that provided in the statute and that the Commis

sion lacks the authority to make such a substantive change

The Commission believes that the proposed rule accurately reflects

the intent of the statute The proposed change in paragraph c I iii

merely clarifies the statutory language covered by an agreement ap

proved by section 15 of the Act in a way which is consistent with the

legislative history As published on page 28 ofthe Senate Committee on

Commerce Science and Transportation Report No 95 1260 clarifica

tion of the statutory words covered by is provided by the following

Committee statement

the Ocean Shipping Act is intended to exempt the rates

charges classifications rules or regulations of a controlled

carrier which are established pursuant to an agreement among

carriers such as a conference agreement Rates set independ

ently by a controlled carrier whether in connection with a

section 15 agreement or otherwise should remain subject to

the regulatory provisions of these bills Sen Rep No 1260

95th Cong 2nd Sess 28 1978

Paragraph c l iii requires that for a rate of a controlled carrier to be

exempt it must be set by the duly authorized action of a ratemaking

body approved under section 15 ofthe Act

Baltic s view that the proposed paragraph c I iii is more restrictive

than the statute requires may have originated with a statement in the

Notice of Proposed Rulemaking under Supplementary Information

wherein it was stated in paragraph Number I thereof that the proposed

section 536 Ic I iii more clearly indicates that only rates actually

set by the concerted action of an agreement s membership are exempt

This language was neither contained in the proposed rule nor is it

intended to interpret the language actually contained in the proposed

rule

It appears however that a reference to the vessels ofthe controlling

state was inadvertently omitted from proposed paragraph c l

i

which could be viewed as altering the intended meaning of the statute

This was not the Commission s purpose and appropriate revisions have

therefore been made in the final version ofthis paragraph

The proposed exemption requirement makes no predetermination of

the authority encompassed by any particular ratemaking body s section

15 agreement Therefore the Commission believes that the proposed

rule conveys the precise meaning of the statutory language covered

by

2 Section 536 3 d

Baltic states that the extra costs incurred in filing three copies of

tariff pages rather than two would be very substantial but fails to

687
688 FEDERAL MARITIME COMMISSION

provide any estimate of the additional burden 1 The Commission b

lieves that the extra copy is an administrative necessity to ensure prop

and timely monitoring of controlled carrier tariff filings We also no

that no other classified controlled carrier has chosen to comment o

this proposal Therefore the Commission will retain the triplicate filin

requirement in the final rule

3 Section 536 5 a i

Baltic states that this designation serves no useful purpose and is 

unwarranted attempt to stigmatize certain carriers To the contrary th

Commission believes that this designation is useful to the general pub

to alert them that certain carriers are subject to rules which differ fro

the general tariff filing rules That difference is important to the sh

ping public and tariff users who would benefit from knowing th

reductions in a certain carrier s tariff are subject to 30 days notic

The Commission does not believe that this identification requireme

unduly stigmatizes certain carriers An identification requirement 

ready applies to NVOCCs and carriers party to an approved section 

agreement primarily for the purpose of alerting the tariff user to impo

tant distinctions between common carriers

The Commission in addition has published lists of carriers found 

be controlled carriers subject to the provisions of section 18 c whi

likewise do not unduly stigmatize certain carriers but merely put t

public on notice as to which carriers are subject to the requirements 

section 18 c Therefore the Commission adopts the requirement 

proposed

4 536 11g 3

The Commission has determined to amend the rule as proposed 

avoid the establishment of any single rigid standard for rejection 

replacement rates However the lowest comparable charges of U 

flag or reciprocal flag carriers will continue to be considered as a fact

in determining whether to reject such rates

Under the statute replacement rates for rates suspended may be fil

to be effective during the suspension period Iffiled during the suspe

sion period the rates become effective immediately Therefore it 

necessary for the Commission to establish a method to expeditious

evaluate and act upon these replacement rates The lowest total charg

then in effect for a U S flag or reciprocal flag carrier provide o

important factor to assist the Commission in coping with the evaluati

and time problem without establishing minimum levels of rates in t

U S foreign commerce

1 The Commission notes that the volume of filings made by the companies on whose behalf 

commentator seeks eliminationof this requirement has been severely curtailed in recent months du

the withdrawal of their servicefrom certain U S trades
CONTROLLED CARRIER TARIFFS

It should be noted that under the statute the replacement rate con

cept was primarily designed to allow the controlled carrier to have a

set of rates in effect during the suspension period Any replacement

rates filed under the statute can be effective for the duration of the

suspension period However the controlled carrier is not precluded

from filing other rates at higher or lower levels during the suspension

period on 30 days statutory notice These rates would replace the

replacement rates which may have been filed on immediate notice In

such cases the Commission would have the benefit ofthe notice period

to evaluate the justness or reasonableness of the new rate level The

Commission could then either act to suspend such rates before they

become effective or allow them to go into effect if it is believed that

they are just and reasonable

The final rule therefore would require the Commission to consider

the lowest charges then in effect by U S or reciprocal flag carrier as

proposed but would not require the rejection of any replacement rate

solely upon that criterion

The commentator notes finally that the concept of total transporta

tion charge is improper when considering rate levels We refer the

commentator to Rates ofFar Eastern Shipping Company 22 F MC 651

655 656 1980 where the Commission held that rate comparisons con

ducted pursuant to section 18 c 2 ii should include not only the

applicable freight rate as stated in the carrier s respective tariffs but

also any differences in surcharges accessorial charges and tariff rules

which may affect the total transportation charge to the shipper The

total transportation concept was also utilized in Specific Commodity

Rates of Far Eastern Shipping Co in the Philippines US Pacific Coast

Trade 23 F MC 406 1980 and in instituting Docket No 80 6 Specif

ic Commodity Rates of Far Eastern Shipping Co in the Philippines U S

Pacific Coast Trade and U S Gulf Australia Trade served 13180

Commissioner Kanuk s dissenting opinion in Rates of Far Eastern Ship

ping Company cited by the commentator was based on opposition to

the introduction of the total charge concept after the proceeding was

instituted and not on opposition to the concept itself 2

The Commission notes that a controlled carrier may have a rate

published at a level which is higher than that of any other carrier in a

trade but that it may apply a surcharge in such a manner that the

resulting total transportation charge to the shipper is considerably

lower than that of any other carrier in the trade For this reason the

Commission will retain the total charge concept in the final rule

2 Commissioner Kanuk s dissenting opinion stated I concur with themajority that consideration of

total charges may well be amatter of great importance in acontrolled carrier proceeding 19 S RR

at 1543

1 Ji f fr

689
690 FEDERAL MARITIME COMMISSION

The Commission has also amended section 536 8 Tariffs containing

through rates and through routes to include a reference to 18 c This

amendment was not included in the Notice of Proposed Rulemaking

and appears as part VIII ofthe attached appendix

Accordingly pursuant to the provisions of 5 US C 553 and sections

18b 18 c and 43 of the Shipping Act 1916 46 U S C 817 b 817 c

and 841 a the Federal Maritime Commission hereby amends 46

C F R 536 in the manner set forth in the attached appendix

By the Commission

S FRANCIS C HURNEY

Secretary

1C u
CONTROLLED CARRIER TARIFFS

A PENDIX

46 CF R Part 536 is amended as follows

I Authority

References to section 18 c and 46 U S C 817 c are added

II 536 0Scope

The second sentence ofparagraph 536 0 b is amended to read

These regulations implement this requirement and in addition the

requirements of sections 14b and 18 c ofthe Act

III 536 1 Exemptions and exclusions

A new paragraph d is added to section 536 1 to read as follows

d Controlled Carriers

I A controlled carrier shall be exempt from the provisions

of this part exclusively applicable to controlled carriers

when i the vessels of the controlling state are entitled

by atreaty of the United States to receive national or

most favored nation treatment ii the controlling state

subscribed as of November 17 1978 to the shipping

policy statement contained in note I Annex A of the

Code of Liberalization of Current Invisible Operations

adopted by the Council of the Organization for Economic

Cooperation and Development iii as to any particular

rate the controlled carriers tariff contains an amount set

by the duly authorized action of a

ratemaking body ap

proved under section 15 of the Act Provided however

that this exemption is inapplicable to rates established

pursuant to an agreement in which all the members are

controlled carriers not otherwise excluded by paragraph

d of this section iv the controlled carrier s rates

charges classifications rules or regulations govern trans

portation of cargo between the controlling state and the

United States including its districts territories and posses

sions and v the controlled carrier operates in a trade

served exclusively by controlled carriers

2 The Commission will notify any carrier of its classifica

tion as a controlled carrier

3 Any carrier contesting such a classification may within 30

days after the date of the Commission s notice submit a

rebuttal statement The Commission shall review the re

buttal and notify the carrier of its final decision within 30

days from the date the rebuttal statement was filed

IV 536 2Definitions

Present paragraphs fthrough n are redesignated as g through 0

and a new paragraph fadded to read as follows

691
692 FEDERAL MARITIME COMMISSION

f

Controlled Carrier

A carrier which is or whose operating assets are directly o

indirectly owned or controlled by the government unde

whose registry the vessels of the controlled carrier operate

Ownership or control by such government shall be deemed to

exist if a majority interest in the carrier or its operating assets

is owned or controlled in any manner by such government a

agency of such government or any person corporation o

entity controlled by such government Ownership or contro

shall also be deemed to exist if the government ofregistry ha

the right to appoint or veto the appointment of a majority o

the carrier s directors or its chief operating or executive off

cer

V 536 3Filing o tariffs general

Paragraph d is amended to read

d All tariffs published in a foreign language shall be accompa

nied by two true copies translated into the English languag

when submitted for filing except that controlled carriers sha

submit three true copies translated into the English language

Paragraph f

is amended to read

f

All tariff matter including temporary filings by mail pursuan

to section 536 1O c I of this part shall be filed in duplicate

except by controlled carriers who shall file all tariff matter i

triplicate Provided however that temporary filings made b

telegraph or cable pursuant to section 536 1O c I need not b

submitted in duplicate or triplicate

Paragraph k is amended to add a final sentence reading

Providedfurther that a controlled carrier newly admitted to mem

bership in a conference shall 30 days prior to admission file notic

of cancellation of any applicable independent tariff effective upo

the date of admission to conference membership unless speci

permission has been granted by the Commission pursuant to sectio

536 15 ofthis part

Paragraph I is amended so that the first sentence reads

Any tariff submitted for filing which fails to conform with section

14b 18b or 18 c of the Act or with the provisions of this pa

is subject to rejection by the Commission and upon rejection sha

be void and its use unlawful Rejection will be accomplished purs

ant to paragraph 536 10 d

VI 5365 Tariff contents

Paragraph a I is amended to add a final sentence to read as follow

A controlled carrier subject to section 18 c of the Act shall 

identify itself under the carrier name on the title page

VII 5366Statement o rates and charges
CONTROLLED CARRIER TARIFFS

Paragraph 536 6 n is amended to add a final sentence which reads as

follows

Controlled carriers filing open rates are subject to the 30 day

controlled carrier notice requirement of section 536 1O a 3 of this

part except when special permission is granted by the Commission

under section 536 15 of thispart

VIII 536 8 Tariffs containing through rates and through routes

The third sentence in paragraph 536 8b is amended to read

Such tariffs will be filed and maintained in the manner provided in

section 18 b and 18 c ofthe Act and rules ofthis part

IX 536 10 Amendments to tariffs

Paragraph 536 1O a 3 is amended to add a final sentence which reads

as follows

Provided however that all changes to controlled carrier tariffs shall

not become effective earlier than 30 days from the date of filing

unless special permission has been granted by the Commission

under section 536 15 of this part or the change affects tariff mat

ters which are the subject of a suspension proceeding in which

case section 536 11 g

ofthis part shall apply

Paragraph 536 1O a 4 is amended by adding a subdivision iii which

reads as follows

and iii the carrier is not a controlled carrier and has not received

special permission authorizing the amendment

Paragraph 536 1O b 2 is amended to add a final uniform symbol K

defined as follows

K To denote a rate or charge that is filed by a controlled carrier

member of a conference or rate agreement under independent

action

Paragraphs 536 1Ob

4 1O d I and 1O d 2 are amended to include a

reference to section 18 c

X 536 11 Supplements to tariffs

Paragraph 536 11 a is amended to add a new subparagraph 6 as

follows

6 To indicate controlled carrier rates which have been sus

pended by the Commission

Section 536 11 is amended to add a new paragraph t

as follows

t

General rate increase decrease supplements filed by controlled

carriers are subject to the 30 day notice requirements of sec

tion 536 10 of this part unless special permission has been

granted pursuant to section 536 15 of this part or the change

affects tariff matter which is the subject of a suspension pro

ceeding in which case section 536 11 g

of this part shall

apply

Section 536 11 is amended to add a new paragraph g

as follows

693
694 FEDERAL MARITIME COMMISSION

g

Treatment ofsuspended tariff matter controlled carriers

I Tariff matter filed by a controlled carrier may be suspend

ed at any time before its effective date Tariff matte

already in effect may be suspended upon issuance of 

show cause order on not less than 60 days notice to th

carrier In either instance the suspension period shall no

exceed 180 days

2 Upon receipt of a suspension order the controlled carrie

shall immediately file a supplement which i contains th

slecific rates charges classifications or rules suspended

Ii cites the date upon which the suspension become

effective and Hi states that all use and application of th

suspended tariff matter is deferred for 180 days

3 Controlled carrier tariff matter filed to become effective

during a suspension period in lieu ofthe suspended matte

may become effective immediately upon filing or upo

the effective date ofthe suspension whichever is later I

determining whether to reject replacement rates th

Commission shall consider whether such rates result i

total charges egrate plus applicable surcharges tha

are lower than the lowest comparable charges effective

for a U S flag or reciprocal flag carrier serving the sam

trade

i The filing carrier shall identify the specific U S flag o

reciprocal flag carrier s rates charges classifications o

rules resulting in total charges which equal or are lowe

than its own

ii All replacement filings shall state on the appropriate tari

page the following

Filed pursuant to 46 U S C 817 c 4 and 46 C F R

536 11 g

XI 53614 Transfer of operations transfer of control changes i

carrier name and changes in conference membership

Section 536 14 is amended to add a new paragraph c as follows

c Whenever a carrier transfers operations control or ownershi

which results in a majority portion of the interest being owne

or controlled in any manner by a government under whos

registry the vessels of the carrier are operated the carrier sha

immediately notify the Commission in writing of the details o

the change

XII 536 15 Applications for special permission

Paragraph 536 15 a is amended to add a second sentence as follows

Section 18 c 3 of the Act authorizes the Commission t

permit a controlled carrier s rates charges classifications

rules or regulations to become effective within less than 3

days offiling
CONTROLLED CARRIER TARIFFS

Paragraph 536 15 b is amended so that the first sentence reads as

follows

b Applications for special permission to establish rate increases

or decreases on less than statutory notice

Paragraph 536 15 f

and footnote 2 thereof is amended to read

f Every tariff or tariff amendment filed pursuant to a Special

Permission granted by the Commission shall contain the fol

lowing notation

Issued under authority of Federal Maritime Commission

Special Permission No 2

XIII The statement of General Accounting Office reporting clear

ance is amended to read as follows

The reporting requirements contained in sections 536 3

536 11 g2 536 14 and 536 15 have been approved by

the U S General Accounting Office under B 180233

R0226

2

The filing carrieres shall fill in the blank with the special permission Jetter and numberassigned

by theCommission for example No F 12J2 orNo CC 12I2

695
FEDERAL MARITIME COMMISSION

DOCKET NO 78 6

ADEL INTERNATIONAL DEVELOPMENT INC

v

PUERTO RICO MARITIME SHIPPING AUTHORITY AND

STAR LINES INC

REJECTION OF PETITION FOR RECONSIDERATION

February 23 1981

By petition filed January 15 1981 complainant Adel Internation

Development Inc requests that the Commission reconsider and clar

certain portions of its Order Adopting Initial Decision served Dece

ber 30 1980 Respondent Puerto Rico Maritime Shipping Authori

responded in the form of a motion to reject the petition or alternative

to deny it Complainant replied

Rule 261 of the Commission s Rules of Practice provides that 

petition for reconsideration will be summarily rejected unless it

1 specifies that there has been a change in material fact or in

applicable law which change has occurred after issuance of

the decision or order

2 identifies a substantive error in material fact contained in

the decision or order or

3 addresses a finding conclusion or other matter upon which

the party has not previously had the opportunity to comment

or which was not addressed in the briefs or arguments of any

party 46 C F R 502 261 a

Complainant s petition meets none of the criteria of Rule 261 a

essentially consists of a restatement of material already considered 

the Commission Accordingly the petition for reconsideration is reje

ed

By the Commission

S FRANCIS C HURNEY

Secretary

Chairman Richard J Daschbach s concurring opinion is attached Commissioner James V Day 

not participate

0
ADEL INTERNATIONAL DEVELOPMENT INC V PRMSA 697

STAR LINES INC

Chairman Richard 1 Daschbach concurring Adel s Petition for Re

consideration and Clarification fails to allege any change in material

fact or applicable law since the issuance of the Commission s order of

December 30 1980 nor does it identify substantive errors in that order

Adel s petition further fails to request clarification of any specific aspect

of the Commission s order It must therefore be denied pursuant to

Rule 261 ofthe Commission s Rules ofPractice and Procedure

However Adels petition does raise the issue of the relevancy of its

equitable claims which was not an appropriate consideration within the

context of the Commission s narrow statutory proceeding but should

ultimately be addressed by the U S District Court for the Northern

District of Texas in order to ensure resolution of the dispute between

Adel and PRMSA
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 716 1

WARNER LAMBERT CO

v

FLOTA MERCANTE GRANCOLOMBIANA S A

NOTICE OF ADOPTION

February 24 1981

Notice is given that upon completion of its review the Commissio

has determined to adopt the decision of the Settlement Officer in th

proceeding

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 716 I

WARNER LAMBERT COMPANY

v

FLOTA MERCANTE GRANCOLOMBIANA SA

DECISION OF NORMAN D LEE SETTLEMENT OFFICER1

Adopted February 24 1981

Reparation Awarded

By complaint dated July 19 1979 and received in the Office of the

Secretary Federal Maritime Commission on July 27 1979 Warner

Lambert Company Claimant claims an overcharge of 355 47 from

Flota Mercante Grancolombiana SA Carrier Claimant is a manufac

turer of various pharmaceutical and consumer products with corporate

headquarters in Morris Plains New Jersey The claim results from a

shipment made by Parke Davis Company a division of Warner

Lambert Company of 23 packages described on the carrier s Bill of

Lading No Z 5 dated March 15 1978 as chemicals NOIBN harmless

and transported from New York N Y to Buenaventura Colombia on

the vessel RIO MAGDELENA

The shipment described as chemicals NOIBN harmless weighed

2858 pounds and occupied 168 cubic feet Ocean freight charges were

assessed pursuant to Atlantic and GulflWest Coast of South America

Freight Conference Freight Tariff S B SA 12 FMC I at 188 25 per

40 cubic feet for the entire shipment based upon a description supplied

by the shipper According to the claimant the commodities shipped

were inadequately described and 10 packages contained Magnesium

Stearate while another 10 was in fact Kaolin leaving only three

packages to be rated under the description of chemicals NOIBN

harmless The Atlantic and GulflWest Coast of South America

Freight Conference Freight Tariff S B SA 12 FMC I at the time of

shipment published a class 15 rate of 109 75 per ton of 40 cubic feet

or 2000 pounds whichever produced the greater revenue which was

applicable to Magnesium Stearate Kaolin which is a refractory clay

1 Both parties having consented to the informal procedure of Rule 19 a of the Commission s Rules

of Practice and Procedure 46 C P R 502 301 304 this decision will be final unless the Commission

elects to review it within 30 days from the date of servicethereof

00
700 FEDERAL MARITIME COMMISSION

also had available to it a rate of 94 2 cents per ton of 2000 pound

under TariffItem No 265

The shipment was rated as follows

168 cubic reet at 188 25 per 40

cubic reet

Terminal Charge

Congestion Surcharge

Port Charge

790 

1 25

6 00

5 58

12 83 x 4 2 cUtons 53 

844 

Charges that would have been assessed if specific rates were applie

to Magnesium Stearate and Kaolin

Magnesium Stearate 112 clbic reet

at 109 75 per 40 cubic reet

Kaolin 1 412 pounds at 94 25 per

2000 pounds

Chemicals NOIBN 14 cubic reet at

188 25 per 40 cubic reet

Terminal Charge

Congestion Surcharge

Port Charge

307 

66 

65 

125

6 00

5 58

12 83 x 3 15 cu tons

x 706 wt tons

40 

9 

489 

Although claimant does not allege a violation of the Shipping Ac

1916 it is presumed that where a carrier assesses rates and charges 

excess ofthose lawfully applicable at the time of shipment that sectio

18b 3 ofthe Act has been violated

Claim for refund was submitted to the carrier by Warner Lambert 

freight auditor on February 2 1979 The claim was ultimately denie

by the carrier on March 19 1979 citing Item 7b of Tariff No S B

SA 12 FMC 1 This item reads as follows

Claims by shippers for adjustment of freight charges will be

considered only when submitted in writing to the carrier

within six months of date of shipment Adjustment of frei ht

based on alleged error in weight measurement or description

will be declined unless application is submitted in writing

sufficiently in advance to permit reweighing remeasuring or

verification ofdescription before the cargo leaves the carrier s

possession any expense incurred to be borne by the party

responsible for the error or by the applicant if no error is

found
WARNER LAMBERT CO V FLOTA MERCANTE 701

GRANCOLOMBIANA SA

It is well established by the Commission that carrier s so called six

month rules cannot act to bar recovery of otherwise legitimate over

charge claims if a claim is filed by the shipper within the two 2 year

statutory time period 2

The question remaining to be decided is what

were the actual commodities shipped The test this Commission applies

on claims of reparation involving alleged errors of commodity tariff

classification is what the claimant can prove based on the evidence as

to what was actually shipped and how it differed from the bill of

lading description 3

The claimant however has a heavy burden of

proof once the shipment has left the custody ofthe carrier4

In support

of the claim claimant has submitted a

freight bill bill of lading in

voices and packing lists A statement in the claim provides that the

freight charges were collect and paid by Parke Davis in Columbia

Examination of these documents provides satisfactory identification for

identical weights measurements invoice and shipping numbers Com

parison results in my being able to readily determine that the shipment

in question did contain 10 Packages of Magnesium Stearate and 10

packages of Kaolin which is a refractory clay This left three packages

described as Polivinilpirrolidona for which the chemicals NOIBN rate

would be assessed

It is my opinion that the supportive documentation has satisfied the

burden of proof placed upon the claimant the actual commodities

shipped have been identified as required by the Commission and there

fore a violation of section 18 b 3 is involved

Reparation in the amount of 355 34 plus 12 percent interest from

the date freight charges were paid is awarded to Warner Lambert

Company based on the computation previously indicated 5

S NORMAN D LEE

September 23 1980

2

The claim was filed with the Commission well within two 2 years of the date on which the

cause of action occurred

3 Western Publishing Company Inc v Hapag Lloyd A

G

12 S R R 1065 1972

4

Colgate Palmolive Co v United Fruit Co 1 J S R R 979 981 l970

46 CP R 530 12
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 717 I

WARNER LAMBERT CO

v

FLOTA MERCANTE GRANCOLOMBIANA S A

NOTICE OF ADOPTION

February 24 1981

Notice is given that upon completion of its review the Commission

has determined to adopt the decision of the Settlement Officer in this

proceeding

By the Commission

S FRANCIS C HURNEY

Secretary

no
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 717 I

WARNER LAMBERT COMPANY

v

FLOTA MERCANTE GRANCOLOMBIANA SA

DECISION OF NORMAN D LEE SETILEMENT OFFICER1

Adopted February 24 1981

Reparation Awarded

Warner Lambert Company Claimant is a manufacturer of various

pharmaceutical and consumer products and maintains corporate head

quarters in Morris Plains New Jersey Claimant filed a complaint with

the Office of the Secretary Federal Maritime Commission on July 27

1979 against Flota Mercante Grancolombiana SA Carrier who is a

common carrier engaged in the transportation of goods by water from

New York N Y to Buenaventura Colombia The claim results from a

shipment made by Parke Davis Company a division of Warner

Lambert Company covered by the carrier s Bill of Lading No Z 5

issued December 9 1977 and transported from New York N Y to

Buenaventura Colombia on the vessel CIUDAD DE BOGOTA

The shipment in question consisted of 56 packages weighed 7083

pounds and had a total cube of 213 feet Ocean freight charges were

assessed and paid2 pursuant to Atlantic and GulflWest Coast of South

American Freight Conference Freight Tariff S B SA 12 FMC 1

Claimant states that 40 drums described on the bill oflading as chemi

cals NOIBN harmless was in fact Lactose in powdered form The 40

drums of Lactose were rated by the carrier at 170 75 per measurement

ton while according to the claimant a rate of 124 50 per ton was

effective in Item No 870 of the aforementioned Conference tariff

According to the claimant another 10 cartons on the bill of lading

were described as chemicals NOIBN harmless Kaolin NFIWhittaker

372 which the carrier rated at 137 25 per measurement ton and Item

No 265 of the Conference tariff published a rate on clay of 94 25 per

1 Both parties having consented to the informal procedure of Rule 19 a of the Commission s Rules

of Practice and Procedure 46 CF R 502 301 304 this decision will be final unless the Commission

elects to review it within 30 days from thedate of service thereof

2

The claim states that freight charges were collect and paid by Parke Davis in Cali Colombia

Respondent in its answer to claim verifies that ocean freight charges were collected by Flota Mer

caDte Grancolombiana

7l
704 FEDERAL MARITIME COMMISSION

weight ton which should have been applied to the Kaolin The total

freight charged the claimant on this shipment including applicable

surcharges was 959 41 calculated as follows

40 Drums Chemicals NOIBN Harm

less 135 cubic feet at 170 75 per

40 cubic feet

10 Cartons Chemicals NOIBN

Harmless Kaolin NF Whittaker

372 41 cubic feet at 37 25 per

40 cubic feet

6 Drums Drugs or Medicines

NOIBN Benadryl Hydrochloride

37 cubic feet at 188 25 per 40

cubic feet

Terminal Charge

Congestion Surcharge

Port Charge

576 28

140 68

174 13

125

6 00

5 58

12 83 x 5 325 cu tons 68 32

959 41

Although claimant does not allege a violation of the Shipping Act

1916 it is presumed that where a carrier assesses rates and charges in

excess ofthose lawfully applicable at the time of shipment that section

18b 3 ofthe Act has been violated

Claimant states that they were overcharged by the carrier a total o

234 923 and claim for refund was submitted to the carrier by their

freight auditor on February 2 1979 The claim was ultimately denied

by the carrier on March 19 1979 citing Item 7b of Tariff No S B

SA 12 FMC 1 which reads as follows

Claims by shippers for adjustment of freight charges will be

considered only when submitted in writing to the carrier

within six months of date of shipment Adjustment of frei ht

based on alleged error in wei ht measurement or description

will be declined unless application is submitted in writing

sufficiently in advance to permit reweighing remeasuring or

verification ofdescription before the cargo leaves the carrier s

possession any expense incurred to be borne by the party

responsible for the error or by the applicant if no error is

found

It is well established by the Commission that carrier s so called six

month rules cannot act to bar recovery of otherwise legitimate over

charge claims if a claim is filed by the shipper within the two 2 year

statutory time period In its response the carrier states this claim should

be time barred since it was brought to their attention two years and

two months after sailing The carrier has erred in their consideration o

3

Statement in Part III K of the claim uses the figure 5234 92 however calculations in this part

show atotal overcharge of 234 42
WARNER LAMBERT CO V FLOTA MERCANTE

GRANCOLOMBIANA S A

this time frame the shipment took place on December 9 1977 was

brought to the attention of the carrier by claimant s freight auditor on

February 2 1979 and claim was filed with this Commission on July 27

1979 well within the two 2 year statutory time period

The test this Commission applies on claims of reparation involving

alleged errors of commodity tariff classification is what the claimant

can prove based on the evidence as to what was actually shipped and

how it differed from the bill of lading description 4The claimant

however has a heavy burden of proof once the shipment has left the

custody of the carrier 5

Evidence available for review includes a dock

receipt bill of lading freight bill invoices and packing lists Examina

tion of these documents enables me to readily identify quantities

weights measurements invoice and shipping numbers and it can be

determined that the shipment contained 40 drums of Lactose 10 car

tons of Kaolin which is a

refractory clay and 6 drums of Benadryl

Hydrochloride At the time of shipment Item No 870 in the Atlantic

and Gulf West Coast of South America Freight Conference Freight

Tariff S B SA 12 FMC 1 published a rate of 124 50 per ton of 40

cubic feet or 2000 pounds whichever produced the greater revenue

which was applicable to Sugar viz Milk Lactose A rate applica

ble to Clay viz common ceramic or refractory was also published

at 94 25 cents per ton of2000 pounds under TariffItem No 265 ofthe

same tariff Utilizing the information as to actual commodities shipped

and applicable rates in the governing rate tariff at time of shipment it is

my opinion charges should appear as follows

40 Drums Lactose 135 cubic feet at

124 50 per 40 cubic feet

10 Cartons Kaolin refractory clay

1410 pounds at 94 25 per 2000

pounds

6 Drums Benadryl Hydrochloride

37 cubic feet at 188 25 per 40

cubic feet

Terminal Charge

Congestion Surcharge

Port Charge

420 19

66 45

174 13

125

6 00

5 58

12 83 55 17

9 05

724 99

Supporting documentation has satisfied the burden of proof placed

upon the claimant the actual commodities shipped have been identified

as required by the Commission and a violation of section 18 b 3 is

involved

x4 3 cu tons

x 705 wt tons

4 Western Publishing Company Inc v Hapag Lloyd A G 12 S R R 1065 1972

6 Colgate Palmolive Co v United Fruit Co 11 S R R 979 981 1970

705
706 FEDERAL MARITIME COMMISSION

Reparation in the amount of 234 42 plus 12 percent interest fro

the date freight charges were paid is awarded to Warner Lambe

Company based on the computation indicated 6

8 NORMAN D LEE

October 1 1980

46 CF R 530 12
FEDERAL MARITIME COMMISSION

DOCKET NO 80 9

ELLENVILLE HANDLE WORKS INC

v

FAR EASTERN SHIPPING COMPA Y

NOTICE

February 25 1981

Notice is given that no appeal has been taken to the January 21 1981

dismissal of the complaint in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has

become administratively final

8 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 9

ELLENVILLE HANDLE WORKS INC

v

FAR EASTERN SHIPPING COMPANY

SETTLEMENT APPROVED COMPLAINT DISMISSED

Finalized February 25 1981

Complainant Ellenville Handle Works Inc and respondent F

Eastern Shipping Company have filed a joint motion requesting a

proval of a settlement and dismissal of this proceeding In support 

their motion the parties have attached the text of their settleme

agreement a letter from complainant explaining the background to th

settlement and the request for dismissal ofthe complaint and an affid

vit signed by both parties attesting to the bona fides of the settlemen

As more fully described below I find that termination of this case b

means of the settlement which the parties have reached is warrante

and grant the motion

This case began with the service of a complaint on February 2

1980 Complainant an importer and manufacturer of various types 

wooden products alleged that respondent FESCO overcharged it o

eight shipments of what complainant alleged to be machine processe

timber which shipments were carried by FESCO during the perio

December 1978 through February 1979 Complainant alleged that r

spondent rated the commodity as laminated board in violation 

section 18b 3 ofthe Shipping Act 1916 and sought reparation in th

amount of 11 272 51 which complainant alleged to be the aggrega

amount of overcharges Respondent denied each and every materi

allegation and claimed that it had correctly rated the commodity 

laminated board

After issue was joined both parties began to use the Commission 

discovery processes set forth in 46 C F R 502 201 et seq in an effort 

obtain relevant facts concerning the nature of the commodity and 

identify the specific issues to be resolved In this regard responde

served interrogatories and requests for production of documents an

both complainant and respondent exchanged requests for admissions 

various times during March May August and September 1980

During the course of discovery which consumed more time tha

would be expected because relevant documents and critical affidav
ELLENVILLE HANDLE WORKS INC V FESCO 709

were being sought from overseas locations complainant ascertained

that significant amendments to its original complaint were necessary

An amended complaint was thereafter filed and served on August 26

1980 The most significant amendment concerned the amount of over

charges which complainant now alleged to be only 5 738 58 on the

basis of new facts which had been revealed to complainant Respondent

again denied that it had misrated the eight shipments and contended

that they consisted of laminated board rather than machine proc

essed timber as complainant alleged After the final exchange of

discovery information prior to the settlement now reached the parties

were still at issue concerning the true nature ofthe commodity shipped

THE NATURE OF THE SETTLEMENT

According to the documents attached to the motion complainant

originally raised the issue of overcharges on the eight shipments by

means of a counter claim in an action which FESCO s agent Moram

Agencies Inc had begun in Federal District Court in New York for

freight due on completely unrelated shipments Thereafter complainant

filed its complaint directly against FESCO with the Commission

During the pendency of this case before the Commission however

complainant reached an agreement with Moram in New York to settle

both Moram s claim and complainants counter claim in the court

action Moram agreed to credit complainant in the amount of 4 700 00

against Moram s claim for freight due in exchange for the release of

Moram and FESCO from complainant s counter claim for overcharges

After complainant had obtained further information in the course of

discovery as noted above complainant found that its original com

plaint had to be amended so as to reduce the amount of alleged

overcharges substantially to 5 738 58 By obtaining a credit of

4 700 00 in its counter claim against Moram in the court action com

plainant believes that it has obtained a

just and reasonable settlement

and that it would not be economically reasonable for it to continue

litigation in the hopes of obtaining a greater amount Therefore com

plainant wishes to have this proceeding terminated so that full effect

can be given to its settlement in this and the court case

EVALUATION OF THE SETTLEMENT UNDER APPLICABLE

PRINCIPLES OF LAW

It is well settled that both the law and Commission policy encourage

settlements and engage in every presumption which favors a finding

that they are fair correct and valid See Old Ben Coal Company v Sea

Land Service Inc 21 F M C 505 1978 and the many cases cited

therein See also Commission Rules 91 and 94 46 C F R 502 91 and

502 94 and the Administrative Procedure Act on which Rule 91 is
710 FEDERAL MARITIME COMMISSION

based 5 U S C 554 c I

1 The general policy favoring settlements is

summarized in the following passage drawn from a recognized lega

authority which language was adopted by the Commission in the Old

Ben Coal Company case 21 F MC at 512

The law favors the resolution of controversies and uncertain

ties through compromise and settlement rather than through

litigation and it is the policy ofthe law to uphold and enforce

such contracts if they are fairly made and are not in contra

vention of some law or public policy The courts have

considered it their duty to encourage rather than to discourage

parties in resorting to compromise as a mode of adjusting

conflicting claims The desire to uphold compromises and

settlements is based upon various advantages which they have

over litigation The resolution of controversies by means of

compromise and settlement is generally faster and less expen

sive than litigation it results in a saving oftime for the parties

the lawyers and the courts and it is thus advantageous to

judicial administration and in turn to government as a whole

Moreover the use of compromise and settlement is conducive

to amicable and peaceful relations between the parties to a

controversy 15A American Jurisprudence 2d Edition pp

777 778 1976 Footnote citations omitted

Consistent with these policies the Commission has in recent years

approved a wide variety of settlements and discontinued numerous

complaint cases under various provisions ofthe Shipping Act 1916 See

list and description of settled cases recited in Del Monte Corporation v

Matson Navigation Company 22 F MC 364 368 69 1979 As those

cases show it is possible to settle cases without admissions ofviolations

of law and for amounts of reparation less than those originally sough

in the complaint Moreover although there had been some doubt at one

time whether the Commission would permit settlements in oases involv

ing alleged overcharges under section 18b 3 absent findings ofviola

tions of that law the Commission has held that settlements in such

cases afe indeed permissible provided that there is a showing that the

settlement is bona fide and not a device for rebating See Organi

1 The APA 5 V S C 554 c I provides

The agency shan give all interestedparties opportunity for

1 The submission and consideration of facts ar uments offers of settlement orproposals of

adjustment when time thenature of the proceedings and the public interest permit

The courts view this provision and its legislative history lias being of the greatest impot

tance to the functioning of the administrative process Pennsylvania Gas Water Co v

Federal Marllime Commission 463 F 2d 1242 1247 DC Cir 1972 Congr ss encour

aged agencies to make use of settlements and wished to advise private parties that they

may legitimately attempt to dispose of cases at least in part through conferences agree

ments or stipulations Senate Judiciary Committee APALegislative History S Doc

No 248 79th Cnng 2d S at 24
ELLENVILLE HANDLE WORKS INC V FESCO 711

Chemicals Glidden Durkee Division of SCM Corporation v Atlanttrafik

Express Service 18 S R R 1536a 1979 Celanese Corporation Inc v The

Prudential Steamship Company 23 F M C 1 1980

As explained in OldBen cited above the Commission recognizes the

advantages to settlements but exercises some judgment before approv

ing them Mainly the Commission is concerned that the settlement not

contravene any law or public policy for example that it not be the

result offraud duress or mistake that it not constitute a discriminatory

device or consummate a desire to contravene tariff law embodied in

section 18b 3 of the Shipping Act 1916 and that if it falls under

section 15 the settlement be filed for approval under that law and

pertinent regulations Old Ben 21 F M C at 513

In considering settlements which parties submit with requests that

their cases before the Commission be dismissed the Commission has

followed the traditional view that the settlement deserves approval if it

avoids wasteful litigation and if it appears that the parties have correct

ly made an economical judgment that continued litigation would cost

more to each side regardless ofwho ultimately prevailed on the merits

than the amount ofmoney which complainant had agreed to accept and

respondent had agreed to pay in exchange for a release Old Ben 21

F MC at 514 Moreover the Commission has given its approval to

settlements which like the present one are offshoots of court actions

and which serve to bring both the Commission and court proceeding to

amicable conclusions See e g Robinson Lumber Company Inc v Delta

Steamship Lines Inc 21 F MC 354 1978 Del Monte Corporation v

Matson Navigation Company 22 F MC 364 1979 Docket No 72 20

Clipper Carloading Company v Trans Pacific Freight Conference of Japan

et al Order ofDismissal July 21 1975 unreported

The present settlement appears to be reasonable and to represent the

considered judgment of the parties First it settles both a court case

and the proceeding brought before the Commission Therefore the

purpose of settlements regarding termination of expensive litigation

would appear to be doubly served Secondly the amount of settlement

4 700 00 seems to be within a zone of reasonableness in which com

plainant has not undervalued its case and respondent has not conceded

too much Had the case proceeded to full litigation it would have been

necessary to resolve a critical factual dispute namely whether the

commodity shipped was machine processed timber or laminated

board since both parties have steadfastly adhered to different positions

on this question Complainant an importer has had difficulty obtaining

affidavits from distant overseas suppliers and respondent apparently

believes that certain documentary evidence favors its position Resolu

tion of a factual dispute ofthis nature might well have required an oral

trial type hearing not to mention post hearing briefs exceptions and

replies to exceptions following my Initial Decision etc In view of the
j

i

j

i

712 FEDERAL MARITIME COMMISSION

costs of litigating in such manner a settlement for 4700 00 would

appear to be more economical to both parties than full litigation to a

conclusion in which complainant might have been awarded the ful

amount of the alleged overcharges 5 738 58 plus interest or in which

respondent might have been required to pay nothing In other words

the parties have decided that it is in their own economic best interests

to settle upon a particular amount of money which they believe to

place them in abetter position than they would be in had they pursued

litigation fully with all of the attendant expenses and uncertainties

Therefore the present settlement conforms to traditional principles

governing all settlements See Old Ben 21 F MC at 512 14

The only remaining problem with approval of the settlement and

discontinuance of the Commission proceeding involves the Commis

sion s concern tha settlements cOncerning tariff issues under section

18b 3 of the Act be bona fide attempts to terminate controversies

rather than devices to circumvent tariff law In this regard the Com

mission enunciated certain conditions to be met when parties submi

settlements and request discontinuance of litigation In Organic Chemi

ca s Glidden Durkee Division of SCM Corporation v Atlanttrafik Ex

press Service 18 S R R at 1539 1540 the Commission as noted decided

that settlements in tariff overcharge cases were permissible but to

ensure that tariff law was not being abused required the parties to do

three things 1 submit a signed agreement to the Commission 2 file an

affidavit setting forth the reasons for the settlement and attesting tha

the settlement is a bona fide attempt by the parties to terminate thei

controversy and not a device to obtain transportation at either than

applicable tariff rates in contravention of law and 3 show that the

complaint on its face presents a genuine dispilteand the facts critical to

the resolution of the dispute are not reasonably ascertainable The

parties have complied with these requirements They have rued the

signed agreement submitted anaftldavit attesting to the fact that the

settlement is a bona fide attempUo terminate the controversy and not 

device to obtain transportation at other than applicable rates and have

shown that there is a genuine dispute concerning the natme of the

commodity shipped which if litigation were to continue would mos

likely require trial type hearings with time consuming cross examina

tion Ina previous settlement which was approved the fact that furthe

litigation of that type was required was considered sufficient reason to

conclude that the facts critical to resolution of the dispute were no

reasonably ascertainable Bee Celanese Corporation Inc v The Prudentia

Steamship Company cited above 23 F M C at 7 Mereover the fac

that this settlement is part of another settlement whioh brings a cour

proceeding to an amicable conclusion is not only another reason favo

ing approval of the settlement but also additional evidence that th

settlement is a good faith effort to terminate litigation rather than 
ELLENVILLE HANDLE WORKS INC V FESCO 713

device to circumvent tariff law 2There is therefore no reason to

withhold approval ofthe proffered settlement nor any legal impediment

to its approval

Accordingly the settlement is approved the complaint is dismissed

with prejudice as requested by complaint and the proceeding is termi

nated

8 NORMAN D KLINE

Administrative Law Judge

January 21 1981

2

It should be noted that although the formal affidavit attesting to the good faith of the settlement

was filed in this case the formal requirement that such an affidavit be filed has been relaxed when

there is independent evidence that the settlement was reached without intent to circumvent tariff law

See Cutter Laboratories Overseas Corporation v Maersk Lines 23 EM C 525 1981
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 748

APPLICATION OF WATERMAN STEAMSHIP CORPORATION

FOR THE BENEFIT OF STOP SHOCK INC

ORDER REMANDING INITIAL DECISION

February 25 1981

This proceeding is before the Commission upon its determination to

review the Initial Decision of Administrative Law Judge Paul J Fitz

patrick granting Waterman Steamship Corporation permission to waive

collection of 20 784 75 in freight charges for the benefit of Stop

Shock Inc pursuant to section l8b 3 of the Shipping Act 1916 46

U S C 817 b 3 Waterman had alleged that it had agreed to rate a

shipment of fabric softener at 140 w m plus bunker fuel surcharge

and that it would not charge the 30 port congestion surcharge pre

scribed in Rule 190 ofits tariff Waterman claims it inadvertently filed a

tariff rate of 140 w m plus surcharges As a result Stop Shock was

charged in addition to the freight charges 20 784 75 as a port conges

tion surcharge the amount for which a waiver is sought

Upon review the Commission determines that two matters require

clarification before it can approve a waiver in this proceeding First

the agreement entered into between Waterman and Stop Shock does

not indicate that the parties intended to exclude the port congestion

surcharge Mere absence of mention of the surcharge in the telex

agreement does not alone indicate that the parties had agreed not to

apply it This rationale carried to its logical conclusion would also

exempt terminal heavy lift container demurrage and similar charges

unless each such charge was also specifically mentioned in such an

agreement

Secondly to exempt only liquid fabric softener from the tariff rule

imposing a port congestion surcharge would appear to discriminate

against shippers ofother commodities within the meaning ofthe provi

so in section 18b 3 It is difficult to imagine what type of transporta

tion factors might justify the applicability of a port congestion sur

charge to some commodities and not to others It would be useful for

this matter to be more fully explored by the parties

The Commission therefore remands this proceeding to the Adminis

trative Law Judge with instructions to attempt to develop the record

on these two areas and then to issue an appropriate decision

71 A
WATERMAN STEAMSHIP CORP FOR THE BENEFIT OF 715

STOP SHOCK INC

THEREFORE IT IS ORDERED That this proceeding is remand

ed to the Administrative Law Judge for further action consistent with

this Order and for issuance of a supplemental decision within 60 days

ofthe date ofthis Order

By the Commission

S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 774 F

EXIM LTD

v

KUEHNE NAGEL

NOTICE

March 6 1981

Notice is given that the time within which the Commission coul

determine to review the February 2 1981 dismissal ofthe complaint i

this proceeding has expired No such determination has been made and

accordingly the dismissal has become administratively final

8 FRANCIS C HURNEY

Secretary

i

i
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 774 F

EXIM LTD

v

KUEHNE NAGEL

1 SETTLEMENT AGREEMENT APPROVED

2 REQUEST TO WITHDRAW MOTION TO DISMISS

GRANTED

3 PROCEEDING DISCONTINUED

Finalized March 6 1981

This proceeding involves a

complaint for alleged overcharges which

was originally considered by a Settlement Officer The rather involved

chronological and procedural events necessitating the holding in abey

ance of a Motion to Dismiss filed by Kuehne Nagel Overseas Corp

are detailed in my Ruling on Motion to Dismiss served June 19 1980

The exact role of both Kuehne Nagel Overseas Corp of New

York City N Y and Kuehne Nagel S A of Barcelona Spain in

this proceeding has been the subject of concern to the Commission the

Settlement Officer and this Judge The Settlement Officer dismissed

the original claim before him on the basis that Kuehne Nagel S

A

was a nonvessel common carrier This Judge sought information con

cerning both entities and then considered it necessary to request this

Commission to order a staff investigation in order to determine the

proper party respondent Memorandum to Commission dated July

10 1980 The Commission in turn referred the proceeding back to

this Judge for such further proceedings as he deems appropriate

Order served November 13 1980 In the Order the Commission

stated

The Commission agrees that the role of both Kuehne

Nagel S A and Kuehne Nagel Overseas Corp requires

further exploration However a staff investigation is not nec

essary to answer the basic question of whether the proper

party is before the Commission It would appear that the

Presiding Officer has the authority and the means under the

Commission s Rules to explore these questions and dispose of

the matter before him

Following the issuance ofthe Order and at my request the Secretary

of the Commission served a copy of the complaint upon Kuehne

Nagel S A at its address in Barcelona and also enclosed materials my

71
718 FEDERAL MARITIME COMMISSION

Memorandum and a

copy of the Order showing the history of th

proceeding to date By motions served December 16 1980 and Januar

13 1981 counsel for Kuehne Nagel S A requested extensions 

time to file an answer to the complaint based upon a request to pursu

settlement negotiations with the complainant In my granting the exte

sions I noted that any proposed settlement of the claim should b

fully responsive to the Commission s Order of November 13 an

specifically referred to the Commission s language to the effect that th

role of both entities requires further exploration On January 2

1981 counsel for Kuehne Nagel S A filed 1 Agreement of Settl

ment and Mutual Release 2 Joint Affidavit and 3 Memorandum 

Support ofSettlement Agreement For convenience the documents a

attached hereto Attachment A the Agreement Attachment B th

Affidavit and Attachment C the Memorandum Also a request wa

made on behalf ofKuehne Nagel Overseas Corp 1 to withdraw i

Motion to Dismiss served May 14 1980 and 2 that its time to answ

the complaint be extended for twenty one days beyond the date 

service of any final Commission ruling on the settlement agreemen

The request to withdraw the motion will be granted and the extensio

will be necessary only if the Agreement is ultimately disapproved

Basically the complaint seeks 1 62187 and 897 45 or a total 

2 519 32 for claimed overcharges on two shipments from Barcelona 

Charleston South Carolina during January and March 1978 The shi

ments were transported aboard the vessels SIS Itaica and American

1001 The basis for the claim is that the applicable freight rate shou

have been applied to laminated compressed wood rather than plywoo

pursuant to the provisions of a tariff of the Med Gulf Conference

Under the terms of the Agreement Kuehne Nagel S A agrees 

pay and the claimant agrees to accept 2 000 in full settlement of th

complaint According to the Memorandum the Agreement represen

a reasonable commercial settlement to an already lengthy proceedin

And it is claimed that there is difficulty in ascertaining the da

necessary to resolve the dispute without further litigation In additio

it is stated that

The settlement is for the purpose of dealing similarly with

Exim s averment that Kuehne Nagel is a nonvessel operat

ing common carrier engaged in transportation by water Al

though Kuehne Nagel would if it filed an answer to the

complaint deny that it was such a carrier and assert that it is a

Spanish freight forwarding company this issue also is dis

posed ofby virtue of the settlement agreement The necessity

of litigating this issue is thus avoided in the face of a bona

fide attempt to avoid the time and expense of such litigation

and to terminate this controversy Attachment C p725

footnote omitted
EXIM LTD V KUEHNE NAGEL 719

In short it is submitted that the resolution ofthe issue relating to the

role of both entities is now unnecessary since the parties have agreed

by settlement to avoid further litigation Nevertheless counsel for

Kuehne Nagel S A has offered information for such aid as it may

provide in the final disposition of this proceeding Attachment C p

726 In any event the approval of the settlement here would effective

ly remove from further consideration that issue in this proceeding The

import of the pleadings submitted now constitutes a judgment by the

parties to reach an amicable solution with due consideration to the

unsureness of a prolonged and expensive proceeding And to withhold

approval from an otherwise acceptable settlement for further contem

plation of certain issues would be unwarranted under the circum

stances I

This is especially appropriate considering the claim is solely

for alleged overcharges and the consideration of the other major

issue is probably oflittle practical concern to this shipper The settle

ment itself represents those traditional considerations utilized by the

Courts and this Commission in encouraging resolution ofcontroversies

See Old Ben Coal Company v Sea Land Service Inc 21 F MC 505

512 1978

Although an approval ofthe settlement removes the issue relating to

the role ofboth Kuehne Nagel Overseas Corp and Kuehne Nagel

S A from further consideration by me the matter need not end here

This Commission can consider the record including the additional

explanation submitted and determine what future course if any it

wishes to pursue The Commission has the appropriate procedures i e

a staff investigation Order To Show Cause Order of Investigation

etc to explore the issue if it is considered necessary On the other

hand to disapprove or delay the settlement under the existing circum

stances and compel the parties to treat this issue and others in this

proceeding would negate entirely the considerations posed by the set

tlement

Accordingly the Agreement ofSettlement is approved and the com

plaint is dismissed

8 PAUL J FITZPATRICK

Administrative Law Judge

February 2 1981

1 Complainant is not represented by counsel and there is pending aMotion to Dismiss as well as the

answer to the complaint Some of the other issues raised also involve jurisdiction and a claim that

service of the complaint upon Kuehne Nagel Overseas Corp was defective
720 FEDERAL MARITIME COMMISSION

AITACHMENT A

BEFORE THE FEDERAL MARITIME COMMISSION

EXIM LTD

v

KUEHNE NAGEL

Docket No 774F

AGREEMENT OF SEITLEMENT AND MUTUAL RELEASE

IT IS HEREBY AGREED by and between the undersigned Ex

Ltd Complainant in Federal Maritime Commission Docket No 

and Kuehne Nagel S A Respondent in said Docket that Doc

No 774 F shall be terminated by mutual accord on the terms a

conditions hereinafter set forth and for the reasons stated in the acco

panying Memorandum in Support ofSettlement Agreement and Mot

to Dismiss

1 Kuehne Nagel S A shall pay to Exim Ltd the sum of T

Thousand 00 100 2 000 00 Dollars

2 Exim Ltd shall inconsideration of the action of Kuehne

Nagel S A as provided in paragraph I above withdraw its Co

plaint in Federal Maritime Commission Docket No 774 F and sh

refrain from further pursuing its claim in this proceeding

3 Neither Exim Ltd Kuehne Nagel S A nor any successor 

interest of either such party shall initiate any new claim against 

other party arising in connection with the complaint in this proceed

except for enforcement of any provision of this Agreement and Ex

Ltd and Kuehne Nagel S A each hereby releases the other fro

without limitation all sums of money accounts actions suits procee

ings claims and demands whatsoever which either ofthem at any tim

had or has up to the date of this Agreement of Settlement against 

other for or by reason of any act cause matter or thing arising fro

the transactions giving rise to this proceeding

4 It is understood and agreed that this Agreement of Settlement a

Mutual Release is in full accord and satisfaction of all disputed clai

in the proceeding

5 This Agreement shall be submitted for any necessary approval 

the appropriate governmental authorities and shall become effect

and binding upon the parties when such final approval is obtaine

6 It is further understood and agreed that this Agreement of Sett

ment and Mutual Release is in no sense to be understood as constituti
EXIM LTD V KUEHNE NAGEL

any admission of liability of any party or of any admission of any

violation oflaw by any party

7 This Agreement of Settlement and Mutual Release constitutes the

entire Agreement between the parties

8 In the event this Settlement Agreement is disapproved by the

Commission or is approved on conditions which are unacceptable to

either party then this Settlement Agreement will be null and void ab

initio and of no effect whatsoever for any purpose

Dated January 18 1981

EXIM LTD

S By CHARLES F TRAVIS

Title President

KUEHNE NAGEL SA

S By ELIOT J HALPERIN

Title Attorney in Fact

1P f r

721
722 FEDERAL MARITIME COMMISSION

ATTACHMENT B

BEFORE THE FEDERAL MARITIME COMMISSION

EXIM LTD

v

KUEHNE NAGEL

Docket No 774 F

JOINT AFFIDAVIT

The undersigned Charles F Travis and Eliot J Halperin bein

respectively the President of Exim Ltd and the Attorney in Fact o

Kuehne Nagel SA depose and state as follows

1 This affidavit is made in connection with the Agreement o

Settlement and Mutual Release in this proceeding acopy of which 

attached hereto

2 Said Agreement of Settlement in FMC Docket No 774 F is 

reasonable commercial settlement ofthis proceeding

3 The complaint in this proceeding on its face presents a genuin

dispute raising genuine issues and the facts and information critical t

the resolution of the dispute are not reasonably ascertainable withou

further lengthy and costly litigation

4 The above mentioned Agreement of Settlement is a bona fid

attempt to avoid the time and expense of such litigation and to term

nate this controversy and said Agreement is not a device to obtai

transportation at other than the proper rates and charges or otherwis

circumvent the requirements of the Shipping Act 1916 as amended

S NAME CHARLES F TRAVIS

Title President

Sworn to before me a Notary Public

this 20th day of Jan 1981

Notary Public

My Commission expires June 4 1981 S NAME ELIOT J HALPERIN

Title Attorney in Fact

Sworn to before me a Notary Public

this 15th day ofJanuary 1981

Notary Public

My Commission Expires 214 82

C
EXIM LTD V KUEHNE NAGEL

ATIACHMENT C

BEFORE THE FEDERAL MARITIME COMMISSION

EXIM LTD

v

KUEHNE NAGEL

Docket No 774 F

MEMORANDUM IN SUPPORT OF

SETTLEMENT AGREEMENT

AND

MOTION TO DISMISS

Kuehne Nagel S A offers this Memorandum in support ofAgree

ment ofSettlement and Mutual Release entered into between Kuehne

Nagel S A Kuehne Nagel and Exim Ltd Exim and submit

ted contemporaneously herewith Kuehne Nagel also moves that the

complaint in this proceeding be dismissed in consideration of approval

ofthe Agreement ofSettlement

I INTRODUCTION

This proceeding already has been lengthy the complaint having been

received by the Commission in January 19801 docketed as No 774 1

and settlement of this proceeding is mutually desired as evidenced by

the accompanying Agreement of Settlement and Joint Affidavit

Exim s complaint was first served on Kuehne Nagel Overseas

Corp which company declined to consent to determination of the

complaint under Subpart S 46 CF R 502 301 502 304 and filed a

Motion to Dismiss In that Motion Kuehne Nagel Overseas Corp

asserted that the claim is jurisdictionally defective for failure to name

a common carrier as respondent 2

and that service of the complaint

was defective 3

This Motion is still pending Exim s complaint was

subsequently served also on Kuehne Nagel S A

by Commission

letter of November 24 1980 In response thereto Kuehne Nagel

requested4 and was granted5 an extension of time to answer As

1

It should be noted that Exim s claims herein were first considered in consolidated Docket Nos

731 1 732 1 733 1 and 734 1 Those cases were dismissed by the Settlement Officer by order served

November 29 1979

2 Motion to Dismiss May 14 1980 at 1

3

d at 2

4 Motion for Extension of Time to Answer December 16 1980

S Motion for Extension of Time to Answer Granted served December 17 1980

723
724 FEDERAL MARITIME COMMISSION

grounds for that request Kuehne Nagel asserted that discussions had

been undertaken to settle this proceeding 6

Such settlement discussions have been held resulting in the accompa

nying Agreement of Settlement

In granting Kuehne Nagels

request for extension of time t

answer the Administrative Law Judge admonished that the settlemen

be responsive to a November 13 1980 Commission interim Orde

which stated that the status of Kuehne Nagel S A and Kuehne

Nagel Overseas Corp is somewhat unclear

Accordingly set forth hereinafter is an analysis ofthe settlement and

an explanation of the status of Kuehne Nagel Overseas Corp and

Kuehne Nagel S A It must be stated however that the Agreemen

of Settlement can and should be considered solely on the basis o

Commission criteria for the approval of settlement agreements 8

and

not on the basis of extraneous considerations of the status of certain

persons involved in the shipping transactions at issue These latte

considerations are not raised as issues by the complaint except as may

be necessary to resolve the specific claims Settlement of the claim

having been reached however in order to avoid litigating any suc

other issues their resolution is unnecessary since to litigate them would

vitiate the purpose and objective of settlement which is favored by the

Commission 9

II THE SETILEMENT

Accompanying this Memorandum is the Agreement of Settlemen

and Mutual Release and the Joint Affidavit of uehne Nl 8e S A

and Exim Ltd These documents are submitted as explained below fo

the purpose ofterminating this proceeding by Settlement in accordance

with the Commission s criteria favoring settlement as set forth in O

ganic Chemicals supra We believe that this settlement comports in a

respects with the Commission s guidelines and therefore warrant

Commission approval

j

In its complaint Exim seeks U 519 32 in alleged freight overcharge

1 for two shipments from Barcelona Spain to Charleston South Carolina

in early 1978 These shipments were carried aboard the vessels ITA

LlCA and AMERICANA neither of which is owned or operated by

KUehne Nagel The freight allegedly assessed to Exim was 4 368 75

and 2 427 30 respectively The correct freight assessment claimed i

2 746 88 and 1 529 85 resulting in the total overcharge claim o

Id at 2

Order Docket No 774 F served November 13 1980 at 1

See e

g Organic Chemicals Atlantrtifik Express Service Docket Nos 78 2 783 served Januar

25 1979 18 S RR 1536

See Old Ben Cool Co Sea Land Service Inc Docket No 78 13 I

D

October II 1978 1

S R R 1085 adopted by Commission December 29 1978
EXIM LTD V KUEHNE NAGEL

2 519 32 which Exim claims is due from Kuehne Nagel S A as a

nonvessel operating common carrier The basis ofthe two claims is that

the applicable rate should have been that for laminated compressed

wood per T S U S item No 203 1000 densified wood and or articles

thereof compression modified densified wood blocks plates sheets and

strips Not plywood per T S US item No 240 1000 pursuant to a

tariff of the Med Gulf Conference lo of which Kuehne Nagel is

not a member

As noted above Kuehne Nagel has not filed an answer to these

claims and if the Agreement of Settlement is approved no answer will

need to be so filed Rather by agreement between Exim and Kuehne

Nagel and to avoid the necessity of litigating at length the genuine

issue raised by the complaint llKuehne Nagel agrees to pay and

Exim agrees to accept 2 000 00 in full settlement of the complaint As

already explained this has already been a lengthy proceeding and it is

asserted that this settlement represents a reasonable commercial settle

ment of this proceeding 12 in view of the difficulty in ascertaining the

data necessary to resolve the dispute without further litigation 13

The settlement is for the purpose of dealing similarly with Exim s

averment that Kuehne Nagel is a nonvessel operating common

carrier engaged in transportation by water 14 Although Kuehne

Nagel would if it filed an answer to the complaint deny that it was

such a carrier and assert that it is a Spanish freight forwarding compa

ny this issue also is disposed ofby virtue ofthe settlement agreement

The necessity of litigating this issue is thus avoided in the face of a

bona fide attempt to avoid the time and expense of such litigation and

to terminate this controversy

15

III OTHER ISSUES

As noted above the Administrative Law Judge requested that the

settlement include information as to the status of Kuehne Nagel

Overseas Corp and Kuehne Nagel S A By letter of June 26 1980

counsel responded to certain questions posed by the Administrative

Law Judge to counse 16 concerning these two entities copy attached

hereto as Attachment A It is submitted that pursuit of this issue is

unnecessary to the resolution of this case since the parties have agreed

by settlement to avoid further lengthy litigation Nevertheless we offer

10 Complaint Brief Attachment No II to Claim

11 Joint Affidavit Docket No 774 F paragraph 3 at 1

12 d paragraph 2 at 1

13 d paragraph 3 at 1

14 Complaint paragraph II

16 Joint Affidavit paragraph 4 at 2 See Latin America Pacific Coast Steamship Conference v

Cia Sud Americana de Vapores Docket No 80 58 Settlement Approved Complaint Dismissed LD

served December 17 1980 at 3

16 Ruling on Motion to Dismiss served June 19 1980 at 5 6

725
726 FEDERAL MARITIME COMMISSION

the information below for such aid as it may provide in the fin

disposition ofthis proceeding

Kuehne Nagel S A is a freight forwarder acting as a transporta

tion agent In the shipping transactions at issue here Kuehne Nag

acted as freight forwarder as is apparent from the documents submitte

with the complaint These include an October I 1979 letter from Exi

to Kuehne Nagel Overseas Inc wherein Exim sought the latte

assistance in filing these claims with the shipping lines involved an

also the dates Kuehne Nagel paid over the freight to those carriers 

Exim was therefore aware that the shipping lines were in fact th

carriers and that Kuehne Nagel S A was the forwarder Confirmin

that those shipping lines were the carriers under whose tariff Exim 

cargo was carried Exim states that agents for the Med Gulf Confe

ence in Barcelona have misled Kuehne Nagel as to the applicab

conference rates 18

Furthermore the Kuehne Nagel invoices attached to the complai

state that Exim wasbilled for AU charges as from Fob Brc up to C 

Charleston 19 including in a lump sum price the ocean freight and 

75 or ISO fee for freight forwarder handling 20 No separate specifica

tion of the handling charges was made or required for these inboun

shipments

It is thus apparent lhat Kuehne Nagel S A with Exim s

fu

knowledge acted as the freight forwarder only Kuehne Nagel S A

was not perceived as the carrier until the Settlement Officer rejecte

Exim s claims against the shipping lines on the ground that Kuehne

Nagel S A was a nonvessel operating common carrier 21 The so

basis for that conclusion was that the cargo moved under Kuehne

Nagels bills of lading 22 Kuehne Nagel of course was not a par

to those proceedings and had no opportunity to rebut that finding an

as shown herein a complete review of Exim s complaint shows th

Kuehne Nagel S A acted as freight forwarder employing its for

bills of lading as nothing more than receipts for the shipment

Kuehne Nagel Overseas Corp acted in these transactions mere

as agent for Kuehne Nagel S A for the purpose of assisting Kuehn

Nagel in assuring delivery of the cargoes to Eximand in collectin

the freight to be paid over to the shipping lines Exim s

freight pa

ments were directed to this company23 because it was selected b

I

I

17 Complaint Attachment 2

18 Complaint Brief Attachment No 11 to Claim

18 Complaint Attachments 9and 10

Although they are difficult to read the carrier bills of lading Complaint Attachments 3 and 

show total charges freight plus surcharges totalling lS0 and 7S less than the invoice amounts 

the ITALlCA and AMERICANA shipments respectively

at See footnote I supra

U

d

23 Complaint Attachments 7and 8
EXIM LTD V KUEHNE NAGEL

Kuehne Nagel S A as its agent in the United States for receipt of

such payments There is no basis whatsoever for ascribing any other

attributes to Kuehne Nagel Overseas Corp regarding the transac

tions at issue 24

IV CONCLUSION

For the foregoing reasons it is respectfully requested that the Agree

ment of Settlement between Kuehne Nagel S A and Exim Ltd be

approved and that the complaint in this proceeding be dismissed

RESPECTFULLY SUBMITTED

JOHN P MEADE

S ELIOT J HALPERIN

Attorneys for Kuehne Nagel SA

Graham James

Suite 1200

1050 17th Street N W

Washington D C 20036

202 296 0505

24 It is understood that contemporaneously with the filing of this Memorandum the earlier filed

Motion to Dismiss of Kuehne Nagel Overseas Corp is being withdrawn for the sake of good order

in considering the Agreement of Settlement

727
728 FEDERAL MARITIME COMMISSION

CERTIFICATE OF SERVICE

Ihereby certify that Ihave this 26th day ofJanuary 1981 served th

foregoing Memorandum in Support of Settlement Agreement an

Motion to Dismiss on all parties of record by first class mail postag

prepaid

S JOHN P MEADE
FEDERAL MARITIME COMMISSION

DOCKET NO 80 71

IN RE ROYAL HAWAIIAN CRUISES INC

ORDER TO DISCONTINUE AS MOOT

March 18 1981

On October 27 1980 the Commission directed Royal Hawaiian

Cruises Inc to show cause why its Certificate Performance No 201

should not be revoked pursuant to the Commission s General Order 20

46 C F R 540 8 and 540 9 Subsequently Royal Hawaiian returned

its Certificate and moved the Commission to dismiss the proceeding as

moot The Bureau of Investigation and Enforcement supports the

Motion to Dismiss

The return of Royal Hawaiian s Performance Certificate effectively

moots the issues presented in this proceeding

THEREFORE IT IS ORDERED That this proceeding is discon

tinued

By the Commission

S JOSEPH C POLKING

Acting Secretary

Royal Hawaiian was issued aCertificate Performance on January 18 1980 pursuant to section 3

of Public Law 89 777 46 U S c

817 e and the Commission s regulations 46 CP R Part 540 The

statute and the Commission s regulations provide that no person in the United States may arrange

offer advertise or provide passage on avessel with accommodations for 50 ormorepassengers unless

the Commission has issued that person a Certificate evidencing financial responsibility for non per

fafmance

Commissioner Teige did not participate
FEDERAL MARITIME COMMISSION

DOCKET NO 80 49

BULTACO INTERNATIONAL LTD AND

JOHN GRACE POSSIBLE VIOLATIONS OF

SECTION 16 INITIAL PARAGRAPH SHIPPING ACT 1916

NOTICE

March 24 1981

Notice is given that no appeal has been filed to the bench ruling o

the Administrative Law Judge dismissing this proceeding and the Com

mission has not determined to review Accordingly the order of dismis

sal is administratively final

5 JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 25

EMMETT ISINDIK D B A

EMMETT I SINDIK CUSTOMS BROKER

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE

APPLICATION AND POSSIBLE VIOLATION OF SECTION 44

SHIPPING ACT 1916

NOTICE

March 31 1981

Notice is given that no exceptions have been filed to the February

25 1981 initial decision in this proceeding and the time within which

the Commission could determine to review that decision has expired

No such determination has been made and accordingly that decision

has become administratively final

8 JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 2

EMMETT I SINDIK DIBIA

EMMETT I SINDIK CUSTOMS BROKER

INDEPENQENT OCEAN FREIGHT FORWARDER LICENSE

APPLICATION AND POSSIBLE VIOLATION OF SECTION 44

SHIPPING ACT 1916

Respondent found to have violated section 44a of the Shipping Act 1916 by engag

in unlicensed forwarding activities related to three shipments

Respondent is found fit to be licensed and is fined 1 000 in civil penalties Applicati

granted

Emmett lSlndlk pro se

Joseph B Slum with whom Paul J Kaller and John Robert Ewers were on brief 

the Bureau of Investigation and Bnforcem nt

INITIAL DECISIONl OF PAUL J FITZPATRICK

ADMINISTRATIVE LAW JUDGE

Finalized March 31 1981

By its Order of Investigation and Hearing served April 25 1980 th

Commission instituted a proceeding to determine whether Emmett 

Sindik respondent a sole proprietor operating under the trade nam

Emmett ISindik Customs Broker 1 violated section 44 a of t

Shipping Act 1916 by engaging in unlicensed forwarding activities 

whether civil penalties should be assessed for such violations and if s

the amount of any such penalty and 3 whether the respondent po

sessed the requisite fitness to be licensed as an independent freig

forwarder 2

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

Commission Rule 227 Rules of Practice and Procedure 46 CF R 02 227

a

The Commission s Order posed the following issues

1 whether Emmett I Sindik db aEmmett I Sindik Customs Broker violated section44 a

Shipping Act 1916 by engaging inunlicensed forwarding activities

2 whether civil penalties should be assessed against Emmett I Sindik dba Emmett I

Sindik Customs Broker pursuant to section 32 and Part 505 3 of the Commission s

regula

tions 46 CF R 0 3 for violations of the Shipping Act 1916 and if so the amount of any

such penalty which should be imposed taking into consideration factors in possible mitigation

of such penaltiesj and

3 whether in light of the evidence adduced pursuant to the first issue together with any

other evidence adduced Emmett I Sindik db a Emmett I Sindik Customs Broker possess

es the requisite fitness within themeaning of section 44b Shipping Act 1916 to be licensed

as an independent ocean freight forwarder
EMMETT I SINDlK FREIGHT FORWARDER LICENSE 733

APPLICATION AND POSSIBLE VIOLATION

The Order also provided for the submission of affidavits of fact and

memoranda of law by the Bureau of Investigation and Enforcement

formerly the Bureau of Hearing Counsel and by respondent Initially

the Bureau argued that 1

respondent engaged in at least three

instances of forwarding without a license 2 a penalty of 5 000

should be assessed and 3 respondent is not fit to properly carryon

the business of forwarding and that the application be denied 3

Re

spondent acting in his own behalf filed an Affidavit ofFact claiming

that among other things I don t feel we did freight forwarding

without a license since the export declaration was signed by a licensed

forwarder however if ruled otherwise certainly not flagrantly nor an

attempt to circumvent the law or evade regulation Iam an honest man

and know Iam fit wi11ing and able to properly conduct the business of

freight forwarding in the manner prescribed 4

The Bureau s

reply

reflected a change of position as initially submitted in that they consid

ered respondent establishing that the violations were inadvertent and

that he should be licensed to engage in the business of forwarding

However the Bureau also noted that we disagree with Mr Sindik on

the question of whether he violated section 44 a by forwarding three

shipments and urged that the civil penalty be reduced from the initial

recommendation of 5 000 to 3 000 The recommended penalty reduc

tion represented consideration of the apparent unintentional and limit

ed nature of the violations and at the same time serves to deter future

violations 5

The Commission s Order also required statements

identifying any unresolved issues of fact and the specifying ofthe type

of procedure best suited to resolve such issues In response to that

procedural requirement the Bureau indicated that respondent did not

believe there were any factual disputes but that respondent desired to

submit financial information regarding his ability to pay any civil penal

ty 6

Also the Bureau added that we do not believe there are any

factual disputes Respondent then submitted a financial statement de

scribing his company as very small and with profits down 7

3

Bureau s Opening Memorandum of Law filed June 9 1980

4

Respondent s Affidavit of Fact p

2 received July 3 1980

Ii Bureau s Reply Memorandum of Law p 4 filed July 24 1980

e

Letter addressed to undersigned dated August 5 1980

7

The exact textof respondents letter of August n 1980 is as foHows

Attached please find financial statement as per agreement with Hearing Counsel and as it

reflects my company is very small and profits are down it would seriously jeopardize my

business if I have to pay the civil penalty asked by the Hearing Counsel I realize I used very

bad judgement concerning the three exports and Hearing Counsel agrees that my affidavit

estabHshes that the three violations do not demonstrate a

pattern of flagrant violations or an

attempt to circumvent the Shipping Act

I

assure Your Honor that I am ahonest law abiding citizen and would if granted my FMC

license would be most aware of the law the Hearing Counsel has done its job in this regard

perhaps Your Honor could see to remit the penalty and place me under probation for a

period of time The penalty would be very hard on me
734 FEDERAL MARITIME COMMISSION

In the Procedural Order served September 2 1980 it was noted that

among other things since the violations were considered inadvertent

and the financial condition of the respondent less than robust a chance

of a settlement existed The parties were provided an opportunity to

explore that possibility Respondent replied that he freely plead s

guilty to violating Commission regulations and again asked that no

penalty be imposed 8

The Bureau responded by indicating that numer

ous discussions were held with the respondent in attempting to settle

but that the parties were unable to agree on the terms of a settle

ment s

The record at this point lacked among other things an agreed

to statement of facts detailing the claimed violation and an appropriate

discussion concerning the imposition of a civil penalty if any to be

imposed As a

consequence a Second Procedural Order was issued

providing an opportunity for a narrowing of issues or a procedural

schedule for a hearing if necessary On October 8 the Bureau respond

ed that the parties were unable to agree upon a statement of facts and

that respondent had requested a hearing in order to present a number of

witnesses Hearing was held in New Orleans LA on November 6

1980 The Bureau filed a Memorandum of Law urging that I re

spondent be found to violate section 44 a by engaging in unlicensed

forwarding activities on three occasions 2 respondent be assessed a

civil penalty in the amount of 3 000 and 3

respondent be found fit

and the application be granted Respondent in his reply claims that I

he did not violate section 44 a 2 he should not be assessed a civil

penalty and 3 his application should be granted

FACTS

On October 24 1978 the respondent contacted the Commission s

Gulf District Office for the purpose of obtaining the necessary forms

for an application for a license to be an independent ocean freight

forwarder Also at the time of filing his application the Commission s

letter to respondent clearly indicated the prohibition against engaging

The financial statement referred to is the FMCs General Counsel s Office Corporate Form Fi

nancialStatement of Corporate Debtor supplied by the Bureau to the respondent

8

The exact textof the respondent s letter of September 19 1980 is as follows

Your Honor Hearing Consul has convinced me I violated the Commissions regulations

therefore I

freely plead guilty HoweverI am deeply concerned about the degree of my guilt

Hearing Consul has agreed in their July 24 1980 reply memorandum of law that J estab

lished that the violations were inadvertent yet to me it seems the civil penalty Hearing

Cansulia asking for is of an amount that would cover premeditated violations they state that

a 3000 00 penalty gives adequate consideration to the apparent unintentional and limited

nature of the violations I disagree 3000 00 is very much more than adequate for uninten

tional and limited violations

Your honor I have now paid my tax in full and have abalance in my savings account of

647 53 please take this into consideration when making your decision Again I ask that any

civil penalty be remitted since I have learned a lesson well and have been penalized by not

having been able to do freight forwarding for the last 12 months orso

9 Memorandum to this Judge dated September 22 1980
EMMETI I SINDlK FREIGHT FORWARDER LICENSE 735

APPLICATION AND POSSIBLE VIOLATION

in the business of forwarding without a license and the potential penal

ties and adverse affect upon the issuance ofthe license if such activities

took place lO When he filed the application he was a sole proprietor

and licensed customs broker db a Emmett I Sindik Customs Brokers

As part of the requested supplemental information supplied later to

the Commission respondent indicated that he had 13 years in the

import export transportation field primarily as a manager He also

stated

I understand that I am not allowed to do ocean freight for

warding whether or not compensated without holding an

FMC license In reference to work Ihave done in the past I

was not the freight forwarder H E Schurig Co of La

FMC 583 did three export shipments for two of my import

customers Clarke Veneers and Monroe Lange Hardwoods I

only coordinated the shipments to the pier Bills ofLading and

Export Declarations etc were executed in the name ofH E

Schurig Co of La However I do handle export entries

without going through H E Schurig

During the course of an investigation into the application respondent

indicated that his office had on three occasions in 1979 handled export

shipments for his customers using the name and license number of a

licensed freight forwarder H E Schurig Co As the evidence

shows in performing these services his office was responsible for the

booking of the cargo preparation of the bills oflading delivery orders

dock receipts and export declarations In addition his office invoiced

the shippers and collected forwarding fees for the services performed

The only service not performed on the shipments was the signing of

the export declaration which was done by H E Schurig Co which

received no compensation on these shipments According to the re

spondent stestimony he believed that he did not require a license since

he did not receive any compensation from the ocean carriers involved

in the shipments He also testified that he considered the arrangements

legal since the documents were signed by a licensed freight forward

er

10 The letter from the Director Gulf District Office stated

Your attention is specifical1y directed to Section 44 Shipping Act 1916 which prohibits any

person from engaging in the business of forwarding unless such person holds alicense issued

by the Federal Maritime Commission to engage in such business Carrying on the business

of forwarding is defined under Section 510 2of the enclosed GeneralOrder 4

Ifyou should engage in the business of forwarding before receiving your license you win be

subject to penalties provided by law and may prejudice the issuance of your license Ifwe

can be of further assistance you may contact this office by telephone orby mail Ex

hibit 4
736 FEDERAL MARITIME COMMISSION

DISCUSSION

Section 44 a of the Shipping Act prohibits a person from carrying

on the business of forwarding without a license llAnd section 1 of

the Act defines the quoted language as

T he dispatching of shipments by any person on behalf of

others by oceangoing common carriers in commerce from the

United States its Territories or possessions to foreign CQun

tries or between the United States and its Territories or pos

sessions or between such Territories and possessions and han

dling the formalities incident to such shipment

The record here establishes that respondent performed freight for

warding services on behalf of his shipper customers and in doing so

violated the provisions of section 44a Although respondent adheres

to the proposition that a licensed freight forwarder signed the export

declarations that alone does not operate to neutralize all the other

freight forwarding activities undertaken by his office 12 And he should

have realized that his role in these shipments was of some consequence

when he accepted payment for services and acknowledges that the

shippers would turn to him if any transportation problems developed

Accordingly it is found that the activities of the respondent constitute

a violation of section 44 a by engaging in unlicensed forwarding on

three occasions

The main focus in this proceeding has been upon whether a penalty

should be assessed and if so the amount to be assessed Section 32 a of

the Shipping Act 1916 provides that

whoever violates section 44 ofthe Act shall

be subject to a civil penalty not to exceed 5 000 for each such

violation

And section 32 a provides that

The Commission shall have authority to assess or com

promise all civil penalties provided in this Act

The Bureau submits that a penalty of 3 000 should be assessed here

Basically it is argued that the penalty would act as a deterrent not only

11 Section 44a provides

No person sball engage in carrying on the business of forwarding as defined in this Act unless

such person holds a license iSBued by the Federal Maritime Commission to engage in such

business

12 The total discussion concerning this issue submitted by the respondent in bis Reply to Memoran

dum of Law is as follows

DISCUSSION

A VIOLATIONS OF SECTION 44A

Under the definition carrying on the business of forwarding nand handling the formali

ties incident to such shipments this part is clear that this includes all the formalities I only

handled some of the fonnal l es and due to lhe value of lhe lhree shipments involved avalid

export declaration properly executed was needed in order for the steamship company to

load the cargoes on board their vessel for export This document was not executed by my

officesince I was not alicensed freight forwarder
EMMEIT I SINDIK FREIGHT FORWARDER LICENSE 737

APPLICAnON AND POSSIBLE VIOLAnON

to this respondent but to others who might find themselves similarly

situated The Bureau finds little acceptable excuse in respondent s claim

that he was not aware that he was violating the law The Bureau

maintains that such a penalty is in accord with prior Commission

assessments for similar violations and gives adequate consideration to

the apparent unintentional and limited nature of the violations while

serving to deter future violations Respondent on the other hand

claims that no civil penalty should be assessed because of the uninten

tional nature of the violations It is also claimed that the Commission s

warning not to engage in forwarding activities prior to receipt of a

license was observed and that his actions were above board since he

did not sign the export declaration himself He also claims that he

made valid efforts to comply with the regulations I3

The circumstances arising in this proceeding require the imposition of

a civil penalty Respondent is not new to the field oftransportation and

had clear and ample warning not to engage in any freight forwarding

activity prior to the issuance of a license In order to buttress his

argument that his actions were considered legal respondent called as

a witness a Vice President of a freight forwarding company Unfortu

nately although this witness provided some support he was not famil

iar with the facts regulations or Commission precedents and indicated

that his testimony was based upon his opinion only Furthermore the

evidence to the effect that respondent was involved in another business

and unable to devote full attention to these transactions and that the

involved documentation was handled by his employee although miti

gating does not constitute an acceptable excuse Here the respondent

received a fee from his shipper customers for the performance of

unlicensed forwarding services And although he stresses that he did

not receive brokerage from the carriers that nonetheless does not offset

the benefit received from the services rendered The circumstances

presented here would indicate that respondent knew or should have

known that the activities performed were in violation of the Shipping

Act The remaining consideration now concerns the amount of civil

penalty to be imposed

The three instances of violations represent a minimal dollar amount

received for the services rendered Respondent produced a witness

favorably attesting to his business reputation in the customhouse bro

kerage field for over ten years The problem is the present financial

posture of the respondent to pay this amount According to the record

as current assets respondent has 647 00 in savings and owns three

undeveloped lots which could be sold for an estimated 5 000 Re

spondent considers that the imposition ofany fine would be detrimental

13 Reply Memorandum of Law p 1
738 FEDERAL MARITIME COMMISSION

to his business and family The maximum penalty permitted under 46

V S C 831 a is set at 5 000 per violation which in this proceeding

would amount to 15 000 In approaching the special financial circum

stances presented here itwould seem to me that an assessment of 1 000

is more appropriate especially where the Bureau concedes that the

violations were inadvertent Ancl while the Bureau considers that the

imposition of 3 000 would operate as a deterring factor for any future

misconduct it appears from the testimony of respondent and his presen

financial condition the amount recommended is not warranted While

the respondent will be able to improve his financial condition at a late

time his potential future earnings should not be the sole consideration

for the imposition of an amount that would presently liquidate a saving

account and force the sale of some undeveloped lots In my view the

delay necessitated in processing this application albeit necessitated by

respondent s activities is a factor to be consiclered as well Certainly

during the period of time from the submission of the application to

date the respondent was foreclosed from receiving compensation as 

licensed freight forwarder The loss of such compensation should no

be entirely disregarded

The Bureau points to two proceedings involving the imposition o

5 000 for either six unintentional violations14 or five shipments by an

unlicensed forwarder 15 On the other hand the drcumstances here

surrounding the violations and the special financial condition of the

respondent justify the lesser penalty Indeed it is recommended that the

Bureau arrange payment ofthe assessed penalty herein from the futur

earnings of the respondent after his application is approved and whe

he has a reasonable time to improve his financial condition The imposi

tion of a penalty in the amount found here should be adequate enough

to realistically meet the stated considerations ofthe Bureau

The final issue to be determined is whether the applicant is fit to

carryon the business offorwarding and to conform to the provisions o

the Shipping Act and Commission regulations promulgated thereunder

The Bureau treated this issue as follows

W e agree with Mr Sindik that Mr Sindik s three

violations are not of the type to demonstrate a pattern of

flagrant violations or a deliberate attempt to circumvent the

Shipping Act In view of these circumstances the fact that

there were only three shipments and the passage of over a

year since the violations we believe that Mr Sindik has estab

lished that he has the requisite qualifications to be licensed

and that he is fit willing and able to properly carryon the

business of forwarding and to conform with the provisions of

4

AIFreight Packers Forwarders Inc 23 P M C 131 1980 and 23 P M C 417 1980

IIAir Campak Inc Freight Forwarder License Application 23 P M C 223 1980
EMMETI I SINDIK FREIGHT FORWARDER LICENSE 739

APPLICATION AND POSSIBLE VIOLATION

the Shipping Act and the requirements rules and regulations

of the Commission Thus he should be licensed to engage in

the business offorwarding

I

agree with the view of the record as stated by the Bureau on this

issue

Accordingly it is held that the respondent Emmet I Sindik violated

section 44 a Shipping Act 1916 by engaging in unlicensed freight

forwarding activities that civil penalties in the amount of 1 000 are

hereby assessed against Emmet I Sindik that payment of said penalty

is a condition precedent to the issuance of a license herein that within

30 days ofthe date of a final determination by the Commission Emmet

I Sindik shall contact the Bureau of Investigation and Enforcement to

arrange payment terms on the assessed penalty that if such arrange

ment is not reached within this time period the entire penalty amount

shall become due and payable and that respondentapplicant is found

to possess the requisite fitness within the meaning of section 44 b

Shipping Act 1916 to be licensed as an independent ocean freight

forwarder

S PAUL J FITZPATRICK

Administrative Law Judge

Washington D C

February 25 1981
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 800 1

STOODY INTERNATIONAL CO

v

SEA LAND SERVICE INC

ORDER DISCONTINUING PROCEEDING

March 31 1981

On February 26 1981 the Commission reviewed the decision of th

Settlement Officer in the above captioned proceeding to consider th

method used in computing the award of interest Chairman Kanuk an

Commissioner Moakley voted to adopt the decision of the Settlemen

Officer Commissioners Teige and Day voted against adoption an

Commissioner Daschbach declined to participate

Reorganization Plan No 7 of 1961 requires the affirmative votes o

three Commissioners to transact business of the Commission Becaus

no action has been agreed upon by any three Commissioners th

decision ofthe Settlement Officer stands

THEREFORE IT IS ORDERED That this proceeding is discon

tinued

By the Commission

S JOSEPH C POLKING

Acting Secretary

Commissioner Richard J Oaschbach does not participate and issues a

separate statement
STOODY INT L CO V SEA LAND SERVICE INC 741

Separate Opinion ofCommissioner Daschbach

I am not participating because I do not believe the Commission

should review the decisions of settlement officers in informal docket

proceedings Under Subpart S of the Commission s Rules of Practice

and Procedure 46 C F R 502 301 parties consent to waive the rights

and obligations associated with normal adjudicatory proceedings for the

express purpose of receiving prompt consideration of a small claim

Commission review precludes the inexpensive and expeditious handling

of small claims which is the foundation of the informal docket process

The settlement officer s decisions in informal dockets have no preceden

tial value and Commission review therefore imposes unnecessary ex

pense and delay in an arbitration process designed to settle minor

commercial disputes in a prompt and responsive manner
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 800 1

STOODY INTERNATIONAL CO

v

SEA LAND SERVICE INC

Decision ofJuan E Pine Settlement Officer1

Discontinued March 31 1981

Reparation Awarded

Stoody International Co Claimant by informal docket claim filed

February 29 1980 seeks recovery of alleged overcharges of 568 80

plus interest from Sea Land Service Inc Respondent Claimant is a

domestic international sales corporation located in Industry California

Respondent is a common carrier by water subject to the provisions o

the Shipping Act 1916

Claimant alleges violation of section 22 of the Shipping Act 1916

and that it has been subjected to the payment of charges for transporta

tion which are inapplicable and unlawful in violation of section 18b 3

ofthe Shipping Act 1916

This claim involves two shipments both of which moved from Long

Beach California to Busan Korea

The first shipment moved under respondent s bill of lading No

995773838 dated February 12 1979 on the SEA LAND EX

CHANGE The shipment consisted of

13 fibreboard drums

6 pallets STC 6 fibreboard drums

pallets STC 4 fibreboard boxes

22 pes Steel Welding Wire Rod

17 692 344 5 eft

8 025 kg 9 755 em

1

Both parties having consented to the informal procedure of Rule 19 a of the Commission s Rule

of Practice and Procedure 46 CP R 92 301 304 this decision will be final unless the Commissio

elects to review it within 30 days from thedate of servicethereof
STOODY INT L CO V SEA LAND SERVICE INC 743

Respondent assessed the

ment

Metal Products N O S Packed

Hand ing

CAF

following rates and charges on the move

9 76cm2

9 76cm

1 629 92

167 00

110

06

Total

Claimant alleges it should have been assessed

Wire and Rods of Base Metal

Used for Soldering or Welding

Special Rate

Handling

CAF

Tota

9 76cm

629 92

1 9 0

6

10

06

1 629 92

107 36

97 80

1 835 08

1 6144

107 36

97 80

1 366 60

Amount of claim on this ship

ment 4688

The second shipment moved under respondent s bill of lading No

995784420 dated June 12 1979 on the SEA LAND MCLEAN The

shipment consisted of

7 pallets STC 7 tibreboard cartons

Steel Welding Rod 5 036 73 7cft 2 284kg 2 087cm

Respondent assessed the following rates and charges on the move

ment

Metal Products N O S Packed

Bunker surcharge

Handling

CAF

2 09cm

369 93

77 001

5 00 6

1100

05

Total

Claimant alleges it should have been assessed

Wire and Rods of Base Metal

Used for Soldering or Welding

Special Rate

Bunker surcharge

Handling

CAF

Total

2 09cm

369 93

29 00

500

10

05

369 93

10 45

22 99

18 50

42187

269 61

10 45

22 99

18 50

32155

2 Rule 39 2 7 of the Pacific Westbound Conference Local and Overland Freight Tariff No II

FMC 19 provides It shan be permissable in computing freight charges on total measurement of a

shipment to round ofT the total cubic meters to three decimal places Respondent and claimant

have both rounded offtwo places i

e 9 76 em However by rounding offthree places i e 9755 em

the total charges assessed would have been 1 834 15 As this is less than one doBar lower than the

total amount respondent charged 9 76 em will be used in the computations for consistency with the

claim

S

Item No 00603 X2nd Revised Page 554 same tariff

4 Rule No 55 23b same tariff

5

Currency Adjustment Factor Rule 213 2 same tariff

6

Item No 653 1700 40 same tariff

7 Item No 006 0300 00 3rd Revised Page 554 same tariff

6 Rule No 21 4 same tariff
744 FEDERAL MARITIME COMMISSION

Amount of claim on this ship

meltt 100 32

From the above computations the total claim for both shipments is

Shipment I 468 48

Shipment 2 100 32

Total claim S68 80

Respondent has reviewed the claim and advises that it is correct as

filed

In processing this claim an error has been found in claimant s com

putation of the charges it alleges it should have been assessed on both

shipments In computing the currency adjustment factor claimant ne

glected to use the low ocean freight charges of 1 16144 and 269 61

respectively resulting from assessment of the lower special rates o

119 00 and 129 00 respectively on the two shipments The claim is

understated accordingly Below are the computations necessary to

amend this oversight

Currency Adjustment Factor

Assessed Correct Assessment

Claim

Understate

ment

Shipment I

1 629 92 06 97 S0

Shipment 2

369 93 OS 18 S0

1 161 44 06 69 69

269 61 OS 13 48

28 11

S 02

Total claim understatement 33 13

In view of the above the amount of the claim as amended herein is

568 80 plus 33 13 or 60193

Reparation in the amount of 60193 plus 12 percent interest from the

date charges were paid is awarded to claimant It is the Commission s

general policy to award 12 percent interest on awards of reparation

where the carrier had sufficient information at the time of shipment to

determine the proper rate and its failure to do so was of its own doing

Upon evidence of payment of the amount awarded this record wil

be complete

8 JUAN E PINE

Settlement Officer

December 31 1980
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 17 AMDT 2 DOCKET NO 80 59

PART 521 TIME FOR FILING AND COMMENTING

ON CERTAIN AGREEMENTS

ACTION

SUMMARY

March 31 1981

Final Rule

These final rules amend existing regulations govern

ing the time within which certain modifications of

agreements approved pursuant to section 15 of the

Shipping Act 1916 46 U S c 814 should be filed

with the Commission In the case of a an applica

tion for extension of an approved agreement due to

terminate or b a modification of an approved agree

ment these rules enlarge the time for filing the appli

cation or modification from not less than 60 days to

not less than 120 days prior to the date the approved

agreement would otherwise terminate or when it is

intended that action will begin change or cease as a

result of the modification These rule changes are

deemed necessary to accommodate agreement proc

essing delays including those imposed by the Gov

ernment in the Sunshine Act 5 U S C 552b and the

National Environmental Policy Act of 1969 42

U S C 5321 et seq The enlargement of time coupled

with shortened internal deadlines for the processing

of agreements should ensure that agreements are

processed within the 120 days notice period

DATE Effective July 2 1981

SUPPLEMENTARY INFORMATION

The Commission previously gave notice 45 FR 58923 4 that it

proposed to amend 46 C F R 521 to enlarge the time period within

which certain modifications ofagreements approved pursuant to section

15 ofthe Shipping Act 1916 should be filed with the Commission The

rule changes are necessary to allow the staff sufficient processing time
746 FEDERAL MARITIME COMMISSION

to accommodate delays imposed on the processing of certain agree

ments by legislation and to ensure that all affected agreements are

processed within the 120 days notice period Experience has also shown

that under present time constraints even where applications for agree

ment extension or modification are timely filed under the 60 days

advance notice standard there is often insufficient titne to permit a

detailed analysis ofthe need for the agreement s continuation

Comments from the public were invited with respect to the proposed

rules and four responses were filed on behalf of 22 representative

commentators Comments from the North European Conferences

NEC represent the views of 12 conferences and rate agreements and 9

out of a total of ten1 member lines while the Far East Conference

FEC expressed the views of its 11 member lines Pacific America

Container Express PACE Line and Delta Steamship Lines Inc

Delta each commented on their own behalf 2

Positions ofthe Commentators

The NEC group expresses support for and urges adoption of the

proposed rule change provided the Commission reaffirms its policy

expressed in General Order 17 to afford filing parties flexibility to meet

extraordinary unforeseen or special circumstances as they pertain to

specific filing deadlines By substituting the word should for must

in the rule as adopted in 1962 the Commission recognized that situa

tions may arise where it is not possible to file a timely application

Therefore the referenced flexibility was incorporated into the rule

The Commission hereby reaffllms that the policy regarding flexibility

in filing modifications that applied to the 60 day filing provisions ofthis

rule shall also apply to the 120 day provisions

NEC s support for the rule change is also contingent upon the inclu

sion ofthe following sentence at the end of section 5212 a

In the event such a duly filed application is not acted upon by

the Commission prior to said termination date the agreement

shall remain in full force and effect at least until the subse

quent date ofreceipt ofservice of a Commission order declar

ing the agreement to have terminated

Implementation of this proposal for automatic interim approval o

timely filed extension amendments would be unlawful and inappropri

ate An agreement may not be extended or otherwise modified even

for a temporary period unless the Commission makes an affirmative

finding that the additional period of implementation meets the require

ments of Jlection IS United Sta tes Lines Inc v Federal Maritime Com

mission S84 F 2d 543 DC Cil 1978 Seatrain International SA v

1 United States Lines chose not to participate in NBC s comments

a

Pace however merely joined in those comments submitted by the FEe
TIME FOR FILING AND COMMENTING ON CERTAIN 747

AGREEMENTS

Federal Maritime Commission 584 F 2d 546 D C Cir 1978 In situa

tions where an agreement s anticompetitive aspects require its propo

nents to submit a justification statement or when substantial protests

have been lodged against an agreement that agreement may not be

approved unless and until the initial arguments raised in opposition to

approval are overcome Ifthe proponents fail to establish a sound basis

for approval within section 5212

as 120 day time period a further

evidentiary hearing is ordinarily necessary

It would turn the intended purpose of section 15 on its head if

agreements originally approved with a specific expiration date could be

extended indefinitely merely by filing an extension application and

electing to participate in an administrative hearing See Canadian

American Working Arrangement 16 S R R 733 1976 review petition

dismissed sub nom 15 S R R 76 D D C 1976

The Far East Conference FEe opposes the rule changes and be

lieves that the Commission s policy of granting approvals for limited

time periods is a major factor contributing to delay in section 15

procedures It also believes that an extra 60 days could result in certain

trade data submitted in support of a filing being at least six months old

at the time ofits review by the Commission

It suggests that those who fail to supply adequate justification with

sufficient promptness should suffer the consequences oftheir delinquen

cy In conclusion FEC opines that environmental considerations should

rarely if ever be involved in agreement approvals

Delta Steamship Lines Inc joins FEC in its general opposition to the

rules changes citing the difficulty and hardship in preparing justification

four months prior to the effective date of the action to be taken Delta

is concerned primarily with the hardship placed on pooling agreement

members and suggests a compromise expansion oftime to 90 days with

waivers for minor modifications and for major modifications for good

cause shown Relative to the filing of modifications to existing pooling

agreements Delta submits that

Often the need arises for minor modifications to a pooling

agreement For instance a party may join or withdraw from a

trade without affecting the overall structure ofthe agreement

In the event that a party wishes to join a pool that party in

the absence of protest should not have to wait four months to

participate in the trade On the other hand the need for a

prompt and sub tantial modification can arise unexpectedly

For instance the parties may be notified that an approved

agreement does not comport with an inter governmental un

derstanding In such circumstances the parties must act quick

ly to avoid disruption of international trade A four month

delay can exacerbate international tension
1

I

I

748 FEDERAL MARITIME COMMISSION

There seems to be some confusion here The rule changes do not

mean that a modification must bemed with the Commission 120 days

prior to the date it is intended that action will begin else it cannot be

processed timely The Commission s affirmation injra and the previous

substitution of the phrase should be filed as contained in sections

5212 a and b in lieu of must he filed should serve to alleviate

Delta s concern

While the Commission is aware of the potential difficulty faced by

certain commentators in meeting the 120 day advance filing require

ment it must also consider the mandated and administrative constraints

that the processing of agreement matters places on its staff The Com

mission has therefore detemlined it appropriate to adopt the rule as

proposed anden1arge the existing 60 days advance notice filing period

set forth in General Order 17 to 120 days

Therefore it is ordered that pursuant to 5 U S C 533 and sections 15

and 43 of the Shipping Act 1916 46 U S C 814 and 841a 46 C F R

Part 521 is amended as follows

Delete the words sixty 60 days from sections 5212 a b

andS213 of46 C P R Part 521 and substitute the words one

hundred twenty 120 days therefor

By the Commission

S JOSllPHC POLKING

Acting Secretary

Commissioner Teigc not participating
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

PART 549 REGULATIONS GOVERNING LEVEL OF

MILITARY RATES

DOCKET 81 9 GENERAL ORDER 29 AMENDMENT 4

TEMPORARY SUSPENSION OF REQUIREMENTS

March 31 1981

Final Rule

This Rule suspends regulations governing rates

quoted for the transportation of U S Department of

Defense cargoes pursuant to Military Sealift Com

mand requests for proposals RFP I600 First Cycle

commencing on October 1 1981 and RFP 1600

Second Cycle commencing on April 1 1982 This

action is taken in light of the determination that mili

tary rates are no longer so low as to be detrimental

to the commerce of the United States and with a

view toward lessening the regulatory burden on U S

flag operators

This Rule shall be in effect during the period October

I 1981 through September 30 1982

SUPPLEMENTARY INFORMATION

Notice is hereby given that the Federal Maritime Commission is

suspending its regulations governing the level of military rates estab

lished in Part 549 of Title 46 of the Code of Federal Regulations

Federal Maritime Commission General Order 29

The Commission s General Order 29 46 C F R 549 governing the

level of military rates was published in the Federal Register on Decem

ber 2 1972 37 FR 25720 The Commission s proposed temporary

suspension of General Order 29 and the reasons therefor were pub

lished in the Federal Register on February 4 1981 46 FR 10767

Comments on the proposed rule were due on March 6 1981 The only

comments received were submitted by the Commander Military Sealift

Command MSC on behalf of the Department of Defense MSC stated

ACTION

SUMMARY

DATE

TAn
750 FEDERAL MARITIME COMMISSION

that it strongly supported the proposed temporary suspension and

furthermore urged that the suspension be made permanent

Therefore pursuant to sections 18b 5 and 43 of the Shipping Act

1916 46 U S C 817 and 841a the Commission amends Part 549 o

Title 46 C F R by the addition of a new section as follows

Section 549 9 Temporary Suspension

The provisions of this Part are suspended during the period Octobe

1 1981 through September 3D 1982

By the Commission

S JOSEPH C POLKING

Acting Secretary

I 0 I r
FEDERAL MARITIME COMMISSION

DOCKET NO 81 2

THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY

v

TRANS FREIGHT LINE INC

NOTICE

April 7 1981

Notice is given that no appeal has been taken to the dismissal of the

complaint in this proceeding and that the time within which the Com

mission could determine to review has expired No such determination

has been made and accordingly the dismissal has become administra

tively final

8 JOSEPH C POLKING

Acting Secretary

l 1114 71
FEDERAL MARITIME COMMISSION

DOCKET NO 81 2

THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY

v

TRANS FREIGHT LINE INC

1 MOTION OF COMPLAINANT TO DISMISS COMPLAINT

GRANTED

2 PROCEEDING DISCONTINUED

Finalized April 7 1981

On Friday February 27 1981 at approximately 1 00 pm the Presid

ing Administrative Law Judge received a telephone call from Com

plainant s attorney Mr Paul M Donovan of LaRoe Winn Moer

man who advised there had been a meeting in Secaucus New Jersey

with the respondents and petitioner for leave to intervene the Massa

chusetts Port Authority and settlement had been reached Request wa

made to cancel the prehearing conference scheduled for Monday

March 2 1981 and a motion to dismiss the complaint The Presidin

Administrative Law Judge asked that the requests be reduced to wri

ing Because of the time limitation between Friday and Monday th

request to cancel the prehearing conference ofMonday March 2 1981

was granted and steps taken immediately to clear the cancellation wit

the reporting company

At 1 50 pm on Friday February 27 1981 the written requests wer

received asking for cancellation of the prehearing conference and dis

missal ofthe complaint

Upon consideration of the above the prehearing conference o

March 2 1981 having been cancelled no action having been taken o

the petition for leave to intervene of the Massachusetts Port Authority

and the Complainant s

request to dismiss the complaint it is ordered

A The motion of the Complainant to dismiss the complaint i

granted

B The proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

March 2 1981

7 1JUr
FEDERAL MARITIME COMMISSION

DOCKET NO 81 7

INGERSOLL RAND COMPANY

v

SOUTH AFRICAN MARINE STEAMSHIP CORP

NOTICE

April 7 1981

Notice is given that no appeal has been taken to the dismissal of the

complaint in this proceeding and that the time within which the Com

mission could determine to review has expired No such determination

has been made and accordingly the dismissal has become administra

tively final

8 JOSEPH C POLKING

Acting Secretary

fc l
FEDERAL MARITIME COMMISSION

DOCKET NO 81 7

INGERSOLL RAND COMPANY

v

SOUTH AFRICAN MARINE CORPORATION

WITHDRAWALOF COMPLAINT

Finalized April 7 1981

By request dated February 9 1981 the Ingersoll Rand Company asks

that its complaint in this proceeding be withdrawn on the ground that

the respondent has agreed to the merits of the complaint and has

agreed to refund the amount sought in the complaint

Good cause appearing the request to withdraw the complaint is

granted and the proceeding is discontinued

8 CHARLES E MORGAN

Administrative Law Judge

March 2 1981
7cc

FEDERAL MARITIME COMMISSION

DOCKET NO 78 39

STANDARD FRUIT AND STEAMSHIP CO INC

AND UNITED BRANDS INC

v

PACIFIC MARITIME ASSOCIATION

DOCKET NO 78 40

SALEN SHIPPING AGENCIES INC

v

PACIFIC MARITIME ASSOCIATION

DOCKET NO 79 103

AGREEMENTS NOS LM 28 ET AL

DOCKET NO 80 16

DAIICHI CHUO KAISEN KAISHA

TOKO KAIUN KAISHA LTD AND

ATLANTIC LINES AND NAVIGATION COMPANY INC

v

PACIFIC MARITIME ASSOCIATION ET AL

DOCKET NO 80 29

WEYERHAEUSER COMPANY

v

PACIFIC MARITIME ASSOCIATION ET AL

NOTICE

April 8 1981

Notice is given that no appeal has been taken to the March 6 1981

dismissal of these proceedings and that the time within which the
756 FEDERAL MARITIME COMMISSION

Commission could determine to review has expired No such determi

nation has been made and accordingly the dismissal has become ad

ministratively final

S JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 78 39

STANDARD FRUIT AND STEAMSHIP CO INC

AND UNITED BRANDS INC

v

PACIFIC MARITIME ASSOCIATION

DOCKET NO 78 40

SALEN SHIPPING AGENCIES INC

v

PACIFIC MARITIME ASSOCIATION

DOCKET NO 79 103

AGREEMENTS NOS LM 28 ET AL

DOCKET NO 80 16

DAIICHI CHUO KAISEN KAISHA

TOKO KAIUN KAISHA LTD AND

ATLANTIC LINES AND NAVIGATION COMPANY INC

v

PACIFIC MARITIME ASSOCIATION ET AL

DOCKET NO 80 29

WEYERHAEUSER COMPANY

v

PACIFIC MARITIME ASSOCIATION ET AL

e
1

758 FEDERAL MARITIME COMMISSION

APPROVAL OP SETTLEMENT AGREEMENT

AND GRANTING OP VARIOUS MOTIONS

PILED BY THE PARTIES

Finalized April 8 1981

PRELIMINARY FACTS

Pacific Maritime Association PMA is a multi employer collectiv

bargaining association consisting of the principal employers of Wes

Coast dockworkers The International Longshoremen s and Warehouse

men s Union ILWU is the certified collective bargaining agent fo

those dockworkers

In 1978 the fringe benefit programs provided under the PMA ILWU

collective bargaining agreements were funded by assessments raised a

follows 1 the PMA ILWU pension welfare holiday and vacatio

plans covering various categories of dockworkers were funded by uni

form man hour assessments 2 the Pay Guarantee Plan PGP wa

funded by a combination of uniform man hour and weighted tonnage

assessments and 3 the Voluntary Travel Pund VTP was funde

on a weighted tonnage basis The PGP VTP and Holiday Pay Plan

assessment methods were not set forth in collective bargaining agree

ments and were approved by the Commission as part of Agreemen

Nos T 263S LM 7 and T 28S8 respectively The pension welfare an

vacation plans were either temporarily exempted or temporarily ap

proved by the Commission in 1978 when PMA filed with the Commis

sion the various collective bargaining agreements it had entered into

with ILWU A history of the filing of the various agreements and o

their handling by the Commission is set forth in the Commission 

Order of Conditional Approval and Investigation and Hearing in

Docket No 79 103 served December 27 1979 and published at 4

Fed Reg 837 Jan 3 1980

On October 6 1978 StandardPruit and Steamship Co Inc Stand

ard and United Brands Inc United jointly filed a complain

against PMA alleging that uniform man hour assessments under various

plans were subject to the Shipping Act and that these assessmen

methods were violativ of section IS 16 and 17 of the Act Standard

and United are principal importers of bananas into the United States

and their complaint alleged that PMA s man hour assessment method

was unfair t them The allegations were generally that unfairness

resulted because their handling of banana cargoes has been labor inten

sive and that because of a decline in man hours worked under PMA

ILWU contracts as a result of mechanization achieved primarily by

other industry sectors their assessment costs had increased On the

same date a similar complaint was filed by Salen Shipping Agencies

Inc on behalf of certain citrus fruit exporters whose operations wer
STANDARD FRUIT AND SS CO INC AND UNITED 759

BRANDS INC ET AL V PACIFIC MARITIME ASSOCIATION

also alleged to be relatively labor intensive The complaints were both

served October 17 1978 were assigned Federal Maritime Commission

Docket Nos 78 39 and 78 40 respectively land were consolidated for

hearing On November 17 1978 the Master Contracting Stevedore

Association of the Pacific Coast Inc MCSA filed petitions to

intervene in the consolidated proceedings alleging that its members had

a significant interest in the outcome ofthe proceeding because they are

the direct employers ofthe ILWU labor for whose fringe benefit plans

the PMA assessments are made On December 12 1978 the MCSA

petition was granted

In response to the concerns expressed by Standard United Salen and

MCSA and pursuant to an undertaking by PMA to the ILWU PMA

commissioned a study of its existing assessment methods which would

recommend any changes believed by the consultant to be appropriate to

make in the assessment formulae Pending this review the parties agreed

to a stay of the complaint proceedings Docket Nos 78 39 and 78 40

and an order to that effect was entered on February 7 1979 A study

was conducted by an independent consulting firm Temple Barker

Sloane Inc TBS and a modified funding method to replace all the

current PMA ILWU funding formulae was recommended in a report

by TBS to PMA dated July 1979 The alternative funding method

recommended in the TBS Report was adopted by PMA and was filed

with the Commission for exemption or approval 2 where it received

conditional approval pending hearing effective January 1 1980 It was

designated Agreement No LM 28

The filing of Agreement No LM 28 did not however resolve the

complaints of Standard United Salen and MCSA and these parties

therefore filed further protests to Agreement No LM 28 although they

did not oppose its implementation pending the disposition of their

protests An investigation concerning the lawfulness of Agreement No

LM 28 was instituted as Docket No 79 103 and the Commission di

rected that that proceeding be heard together with the earlier com

plaint proceedings Docket Nos 78 39 and 78 40 3

The filing of Agree

ment No LM 28 also prompted a number of petitions for intervention

by new parties all of which were granted 4

The intervenors participat

1

43 Fed Reg 49564 Oct 24 1978

44 Fed Reg 69008 Nov 30 1978

45 Fed Reg 837 Jan 3 1980

4

The Bureau of Hearing Counsel and Boise Cascade Corp both intervened in the proceedings but

subsequently withdrew from participation Intervenors participating in the proceedings were MacMil

lan Bloedel Limited Crown Zellerbach Corporation Crown Norsk Pacific Steamship Company

Limited Norsk Weyerhaeuser Co Georgia Pacific Corp Sause Bros Ocean Towing CoCres

cent City Marine Ways Drydock Co Sause Crescent Daiichi Chuo Kisen Kaisha Daiichi

Toka Kaiun Kaisha Ltd Toka Atlantic Lines and Navigation Co Atlantic and Tokai Ship

ping Co Ltd Tokai
760 FEDERAL MARITIME COMMISSION

ing in the proceedings are shippers and carriers of forest product

MacMillan Bloedel Limitedi Crown Zellerbach Corporation Nors

Pacific Steamship Company Limited Weyerhaeuser Co Georgia Pa

cific Corp Sause Bros Ocean Towing Co and Crescent City Marin

Ways Drydock Co and carriers of imported iron and steel cargoe

Daiichi Chuo Kisen Kaisha Toko Kaiun Kaisha Ltd Atlantic Line

and Navigation Co and Tokai Shipping Co Ltd all ofwhom allege

that their handling methods are labor efficient and that Agreement N

LM 28 and the substantial tonnage assessments made thereunder we

unfair and discriminatory to those labor efficient operations Complai

proceedings were instituted by the steel carriers Daiichi Toko an

Atlantic and Weyerhaeuser Co seeking reparations for alleged unfa

assessments collected under Agreement No LM 28 These proceeding

were assigned Docket Nos 80 16 and 8029 respectively and we

consolidated for hearing with Docket Nos 78 39 78 40 and 79 10

Extensive discovery was conducted by all parties and was complete

in October 1980

Hearings in the consolidated proceedings were commenced in Sa

Francisco California on November 18 1980 and PMA presented th

testimony of five witnesses who in turn were subjected to extensiv

cross examination The hearings in San Francisco were recessed o

December 2 1980 and were set to continue on January 6 1981 In th

meantime MCSA filed a motion dated January 2 1981 to withdraw 

protestants and parties Immediately before the hearings wereto resum

on January 6 the parties advised the Administrative Law Judge tha

notwithstanding their diverse interests they had come to a commo

basis for settlement in principle although they had not yet complete

the details oftheir settlement

No final settlement having been reached the matter was called fo

hearing at 10 00 a m on January 6 1981 The parties had not the

completed the settlement stipulation and agreement although they we

intensively negotiating a resolution ofthe complex and difficult issues 

the case The hearings were recessed to permit the parties to comple

their negotiations and to report their conclusions and the parties fro

time to time reported the progress ofthe negotiations

On January 12 1981 counsel for all the parties advised that they ha

achieved a settlement of all matters in dispute and had reduced tha

settlement to writing subject to execution by principals and ratificatio

by the membership of the Pacific Maritime Association in accordanc

with its by laws 6At that time they furnished copies of documen

which comprised the settlement agreement to the Administrative La

Judge a General Agreement ofCompromise and Release a revise

The membership of PMA has since ratified the settlement agreement and the principals have e

cuted all necessary documents
STANDARD FRUIT AND SS CO INC AND UNITED 761

BRANDS INC ET AL V PACIFIC MARITIME ASSOCIATION

Assessment Agreement proposed motions for dismissal and a Compro

mise and Release ofClaims by the parties to Dockets 78 39 and 78 40

The parties also furnished a

copy of a motion to dismiss Docket No

79 103 as moot which they intended to file in view ofthe cancellation

of Agreement No LM 28 and the withdrawal ofall claims for repara

tions or other retroactive adjustments 6

CONTENTIONS OF PARTIES

In essence these proceedings concern two different assessment meth

ods in effect at different times The first consists of man hour assess

ment formulae in Agreements Nos LM 4 LM 23 and LM 24 and the

second is embodied in Agreement No LM 28 which uses both a man

hours and tonnage formula As to the first Standard United and Salen

contend that man hour assessment formulae as constituted under those

agreements tend to shift assessment costs unfairly to labor intensive or

low productivity general cargo operators

The MCSA urged that its members are direct employers of ILWU

labor responsible under the Employee Retirement Income Security Act

ERISA for the adequate funding of various PMA ILWU pension

plans and that tonnage based formulae would ensure adequate funding

betterthan man hour based formulae

The shippers and carriers of forest products MacMillan Bloedel

Crown Norsk Weyerhaeuser Georgia Pacific and Sause BrosCres

cent and the carriers of imported iron and steel cargoes Daiichi

Toko Atlantic and Tokai all either support or have no objection to

the man hour assessment method of Agreement LM 4 et aI but do

object to the substantial tonnage assessments provided in Agreement

No LM 28 These parties offered several alternative contentions as to

how Agreement No LM 28 should be modified to reduce these bur

dens including the creation of new cargo assessment categories for

their cargoes and numerous variations of man hour assessment methods

to accommodate different cargo handling characteristics

During the course of the proceedings the parties marshalled all avail

able data which they believed supported their contentions as to the

correct assessment method A dozen or more different suggested assess

ment formula methods were urged upon the Commission and the

record was inundated with complex expert testimony None of the

formula achieved any consensus Instead they all provoked extensive

controversy The principal obstacle to resolution of the disputes be

tween the parties was that the labor intensive operators Standard

United and Salen the high labor productivity parties forest products

6

All documents have since been filed Cormany with the Secretary of the Commission and all parties

to the settlement plus the MeSA have filed motions to dismiss their complaints and or to withdraw

theirinterventions as parties in the consolidated dockets with prejudice
762 FEDERAL MARITIME COMMISSION

and steel carriers and PMA were unable to reach a consensus as to an

assessment method that would meet the needs ofall interests container

ized operators bulk carriers auto carriers and other general cargo

operators Such a consensus is understandably difficult to achieve

where large sums of money must be raised annually nearly

104 000000 in 1979 among a finite group ofcontributors and where a

reduction in one party s contribution under an assessment system neces

sarily means a corresponding increase in the assessments borne by the

others

SETILEMENT AGREEMENT

The parties have after extensive negotiations over a considerable

period of time reached a General Agreement of Compromise and

Release which was executed by all parties participating in the pro

ceeding except the Master Contracting Stevedore Association which

as has been noted sought to withdraw from the proceedings Under the

agreement PMA undertakes to cancel Agreement No LM 28 and to

file a new assessment agreement with the Commission effective upon

filing in accordance with the provisions of the Maritime Labor Agree

ments Act of 1980 Public Law 96 325 94 Stat 1021 Aug 8 1980

The new assessment agreement provides for a new assessment formula

in two phases Phase 1 effective upon the filing of the agreement wi

continue in effect for two and one half years Under Phase 1 of the

agreement 80 9 of the estimated monies required by the PMA Plans

would be assessed on a uniform man hour basis and 19 1 on a tonnag

basis The tonnage rates would be weighted according to six categories

of cargo dry bulk autos and trucks logs and lumber low productivit

general cargo other general cargo and containers Containers are as

sessed a basic tonnage rate and the other five categories pay tonnag

assessments as a percent ofthe container rate as follows

Dry Bulk 5 2154

Autos and Trucks 23 4150

Logs and Lumber 75 0000

Low Productivity

General Cargo 0 0

Other General Cargo 73 0000

During Phase 2 commencing two and one half years later th

formula shifts from 80 9 uniform man hour contributions to 100

man hour contributions Inaddition to a uniform man hour contriblltio

utilized to pay all benefit costs however there is a man hour asses

ment which is utilized to finance credit adjustments given to low

productivity general cargo called Credit Adjustment Cargo unde

Phase 2 of the agreement Low productivity general cargo operator

thus will pay no tonnage assessments under Phase 1 and will receiv

comparable credits under Phase 2 and they therefore have withdraw

their complaints At the same time the complaints of the high produc
STANDARD FRUIT AND SS CO INC AND UNITED

BRANDS INC ET AL V PACIFIC MARITIME ASSOCIATION

tivity operators as to Agreement No LM 28 have been alleviated

sufficiently by the new formula to produce a settlement since the

formula shifts the assessment system substantially back to a man hour

system which high productivity operators tend to favor The auto and

dry bulk sectors will pay assessments which do not exceed what they

paid under Agreements Nos LM 4 et aI a system which they did not

challenge Containers do have a higher tonnage assessment rate than

high productivity general cargo or logs and lumber but only for a two

and one half year period Here it should be noted that some parties in

the case contended that under Agreement No LM 28 container inter

ests for the year LM 28 was in effect were better off than high produc

tivity general cargo or high productivity lumber

Under the settlement agreement the parties have agreed to forego

retroactive adjustments or reparations in favor of a prospective two

phase assessment agreement Both PMA and the MCSA vigorously

opposed retroactivity in large part because they contend that the

impact of retroactive adjustments falls upon stevedoring concerns who

pay the assessments and who would likely be unable to pass shortfalls

along to customers and who in other instances might receive wind

falls that could distort competitive relationships between them PMA

and the fruit shippers have however entered into a money settlement

set forth in a separate settlement agreement between them This settle

ment concerns allegations by the fruit shippers seeking adjustments for

1978 and before during which period the collective bargaining con

tracts and uniform manhour formulae contained therein were not filed

with the Commission and claims that the fruit shippers experienced a

consistent and abnormally high historical pattern of use of non regis

tered dockworkers in unloading their vessels PMA contested the Com

mission s jurisdiction over these issues but elected to settle them rather

than to continue litigation PMA has agreed to pay Standard United

and Salen as follows

On January 30 19817

To Standard

To United

To Salen

On January 30 1982

To Standard

To United

To Salen

131 544

124 626

186 838

131 545

125 627

186 839

DISCUSSION

It is well established that settlement of administrative proceedings is

favored by Congress the courts and administrative agencies themselves

See 5 U S c 554 c I and Pennsylvania Gas Water Co v Federal

7

These payments for January 3D 1981 have already been made

763
764 FEDERAL MARITIME COMMISSION

Power Commission 463 F 2d 1242 1247 D C Cir 1972 The partie

hereto have already consumed very large amounts of time and money

in litigating the issues Continuance ofthe litigation would cause furthe

unnecessary expenditure of large amounts of time and money The

direct testimony and cross examination in the litigation revealed n

common ground as to an assessment basis with which the parties could

all live The multi faceted settlement adopted during negotiations doe

produce this result

Further the parties in these proceedings represent major shipper an

carrier elements of the maritime industry Their interests are diverse

and representative The new assessment formula is a delicate compro

mise agreed to by the parties and represents a careful balancing o

interests achieved during the course ofhearings after months of expen

sive litigation having an uncertain outcome and after months ofexhaus

tive negotiations A critical element enabling this settlement to go

forward at all is the mutual decision by the parties to adopt formulae

operating prospectively which obviated the need for the parties to

press claims for retroactive application of whatever formula they con

tended should have been imposed by the Commission in lieu ofAgree

ment No LM 28

It should be noted that during the pendency of these proceedings

since 1978 all affected parties have had an opportunity to come for

ward and be heard by the Commission on the question offringe benefi

assessment methods No party seeks continuation of these proceedings

and no interest public or private would be served by such a perpetua

tion Accordingly it is appropriate at this time to discontinue these

proceedings

Also under the terms of the settlement agreement Agreement LM

28 has been terminated and all parties having claims concerning Agree

ment LM 28 have withdrawn them Accordingly Agreement LM 28

and predecessor agreements and the consolidated proceedings con

cerning these agreements are moot No purpose would be served by

reviving disputes over the lawfulness of superseded agreements To do

so would create wasteful and unnecessary litigation concerning wha

would have become theoretical issues arising out of agreements which

are moot

One should recognize that at the hearing of these proceedings coun

sel for all parties werediligent and resourceful and explored exhaustive

ly all aspects of the issues presented Their settlement reached after

detailed good faith negotiation represents a statesmanlike practica

solution to highly complex problems in the industry by the persons

most knowledgeable concerning them and most directly affected by

them

Finally it is important to note two aspects ofthe proposed settlement

that one might well overlook First since the settlement is so complex
STANDARD FRUIT AND SS CO INC AND UNITED 765

BRANDS INC ET AL V PACIFIC MARITIME ASSOCIATION

and since the issues overlap the elements agreed to are interdependent

on one another What is given away or taken from one faction or group

directly affects what is given away or taken from a competing faction

or group Therefore any change in the settlement agreement may well

cause the entire agreement to fall For this reason great care needs to

be exercised to insure that the agreement is considered as an entirety

rather than a sum ofmany parts

Secondly since a new assessment agreement has been filed as a part

of the settlement consideration must be given to just how Public Law

96 325 should be applied The law amends the Shipping Act of 1916

and provides in pertinent part that

SEe 15 Every common carrier by water or other person

subject to this Act shall file immediately with the Commission

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

every agreement with another such carrier or other person

subject to this Act The term agreement in this section

includes understandings conferences and other arrangements

but does not include maritime labor agreements or any provi

sions of such agreements unless such provisions provide for

an assessment agreement described in the fifth paragraph of

this section

Section 5 of the law adds a new section 45 to the Shipping Act as

follows

SEe 45 The provisions of this Act and of the Intercoastal

Shipping Act 1933 shall not apply to maritime labor agree

ments and all provisions of such agreements except to the

extent that such provisions provide for the funding of collec

tively bargained fringe benefit obligations on other than a

uniform man hour basis regardless of the cargo handled or

type of vessel or equipment utilized Notwithstanding the pre

ceding sentence nothing in this section shall be construed as

providing an exemption from the provisions of this Act or of

the Intercoastal Shipping Act 1933 for any rates charges

regulations or practices of a common carrier by water or

other person subject to this Act which are required to be set

forth in a tariff whether or not such rates charges regula

tions or practices arise out of or are otherwise related to a

maritime labor agreement

Further Public Law 96 325 further amends section 15 of the Shipping

Act to read

Assessment agreements whether part of a collective bar

gaining agreement or negotiated separately to the extent they

provide for the funding ofcollectively bargained fringe benefit

obligations on other than a uniform man hour basis regardless

of the cargo handled or type of vessel or equipment utilized

shall be deemed approved upon filing with the Commission
766 FEDERAL MARITIME COMMISSION

The approval of the settlement agreement in these consolidated pro

ceedings was not predicated on any determination of whether or not

the new assessment agreement is or is not exempt from the provisions

of the Shipping Act 1916 or the Intercoastal Shipping Act 1933 The

question was not raised in the pleadings in these consolidated proceed

ings nor was it later argued by the parties Therefore it would be

wrong to cite the settlement of these consolidated cases as precedent

for the proposition that the provisions ofthe Shipping Act 1916 or the

Intercoastal Shipping Act 1933 do or do not apply to the new assess

ment agreement within the ambit ofPublic Law 96 325

In light of the above discussion and the entire record in these con

solidated proceedings it is held that the settlement agreement reached

by the parties is in the public interest and is approved 8It is Ordered

that

I PMA shall pay to Standard United and Salen at the times

specified the amounts set forth in the Compromise and Release of

Claims and that all parties to the compromise will abide by the provi

sions contained in the Compromise and Release of Claims and will

carry out its terms

2 All parties to the General Agreement ofCompromise and Release

will abide by the provisions contained in said document and will carry

out its terms

3 As between the parties to these consolidated cases the various

formulae set forth in the Memorandum of Agreement Between Mem

bers of the Pacific Maritime Association Concerning Assessments to

Pay ILWU PMA Employee Costs shall be used to PIlY such employee

benefit costs and as between the parties to these consolidated clSes the

provisions of the Agreement shall be binding on the parties thereto 8 a

4 The Motion to Dismiss Proceeding as Moot with respect to

Docket No 79 103 is hereby granted 9

5 The various Motions for Dismissal of Intervention and Withdraw

al ofProtest are hereby granted with prejudice 1 0

8

The settlement agreement is comprised of the faUowins documents 1 General Agreement of

Compromise and Release 2 Memorandum of Agreement Between Members of the Pacific Maritime

A

ociation Concerning A ments to Pay ILWU PMA Employee Benefit Co t 3 Motion to Dis

miss Proceeding 79 103 as Moot 4 seriof Motions for Dismi al of Complaint and Intervention

and Withdrawal of Protests While necessary to an understanding of the entire settlement agreement

these document are too lengthy to attach to this Order They are part of the record of the case and

are contained therein

8

Ordering Paragraph 3 is not incon i tent with ordering paragraph 2 orwith any provi ions

of the Genetal Agreement of Compromise and Release and mustbe considered and read toaether with

them 80 as not to preclude any chanses in the Assessment Agreement pennitted under the terms of

the Oeneral Agreem nt of Compromise and R le

I The motion was filed by PMA Standard United Salen Daiichi Taka Atlantic Tokai Weyer

haeuser MacMillan Sause Crescent Crown Norsk and Georaia Paoitic

10 Such motions were filed by thesame parties 8S are set forth in footnote 9
STANDARD FRUIT AND SS CO INC AND UNITED 767

BRANDS INC ET AL V PACIFIC MARITIME ASSOCIATION

6 The Motion for Permission to Withdraw as Intervenor by MeSA

is hereby granted with prejudice 11

7 These consolidated proceedings are terminated with prejudice and

are hereby discontinued It is

Further Ordered that within thirty 30 days after this Order becomes

final the parties file a joint affidavit ofcompliance with the terms ofthe

settlement

S JOSEPH N INGOLIA

Administrative Law Judge

March 6 1981

11 The term with prejudice as to MeSA applies to issues detennined in this consolidated proceed

ing It does not apply to any issues raised in other later proceedings nor does it apply to any issues

raised by Public Law 96 325
FEDERAL MARITIME COMMISSION

DOCKET NO 79 30

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE NO FMC 1728 IMS INC

NOTICE

April 8 1981

Notice is given that no exceptions have been filed to the March 6

1981 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 JOSEPH C POLKING

Acting Secretary

e o
FEDERAL MARITIME COMMISSION

DOCKET NO 79 30

INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE

NO F M C 1728 IM S INC

Proposed settlement of civil penalties rejected respondent found to have violated the

Shipping Act and a civil penalty of 5 000 assessed

Philip L Kellog and JamesL Lyons for respondent IM S Inc

Paul J Kaller Joseph B Slunt and Alan J Jacobson as Hearing Counsel

REVIEW OF RECOMMENDED SETTLEMENT BY

AND INITIAL DECISION OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

Finalized April 8 1981

By order of investigation and hearing served April 6 1979 this

proceeding was instituted to determine whether respondent IMS Inc

IM S a nonvessel operating common carrier by water NVOCC

has violated section 18 b 3 of the Shipping Act 1916 the Act by

failing to charge and collect fees for ocean transportation in accordance

with the tariff filed by IMS with the Commission whether IMS has

violated section 18b 1 of the Act by providing a house to house

ocean transportation service without an applicable tariff provision on

file with the Commission whether IM S has violated section 18 b I

by operating as an NVOCC by water prior to the filing of a tariff with

the Commission and whether IM Ss license as an independent ocean

freight forwarder should be revoked or suspended

On May 17 1979 IM S advised the Commission that it voluntarily

has surrendered its Independent Ocean Freight Forwarder License No

1728 for revocation without prejudice Thus this issue became moot

By amended order of investigation and hearing served August 30

1979 the Commission noted that IMS has surrendered its forwarder

license for revocation and also that IMS had requested permission to

negotiate a settlement of civil penalty claims arising from the activities

at issue in this proceeding The Commission ordered the addition of a

further issue to this proceeding namely the issue of whether civil

penalties should be assessed against IMS Inc and or Peter Kim

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

Commission Rule 227 Rules of Practice and Procedure 46 CP R 502 227
j

1

770 FEDERAL MARITIME COMMISSION

President of IMS Inc pursuant to 46 U S C 831 e for violations o

Shipping Act 1916 and if so the amount of such penalties

It was further ordered by the Commission in its amended order o

investigation and hearing that the Administrative Law Judge sha

preside over the taking ofevidence review of any recommended settle

ment and render an Initial Decision thereon and that settlement nego

tiations if any between the parties be concluded on or before Novem

ber 26 1979

At the first prehearing conference Hearing Counsel and counsel fo

IM S stated that they wanted time to engage in discovery and fo

possible future settlement of the issues and a status report was prom

ised in 4S days

On November 26 197 in lieu of completing settlement negotiations

Hearing Counsel filed a motion to reactivate the proceeding statin

that despite the best efforts of all concerned and substantial progres

toward a settlement that it had not been possible to reach a fina

settlement

Accordingly a second prehearing conference was held on Decembe

13 1979 At that time Hearing Counsel stated that they had run int

the problem oftrying to come up with some guidelines or standards fo

the future conduct of the activities of IMS Hearing Counsel state

that the problem was with the terms of settlement but not with th

monetary amount of a penalty

Hearing Counsel stated that there was not any dispute as to what ha

happened in the past but that there was a question as to whether th

past activities of lM S had violated provisions of the Shipping Ac

Hearing Counsel stated that IM S was a freight forwarder license

pursuant to section 44b of the Act that IMS also had anon vess

operating common carrier NVOCC taritT on file with the Commissio

so thatlM S could act as ail NVOCC that IMS also is known as a

exempt Part IV freight forwarder under the Interstate Commerce Ac

and that IMS moved household goods only

The problem in the view ofHearing Counsel related to the facts tha

1M S performed functions under both the frtterstate Commerce Act a

well as the Shipping Act and IMS s operations were intermoda

A typical shipment of IMS involved the transportation of house

hold goods from a point in the Washington D C area to the Port o

Baltimore thence by ocean carrier to thePott of Bremen Germany

and thence to an inland point in Germany serving German nationa

diplomatic and military personnel

The ocean transportation would be performed by a vessel operatin

common carrier pursuant to its tariff IMS hild a port to po

NVOCC tariff on file with the Federal Maritime Commission with th

tariff providing rates and charges from the Port of Baltimore to th

Port ofBremen among other ports listed
INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE 771

NO FMC 1728 IM S INC

Hearing Counsel requested two months to work out a stipulation and

February 15 1980 was set as the time of submission of a

proposed

stipulation of facts and settlement of the proceeding The proposed

stipulation and settlement were not forthcoming timely and extensions

were granted at the request of Hearing Counsel but finally to resolve

the matter hearing was scheduled on June 11 1980

At the hearing on June 11 Hearing Counsel and counsel for IM S

offered two papers both unsigned and both with handwritten insertions

and deletions in rough Draft form Counsel also promised to prepare

a third document a memorandum in support of the proposed settle

ment which memorandum would be based on guidance from the Ad

ministrative Law Judge Hearing Counsel stated that such guidance had

not been requested three or six months earlier because Until three days

ago we did not have the amount When asked to explain Hearing

Counsel elaborated that basically the amount was not a problem but

that What has been holding up the parties is the Commission has had

under consideration for a

very long time a proposal to exempt from

filing with the Commission the tariff for an NVOCC household goods

carrier In some instances IM S does act as a household good

carrier as a non vessel operating household carrier They have re

peatedly sought to work out with the Commission s staff with myself

and with the Commission s staff a means under which they could file a

tariff that would meet the Commission s

requirement They have

been unable to do so Because it is an extremely difficult situation to

cover a tariff which will cover the movement of household goods from

anywhere in this country to anywhere in the world including from an

inland destination

Hearing Counsel went on to state that the Federal Maritime Commis

sion was in the process of proposing that you meaning NVOCC s

handling household goods not have to file such a tariff in the future

Hearing Counsel apparently refer to Docket No 80 37 46 C F R 531

536 Used Household Goods TarijJFiling Regulations Applicable to Car

riers in the Foreign and Domestic Offshore Commerce of the United

States Proposed Rulemaking served June 10 1980 In the proceeding in

No 80 37 it was proposed 1 to exempt transportation of used house

hold goods by non vessel operating common carriers from all tariff

filing requirements and 2 to require that rates for used household

goods established by vessel operating common carriers be stated on a

weight or container basis only and that the weights be substantiated by

a public weigher s certificate

Until June 4 1980 counsel for the parties had not advised that one of

their concerns in settling this proceeding related to the tariff filing rules

which became the subject of Docket No 80 37 But in any event this

concern relates only to IM Ss future conduct as to the filing oftariffs
772 FEDERAL MARITIME COMMISSION

and does not relate to the alleged past violations by IM S of th

Shipping Act

At the hearing on June 11 counsel were advised that the only tw

papers presented at the hearing namely the Stipulation and Pr

posed Settlement of Civil Penalties were lacking in factual detail an

that the stipulation was too vague

In the stipulation Exhibit No 1 in paragraph 2 it was stipulate

that in some instances IM S only provided packing and cratin

services for export shipments and in paragraph 3 it was stipulated th

in the majority of instances IMS offered to make all the shippin

arrangements for the transportation of household goods to the foreig

destination and that when IMS provided this service it arranged f

the transportation to the export port as well as for the ocean transporta

tion However there was no stipulation as to how many shipments we

handled one way or the other

In paragraph 7 of the original stipulation presented at the June 

hearing it was stipulated that IM S maintained an NVQCC tariff f

the carriage of used household goods This paragraph further stipula

ed

However IMS did not uniformly follow its tariffin arranging

for the transportation of the household goods Emphasis sup

plied

At the request of counsel the parties were given two more weeks 

present their memorandum in support of proposed stipulation Couns

were advised also that they could use the same two weeks to revise 

they wished the stipulation and the proposed settlement so as 

improve upon and flesh out factual details in the stipulation

In fact the revised stipulation filed on June 25 1980 was substa

tially the same as Exhibit 1 of record But the revised stipulation wa

more vague in that it changed the original stipulation in its paragraph 

to state that IMS may not have uniformly followed its tariff Empha

sis supplied

Paragraph 7 as revised added the word through in connectio

with transportation of household goods The significance of the wor

through is that the IM S NVOCC tariff on file with the Commissio

provides rates and charges on port to port shipments rather than th

through house to house transportation offered at times by IMS to i

clients

Upon examination of the three papers filed on June 25 1980 it wa

clear that factual details of the past operation of IM S were lacking

and the stipulation of facts was too vague The said Stipulation 

attached to this decision as Appendix A and the Proposed Settl

ment of Civil Penalties submitted June 25 1980 is attached as Appen

dix B
INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE 773

NO FMC 1728 IM S INC

Accordingly the proposed settlement was rejected and the matter

was set for hearing on August 12 1980 Only one witness was called by

the parties namely a district investigator for the Federal Maritime

Commission Following the conclusion ofthe August 12 1980 hearing

opportunity was given the parties to petition to reopen the record if

they saw fit so to request by August 22 1980

No request to reopen was made timely but by letter dated August

25 1980 Hearing Counsel and counsel for IMS requested an opportu

nity to present additional evidence Hearing Counsel stated that they

and counsel for IM S were meeting on September 3 1980 and would

give notification promptly regarding a

proposed date for presenting

further evidence No such notification was received by September 25

1980 and the parties were advised by notice of that date served the

next day that the record would be deemed closed on October I 1980

On October I 1980 the respondent served its Supplemental Memo

randum in Support of Proposed Settlement with attachments There

in in conclusion the respondent asks that the presiding Administrative

Law Judge render an Initial Decision approving the proposed settle

ment This supplemental memorandum hereby is accepted as part ofthe

record in this proceeding

This supplemental memorandum of IM S contains some factual

matter and together with the stipulations of the parties and the tran

script of hearing there appears to be a minimum factual basis for

reaching the conclusions necessary for an Initial Decision on the mat

ters at issue in this proceeding Nevertheless the record at best is

merely minimally adequate to reach necessary conclusions For exam

ple Hearing Counsel stated we have decided that this case is not

worth pursuing through a hearing We decided instead to propose a

settlement The alternative to your not accepting the settlement not

considering it is for the case to be dismissed and the U S Government

getting nothing Your Honor the primary factor that goes into

the 2 500 is that we can t

prove a case

At the June II 1980 hearing Hearing Counsel agreed that in the

first stipulation paragraph 7 of Exhibit I of the record there was an

admission by IM S that IMS violated the law by not following its

NVOCC tariff on file with the Commission

However Hearing Counsel went on to say at page 33

Yes your Honor And what Im

saying to you is that the

violations were the possible violations were so complex and

confusing and their basic operation had nothing to do with

the FMC jurisdiction that we made the decision not to go

ahead and establish exactly what shipments may have been in

violation and which ones may not have been
774 FEDERAL MARITIME COMMISSION

Apparently Hearing Counsel failed to consider that it might hav

been advisable to prove that some violations occurred without attempt

ing to make findings as to all of IM S shipments

The revised stipulation submitted on June 25 1980 states in par

However not more than twenty percent of its approximately 20

shipments per year may have been handled as an NVQCC In con

nection with these shipments IMS may not have uniforlllly followed

its tariff in arranging folthe through transportation of tlle househol

goods

At the hearing on August 12 1980 a specific example of the oper

ation of IMS was given This example was of a

shipment whic

occurred during the period in issue herein the five years between Apri

6 1974 and April 6 1979 In January of 1976 IMS quotld a German

national an estimated cost for moving his used household goods from 

point in the Washington D C commercial area to Wilhemshaven

West Germany

In particular for this shipment IMS estimated a cost for packing

wrapping and crating material a cost for load1ng the co tainer at th

residence ofthe German national a cost for supplying the teel contain

er and the cartage to the warehouse of IMS in Alexandri Va a cos

for forwarding fees a cost for cartage from the warehou e in Alexan

dria to the Port of Baltimore a cost of ocean freight fro the Port o

Baltimore to the Port of Bremen Germany and a cost for destinatio

services that is from dockside at Bremen to the residertce or inlan

destination at Wilhelshaven

In this particular instance the total figure quoted was 4 77120 t

the German national IMS included in its letter to the G rman nation

al an estimate that the total charges would amount to 6 80 per 10

pounds Based upon an estimated weight of 8 400 pounds given to th

German national the total estimated charges 56 84 times 84 wa

4 77120

IMS also estimated the volume at 34 cubic meters or 1 200 cubi

feet that is to the German national

When IMS sent its bill to the German military representative at the

German Embassy in Washington D C this military reprClsentative wa

paying for the move of the German national a second set of figures

was given by IMS Namely the weight was listed at 9 190 pounds

and the cubic feet as 1 312 Using the same rate of 6 80 per 10

pounds and the higher 9 190 pounds the charges to the shipper appar

ently became 5 219 92

In connection with the same shipment a third set Qf weight and

measurement figures was used by IM S for IM Ss payment of ocean

freight to the vessel operating common carrier Baltic Shipping Compa

ny and its agent Norton and Lilly Namely a weight of 6 700 pounds

was recorded for the shipment In other words Baltic Shipping Compa
INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE 775

NO FMC 1728 IM S INC

ny received less than its tariff rate and charges from 1M S to the

extent that this shipment falsely was listed as weighing 6 700 pounds

when in fact it weighed 9 190 pounds This was an undercharge or

rebate to 1M S whatever one may wish to call it of 2490 divided by

9 190 more than 27 09 percent

The Commission s witness estimated that an average undercharge or

rebate to 1M S in connection with the files he examined would be

1 500 to 2 000 per shipment on those shipments in which there were

discrepancies in weight This witness reviewed 60 files not all of which

showed discrepancies of weight because IM S also moved motor

vehicles for which there were no weight discrepancies so far as he

knew because motor vehicle weights may be checked later with ease

This witness believed that it was fair to say that 1M S was the

beneficiary of undercharges or rebates on 20 of the 60 shipments which

he examined or about a total of 1 500 times 20 or 30 000

The predominant carrier offering undercharges or rebates to IMS

was the Baltic Shipping Company Another name which came to the

mind ofthe witness in this connection was the Atlantic Container Line

As stipulated the primary service of IMS was packing and crating

for export shipment In some instances the client made its own arrange

ments for the through transportation

In the majority of instances 1M S offered and provided for the

transportation ofthe household goods from the client s residence in the

Washington D C area to the export port Baltimore and for the

ocean transportation Also 1M S offered to make the arrangements

and provided for destination services including the unpacking of the

household goods at the ultimate destination or inland point in West

Germany

Though IMS was licensed as an ocean freight forwarder it used

the services of another licensed independent ocean freight forwarder in

making arrangements for ocean transportation

IM S did not receive any brokerage compensation from the vessel

operating ocean common carrier but did receive the benefit of under

charges or rebates from the ocean carrier based on false underweights

or undermeasurements ofthe household goods

IMS normally expressed the total charge for the through transpor

tation to its clients in terms of costs per 100 pounds for all of the

various services of packing and crating loading into container at resi

dence supplying of the container and cartage to the 1M S warehouse

in Alexandria cartage from warehouse to Port of Baltimore forward

ing fees at the port ocean freight charges and destination charges

including unpacking ofthe household goods

IMS maintained and still maintains an NVOCC tariff but it is a

port to port tariff and does not provide rates and charges from a resi

dence in the Washington D C area to an inland point in Germany
776 FEDERAL MARITIME COMMISSION

In accordance with section 18b 1 of the Act IM S filed a

NVOCC tariff with the Commission on February 14 1975J showing it

rates and charges for the ocean transportation of household goods

IMS tariff FMC l Effective March 29 1979 IM Ss tariff FMC 

cancelled and superseded its tariff FMC 1 In No FMC 2 the rate from

Baitimore to Bremen is listed as 59 per 100 pounds but again it is 

port to port rate rather than a house to house rate

On the shipments that I examined there was no shipment tha

reflected the commodity rate on file inIM Ss tariff was the unrefu

ed testimony ofthe Commission s witnesa

It is concluded not only that the underlying ocean carrier knowingl

did not charge its proper tariff chuges for its servieesto IM S bu

also that IMS knowingly did not charge its proper tariff charges to it

clients

It is concluded further that IMS did not have a

proper NVOCC

tariff on file for the through house to house service which it offered to

and provided for its clients at times

It has been stipulated that IMS provided its servicesl including i

the majority of instances all transportation to the foreign destination

and that these services were provided between April 6 1974 and Apr

6 1979 It is concluded further that IMS operated as an NVOCC

prior to the time which IMS filed a tariff as a NVOCC with th

Commission

It is common knowledge that the transportation of used househo

goods involves many characteristics which are different f110m the trans

portation of manufactured goods or of other commercial roducts It

equally common knowledge that a one time or two or three times in

his life shipper of household goods is not as aware ofshipping custom

and practices as is a shipper of commercial products who makes dozen

ofshipments every month or every year

As the witness for the Commission testified it was not an uncom

mon practice for the household goods carriage industry to engage i

certain abuses ofshipper clientele Such abuses include underestimating

of weight and costs to a shipper to obtain his bUSiness and the late

assessment ofhigher charges based on higher weights afulr the busines

is obtained

Mr Kirn the president of IM S was approached by representa

tives ofthe underlying ocean carrier who offered to allow Mr Kimt

declare to that ocean carrier a weight or measure belowIactual weigh

or measure to save on the cost of ocean freight Mr Kim accepted th

offer Thus the shipper client ofIMS was billed based at a

relativel

high weight whereas the weight on the ocean carrier s bill of lading

was lower the latter fact being at the invitation ofthe ocean carrier a

reported by Mr Kirn to the Commission s witness Insofar as th

record shows the shipper clients were billed ultimately at the correc
INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE 777

NO FMC 1728 IM S INC

weights although before the shipments were made the weights were

underestimated to the shipper clients ofIMS

IM S in its normal operations offered and provided for the seven

services listed in paragraph 4 of the stipulation including origin pack

ing and destination unpacking of the household goods and billed its

client shipper for these through house to house services as listed on a

cost per 100 pounds basis

The proposed settlement entered into between Hearing Counsel and

IMS states that IMS has terminated all its practices related to

inflating to its clients the weight of shipments underdeclaring the

weight or cube of shipments to carriers and is willing and committed

to maintaining measures designed to eliminate to discourage and to

prevent violations ofthe Shipping Act IM S is agreeable to paying to

the Federal Maritime Commission the sum of 2 500 in consideration of

the compromise of all civil penalties under the Act that may have

occurred between April 6 1974 and April 6 1979 and on condition

that payment of this civil penalty shall forever bar any civil action or

other claim for recovery of civil penalties from IMS arising from the

alleged violations between the dates above and it being understood and

agreed that there is no admission of guilt by IM S its officers direc

tors or employees to the alleged violations above

This settlement must be rejected because for one reason the record

shows that IMS has violated provisions of the Shipping Act IMS

violated section 18 b 3 of the Act by charging its clients not in

accordance with its rates on file IM S violated section 18 b I ofthe

Act by providing a house to house ocean transportation service without

an applicable tariff provision on file with the Commission and by

operating as an NVOCC prior to the filing of a tariff with the Commis

Sion

The settlement must be rejected for a second reason The amount of

2 500 is less than a minimum reasonable penalty for violations of the

nature herein even considering the character references and other

mitigating data cited in IM Ss supplemental memorandum There is

nothing in such data which would show that IMS cannot pay a

larger

civil penalty

The facts remain that Peter Kim IM S president pleaded guilty to

one count of mail fraud in connection with IM Ss activities prior to

1975 In the present proceeding IM Ss activities continued into 1975

and 1976 as seen by the typical shipment in January 1976 cited by the

Commission s witness at the last hearing The Federal Republic of

Germany on the basis of its investigation of IM S was satisfied that

IM S had terminated its improper weight practices in early 1975 and

agreed to continue to do business with IMS However at least as late

as January 1976 IMS was continuing its improper weight practices

record transcript line 15 page 59 and pages 60 and 61 This evidence
778 FEDERAL MARITIME COMMISSION

directly negates the statement of counsel for IMS at page 4 firs

complete paragraph of IMS s supplemental memorandum tha

IMS terminated the improper practice of inflation of weights in early

1975

Under all the above circumstances a minimum penalty of 5 000 i

certainly justified in this proceeding

It is ultimately concluded and found that the proposed settlement o

civil penalties herein has not been justified that respondent IM S ha

violated sections 18b 1 and 18b 3 of the Shipping Act 1916 and

that a civil penalty of 5 000 shall be assessed against IMS

5 CHARLES E MORGAN

Administrative Law Judge

Washington D C

March 6 1981

Attachments

Appendix A

Appendix B
INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE 779

NO FMC 1728 I M S INC

APPENDIX A

BEFORE THE FEDERAL MARITIME COMMISSION

INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE NO

F MC 1728 IMS INC

DOCKET NO 79 30

STIPULATION

Pursuant to Rule 162 of the Commission s Rules of Practice and

Procedure 46 CF R 502 162 Respondent and Hearing Counsel

hereby file this joint stipulation

IBetween April 6 1974 and April 6 1979 IM S provided a

variety of services for clients who were primarily foreign military and

embassy personnel shipping used household goods to and from the

United States The primary service performed by IMS was the pack

ing and crating or the unpacking of household goods at its client s

residence in the United States

2 In some instances IMS only provided packing and crating

services for export shipments The client made its own arrangements

for the delivery ofthe household goods to the port and for the ocean

transportation ofthe household goods to the foreign destination

3 In the majority ofinstances in addition to providing for packing

and crating services IMS offered to make all the shipping arrange

ments for the transportation of the household goods to the foreign

destination When IMS provided this service IMS arranged for the

transportation of the household goods to the export port as well as for

the ocean transportation ofthe household goods

4 When IMS offered to make all the export arrangements for the

household goods it provided an estimate for the cost of each of the

following services

a Packing wrapping crating and packing material

b Loading into container at residence

c Supplying of steel container and cartage to the IMS ware

house

d Cartage from warehouse to port

e Forwarding fees at port

f Ocean freight charges

g Destination services including unpacking of household goods
780 FEDERAL MARITIME COMMISSION

The charges were also expressed in terms of cost per hundred weigh

100 Ibs for all the services

5 Though IMS was licensed as an independent ocean freigh

forwarder it used the services of another licensed independent ocea

freight forwarder in making arrangements for the ocean transportation

IM S would select and contact the forwarder The forwarder woul

book the shipment with the ocean carrier and inform IMS of th

ocean carrier booking number IMS or the forwarder arranged for th

spotting of the ocean container at IM Ss warehouse or the client 

residence IMS then arranged for the transportation of the containe

carrying the household goods to the port

6 IM S did not receive any ocean freight compensation from th

ocean carrier or share in any compensation with the ocean freigh

forwarder

7 IM S maintains a non vessel operating common carrie

NVOCC tariff for the carriage of used hOlsehold goods on file wit

the Commission However not more than twenty percent of its ap

proximately 200 shipments per year may have been handled as o

NVOCC In connection with these shipments IMS may not hav

uniformly followed its tariff in arranging for the through transportatio

ofthe household goods

8 Peter Kim the former President of IMS plead guilty to on

count of mail fraud perpetrated in connection with IM Ss activitie

prior to 1975 IMS and Peter Kim were alleged to have engaged i

inflating the total net weight of property moved by IM S

9 During 1975 and 1976 IMS would on occasion understate th

net weight ofshipments to ocean carriers This practice was engaged i

following advice from the carriers sales agents

S PHILLIP L KELLOGG

Counselfor LMS Inc

S JAMES L LYONS

Counselfor LMS Inc

S PAUL J KALLER

Acting Director

Bureau ofHearing Counsel

S JOSEPH B SLUNT

Hearing Counsel

S ALAN J JACOBSON

Hearing Counsel
INDEPENDENT OCEAN FREIGHT FORWARDER LICENSE 781

NO FMC 1728 I M S INC

APPENDIX B

BEFORE THE FEDERAL MARITIME COMMISSION

INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE NO FMC

1728 IMS INC

DOCKET NO 79 30

PROPOSED SETTLEMENT OF CIVIL PENALTIES

This proposed settlement is entered into between the Bureau of

Hearing Counsel and IM S Inc hereinafter referred to as Respondent

the only parties The Parties to this proceeding This settlement is

submitted to the Presiding Officer for approval under 46 C F R

502 162 and 505 3 to be included in the Final Order in this proceeding

if approved

Whereas by Order dated April 6 1979 the Commission has insti

tuted an investigation of Respondent s activities as a non vessel operat

ing common carrier NVOCC and whereas the April 6 1979 Order

was amended by an Order of August 30 1979 to include a determina

tion of whether civil penalties should be assessed for possible violations

of sections 18 b 1 and 18 b 3 ofthe Shipping Act 1916

Whereas the Order of Investigation recites that the Respondent

had apparently engaged in violations of sections 18 b 1 and 18 b 3 of

the Shipping Act 1916

Whereas the Respondent will not contest that it carried out certain

practices which have been stipulated to with Hearing Counsel

Whereas the parties are desirous of expeditiously settling the

matter according to the terms and conditions of this agreement and

wish to avoid the delays and expense which would accompany further

agency litigation concerning the activities set forth in the Commission s

Order ofApril 6 1979

Whereas section 32 of the Shipping Act 1916 authorizes the

Commission to assess collect compromise and settle certain designated

civil penalties arising under the Shipping Act 1916

Whereas the Respondent has terminated all its practices related to

inflating to its clients the weight of shipments underdeclaring the

weight or cube of shipments to carriers and has instituted and indicated

its willingness and commitment to maintain measures designed to elimi

nate discourage and prevent violations of the Shipping Act 1916
782 FEDERAL MARITIME COMMISSION

Now therefore in consideration ofthe premises herein the unde

signed Respondent hereby agrees to pay to the Federal Maritime Co

mission the sum ofTwo Thousand Five Hundred Dollars the payme

of said amount to be made in accordance with the following terms 

settlement

1 In consideration of the premises herein and in compromise of

civil penalties under the Act arising from violations set forth a

described herein that may have occurred between April 6 1974 a

April 6 1979 the undersigned Respondent agrees to pay to the Fede

Maritime Commission the sum ofTwo Thousand Five Hundred Dolla

within 15 days from approval of the terms and conditions set for

herein by the presiding Administrative Law Judge and Commissio

2 Upon payment ofthe civil penalty amount following approval 

this agreement of settlement by the presiding Administrative La

Judge and Commission this instrument shall forever bar the commenc

ment or institution of any civil action or other claim for recovery 

civil penalties from Respondent arising from the alleged violations s

forth and described herewith and that occurred between April 6 19

and April 6 1979

3 It is expressly understood and agreed that this Agreement is n

to be construed as an admission of guilt by Respondent its office

directors oremployees to the alleged violations set forth above

8 PHILIP L KELLOGG

Counselfor LMS Inc

8 JAMES L LYONS

Counselfor LMS Inc

8 PAUL J KALLER

Acting Director

Bureau ofHearing Counsel

8 JOSEPH B 8WNT

Hearing Counsel

8 JOSEPH B 8WNT

for ALAN J JACOBSON

Hearing Counsel
8 JOSEPH C POLKING

Secretary

FEDERAL MARITIME COMMISSION

DOCKET NO 79 88

PACIFIC COAST OCEAN FREIGHT FORWARDERS

CONFERENCE AGREEMENT NO 8330 AS AMENDED AND

AGREEMENT NO 8330 2

NOTICE

April 10 1981

Notice is given that no exceptions were filed to the February 26

1981 initial decision in this proceeding and the time within which the

Commission could determine to review has expired No such determi

nation has been made and accordingly the decision has become admin

istratively final
FEDERAL MARITIME COMMISSION

DOCKET NO 79 88

PACIFIC COAST OCEAN FREIGHT FORWARDERS

CONFERENCE AGREEMENT NO 8330 AS AMENDED AN

AGREEMENT NO 8330 2

IWhere a group of freight forwarders seeks approval of an agreement under section 

Shipping Act 1916 which agreement allows them to form a conference to disc

any and all mailers of mutual interest with other conferences and with direct 

indirect carriers by rail water truck or air such agreement is per se violative 

United States antitrust laws and requires justification under the ruling in Fed

Maritime Commission v Aktiebalager Svenska Amerika LiDian Swedish Ameri

Line 390 U S 238 1968

2 In considering the question of approval under section IS the Commission must h

sufficient information and data to determine the impact of the agreement on 

commerce of the United States and where justified to exempt the proposed antic

petitive combination from the operation of the antitrust laws and it is incumben

the proponent to furnish such information Here where the record is devoid 

substantive probative facts approval of Agreement 83302 is notjustified

3 Where as here an agreement is so broad indefinite and vague that it fails to app

the Commission as well as any interested parties as to the procedures and arran

ments under which the concerted activity permitted by the agreement is to t

place it cannot be approved

4 Since Agreement 83302 is a complete revision and update of Agreements 8330 

8330 1 these latter agreements likewise do not meet the requirements of section IS 

the Shipping Act 1916 and must be disapproved

1

i

J Donald Kenny for proponents the Pacific Coast Ocean Freight Forward

Conference and members thereof

Paul J Kaller Jaseph B Slunt and William D Weiswasser for Bureau of Invest

tion and Enforcement formerly Bureau of Hearing Counsel

INITIAL DECISIONl OF JOSEPH N INGOLIA

ADMINISTRATIVE LAW JUDGE

Finalized April 10 1981

This proceeding arose as a result of an Order of Investigation a

Hearing served by the Federal Maritime Commission Commission 

September 13 1979 2

The parties took part in discovery and vario

documents were made a part of the record In order to facilita

reference to those documents as well as the Order of Investigation a

1 This decision will become the decision of theCommission in the absence of review therebf by 

Commission Rule 227 Rulesof Practice and Procedure 46 CF R S02 227

Exhibit S Ibid
AGREEMENT NO 8330 AS AMENDED AND AGREEMENT 785

NO 8330 2

Hearing itself they have been identified and assigned exhibit numbers

as follows

Deposition of William F Bosque Exhibit I

Deposition of Donald I Theiss Exhibit 2

21 Supporting Affidavits Exhibit 3

Supporting Affidavit of J Murray Fox Exhibit 4

Order of Investigation and Hearing Exhibit 5

As to the agreements involved here neither of the parties actually

offered them into evidence even though they are referred to and dis

cussed in the original and reply briefs Portions ofthe agreements as set

forth in the briefs will be noted and discussed herein where necessary

Finally during the pendency of the proceeding the parties did not

offer any oral testimony for the record and the case was submitted on

the basis of the written materials previously identified

FINDINGS OF FACT

1 On December 10 1958 the Commission approved Agreement

8330 which authorized the formation of a conference of freight for

warders named the Pacific Coast Ocean Freight Forwarders Confer

ence PCOFFC Exhibit 5

2 On June 19 1958 the Commission approved Agreement 8330 1

which was amodification ofAgreement 8330 Exhibit 5

3 The PCOFFC never actually functioned in the manner contem

plated by the agreements and recently its members decided to activate

the conference realizing that some of the provisions of Agreements

8330 and 8330 1 may be archaic in view of intervening legal and

commercial developments Exhibit 5

4 Agreement 8330 2 was filed by the Temporary Committee for

Revitalization of the Pacific Coast Ocean Freight Forwarders Confer

ence on September 17 1978 and was signed by thirteen licensed

ocean freight forwarders It is primarily designed to update Agreements

8330 and 8330 1 Exhibit 5

5 The Commission in its Order of Investigation and Hearing or

dered

That pursuant to sections 15 and 22 of the Shipping Act 1916

46 U S C 814 and 821 that a proceeding be instituted to

determine

1 Whether Agreements Nos 8330 8330 1 and 8330 2 are

unjustly discriminatory or unfair as between carriers shippers

exporters importers or ports or may operate to the detriment

of the commerce of the United States or are contrary to the

public interest or otherwise in violation of the Shipping Act

1916

2 Whether Agreements Nos 8330 and 8330 1 should be or

dered modified or disapproved pursuant to the standards of

section 15 ofthe Shipping Act 1916
786 FEDERAL MARITIME COMMISSION

3 Whether Agreement No 8330 2 should be approved modi

fied or disapproved pursuant to the standards of section IS of

the Shipping Act 1916 Exhibit 5

6 The Commission Order designated PCOFFC as the proponent 

this case and Hearing Counsel as a party While it invited petitions 

intervene none were forthcoming from other parties However th

Pacific Coast European Conference PCEC did file comments o

Agreement 8330 2 Exhibit 5

7 Article 13 of Agreement 8330 2 authorizes PCOFFC to me

with any other Conference for the purpose ofdiscussing and agreein

upon any and all matters of mutual interest It also authorize

meetings with direct and indirect carriers of all modes as required t

fulfill the purposes of this Conference asset forth under Article 2

Opening Brief of Hearing Counsel page 6 Reply Brief of PCOFFC

pages 3 and 4

8 Agreement 8330 2 is a complete revision of Agreements 8330 an

8330 1 Opening Brief ofPCOFFC page 4

ULTIMATE FINDINGS OF FACT

9 Article 13 of Agreement 8330 2 which would allow discussion o

any and all matters of mutual interest with other conferences an

with direct and indirect carriers by rail water truck or air is per s

violative ofUnited States antitrust laws and requires justification unde

the Svenska test Entire record

10 Article 13 ofAgreement 8330 2 is so broad indefinite and vagu

that it fails to apprise the Commission as well as any interested parties

as to the procedures and arrangements under which the concerte

activity permitted by the agreement is to take place Entire record

11 The record is devoid of any substantive probative facts whic

would justify approval of Agreement 8330 2 under section 15 of th

Shipping Act 1916 Entire record

12 Since Agreement 8330 2 is a complete revision and update o

Agreements 8330 and 8330 1 those latter agreements likewise do no

meet the requirements of section 15 of the Shipping Act 1916 an

must be disapproved Entire record

3

Article2 reads

The Conference is formed to promote the commerce of the United States to promote sound

ethical and honorable business dealings Bnd practices among those engaged in the ocean for

warding business Bnd between those engaged in such business on the one hand and on the

other hand shippers and receivers of freight Bnd common carriers by water to promote har

monious relationships between exporters common carriers by water intermodaJ carriers

steamship conferences and the membersof this Conference and to promote financial respon

sibility of Conference members for the protection of theexporting pUblic and other matters

of general interest and importance to themembers of this Conference
AGREEMENT NO 8330 AS AMENDED AND AGREEMENT 787

NO 8330 2

DISCUSSION

Section 15 of the Shipping Act 1916 requires that every common

carrier by water or other person sJlbject to this Act shall file immedi

ately with the Commission a true copy of every agreement with

another such carrier or other person or modification thereof

pooling or apportioning earnings losses or traffic Section 15 further

provides that once an agreement is filed

The Commission shall by order after notice and hearing disap

prove cancel or modify any agreement or any modification

or cancellation thereof whether or not previously approved

by it that it finds to be unjustly discriminatory or unfair as

between carriers shippers exporters importers or ports or

between exporters from the United States and their foreign

competitors or to operate to the detriment of the commerce

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

or to be in violation of this Act and shall approve all other s

Since its enactment section 15 has been the subject of a large body of

case law While not always definitive there are certain tenets that have

been established It has been held that in enacting this provision Con

gress intended to tolerate only minimum anticompetitive behavior nec

essary to preserve an essentially competitive structure in the Maritime

industry Seatrain Lines Inc v Federal Maritime Commission 460 F 2d

932 1972 affd 411 U S 726 1973 that once agreements come under

the Commission s jurisdiction the Commission may approve them even

though they violate the antitrust laws if they take antitrust principles

into account in reaching their decision Seatrain Lines Inc v Federal

Maritime Commission supra that accommodation between antitrust

and regulatory objectives by the Commission does not authorize it to

ignore the antitrust laws Federal Maritime Commission v Aktiebalager

Svenska Amerika Linian Swedish Am Line 390 U S 238 1968 Dist

Co1968 that antitrust questions in general and in particular con

tracts involving all encompassing restraints present issues of a kind that

should be explored sua sponte in order to discharge an agency s duty to

guard the public interest Marine Space Enclosures Inc v Federal Mari

time Commission 420 F 2d 577 1969 that presumptively all anticom

petitive combinations run counter to the public interest in free and open

competition and it is incumbent upon those who seek exemption of

anticompetitive combinations under section 15 to demonstrate that the

combination seeks to eliminate or remedy conditions which preclude or

hinder the achievement of the regulatory purposes of the Shipping Act

Svenska supra Mediterranean Pools Investigation 9 F MC 264 290

1966 that under section 15 it is not enough that the Commission is

apprised merely as to the terms of an agreement but it is essential that it

know at all times the nature of the activities undertaken in the agree
788 FEDERAL MARITIME COMMISSION

I

ment In re Pacific Coast European Conference 7 F MC 27 1961

that section 15 expressly confers on the Commission the power o

disapproval whether or not previously approved and necessarily

imposes a continuing duty upon the Commission to ensure that the

parties to section 15 agreements are complying with the Act and with

their approved agreement In re Pacific Coast European Conference

supra

In this proceeding the proponent avers that freight forwarders are

employed to represent the shipping public and that the only shippers

representatives who could negotiate collectively on their behalr with

antitrust immunity are freight forwarders It argues that PCEC is domi

nated by foreign flag carriers who dictate to the forwarders as to the

amount of brokerage which the Conference members would pay to

freight forwarders but who nevertheless do not believe that freigh

forwarders should be in a position to negotiate with the Conference

PCEC over brokerage The proponent concludes that

It is inconceivable that the Commission could find that it is in

the public interest to deny the representatives of American

shippers the right to negotiate collectively as to items which

directly affect the public s costs while permitting a foreign flag

dominated Conference to sit with antitrust immunity and dic

tate as a collective body the amount ofbrokerage to be paid

and what rules will govern the payment of such Sun1S

In support of approval of its agreements the proponent submits the

affidavit of J Murray Fox 4 the Executive Secretary of the Pacific

Agricultural Cooperative for Export Inc PACE which is an associa

tion of exporters qualified under the Webb Pomerene Act 15 U S C

61 65 as exempt from certain United States antitrust laws According

to Mr Fox it was established to facilitate the movement of American

products to foreign markets Mr Fox supports the agreement involved

here because

a Under present law groups such as PACE are exempt from

antitrust laws as to certain concerted activities by member

exporters Steamship conferences also have antitrust immunity

as to certain concerted activities of member lines Under

Agreement 8330 2 the Forwarder Conference could negotiate

with steamship conferences such problems dealing with docu

mentation delivery procedures and certain rate issues in a

manner not presently available to forwarders

b Agreement 8330 2 is not a substitute for shieper s councils

or exporter associations It does however provide a means for

negotiation and agreement between forwarders lUld confer

Exhibit 4
AGREEMENT NO 8330 AS AMENDED AND AGREEMENT 789

NO 8330 2

ences under direct Commission supervision which does not

presently exist in any other form

c As shippers PACE members recognize that the portion of

forwarder overhead not borne by the conference carriers

must be paid by the shippers At present conferences establish

levels of forwarder compensation under their approved agree

ments There is no requirement that conferences investigate to

determine a fair and proper compensation level While Agree

ment 8330 2 does not force conferences to negotiate compen

sation with forwarders it does permit such negotiations on

behalf ofthe forwarders

In addition to the affidavit the proponent offered the testimony of

William F Bosque into evidence 5

Mr Bosque is the Acting Committee

Secretary Temporary Committee for Revitalization of PCOFFC He

stated he was the person most familiar with the need for the agree

ment and the reasons for the revitalization of the Conference In

discussing the scope of Article 13 of Agreement 8330 2 Mr Bosque

stated

Q Why don twe answer the first questions What would you

talk about what types of matters is it anticipated would be

discussed within the membership itself

A The Freight Forwarding industry is so involved with inter

national transportation matters that one could picture an entire

gamut of interests that Freight Forwarders will have They

would touch upon the involvement of the other Conferences

upon our Conferences what affect they have on it what we

as a group could do to facilitate the public interest what

influence we could have with other portions of the shipping

industry to promote exports to the United States I am sure

that there are many specific things that we could involve

ourselves with but in general it was felt that this Conference

would serve the industry our industry as well as the general

industry of exports and public interest because of the Shipping

Act allowing us to meet and the current feeling within the

international industry Ican tget too much more specific with

it

Q Fine Now to get back to meetings with other Confer

ences can you give us a general idea what types of discussions

would be held with other conferences under Article 13

A Yes It had been a feeling of our industry the freight

forwarding industry particularly out on the Pacific Coast

here that the shippers have not been represented sufficiently

enough in their contact with Steamship Conferences for in

stance or perhaps Conferences of terminal operators and other

people that are under control of the Shipping Act Therefore

Exhibit 1
790 FEDERAL MARITIME COMMISSION

we envIsIon situations that we could meet with these other

Conferences in order to promote the good of the country all

of our exports the shipping public in general Now the freight

forwarding industry is probably the one industry that does

represent the public to the greatest degree because it is inde

pendent it represents shippers paid by shippers to represent

them so that it opens an opportunity for us to represent them

in a better way Without a Conference structure the industry

the freight forwarders have been very frustrated as well as

the shipping public because of the limitations that are placed

upon us in reacting to Conference cartel type rules and regula

tions

We of course envision many activities that we could work

with at Conferences such as simplification oftariffs the ability

to interface EOP equipment with Conference systems or mem

bers of the Conferences the ability to have Conferences react

to rate requests of exporter and industry matters the problems

that are involved with rate matters such as the inability of the

public at the moment to receive instant information as to what

rate structures are matters of interest to the general public

again such as the ability to depend on the rates that are

quoted questions regarding the financial status of the member

carriers of the Conference are of great interest to the public

now because ofthe recent bankruptcies in the industry

The subject could be almost limitless as to what could be

brought up in these matters that our people feel is necessary to

have the protection of a Conference status

Q Assuming that a particular freight forwarder had the ability

to route a particular piece of cargo and the routing was open

at the discretion of the freight forwarder and the freight for

warder had this ability to route cargo to a certain carrier and

there was a certain carrier in a trade that was taking a position

contrary to the uniform position of the forwarder that had

been agreed upon within the Conference Would the possibili

ty under those conditions exist that the forwarder due to the

fact he had agreed to take a uniform position in regard to a

certain trade practice would not route the cargo to that par

ticular carrier but route it to another carrier instead

A Iam afraid Ican t answer that question because I

just don t

have the experience in working within a Conference structure

nor am I certain as to the authority that the Conference has

Q Could you elaborate on that is there still a problem with

foreign competition and could you explain that a little bit for

us
AGREEMENT NO 8330 AS AMENDED AND AGREEMENT 791

NO 8330 2

A Three years ago Ibelieve there was a concern upon the

industry for their welfare because of the entry into the indus

try of foreign owned and controlled business and there is also

the concern of the shipping public and the freight forwarders

alike that foreign interests are able to have certain advantages

over the United States owned companies so I believe that

that was the reason why we mentioned it Again there is

nothing specific there but since it is obviously an international

business those concerns are always with our industry as well

as the general shipping public

Q Now the competition within the forwarding industry itself

between the members of the forwarding industry would that

be affected by this group offreight forwarders banding togeth

er and having this conference

A We would assume there would be some affect yes How

ever the international freight forwarding industry also usually

uses the word independent freight forwarder and I think in

that respect independent is meant independent from carriers

independent from exporters but in fact the industry histori

cally is a very independent one that is amongst themselves

wanting to take independent action and the spirit of the indus

try has always been one ofindependence So we don tforesee

that a group such as ours will be such an influence to elimi

nate the need from other outside freight forwarders forward

ers that operate from other coasts but Iam sure it will have a

certain affect hopefully a beneficial effect to the general

public

Q Is there any intention among the members of the Confer

ence if the Conference is reactivated to discuss the subject of

ocean freight forwarding compensation with either ocean car

rier conferences or independent ocean carriers

A I can t predict what the Conference would do or the

members of the conference I am sure that there is some

tendency on the part of some to want to change the different

levels of compensation or brokerage but I believe that the

impact of it will be more in the conditions that are applied

rather than the rate the cost of living today the inflation the

steamship tendency to apply surcharges as methods of receiv

ing compensations such as bunker surcharges and currency

surcharges which are now outside of the areas of compensa

tion to the freight forwarder indicate to me that there could

be questions of this nature brought up but I don t believe at

this time that there is any program or that this is the major

consideration to any extent
792 FEDERAL MARITIME COMMISSION

Q But certainly the level ofcompensation would be wouldn t

it a subject matter which could possibly be discussed

A Certainly Ithink so yes

MR KENNY What I am driving at is it the intent of this

Conference to act as a group in discussing and possibly

coming to agreement with conferences of ocean carriers with

respect to their limitations on brokerage

THE WITNESS Yes I would envision that possibility that

this conference would try to eliminate unfair restrictions

placed on commissions yes by conferences

MR KENNY Now you mentioned thllt the group would

deal with irttermodal carriers to some extent where that is

connected with ocean freight For example let s say that you

have cargo coming into the Pacific Coast by rail by truck and

by air for forwarding to ocean vessels to carry to the Far

East or beyond Would it be your intention to deal with these

rail air or truck carriers as to matters that involve your

customers your shippers

THE WITNESS Yes indeed If the Conference could pro

vide the vehicle to deal with these different other regulated

groups it would be a big plus factor for the shipping public

since again it is my understanding that even in domestic areas

the exporting public or the shipping public is somewhat limit

ed in what influence they have on these other groups of

carriers

Finally the proponent submitted into evidence twenty one suppor

ing aftidavits6 from members of PCOFFC Generally the affidavits are

similar in context All support the approval of Agreement 8330 2 fo

various reasons including

1 The shipping public needs effective representation in resolv

ing problems that arise with ocean carriers 7

2 The need for exporters and freight forwarders to be repre

sented by a group empowered to make joint decisions on its

behalf

3 It would further the national goal of increasing exports and

creating a more favorable balance of payments

Exhibit 3

7

The problems are characterized in general terms For example one affidavit refers to protectio

against lithe arbitrary acts by members of the Pacific Westbound Conference and other member orga

nizations and identifies those acts as capricious increases in bunker and currency surcharges witho

valid justification It also refers to ubrokerage fees which are ridiculously low in view of the fee

paid in eastern and gulf ports
AGREEMENT NO 8330 AS AMENDED AND AGREEMENT 793

NO 8330 2

Hearing Counsel opposes the approval of the agreements involved

for several reasons First it avers that there is no demonstrated reason

to forego the benefits of competitive rate setting by forwarders It

cites Svenska supra for the proposition that if a price fixing agreement

interferes with the policies of the antitrust laws it will be approved

only if the proponents can bring forth such facts as would demonstrate

that the rule was required by a serious transportation need neces

sary to secure important public benefits or in furtherance of a valid

regulatory purpose ofthe Shipping Act In addition Hearing Counsel

notes that section 15 requires that once approved an agreement is

subject to continued scrutiny by the Commission and argues that the

filing of Agreement 8330 2 itself emphasizes that Agreement 8330 is

outmoded and irrelevant to the facts and conditions of the 1980 s It

cites the change in the regulatory context ofAgreement 8330 s original

approval wherein in 1961 section 44 of the Shipping Act was promul

gated empowering the Commission to regulate the independent ocean

freight forwarder industry 8Hearing Counsel also notes that in 1968

the Supreme Court decided Svenska now seen as one of the fundamen

tal interpretations ofthe Shipping Act

Hearing Counsels second major objection to approval of the agree

ments is that the unfettered discussion authority sought by Article

Thirteen is unnecessarily vague and may seriously infringe anti trust

principles As has been noted Article 13 authorizes the Conference to

meet with any other Conference for the purpose of discussing and

agreeing upon any and all matters of mutual interest It also

authorizes meetings with direct and indirect carriers of all modes as

required to fulfill the purposes of this Conference as set forth under

Article 2 Hearing Counsel points out that the language of Article 13

might allow the Conference to overstep the permissible It argues

the question is the legality of the Commission giving section 15 ap

proval and anti trust immunity to anything respondents might decide

to do under the broad wording of the agreement citing Agreement

9448 N Atlantic Outbound European Trade 10 F M C 299 1967 at

306 Hearing Counsel then proceeds to illustrate the vagueness of the

agreements by citing instances in the testimony of Mr Bosque where

the witness ostensibly exhibited an inability to be specific about the

intentions of the Conference and its members and the direction the

Conference might take

Hearing Counsel argues further that General Order 18 Conference

Agreement Provisions Relating to Concerted Activities 46 C F R 537

clearly articulates Commission policy that it ensure that parties to

agreements approved under section 15 are at all times complying

8 General Order 4 46 CF R 510 has been issued to implement this authority
794 FEDERAL MARITIME COMMISSION

with the requirements of the Act In order to discharge proper

this responsibility the Commission must be fully apprised ofthe mann

in which operations are being and will be carried out It again cite

the testimony of Mr Bosque in support of the argument that th

agreements are vague

Finally Hearing Counsel asserts that the benefits claimed are larg

ly available independently of the agreements It argues that Gener

Order 4 protects the public with the payover provision of sectio

50123 t

and by section 510 5 galso affords as much protection 

would the agreements in the area of fiscal responsibility

In addition to testimony previously discussed the record contains th

affidavit of Donald I Theiss the Chairman of PCEC Exhibit 2 

his testimony Mr Theiss opposed approval of the instant agreement

Some of the reasons given were that the carriers prefer to handle ra

requests through the shipper and not the freight forwarder that th

carriers did not wish to discuss brokerage fees with a freight forward

ers conference that the agreements do not spell out what is inten

ed that a conference of freight forwarders might exert undue pressu

on conference member lines by playing an independent line again

the conference and might influence more and more the routing 

cargo

In rebuttal to Hearing Counsel and to the testimony of Mr Theis

the proponent argues that since Agreement 8330 2 deleted Article 5 

Agreement 8330 rCOFFC no longer seeks rate setting authority an

the issue is moot The proponent also states that the discussion autho

ity sought by Article 13 is not unnecessarily vague and satisfies 

serious transportation need It points out that the agreement does n

permit agreements between the forwarders conference and other pa

ties unless approved pursuant to Section 15 of the Shipping Ac

1916 Once again the proponent cites the serious transportatio

need satisfied by the agreement namely that shippers presently hav

no means to negotiate as a collective body with anti trust immuni

except through forwarders It states that the only area of Article 

which could be considered vague is the statement for the purpose 

discussing and agreeing upon any and all matters of mutual interest

and proposed a modification which in pertinent part is as follow

This Conference may meet with any other Conference the

agreement of which has been approved under Section 15 of

the Shipping Act of 1916 as amended for the purpose of

discussing and agreeing upon matters related to documenta

tion terminal practices and procedures tariff rates and regula

tions dual rate and credit agreements brokerage container

allocations shipper s

requests and complaints and matters of a

similar nature
AGREEMENT NO 8330 AS AMENDED AND AGREEMENT 795

NO 8330 2

Finally the proponent disputes Hearing Counsel s contention that the

benefits available under the agreements are available independent of

section 15 approval It notes that common carriers cannot even meet

with shippers or freight forwarders and that section 15 authority is

necessary to antitrust immunity

CONCLUSIONS9

In arriving at any determination of the issues in any proceeding it is

first necessary to extract from the record those facts that have been

proven Unfortunately in this proceeding the record is almost com

pletely barren of any substantive probative facts As has been noted

the agreements themselves have not been placed into evidence Howev

er from the briefs ofboth parties which discuss Article 13 of Agree

ment 8330 2 it is clear that the proponents do intend to meet not only

amongst themselves but with members of conference carriers and with

carriers by rail water truck or air It is equally clear and is admitted

by the proponents that those meetings will involve discussion of any

and all matters of mutual interest including tariff rates and regula

tions dual rate and credit agreements brokerage container allocations

shippers requests and complaints and matters of a similar nature

Given these facts it is clear that Agreement 8330 2 is anticompetitive in

nature as Hearing Counsel suggests The unfettered discussion author

ity that is sought is obviously meant to engender concerted behavior as

to the setting of freight forwarder commissions as well as a whole

range of subjects affecting the shipping public and the shipping envi

ronment

In considering the antitrust aspects of section 15 agreements the

Commission in Mediterranean Pools Investigation supra stated

Thus the question of approval under section 15 requires I

consideration of the public interest in the preservation of the

competitive philosophy embodied in the antitrust laws insofar

as consistent with the regulatory purpose of the Shipping Act

and 2 a consideration of the circumstances and conditions

existing in the particular trade involved which the anticom

petitive agreement seeks to remedy or prevent The weighing

ofthese two factors determines whether the agreement is to be

approved The essential ingredient in this process is of course

information or data for without it no intelligent judgment as to

the probable future impact of the particular agreement upon

our commerce would be possible Almost uniformly the kind

of information necessary to this judgment is in the hands of

those seeking approval of the agreement and the resultant

9

As the proponent suggests Agreement 8330 2 is acomplete revision of Agreements 8330 and

8330 1 and whatever determination is made regarding Agreement 8330 2 will be equally applicable to

the other two agreements
796 FEDERAL MARITIME COMMISSION

exemption of the proposed anticompetitive combination from

the operation of the antitrust laws and it is incumbent upon

those in possession of such information to come forward with

it

Here when one searches the record for the information needed 

make a valued judgment in the antitrust area he finds allegations th

freight forwarders are employed to represent the shipping public a

that the only shippers representatives who eould negotiate collective

on their behalf with anti trust immunity are the freight forwarders

However the record contains no evidence that under the terms 

Agreement 83302 freight forwarders will be acting as agents f

shippers and in their behalf Indeed as to the setting of freight forwar

er commissions for example Mr Bosque testified that the freight fo

warders conference would seek to raise those commissions an a

hardly calculated to aid shippers Likewise if freight forwarders c

act in concert with carrier conferences generally what assurance 

even likelihood is there that the resultant action will benefit shipper

Unfortunately the record is devoid ofany real evidence in this regar

The proponent also avers that a freight forwarders conferen

would have the right to discuss brokerage fees with PCEC becau

PCEC is able to act as a conference in unilaterally setting brokera

rates without negotiation and without the impact of the forwarders as 

group It criticizes the fact that PCEC is a foreign flag dominate

conference Yet nowhere in the record is there any evidence relati

specifically to anything PCEC has done Is PCEC operatirig under 

agreement approved by the Commission is its act of setting freig

forwarders commissions outside the ambit of the agreement is PCE

violating any section of the Shipping Act and if so how wh

adverse effect do the foreign flag members have on PCEC activiti

which causes the conference to act in a manner detrimental to t

United States commerce or contrary to the public interest or in vio

tion of the Shipping Act even assuming PCEC is acting lllegally 

setting freight forwarders commissions how would a freight forwar

ers cOJ ference go about remedying the wrong and would it be cons

nant with the provisions of the Shipping Act None of these speci

questions or others like them calculated to supply the Commission w

the factual information it needs is even asked much less answered 

the prop ment Instead the proponent leaps to the conclusion that 

permit ocean carriers to meet and arbitrarily establish rates and proc

dures without negotiation with the representatives of shippers and e

porters is discriminatory and unfair The bare allegation standing alo

as it does without any material factual support ofrecord is worthle

The same is true of proponent s assertions that we have shown th

the agreement fulfills a serious transportation need and is not discrim

natory nor is it unfair Further the agreement will support the co
AGREEMENT NO 8330 AS AMENDED AND AGREEMENT 797

NO 8330 2

merce of the United States and will not be a detriment in any way

There simply is no evidence in the record to support these statements

The self serving statements in the affidavits Exhibit 3 recite a host of

alleged reasons why the freight forwarders conference should be ap

proved but nowhere is there any evidence of a single specific incident

which would support the reasons given or would demonstrate how the

freight forwarders conference would resolve any alleged wrongdoing

For example as has been noted at least one ofthe affiants characterizes

bunker surcharge increases by PCEC as arbitrary and capricious

without valid justification Yet the record is silent as to any facts

which might support the allegations made

As to the arguments ofHearing Counsel and the proponents on brief

it must be noted that there are counterbalances on each side The

proponent has deleted Article 5 of original Agreement 8330 so that as

the proponent avers Hearing Counsel s arguments based on Article 5

rate setting authority are moot However the new Article 13 even as

modified as the proponent suggests would allow concerted activity

clearly violative ofantitrust laws so that while the specific applicability

of Article 5 might be moot in Agreement 8330 2 the issue of antitrust

immunity granted under section 15 is not

In essence then the record in this proceeding supports the finding

that Article 13 of Agreement 8330 2 which allows discussion of any

and all matters of mutual interest with other conferences and with

direct and indirect carriers by rail water truck or air is per se viola

tive of United States antitrust laws and requires justification under the

Svenska test The record does not justify a holding that Agreement

8330 2 is required by a serious transportation need necessary to secure

important public benefits or in furtherance of a valid regulatory pur

pose ofthe Shipping Act Indeed Article 13 of Agreement 8330 2 is so

broad indefinite and vague as is the testimony of the proponents

principal witness that it falls to apprise the Commission as well as any

interested parties as to the procedures and arrangements under which

the concerted activity permitted by the agreement is to take place

Further the record is devoid of any substantive probative facts which

would justify approval of Agreement 8330 2 under section 15 Ship

ping Act 1916 Since Agreement 8330 2 is a complete revision and

update of Agreements 8330 and 8331 those latter agreements likewise

do not meet the requirements of section 15 Shipping Act 1916 and

must be disapproved

Finally it should be noted that the above holding is based on the

proponents failure of proof There is nothing inherently wrong in

freight forwarders forming a conference and it may well be that there

are problems in the industry which justify its formation Certainly one

need not reject such a conference because the carrier conferences

simply prefer to talk to shippers directly rather than to freight forward
798 FEDERAL MARITIME COMMISSION

ers Also there may be a serious transportation need for such a confe

ence and it may be necessary to secure important benefits all o

which would justify its approval by the Commission Here howeve

there is a complete failure of proof The record is little more than 

conglomeration of unsupported conclusory statements espousing th

approval ofdiscussion ofalmost any activity related to freight forward

ers with any group having anything to do with the freight forwardin

business The activity intended is too broad the record made is to

weak

It is held therefore that

1 Agreements 8330 8330 1 and 8330 2 may operate to the detrimen

of the commerce of the United States and are contrary to the publi

interest and

2 Agreements 8330 8330 1 and 8330 2 are disapproved pursuant t

the standards of section IS ofthe Shipping Act 1916 10

5 JOSEPH N INGOLlA

Administrative Law Judge

Washington D C

February 26 1981

lOIn re Pacific Coast European Conference supra
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 752

APPLICATION OF COORDINATED CARIBBEAN TRANSPORT

INC FOR THE BENEFIT OF UNIVERSAL

TRANSCONTINENTAL CORP

NOTICE

April 10 1981

Notice is given that no exceptions were filed to the March 9 1981

Order Affirming Initial Decision in this proceeding and the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the March 9 1981 order

has become administratively final

8 JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 752

COORDINATED CARIBBEAN TRANSPORT INC FOR THE

BENEFIT OF UNIVERSAL TRANSCONTINENTAL CORP AS

AGENT FOR MORISAENZ S A C

ORDER AFFIRMING INITIAL DECISION SERVED OCTOBER

16 1980 DENYING APPLICATION FOR PERMISSION TO

REFUND A 682 22 PORTION OF AGGREGATE FREIGHT

CHARGES OF 6 182 22

Finalized April 10 1981

In response to the Commission s Order of Remand served February

6 1981 the Presiding Administrative Law Judge issued on that same

date served February 9 1981 an Order for Applicant Carrier to devel

op a full and complete picture ofthe arrangements between the carrier

and shipper which led to the filing of the July 14 1980 project rate

relied upon in the application including the nature of the project

which qualified the subject shipment ofmotor vehicles for carriage at a

rate other than that stated for other Passenger Automobiles at Third

Revised Page 46 of the Coordinated Caribbean Transport Incs Tarif

FMC No 14 It was ordered A Within ten 10 days of its receipt

date of receipt to be certified in response of this Order the said

Applicant Carrier shall conform to the provisions of the Order o

Remand in developing a full and complete picture in which the said

Applicant Carrier fully explains the clerical or administrative error o

error due to inadvertence showing why the application should be

granted B Failure of the Applicant Carrier to respond within the time

provided will leave denial ofthe application unchanged

DISCUSSION

Twenty eight 28 days have elapsed since the serving of the Order

on February 9 1981 and no response has been received from the

Applicant Carrier It is deemed that the Applicant Carrier has been

given a reasonable period of time within which to respond to the

request for further information The failure ofthe Applicant Carrier to

respond to the request for further information and the Commission s

conclusion in its February 9 1981 Order ofRemand that the Presiding

Officer s findings regarding the applicant s

insufficiency under 46

C F R 502 92 were correct are reasons why the Presiding Administra

tive Law Judge finds and concludes his Initial Decision herein served

October 16 1980 should be affirmed
COORDINATED CARIBBEAN TRANSPORT INC FOR THE 801

BENEFIT OF UNIVERSAL TRANSCONTINENTAL CORP

Wherefore it is ordered

The Initial Decision denying the special docket application served

herein October 16 1980 be and hereby is affirmed

8 WILLIAM BEASLEY HARRIS

Administrative Law Judge

March 9 1981
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 7S 2

APPLICATION OF COORDINATED CARIBBEAN TRANSPORT

INC FOR THE BENEFIT OF UNIVERSAL

TRANSCONTINENTAL CORP AS AGENT FOR MORISAENZ

S A C

Permission to refund a 682 22 portion of aggregate freight charges of 6 182 22 denied

INITIALDECISIONl OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Finalized April 10 1981

This is a special docket proceeding under section 18b 3 of the

Shipping Act 1916 and Rule 92 of the Commission s Rules of Practice

and Procedure 46 C F R 502 92

The commodity shown on the Bills of Lading is set up motor vehi

cles ORM C Model Scout

The tariff applicable is that of Coordinated Caribbean Transport

Inc FMC 14 between Ports of Florida and Ports in Ecuador S A

The commodity set up motor vehicles a one shipment of project o

II vehicles were transported on the vessel Lionheart Voy 84 which

sailed July 13 1980 from Miami Florida for Manta Ecuador Third

Revised Page 46 ofthe applicable tariff effective March 18 1980 for

the Commodity Automobile viz Passenger Includes Jeeps and

Scouts SIU unboxed to Manta Rate Basis 43 00 W1M rate was

applied on the following Bills of Lading

UniversalTranscontinental Corp Forwarding Agent FMC No 394

I

Prepaid Date of For

Veasell FreIght B L

B L No Commodity Weight warder

Charge Date Voyage

S89 S6 7 07 80 MA I set up Motor M 477 6 30 80 Miami Fla Lionheart

106120 Vehicle ORM Cll ft to 84

C Model Scout Manta

weight 3 990 Ecuador

IbsI 81O K

3 305 38 7 07 80 MA 6 set up Motor M 2 687 6 26 80 Miami Fla Lionheart

106173 Vehicles OCR cuft to 84

CModel Scout Manta

weight 23 S19 Ecuador

IbsIO 668 K

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

Commission Rule 227 Rules of Practice and Procedure 46 CF R 502 227

i
COORDINATED CARIBBEAN TRANSPORT INC FOR THE 803

BENEFIT OF UNIVERSAL TRANSCONTINENTAL CORp

Universal Transcontinental Corp Forwarding Agent FMC No 394 Continued

Pre id Date of For

Vessell Freight B L

B L No Commod ty Weight warder

Charge Date Voyage

S 554 08 7 08 80 MA 1 set up Motor M 447 6 30 80 Miami Fla Lionheart

106132 VehicJe ORM co ft to 84

C Model Scout Manta

weight 3920 Ecuador

IbsI 778K

589 56 708 80 MA 1 set up Motor M 447 6 36 80 Miami Fla Lionheart

106136 Vehicle ORM co ft to 84

C Model Scout Manta

weight 3 990 Ecuador

Ibs1 810 K

589 56 7 09 80 MA 2 set up Motor M 447 6 30 80 Miami Fla Lionheartj

106166 Vehicle ORM co ft to 84

C Model Scout Manta

weight 3 990 Ecuador

Ibs1 810 K

S 554 08 7 10 80 MA 1 set up Motor M 447 7 9 80 Miami Fla Lionheart

106195 Vehicle ORM co ft to 84

C Model Scout Manta

weight 3 926 Ecuador

IbsI 781 K

6 182 22

The aggregate freight charges of 6 182 22 are certified to have been

paid and borne by Morisaenz S A C for whom Freight Forwarder

Universal Transcontinental Corp FMC 394 is Agent

The rate sought to be applied is 500 00 all inclusive per vehicle

Shipment consists of 11 vehicles at 500 00 equals 5 500 Amount

collected 6 182 22 minus 5 500 equals 682 22 sought to be refunded

On July 10 1980 the applicant carrier had ordered tariff change to

be effective July 11 1980 that movement from Miami Fla to Manta

Ecuador of eleven vehicles each measuring approximately 504 cu ft

will be accorded a rate offlat 500 including all charges accrued under

the tariff Bill of Lading to be claused E JOB 2009 Noted that cargo

will be moving on July 11 1980 approximate date

The carrier submits as fully explaining the clerical or administrative

error or error due to inadvertence for which the application should be

granted only the following Attached Bills of Lading were rated

without knowledge of the existing project rate filed with FMC prior to

the sailing

The carrier filed in its tariff 14th Revised Page 106 effective date

July 14 1980

Movement from Miami Fla to Manta Ecuador ofeleven 11

vehicles each measuring approximately 504 cu ft will be ac

corded a rate each of Flat 500 00 including all charges ac

crued under this Tariff Bill of Lading to be claused Item

JOB E 2009 Rate to expire 8 14 80
804 FEDERAL MARITIME COMMISSION

Certification is contained in the application that it was mailed at

Miami Florida September 10 1980 to the Secretary of this Commis

sion Under Rule 92 a 3 and such circumstances the filing date of this

application is the so certified date of mailing being within 180 days o

July 13 1980 the sailing date of the shipment the application is filed

timely

The shipments involved sailed on the vessel Lionheart Voy 84 July

13 1980 date shown on Republica del Ecuador Declaration Genera

copy attached to application

DISCUSSION

The application does not explain whether a clerical or administrative

error or error due to inadvertence is involved it merely states At

tached Bills of Lading were rated without knowledge of the existing

project rate filed with FMC prior to sailing Such a statement tends to

raise more questions than it answers Fore example who was withou

knowledge of the project rate Who rated the Bills of Lading When

by whom and with whom was the project rate negotiated In any

event the applicant should have identified the kind of error and eluci

dated that it was not a rate agreed upon after shipment

The application asserts the dates shown on the Bills of Lading are 61

26 80 6 30 80 and 7 9 80 These dates on the Bills of Lading above

are dates next to the name ofthe Forwarding Agent Universal Trans

continental Corp the date of6 26 80 on BIL MA 106173 6 30 80 on

B Ls MA 106120 MA 106132 MA 106136 and MA 106166 7 9 8

on BIL MA 106195 There is no explanation as towhat the dates mean

so it is surmised the dates show when the cargo came into the posses

sion ofthe forwarding agent

The applicant s change order dated July 10 1980 directed the

change to be effective July 11 1980 To set forth the rate on which to

base refund the Revised Page 106 of the applicant s tariff filed was to

be effective July 14 1980 Third Revised Page 46 of the applicable

tariff effective Maroh 18 1980 under which the cargo was rated

previously remained unchanged The 14th Revised Page 106 of the

tariff was received by the Commission prior to the September 10 1980

filing of this application and so oonforms to Rule 92 a 2

The application is silent as to whether there are other special docke

applications or deoided or pending formal prooeedings involving the

same rate situation or whether there are shipments of other shippers o

the same or similar commodity which a moved via applioant during

the period of time beginning on the day the bills of lading were issued

and ending on the effeotive date ofthe conforming tariff and b moved

on the same voyage of the vessel carrying the shipment described

herein
COORDINATED CARIBBEAN TRANSPORT INC FOR THE 805

BENEFIT OF UNIVERSAL TRANSCONTINENTAL CORP

The Commission wrote in Munoz y

Cabrero v Sea Land Service Inc

Special Docket No 491 20 F MC 152 153 1977

While we recognize that should the application be denied the

consequences of the carrier s consecutive errors would fall

upon the shipper nevertheless the authority granted by P L

90 298 to depart from the rigid requirements of section

18b 3 of the Act and to make a rate applicable retroactively

is strictly limited and in our opinion would not extend to

approve a rate which was never agreed upon or intended to

be filed

Upon consideration of all the aforesaid the Presiding Administrative

Law Judge finds and concludes in addition to the findings and conclu

sions hereinbefore stated

1 The information submitted is inadequate to prove the requested

permission to refund should be granted

2 The application for permission to refund should be denied

Wherefore it is ordered subject to review by the Commission as

provided in the Commission s Rules of Practice and Procedure that

A The application is denied

B This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

Washington D C

October 16 1980
FEDERAL MARITIME COMMISSION

DOCKET NO 81 13

CHARLESTON WAREHOUSE ASSOCIATES ET AL

v

BARBER STEAMSHIP LINES INC ET AL

NOTICE

April 17 1981

Notice is given that no appeal has been taken to the March 16 1981

discontinuance of the complaint in this proceeding and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the discontinu

ance has become administratively final

8 JOSEPH C POLKING

Acting Secretary

i

j

nnr
FEDERAL MARITIME COMMISSION

DOCKET NO 81 13

CHARLESTON WAREHOUSE ASSOCIATES ET AL

v

BARBER STEAMSHIP LINES INC ET AL

NOTICE OF WITHDRAWAL OF COMPLAINTAND

DISCONTINUANCE OF PROCEEDING

Finalized April 17 1981

Complainants seven warehouse operators within a 50 mile radius of

Charleston South Carolina have filed a motion seeking permission to

withdraw their complaint Complainants had alleged that 17 named

respondent vessel operating common carriers by water or associations

ofthem had violated sections 14 16 17 and 18 a of the Shipping Act

1916 and sections 2 and 4 of the Intercoastal Shipping Act 1933 by

implementing the so called 50 mile container rules at Charleston How

ever even before the date on which an answer to the complaint would

have been due complainants on February 17 moved for permission to

withdraw the complaint without prejudice No replies to the motion

were filed

Complainants give no reason for their decision to withdraw the

complaint Respondents on the other hand have said nothing about the

request that the complaint be withdrawn without prejudice Ihave no

reason to disturb the apparent desires ofthe parties and no authority to

compel a private litigant to continue litigating its own complaint against

its will under the present circumstances Accordingly the motion is

granted The complaint is withdrawn without prejudice and the pro

ceeding is discontinued

S NORMAN D KLINE

Administrative Law Judge

March 16 1981
I

j

I

FEDERAL MARITIME COMMISSION

DOCKET NO 81 29

MURAN INTERNATIONAL CORPORATION POSSIBLE

VIOLATIONS OF SECTION 16 INITIAL PARAGRAPH SHIPPING

ACT 1916

ORDER

April 12 1981

By an Order of Investigation and Hearing dated April 17 1981 this

proceeding was instituted to determine whether Muran International

Corporation Muran obtained transportation by water for cargo bound

for Tunisia at rates in violation of section 16 Initial Paragraph of the

Shipping Act 1916 The Commission had information that indicated

that Muran had misdeclared the weight of certain shipments for the

purpose of obtaining transportation by water for property at less than

rates and charges which would otherwise be applicable and had refused

to pay applicable tariff rates for other shipments Pursuant to the

special settlement procedures set forth at 46 C F R 50S respondent

Muran and the Commission s General Counsels office and the Bureau

of Investigation and Enforcement entered into settlement discussions

Muran and the Commission s Bureau of Investigation and Enforce

ment entered into stipulations which set forth the factual background

surrounding the violations alleged in the Order of Investigation and

Hearing The stipulations Provided the factual basis upon which a

settlement agreement has been concluded between Murau and the Di

rector Qureau ofInvestigltion and Enforcement As an express condi

tion of such settlement and comprpmise Muran has consented to the

entry of this Order below directing them to cease and desist from

practices enumerated below

THEREFORE IT IS ORDERED That Muran International Cor

poration shall cease and desist from misdeclaring the weight of its

shipments and obtaining orattempting to obtain transportation by water

for property at less than rates and charges which would otherwise be

applicable

IT IS FURTHER ORDERED That Muran International Corpora

tion shall cease and desist from refusing to pay applicable ocean carrier

tariff rates

IT IS FURTHER ORDERED That Muran International Corpora

tion shall cease and desist for a period of five years from the date of

this Order from discarding mutilating disposing of or otherwise de

stroying any underlying documents such as warehouse receipts ship
MURAN INTERNATIONAL CORP POSSIBLE VIOLATIONS 809

pers instructions or packing lists delivery receipts weight bills or

other documentation which show or reflect the actual weight or meas

ure of cargo tendered by Respondent and upon which the ocean freight

rate is computed and assessed

IT IS FURTHER ORDERED That this Order shall continue in

force unless and until suspended modified or set aside by the Commis

sion provided however that should Muran International Corporation

petition the Commission after April 20 1986 to set aside this Order

such petition shall be favorably considered unless the Commission at

that time has reason to believe that Muran International Corporation

has in any way violated the Shipping Act 1916 or this Order while this

Order has been in effect

IT IS FURTHER ORDERED That Muran International Corpora

tion shall upon reasonable notice allow investigators or attorneys of

the Federal Maritime Commission unimpeded access to the underlying

documents required to be maintained by this Order and shall allow the

removal of such documents specifically requested by Commission inves

tigators or attorneys for the purpose ofduplication

IT IS FURTHER ORDERED That this proceeding be and hereby

is discontinued

By the Commission

S JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 44 DOCKET NO 80 82

PART 525 EXEMPTION OF COLLECTIVE BARGAINING

AGREEMENTS

April 24 1981

Removal ofExemption Final Rule

The existing section 35 exemption for collective bar

gaining agreements from the filing and approval re

quirements of section 15 Shipping Act 1916 has

been superseded by the Maritime Labor Agreements

Act of 1980 P L 96 325

DATE Effective May 1 1981

AUTHORITY Sections 15 35 and 43 46 U S C 814 833 and 841a

SUPPLEMENTARY INFORMATION

On December 23 1980 the Commission gave Notice in the Federa

Register 45 F R 84832 of its intention to revoke 46 C F R 525

Commission General Order 44 providing for the exemption of collec

tive bargaining agreements from the filing and approval requirements o

section 15 Shipping Act 1916 46 U S C 814 That Notice was

prompted by the enactment of the Maritime Labor Agreements Act o

1980 P L 96 325 94 Stat 1021 which removes collective bargaining

agreements from the requirements of section 15 The American Truck

ing Associations Inc ATA filed comments which do not oppose the

proposed revocation of 46 C F R 525 but rather focus on the scope o

the Maritime LaborAgreements Act of 1980

Generally ATA points out that the Maritime LaborAgreements Act

of 1980 does not affect the Commission s responsibility to ensure that

carriers provide services and facilities including access to and the use

of containers to all persons on a nondiscriminatory basis The Commis

sion does not disagree with this assessment but is of the view that it is

not relevant to the matter at issue The fact is that the types o

agreements i e those arising from collective bargaining which 46

C F R 525 exempts from regulation under section 15 have since been

statutorily removed altogether from Commission jurisdiction under that

ACTION

SUMMARY
REMOVAL OF EXEMPTION OF COLLECTIVE BARGAINING 811

AGREEMENTS

section It follows therefore that the administrative exemption provided

by 46 C F R 525 is no longer necessary or appropriate

THEREFORE IT IS ORDERED That effective upon publication

of this Notice in the Federal Register Part 525 of Title 46 of the Code

ofFederal Regulations is removed

By the Commission

S JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

46 C F R PART 510

GENERAL ORDER 4 REVISED DOCKET 80 13

LICENSING OF INDEPENDENT OCEAN FREIGHT

FORWARDERS

ACTION

SUMMARY

DATES

April 27 1981

Final rule

The Federal Maritime Commission is revlsmg its

General Order 4 46 C F R 510 which governs the

licensing and operations ofindependent ocean freight

forwarders Ocean freight forwarders oceangoing

common carriers and the Commission have agreed

that General Order 4 needs to be substantially re

vised updated and clarified The Commission also

wishes to minimize its regulation of this business ac

tivity to the extent its statutory duties permit This

revision of the Order is intended to accomplish those

purposes and at the same time balance the differing

interests of freight forwarders export shippers and

oceangoing common carriers and where possible

eliminate unnecessary ineffective or unduly burden

some regulation The major changes include a re

quirement for the licensing ofseparately incorporated

branch offices increased bond amounts to cover

branch office operations establishment of a minimum

period ofexperience for qualifying individuals elimi

nation of the so called payover rule an increase in

fees for licenses and new anti rebate certification re

quirements

October I 1981 is the general effective date ofthese

revised rules However persons who on October I

1981 hold valid independent ocean freight forwarder

licenses need not comply with the surety bond re

quirements contained in section 51O 15 a of these re

vised rules until March I 1982 With respect to such

persons the surety bond requirements of the present

rules will continue to apply until March I 1982

Licensees who fail to comply with the revised surety

bond requirements by March 1 1982 will be issued a

notice that their licenses will be suspended effective
LICENSING OF INDEPENDENT OCEAN FREIGHT 813

FORWARDERS

May 1 1982 in the absence of compliance by that

date Failure to achieve compliance with the bond

requirements by July 1 1982 will result in automatic

revocation of the license This rule is being submitted

to the Office of Management and Budget pursuant to

the provisions of the Paperwork Reduction Act of

1980 Pub L 96 511

SUPPLEMENTARY INFORMATION

Sections 18 21 43 and 44 ofthe Shipping Act 1916 46 U S C 817

820 841a 84Ib and section 4 of the Administrative Procedure Act 5

U S C 553 authorize the Federal Maritime Commission to make rules

and regulations affecting oceangoing common carriers and the licens

ing activities obligations and responsibilities of independent ocean

freight forwarders engaged in carrying on the business of forwarding in

commerce from the United States

The current rules General Order 4 were originally issued in Decem

ber 1961 Commission and industry experience has indicated a need for

updating clarifying and changing many provisions of the Order Ac

cordingly on March 17 1980 the Commission issued a notice of

proposed rulemaking 45 F R 17029 requesting comments from inter

ested parties with respect to proposed revisions of General Order 4

Written comments were received from 30 commentators l

some of

whom also provided oral comments to the Commission on September

16 1980 On the basis of the written and oral comments a number of

changes to the rules as proposed on March 17 1980 are now being

1

1 B F Goodrich Company 2 North Carolina State Ports Authority 3 Fritz Companies 4

South Carolina State Ports Authority 5 American Council of Voluntary Agencies for Foreign Serv

ice Inc 6 Casey Overseas Corp 7 Joint AssociationnSouth Atlantic Marine Terminal Conference

Terminal Operators Conference of Hampton Roads 8 Emerson Electric Co 9 The Far East Con

ference 10 Associated Latin American Freight Conferences 11 McGregor Swire Air Services

America Inc 12 Foreign Shipowners Association of the Pacific Coast 13 Pacific Coast European

Conference Latin America Pacific Coast Steamship Conference and Pacific Coast River PJate Brazil

Conference J4 National Customs Brokers and Forwarders Association of America Inc 15 Inter

American Freight Conference 16 West Gulf Maritime Association 17 Pacific Westbound Confer

ence Pacific Straits Conference and Pacific Indonesian Conference 18 Behring International Inc

19 International Freight Forwarders and Customs Brokers Association of New Orleans Inc 20

The 8900 Lines North Atlantic Mediterranean Freight Conference U S Atlantic GulfAustralia

New Zealand Conference US North Atlantic Spain Rate Agreement and U S South Atlantic Span

ish Portuguese Moroccan and Mediterranean Rate Agreement except Lykes Bros Steamship Co

Inc 21 Transoceanic Shipping Co Inc 22 FiUette Green Co of Tampa Smith and KeHy Co

Southern Overseas Corporation Southern Shipping Company and Waters Shipping Company 23

Independent Customs Brokers and Freight Forwarders Association of Savannah Inc 24 The North

European Conferences 25 Interconex Inc 26 Dorf International Ltd 27 The Roanoke Compa

nies 28 Association of Forwarding Agents and Foreign Freight Brokers of Mobile Inc 29 Georgia

Ports Authority and 30 Customs Brokers and Forwarders Association of Miami Inc These 30 com

mentators are comprised of shippers freight forwarders common carriers by water port terminal in

terests surety companies and charitable institutions
814 FEDERAL MARITIME COMMISSION

adopted by the Commission A brief section by section discussion ofth

newly adopted revisions to General Order 4 follows 2

51O 1 Scope This section describes the scope of the entire part an

reflects present sections 510 1 and 510 20 No comments on this sectio

were received but changes have been made to reflect the change

adopted in other sections

51O 2 Definitions This section collects the definitions contained 

present sections 510 2 and 510 21

Proposed section 51O 2b changed the definition of beneficial inte

est from present section 510 21 1 for purposes of clarification only

One commentator 17 however recommended that the definition b

substantively revised to include the rental leasing or other furnishing 

containers The Commission does not believe such a change should b

made and only minor editorial changes have been adopted

A number of commentators raised points in regard to propose

section 51O 2 h the definition of freight forwarding services On

commentator 16 asked that a provision be added to proposed sectio

51O 2 h 3 dealing with export declarations which would make it cle

that forwarders are required to file shippers export declarations 

accordance with U S Customs Service regulations The Commissio

however believes that such revision would be superfluous Comment

tors 9 and 15 suggested clarification in regard to proposed sectio

51O 2 h 14 dealing with the advancement of funds by forwarders Th

Commission is in general agreement with those suggestions and ha

revised the definition accordingly See combined definition 

51O 2 h 1l

One commentator 23 suggested that proposed section 510 20 th

definition of an independent ocean freight forwarder be revised 

exclude from the definition any person connected to any shipp

e g by rail air or motor The Commission however believes it w

the Intent of Congress to proscribe only those shipper connection

involving oceangoing common carriers as defined in section 51O 2 n 

these final rules

510 3 License when required This section as proposed incorporate

the requirements ofpresent section 510 3 a but also included a

requir

ment that every branch office be separately licensed and bonded In th

Supplementary Information section of its notice of proposed rulema

ing the Commission stated that one alternative would be graded leve

of surety bonds depending on the number of a forwarder s branc

a Written and oral comments not mentioned in the section by section discussion have neverthele

been considered by the Commission Further it should be clearly understood that failure to address 

refute aparticular comment in no way implies Commission agreement with the comment This is es

cially true with respect to commentators assertions as to the proper interpretation of law court de

sions and Commission rules findings oractions
LICENSING OF INDEPENDENT OCEAN FREIGHT 815

FORWARDERS

offices Proposed section 510 3 also deleted the obsolete grandfather

provisions ofpresent section 51O 3 b

The commentators were divided in their opinions as to whether

separate licenses and bonds should be required for each branch office

In order to minimize the impact of its regulations on the forwarding

industry while increasing the protection to the shipping industry the

Commission has decided to require a separate license and bond only for

branch offices which are separately incorporated At the same time

10 000 in additional bond coverage will be required for each unincor

porated branch office operated by a licensee For example a forwarder

operating out of its home office and two unincorporated branch offices

would be required to maintain on file with the Commission one surety

bond in the amount of 50 000 ie the basic 30 000 bond plus an

additional 10 000 for each branch office The full amount of such

coverage ie 50 000 would be available with respect to any obliga

tion of the forwarder originating at any location from which it oper

ates Thus branch office coverage under a bond will not be limited to

just 10 000

51O 4 License when not required This proposed section combined

various provisions ofthe present rules

One commentator 17 suggested that nonvessel operating common

carriers by water be prohibited from engaging in forwarder activity

Another commentator 23 suggested that vessel operating common

carriers by water and their agents be denied licenses as there are

sufficient forwarders to perform the services on behalf of shippers

The Commission does not believe sufficient grounds exist for adopt

ing those suggestions The final rule has been modified but only to

clarify the rule with respect to ocean freight brokers

51O 11 Basic requirements for licensing eligibility This proposed sec

tion retained substantially the same requirements as the present rules

except that a specific minimum experience requirement was prescribed

to assure that each applicant has a basic level of expertise to operate an

independent ocean freight forwarding business

Commentators generally supported the minimum experience require

ment but one commentator 11 was opposed to requiring a minimum

level of experience for managers of branch offices One commentator

30 suggested that prospective forwarders should be required to pass a

test as the three year experience requirement may not adequately

ensure that newly licensed forwarders will have an adequate level of

expertise

The Commission has decided not to impose a

specific experience

requirement for managers of unincorporated branch offices The proper

operation of an unincorporated branch office is the responsibility of the

licensee who will be held strictly responsible for the activities ofall its

employees Since under these revised rules a separately incorporated
816 FEDERAL MARITIME COMMISSION

branch office must be separately licensed an applicant for such 

license must meet the same minimum experience requirements as an

other applicant In addition the Commission has decided that an exam

nation for applicants will not be required Minor clarifications to th

section also have been made

510 12 Persons not eligible No change was made to this propose

section

51O 13 Application for license The license application form is delete

from the body of the rules to enable revisions to be made to the form

when necessary without republication of the rule While not containe

in the proposed rule the requirement to publish notice of application

in the Federal Register as provided in present section 510 6 is restore

pending its consideration in Docket 80 44

510 14 Investigation of applicants No major change was made to th

proposed section

5 10 1 5 Surety bond requirement This proposed section incorporate

provisions of present sections 510 5 0 g h and the provisos 

present section 510 9 with some changes for clarification and flexibility

Many of the commentators expressed the view that the bond shou

be increased either by a sliding scale based on the volume of carg

handled by the forwarder or by the number of branch offices operated

As mentioned earlier the Commission has decided to require 10 00

additional bond coverage for each unincorporated branGh office

510 16 Denial of license Proposed paragraph b of this section

Reapplication within one year prohibited is deleted That subjec

matter is covered under new section 510 18 of the final rules

510 17 Revocation or suspension of license This proposed sectio

originally proposed as section 510 50 retained the criteria of preSen

section 510 9 but added a proposed paragraph b which provided fo

assessment of civil penalties for violations in any proceeding involvin

the suspension or revocation of a license In addition under propose

paragraph c the Commission addressed the matter of rejecting a

application submitted within one year from the date of revocation o

the appliGattts previous license

One commentator 18 urged the deletion of proposed sectio

510 50a I which provided for the suspension or revocation of 

license for failure to conduct forwarding business consistent with th

national maritime policies stated in the Merchant Marine Act of 193

That provision as well as proposed paragraph c is deleted in the fin

rules The subject matter of proposed paragraph c is covered unde

new section 510 18

5 10 18 Application after revocation or denial This section covers th

subject matter ofoiigina1ly proposed sections SI0 16b and 510 50 0

51O 19 Issuance and use of license This section was originally pro

posed as section 510 17 It contains provisions of present section
LICENSING OF INDEPENDENT OCEAN FREIGHT 817

FORWARDERS

51O 5 a 3 8b and 8 d and reflects changes made to other sections of

the final rules

510 20 Changes in organization This section originally proposed as

section 510 18 includes various provisions in the present rules plus

codification of existing policy concerning the conduct of operations in

the event ofthe death of a sole proprietor licensee

Three commentators 14 23 and 30 opposed the requirement in

proposed subparagraph a

5 that prior approval be required for the

transfer of 5 or more of the stock of a corporate licensee The

Commission has decided to retain this requirement in order to better

ensure that licensees remain independent of shipper connections a pri

mary reason for the enactment of section 44 of the Act A new

paragraph d specifies the conditions under which newly incorporated

branch offices may operate until they are independently licensed

51O 21 Branch offices interim operation This section originally pro

posed as section 510 19 provides for an orderly system of transition

from an existing separately incorporated branch office status to a sepa

rately licensed status

This grandfather provision is necessary to cover a separately incorpo

rated branch office during the interim period from the effective date of

these rules until it is granted its individual license

51O 31 General duties This section incorporates the provisions of

prior sections 51O 5 e and 51O 23 a b d and 1 and adds a new

provision paragraph h requiring anti rebate certifications on invoices

and other documents as provided in section 21 b of the Shipping Act

1916

Three commentators 11 18 and 23 objected to the requirement in

proposed paragraph b that the name and license number of all related

forwarders be included on a licensee s stationery and billing forms as

such information would take too much room The Commission agrees

and has deleted the requirement

Two commentators 14 and 18 objected to the new requirement in

proposed paragraph h for an anti rebating statement on forwarders

certifications and invoices while one commentator 20 supported the

proposed requirement The Commission believes that consistent with

the intent of section 21 b of the Act forwarders should certify con

tinuously that they have a policy against rebates and has retained the

certification requirement

In agreement with a commentator 18 who objected to proposed

section 51O 31 d 5 as being unfair and unnecessarily restrictive the

Commission deleted that provision from the final rule It would have

required forwarders to obtain Commission approval before employing

persons whose licenses have been revoked or suspended

51O 32 Forwarder and principal fees With slight changes this pro

posed section incorporated several provisions of the existing rules and
818 FEDERAL MARITIME COMMISSION

in order to avoid discrimination between shippers deleted tne exemp

tion contained in current section 5l0 24b which allowed a forwarder

to perform forwarding services for relief or charitable agencies free o

charge or at a reduced rate

Several commentators 14 18 and 30 objected to the language o

proposed section 51O 32 e as it affects a forwarder s obligation for its

principals actions A new subpart k has been added requiring for

warders to account to their principals for certain overpayments and

adjustments and other language in this section has been revised to

clarify the fact that a forwarder will not automatically be held responsi

ble for the actions ofits principal

f51O 33 Forwarder and carrier compensation This proposed section

included a number of provisions from the current rules and proposed

in paragraph b to change the maximum allowable time period for a

forwarder to pay over freight monies to a carrier from seven days to

twenty days and in paragraph c proposed a new provision to prohib

it a carrier from requiring a licensee to assume the obligation of paying

freight charges before such sums are advanced by the shipper to the

forwarder A provision in paragraph d proposed to require ocean

carriers to pay compensation to forwarders within 30 days after the

payment of ocean freight charges

Numerous comments were received both for and against the three

new proposals After fully considering all ofthe concerns the Commis

sion has decided to delete all three of the new proposals as well as the

existing payover rule The matters addressed in the new proposals in

proposed section 51O 33 c and d are best left to the parties own

determination With respect to the payover rule ocean freight pay

ments are governed by tariff and bill of lading provisions and the

Commission is of the opinion that any type of payover rule tends to

confuse the legal rights and obligations of the parties under such gov

erning provisions In short the Commission is of the view that all o

these financial arrangements should not be governed by Commission

regulations but instead should be left to the competitive controls ofthe

market place

51O 34 Records required to be kept This proposed section contained

provisions ofpresent sections 51O 23k and I

51O 25 a and 5l0 26b

No comments were received in regard to these provisions and no

significant changes were made in the final rule

51O 35 Reports required to be filed This section includes the report

ing requirementsof present sections 51O 5 c and 51O 26 a A new pro

vision paragraph a would require the filing of samples of office

stationery and invoice forms within sixty days of changes in organiza

tion Proposed new paragraph c requires an annual filing of an anti

rebate certification pursuant to section 2Ib ofthe Act
LICENSING OF INDEPENDENT OCEAN FREIGHT 819

FORWARDERS

One commentator 18 opposed the filing of the annual anti rebate

certification The Commission believes that it is important and consist

ent with the intent of section 21 b that the requirement be retained and

does not believe that an annual certification will cause any undue

burden on licensees

51O 36 Section 15 agreements This proposed section tracks the

present section 510 26

One commentator 14 objected to the requirement that a

copy of

non exclusive working agreements be kept in a licensee s file while

another commentator 17 suggested that the Commission should re

quire the filing of such agreements with the Commission The Commis

sion has decided to adopt the rule as proposed with a slight modifica

tion to cover agreements which have been exempted from the require

ments of section 15

Therefore 46 C F R Part 510 is amended to read as follows
820 FEDERAL MARITIME COMMISSION

PART 510 LICENSING OF INDEPENDENT

OCEAN FREIGHT FORWARDERS

SUBPART A GENERAL

Sec

510 1 Scope

510 2 Definitions

510 3 License when required

510 4 License when not required

SUBPART B ELIGIBILITY AND PROCEDURE

FOR LICENSING BOND REQUIREMENTS

Sec

510 11

510 12

510 13

510 14

510 15

510 16

510 17

510 18

510 19

510 20

510 21

Basic requirements for licensing eligibility

Persons not eligible

Application for license

Investigation ofapplicants

Surety bond requirements

Denial oflicense

Revocation or suspension oflicense

Application after revocation or denial

Issuance and use oflicense

Changes in organization

Branch offices interim operation

SUBPART C DUTIES AND RESPONSIBILITIES OF FREIGHT

FORWARDERS FORWARDING CHARGES REPORTS TO

COMMISSION

Sec

510 31 General duties

510 32 Forwarder and principal fees

510 33 Forwarder and carrier compensation

510 34 Records required to be kept

510 35 Reports required to be filed

510 36 Section 15 agreements

AUTHORITY Sees 18 21 43 and 44 as amended 46 U S C 817 820

841a and 841b

SUBPART A GENERAL

51O 1 Scope

This part sets forth regulations providing for the licensing as inde

pendent ocean freight forwarders of persons including individuals co

porations and partnerships who wish to carryon the business of freigh
LICENSING OF INDEPENDENT OCEAN FREIGHT 821

FORWARDERS

forwarding This part also prescribes the bonding requirements and the

duties and responsibilities ofindependent ocean freight forwarders reg

ulations concerning practices of freight forwarders and common carri

ers by water and the grounds and procedures for revocation and

suspension oflicenses

51O 2 Definitions

The terms used in this part are defined as follows

a Act means the Shipping Act 1916 46 D S C 801 et seq as

amended

b Beneficial interest includes any lien or interest in or right to

use enjoy profit benefit or receive any advantage either proprietary

or financial from the whole or any part of a shipment of cargo where

such interest arises from the financing of the shipment or by operation

of law or by agreement express or implied The term beneficial

interest shall not include any obligation in favor of a freight forwarder

arising solely by reason of the advance of out ofpocket expenses in

curred in dispatching a shipment

c Branch office means any office established and maintained by

or under the control of a licensee for the purpose of rendering freight

forwarding services which office is located at an address different from

that ofthe licensee s designated home office This term does not include

a separately incorporated entity

d Brokerage refers to payment by an oceangoing common carrier

to an ocean freight broker for the performance of services as specified

in section 51O 2 m ofthis part

e Compensation means payment by an oceangoing common carri

er to a freight forwarder for the performance of services as specified in

section 51O 33 c ofthis part

f Freight forwarder is anyone who performs or holds itself out

to perform the dispatching of a

shipment of cargo for another by

rendering anyone or more of the services enumerated in section

510 2 h ofthis part

g Freight forwarding fee means charges billed by a freight for

warder to a shipper consignee seller purchaser or any agent thereof

for the performance of freight forwarding services as specified in sec

tion 51O 2 h ofthis part

h Freight forwarding services refers to the dispatching of ship

ments on behalf ofothers in order to facilitate shipment by an ocean

going common carrier which may include but is not limited to the

following

I ordering cargo to port

2 preparing and orprocessing export declarations

3 booking arranging for or confirming cargo space

4 preparing or processing delivery orders or dock receipts
822 FEDERAL MARITIME COMMISSION

5 preparing and or processing ocean bills oflading

6 preparing or processing consular documents or arranging for

their certification

7 arranging for warehouse storage

8 arranging for cargo insurance

9 clearing shipments in accordance with United States Govern

ment export regulations

10 preparing and or sending advance notifications of shipments

or other documents to banks shippers or consignees as re

quired

11 handling freight or other monies advanced by shippers o

remittin or advancing frei ht or other monies or credit in

connectlon with the dispatchmg of shipments

12 coordinating the movement ofshipments from origin to vessel

and

13 giving expert advice to exporters concerning letters of credit

other documents licenses or inspections or on problems ger

mane to the cargo s dispatch

i In commerce from the United States means oceanborne export

commerce from the United States its Territories or possessions to

foreign countries or oceanborne commerce between the United States

and its Territories and possessions or between such Territories and

possessions

j

Independent ocean freight forwarder refers to a person perform

ing freight forwarding services for a consideration either monetary o

otherwise who is not a shipper or consignee or seller or purchaser o

property in commerce from the United States and who has no benefi

cial interest therein nor directly or indirectly controls or is controlled

by such shipper or consignee orby any person having such a beneficia

interest

k Licensee is any person licensed by the Federal Maritime Com

mission as an independent ocean freight forwarder

I Nonvessel operating common carrier by water is a common

carrier by water as defined in section 1 of the Act which does no

operate the vessel by which its ocean transportation is provided bu

which holds itself out by the establishment and maintenance of tariffs

by advertisement solicitation or otherwise to provide transportation o

property for hire by water in commerce from the United States which

assumes responsibility or has liability imposed by law for the safe

transportation of such property and which arranges in its own nam

for the performance of such transportation by underlying water carr

ers

m Ocean freight broker is an entity which is engaged by a carrie

to secure cargo for such carrier and or to sell or offer for sale ocea
LICENSING OF INDEPENDENT OCEAN FREIGHT 823

FORWARDERS

transportation services and which holds itself out to the public as one

who negotiates between shipper or consignee and carrier for the pur

chase sale conditions and terms oftransportation

n Oceangoing common carrier is a common carrier by water as

defined in section I of the Act including a nonvessel operating

common carrier by water engaged in transportation for hire by water

of property in commerce from the United States as defined in section

51O 2 i ofthis part

0 Principal except as used in Surety Bond Form FMC 59 Rev

refers to the shipper consignee seller or purchaser ofproperty and to

anyone acting on behalf of such shipper consignee seller or purchaser

of property who employs the services of a licensee to facilitate the

ocean transportation of such property

P Reduced forwarding fees means charges to a principal for

forwarding services that are below the licensees usual charges for such

services

q Small shipment refers to a single shipment sent by one consign

or to one consignee on one bill of lading which does not exceed the

underlying oceangoing common carriers minimum charge rule

r Special contract is a contract for freight forwarding services

which provides for a periodic lump sum fee

s Territory or possession includes the Commonwealth of the

Northern Marianas the Commonwealth of Puerto Rico American

Samoa Guam the U S Virgin Islands and any other Territory or

possession ofthe United States

51O 3 License when required

Except as otherwise provided in this part a person must hold a valid

independent ocean freight forwarder license in order to perform freight

forwarding services and except as provided in section 510 4 of this

part no person shall perform or hold out to perform such services

unless such person holds a valid license issued by the Commission to

engage in such business A separate license is required for each branch

office that is separately incorporated

510 4 License when notrequired

Alicense is not required in the following circumstances

a Shipper Any person whose primary business is the sale of mer

chandise may without a license dispatch and perform freight forward

ing services on behalf of its own shipments or on behalf ofshipments or

consolidated shipments of a parent subsidiary affiliate or associated

company Such person shall not receive compensation from the ocean

going common carrier for any services rendered in connection with

such shipments

b Employee or branch office of licensed forwarder An individual

employee or unincorporated branch office of a licensed independent

ocean freight forwarder is not required to be licensed in order to act
I

j

824 FEDERAL MARITIME COMMISSION

solely for such licensee but each licensed independent ocean freigh

forwarder will be held strictly responsible hereunder for the acts o

omissions of any of its employees rendered in connection with th

conduct ofthe business

c Oceangoing common carrier An oceangoing common carrier o

agent thereof may perform ocean freight forwarding services without 

license only with respect to cargo carried under such carrier s ow

ocean bill of lading Charges for such forwarding services shall b

assessed in conformance with the carrier s published tariffs on file wit

the Commission

d Ocean freight broker An ocean freight broker is not required to b

licensed to perform those services specified in section 510 2 m of th

part

SUBPART B ELIGIBILITY AND PROCEDURE

FOR LICENSING BOND REQUIREMENTS

510 11 Basic requirements for licensing eligibility

a Necessary qualifications To be eligible for an independent ocea

freight forwarder s license the applicant must demonstrate to the Com

mission that

I its proposed forwarding business will be consistent with th

national maritime policies declared in the Merchant Marine

Act 1936

2 it will meet the definition of an independent ocean freigh

forwarder

3 it is fit willing and able properly to carryon the business o

freight forwarding and to conform to the provisions of the

Shipping Act 1916 as amended and the requirements rules

and regulations ofthe Commission issued thereunder

4 its qualifying individual has a minimum of three 3 years o

experience in ocean freight forwarding duties in the United

States

5 it has obtained and filed with the Commission a valid surety

bond in conformance with section 510 15 of this part and

6 it and its qualifying individual are otherwise qualified within

the provisions ofthe Shipping Act 1916 and the requirements

rules and regulations of the Commission

b Qualifying individual The following individuals must qualify the

applicant for a license

1 Sole proprietorship The applicant sole proprietor

2 Partnership At least one of the active managing partners bu

all partners must execute the application

3 Corporation At least one of the active corporate officers
LICENSING OF INDEPENDENT OCEAN FREIGHT 825

FORWARDERS

c Affiliates offorwarders An independently qualified applicant may

be granted a separate license to carryon the business of forwarding

even though it is associated with under common control with or

otherwise related to another independent ocean freight forwarder

through stock ownership or common directors or officers if such

applicant submits 1 a

separate application and fee and 2 a valid

surety bond in the form and amount prescribed under section 510 15 of

this part The proprietor partner or officer who is the qualifying

individual of one active licensee shall not also be designated the qualify

ing proprietor partner or officer of an applicant for another independ

ent ocean freight forwarder license

d Oceangoing common carriers An oceangoing common carrier or

agent thereof which meets the requirements ofthis part may be licensed

to dispatch shipments moving on other than such carrier s own bill of

lading subject to the provisions of section 51O 33 g ofthis part

51O 12 Persons not eligible

No person is eligible for a license who is a shipper consignee seller

or purchaser ofshipments in commerce from the United States or who

has any beneficial interest therein or who directly or indirectly con

trols or is controlled by such shipper consignee seller or purchaser of

shipments or by any person having a beneficial interest in such ship

ment

51O 13 Application for license

a Application and forms Any person who wishes to obtain a license

to carryon the business offorwarding shall submit in duplicate to the

Director ofthe Commission s Bureau of Certification and Licensing a

completed application Form FMC 18 Rev Application for a License

as an Independent Ocean Freight Forwarder and a completed anti

rebate certification in the format prescribed under section 51O 35 c of

this part Copies of Form FMC 18 Rev may be obtained from the

Director Bureau of Certification and Licensing Federal Maritime

Commission Washington D C 20573 or from any ofthe Commission s

offices at other locations Notice of filing of such application shall be

published in the Federal Register and shall state the name and address of

the applicant Ifthe applicant is a corporation or partnership the names

ofthe officers or partners thereof shall be published

b Fee The application shall be accompanied by a money order

certified check or cashier s check in the amount of 350 made payable

to the Federal Maritime Commission

c Rejection Any application which appears upon its face to be

incomplete or to indicate that the applicant fails to meet the licensing

requirements of the Shipping Act 1916 or the Commission s

regula

tions shall be returned by certified US mail to the applicant without

further processing together with an explanation of the reason s for

rejection and the application fee shall be refunded in full All other
I

1

1

826 FEDERAL MARITIME COMMISSION

applications will be assigned an application number and each applicant

will be notified of the number assigned to its application Persons who

have had their applications returned may reapply for a license at any

time thereafter by submitting a new application together with the ful

application fee

d Investigation Each applicant shall be investigated in accordance

with section 510 14 of this part

e Changes prior to licensing Each applicant shall submit to the

Commission in duplicate an amended Form FMC 18 Rev advising o

any changes in the facts submitted in the original application within

thirty 30 days after such change s occur Any unreported change wil

delay the processing and investigation of the application and may resul

in rejection or denial of the application No fee is required when

reporting changes to an application for initial license under this section

510 14 Investigation ofapplicants

The Commission shall conduct an investigation of the applicant 

qualifications for a license Such investigations may address

a the accuracy of the information submitted in the application

b the integrity and financial responsibility ofthe applicant

c the character and independence of the applicant and its quali

fying individual

d the length and nature ofthe qualifying individuals experience

in handling freight forwarder duties and

e such further evidence of the fitness willingness and ability o

the applicant to carryon the business of forwarding as the

CommIssion may require

510 15 Surety bond requirements

a Form and amount No license shall be issued to an applicant who

does not have a valid surety bond FMC 59 Rev on file with the

Commission in the amount of 30 000 The amount of such bond sha

be increased by 10 000 for each of the applicant s unincorporated

branch offices Surety companies must be c

ertitled by the U S Depart

ment of the Treasury in order to execute Federal bonds Surety Bon

Form FMC 59 Rev can be obtained in the same manner as Form

FMC 18 Rev under section 51O 13 a of this part and shall read a

follows

c
LICENSING OF INDEPENDENT OCEAN FREIGHT 827

FORWARDERS

FORM FMC 59 REV

BOND NO

FMC LICENSE NO

FEDERAL MARITIME COMMISSION

INDEPENDENT OCEAN FREIGHT FORWARDER S BOND

SECTION 44 SHIPPING ACT 1916

KNOW ALL MEN BY THESE PRESENTS That

Principal hereinafter called Principal and

as

Surety hereinafter called Surety are held and firmly bound unto the

UNITED STATES OF AMERICA in the sum of

for the payment of

which sum we bind ourselves our heirs executors administrators

successors and assigns jointly and severally firmly by these presents

WHEREAS Principal has applied for is about to apply for or holds

a license as an independent ocean freight forwarder pursuant to section

44 of the Shipping Act 1916 and has elected to file this bond with the

Federal Maritime Commission

NOW THEREFORE the condition ofthis obligation is such that if

the Principal shall while this bond is in effect supply the services of an

independent ocean freight forwarder in accordance with the contracts

agreements or arrangements made therefor then this obligation shall be

void otherwise to remain in full force and effect

The liability ofthe Surety shall not be discharged by any payment or

succession of payments hereunder unless and until such payment or

payments shall aggregate the penalty ofthis bond and in no event shall

the Surety s total obligation hereunder exceed said penalty

This bond shall inure to the benefit of any and all persons for whom

the Principal shall have undertaken to act as an independent ocean

freight forwarder

This bond effective the day of

19 and shall continue in effect until

discharged or terminated as herein provided The Principal or the

Surety may at any time terminate the bond by written notice to the

Federal Maritime Commission at its office in Washington D C Such

termination shall become effective thirty 30 days after receipt of said

notice by the Commission The Surety shall not be liable for any

contracts agreements or arrangements made by the Principal after the

expiration of said thirty 30 day period but such termination shall not

affect the liability of the Principal and Surety for any breach of the

is

as
828 FEDERAL MARITIME COMMISSION

condition hereof occurring prior to the date when said termination

becomes effective

The underwriting Surety will promptly notify the Director Bureau

ofCertification and Licensing Federal Maritime Commission Washing

ton D C 20573 ofany claims against this bond

Signed and sealed this day of

19

PLEASE TYPE NAME OF SIGNER UNDER EACH SIGNA

TURE

Individual Principal or Partner Business Address

Individual Principal or Partner Business Address

Individual Principal or Partner Business Address

Corporate Principal

Business Address

Affix Corporate Seal

By

Title

Corporate Surety

Business Address

Affix Corporate Seal

By

Title
LICENSING OF INDEPENDENT OCEAN FREIGHT 829

FORWARDERS

b Filing of bond Upon notification by the Commission by certified

U S mail that the applicant has been approved for licensing the appli

cant shall file with the Director of the Commission s Bureau of Certifi

cation and Licensing a surety bond in the form and amount prescribed

in section 510 15 a of this part No license will be issued until the

Commission is in receipt of a valid surety bond from the applicant If

more than six 6 months elapse between issuance of the notification of

qualification and receipt ofthe surety bond the Commission shall at its

discretion undertake a supplementary investigation to determine the

applicant s continued qualification The fee for such a supplementary

investigation shall be 100 payable by money order certified check or

cashier s check to the Federal Maritime Commission Should the

applicant not file the requisite surety bond within two years ofnotifica

tion the Commission will consider the application to be invalid

c Branch offices A new surety bond or rider to the existing bond

increasing the amount of the bond in accordance with section 51O 15 a

of this part shall be filed with the Commission prior to the date the

licensee commences operation of any branch office Failure to adhere

to this requirement may result in revocation ofthe license

d Termination of bond No license shall remain in effect unless a

valid surety bond is maintained on file with the Commission Upon

receipt ofnotice oftermination of a surety bond the Commission shall

notify the concerned licensee by certified U S mail to its last known

address that the Commission shall without hearing or other proceed

ing revoke the license as ofthe termination date ofthe bond unless the

licensee shall have submitted a valid replacement surety bond before

such termination date Replacement surety bonds must bear an effective

date no later than the termination date ofthe expiring bond

51O 16 Denial of license

Ifthe Commission determines as a result ofits investigation that the

applicant

a will not conduct its forwarding business in a mannerconsistent

with the national maritime policies declared in the Merchant

Marine Act 1936

b fails to meet the definition of an independent ocean freight

forwarder as set forth in section 1 of the Act and section

51O 2jofthis part

c is not fit willing and able properly to carryon the business of

forwarding or to conform to the provisions ofthe Act or the

requirements rules and regulations of the Commission issued

thereunder

d has failed to respond to any lawful inquiry of the Commission

or
830 FEDERAL MARITIME COMMISSION

e has made any willfully false or misleading statement to the

Commission in connection with its application

a letter of intent to deny the application shall be sent to the applican

by certified U S mail stating the reason s why the Commission in

tends to deny the application Ifthe applicant submits a written reques

for hearing on the proposed denial within twenty 20 days after receip

ofnotification such hearing shall be granted by the Commission pursu

ant to its Rules of Practice and Procedure contained in part 502 ofthis

Chapter Otherwise denial ofthe application will become effective and

the applicant shall be so notified by certified U S mail Civil penalties

for violations of the Act or any Commission order rule or regulation

may be assessed in any proceeding on the proposed denial of a license

or may be compromised for any such violation when a proceeding has

not been instituted in accordance with part 505 ofthis Chapter

510 17 Revocation or suspension of license

a Grounds for revocation Except for the automatic revocation fo

termination of a surety bond under section 510 15 d ofthis part or a

provided in section 51O 15 c of this part a license may be revoked o

suspended after notice and hearing for any of the following reasons

1 Violation of any provision of the Act as amended or any

other statute or Commission regulation related to carrying o

the business offorwarding

2 Failure to respond to any lawful inquiry by the Commission

3 Making a willfully false or misleading statement to the Com

mission in connection with an application for a license or its

continuance in effect

4 Change of circumstances whereby the Commission determine

that the licensee no longer qualifies to be an independen

ocean freight forwarder or

5 Conduct which the Commission determines renders the licens

ee unfit or unable to carryon the business of forwarding

b Civil penalties As provided for in part 505 of this Chapter civ

penalties for violations of the Act or any Commission order rule o

regulation may be assessed in any proceeding to revoke or suspend 

license and may be compromised when such a proceeding has not bee

instituted

c Notice of Revocation The Commission shall publish in the Federa

Register its order of revocation

510 18 Application after revocation or denial

Whenever a license has been revoked or an application has bee

denied because the Commission has found the licensee or applicant t

be unfit any further application within 3 years ofthe date of the mos

recent conduct on which the Commission s notice of revocation o

denial was based made by such former licensee or applicant or b

another applicant employing the same qualifying individual or con
LICENSING OF INDEPENDENT OCEAN FREIGHT 831

FORWARDERS

trolled by persons on whose conduct the Commission based its determi

nation oflack of fitness shall be reviewed directly by the Commission

51O 19 Issuance and use of license

a Qualification necessary for issuance The Commission will issue a

license if it determines as a result ofits investigation that the applicant

is fit willing and able properly to carryon the business of ocean

freight forwarding and is otherwise qualified within the provisions of

applicable statutes and the requirements rules and regulations of the

Commission

b To whom issued The Commission will issue a license only in the

name ofthe applicant whether the applicant be a sole proprietorship a

partnership or a corporation and the license will be issued to only one

legal entity A license issued to a sole proprietor doing business under a

trade name shall be in the name of the sole proprietor indicating the

trade name under which the licensee will be conducting business Only

one license shall be issued to any applicant regardless of the number of

names under which such applicant may be doing business

c Use limited to named licensee Except as otherwise provided in this

part such license is limited exclusively to use by the named licensee

and shall not be transferred to another person

51O 20 Changes in organization

a The following changes in an existing licensee s organization re

quire prior approval ofthe Commission

I Transfer of a corporate license to another person

2 Change in ownership of an individual proprietorship

3 Addition of one or more partners to a licensed partnership

4 Change in the business structure of a licensee from or to a sole

proprietorship partnership or corporation whether or not

such change involves a change in ownership

5 Sale or transfer of five 5 percent or more of stock of a

licensed corporation to new stockholder interests

6 Acquisition of one or more additional licensees whether for

purposes ofmerger consolidation or control see section 15 of

the Act

7 Any change in a licensee s name or

8 Change in the identity or status of the designated qualifying

individual except as discussed in paragraphs b and c ofthis

section

b Operation after death of sole proprietor In the event the owner of a

licensed sole proprietorship dies the licensee s executor administrator

heir s or assign s may continue operation of such proprietorship

solely with respect to shipments for which the deceased sole proprietor

had undertaken to act as an independent ocean freight forwarder pursu

ant to the existing license if the death is reported within thirty 30
832 FEDERAL MARITIME COMMISSION

days to the Commission and to all principals for whom services on suc

shipments are to be rendered The acceptance or solicitation of an

other shipment is expressly prohibited until a new license has bee

issued Applications for a new license by the said executor administra

tor heir s or assign s shall be made on Form FMC 18 Rev and sha

be accompanied by the transfer fee set forth in section SIO 20e ofthi

part

c Operation after retirement resignation or death of qualifying individ

ual When a partnership or corporation has been licensed on the basi

of the qualifications of one or more of the partners or officers thereo

and such qualifying individual s shall no longer serve in a full time

active capacity with the firm the licensee shall report such change to

the Commission within thirty 30 days Within the same 30 day period

the licensee shall furnish to the Commission the name s and detailed

ocean freight forwarding experience of other active managing

partner s or officer s who may qualify the licensee Such qualifying

individua1 s must meet the applicable requirements set forth in section

51O I1 a of this part The licensee may continue to operate as an

independent ocean freight forwarder while the Commission investigates

the qualifications ofthe newly designated partner or officer

d

Incorporation of branch office In the event a licensee s validly

operated branch office undergoes incorporation as a separate entity the

licensee may continue to operate such office pending receipt of a

separate license provided that

I the separately incorporated entity applies to the Commission

for its own license within ten 10 days after incorporation

and

2 the continued operation of the office is carried on as a bona

fide branch office of the licensee under its full control and

responsibility and not as an operation of the separately incor

porated entity

e Application form andfee Applications for Commission approval o

status changes or for license transfers under section510 20 a of this

part shall be filed in duplicate with the Director Bureau of Certifica

tion and Licensing Federal Maritime Commission on Form FMC 18

Rev together with a processing fee of 100 made payable by money

order certified check or cashier s check to the Federal Maritime

Commission

SI0 21 Branch offices interim operation

A licensee operating a separately incorporated but not separately

licensed branch office approved by the Commission prior to the effec

tive date of this rule may continue to operate such officeowhiIe the

application by the branch office for an individual license is pending No

such branch office may continue in operation unless it files an applica
LICENSING OF INDEPENDENT OCEAN FREIGHT 833

FORWARDERS

tion for an individual license with the Commission within one year after

the effective date ofthis rule

SUBPART C DUTIES AND RESPONSIBILITIES OF FREIGHT

FORWARDERS FORWARDING CHARGES REPORTS TO

COMMISSION

51O 31 General duties

a License name and number Each licensee shall carryon the

business of forwarding only under the name in which its license is

issued and only under its license number as assigned by the Commis

sion Wherever the licensee s name appears on shipping documents its

FMC license number shaH also be included

b Stationery and billing forms The name and license number ofeach

licensee shall be permanently imprinted on the licensee s office station

ery and billing forms The Commission may temporarily waive this

requirement for good cause shown if the licensee rubber stamps or

types its name and FMC license number on all papers and invoices

concerned with any forwarding transaction

c Use of license by others prohibition No licensee shall permit its

license or name to be used by any person who is not a bona fide

individual employee of the licensee Unincorporated branch offices of

the licensee may use the license number and name of the licensee if

such branch offices 1 have been reported to the Commission in writ

ing and 2 are covered by an increased bond in accordance with

section 51O 15 c ofthis part

d Arrangements with forwarders whose licenses have been revoked

Unless prior written approval from the Commission has been obtained

no licensee shall directly or indirectly 1

agree to perform forwarding

services on export shipments as an associate correspondent officer

employee agent or sub agent of any person whose license has been

revoked or suspended pursuant to section 510 17 of this part 2 assist

in the furtherance of any forwarding business of such person 3 share

forwarding fees or freight compensation with any such person or 4

permit any such person directly or indirectly to participate through

ownership or otherwise in the control or direction of the freight

forwarding business ofthe licensee

e Arrangements with unauthorized persons No licensee shaH enter

into an agreement or other arrangement with a person not authorized

by this part to transact forwarding business for others so that any

resulting fee compensation or other benefit inures to the benefit of the

unlicensed person When a licensee is employed for the transaction of

forwarding business by an unlicensed person who is not the actual

shipper the licensee must transmit to the actual shipper of the cargo a

copyof the invoice for services rendered
I

834 FEDERAL MARITIME COMMISSION

t

False or fraudulent claims false information No licensee sh

prepare or file or assist in the preparation or filing of any claim

affidavit letter ofindemnity or other paper or document concerning 

forwarding transaction which it has reason to believe is false or fraud

lent nor shaIl any such licensee knowingly impart to a principa

oceangoing common carrier or other person false information relativ

to any forwarding transaction

g Response to requests of Commission Upon the request of an

authorized representative of the Commission a licensee shaIl mak

available promptly for inspection or reproduction all records and boo

of account in connection with its forwarding business and shaIl r

spond promptly to any lawful inquiries by such representative

h Policy against rebates The foIlowing declaration shall appear o

all invoices and certifications under section 1O 32h and 51O 33 c 

this part

Name of Firm has a policy against payment solicitation or

receipt of any rebate directly or indirectly which would be

unlawful under the United States Shipping Act 1916 as

amended

5 10 32 Forwarder and principal fees

a Beneficial interest No licensee shall act in the capacity of 

shipper consignee seIler or purchaser of any shipment in commerc

from the United States nor have any beneficial interest in such 

shipment

b Compensation or fee sharing No licensee shall share directly o

indirectly any compensation or freight forwarding fee with a shippe

consignee seller or purchaser or an agent affiliate oremployee there

of nor with any person advancing the purchase price of the propert

or guaranteeing payment therefor nor with any person having a benef

cial interest in the shipment

c Withholding information No licensee shall withhold any informa

tion concerning a forwarding transaction from its principal

d Due diligence Each licensee shall exercise due diligence to asce

tain the accuracy of any information it imparts to a principal concern

ing any forwarding transaction

e Errors and omissions Each licensee shaIl comply with the laws o

the United States and any involved State Territory or possessio

thereof and shall assure that to the best ofits knowledge there exists n

error misrepresentation in or omission from any export declaration

bilI of lading affidavit or other document which the licensee execute

in connection with a shipment A licensee who has reason to believ

that its principal has not with respect to a

shipment to be handled b

such licensee complied with the laws ofthe United States or any State

Commonwealth or Territory thereof or has made any error or misrep

resentation in or omission from any export declaration bilI of lading
LICENSING OF INDEPENDENT OCEAN FREIGHT 835

FORWARDERS

affidavit or other paper which the principal executes in connection

with such shipment shall advise its principal promptly of the suspected

noncompliance error misrepresentation or omission and shall decline

to participate in any transaction involving such document until the

matter is properly and lawfully resolved

f Express written authority No licensee shall endorse or negotiate

any draft check or warrant drawn to the order of its principal without

the express written authority of such principal

g Receipt for cargo Each receipt issued for cargo by a licensee shall

be clearly identified as Receipt for Cargo and be readily distinguish

able from a bill oflading

h Invoices list of charges exceptions

1 Each licensee shall use an invoice which lists separately for

each shipment

i the actual amount of ocean freight assessed by the ocean

going common carrier

H the actual amount of consular fees paid

Hi the insured value the actual insurance rate and the actual

premium paid the insurance company for insurance ar

ranged

iv the actual cost to the licensee for each accessorial service

arranged by the licensee to be performed by others in

connection with the shipment and

v the total service fee charged by the licensee unless the

licensee has a special contract arrangement with the prin

cipal

2 Exceptions

i The licensee need not list separately its costs for services

set forth under sections 51O 32 h I ii 51O 32 h 1 Hi

and 51O 32 h 1 iv of this part if the licensee has provid

ed its principal with a prior written quotation of total

charges for shipment s a copy of which it retains in the

shipment file and has received written authorization from

the principal to forward the shipment s for that total

charge

H Licensees who offer to forward small shipments for uni

form charges available to the public at large and duly

filed with the Commission shall not be required to itemize

the components of such uniform charges on shipments so

long as the charges have been quoted in writing to the

shipper prior to the time ofshipment

iii Licensees who maintain a uniform schedule of fees for

placing insurance and for performing accessorial services

stated by dollar amount and or percentage of markup

need not itemize the components of such charges in their
836 FEDERAL MARITIME COMMISSION

invoices Licensees who elect to maintain such uniform

pricing schedules must make the current schedule an

every superseded schedule available upon request an

shall not assess fees different from those specified in th

effective schedule Such a schedule shall be filed with th

Commission posted in a conspicuous place in the fo

warder s office and shall be mailed upon request to ship

pers

i Special contracts To the extent that special arrangements or con

tracts are entered into by a licensee the licensee shall not deny equ

terms to other shippers similarly situated

j

Reduced forwarding fees Except as otherwise provided in this pa

no licensee shall render or offer to render any forwarding service fre

of charge or at a reduced fee in consideration of receiving compensa

tion from oceangoing common carriers on the relevant shipment or fo

any other reason

k Accounting to principal Each licensee shall account to i

principal s for overpayments adjustments of charges reductions 

rates insurance refunds insurance monies received for claims proceed

of c od shipments drafts letters of credit and any other sums du

such principal s These sums shall be forwarded promptly to the prin

cipal or with the principals written consent may be used to offset th

licensee s outstanding receivables due from such principal

510 33 Forwarder and carrier compensation

a Disclosure ofprincipal No licensee acting in the capacity of a

independent ocean freight forwarder shall identify itself as the shippe

on the shipper identification line which appears above the cargo de

scription data on the bill of lading The actual shipper must always b

disclosed thereon The forwarder s name may appear after the name o

the actual shipper but the forwarder must be identified as agent

b Certification required for compensation An oceangoing commo

carrier may pay compensation to a licensee pursuant to such carrier 

tariff provisions If the carrier s tariff so provides such compensatio

shall be paid for any shipment forwarded on behalf of others when an

only when such carrier is in possession of a certification in the form

prescribed in section 51O 33 c of this part and the actual shipper ha

been disclosed on the bill of lading as provided for in section 51O 33 a

ofthispart The oceangoing common carrier shall be entitled to rely o

such certification unless it knows that the certification is incorrect an

shall retain such certification for a period of five 5 years

c Form of certification Priorto receipt ofcompensation the license

shall file with the carrier in addition to the anti rebate certificatio

required by section 510 31 h of this part a signed certification as se

forth below on one copy of the relevant ocean bill of lading whic
LICENSING OF INDEPENDENT OCEAN FREIGHT 837

FORWARDERS

indicates performance of at least two ofthe listed services in addition to

arranging for space

The undersigned hereby certifies that it is the holder of valid

FMC License No issued by the Federal Maritime

Commission and has in addition to soliciting and securing the

cargo specified herein or booking or otherwise arranging for

space for such cargo performed at least two 2 ofthe follow

ing services as indicated

1 Coordinated the movement of the cargo to shipside

2 Prepared and processed the ocean bill of lading

3 Prepared and processed dock receipts or delivery orders

4 Prepared and processed consular documents or export declara

tions

5 Paid the ocean freight charges

A copy of such certificate shall be retained by the licensee pursuant to

section 510 34 ofthis part

d Compensation pursuant to tariffprovisions No licensee or employ

ee thereof shall accept compensation from an oceangoing common

carrier which is different than that specifically provided for in the

carrier s effective tariff s

lawfully on file with the Commission

e Compensation services performed by underlying carrier exemptions

No licensee shall charge or collect compensation in the event the

underlying oceangoing common carrier or its agent has at the request

of such licensee performed any of the forwarding services set forth in

section 51O 2 h of this part unless no other licensee is willing and able

to perform such services or unless the Commission has granted a port

wide exemption from this rule to oceangoing common carriers or their

agents in the port of loading Such exemptions may be granted by the

Commission upon 1 application of any licensed forwarder 2 publica

tion of notice of application for such exemption in the Federal Register

with a

twenty 20 day public comment period and 3 a

finding by the

Commission that an insufficient supply of forwarding services is being

offered by licensees domiciled at the port of loading Exemptions shall

remain in effect until rescinded by the Commission

f Duplicative compensation or brokerage Where an oceangoing

common carrier has paid or has incurred an obligation to pay either

brokerage to an ocean freight broker or compensation to a licensee

such carrier shall not be obligated to pay additional compensation to

any other person for forwarding services rendered on behalf of the

same cargo

g

Licensed oceangoing common carriers compensation An oceango

ing common carrier agent or person related thereto acting as an

independent ocean freight forwarder may collect compensation when

and only when the following certification is made on the line copy
838 FEDERAL MARITIME COMMISSION

ofthe underlying carrier s bill oflading in addition to all other certif

cations required by this part

The undersigned certified that neither it nor any related

person has issued a bill of lading covering the ocean transpor

tation of the shipment covered by this bill of lading or other

wise undertaken common carrier responsibility therefor

Whenever a person acts in the capacity of an oceangoing commo

carrier or agent thereof as to any shipment such person shall not b

entitled to collect compensation nor shall any underlying carrier pa

such compensation to such oceangoing common carrier or agent there

of for such shipment

5l0 34 Records required to be kept

Each licensee shall maintain in an orderly and systematic manne

and keep current and correct all records and books of account i

connection with its business of forwarding These records must be kep

in the United States in such manneras to enable authorized Commissio

personnel to readily determine the licensee s cash position account

receivable and accounts payable and to verify information submitte

under section 510 35 ofthis part The licensee must maintain the follow

ing records for a period offive years

a Generalfinancial data A current running account of all receipt

and disbursements accounts receivable and payable and daily cas

balances supported by appropriate books ofaccount bank deposit slips

cancelled checks and a monthly reconciliation of bank statement

b Types of services by shipment A separate file for each shipmen

which includes a copy of each document prepared processed or ob

tained by the licensee with respect to such shipment

c Receipts and disbursement by shipment A record of all sum

received and or disbursed by the licensee for services rendered an

out ofpocket expenses advanced in connection with each shipmen

including specific dates and amounts

d Special contracts A true copy or if oral a true and complet

memorandum of every special arrangement or contract with a princi

pal ormodification or cancellation thereof to which it may be a party

Authorized Commission personnel and bona fide shippers shall hav

access to such records upon reasonable request

e Exempt non exclusive cooperative working arrangements As provid

ed in section SIO 36b of this part

is10 35 Reports required to befiled

Each licensee shall file with the Commission information and report

as follows

a Samples of office stationery and invoice forms Within sixty 60

days after licensing or approval of a change in business name o

organization
LICENSING OF INDEPENDENT OCEAN FREIGHT 839

FORWARDERS

b Non exempt section 15 agreements As provided in section 510 36

ofthis part

c Anti rebate certification By March 1st of each year the Chief

Executive Officer of every licensee shall certify that it has a policy

against rebates that it has promulgated such policy to all appropriate

individuals in the firm that it has taken steps to prevent such illegal

practices which measures must be fully described in detail and that it

will cooperate with the Commission in any investigation of suspected

rebates This certification shall be in accordance with the following

format
840 FEDERAL MARITIME COMMISSION

NAME OF FILING FIRM

CERTIFICATION OF POLICIES AND EFFORTS TO COMBAT

REBATING IN THE FOREIGN COMMERCE

OF THE UNITED STATES

Pursuant to the provisions of section 2l b of the Shipping Act 191

as amended and Federal Maritime Commission regulations promulga

ed pursuant thereto 46 C F R parts 510 and 552

I Chief Executive Officer o

name of firm holder of valid independent ocean freight forwarde

license state under oath that

1 It is the policy of name of firm to prohibit the participatio

of said freight forwarder in the payment solicitation or re

ceipt of any rebate directly or indirectly to or by any carrie

or shipper which is unlawful under the provisions of th

Shipping Act of 1916 as amended

2 Bach owner officer employee and agent of name of firm

was notified or reminded of this policy on or befor

ofthe present year

3 Set forth the details of measures instituted within the filin

firm or otherwise to prohibit participation in the payment o

illegal rebates in the foreign commerce of the United States

4 Name of firm affirms that it will fully cooperate with th

Commission in its investigation ofsuspected rebating in Unite

States foreign trades

Signature

Subscribed to and sworn before me this day o

19

S

NOTARY PUBLIC
LICENSING OF INDEPENDENT OCEAN FREIGHT 841

FORWARDERS

51O 36 Section 15 Agreements

a Filing for approval A copy of each written agreement and a true

and complete memorandum of each oral agreement between a licensee

and any other licensee common carrier or other person subject to the

Act and modifications or cancellations thereof must be filed with the

Commission for approval in accordance with part 522 of this Chapter

if they are subject to section 15 of the Act and have not been exempted

from the requirements of that section Such submissions shall clearly

show the nature of the agreement the parties thereto the port s

involved and subject matter in detail and shall refer to any previously

filed agreements to which they may relate Except as provided for in

paragraph b ofthis section no agreements or modifications or cancel

lations thereof shall be implemented without prior approval of the

Commission

b Exemptions Nonexclusive cooperative working agreements be

tween licensed independent ocean freight forwarders which provide

for the completion of documentation and performance of other for

warder services on behalf of the parties to the agreements are exempt

from the provisions of section 15 of the Act and need not be filed with

the Commission for approval but shall be retained in the files of the

licensees Such agreements shall be in the following format

NONEXCLUSIVE COOPERATIVE WORKING AGREEMENT

Parties to the agreement are

a Company name Street address City State Zip

FMC No

b Company name Street address City State Zip

FMC No

Terms ofthe agreement

1 This is a cooperative nonexclusive working arrangement ex

empted under 46 C F R 51O 36 b in which either party may

complete documentation and perform other freight forwarder

functions on behalf of the other party Either of the parties

may engage or be engaged by other forwarder s under a

similar nonexclusive working agreement or pursuant to an

agreement approved by the Federal Maritime Commission

under the provisions of section 15 of the Shipping Act 1916

as amended

2 Forwarding fees are to be divided between the parties as

follows

3 Ocean freight compensation is to be divided between the par

ties as follows
842 FBDBRAL MARITIMB COMMISSION

4 This agreement shall not be terminated on less than 15 days

notice to the other party

Signature Official Title

Type in company name

Date

Signature Official Title

Type in company name

Date

By the Commission

5 JOSEPH POLKING

Acting Secretary

i
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 420 1

THE STOP SHOP COMPANIES INC BRADLEES DIVISION

Y

BARBER BLUE SEA LINE AND

BARBER STEAMSHIP LINES INC

NOTICE

April 28 1981

Notice is given that the time within which the Commission could

determine to review the March 25 981 order of dismissal of the

Settlement Officer in this proceeding has expired No such determina

tion has been made and accordingly the dismissal has become adminis

trative y

final

5 JOSEPH C POLKING

Acting Secretary
i

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 420 1

STOP SHOP COMPANIES INC BRADLEES DIVISION

v

BARBER BLUE SEA LINE AND

BARBER STEAMSHIP LINES INC

Complaint dismissed

DECISION OF JAMES S ONETO SETTLEMENT OFFICER1

Finalized April 28 1981

By complaint timely filed through an auditing service the complain

ant a corporation whose primary enterprise is that of a

departmen

store seeks the return of monies paid for charges alleged to have bee

in excess of those lawfully applicable for transportation in violation o

section 18b 3 of the Shipping Act 1916 on a shipment of hardwar

from Taiwan to Boston via New York Two hundred and fifty tw

dollars and sixty four cents are sought as reparation

The complaint was dismissed as juriSdictionally defective because th

complainant did not appear to be the real party in interest Tha

decision was reversed and the proceeding remanded for amendment o

the complaint Thereafter the complaint was satisfactorily amended t

show the real party complainant

The second decision denied reparation because the evidence adduce

did not demonstrate the validity of the claim with reasonable certaint

and definiteness In reviewing the second decision the Commissio

agreed that the complainant s presentation did not support an award o

reparation nevertheless it ruled the complainant should have bee

afforded an opportunity to explain or correct the inconsistencies in it

submissions Accordingly the second decision wasalso reversed and th

proceeding again remanded for the issuance of a supplemental decisio

within forty five days from the date of its order February 11 198

The complainant was requested on February 17 to provide any add

tional information by March 16 No further information having bee

forthcoming from the complainant explaining or correcting the incon

1 Both parties having consented to the informal procedure under Subpart S of the Commission 

Rules of Practice and Procedure 46 C F R 502 301 304 this decision will be final unless the Com

mission elects to review it within 30 days frorn the date of service thereof
STOP SHOP CO BRADLEES DIVISION V BARBER BLUE 845

SEA LINE

sistencies in its submissions as ofthe date of this decision the complaint

is herewith dismissed

8 JAMES 8 ONETO

Settlement Officer

March 25 1981
FEDERAL MARITIME COMMISSION

DOCKET NO 76 34

TARIFF FMC 6 RULE 22 OF THE CONTINENTAL

NORTH ATLANTIC WESTBOUND FREIGHT CONFERENCE

DOCKET NO 76 36

TARIFF RULES CONCERTEDLY PUBLISHED DEFINING

PRACTICES OF CONFERENCES AND RATE AGREEMENT

MEMBERS REGARDING THE ACCEPTANCE AND

RESPONSIBILITY FOR SHIPPER OWNED OR SHIPPER LEASED

TRAILERS OR CONTAINERS

ORDER

April 30 1981

On January 27 1981 the Commission issued an Order on Reman

following the decision of the United States Court of Appeals in Inte

pool Ltd v FMC D C Cir No 79 1194 which vacated the Commi

sion s Report and Order in these consolidated dockets and remande

the case to the Commission for further proceedings The Commission 

Order on Remand invited interested parties especially container lea

ing companies to file statements indicating whether they believed fu

ther proceedings were necessary and if so to describe the evidentia

issues which required determination and the appropriate procedures f

resolving such issues Interested parties were also invited to comme

as to whether other procedures eg

rule making might be more desir

ble for considering the general question of container use practices an

allowances from a broader perspective

In response to its January 27th Order the Commission received fiv

separate submissions Responses were received from 1 Trans Ocea

Leasing Corporation a petitioner in D C Cir No 79 1194 2 t

other two petitioners Interpool Ltd and ITEL Corporation as well 

a number of shippers 3 the Pacific Coast European Conference 

the North European U S Pacific Freight Conference and 5 fo

other North Atlantic Conferences No statements were received fro

the Pacific Westbound Conference or the Far East Conference wh

were intervenors in the appeal of the Commission s previous Repo

and Order The Department of Justice which opposed the Commissi

on appeal also filed no response to the Order on Remand All respon
NEUTRAL CONTAINER RULES 847

ing parties however expressed the view that further proceedings were

unnecessary and the current proceedings should be discontinued

In its Order on remand to the Commission the Court did not indi

cate whetherit believed the neutral container rules should be approved

or disapproved

All of the participating conferences in Dockets Nos 76 34 and 76 36

have discontinued the neutral container rules prescribed by the tariff

regulations in issue While the Pacific Coast European Conference

PCEC has had a similarly worded tariff rule in operation for nearly

10 years this conference has represented to the Commission that its

rule prohibiting carriers from paying rental or lease charges for shipper

furnished containers is different in effect and implementation from the

North Atlantic neutral container rules that are the primary subject of

this proceeding Despite the existence of PCEC s rule the container

leasing companies nevertheless contend that there is no reason to con

tinue these proceedings at this time

Because there is no known neutral container rule presently in

effect and no interested party has expressed an interest in having these

or alternative proceedings involving the neutral container rule contin

ued the Commission has concluded that there is no immediate regula

tory purpose to be served by going forward with this investigation The

Commission has therefore decided to discontinue all further proceed

ings herein If any conference should seek to implement a neutral

container rule ofthe type covered by this proceeding the Commission

can sua sponte or upon application or complaint of an aggrieved party

institute a new proceeding to determine whether such rules are permit

ted under provisions of the Shipping Act and can be promulgated

under the authorization given to conferences by their section 15 agree

ments

THEREFORE IT IS ORDERED That proceedings in Dockets

Nos 76 34 and 76 36 will not be reopened and are hereby discontinued

By the Commission

8 JOSEPH C POLKING

Acting Secretary
848 FEDERAL MARITIME COMMISSION

Acting Chairman Leslie Kanuk dissenting I cannot agree with t

majority s decision to discontinue these proceedings because I belie

that this action is inconsistent with the court s decision remanding t

case to the Commission See my dissenting opinion to the Order 

Remand served January 27 1981 The court specifically directed t

Commission to reconsider the rules in terms of their effect on compe

tion Interpool Ltd v Federal Maritime Commission No 79 1194 S

Op at 18 D C Cir Nov 18 1980 By not following this cle

instruction the Commission has failed to satisfy the terms of t

remand
FEDERAL MARITIME COMMISSION

DOCKET NO 80 73

KELCO DIVISION OF MERCK COMPANY

v

JOHNSON SCANSTAR

NOTICE

May 4 1981

Notice is given that no exceptions have been filed to the March 31

1981 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

5 JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

NO 80 73

KELCO DIVISION OF MERCK COMPANY

v

JOHNSON SCANSTAR

Complainant found to have been overcharged 4 597 33 on two shipments found to ha

consisted of propylene glycol alginate and xanthan gum rather than of synthe

resins and Johnson Scanstar a joint service found properly named as responde

Albert W Risch for the complainant Kelco a division of Merck Compan

David C Nolan and F Conger Fawcett for respondent Johnson Scanstar

INITIAL DECISION OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

Finalized May 4 1981

The shortened procedure was followed By complaint dated at Ch

cago Illinois September 30 1980 filed October I 1980 and served o

October IS 1980 the complainant Kelco a division ofMerck Com

pany a New Jersey corporation engaged in the manufacture and dist

bution of chemicals and chemical products alleges that responden

Johnson Scanstar billed and collected inapplicable freight charges o

two shipments made by the complainant from Los Angeles California

to Liverpool England respectively on September 22 1978 and o

October 26 1978 The complainant alleges that it was overcharged 

total of 4597 33 in violation of section 18b 3 of the Shipping Ac

1916 the Act

The shipments both were described on the bills oflading as syntheti

resin dry non hazardous The first shipments consisted of one 20 foo

container S T C said to contain 200 drums synthetic resins dry non

hazardous shipper s load count The second shipment consisted o

two 4O foot containers S T C 1090 drums synthetic resin dry non

hazardous shipper s load count

Both bill of lading 730302 dated September 22 1978 and bill o

lading 63041 dated October 26 1978 are marked Freight Prepaid

The first shipment weighed 23 800 pounds or 10 796 kilograms an

measured 920 cubic feet or 26 052 cubic meters

1 This decision will become thedecision of the Commission in theabsence of review thereof by t

Commission Rule 227 Rules of Practice and Procedure 46 CF R 502 227
KELCO DIVISION OF MERCK CO V JOHNSON 851

SCANSTAR

The second shipment weighed 94 704 pounds or 42 974 kilograms

and measured 2 988 cubic feet or 84 612 cubic meters

Both shipments were charged on the basis of metric tons of 1 000

kilograms per ton

The basic freight rate charged was 294 25 per metric ton applicable

on Resins Synthetic Viz NOS Non Hazardous Value per 1000

kilos over 2 755 75 as per 1st revised page 187 A of Pacific Coast

European Conference Tariff No FMC 16 Thus basic freight charges

on the first shipment for 10 796 metric tons were 3 176 72 and for the

second shipment for 294 25 metric tons were 12 645 10

Other charges of 845 per metric ton billed and collected are not in

issue They were 90 15 and 358 83 respectively on the first and

second shipments

The sought basic freight rate is 208 75 per metric ton applicable on

Algin in Fiber Drums Viz Propylene Glycol Alginate item 5819910

as per 8th revised page 89 of the conference s tariff For the first

shipment at this rate basic charges would be 2 253 67 resulting in an

alleged overcharge of 923 05

For the second shipment the sought basic freight rate also is 208 75

per metric ton applicable on Algin in Fiber Drums Viz Propylene

Glycol Alginate again as per 8th revised page 89 of the tariff for part

of the second shipment and for the other part of the second shipment

the same rate applicable on Xanthan Gum in Fibre Drums item

292 2090 as per 5th revised page 218 of the conference s tariff the rate

on the latter commodity subject to an expiration date of November 26

1978 For the second shipment basic charges at the sought rate would

be 8 970 82 resulting in an alleged overcharge of 3 674 28

Total alleged overcharges for the two shipments are 4 597 33

All ofthe above three tariff items are in the same General Section

of the conference s tariff providing commodity code numbers and

commodity descriptions and packagings In other words their location

in the tariff is no reason to favor one of these tariff listings over

another as might be the case if these items were listed in different

sections of a tariff

The shipments were described in the bill of lading as synthetic resins

Also the shipper s export declarations described the shipments as syn

thetic resins dry non hazardous Packing lists also described the ship

ments as synthetic resin and show that the containers were sealed The

second shipment on the FALSTRIA made on October 26 1978 was the

subject of a routine cargo policing inspection by the conference s neu

tral body and no discrepancies were found When the complainants

freight forwarder requested space for the two shipments the commod

ities were said to be synthetic resin

On August 2 1979 Ocean Freight Consultants Inc apparently

presented two overcharge claims on behalf of the complainant to Gen
I

j

I

852 FEDERAL MARITIME COMMISSION

eral Steamship Corporation Ltd acting as general agents for Johnso

Scanstar In reply to a follow up letter dated December 5 1979 th

general agents advised on February 6 1980 that they were unable 

favorably consider the claims at that time because of Rule 19 of th

conference which states that overcharge Iaims based on errors 

description unless presented to the cartier in writing before the shi

ment involved leaves the custody ofthe carrier will not be considere

Of course a

shipper may yet prove his claim of misdescription an

misrating of cargo by the filing of a complaint with the Commissio

but the shipper bears a heavy burden of proof as to what actually wa

shipped The complainant contends that the first shipment should hav

been described as kelcoloidO propylene glycol alginate and rated 

algins viz propylene glycol alginate The complainant contends th

the second shipment should have been described and rated partly 

xanthan gum and partly as kelcoloid 0 HVF propylene glyc

alginate

GENERAL DISCUSSION AND CONCLUSIONS

Besides the issue as the merits or proper description of the commod

ities shipped there are other issues raised in response to the complain

These other jurisdictional issues will be discussed first

The complaint was filed more than two years after the first shipme

moved The complainant states that these claims were received by th

respondent within the legal two 2 year Statute of Limitation

Perhaps Mr A W Risch the manager of distributiQnand sales oser

ice who filed the complaint of Kelco is aware of the statute of th

Interstate Commerce Commission which prQvidesin part in its sectio

16 c that for recovery of overcharges the stat lte may be tolled if claim

for the overcharges has been presented in writing to the carrier withi

the statutory period of limitation and said period shall be extended t

include six months from the time notice in writing is given by the carrie

to the claimant ofdisallowance of the claim

However the statute of limitations ofthe Federal Maritime Commis

sion contains no similar provision and a complaint under the Shippin

Act for overcharges must beflied with the Commission rather than wit

the carriertQ toll the statute

Nevertheless the response of Johnson Scanstar admits Exhibit No

5 that a check for the freight funds for the first shipment herein wa

received in the custody of the carrier s agent on October 13 1978 

one treats this date as the date on which the cause of action accrued

then the complaint was filed timely as to the tirst shipment Johnso

Scanstar states that the complainant was allowed this briefcredit perio

for cash payment only because it had a surety bend on file with th

Pacitic Coast European Conference and the argument is made that th

surety bond irrevocably bound the complainant and its surety to pay
KELCO DIVISION OF MERCK CO V JOHNSON 853

SCANSTAR

ment of the freight charges on September 22 1978 the bill of lading

date

It is concluded and found since Johnson Scanstar or the conference

did not go against the surety bond as of September 22 1978 that the

cause ofaction did not occur then but in fact occurred when the check

for the freight for the first shipment was received on October 13 1978

Thus the first shipment was not time barred

In respondents answering memorandum under the shortened proce

dure they consent to the shortened procedure make certain admissions

and denials and assert as an affirmative defense that the respondents

are not the proper parties and that the Commission lacks jurisdiction

over them

The pertinent two bills oflading at their tops list one ofthe contract

ing parties as Johnson Scan Star in large print and in small print

Joint Service of REDERIAKTIEBOLAGET NORDSTJERNAN

JOHNSON LINE STOCKHOLM THE EAST ASIATIC COMPA

NY LTD COPENHAGEN BLUE STAR LINE LTD LONDON

The bills of lading at the bottom show Signed for the Master Acting

for the Owner By General Steamship Corporation Ltd as Agents

Only

The other contracting party shown is the shipper Kelco Company

Clark New Jersey the complainant

The shipments were made freight prepaid and freight payments were

made to the General Steamship Corporation Ltd as agents only

The complaint listed Johnson Scanstar as the single respondent and

it was served on the General Steamship Corporation Ltd 400 Califor

nia Street San Francisco California as agent for the respondent

In the answering memorandum it is stated that the response is made

by Johnson Scanstar the trade name for a joint service of three common

carriers by water in the U S foreign commerce and by Johnson Scanstar

North America a

partnership consisting of Axel Johnson Corporation

the East Asiatic Co Inc and the Blue Star Line Inc emphasis

supplied

The three common carriers by water listed on the pertinent bills of

lading following Johnson Scanstar Joint Service or are the Johnson

Line the East Asiatic Company Ltd and the Blue Star Line Ltd

emphasis supplied

The respondents including Johnson Scanstar the joint service who

have responded to the complaint state that they are not common

carriers by water in the U S foreign commerce within the meaning of

the Shipping Act

Respondents state that Johnson Scanstar is the trade name for a

joint service operated by three common carriers by water in the U S

foreign commerce pursuant to Federal Maritime Agreement No 9973

namely Blue Star Line Ltd of the United Kingdom the East Asiatic
854 FEDERAL MARITIME COMMISSION

Company Ltd of Denmark and Rederiaktiebolaget Nordstjerna

Johnson Line of Sweden The Commission s records Approved Co

ference Rate Interconference Pooling and Joint Service Agreement

September 1 1980 lists Johnson Scanstar 1S as having the address 

P O Box 7494 S 103 92 Stockholm Sweden

Insofar as the response is made by Johnson Scanstar North America

and by its partnership members these are not proper responden

herein inasmueh as neither this partnership nor any ofits partners ow

operate or control any vessels have any tariffs on file or otherwise a

as common carriers or persons subject to the Shipping Act

Johnson Scanstar the joint service located in Stockholm throug

its agent General Steamship Corporation Ltd located in San Franci

co is a common carrier subject to the Shipping Act

The shipping contracts here in issue the bills of lading listed John

son Scanstar Joint Service of as the commo

carrier by water party to the contract

While the bills of lading list the vessels MVMEONIAand MV

FALSTRIA respectively for the first and second shipments there is n

designation on the bills of lading of which underlying carrier of th

three may have owned or used these vessels in this joint servic

There was and is no duty on the complainant to ascertain whethe

Johnson Scanstar located in Sweden was or is a corporation partne

ship or other type of entity sanctioned by the Swedish or other law

Suffice it was that complainant dealt with and paid the freight charge

to the agent for Johnson Scanstar

Even the respondents show how questionable their own argument i

in that they first listed on November 10 1980 in the original answerin

memorandum Blue Star Line Ltd as the owner and operator of th

vessels MEONIA and FALSTRIA and Blue Star Line Ltd as th

signatory member of the Pacific Coast European Conference whic

issued on behalfof the members the tariff in issue As ofNovember 2

1980 by letter amending their answering memorandum under the shor

ened procedure the respondents state that the owner and operator o

the two vessels above is the East Asiatic Company Ltd rather tha

Blue Star Line Ltd

The respondents cite the decision in Docket No 76 25 Trane Co 

South African Marine 19 F MC 374 November 4 1976 in which 

was held that a complaint which fails to name as respondent a commo

carrier by water or other person subject to the Act or to aIleg

violation of section 18b 3 of the Act by a common carrier by wate

or conference of such carriers is jurisdictionaIly defective and must b

dismissed

The present case has features which distinguish it from the case cite

above In the cited case no common carrier was named as responden

but only the general agent of three common carriers The presen
KELCO DIVISION OF MERCK CO V JOHNSON 855

SCANSTAR

complaint differs in that the agent was not named respondent and the

respondent named as Johnson Scanstar a

joint service ofthree common

carriers

Furthermore the complainant had no reasonable means of ascertain

ing which of the three underlying carriers providing the Johnson

Scanstar joint service actually owned and operated the ships used

It is concluded and found that in effect Johnson Scanstar as a joint

service itself is a common carrier by water in the U S foreign com

merce and was named properly as respondent for the alleged violation

of section l8 b 3 ofthe Act

The joint service agreement of Johnson Scanstar Exhibit 2 of re

spondent s answering memorandum shows that the three parties agreed

to operate as a group so as to insure uniformity ofrates for the service

that the joint service normally would have only one vote when belong

ing to any conference that the three parties would have common

agents in all areas that the three parties would share profits and losses

from their operations in the joint service and that the parties might use

a uniform bill of lading among other provisions All of these provisions

in the joint service agreement lead to the conclusion that these three

parties to the joint service agreement collectively were acting as one

common carrier through their joint service Thus the conclusion above

seems proper that the complaint naming Johnson Scanstar as respond

ent named a common carrier by water in the U S foreign commerce

The complaint in the present proceeding named a common carrier

rather than only as agent as did the complaint in the cited Trane Co

case

Turning to the merits of the proceeding the issue is whether the

complainant has met its heavy burden ofproof under the circumstances

The bills of lading export declarations packing lists and freight for

warder s

requests for space all described the commodities shipped as

synthetic resins The complainant s burden is to counter this evidence

Long after the fact of shipment the complainant now advises that

what it advised the carrier and what it advised the U S Government in

the export declarations was false

The complainant now offers two invoices addressed to a

company in

Belgium attachments Nos 3 and 10 to the complaint which described

the one shipment of200 drums as kelcoloid 0 and the second shipment

of 1 090 drums as Kelzan M Keltrol Kelcoloid 0 Kelcoloid HVF

Keltrol F and Kelzan

The complainant also offers some ofits product literature of unspeci

fied date and a page from an unspecified edition of a chemical diction

ary

The complainant states that Kelcoloid 0 first shipment as per its

attachment No 5 is an algin or alginate and as per the chemical

dictionary is propylene glycol alginate that alginates are naturally
856 FEDERAL MARITIME COMMISSION

occurring carbohydrate high polymers source of the most abundan

source of natural resins found in vegetable gums such as sea weed Iris

moss kelp and other vegetables like cabbage rutabagas and cauliflow

er and that natural algins natural alginates or natural resins thes

cannot be classified as synthetic resins

It is hard to believe that the products shipped were natural whe

they were manufactured by the complainant and valued at ove

2 755 75 per 1 000 kilograms

Even though concluding that the products shipped were not natura

and were manufactured or synthetic that does not preclude finding tha

they were xanthan gum part of the second shipment and algin viz

propylene glycol alginate part of the second shipment and aU of th

first shipment

The question remains whether they were synthetic resins or algi

and xanthan gum

The respondents contend that the complainant has not met its burde

of proof

The proper test is does the evidence show what actuaUy moved

What actually moved was propylene glycol alginate and xanthan gum

and there were tariff items which specifically listed these commoditie

These specific tariff items were applicable on the shipments herei

first because these tariff items more specifioally described these com

modities than did the tariff item which was charged namely synthet

resin and for the second reason that where two items in a tariff cove

the same commodity generally the shipper is entitled other thing

being equal to the tariff item providing the lower rate and charg

The Commission s Office of Environmental Analysis has examine

the complaint in this proceeding and has determined that sectio

547 4a 22 of the Commission s Procedure for Environmental Anal

sis applies and has determined further that No environmental anal

sis needs to be undertaken nor environmental documents prepared 

connection with this docket

It is ultimately concluded and found that the complainant was ove

charged 4597 33 on the two shipments herein and that Johnson Sca

star the joint service was named properly as respondent

S CHARLES E MORGAN

Administrative Law Judge

Washington D C

March 31 1981
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 748

APPLICATION OF WATERMAN STEAMSHIP CORPORATION

FOR THE BENEFIT OF STOP SHOCK INC

NOTICE

May 4 1981

Notice is given that no exceptions were filed to the March 31 1981

initial decision on remand in this proceeding and the time within which

the Commission could determine to review has expired No such deter

mination has been made and accordingly the initial decision on remand

has become administratively final

Applicant shall waive charges publish and file with the Secretary a

tariff notice and notify the Commission of its compliance in the time

and manner required by the initial decision served November 5 1981

S JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 748

APPLICATION OF WATERMAN STEAMSHIP CORPORATION

FOR THE BENEFIT OF STOP SHOCK INC

Upon remand initial decision to grant application for permission to waive collection of 

portion of freight charged in the amount of 20 784 75 affirmed

INITIAL DECISION ON REMANDl OF

PAUL J FITZPATRICK ADMINISTRATIVE LAW JUDGE

Finalized May 4 1981

By its Order served February 25 1981 2

the Commission expresse

concern over two matters that were determined as requiring clarifica

tion before approval can be granted to the requested waiver of freig

charges in this proceeding First the Commission seeks a

developmen

of the record regarding the agreement entered into between the app

cant and Stop Shock Inc and the intent of the parties to exclude th

port congestion surcharge In that regard the Order states Mer

absence of mention of the surcharge in the telex agreement does no

alone indicate that the parties had agreed not to apply it And finally

the Commission is concerned with the type of transportation factor

that might justify the applicability of a port congestion surcharge t

some commodities and not to others

Under the circumstances the applicant was provided an opportunit

to develop the record in the areas as discussed in the Order by th

undersigned 3

In response to that opportunity Waterman submitted a

affidavit ofMr Charles G Boyle its Vice President Export Cargo Mi

East Service who was personally familiar with the facts surroundin

the booking ofthe shipment at issue since he computed the rate quote

to the shipper 4

In order to place the concern of the Commission in perspective 

brief recitation of the facts is appropriate The initial decision stated

On March 11 1980 Waterman s Dallas office communicated

an upcoming movement of 1850 drums of liquid fabric soften

er from Houston to Port Sudan to its New York office and

solicited interest and possible rates On March 18 the New

1 This decision will become the decision of the Commission in theabsence of review thereof by th

Commission Rule 227 Rules of Practice and Procedure 46 C P R 502 227

2 Order Remanding Initial Decision

S Order Upon Remand served March 3 1981

4

The affidavit was submitted on March 25 1981
WATERMAN STEAMSHIP CORP FOR THE BENEFIT OF 859

STOP SHOCK INC

York office informed its Dallas office AGREEABLE

OFFER RATE DLRS 140 00 A TON W1M PLUS APPLI

CABLE BFS On April 15 Waterman s Dallas office con

firmed the booking of 1850 drums of fabric softener at 140

WIM plus bunker fuel surcharge BFS The 1850 drums were

delivered to Waterman s

loading berth between April 21 and

May 8 Shipment was made on May 16 1980 aboard the

George Whyte VII Pursuant to Waterman s tariff Freight

Tariff 18 C from Atlantic and Gulf Ports to Gulf of Suez

Gulf of Aqaba Red Sea and Gulf of Aden and to Points in

Iraq via Aqaba Jordan cargo delivered to the vessels

loading

berth shall be assessed the rate in effect at the time of delivery

Rule 3 2nd Rev p 13 There was also a port congestion

surcharge of 30 to Port Sudan in effect in Waterman s tariff

at the time ofdelivery 69th Rev p

31

Although Waterman intended to exclude the port conges

tion surcharge and its offer was based on imposing only the

bunker fuel surcharge Waterman inadvertently filed a rate of

140 WIM PLUS SURCHARGES on April 17 April 17

1980 telex and 88th Rev p73 Surcharges without further

qualification include the 30 port congestion surcharge to

Port Sudan On May 22 1980 Waterman filed a corrected

tariff on fabric softener excepting the item from Rule 190 the

congestion surcharge 90th Rev p

73

The shipper Stop Shock Inc by check dated June 18

1980 paid Waterman 80405 40 after having deducted the

amount invoiced for the port congestion surcharge

Waterman s original invoice covering the shipment shows

that it was erroneously rated the 101 dispensing units were

assessed the fabric softener rate when they should have been

assessed the General Cargo rate plus all applicable surcharges

A bunker surcharge of 22 50 was in effect at the time of

shipment of 671 ofthe total 1 850 drums not the 20 invoiced

As a result Waterman seeks a waiver in the amount of

20 784 75 representing only the port congestion charges erro

neously applied Footnote reference omitted

Based upon consideration of this evidence the initial decision provid

ed for a granting of the waiver sought Although the initial decision

was silent on the point the undersigned was aware of the booking

practices ofWaterman where surcharges are sometimes included within

the base rate even though explicit reference thereto is absent from the

booking contract U S Dept of Agriculture v Waterman SS Corp 20

FMC 645 660 1978 And the affidavit makes clear that the practice

continues The affidavit discloses that it was the definite intent of

Waterman to include the 30 port congestion surcharge in the quoted

rate of 140 00 a ton W M
860 FEDERAL MARITIME COMMISSION

I

I

Mr Boyle s affidavit states

In March of 1980 Ireceived an inquiry from Water

Dallas Texas Sales Office requesting a rate for a moveme

1850 drums of liquid fabric softener from Houston to 

Sudan There was no rate for liquid fabric softener in W

man s tariff 18 C at the time of this rate request Accord

I constructed a fabric softener rate by comparison to a

gous commodities and utilizing my experience gained 

many years in the shipping business

Since our Dallas Sales Office advised that Stop Shock 

new shipper and desired the lowest possible rate for its m

ment I

thought it preferable from a business viewpo

include the congestion surcharge in the basic rate q

rather than quote the lower base rate plus the cong

surcharge i e 108 00 plus 32 00 I saw no reason to in

the bunker surcharge in the basic rate because bunke

charges are contained in most tariffs and are accepte

shippers and consignees as amodern day fact of life

Iadvised our Dallas Sales Office ofthe rate Icompute

Stop Shock fabric softener movement via my March 18 

telex Enclosure 6 to September 10 1980 Special Docke

plication As will be noted I

requested that our Sales O

secure the movement by offering a rate of DLRS 140 

TON W1M PLUS APPLICABLE BFSwhich rate fac

in and included the applicable 30 Port Sudan conge

surcharge

On April IS 1980 our Dallas Sales Office telexed me 

closure 7 September 10 1980 Application that the 

quoted inmy March 18 1980 telex had been accepted and 

the Stop Shock fabric softener booking had been made on 

basis

The initial FMC tarifffiling herein Enclosure 12 to Se

ber 10 1981 Application which was accomplished by o

m subordinates was a mistake As will be noted the 

filing made no mention of the applicability of any surcha

thereby making the basic 140 00 W1M fabric softener 

subject to both the bunker and Port Sudan congestion 

charges assessed respectively by Tariff Rule 250 and T

Rule 190 This was not my intention and Itherefore requ

our Legal Department to file the necessary Special Do

Application to prevent injustice to shipper Stop Shoc

virtue ofits being required unless thisApplication is gran

to pay freight charges containing double application o

congestion surcharge
WATERMAN STEAMSHIP CORP FOR THE BENEFIT OF 861

STOP SHOCK INC

Isincerely regret any confusion caused by this Application

and hope my affidavit will provide the additional clarification

requested for final and favorable action on this Special Docket

Application request

Based upon the submission of Waterman the intent to exclude the

port congestion surcharge is evident and the areas of concern expressed

by the Commission have been clarified

Accordingly the application for permission to waive collection of a

portion of the freight charges in the amount of 20 784 75 is granted

under the terms and conditions contained in the initial decision of this

Administrative Law Judge served November 5 1980

Washington D C

March 31 1981

S PAUL J FITZPATRICK

Administrative Law Judge
FEDERAL MARITIME COMMISSION

DOCKET NO 80 42

NEW YORK TERMINAL CONFERENCE

v

JAPAN KOREA ATLANTIC AND GULF FREIGHT CONFERENCE

NOTICE

May 14 1981

Notice is given that no appeal has been taken to the April 6 198

dismissal of the complaint in this proceeding and that the time withi

which the Commission could determine to review has expired No suc

determination has been made and accordingly the dismissal ha

become administratively final

8 JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

NO 80 42

NEW YORK TERMINAL CONFERENCE

v

JAPAN KOREA ATLANTIC AND GULF FREIGHT CONFERENCE

MOTION TO WITHDRAW COMPLAINT GRANTED

PROCEEDING DISCONTINUED

Finalized May 14 1981

Complainant New York Terminal Conference pursuant to Rules 73

and 147 of the Commission s Rules of Practice and Procedure 46

C F R 502 73 and 502 147 has filed a Motion to Withdraw Com

plaint served March 6 1981 The complaint against the Japan Korea

Atlantic Gulf Freight Conference respondent was served June 24

1980 and alleges that respondent s tariff amendment ofits Rule 114 A

which rescinds second and third period demurrage charges results in

violation of sections 15 16 First 17 and 18 b 5 of the Shipping Act

1916 The tariff amendment institutes a flat per diem rate on all import

containers discharged by its carrier members in the import trade from

ports in Japan and Korea to ports in the Atlantic and Gulf Coasts

Complainant seeks among other things that respondent cease and

desist from the claimed violations of the Shipping Act repeal of the

tariff amendment reparation for damages and that the Commission

establish future demurrage rates charges regulations and practices

Petitions for leave to intervene were filed by and granted to the Port

Authority of New York and New Jersey Global Terminal and Con

tainer Services Inc and the Bureau ofInvestigation and Enforcement

Bureau A prehearing conference was held on October 30 1980 and

procedural dates were established for the conduct of this proceeding

The motion in addition to seeking approval of the withdrawal ofthe

complaint requests that it be without prejudice to the rights of NYTC

and its members to challenge at a later date in an appropriate proceed

ing before the Commission JKAG s tariff amendment which is the

subject of this proceeding or any other tariff provision rescinding penal

demurrage The stated grounds for the relief sought are I complain

ants conviction that the amendment will eventually destroy consign

J Prehearing Conference Report served October 31 1980 See also Revised Procedural Schedule

served January 12 1981
864 FEDERAL MARITIME COMMISSION

ees incentive in prompt removal of cargo from the terminals 2 the

opinion that other steamship carriers and conferences would adop

similar rules which would lead to pier congestion and inefficient cargo

handling throughout the Port of New York and New Jersey 3 tha

during the period the amendment has been in effect 2

the responden

alone has instituted the amendment so that complainant needs more

time to determine the effects of the amendment The motion

concludes that under the circumstances and considering the benefit to

all parties in avoiding the costs oflitigation the withdrawal is warrant

ed

The Bureau supports complainant s

request It points out that dismis

sals with prejudice are usually based upon factors of a clear record o

delay contumacious conduct by complainant or a serious showing o

willful default Citing Consolidated Express Inc v Sea Land 19 F MC

722 724 Complaint Dismissed March 8 1977 affd by Commission 

Notice Not to Review April 7 1977 And the Bureau observes that the

application of these considerations to the current record would no

warrant a dismissal of the complaint with prejudice The Bureau also

observes that a dismissal of this nature would preclude complainan

from later filing a complaint even if the current circumstances are

altered with a resultant harm to the operations of the members of the

conference

The respondent filed an extensive replyS in opposition to the reques

that the withdrawal ofthe complaint be permitted without prejudice

Basically it is argued that 1 the motion is predicated upon the mere

unsupported predictions of complainant s attorneys 2 the motion i

predicated upon allegations set forth in a sworn complaint which have

since been shown to be utterly false and untrue 3 contrary to com

plainant s contentions there is no single or historical method o

assessing demurrage at the Port of New York New Jersey 4 con

trary to complainant s contentions review of documents produced by

Maher Terminals Inc Global Terminals and Universal Maritime Serv

ices Corporation in response to discovery in this proceeding demon

strates respondent s tariff rule has produced no ill effects upon com

plainant its members or the shipping public 5 contrary to complain

ant s claim respondent s rule does not encourage consignees to leave

a

Complainant Btates that although JKAO s tariffllmendment was initially adopted effective Marc

21 1980 various orders in PMC Docket 79 86 caused its status to be unccrtain until August 4 1980

when JKAO reinstated the identical tariffamendment It concludes that the amendment has been i

effect from August 4 1980dO dateua period of approximately seven months Respondent on the othe

hand claims the taritT rule has becn in force not for just seven months but for over 8 year sinc

March 21 1980 when it was incorporated into respondent stariff It also points out that the complai

itself was filed on June to 19800ver nine months ago

3

Respondent srequest for an extension of time to file a

reply until March 30 was unopposed an

gr nt d The r ply 14 p ge includes n ffid vit of Mr Robert D Orey Ch irm n of the J p

n

iKor AtI ntic nd Oulf Fr ight Conf rence 17 p ge ndApp ndice A O 47 p g
NEW YORK TERMINAL CONFERENCE V JAPAN KOREA 865

ATLANTIC AND GULF FREIGHT CONFERENCE

their containers on terminal property for extended periods of time 6

contrary to complainants claim the number of average days a contain

er was on demurrage under the tariffs of other carriers at Maher s

terminal did not decline in relation to the number under respondent s

tariff rule and 7 contrary to complainant s claim it is not being

deprived of substantial revenues from demurrage it would have re

ceived had respondents tariff not been amended The respondent con

cludes that it has been put to considerable inconvenience and costs in

legal fees and time expended by the Conference office and that it is

quite evident that had the matter gone to trial complainant would have

been totally unable to show any ill effect from respondent s tariff rule

It is evident from the arguments submitted by respondent that it

views its opportunity to reply to the motion as a vehicle to evaluate

existing discovery draw conclusions therefrom and in effect say to the

Commission the complainant should or would lose its case if the pro

ceeding went to oral hearing This may be so but prior to an evaluation

of this nature it would seem at the very least that the complainant and

intervenors might want a word or two themselves In any event it

would be an unnecessary exercise and clearly inappropriate to appraise

the record at this stage and draw conclusions therefrom 4

A more

appropriate consideration of the opposition to the motion should focus

upon the arguments of respondent concerning the time energy and

expense incurred in defense against the complaint and whether a legiti

mate reason has been presented for complainant s need of more time to

evaluate the effect ofthe amendment

In general the courts have exercised the power of dismissal of

actions a similar effect of dismissing this complaint with prejudice

with restraint and have found dismissal appropriate only on the face of

a clear record of delay or contumacious conduct by the plaintiff

Durham v Florida East Coast Ry Co 385 F 2d 366 368 5th Cir 1967

Also when considering a dismissal without prejudice the court bears in

mind the interests of the party to be adversely affected for it is that

party s position which should be protected 9 Wright Miller Federal

Practice Procedure Civil 2362 2364 at 149 165 1971 Further

more in order to succeed there should be a showing that there exists

some plain legal prejudice other than the mere prospect of a second

law suit Holiday Queen Land Corp v Baker 489 F 2d 1031 1032 5th

Cir 1974

Applying these principles to the arguments raised by respondent

requires the approval of the withdrawal of the complaint without

prejudice First the Bureau is correct that there is no clear record of

4

Curiously after its lengthy treatment of the material respondent observes While we believe that

this reply should stand independent of this particular data the analysis which is made in reliance upon

it is indicative of theutter frivolity of complainant s claims
866 FEDERAL MARITIME COMMISSION

delay contumacious conduct by complainant or a serious showing o

willful default Consolidated Express supra Second the concern of the

members of the complainant conference that other operators might

institute the same action cannot be prematurely invalidated Certainly a

fair reading of the petitions to intervene filed on behalf of the Por

Authority of New York and New Jersey Global Terminal and Con

tainer Services Inc and the Bureau attest to apprehension of those

interests to the imposition of the tariff amendment And basically al

complainant is saying is that the evidence at this stage is insufficient to

prove its case since the facts have not developed as anticipated Tha

circumstance should not operate in a fashion to deny complainant an

opportunity to seek recourse at a future time if it may be necessary to

pursue its rights Third admittedly delay and expenses have been in

curred by the respondent but in balancing that with a denial of com

plainant s future recourse to this Commission if events dictate then the

balance clearly weighs in favor ofthe complainant

Accordingly the Motion To Withdraw Complaint is granted

IT IS ORDERED That the complaint in this proceeding is hereby

withdrawn without prejudice

IT IS FURTHER ORDERED ThaUhe proceeding is discontinued

S PAUL J FITZPATRICK

Administrative Law Judge

April 6 1981
FEDERAL MARITIME COMMISSION

DOCKET NO 81 23

GULF UNITED KINGDOM FREIGHT CONFERENCE

AGREEMENT NO 161 31

DISCONTINUANCE OF PROCEEDING

May 14 1981

This proceeding was instituted by order of the Commission served

March 23 1981 to determine the approvability uder section 15 of the

Shipping Act 1916 of Agreement No 161 31 Proponents subsequently

have withdrawn the agreement in question and have moved for discon

tinuance of this proceeding

Agreement 161 31 having been withdrawn nothing remains to be

litigated in this proceeding The motion for discontinuance therefore is

granted

By the Commission

S JOSEPH POLKING

Acting Secretary

Commissioner Richard J Daschbach concurring I concur with the Commission s Order to Discon

tinue and applaud the Proponents wisdom in withdrawing their agreement The Commission s March

23 1981 Order of Investigation and Hearing would have required the Proponents to address issues of

questionable relevance to the instant agreement in excessive detail and at great cost and burden to

themselves and the Commission itself In the future we must temper our zeal to require proponents of

section 15 agreements to describe every conceivable competitive contingency arising from their pro

posed activities with an awareness of the expense such farreaching adjudication imposes upon all par

ticipants
FEDERAL MARITIME COMMISSION

DOCKET NO 81 12

SPADA DISTRIBUTING COMPANY INC

v

MATSON NAVIGATION COMPANY

NOTICE

May 26 1981

Notice is given that no exceptions have been filed to the April 15

1981 initial decision in this proceeding and the time within which th

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision ha

become administratively final

8 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

NO 81 12

SPADA DISTRIBUTING CO INC

v

MATSON NAVIGATION CO

Complaint dismissed for failure to establish violations alleged

George Spada for complainant

Gary E Koechler for respondent

INITIALDECISIONl OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Finalized May 26 1981

Spada Distributing Company Incorporated the complainant is a

grower shipper distributor and exporter of agricultural commodities

The respondent Matson Navigation Company is a common carrier by

water engaged in transportation of water between the West Coast of

the United States and the State of Hawaii The complaint filed by

Spada accuses Matson of violating sections 16 First and 18 a of the

Shipping Act 46 U S C 815 817 a In paragraph VII of the com

plaint Spada says Complainant shall further consent to a shortened

procedure according to section 502 181 Subpart K of the Shipping

Act 2 Rule 182 requires that complaints invoking the shortened pro

cedure provided for in Subpart K shall have attached a memorandum

of facts and arguments separately stated upon which the complainant

relies Spada s complaint was not accompanied by the memorandum

required by Rule 182 Rule 183 provides that if the respondent to the

complaint consents to the shortened procedure it must submit an an

swering memorandum within 25 days of the date of service stamped on

the complaint Matson consented to the shortened procedure and timely

filed its answering memorandum of facts and arguments Finally Rule

184 of Subpart K allows a complainant to file a

reply to the respond

ent s answering memorandum The time within which complainant

could have filed a

reply to Matson s answering memorandum has ex

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227

2

Spada is obviously referring to Subpart Kof the Commission s Rules of Practice and Procedure

46 C F R 502 181 et seq not Subpart K of the Shipping Act
870 FEDERAL MARITIME COMMISSION

i

pired and to date Spada has not submitted any further pleadings in the

case

The complainant bears the burden ofproof here Western Publishing

Co v Hapag Lloyd FMC Docket No 283 I served March 30 1972

12 S R R 1065 Abbott Laboratories v United States Lines Inc 18

F MC 262 1975 Spada s case consists solely of the unsupported

allegations ofits complaint 3

In its complaint Spada alleges that it loaqed 350 100 II total weigh

35 000 pounds net weight bags of fresh potatoes into two containers

Nos 80014 and 85020 at its plant in Pasco Washington The contain

ers were then trucked to Qakland California fCr

loading apoard Mat

son s ship The Matsonia The containers were consigned to State

French Fry in Honolulu on a freight collect basis The containers wer

loaded aboard The Matsonia on September 29 1980 The complainan

then alleges

Freight charges werepaid by State French Fry in Honolulu in

the amount of 3 367 63 The overcharge was then deducted

by State French Fry from the remittance made to complainant

Spada

Presumably the amount of overcharges l1educted by State French

Fry was 1 820 43 since this is the amount claimed by Spada as repara

tion It wouldappear that the gravamen of Spaqa s complaint is to b

found in the f9llowing statement made in paragraph III

That complainant diel book this movement with Matson s

office in Portland Oregon and rellPQndent did not inform

complainant at any time of the e orbitant N O S rates it se

cretly intended to assess this shipment That complainant

could have easily made arr gements for off dock stuffing of

all 350 100 II bags into one container for the total sum of

100 00 and returned it to the OaklandCY for a total sum of

50 00 in order that charges could be assessed on a CY CY

basts Complainant also alleges that respondent had never in

formed complainant at any time of this N O S rate of 8 91

plus 54 per hundred weight of suroharges Item 2000 of

Tariff 140 being inor having gonecinto effect

Complainant further alleges that respondent has not charged

this rate to any other shippers on full containedoads in at

least several years The normal tariff rate of 1 38700 per

vanload 35 000 pounds is under Tariff 140 Item number

2066

On the basis of these allegations Spada charges Matson with viola

tions ofsections 16 First and 18 a ofthe Shipping Act

3

Having itself invoked the prOcedures of Subpart K Spada cannot now be heard to argue uDram

iarity with those procedures Spada s continued silence in the case leads to the quite reasonable a

sumption that it in fact has no case to plead
SPADA DISTRIBUTING CO INC V MATSON NAVIGATION 871

co

On the basis of the allegations contained in its complaint it would

seem that Spada s dispute with Matson centers on the proper applica

tion of Matson s Westbound Container Freight Tariff No 4 G FMC

F No 72 The facts of the shipment in question as established by the

documentary evidence submitted by Matson are as follows

Spada tendered 35 350 bs ofpotatoes to Matson s Oakland container

freight station CFS for movement on Matsonia voyage 82 which

departed for Hono u u on September 26 980 Ru e e of TariffNo

4 G provides that Rates from CFS include container loading at the

Container Freight Station Spada was rendered the CFS service

pursuant to its own booking instructions 4

Tariff 4 G contains no commodity rate for the CFS movement of

fresh potatoes thus the Refrigerated Cargo N O S rate Item 2000 was

applicable to Spada s shipment s

The N O S rate of 89I1cwt together

with a Bunker Surcharge of 3 36 and a Main and Wharfage charge of

3 25 000 kilograms all of which were applicable to Spada s shipment

under the provisions of Tariff 4 G then in effect resulted in the

correctly assessed freight charges of 3 367 63

Under section 2 of the Intercoasta Shipping Act 933 and section

8 a of the Shipping Act Matson had no choice but to apply the

relevant tariff provisions to Spada s shipment See e

g Gilbert Import

ed Hardwoods Inc v 245 Packages of Guatambu Squares 508 F 2d 11 6

5th Cir 978 Spada has offered no evidence to support its allegation

that Matson has violated section 16 First

The complainant Spada Distributing Company Incorporated having

failed to establish the violations alleged in its complaint against Matson

Navigation Company Inc said complaint is dismissed

S JOHN E COGRAVE

Administrative Law Judge

Washington D C

April 15 1981

4

Item 2066 called by Spada the normal tariff rate is applicable only where the shipper tenders

loaded containers to Matson at the container yard and the consignee accepts delivery at the container

yard It should be remembered that the shipper not the carrier selects the mode of service

5

Original page 24 of Tariff 14 G defines the CFS as the physical facility where goods are received

by MNC Matson for loading into containers A containeryard is defined as the place where 1

loaded containers are received or delivered as provided in this tariffand 2 MNC assembles holds or

storesits containers ortrailers
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 949 1

BRISTOL MYERS COMPANY

v

SEATRAIN INTERNATIONAL S A

PARTIAL ADOPTION OF DECISION

OF SETTLEMENT OFFICER

May 27 1981

The Commission has undertaken a review of Settlement Office

Aaron W Reese s Decision dated January 29 1981 awarding repara

tions without interest for Seatrain International S As misrating o

Bristol Myers Company s shipments ofbaby food

Complainant alleged that Seatrain applied the correct tariff item fo

the cargo but that it erroneously computed the freight charges on 

measurement basis instead of a weight basis In response Seatrai

indicated that it would have settled the claim directly with Complain

ant but for its 6 month tariff rule Complainant having filed its ove

charge claim on the seventh month

The Settlement Officer awarded Complainant 1 672 32 in repara

tions He did not grant interest on the award however noting 1 tha

Complainant waited 16 months after receiving Seatrain s denial of it

claim before filing its complaint with the Commission and 2 tha

Complainant did not request an award ofinterest

Although the Commission agrees with the Settlement Officer s award

of reparations it finds that his decision not to award interest wa

erroneous Payment of interest for the period Seatrain has held th

excess charges paid by Complainant will not unjustly enrich Complain

ant It will merely compensate Complainant for being deprived of th

use of its money As such the Commission s award of interest is 

compensatory rather than punitive measure Moreover the Commissio

will not decline to make whole an injured party merely because it faile

to request award of interest in its complaint

Interest shall be awarded on the Settlement Officer s grant ofrepara

tions to be calculated at the rate of 12 accruing from the date o

payment offreight charges

THEREFORE IT IS ORDERED That the Decision of the Settl

ment Officer is adopted except as indicated and
BRISTOL MYERS CO V SEATRAIN INTERNATIONAL S A 873

IT IS FURTHER ORDERED That Seatrain International S A pay

Bristol Myers Company 12 interest on the award of reparations

accruing from the date ofpayment offreight charges and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Acting Secretary

Commissioner James V Day concurs in the award of reparation with interest but dissents from

that portion of this Order which fixes the level of interest awarded at 12 Commissioner Richard J

Daschbach did not participate
i

i

j

j

1

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 949 1

BRISTOL MYERS COMPANY

v

SEATRAIN INTERNATIONAL S A

Decision ofSettlement Officer Aaron W Reese

Partially Adopted May 27 1981

Reparation Awarded

By complaint filed with the Commission s Secretary August 12 1980

Bristol Myers Company Myers seeks reparation in the amount o

2 437 27 for alleged overcharges on two shipments ofbaby food from

New Orleans to Santo Domingo D R The shipments moved on Sea

train International S A Seatrain vessel WESER CARRIER unde

separate bills of lading dated July 26 and July 28 1978 Ocean freigh

charges for the two shipments were paid by check dated August 30

1978 The complaint was filed within two years after the cause o

action accrued as required by section 22 Shipping Act 1916

On April 2 1979 Ocean Freight Consultants Inc submitted claim

to Seatrain on behalf of Myers Seatrain s denial dated April 5 1979

states

Overcharge claims must be presented to the carrier within 6

months from date of shipment You may file a complaint with

the Federal Maritime Commission Washington D C 20573

The shipment under Seatrain bill oflading number 1803499 5 includ

ed 12 pallets described as Foods Canned Milk Base weighing 14 06

pounds and measuring 560 cubic feet The ocean freight charges for thi

portion ofthe shipment were computed at the rate of 102 50 40 This

resulted in a charge of 1435 00 Myers contends that the applicabl

tariff provides that freight charges for this commodity are to be based

upon weight rather than measurement Myers contention is correc

The applicable tariff is the United States Atlantic Gulf Sant

Domingo Conference Freight Tariff F MC No 1 Item 257 36t

revised page 281 effective April 1 1978 provides that the rate basis fo

the commodity shipped by Myers is weight Accordingly the freigh

charge should have been computed on the basis of 102 50 2 00

pounds The correct freight charge for this portion of the shipmen

should have been 720 58 In addition to the overcharge of 714 42

computation of charges based upon measurement rather than weigh
BRISTOL MYERS CO V SEATRAIN INTERNATIONAL S A 875

resulted in an additional overcharge of 50 53 for bunker and terminal

surcharges

The shipment under Seatrain bill of lading number 18 03500 6 con

sisted of one container containing infants canned food weighing 40 000

pounds The freight charges again were erroneously computed on the

basis of measurement instead of weight resulting in a

charge for the

infants food portion of the shipment excluding surcharges of 2936 63

The proper charge excluding surcharges pursuant to item 257 of the

applicable tariff should have been 1305 00 computed on the basis of

65 25 2000 pounds the volume rate provided for by item 257 of the

tariff for a minimum shipment of 40 000 pounds In addition the appli

cation of a rate different than the rate clearly provided for by the

applicable tariff resulted in an overcharge of 40 19 for bunker and

terminal surcharges Seatrain in computing the total freight charges for

the shipment under bill of lading number 18 03500 6 made an error in

addition resulting in an additional overcharge of 50

The overcharges complained of by Myers do not involve any dispute

as to weight measurement or commodity description They were the

result ofthe failure of Seatrain to apply the correct rate basis as clearly

set forth in the applicable tariff as well as an error in addition

Seatrain in its response to the complaint filed by Joseph J Graul

Manager Audits and Tariffs agrees that overcharges were assessed as

claimed by Myers and further stated

We would further state that except for the six months tariff

rule we would have settled this claim directly with the claim

ant

It is well settled that a six month tariff rule cannot bar the recovery of

a valid claim when a complaint is filed with the Commission within

two years after the cause ofaction accrued

Accordingly Bristol Myers company is entitled to reparation in the

amount of 2 437 27 computed as follows

B LNo 18 03499 5

Overcharge ocean freight

Overcharge on surcharges

Total overcharge

714 42

50 53

764 95

B LNo 18 03500 6

Overcharge ocean freight

Overcharge on surcharges

Error in addition of charges

Total overcharge

1 631 63

40 19

50

1 672 32
876 FEDERAL MARITIME COMMISSION

On January 5 1981 the Commission repealed its May 14 1980 polic

statement entitled Interest on Awards of Reparation The Commis

sion explained its action as follows

Although the policy statement was not intended to establish a

binding nonn of awarding 12 interest in all instances it has

been repealed to underscore the fact that interest due on

reparation awards is evaluated on a flexible case by case basis

The freight charges on the shipments at issue in this proceeding wer

paid on August 30 1978 Seven months later Myers submitted a claim

to Seatrain requesting a refund of the overcharges Seatrain promptl

denied the claim the denial based solely upon the six months tariff rule

and advised that a complaint could be filed with the Commission

Seatrain s denial was dated April 5 1979 It was not until August 12

1980 approximately sixteen months later that the complaint was file

with the Commission To award interest for a period in excess of two

years from August 30 1970 to the date the reparation being awarde

herein is paid is not warranted There is no justification for rewardin

Myers for its dilatoriness in prosecuting this claim It is apparent tha

Seatrain would have settled the claim except for the six months tari

rule Even though such rules cannot be invoked to bar recovery o

valid claims when a complaint is filed with the Commission within two

years after the cause of action accrued as long as such rules ar

allowed to remain in filed carrier and conference tariffs carriers ar

bound to adhere to the tenns ofthe tariff as filed Kraft Foods v Moor

McCormack Lines 17 F MC 320 322 1974

Another factor relevant to the issue ofinterest is that interest wasno

requested in the complaint

Accordingly no interest is awarded In the event however Seatrain

should unduly delay making the reparation awarded herein the pay

ment of interest would be justified Therefore it is ordered that i

reparation in the amount of 2 437 27 is not paid within thirty 30 days

ofthe date of service ofthis decision Myers shall be entitled to interes

at the rate of 12 per annum from the date of service to date o

payment

S AARON W REESE

Settlement Officer

January 29 1981
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 771

APPLICATION OF LYKES BROS STEAMSHIP CO INC

FOR THE BENEFIT OF TEXAS TURBO JET INC

ORDER ON REMAND

May 27 1981

On February 19 1981 the Commission served a notice of its determi

nation to review the Initial Decision of Administrative Law Judge

William Beasley Harris issued in this proceeding That decision granted

Lykes Bros Steamship Co Inc Lykes permission to refund a portion

of the freight charges collected from Texas Turbo Jet Inc TTJ on a

shipment of aircraft engines carried from Leghorn Italy to Houston

Texas

The relevant facts as developed from Lykes application for permis

sion to refund1 and supporting documents are as follows Lykes oper

ates both an all water port to port service from Italian and other Medi

terranean ports to United States South Atlantic and Gulf ports under

the tariff of the Med Gulf Conference as well as an individual inter

modal joint water rail service2 from Mediterranean and Black Sea ports

to United States Railroad Destination Terminals in several states includ

ing Texas

In May 1980 Lykes Dallas sales office entered negotiations with

TTJ for the transportation of aircraft engines from Leghorn to Dallas

Subsequently the following internal telex was sent to Lykes New

Orleans personnel

DLS to NOLA OPR

Please relay the flwg msg via teletype

We will quote the following rate for aircraft engines

microbridge from Italy to Dallas

Aircraft engines 3600 lump sum 40 ftcntr

Bunker surcharge 320 lump sum total 3920

Our agents in Leghorn are Coe Clerici SPA

1 The application was filed under section 18 b 3 of theShipping Act 1916 and under Rule 92 a of

the Commission s Rules of Practice and Procedure 46 C F R 502 92 a

2

Lykes Bros Steamship Co Inc Import Joint Freight Tariff No LYKU ICe 310 FMC No

99
878 FEDERAL MARITIME COMMISSION

Attn Peter Meneschi

PIs advise us ofnext shipment as these rates will

only be filed upon receiving a firm booking

By affidavit Lykes states that this arrangement was made known 

TTJ

On July 9 1980 the shipment was delivered to the carrier as ev

denced by the bill of lading The application further states that a

though a formal commitment was extended to TTJ Lykes Sale

Department and Mediterranean Traffic Department failed to commun

cate any details of the offer to Lykes Mediterranean representative 

Genoa When the shipper through its agent booked the cargo 

Leghorn Lykes Mediterranean office did not notify the New Orlean

Traffic Department of the booking so that the agreed upon thru rat

was not filed in a timely fashion in Lykes microbridge tariff

Lykes agent in Leghorn booked the shipment for a port to po

Leghorn Houston all water movement under the Med Gulf Confe

ence tariff at the rate of 192 00 W M plus a Port and Termina

Service Charge Open Top Container Charge Bunker Adjustmen

Factor and Congestion Surcharge Moreover in lieu of two 4O foo

containers which were specified in the internal telex quoted above

Lykes placed the cargo in four 20 foot containers This further in

creased the cost of transportation to a total of 29 760 53 3

In order t

obtain immediate delivery of the cargo TTJ paid the charges in fu

and filed a complaint with Lykes requesting an explanation for th

overcharge

In his Initial Decision the Presiding Officer although noting som

questions that remained unanswered concluded that the application me

the requirements of section 18b 3 ofthe Shipping Act 1916 and tha

there was an error in the tariff due to inadvertence in failing to file 

new tariff which resulted in the necessity for refund 4

DISCUSSION

The Commission is unable to determine on this record whether th

requirements of the first proviso clause of section 18 b 3 of the Ac

have been met and whether the relief contemplated by that section ma

be granted

The application Lykes bill oflading and the affidavit supporting th

application confirm that ITJ delivered the cargo to Lykes agents i

3

Lykes invoice to ITJ shows charges in the amount of 29 818 07 or adifference of 57 54 Th

djfferenceis apparently attributable to wharfage and is not at issue here

4

The Presiding Officer questioned whether delivery of the shipment was the notice to Lykes r

quested in the May 30 1980 telex and whether TT advised its agent in Leghorn of the special ra

agreed upon for this shipment The Presiding Officer also mentioned other issues raised by referenc

to offer and acceptance and the implication of business practices
LYKES BROS STEAMSHIP FOR THE BENEFIT OF TEXAS 879

TURBO JET INC

Leghorn It appears however that neither ITJ nor Lykes advised

their agents in Leghorn of the special arrangements made for this

shipment Lykes maintains that the lack of notice of the firm booking

and its failure to timely file the intended rate in its intermodal tariff

were caused by a breakdown in communications between its home

office in New Orleans and its Mediterranean representatives in Genoa

Thus while Lykes affirms that it made the offer to ITJ to carry the

shipment of aircraft engines to Dallas in two 4O foot containers at the

aggregate rate of 3920 nothing in the record shows under what

circumstances the offer was relayed to ITJ and whether ITJ notified

Lykes ofits acceptance before the date ofthe shipment

Furthermore although Lykes filed a tariff purporting to cover trans

portation to Dallas the record contains no information on whether the

cargo which the shipper picked up at Houston did in fact move to

Dallas and if so who assumed responsibility and costs of the inland

transportation

Finally Lykes acknowledges that it placed the cargo in four 20 foot

containers rather than the two 40 foot containers it promised ITJ This

raises the question of whether Lykes use of containers which did not

conform to the terms of the offer stated in the internal telex leaves this

matter outside the coverage of section 18 b 3

Therefore the proceeding is being remanded to the Presiding Officer

for the purpose of further developing the record on these points to wit

I Whether the parties had in fact reached an agreement on the

negotiated rate and if so the manner in which that arrangement was

communicated and accepted by ITJ

2 Whether the shipment in question actually moved to Dallas and

if so who arranged and paid for the inland transportation

3 Whether the inland transportation was provided by rail and or

motor carriers named as participants in Lykes intermodal tariff and if

so at what rates

4 Whether the substitution of four 20 foot containers for the two

offered 40 foot containers was caused by an error of the type contem

plated in section 18 b 3 of the Shipping Act 1916 and

5 Whether if it is ascertained that the parties had established an

agreed rate for the shipment the use of 20 foot containers for the

shipment bars refund based on the new tariff filed with Lykes applica

tion in this proceeding
880 FEDERAL MARITIME COMMISSION

The Presiding Officer is directed to issue a supplemental decisio

addressing these issues and any other matters deemed relevant to th

disposition of Lykes application such decision to be issued within 

days from the date of service ofthis Order

It is so ordered

By the Commission

8 JOSEPH C POLKING

Acting Secretary

Commissioner Peter N Teige did not participate
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 987 1

J I CASE INTERNATIONAL DIVISION

v

SOUTH AFRICAN MARINE CORP

ORDER

June 5 1981

The Commission determined to review the decision of Settlement

Officer Donald F Norris in which he denied the claim of J I Case

International Division for freight overcharges allegedly collected by

South African Marine Corp on a shipment of four tractors from

Charleston South Carolina to Elizabeth Republic of South Africa

At the time of shipment the applicable tariff 1

contained four differ

ent rates for various types of tractors 2

Respondent rated the shipment

at 85 75 per 40 cubic feet Claimant contends that it should have been

rated at 7100 per 40 cubic feet the rate payable on Tractors Farm

Type The Settlement Officer denied the claim on the basis that the

proper rate depended on the controlling use to which the tractors

were to be put and the controlling use could not be determined in

this case

3

The shipment contained four tractors of the same type weight and

measurements As shown on the manufacturer s leaflet these tractors

are clearly of a farm type rather than of a construction type There is

therefore no need to resort to a controlling use inquiry In any event

the principle is well established that where an ambiguity exists as to the

nature of a product or where a product comes within two classifica

tions the shipper is entitled to the lower of the two rates 4

In this

instance the shipment should have been assessed the rate of 71 00 per

40 cubic feet provided for tractors of the farm type and the collection

I United States South and East Africa Conference South Bound Tariff No 6 FMCNo 8

2

Item 5235 Tractors Farm Type 7100 Item 5240 Tractors Garden 117 50 Item 5250 Trac

tors Industrial Towing or Warehouse Parts ND S 157 25 Item 5260 Tractors NO S 85 25

Item 4310 which applies to Roadmaking earthmoving orconstruction equipment also contains arate

of 85 25 for Tractors NDS Gasoline Kerosene orDiesel Powered

3

The Settlement Officer explained that the controlling use could only be determined after the

consignee in Africa had marketed thefour tractors

4 United Nations Children s Fund v Blue Sea Line 15 F M C 206 1971 see also Coca Cola Inc v

Atchison T S P Ry Co 608 F 2d 213 5th Cir 1979 Indiana Harbor Beit R R V United States

510 F 2d 664 7thCir 1975 cer denied 422 US 1045 1975
882 FEDERAL MARITIME COMMISSION

by South African Marine Corp offreight charges based on the 85 2

rate applicable to Tractors N O S violated section l8b 3 ofthe Ship

ping Act 1916 Consequently the decision ofthe Settlement Officer 

reversed and J I Case International Division is awarded reparatio

from South African Marine Corp in the amount of 1 735 13 plu

twelve percent interest from the date of the payment of the freigh

charges

It is so ordered

By the Commission

S JOSEPH C POLKING

Acting Secretary

Commissioner Richard J Daschbach did not participate and issues a

separate opinion
J I CASE V SOUTH AFRICAN MARINE CORP 883

Commissioner Richard J Daschbach s

separate opinion

I am not participating because Ido not believe that the Commission

should review the decisions of Settlement Officers in informal docket

proceedings Under Subpart S of the Commission s Rules of Practice

and Procedure 46 CF R 502 301 parties consent to waive the rights

and obligations associated with normal adjudicatory proceedings for the

express purpose of receiving prompt consideration of a small claim

Commission review therefore imposes unnecessary expense and delay in

an arbitration process designed to settle minor commercial disputes in a

prompt and responsive manner
j

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 987 1

J I CASE INTERNATIONAL DIVISION

v

SOUTH AFRICAN MARINE CORP

DECISION OF DONALD F NORRIS SETTLEMENT OFFICER 

Finalized June 5 1981

Reparation Denied

By its complaint filed with the Commission during December I

1980 the J I Case International Division J I Case through it

registered practitioner agent claims 1 735 13 of the South Africa

Marine Corporation Safmarine this amount representing an ove

charge arising from a shipment of four model 2090 tractors and the

rims and parts transported in a Safmarine vessel from Charleston

South Carolina to Port Elizabeth Republic of South Africa pursuant t

a bill of lading dated August 23 1979 Freight and charges wer

prepaid by J ICase The cargo was consigned to J ICase Sout

Africa Pty Ltd Case South Africa J ICase s agent describes hi

principal as a manufacturer of construction machinery J I Case de

scribes Case South Africa as a wholly owned subsidiary of J 

Case Company They are primarily concerned with the marketing of J

I Case agricultural and construction equipment although they do man

ufacture a few components for the units

There is no dispute or question as to the commodity shipped it

weight or its measurement At issue is what rate should have bee

assessed the tractors and their parts Safmarine rated the shipment a

the rate of 85 75 per 40 cubic feet pursuant probably to tariff item

No 4310 applicable to road making earthmoving or constructio

equipment including tractors NOS appearing in the United States

South and East Africa Conference s South Bound Freight Tariff No 6

FMC No 8 J ICase contends that the proper rating should hav

been 71 per 40 cubic feet in accordance with tariff item No 5235

applicable to TRACTORS Farm Type Wheeled Self Propelled o

1

Both parties having consented to the informal procedure set forth in the Commission s Rules o

Practice and Procedure 46 CF R 50231 et seq thisdecision will become final unless the Commis

sion elects to review it within 30 days of the date of service
JICASE V SOUTH AFRICAN MARINE CORP 885

Mobile Boxed or Unboxed 2Safmarine is in agreement and is pre

pared to process payment given the agent s withdrawal of the com

plaint The agent for J I Case has so requested The Settlement Officer

S O considers a request to permit a complainant to withdraw a

case as tantamount to a request for its dismissal

The circumstances in which a S O may dismiss a complaint are

circumscribed by the Commission s decision in Dockets Nos 78 2 and

78 3 Organic Chemicals Glidden Durkee Division of SCM Corporation

v Atlanttrafik Express Service Farrell Lines Inc Order on Appeal 18

S R R 1536a There the Commission established the following a

precedent by which the S O considers himself bound

The Commission has held in the past that approval of the

settlement of claims under section 18 b 3 could be made only

upon a finding of a violation of that section This policy

appears to be unnecessarily restrictive We believe that even

where section 18 b 3 claims are involved parties to the dis

pute should under certain circumstances have the opportunity

to settle their disputes To that end and to insure that the

Commission s processes are not used to circumvent the re

quirements of the statute and that settlements and compro

mises do not serve as a means for carriers to disregard their

obligations under the tariff we will permit the settlement of a

claim arising under section 18 b 3 of the Act if the following

conditions are met

I A

signed agreement is submitted to the Commission

2 The parties file with the settlement an affidavit setting forth

the reasons for the settlement and attesting that the settlement

is a bona fide attempt by the parties to terminate their contro

versy and not a device to obtain transportation at other than

the applicable rates and charges or otherwise circumvent the

requirements of the Shipping Act 1933 as amended as the

case may be

3 The complaint on its face presents a genuine dispute and the

facts critical to the resolution of the dispute are not reasonably

ascertainable Emphasis added

Here the facts critical to the resolution of the dispute are ascertain

able so that a dismissal pursuant to the doctrine cited and quoted above

is inappropriate Consequently the Commission s directive in Informal

Docket No 372 1 Yasutomo Co v Y S Line Order on Review of

Dismissal March 30 1977 Unpublished applies ie the S O is

obliged to discuss the question ofwhether settlement by payment

2 No specific violation of section 18 b 3 of the Shipping Act 1916 was alleged by complainant

inasmuch as none is required with respect to overcharge claims See 46 GFR 502 304 Appendix

A However acarrier s failure to apply thecorrect rate with respect to any particular shipment would

be in violation of section 18 b 3
886 FEDERAL MARITIME COMMISSION

in full results in payment ofapplicable tariff rates under section 18b 

of the Shipping Act While settlement oflitigation is to be encou

aged it is the Commission sresponsibility to assure that such settle

ments in matters involving section 18 b 3 do not result in payment o

charges which would not otherwise be permitted specific finding

to this effect must be incorporated in the order ofdismissal

We turn now to the merits of the claim The Conference s Tariff No

6 is unambiguous to the extent that tractors may be assessed any o

four rates dependent upon use Under tariff item No 4310 Tractors

NOS Gasoline Kerosene or Diesel Powered wheel or tracklaying

are accorded the same rate as other road making earthmoving o

construction equipment encompassed by that item if used in thos

capacities The rate applied is the same as for Tractors NOS unde

item No 5260 The highest rated tractors are those intended for indus

trial towing or warehouse use pursuant to item No 5250 Garden

tractors take a lower rate in accordance with item No 5240 Farm

type tractors take the lowest rate ofall under item No 5235 3

In theory at least t here is no better entrenched rule in the makin

of rates and ratings than the one that a commodity cannot lawfully b

rated or classified according to the different uses to which it may b

put Food Machinery Corp v Alton SR 269 IC C 603 606 1948

citing Eastern Clay Products Inc v New York Central R Co 243 IC C

1 1940 However the use for which a product is manufactured an

sold can be most important factor in deciding the proper tariff classif

cation of the product CS c International v Lykes Bros 20 F MC

552 560 March 22 1978 When use is a factor in decidingthe prope

designation of an article it is the controlling use that determines th

nature and character of a shipment at the time tendered and the fac

that an article may have other subordinate or secondary uses does no

alter the nature of the product See Contine1 ltal Can Co v US 272 F

2d 312 CA2 1959 CS c International 560 supra As the S O view

it these are two of the three principles controlling resolution of th

matter here The third is that it is upon the complainant to se

forth sufficient facts to prove with reasonable certainty and definitenes

the validity ofits claim by a preponderance ofthe evidence Informa

Docket No 387 1 Pan American Health Organization v Moore McCo

mack Lines Inc Report on Remand slip decision September 12 1979

At the time the tractors were tendered to Safmarine neither the

shipper nor the carrier seemed to have been concerned as to th

3 While not critical to the resolution of the matter here the S D is compelled to observe that th

Conference s tariff is lamentably lacking in precision in deHneating usages Most employed are mo

conceptual than descriptive in nature A scale of tractor rates predicated upon dimensions weigh

horsepower value etc would be rar easier of application than thepresent scheme and would obviat

the possibility of those unjust discriminations which is the root and reason for the holdings in Foo

Machinery Corp and Eastern Clay Products Inc supra
J I CASE V SOUTH AFRICAN MARINE CORP 887

controlling use to which the tractors might be put This is evidenced

by the invoices and the bill of lading both of which are silent on the

point In support of its contention that the tractors are farm type U

I Case has submitted a sheet ofwhat appears to be sales literature and

a

copy of the export declaration The former dwells in considerable

detail on the technical features of 2090 tractors but is absolutely silent

as to their utility There is a picture of a 2090 tractor towing some

thing perhaps a harrow although the S O cannot be certain given the

poor quality of the reproduction and the fact that the S O is nautically

rather than agriculturally oriented Whatever the S O is willing to

concede the point that 2090 tractors can be usefully employed on farms

and conceivably even in large gardens several acres in size The

export declaration provides us with the Schedule B Commodity

number 692 3335 That number applies to Tractors new or used of a

specified horsepower whether or not suitable for agricultural

use

4

However this description in no way assists in determing what

the controlling use of 2090 tractors is The probability is that 2090

tractors can be used in a number ofways

At the time the cargo here was tendered to Safmarine it was con

signed to Case South Africa The latter is primarily concerned

with marketing J I Case agricultural and construction equipment

Only after Case South Africa had finished marketing the four trac

tors here might we know to what controlling use they had been put

In conclusion the S O is of the view that the J I Case has failed to

prove its case by a preponderance ofthe evidence Accordingly

reparation is denied So ordered

S DONALD F NORRIS

Settlement Officer

Office ofInformal Dockets

March 19 1981

4

Asextracted from the Statistical Classification of Domesticand Foreign Commodities Exported from

the United StOles U S Department of Commerce Bureau of the Census Schedule B
FEDERAL MARITIME COMMISSION

DOCKET NO 80 86

NEWARK TRUCK INTERNATIONAL

v

PRUDENTIAL LINES INC

NOTICE

June 8 1981

Notice is given that no exceptions have been filed to the May 5 198

initial decision in this proceeding and the time within which the Com

mission could determine to review has expired No such determinatio

has been made and accordingly that decision has become administra

tively final

8 JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 86

NEWARK TRUCK INTERNATIONAL

v

PRUDENTIAL LINES INC

Reparation granted for violation of section 18 b 3

Francis J DeVito for complainant

John F McHugh for respondent

INITIAL DECISION 1 OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Finalized June 8 1981

Complainant Newark Truck International charges respondent Pru

dential Lines Inc with a violation of section 18 b 3 of the Shipping

Act 1916 due it is alleged to the misapplication of heavy lift

charges Complainant requested disposition of the case under the

shortened procedure provided for in Rules 181 et seq of the Commis

sion s Rules ofPractice and Procedure The respondent answered the

same 27 days after it was served by the Secretary of the Commission

The answer made no mention of complainants

request for shortened

procedure

On January 28 1981 I

issued an order which based on the assump

tion that respondent may have misread the Commission s Rules gave

respondent until February 9 1981 to submit the memorandum called

for by Rule 184 Complainant was given until February 20 to file the

reply memorandum allowed under Rule 185

On February 19 1981 counsel sent me a copy of a letter he had

written to the Secretary in which he said that he had not received the

memorandum required by my order that he assumed no more pleadings

were necessary and that the case was then resting on the original

papers A copy of the letter was also sent to respondent To date I

have heard nothing from respondent

The complaint reads as follows 2

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227

2

Quotation marks have been omitted
890 FEDERAL MARITIME COMMISSION

I The Complainant is a corporation with its place ofbusiness at 56

Market Street Newark New Jersey Complainant is in the business o

selling new and used trucks trailers and equipment both domesticall

and internationally

II The Respondent above named is a common carrier by wate

engaged in transportation between the United States and Egypt an

carries on the business of shipping forwarding or furnishing wharfage

dock warehouse or other terminal facilities in connection with 

common carrier by water and as such is subject to the provisions ofth

Shipping Act 1916 as amended

III That

A On or about November 25 1979 Newark Truck Internationa

shipped nineteen 19 Fontaine Flatbed Trailers Models PTW 3 554

from the port of New York to Alexandria Egypt via the Responden

Prudential Lines Inc

B The purchaser of the equipment was the Alexandria Port Au

thority bid invitation 78 03 U S AID Loan No 263 K031 Item A

2b The shipment was made under the Alexandria Harbour Improve

ment Project

C Prudential s bill SI800 see attached indicates Heavy Lif

Charges for Item Nos 3 21 totalling 9 810 87

D According to the bid specifications permitted charges an

freight tariff No IFMC 47 page 202 3rd revision copy attached

effective date 11 279 Heavy Lifts Not Applicable

E Despite this and through oversight on behalf ofboth the Com

plainant and Respondent 9 810 87 was improperly charged and im

properly paid

F Upon notice of the error that Heavy Lift Charges were not i

effect though Complainant was charged 9 810 87 for the Heavy Li

Charges Complainant contacted Respondent who suggested the

merely write requesting the return of the funds which were admittedl

improperly charged and incorrectly paid

G Despite repeated demands for the money the said 9 810 87 ha

not yet been returned because the Respondent stated the claim was no

presented within six months ofthe incident and as such no refund coul

be made

H See letter dated August 22 1980 from Complainant to Respond

ent explaining the situation all ofwhich is selfexplanatory

ISee letter dated August 26 1980 from Respondent to Complain

ant rejecting the claim

J By reason of the imposition of the improper charges Respond

ent has violated Section 18B 3 in that it admittedly charged Complain

ant in error fees in excess of their tariff and has refused to return th

overage on the basis of its unenforcible six month notice provisio
NEWARK TRUCK INT L V PRUDENTIAL LINES INC 891

knowing same is inconsistent with the maritime commission s two year

statute oflimitation for such claims

IV That by reason of the facts stated in the foregoing paragraphs

Complainant has been subjected to the payment ofrates for transporta

tion and services which were when enacted and still are I unduly or

unreasonably preferential prejudicial or disadvantageous in violation of

Section 18B 3 j 2 unjustly discriminatory or prejudicial in violation of

Section 18B 3 and 3 unjust and unreasonable in violation of Section

18B 3

V The Complainant has been injured in the following manner To

his damage in the sum of 9 810 87 as shown by proof of our payment

of Check 18276 for 25 000 dated January 11 1980 and bank wire for

69 714 73 dated February 11 1980 totalling the original invoice of

94 714 73 which was excessive by the sum of 9 810 87

Ihave reviewed the documents attached to the complaint and they

fully support the allegations made in the complaint Moreover the only

basis for respondent s refusal to allow the claim was its reliance upon

its six months rule From the evidence it is clear that heavy lift

charges were inapplicable to the shipment in question and that re

spondent s collection of those charges was in violation of section

18 b 3 ofthe Shipping Act 1916

Accordingly reparation in the amount of 9 810 87 to be paid by

Prudential Lines Inc is hereby awarded Newark Trucking Interna

tional

S JOHN E COGRAVE

Administrative Law Judge

Washington D C

May 5 1981
FEDERAL MARITIME COMMISSION

DOCKET NO 80 74

IN RE AGREEMENT NO 580 DR W S

NORTH ATLANTIC WESTBOUND FREIGHT ASSOCIATION

WINES AND SPIRITS DUAL RATE CONTRACT

Respondents Wines and Spirits Dual Rate Contract found contrary to the standards 

section 14b of the Shipping Act 1916 and permission for its use withdrawn

Howard A Levy and Patricia E Byrne for North Atlantic Westbound Freig

Association

Thomas E ONeill for the National Association of Beverage Importers

Douglos W Metz for the Wine and Spirits Shippers Association

Paul J Koller and Alan J Jacobson for the Bureau of Investigation and Enforcemen

REPORT AND ORDER

June 9 1981

BY THE COMMISSION LEsLIE L KANUK Acting Chairman RICH

ARD J DASCHBACH JAMES V DAY THOMAS F MOAKLEY AN

PETER N TEIGE Commissioners

By Order served October 17 1980 the North Atlantic Westboun

Freight Association NAWFA and its member lines were directed t

show cause why the Commission should not find Respondents Wine

and Spirits Dual Rate Contract Agreement No 5850 DR W S to b

contrary to the standards of section 14b of the Shipping Act 1916 4

V S C 813a and either withdraw permission for its use or require it t

be modified

The basis for the Commission s Order to Show Cause was two fold

First the Commission expressed concern that the existing NAWF

Wines and Spirits Contract may be unjustly discriminatory or unfair 

between shippers exporters or importers and may be contrary to th

public interest because it specifically provides for consultations wit

only one segment of the wines and spirits imports industry Le th

National Association ofAlcoholic Beverage Importers NAABI to th

exclusion of other segments Second the Commission questione

whether the Contract was in the public interest because NAWFA 

unwilling to abide by its terms The Commission noted that althoug

the Wines and Spirits Contract provided for rate discussions to be he

between NAWFA and NAABI since at least 1978 NAWFA has bee

unwilling to consult with NAABI
IN RE AGREEMENT NO 5850 DR W S

The proceeding was limited to the submission ofaffidavits offact and

memoranda of law but provided a procedure for requesting an eviden

tiary hearing should any party believe one was required

The Commission s Bureau of Investigation and Enforcement then

Bureau of Hearing Counsel was made a party to the proceeding by the

Commission s Order The National Association of Beverage Importers

NABI formerly NAABI and the Wines and Spirits Shippers Associa

tion WSSA intervened and filed pleadings All parties submitted

memoranda of law pursuant to the Commission s Order but only

NAWFA filed an affidavit along with its memorandum

POSITIONS OF THE PARTIES

Respondents do not contest the major allegations made in the Order

to Show Cause 2

nor do they request an evidentiary hearing Rather

Respondents propose certain modifications to their Wines and Spirits

Contract which they believe will resolve the Commission s concerns

The stated purpose of these modifications is to allow N AWFA to

consult with all segments ofthe wines and spirits industry and thereby

remove impediments to implementation of the contract Specifically

the following amendments are proposed

1 Deletion of NAABI as the sole group with whom rate consul

tation will occur and incorporation of NAWFA s Procedures

for Handling Shippers Requests and Complaints issued pur

suant to Commission General Order 14 G O 14 3

2 Deletion of a rate table attached to the contract and incorpo

ration by reference of rates published in NAWFA s ocean

freight tariffs

3 Inclusion of new rate negotiation procedures The requirement

for rate change consultation with NAABI and the 45 day

mutual agreement requirement4 would be deleted The incor

poration of G O 14 Procedures would result in a procedure

whereby any shipper could upon notice of a rate increase

request a meeting or different rate action and NAWFA would

determine whether it would act on that request within 45

days A resulting rate reduction would then be published on

30 days notice

4 Amendment of the Contract to provide for the orderly transi

tion ofpresent signatories to the amended contract Specifical

1 The affidavit is that of Robert E Benedict NAWFAs U S Resident Representative

2 NAWFA states that it has met with wines and spirits shippers since 1977 but has refused to meet

with NAABI orany other shippers association

s GO 14 46 CF R Part 527 requires that ratemaking groups approved pursuant to section 15

Shipping Act 1916 46 U S c 814 implement reasonable procedures for promptly and fairly hearing

and considering shippers requests and complaints

4

The existing Wines and Spirits Contract requires rate adjustments by mutual agreement of the

parties within 45 days of the effective date of arate increase

893
894 FEDERAL MARITIME COMMISSION

i

Iy it is proposed that references to the expiration date of prio

contracts be omitted from the amended contract that th

Commission direct that the proposed modifications be made b

addendum to the existing contracts and that shippers who d

not give notice oftermination within 90 days ofthe date suc

order is issued be deemed to have consented to the modifica

tions

The Bureau ofInvestigation and Enforcement BIE believes that th

modifications proposed by NAWFA should resolve the concerns ex

pressed in the Commission s Show Cause Order The other technica

changes proposed are viewed by BIE as appropriate and transitio

procedures outlined by NAWFA are also found acceptable Howeve

an alternative procedure wherein Contract signatories are provided 

new integrated contract with a formal acceptance deadline is suggested

NABI opposes NAWFA s suggested modifications Its principal ob

jection to the existing Contract is that NAWFA has refused to negot

ate rates as required NABI accordingly proposes that the Contract b

expressly revised to require rate action upon complaint or request by 

signatory NABI further urges that the Contract be modified to mak

contract rates binding for one year and that the exclusive patronag

requirement ofthe Contract be replaced with a 90 percent fixed portio

requirement NABI concludes that because NAWFA s proposed mod

fications render the Wines and Spirits Contract indistinguishable from

the General Cargo Contract 3

unless its NABls modifications fo

contract modifications are followed the former contract should b

cancelled

WSSA also expresses the opinion that the changes to the Wines an

Spirits Contract proposed by NAWFA effectively render it indistin

guishable from the General Cargo Contract It proposes modifications

to the Contract similar to those proposed by NABI 6

Otherwise

WSSA would prefer the cancellation of the Wines and Spirits Contrac

in its entirety with NA WFA being required to present the Genera

Cargo Contract to all existing Wines and Spirits Contract signatories

DISCUSSION

The Commission finds that Respondents Wine and Spirits Contract i

contrary to the public interest and discriminatory and unfair as between

shippers within the meaning ofsection 14b of the Shipping Act 1916 

5 NAB states that the only difference between the two contracts would be the more stringent te

mination notice requirements of the Wines and Spirits Contract

e WSSA seeks a three year fixed rate period and alimited commitment of a

majority of signatory

shipments

7

Section 14b requires the Commission to withdrawany approved dual rate contract which is foun

to be detrimental to the commerce of the United States orcontrary to the public intereat or

unjustly discriminatory orunfair as between shippers exporters importers or ports or between ex

porters from the United States and their foreign competitors
IN RE AGREEMENT NO 5850 DR W S

Therefore use of Agreement No 5840 DR W S can no longer be

permitted and will be withdrawn The controlling facts set forth in the

Order instituting this proceeding and not disputed by Respondents

clearly support this action 8

NAWFA s Contract provides for rate negotiations with only one

segment of the wines and spirits imports industry ie NABAs a

result other segments of the industry whose interests might not neces

sarily be coextensive with NABls are bound by the results of its

negotiations with NAWFA In the event NABI and NAWFA fail to

agree on rates NAWFA can terminate the Contract and thereby abro

gate the rights ofother signatories who have no negotiation rights and

who are unrepresented in the rate negotiation process A contract that

grants certain signatory shippers rate consultation and negotiation rights

while denying such rights to other signatories is unjustly discriminatory

and unfair as between shippers and contrary to the public interest on its

face particularly since section 14b expressly requires that dual rate

contracts be applicable to all shippers and consignees on equal terms

and conditions Emphasis supplied

Moreover NAWFA s admitted failure to abide by the terms of its

contract not only constitutes a breach of that contract but evidences

further conduct inconsistent with the public interest standard of section

14b Although section 14b dual rate contracts have been determined by

the Commission to be subject to the Svenska doctrine 9

a less stringent

justification is required to secure their approval when they contain the

protective conditions found presumptively acceptable by Congress

Agreement Nos 150 DR 7 and 3103 DR 7 22 F MC 378 386 1979

consolidated appeal pending sub nom SEAPAC Container Service SA

v FMC and United States v FMC D C Cir Nos 80 1248 and 80 1251

Unless justified however dual rate contracts are deemed contrary to

the public interest because they are in effect tying devices and as such

are per se violative of the antitrust laws tO Dual rate contracts are

approved pursuant to section 14b on the basis that they will achieve

positive public interest or transportation objectives In order for these

objectives to be met however it is necessary that the parties to these

otherwise unlawful arrangements abide by their strict terms Failure to

8

Because NAWFA has in effect admitted the determinative facts and waived afurther evidentiary

hearing the Commission may appropriately dispose of the issues raised as matters of law American

Export fshrandtsen Lines Inc v FMC 334 F2d 185 9th Cir 1964 Admission to Conference Mem

bership 9 F M C 241 1966

9

The Svenska doctrine is the proposition affirmed in Federal Maritime Commission v Aktiebo aget

Svenska Amerika Linien 390 US 238 1968 whereby agreements which interfere with the policies of

the antitrust laws wi1l be disapproved as contrary to the public interest unless justified by evidence

establishing that the Agreement if approved wi1l meet aserious transportation need secure an impor

tant public benefit orfurther a valid regulatory purpose of the Shipping Act 1916 The burden is on

proponents of such agreements to come forward with thenecessary evidence

10 See Northern Pacific Railway CO Y United Slales 356 US 1 1958

895
896 FEDERAL MARITIME COMMISSION

do so undermines the basis for approval and causes the arrangement to

become contrary to the public interest within the meaning of section

14b The Commission must not only ensure that the parties to approved

agreements are properly operating within the scope of such agreements

but must also act to disapprove arrangements when the parties are no

fulfilling their obligations thereunder See States Marine Line Inc v

Trans Pac Freight Conf 7 F MC 204 210211 1962 aIIdsub nom

Trans Pacific Freight Conf v FMC 314 F 2d 928 9th Cir 1963

While NAWFAs proposed modifications to its Wines and Spirits

Contract may alleviate some of the discriminatory aspects of that Con

tract they go well beyond the specific issues raised in the Commission 

Order to Show Cause In so doing other aspects of the Contract are

modified especially the existing rate negotiation rights ofshipper signa

tories The result is a different arrangement incorporating terms sub

stantially altering the relationship between the parties in a manner no

contemplated by the Commission in its approval of this particular dua

rate system Such a new arrangement should be evaluated under the

procedures prescribed in 46 C F R Part 538 rather than in the contex

ofthis narrow proceeding

Resolution ofall issues raised by the pleadings would also expand the

scope ofthis proceeding beyond that contemplated in the Commission 

Show Cause Order llThe Commission therefore declines to modify

the Contract in this proceeding as suggested by NAWFA bccause o

the extent of such modifications the objections of the shipper parties to

those modifications the nature and limited scope of this proceeding

and the desirability of noticing those changes pursuant to Commission

rules to other interested shippers not party to this proceeding

In view ofthe foregoing the Commission hereby withdraws permis

sion for the use of the Contract In order to permit orderly transition

and to avoid prejudice to existing contract rights of signatories the

Commission is deferring the effective date of this Order for 90 days

11 In addition to the disagreement that has risen over the modifications proposed by NAWFA an

issue has been raised as to the applicability of the existing contract to intermodal shipments The Com

mission by Order dated September 17 1973 permitted NAWFA to amend clau e2 a of it Wine

and Spirits Contract to cover intermodal shipments moving under through bills orlading if NAWFA

wishes to offer contract rates on such shipments WSSA has alleged that NAWFA has never offered

intermodal contract rates NAWFA has not responded to this allegation Examination of NAWFA 

tariffs reveals that NAWFA does pUblish separate inland ratesfor Great Britain Northern Ireland and

Eire and issues through bills of lading reflecting acombination of these rates No tariffprovisions ca

be found which offer acontract through rate Thus itappears that for overseven years NAWFA has

restricted its contract rates for wines and spirits to port to port shipments

The record of this proceeding however is insufficient to draw any firm conclusions as to whethe

the effect of the NAWFA Contract orits interpretation by Respondents have served to inhibit the us

of independent intermodal services It should be noted that an exclusive patronage dual rate contrac

confined to a carrier s all water service does not prohibit contract shippers from utilizing competing

intermodal ervice Lykes Bros Y Far East Collferenee 19 F M C 589 594 1977 However adua

rate contract may not cover intermodal movements for which no service is provided Agreement Nos

SO DR 7and 3 03 DR 7 22 F M C supra at 389
IN RE AGREEMENT NO 5850 DR W S

Within that time NAWFA is ordered to take appropriate actions to

make Wines and Spirits Contract rates available to all shippers of those

commodities under its General Cargo Contract

NAWFA may of course submit a new request for permission to use a

separate wines and spirits contract pursuant to the procedures provided

in 46 CF R Part 538 However should NAWFA file such a

request it

should be prepared to justify the existence of a

separate wines and

spirits contract both as a matter of fact and as a matter of law

Specifically its application should explain why a different contract

for wines and spirits is warranted

THEREFORE IT IS ORDERED That permission for the use of

Agreement No 5850 DR W S is withdrawn effective 90 days from

the date ofthis Order and

IT IS FURTHER ORDERED That within 30 days of the date of

this Order the North Atlantic Westbound Freight Association take

whatever action is necessary including amendment of its applicable

tariffs to allow wines and spirits shippers to sign its General Cargo

Contract and to make wines and spirits contract rates available to those

signatories and

IT IS FURTHER ORDERED That within 45 days of the date of

this Order Respondent North Atlantic Westbound Freight Association

file with the Commission a written report stating what actions it has

taken in compliance with the requirements ofthis Order

FINALLY IT IS ORDERED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Acting Secretary

897
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 941 1

INFORMAL DOCKET NO 942 1

J T BAKER CHEMICAL CO

v

ATLANTIC CONTAINER LINE

PARTIAL ADOPTION OF DECISION

OF SETTLEMENT OFFICER

June 12 1981

The Commission has undertaken a review ofSettlement Officer Jere

miah D Hospital s Decision dated February 2 1981 awarding repara

tions without interest for Atlantic Container Line s misrating of J T

Baker Chemical Cos shipments of sodium hydroxide solution

Complainant alleged that ACL misrated the cargo as Chemica

NES when it should have been rated as Caustic Soda and tha

ACL denied Complainant s informal overcharge claim on the basis o

its 6 month rule

In response ACL argued that Complainant was responsible for the

misrating because it failed to declare the commodity by its generally

accepted generic or common name caustic soda as required in

ACLs tariff rules ACL requested the Settlement Officer not to award

Complainant interest on any reparations granted The Settlement Offi

cer agreed awarding 453 14 in reparation but without interest because

ACL was not entirely at fault in assessing an incorrect rate

The Commission concurs with the Settlement Officer s award o

reparations in these proceedings but has determined that the failure to

award interest was in error The fault of the parties incident to the

misrating is irrelevant to the award of interest for the imposition o

interest is compensatory rather than punitive It is intended to make

whole the complaining party It is not intended to inflict a hardship on

the carrier It provides a means by which the complaining party is

compensated for the use of excess monies held and enjoyed by the

carrier

Interest shall be awarded on the Settlement Officer s grant ofrepara

tions to be calculated at the rate of 12 accruing from the date o

payment offreight charges

THEREFORE IT IS ORDERED That the Decision of the Settle

ment Officer in these proceedings is adopted except as indicated and
J T BAKER CHEMICAL CO V ATLANTIC CONTAINER 899

LINE

IT IS FURTHER ORDERED That Atlantic Container Line pay

J T Baker Chemical Co 12 interest on the award of reparations

accruing from the date ofpayment offreight charges and

IT IS FURTHER ORDERED That these proceedings are discon

tinued

By the Commission

S JoSEPH C POLKING

Acting Secretary

Commissioner James V DIlY concurs in the result but dissents from that portion of the order

which establishes the level of interest awarded at twelve percent Commissioner Richard J Daschbach

did not participate
i

I

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 941 1

INFORMAL DOCKET NO 942 1

J T BAKER CHEMICAL COMPANY

v

ATLANTIC CONTAINER LINE

DECISION OF JEREMIAH D HOSPITAL SETTLEMENT

OFFICER1

Partially Adopted June 12 1981

Reparation Granted

J T Baker Chemical Company Claimant is engaged in the busines

of the manufacture and distribution of various types of chemicals O

October I 1980 Claimant filed the instant complaints alleging tha

Atlantic Container Line ACL a common carrier by water had ove

charged it a total of 453 14 on two shipments containing packages o

sodium hydroxide solution

The complaint in Informal Docket No 941 1 states that ACL trans

ported a shipment consisting of40 packages of chemicals which includ

ed two pallets and 25 cartons of sodium hydroxide solution weighin

6 175 pounds and filling 122 3 cubic feet This shipment moved from

New York to Rotterdam aboard ACLs vessel Atlantic Causeway o

prepaid bill oflading No A70048 dated November 3 1978

The complaint in Informal Docket No 942 1 states that ACL trans

ported a shipment of 85 packages of chemicals which included 5

cartons ofsodium hydroxide solution weighing 2 910 pounds and filling

66 9 cubic feet This particular shipment moved from New York t

Rotterdam aboardACLs vessel Atlantic Causeway on prepaid bilI o

lading No A70051 dated March 25 1979

Claimant states that ACL assessed a rate for Chemical NES o

each shipment of sodium hydroxide solution Claimant argues that i

should have been assessed the rate for Caustic Soda Packed as i

appeared in the applicable tariff 2

Claimant points out that the lega

1 Both parties having consented to the informal procedure under subpart S of the Commission 

Rules of Practice and Procedure 46 CF R 502 301 304 this decision will be final unless theCommis

sion elects to review it within 30 days from thedate of servicethereof

2

The earHer shipment moved under the North Atlantic Continental Freight Conference Tariff No

29 FMC4 while the latter moved under the Conferences Tariff No 30 FMC 5which superseded th

former tariff
J T BAKER CHEMICAL COMPANY V ATLANTIC 901

CONTAINER LINE

label name for sodium hydroxide solution is caustic soda and it submit

ted a copy of a page from the Chemical Dictionary to support its

argument

In response to these complaints ACL does not take exception to

Claimants argument that sodium hydroxide is caustic soda To the

extent ACL states that Claimants charge is correct ACL does point

out however that its tariff rule 2J9 provides

Shippers are required to declare their commodities by their

generally accepted generic or common name

ACL feels it is unreasonable to expect a rate clerk to know that the

two descriptions are synonymous

It is well settled that in situations as presented here it is what the

Claimant can prove actually moved that is controlling I am satisfied

that Claimant has met its burden and I so find that the shipments of

sodium hydroxide solution in question should have been assessed the

rate for caustic soda Accordingly Claimant is awarded 453 14 in

reparation

As for the matter of interest it is apparent to me that ACL was not

entirely at fault in assessing an incorrect rate because it did not know

that sodium hydroxide and caustic soda are synonymous terms accord

ingly no interest will be awarded in these cases

S JEREMIAH D HOSPITAL

Settlement Officer

February 2 1981
FEDERAL MARITIME COMMISSION

DOCKET NO 77 19

CONSOLIDATED FORWARDERS INTERMODAL CORPORATION

AGREEMENT NO 1023S

ORDER PARTIALLY ADOPTING INITIALDECISION

June 15 1981

The record in the above captioned proceeding is before the Commis

sion on Exceptions to the November 6 1980 Initial Decision ofAdmin

istrative Law Judge Norman D Kline The Initial Decision recom

mended disapproval of FMC Agreement No 10235 a cooperativ

working arrangement among 39 independent ocean freight forwarder

and nonvessel operating carriers Proponents enabling them to jointly

own and manage a nonvessel operating carrier and cargo consolidatio

service under the name of Consolidated Forwarders Intermodal Corpo

ration CONFICO l

Exceptions were filed by the Proponents and by two separate group

of intervenors which opposed approval of the Agreements 2

Replies t

Exceptions were filed by the Commission s Bureau of Investigation an

Enforcement BIE and several other intervenors which also oppose

approval ofthe Agreements 3

Oral Argument was heard by the Commission on March 31 198

POSITION OF THE PARTIES

The Proponents argue that the Presiding Officer erred in 1 requir

ing the Proponents to justify their Agreement under the Svenska doc

trine 4

2 not finding that the Agreement was necessary to meet trans

1

Jurisdictional aspects of this proceeding were addressed by the Commission in an earlier decisio

from which no appeal was taken 21 F M C 553 1978

i The intervenors tiling Exceptions were the International Association of Nonvessel Operatin

Common Carriers and a

group of ten North European steamship conferences

3

The intervenors filing only Replies were the Trans Pacirtc Freight Conference of Japan Korea

the Japan Korea Atlantic and Gulf Freight Conference and the Pacific Coast European Conferenc

The International Association of NonvesseJ Operating Common Carriers the North European confe

ences and the North Atlantic Mediterranean Freight Conference et at also filed Replies No Rep

was submitted by theProponents

The Svenska doctrine is the proposition affirmed in Fede al Maritime Commission v Aktiobolag

Svenska Amerika Linien 390 US 238 1968 whereby section 15 agreements which interfere with th

policies of the antitrust laws will be disapproved as contrary to the public interest unless justified b

evidence establishing that the Agreement ifapproved will meet aserious transportation need secu

an important public benefit or further a valid regulatory purpose of the Shipping Act 1916 Th

burden is on proponents of such agreements to come forwardwith the necessary evidence
CONSOLIDATED FORWARDERS INTERMODAL 903

CORPORATION AGREEMENT NO 10235

portation needs secure public benefits or further a valid regulatory

purpose within the meaning of the Svenska doctrine 3 not requiring

evidentiary support for the positions advanced by the Protestants 4

suggesting that the Agreement would be approvable if there were only

six rather than 39 Proponents 5 misconstruing Proponents arguments

regarding the trustworthiness of nonvessel operating carriers and 6

not approving the Agreement on the condition that those Proponents

which presently operate as nonvessel operating carriers be omitted from

the joint venture

BIB supports the Initial Decision in all respects The Intervenors

contend that the Initial Decision should be adopted by the Commission

in all respects save one the discussion at pages 935 938 concerning

the Type of Alternative Agreement Which Could be Approved This

material is alleged to be irrelevant and overly broad The Intervenors

and BIB both stress the dearth of evidence regarding CONFICO s

intended operations their probable competitive impact and any trans

portation benefits which would be realized by approval of the Agree

ment

DISCUSSION

Other than the objections to the Presiding Officer s discussion of

preferred types of nonvessel operating carrier joint ventures at pages

935 938 the arguments raised on exceptions were previously made to

the Presiding Officer and correctly and adequately disposed of in the

Initial Decision

Agreement No 10235 is a joint venture among competitors As such

it is subject to justification under the Svenska doctrine even though

joint ventures are not necessarily per se violative of the antitrust laws

EuroPacific Joint Service Agreement Nos 9902 3 et at 21 F M C 911

1979 The anticompetitive potential of joint ventures is well recog

nized and the information necessary to evaluate the purpose and proba

ble impact of such agreements must be provided by the proponents of

such agreements It is therefore appropriate that the burden of going

forward be placed upon the Proponents in this instance

The Initial Decision recognizes and applies this established approach

to joint ventures and otherwise treats the evidentiary and legal argu

ments ofthe parties in a thorough and accurate manner The burden of

justifying Agreement No 10235 was on the Proponents and they failed

to meet it Under these circumstances the evidentiary basis for the

Protestants factual allegations need not be closely examined Accord

ingly the Initial Decision will be adopted by the Commission with

certain modifications

The Initial Decision is a complete and well reasoned treatment ofthe

issues presented However because the statements found at pages 935

through 938 of the Initial Decision to which various parties took
904 FEDERAL MARITIME COMMISSION

exception are not necessary to support the result reached portions o

those pages will not be adopted Where deletions have been made from

the Initial Decision they have been made to eliminate any possible

confusion regarding the precedential value of the Presiding Offioer 

statements especially conoerning procedural matters and not t

endorse or condemn the underlying principles upon whioh they are

based 6

THEREFORE IT IS ORDERED That the Initial Decision issued

in this proceeding is adopted with the exception of the following

portions

I All material beginning with the eighth word on line 23 of pag

935 and continuing through line 20 of page 938 with th

exception offootnote 23 and 6

2 The final paragraph on page 940

3 Headnote 5 on page 905

The amended Initial Decision as supplemented by this Report and

Order constitutes the Commission s final decision in this proceeding

and

IT IS FURTHER ORDERED That the Exceptions ofConsolidate

Forwarders Intermodal Corporation the International Association o

Nonvessel Operating Common Carriers and the North European

steamship conferences are granted to the extent indicated above and

denied in all other respects and

IT IS FURTHER ORDERED That Agreement No 10235 is disap

proved and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Acting Secretary

is Each joint venture proposed under section J5 must be justified on its own merits the numerou

factors affecting the applicability of the Svenska test do not lend themselves well to prognostication a

specific as that found in pages 935 938 of the Initial Decision

6

Footnote 23 is expressly being retained as part of the Commission s final decision as two separat

paragraphs commencing after line 23 of page 935
FEDERAL MARITIME COMMISSION

DOCKET NO 77 19

AGREEMENT NO 10235 CONSOLIDATED FORWARDERS

INTERMODAL CORPORATION

Thirty nine forwarders are seeking approval of a

joint venture by which a corporation

they have formed will operate an NVO consolidation service These proponents

claim that their Agreement to do this does not require the type of proof of need

benefits and purposes mandated by the so called Svenska doctrine that their Agree

ment has minimal anticompetitive effects is required to protect the forwarders

against NVOs who take business away from them has many benefits and serves valid

regulatory purposes I find that the Agreement has not been shown to merit approval

as follows

1

The Agreement is a joint venture among parties engaged in the same line of business

As such it is inherently anticompetitive and highly suspect under antitrust law

Hence it requires justification under the Svenska test whether or not it is per se

viola tive of antitrust law

2 The evidence offered in support of approval is thin and contradictory long on

argument but short on facts The main reason for approval furthermore is based

upon allegations that the NVO industry is untrustworthy because it will wean

away the forwarders business therefore the forwarders need a safe NVO Ap

proval of the Agreement on such evidence would be tantamount to the Commis

sion s announcing that it agrees that NVOs are to be so characterized and that all 39

forwarders need protection because they fear NVOcompetition

3 Most of the purported benefits stemming from the Agreement are achievable by any

individual forwarder who becomes an NVO It is not necessary for all 39 to band

together to achieve such benefits

4 There is no persuasive evidence showing why it is necessary for all 39 forwarders to

form this NVO Le why each individual forwarder cannot commence an NVO

service without joint action

5 Although the subject Agreement is too large and inherently anticompetitive to be

supported by the limited type of evidence and contradictory arguments offered in

support a more limited agreement confined to truly needy forwarders who cannot

by themselves offer NVO services which they need to remain competitive deserves

favorable consideration if supported by specific probative evidence

Gerald H Ullman for Proponents

Donald L Flexner Elliott M Seiden and Janice M Reece for Protestant United

States Department of Justice

Stanley 0 Sher and John R Attanasio for Protestants North Atlantic Mediterranean

Freight Conferences et al

Howard A Levy and Patricia E Byrne for Protestants North Atlantic United

Kingdom Freight Conference et al except Seatrain International S A

Charles F Warren and George A Quadrino for Protestants Trans Pacific Freight

Conference of Japan Korea et al
906 FEDERAL MARITIME COMMISSION

David C Nolan and J Michael Cavanaugh for Protestants Pacific Coast Europea

Conference et al

Raymond P deMember for Protestants International Association of NVOCCs et a

Alan J Wohlstetter for Protestant Express Forwarding and Storage Co Inc

Paul J KaJler and C Douglass Miller for Bureau of Hearing Counsel

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Partially Adopted June 15 1981

This is an investigation instituted by the Commission on May 23

1977 essentially to determine the approvability of an agreement orig

nally among 51 licensed independent ocean freight forwarders wh

desired among other things to form a corporation which would oper

ate a common carrier service by water known as CONFICO Consol

dated Forwarders Intermodal Corporation This common carrier serv

ice furthermore was to be provided by CONFICO without CONF

CO s owning or operating vessels in other words as a so calle

NVOCC or NVO operation non vessel operating common carrier The

agreement in question designated as No 10235 was originally executed

on March 24 1976 by 51 signatories although the corporation know

as CONFICO was actually formed by 52 shareholders The agreemen

was filed with the Commission under pertinent regulations governin

the processing of such agreements on April 23 1976 and following

staff processing during which a number of protests against approva

were received the Commission instituted this formal prilceeding

The background to the formation of CONFICO which led to th

filing of the subject agreement has been described by the Commissio

in its original Order ofInvestigation and Hearing in an interim decision

which the Commission served on December 13 1978 Docket No 77

19 Agreement No 10235 Consolidatqd Forwarders lntermodal Corpora

tion 21 F MC 533 1978 and by several parties in their briefs In

short that background is as follows

PROCEDURAL AND FACTUAL BACKGROUND

In April 1967 a corporation known as Forwarders Intermodal Corp

FICO was organized under the laws of the State of New York Its

basic purpose was to engage in the business ofconsolidating unitizing

containerizing distributing and transporting freight and shipments in

export and import commerce

n

FICO consisted of some 49 share

holders who were licensed forwarders located in the Port of New

York On or about July 1967 FICO filed Agreement No 9646 with the

1 This decision will become the decision of theCommission in the absence of review thereof by th

Commission Rule 227 Rules of Practice and Procedure 46 CF R 02 227
CONSOLODATED FORWARDERS INTERMODAL 907

CORPORATION AGREEMENT NO 10235

Commission providing for the formation of a conference to carryon

the business authorized in its charter This agreement was approved by

the Commission on September 26 1967 According to the Commission s

interim decision the shareholders of FICO had agreed on May 23

1967 to restrict ownership in the corporation to licensed freight for

warders and to restrict sale or other disposal of stock by requiring an

offering of shares to the corporation for repurchase before a sharehold

er could sell the shares Any licensed forwarder could become a FICO

shareholder by buying shares at a price set by the Board of Directors

In December 1967 FICO commenced operations as a consolidator of

export shipments and a breakbulk agent on imports at Port Newark

This operation lasted until September 1968 when according to Mr G

Feste the President of the successor company CONFICO FICO

ceased this activity because of inability to obtain labor from the ILA

On or about October 25 1968 FICO merged with a similar corpora

tion owned by ten other licensed forwarders known as Confreight

Inc 2This latter company operated under FMC approved Agreement

No 9645 which closely resembled Agreement No 9646 and was also

approved by the Commission in September 1967 According to the

Commission s interim decision both FICO and Confreight had operated

as NVOs under tariffs filed with the Commission until shortly before

the merger The Confreight agreement and tariff were cancelled how

ever prior to the merger The FICO agreement was cancelled on

August 11 1970 according to the Commission After the merger the

corporation was known as Consolidated Forwarders Intermodal Corp

CONFICO which began to operate a variety of services including

some sales agency services from 1968 until September 1973 when it

agreed to act as sales agent for one carrier American Export Lines

Inc on exports and to perform a deconsolidation documentation serv

ice on imports The arrangement with that carrier however terminated

in October 1974

On or about June 1975 CONFICO s Board of Directors decided to

commence operations as an NVO and consolidator FICO the previous

company had operated as an NVO before the FICO agreement No

9646 was canceled in August 1970 However the shareholders of

CONFICO wished to resume operations as an NVO and consolidator

and deconsolidator of export and import traffic Pursuant to this deci

sion CONFICO filed an NVO tariff with the Commission on or about

2

As theCommission noted however Interim Report and Order p

6 n 9 the changes in member

ship affecting Agreement No 9646 the previous FICO agreement whose purposes were basically

continued after the merger

were not submitted to the Commission for approval Protestants North

Europe Conferences North Atlantic United Kingdom Freight Conference et at NEC point out not

only that the merger between FICO and Confreight was not submitted to the Commission for approv

al but that neither were the corporate articles and by laws of FICO nor the amendments to the FICO

agreement occasioned by the merger NEe Answering Brief pp 4 S
908 FEDERAL MARITIME COMMISSION

November 25 1975 however because of objections raised by the

Commission s staff the tariff was withdrawn and Agreement No 10235

signed by all but one stockholder was filed with the Commission in

April of 1976 as previously noted

While the subject Agreement was being processed by the Commis

sion s staff CONFICO commenced a consolidation service on or abou

February 1 1977 at certain piers in the Port of New York in which

CONFICO consolidated shipments into containers at the piers for dis

patch to overseas destinations However CONFICO terminated thi

consolidation service long before the Commission s interim decision

ordered it terminated apparently stopping it some time in or befor

November 1977 Since that time while awaiting final disposition of the

Agreement which would authorize it to resume NVO operations CON

FICO has been acting as general agent for all NVO known as Unimo

dal Inc a corporation owned by Australian freight forward rs char

tered under California law 3

THE FIRST PHASE OF THE DOCKETED PROCEEDING

As noted the Commission instituted a formal proceeding on May 23

1977 to determine the approvability ofAgreement No 10235 and thus

the ability of CONFICO to file an NVO tariff and offer an NVO

service in addition to consolidation and related activities The Commis

sion s Order ofInvestigation and Hearing states that under the terms o

the subject agreement CONFICO on behalf of its shareholders wi

engage in the following activities at the Port of New York and a

other unspecified ports and inland points in the United States

1 Assemble and consolidate export cargo into containers or uni

loads for tender to vesseloperating Carriers either as an NVOCC or a

a consolidator working on a fee or allowance basis andlor

2 Break bulk or deconsolidate import cargo for distribution withi

local port areas or arrange for the transportation of containers o

individual shipments to inland points ofdestination

Furthermore according to the Commission s Order approval of th

Agreement would also permit the shareholders acting through the

corporation to meet discuss and agree with any other person subjec

to the Shipping Act 1916 on matters of mutual interest with the

proviso that adoption of any agreements would require a majority vote

of the shareholders and Commission approval before implementation

3 Mr Outtorm Feste President and Chief Operating Officer of CONFICO testified that Unimoda

Inc is aCalifornia corporation with its prinCipal office in San Francisco which also conducts ope

ations in Chicago and Los Angeles and is owned by anumber of Australian ocean freight forwarde

and customs brokers Approval of the Unimodal formation was not sought from the Commissio

under section 1 S before it commenced operations as an NVO As general agent for Unimodal CON

FICO solicits forwarders for less than carload LCL cargo for the NVO operation to Australia

Japan Hong Kong Singapore other Pacific destinations and in the North Atlantic trade and pe

forms other activities relating to the general agent s functions
CONSOLODATED FORWARDERS INTERMODAL 909

CORPORATION AGREEMENT NO 10235

Finally membership in CONFICO and participation in any activity

contemplated by the Agreement would be restricted to current CON

FICO shareholders and any other Commission licensed ocean freight

forwarder who applies for membership

The filing of the Agreement generated protests from several different

groups consisting of forwarder NVOs and 38 Conferences of ocean

carriers according to the Commission s Order all of whom were

named as Protestants in the proceeding Later other groups intervened

so that eight individual companies or groups of companies and the

Commission s Hearing Counsel protested approval of the Agreement

The number of active Protestants currently consists of eight parties

identified as follows The United States Department of Justice DOJ

the North Atlantic Mediterranean Freight Conference and associated

conferences NAM the North Atlantic United Kingdom Freight Con

ference and associated North European Conferences except Seatrain

International S A NEC Trans Pacific Freight Conferences of

Japan Korea and Japan Korea Atlantic and Gulf Freight Conference

TP Pacific Coast European Conferences et al PCEC International

Association of NVOCCs NVOCCs Express Forwarding and Storage

Co Inc Express and the Commission s Bureau of Hearing Counsel

Hearing Counsel All oppose approval of the Agreement although

Hearing Counsel in its last brief suggest that a more limited agreement

might be approvable and that they are not opposed in principle to joint

ventures among freight forwarders of this type Hearing Counsel s

Answering Brief pp 19 20

Opposition to approval of the subject Agreement at the beginning of

the docketed proceeding was described by the Commission under sev

eral categories One or more of the Protestants attacked the Agreement

on several grounds They perceived the Agreement to be a joint

venture within the meaning ofthe antitrust laws specifically section 7

of the Clayton Act 15 U S C 18 which prohibits corporations from

acquiring stock or assets of other corporations in such a way as may

substantially lessen competition or tend to create a monopoly Protes

tants argued that the creation of an NVO by the many forwarder

shareholders would create a larger NVO forwarding combination

which would be capable of engaging in destructive competition with

NVOs and forwarders not affiliated with CONFICO Protestants insist

ed furthermore that proponents of CONFICO must justify approval of

the Agreement under the standards enunciated by the Supreme Court

in FMC v Aktiebolaget Svenska Amerika Linien 390 U S 238 1968

commonly known as the Svenska case meaning that Proponents must

show that their agreement is required by a serious transportation need

is necessary to secure important public benefits or furthers a valid

regulatory purpose of the Shipping Act 1916 Some Protestants argued

that CONFICO s proposed inland operations would require separate
910 FEDERAL MARITIME COMMISSION

approval from the Interstate Commerce Commission so that this Com

mission s approval would contravene another statute 4Other protest

expressed concern over the lack ofspecificity in the written Agreemen

as submitted and questioned whether the Commission had before it th

complete understanding of the parties signatory to the Agreement an

whether the Commission could ascertain what activities Proponent

would actually be conducting Other protests questioned whethe

CONFICO needed to obtain a license to act as a forwarder as require

by section 44 of the Act and whether dividends paid to shareholders o

CONFICO might be prohibited under section 44 e of the Act Man

other Protestants urged the Commission to consider the potential eco

nomic power which they believed would accrue to a large group o

forwarders operating an NVO service and whether outside carrier

such as NVOs would lose business to forwarder owners of CONFICO

because forwarder owners of CONFICO might steer cargo to CON

FICO rather than to other NVOs The Commission itself expresse

concern that CONFICO might be conducting some operations such a

consolidation without approval under section 15 ofthe Act

In view of the foregoing protests and concerns the Commissio

ordered this proceeding to determine

I Whether Agreement No 10235 is a true and complete copy ofth

understandings or arrangements between the parties

2 Whether the parties have in any cmanner entered into and imple

mented any agreement or agreements understandings and or arrange

ments without prior approval in violation of section 15 ofthe Act an

3 Whether Agreement No 10235 oragleements understandings o

arrangements between the parties shall be approved disapproved o

modified under the provisions ofthat section

THE JURISDICTIONAL ISSUE

From the inception ofthis proceeding in May 1977 to December 13

1978 a dominant issue for resolution emerged relating to the Commis

sion s jurisdiction over the subject Agreement After an early prehea

ing conference held in June 1977 then presiding Judge Stanley M

Levy established a procedure to resolve this issue including opportunity

to pursue certain discovery against Proponents in an effort to develop

facts adequate to a determination of the legal questions involved Afte

4

I do not find merit to this particular contention and will not return to it Approval of an agre

ment by this Commission does not authorize violation of another statute This Commission can gra

authority to carriers or forwarders to 8Qt concertedly but the parties must obviously comply with an

other appliQable laws The Interstate Commerce Act does Dot require this Commission to refuse 

group of forwarders authority to seek IC C approval of any segmenf of their operations if such a

proval is necessary See Freight Forwarder Agreement 71 7 17 F M C 302 308 309 1974

Moreover sometimes Ice approvaJ of an inland inJermodaJ service is not required See IML S

Transit Ltd v US 343 F Supp 32 N D Ca1972 and Japan Line Ltd v US 393 F Supp 13

ND Cal 1975
CONSOLODATED FORWARDERS INTERMODAL 911

CORPORATION AGREEMENT NO 10235

time had been allowed for the obtaining of facts and for further com

ments by the parties on the adequacies of the record in relation to the

jurisdictional issue in question Judge Levy issued his ruling on May 25

1978 granting Proponents motion to dismiss the proceeding on juris

dictional grounds See Motion to Dismiss Granted May 25 1978 In

brief Judge Levy found that the Agreement was essentially one whose

purpose was the formation of a corporation As such he found that it

was not an agreement in the nature of an ongoing relationship but

rather one more in the nature of a stock acquisition or merger which

would not fall within any ofthe types ofagreements set forth in section

15 of the Act He furthermore found that the Agreement did not fall

under section 15 categories concerning rate fixing special privileges or

advantages or pooling of earnings or that it would stifle competition

within the meaning of any of the seven categories enumerated in sec

tion 15 In Judge Levy s view the primary thrust of the Agreement

was not that of an ongoing joint venture but rather the primary

thrust and underlying purpose of Agreement 10235 is the corporate

formation of CONFICO to operate as an NVOCC Ruling cited p

9

In its Interim Report and Order cited above on December 13 1978

the Commission reversed Judge Levy The Commission did not agree

that the subject Agreement was a simple act of forming a corporation

Rather for purposes ofdetermining jurisdiction the Commission found

that the Agreement was an ongoing joint venture and that as such it

was both a cooperative working arrangement and an agreement

controlling regulating or preventing competition Interim Report p

13 The Commission found the Agreement indistinguishable for juris

dictional purposes from another agreement among six forwarders who

formed a corporation seeking inland forwarding authority from the

lC C which agreement the Commission had approved under section

15 Freight Forwarder Agreement 71 7 17 F M C 302 1974 known as

Customs Forwarders Inc The Commission described certain aspects

of the Agreement which they felt would give the shareholders of

CONFICO a competitive advantage would enable them to control

prices they and other customers would pay to CONFICO for consoli

dation services and the amount they would receive as forwarder com

pensation from CONFICO brokerage The Commission found that

the Proponents would continue to operate and compete as separate

entities but would be continually obligated to make decisions concern

ing their joint management of CONFICO decisions which will also

relate to the management of their own businesses Id p 13 The

Commission further observed

Proponents decision to conduct their joint venture through

the medium ofcorporate democracy does not however mask

the ongoing nature of Agreement No 10235 A closely held
j

I

i

912 FEDERAL MARITIME COMMISSION

corporation cannot be operated without the active participa

tion of its shareholders The establishment of CONFICO s

policies under the Agreement presents a constant need and

opportunity fOr cooperation between Proponents which war

rants Commission supervision Id p14

The Commission further stated that CONFICO s Board would fr

quently be engaged in detailed discussions planning sessions and agre

ments concerning competitively significant matters and that t

powers delegated to the Board must be attributed toCONFICO 

shareholders under the circumstances Id at pp IS 16 Footno

omitted

Although the Commission s interim decision was not intended 

determine whether Agreement No 10235 deserved to be approved 

its merits and had commented that nothing presently indicates th

CONFICO or the Proponents will or will not prove to be super

competitors by virtue of Agreement No 10235 Id p

12 the Com

mission indicated concern over the effects on competition which mig

flow from CONFICO if the Agreement were ultimately approved 

this regard the Commission stated

This sharing of costs is intended to improve Proponents abili

ty to compete with nonparties may reduce the likelihood of

Proponents individually entering the consolidation business in

the same area and might also have the effect of raising entry

barriers to potential competitors A freight consolidation busi

ness could also be employed to unduly prefer or prejudice

shippers carriers or other persons that deal with Proponents

in a Shipping Act capacity Id at pp 17 18 Footnote

omitted

Having made the previous statements the Commission proceeded 

find Agreement No 10235 subject to the requirements of section 15 

the Act and ordered CONFICO to terminate its consolidation servic

while the question of approvability of the Agreement was pending 

the proceeding The Commission stayed the proceeding for 60 days 

permit Proponents to seek judicial review an action which they d

not however take After the expiration of the 6O day period thre

further conferences were held further evidence was sought and 

hearing was held On February 28 1980 upon the retirement ofJudg

Levy the case wag assigned to me On March 4 1980 Ipresided ov

a final conference which had been scheduled by Judge Levy at whic

time the parties requested that the record be closed without cros

examination of Proponents two witnesses who had testified earlie

Problems relating to outstanding discovery requests were resolved an

provision was made for further evidence to be added to the reco

including identification of current shareholders of CONFICO and Pr

ponents ofthe subject Agreement Although the written Agreement 
CONSOLODATED FORWARDERS INTERMODAL 913

CORPORATION AGREEMENT NO 10235

originally submitted was admittedly not quite consistent with the scope

of Proponents intentions regarding trade areas to be served and names

of Proponents and was inadequately drafted in the opinion of some

Protestants I

granted Proponents request that the proceeding not be

dismissed so that the Agreement would not have to be redrafted and

refiled Instead I ruled that the proceeding should go forward to

determine whether the Agreement should be approved on its merits and

on the basis of the evidence furnished by Proponents two witnesses

and Proponents answers to discovery requests See Notice of Rulings

Made March 6 1980 5

Thereafter a briefing schedule was established

additional evidence was received and the case became ripe for deci

sion

DISCUSSION AND CONCLUSIONS

As noted earlier the Commission framed three issues for determina

tion in this case the first relating to the question whether the subject

Agreement was true and complete the second whether the parties had

implemented any agreements without approval by the Commission and

the third whether the subject Agreement or any other agreements or

understandings among the same parties should be approved under sec

tion 15 of the Act The primary issue however is the third Since the

Commission has ordered CONFICO to terminate its consolidation serv

ices by its interim decision no one argues that Proponents are carrying

out their Agreement without approval by the Commission Further

more although some Protestants argue that Agreement No 10235 as

submitted does not contain the entire agreement or understanding

because it does not contain the earlier charter and by laws of the

predecessor FICO corporation and is furthermore vague and indefinite

these defects could be corrected if as a matter of law they should

have been included in the draft Agreement as submitted and if the

entire package thereafter became fully understandable However if the

Agreement even with these earlier documents incorporated therein

could not be approved on the basis of the evidence presented in its

support there is no point in amending or clarifying a vague and

incomplete text The important question therefore is whether an agree

ment among 39 licensed forwarders essentially to operate an NVO and

consolidation service can be approved on the present record Since I

find that the record does not support approval the problems with

draftsmanship which could be corrected are not the determining fac

tors in this decision

5

also ruled that if the subject Agreement were to be approved such approval would have to be

limited to the 39 Proponents whom their counsel identified as being active Proponents although the

original Agreement had shown 51 Proponents
914 FEDERAL MARITIME COMMISSION

THE TWO BASIC ISSUES CONCERNING APPROV ABILITY

As becomes apparent from a reading of the post hearing briefs ther

are essentially two basic issues the first a question of applicable law

and the second a question of adequacy of the evidence in support o

approval Thus as to the first issue Proponents contend that th

Svenska case cited previously does not apply here In other word

Proponents apparently contend that they do not have to present ev

dence of need benefit or valid regulatory purpose flowing from the

Agreement on pain ofhaving it declared contrary to the public interes

as the Svenska case would require Stated in another way Proponent

seem to be arguing that their Agreement is not the type of per s

violation ofthe antitrust laws nor is it otherwise violative ofthose law

so that it is prima facie contrary to the public interest Presumably th

argument means that before the Commission can disapprove the Agree

ment Protestants must show how the Agreement would be detrimenta

to commerce contrary to the public interest or otherwise contraven

the standards of the Shipping Act 1916 which Proponents do no

believe they have done

Proponents contend that Svenska is inapplicable to their particula

Agreement on several grounds They argue that their Agreement is no

per se violative of the antitrust laws as the obnoxious rules in Svensk

were at least the tying rule in that case Furthermore they argu

the Agreement in no way seriously interferes with the purposes o

the antitrust laws as did the rules in Svenska 390 U S at 250 The

Agreement so they say does not eliminate or stifle competition nor 

it intended to do so All they seek to do so they say is establish on

NVO which will act alone and not concertedly with any other perso

to fix rates or practices Furthermore there is no adverse effect o

competitors Four originally eight of the Proponent shareholders o

CONFICO are NVOs themselves who say Proponents will continu

operating 6 No forwarder shareholder is required to patronize CON

FICO Any licensed forwarder can become a shareholder if it chooses

Discussions among forwarder shareholders are usual and harmless an

if they lead to anything they would have to be filed for approval wit

the Commission If the shareholders fix CONFICO s rates or broke

6

There is acurious confusion as to what Proponents are also offering NVO services themselve

Proponents as late as August 1980 Reply Brief p 3 state that eight Proponent forwarders are als

NVOs citing witness Feste Ex 3 p 4 But Mr Peste s

testimony was written in April 1979 Couns

for Proponents stated in April 1980 Ex 7 that 12 shareholders are no longer Proponents Included 

thelist of 12 are four forwarder NVOs Therefore it would seem tbat only four Proppnent forwarde

also offer NVO services Other parties believe that the number of remaining forwarder NVOs a

three Hearing Counsel oreight NAM group Hearing Counsel rely on answers to interrogatorie

whereas DOJ and I have compared Ex 3 with Ex 7 Although Ex 7 shows that one shareholde

forwarder NVO withdrew from CONFICO as inactive and insolvent three others simply withdrew

returning their stock to the corporation Query does this mean that some NVO Proponents do n

really need CONFICO
CONSOLODATED FORWARDERS INTERMODAL 915

CORPORATION AGREEMENT NO 10235

age this is de minimis in its competitive impact Furthermore the entire

operation of CONFICO is minuscule since the percentage of exports

handled by CONFICO shareholders is puny for example in 1978

amounting to only 2 5 percent of exports to the world Furthermore

most forwarder owners of CONFICO have not even patronized CON

FICO which is acting as general agent of an NVO known as Unimodal

Inc as I have noted above Only 33 percent of the CONFICO mem

bers patronized this Unimodal service In short Proponents claim that

they merely wish to set up an NVO service which will have minimal

anticompetitive effect and would in fact be rather puny compared to

the totality of cargo being exported There is therefore no triggering of

antitrust concerns and no need to apply the Svenska standards

The reply by Protestants as one might expect presents a vastly

different picture According to them we are dealing here with a joint

venture among 39 forwarders who control much more cargo than

Proponents intimate for example not less than 8 2 percent of exports

through New York to Northern Europe and the Mediterranean These

39 forwarders are engaging in a joint venture as the Commission held

in its interim decision The courts and commentators have consistently

found joint ventures to be replete with anticompetitive dangers as the

Commission itself acknowledged in that decision Eight of the forward

ers themselves are NVOs and as the courts note this fact is likely to

dampen competition between the parents and their progeny In other

words it is not likely that these eight NVOs will wish to compete with

their offspring NVO CONFICO As a joint venture according to

Protestants the CONFICO arrangement contains all the inherent anti

competitive dangers noted by courts in addition to the dampening of

competition between the parent NVO forwarders and the offspring

CONFICO NVO Any forwarder owner of CONFICO contemplating

establishing its own NVO service will most likely not do so since it

would be competing with CONFICO which the forwarder partly

owns Therefore new NVO services will be discouraged Even aside

from the observations of the courts and other authorities regarding the

anticompetitive dangers ofjoint ventures in this case argue Protestants

the tendency is obviously present for the forwarder owners of CON

FICO to steer cargo to CONFICO rather than to an outside NVO

Indeed the primary purpose of the Agreement as Proponents them

selves reiterate is to establish a so called neutral NVO i e one

whom the 39 forwarders can trust will not wean away their business

In other words how can it be argued that the Agreement will have no

anticompetitive effects when the primary purpose of the Agreement is

to satisfy a

supposed need for these 39 forwarders to avoid having to

use the services of NVOs whom they do not trust because they fear

that such NVOs are likely to wean away the underlying shippers for

themselves As Protestants also argue the forwarder owner of CON
916 FEDERAL MARITIME COMMISSION

FICO would also tend to prefer CONFICO over an outside NVO sinc

the forwarder owner stands also to share in the profits of CONFICO

through dividends

Additional dangers to joint ventures are pointed out by Protestant

For example joint venturers who would be fixing CONFICO s rates t

shippers and brokerage payments to forwarders through the Board o

Directors would also be thrust into dangerous proximity to discus

other aspects oftheir businesses as the Court noted in Northern Natur

Gas Company et al v Federal Power Commission 399 F 2d 953 97

D C Cir 1968 Other anticompetitive dangers flowing from approva

of the CONFICO agreement are argued by Protestants For example

the concentration of traffic handled by the 39 forwarders who woul

tend to utilize CONFICO would enhance CONFICO s power in i

dealing with underlying vessel operating carriers Non shareholde

NVOs without the backing of 39 sources of cargo might be placed 

a competitive disadvantage when negotiating with underlying vess

operating carriers or might otherwise have difficulties in competin

without such a source of business flowing from 39 owner forwarder

In the view of another group of Protestants NEC furthermore th

entire CONFICO arrangement is both horizontal price fixing whic

would violate section I of the Sherman Act per se because shareholde

NVOs would be determining prices of another NVO CONFICO

regardless of the corporate facade and would also constitute a tendenc

to monopolize on a vertical level by establishing a combination o

forwarders consolidators and NVO operations in CONFICO whic

together constitute a sizeable segment ofthe export industry Moreove

Agreement No 10235 in the view of NEC constitutes a prima fac

violation of section 7 ofthe Clayton Act because of its qualitative an

quantitative anticompetitive effects and because ofthe dangerous incip

ent trend toward concentration which it demonstrates

APPLICATION OF THE SVENSKA DOCTRINE

I find Proponents contentions that their Agreement is somehow

exempt from application of the Svenska doctrine requiring specific just

fication for approval to be without merit Proponents would have th

Commission find their Agreement to be a

relatively harmless arrange

ment by which a single NVO would be established which woul

provide first class efficient NVO consolidation services for shipper

and would cause no undue concentration of power or have advers

effects on competition But as Protestants have argued above and a

this Commission and the courts have so often recognized joint venture

are very dangerous things indeed and though the courts have not ye
CONSOLODATED FORWARDERS INTERMODAL 917

CORPORATION AGREEMENT NO 10235

held them to be per se violations ofantitrust law 7they possess so many

inherent anticompetitive characteristics and are so suspect that they

must be evaluated most searchingly before they are allowed to pass

muster under section 7 of the Clayton Act

Contrary to Proponents description oftheir Agreement as one which

is neither per se nor otherwise violative of antitrust law the Commis

sion has already made findings which point out the inherent dangers in

joint ventures and specifically in this particular joint venture which is

Agreement No 10235 In its interim decision as discussed above the

Commission found this Agreement to be subject to section 15 because it

was a cooperative working arrangement as well as an agreement

controlling regulating or preventing competition and furthermore

described the many ongoing aspects of the CONFICO arrangement

which would require careful monitoring by the Commission because of

the many anticompetitive aspects of such an arrangement and the

tendency of such agreement to lessen or control competition between

the parties Rather than treat this Agreement as something having

minimal impact on competition the Commission took three pages to

describe its serious concerns with the effects of the Agreement See

Interim Report and Order pp 13 16 Moreover the Commission paid

special attention to the warnings of the Supreme Court in the leading

case on joint ventures as they relate to the antitrust laws namely

United States v Penn Olin Chemical Co 378 U S 158 1964 The

Commission stated that c ourts and commentators have removed all

doubts that joint ventures tend to lessen or control competition be

tween the parties Id at pp 15 16 and cited the following language

from the Courts decision in Penn Olin

T he formation of a joint venture and purchase by the

organizers of its stock would substantially lessen competition

indeed foreclose it as between them both being engaged in

commerce This would be true whether they were in actual or

potential competition with each other and even though the

new corporation was formed to create a wholly new enter

prise Realistically the parents would not compete with their

progeny 378 U S at 168

The Penn Olin decision is a good place to begin if one wishes to

understand at a glance why joint ventures are so suspect and why they

7

In Broadcast Music Inc v CBS 441 US 1 23 1979 the Supreme Court held that joint ven

tures and other cooperative arrangements are also not usually unlawful at least not as price fixing

schemes where the agreement on price is necessary to market the product at alL In United States

Lines Inc v Federal Maritime Commission 584 F 2d 519 D C Cir 1978 the so called Euro Pacif

ic case the courtdistinguished between market divisions which are per se violations of antitrust law

and sjoint venture to be considered underarule of reason 584 F 2d at 530 In Freight Forward

er Agreement 71 7 Cus oms Forwarders Inc cited above the Commission refused to hold that a

joint venture is aper se violation of the Clayton Actorthe policies of the antitrust laws 17 F M C at

310
918 FEDERAL MARITIME COMMISSION

are considered to be so intrinsically dangerous to competition El

where in that decision the Court explained

The joint venture like the merger and the conglomera

tion often creates anticompetitive dangers It is the chosen

competitive instrument of two or more corporations previous

ly acting independently and usually competitively with one

another If the parent companies are in competition or

might compete absent the joint venture it may be assumed

that neither will compete with the progeny in its line of

commerce Inevitably the operations ofthe joint venture will

be frozen to those lines of commerce which will not bring it

into competition with the parents and the latter by the same

token will be foreclosed from the joint venture s market 378

U S at 169

The inherent dangers of joint ventures have been recognized 

other authorities These authorities acknowledge the danger that 

joint venture is likely to prefer its owners as well as the joint owne

preferring to do business with their progeny as the Supreme Co

noted above Furthermore because of the proximity of the owne

engaged in the same business there is danger of exchanging pr

information and engaging in other dangerously anticompetitive act

ties Finally there is a

probable effect on limiting entrants to a mark

and possible price manipulation See e g Pitofsky Joint Ventures Und

the Antitrust Laws 82 Harv L Rev 1007 1030 1038 1969 and ca

cited therein Northern Natural Gas Company v Federal Power Comm

sion 399 F 2d 953 972 D C Cir 1968 In the last case cited 

example the court commented on the fact that in joint ventures part

are exposed to the risk of engaging in other activities relating to th

business merely because oftheir close relationship as joint venturers 

this regard the court stated

The joint venture puts the parents particularly if they are

competitors in dangerous proximity to discuss and act jointly

on aspects of their business apart from the joint venture and

creates an aura of cooperative team spirit which is apt to

dampen competitive fires between the firms involved 399

F 2d at 972 Footnote omitted

The court made special mention ofthe fact that in the joint ventu

involved in that case officers of the joint venture company would a

be officers ofthe individual owners a situation which could lead to t

cited danger d The Commission in its Interim Report and Order 

14 noted that Proponents elected representatives would compri

CONFICO s Board ofDirectors who would frequently be engaged 

detailed discussions planning sessions and agreements concerning co

petitively significant matters As Protestants NEC comment mor

over the current members of CONFICO s Board are officers or dire
CONSOLODATED FORWARDERS INTERMODAL 919

CORPORATION AGREEMENT NO 10235

tors of its shareholders as well as signatories of the Agreement NEC

Answering Brief p

41

Given the preceding context and analysis ofjoint ventures under the

antitrust laws and specifically section 7 ofthe Clayton Act one would

be hard pressed to conclude that Proponents of a

joint venture subject

to section 15 of the Shipping Act need not proffer supporting evidence

showing the need benefit and purpose of their agreement even if there

were no Protestants We need not ponder the matter further however

for the Commission and the Courts have now indicated that the Svenska

test should apply whether or not an agreement is per se violative or

otherwise violative of antitrust policies Moreover the Commission has

specifically held that joint service agreements need supporting evidence

in justification regardless of the question whether they are per se viola

tive In Agreement Nos 9929 2 et al 19 SRR 415 419 1979 the

Commission conditionally approved a joint service agreement between

two vessel operating common carriers by water The Commission de

scribed the Agreement in question Agreement No 10266 2 as a joint

service arrangement which are viewed as arrangements for dividing

markets and are also presumed to reduce potential if not actual compe

tition between the participants The Commission then stated that

the Commission will therefore require an appropriate justification

without regard to whether their particular proposal constitutes a

per se

violation of the antitrust laws The Commission noted in its Order

Partially Adopting Initial Decision that the Presiding Officer found

the Agreements to be subject to the Commission s Svenska doctrine

Footnote omitted 8

Thus the application of the Svenska test was not

withdrawn by the Commission merely because one ofthe agreements in

that case was a joint service arrangement On the contrary the Com

mission imposed limiting conditions on the agreement as prerequisites

for approval because ofinadequate supporting evidence or vagueness in

the agreement s

language specifically found need benefit and purpose

otherwise relating to the agreement and moreover defined those terms

19 SRR at 420 n 21

In another joint service case United States Lines Inc v Federal

Maritime Commission Euro Pacific cited above the court made

clear that the Commission was obliged to scrutinize agreements submit

ted under section 15 to determine their impact upon antitrust laws

regardless of whether the agreements wereper se violative of antitrust

laws or merely possibly violative of those laws under the rule of

reason test The court implied that a joint service arrangement might

be one that should be viewed under the rule ofreason test rather

8

The Commission earlier in its decision described Agreement No 10266 2 as ajoint service ar

rangement between two carriers whereby the carriers would share revenues and expenses from joint

operations of ships under atrade name to be selected 19 SRR at 417
920 FEDERAL MARITIME COMMISSION

than as a per se violation of antitrust laws but more importantly t

court did not care under which category of antitrust law such 

agreement fell It held that the Commission must carefully examin

antitrust consequences regardless of category and find offsetting ben

fits consistent with the public interest and the purposes of the Shippin

Act In these respects the court stated

Whether the arrangement established is viewed as a

division of markets and illegal per se under the antitrust laws

or as ajoint venture to be considered under a rule ofreason it

is clear that serious antitrust issues are posed by its implemen

tation 584 F 2d at 530

Elsewhere the court stated that the Commission s duty extend

beyond scrutinizing only per se violative agreements in search ofjusti

cation stating

The responsibility delegated to the Commission by Congress is

not simply to guard against per se violations of the antitrust

laws it is to protect the public interest which may be adverse

ly affected by all forms of anticompetitive arrangements 584

F 2d at 531

In another portion of the court s opinion the court alluded to its te

in an earlier case lsbrandtsen v United States 211 F 2d 51 57 whi

was the genesis of the later Svenska test requiring the Commission 

make sure that section 15 agreements not invade the policies ofantitru

laws any more than necessary to carry out the purposes ofthe Shippin

Act In so doing the court again announced its view that this requir

ment did not depend upon a finding that an agreement was per 

violative of antitrust laws Indeed the court made the very sensi

observation that an agreement might restrict competition more severe

than per se type violations depending upon the circumstances Ther

fore the Commission had to be on its guard against all restricti

agreements when seeking to determine what if any beneficial purpos

they served Thus after referring to Svenska and noting that per 

violations of antitrust law certainly required careful scrutiny by t

Commission the court applied the same test to other agreements whi

werenot per se violative stating

But the fact that a given practice is considered under a rule of

reason rather than as a per se violation does not mean that the

dangers to competition in any particular circumstance are nec

essarily lower clearly certain practices which are not per se

violations may depending upon the facts of the particular

case restrict competition more severely than would per se

restraints As a result any determinative line drawn at per se

violations cannot adequately serve to fulfill the Commission s

responsibility to protect the public interest and to ensure that

the agreements entered into by carriers do not restrict compe
CONSOLODATED FORWARDERS INTERMODAL 921

CORPORATION AGREEMENT NO 10235

tition any more than is necessary to serve the public consistent

with the purposes of the Shipping Act 584 F 2d at 529 n 31

See also the courts opinion at p

531 where it stated

But the fact remains that the agreement in this case on its face

raised serious antitrust questions and presented the potential

nowhere denied by the Commission that competition would

be unduly restrained Ifthe Commission chooses not to deter

mine whether competition will in fact be restrained substantial

ly then it must at least demonstrate that it has considered the

antitrust implications and has found that the public interest

supports approval notwithstanding the possible anticompetitive

effects

Obviously Proponents Agreement a joint venture among persons in

the same line of business as described above cannot be exempted from

application of the Svenska requirement and must be scrutinized carefully

by the Commission Perhaps there is an innocuous agreement which

cannot reasonably be considered to have any significant effects on

competition in fact or in theory but Agreement No 10235 among 39

freight forwarders to establish an NVO consolidation operation when

four or so of the forwarders themselves are also NVOs is certainly not

that innocuous agreement The point is not that the respondents have

no obligation to provide evidence of need benefit or purpose They

obviously do The question really is how deep and probative should

their evidence be to offset the invasion of our national philosophy

favoring free and open competition embodied in the antitrust laws

The Commission has recognized that the quantum and quality ofproof

required to justify an anticompetitive agreement may vary depending

upon the extent to which the agreement invades the prohibitions ofthe

antitrust laws See Agreement No 8760 5 17 F MC 61 62 1973

Agreement No 57 96 20 F MC 289 300 1975

I conclude therefore that the so called Svenska test is fully applicable

to determine the approvability of the subject Agreement That test as

created by the Commission and as approved by the Supreme Court is

stated by the Court as follows

The Commission has formulated a rule that conference re

straints which interfere with the policies of antitrust laws will

be approved only if the conferences can bring forth such

facts as would demonstrate that the rule was required by a

serious transportation need necessary to secure important

public benefits or in furtherance of a valid regulatory purpose

of the Shipping Act See 10 F M C at 45 Federal Maritime

Commission v Aktiebolaget Svenska Amerika Linien 390 U S

238 243 1968 9

9

There is no need to discuss in detail the origins of the so called Svenska test orto engage in along

discussion concerning whether someone must first find that an agreement is in fact or in law violative
922 FEDERAL MARITIME COMMISSION

It would also be wen to consider the Commission s original stat

ments which ultimately led to enunciation of the doctrine Mediterran

an Pools Investigation 9 F M C 264 290 1966 the Commission form

lated this balancing test

T he question of approval under section 15 requires 1 con

sideration of the public interest in the preservation of the

competitive philosophy embodied in the antitrust laws insofar

as consistent with the regulatory purpose of the Shipping Act

and 2 a consideration of the circumstances and conditions

existing in the particular trade involved which the anticom

petitive agreement seeks to remedy or prevent The weighing

ofthese two factors determines whether the agreement is to be

approved

I must therefore weigh the evidence proffered by Proponents 

favor of approval of their Agreement to determine if it offsets th

anticompetitive effects inherent in theirjoint venture and consider th

particular circumstances and conditions which their Agreement seeks 

remedy or prevent It is furthermore important to consider the quantu

and quality of the evidence submitted by Proponents as Ihave note

Moreover as the court in United States Lines Inc v Federal Maritim

Commission cited above observed 584 F 2d at 530 n 35 it 

important that the evidence not be merely general and conclusory 

that it be unsupported by any facts included in the record if a

anticompetitive effect appears likely as it does in this case As thes

cases and other decisions of the Commission clearly demonstrate fu

thermore Proponents are obliged to submit probative evidence show

ing clear factual connections between the asserted problem which th

Agreement purports to remedy and the means by which the Agreeme

will correct such problem Without such evidence the Commission ha

disapproved or modified agreements for example by removing on

of the antitrust laws rather than simply being contrary to the policies of the antitrust laws which p

serve and promote free and open competition to trigger Svenska A study of the genesis orthe 

called Svenska doctrine shows that its roots go back to the Isbrandtsen case 211 F 2d 51 7 and 

the Commission s decision in Mediterranean Pools Investigation 9 F M C 2641 288 290 1966 and 

vestigation of Passenger TravelAgents lOF M C 27 1966 All of these casesare concerned with inv

sions of anti trust policies and the prohibitions of those laws These as well as later decisions of 

Commission continually require abalancing of evidence showing needs benefits or valid purposes 

offset invasion of the national philosophy favoring free and open competition See e

g Agreem

Nos 9847 and 9848 14 F M C 149 155 156 1970 Inter American Freight Conference 14 F M C 

61 1970 Agreement No 98J5 14 F M C 203 207 1971 Agreements Nos 9718 J and 97JI 5 

F M C 351 1976 Although usually considered per se violative of antitrust laws not an of the agr

ments in these cases were clearly such However as I have discussed it does not matter whether th

were per se violative of antitrust laws or merely significantly restrictive or anticompetitive In eith

event the Commission is obliged to balance evidence of justification for approval of the agreeme

against their invasion of antitrust policies As the court stated in United States Lines Inc v FM 

cited above furthermore the Commission must balance the evidence in support of approval agai

antitrust implications even if the Commission chooses not to determine whether competition wil

fact be restrained substantially
CONSOLODATED FORWARDERS INTERMODAL 923

CORPORATION AGREEMENT NO 10235

party from a three party joint service lO refusing to allow a dual rate

contract to be applied to shippers desiring to use different modes 11

limiting joint service vessel capacity 12 disallowing an unduly broad

geographic scope

13

or denying approval because the evidence in sup

port of an agreement is merely conjectural or theoretical 14

THE INADEQUACIES OF THE EVIDENCE SUBMITTED BY

PROPONENTS

Notwithstanding their argument that the Svenska test does not apply

Proponents have submitted evidence in support of approval However

as measured by the various tests described above the type ofevidence

submitted by Proponents I

find to be seriously deficient It is generally

long on argument and self serving puffing but rather short on facts

Furthermore it is continually contradictory Considering the fact that

Proponents wish approval of a joint venture among 39 forwarders to

establish a

super NVO as one group of Protestants calls it which

originally sought authority to operate in every export trade in the

world Ifind such evidence terribly inadequate in view of its anticom

petitive implications Ifind furthermore that underlying this Agreement

there is a sound idea However this particular Agreement has not been

shown to be necessary to carry out the idea without serious anticom

petitive consequences I conclude that this Agreement is simply not

approvable even with limiting amendments proposed by Proponents

counsel but that another more limited and better justified agreement

seeking to preserve small forwarders who may truly need to join forces

to offer an NVO service if fully supported by probative evidence may

well deserve favorable consideration Inow explain

The evidentiary record in this proceeding is actually quite small It

consists merely of affidavits of two witnesses Messrs Bowen and

Feste Chairman of the Board and former President of CONFICO

respectively together with requests for information submitted by other

parties and CONFICO s

responses Other than this evidence the record

contains a copy of the Agreement itself Exhibit 4 and a statistical

analysis prepared by the Commission s staff showing certain traffic

aspects and a clarifying statement of Proponents counsel explaining

who are now to be considered Proponents of the Agreement as com

pared to shareholders of CONFICO and the original signatories to the

Agreement The evidence and arguments proffered by Proponents can

10 Agreement Nos 9902 3 et 01 21 F M C 911 1979

Agreement Nos 150 DR 7and 3103 DR 7 22 F M C 378 1979

Agreement No 9929 3 19 SRR 84 1979

13 New York Freight Bureau IntermodalAgreement 22 F M C319 1979

Agreements Nos 8200 8200 1 8200 2 8200 3 21 FM C 959 1979 Agreement No 17 34 21

F M C 750 1979
924 FEDERAL MARITIME COMMISSION

be categorized under following purported benefits Proponents Ope

ing Brief pp 13 20

1 Providing a neutral service

2 Substantial savings to the less than carload shippers

3 Providing expertise

4 Reducing pilferage congestion and shut outs

5 Providing split delivery service

6 Offering single carrier responsibility and one charge from th

interior

7 Benefitting the small forwarder

8 Establishing an international network

9 Strengthening the forwarding industry

Proponents also offer the following as serious transportation need

which the CONFICO arrangement will purportedly meet Proponent

Opening Brief p

21

1 Reducing labor costs for steamship lines by consolidating 

offpier warehouses

2 Reducing risk of pilferage and congestion and shut out 

cargo by utilizing offpier consolidation premises

3 Reducing multiple bills of lading issued by a steamship line 

a single CONFICO bill of lading

4 Relieving underlying vessel operating carrier of responsibili

for loss or damage to cargo because CONFICO will assume 

5 Saving the vessel operating carrier from having to process an

pay claims ofLCL shippers and from the cost of soliciting th

LCL market

Proponents conclude their presentation with additional argument

Thus they contend that CONFICO would be unique compared 

other NVOs who are not bonded and possibly not financially respons

ble unlike CONFICO which would be backed by 39 licensed forwar

ers Furthermore they contend that there are at least three NVOs wh

file tariffs who are owned by overseas forwarders These forwarde

did not have to obtain section 15 approval therefore why shou

Proponents Also Conferences approved by the Commission are o

posing approval of this Agreement but they have cartel powers an

are dominated by foreign lines These facts are noteworthy a

cording to Proponents Proponents Opening Brief p

24 CONFICO

serves a valid regulatory purpose argue Proponents because bein

owned by American forwarders its records would always be availab

to the Commission unlike the records of foreign forwarders who ow

NVOs Finally an NVO service operated by an American CONFICO

will help restore the American merchant marine and improve o

balance ofpayments Proponents Opening Brief pp 24 25
CONSOLODATED FORWARDERS INTERMODAL 925

CORPORATION AGREEMENT NO 10235

As Inoted earlier the evidentiary record is rather thin and is long on

argument but short on facts Furthermore it is internally contradictory

and frequently specious i e apparently valid but not really so Virtual

ly all Protestants have shown the serious shortcomings in the evidence

submitted by Proponents All of the supposed benefits and needs on

careful analysis appear either to be unsupported by facts ofrecord do

not show that an Agreement such as CONFICO is necessary to achieve

them or are simply arguments of a

conclusory nature Moreover the

very first benefit namely that the Agreement is necessary to estab

lish a neutral or safe NVO is based upon allegations and innuen

does that attack the integrity and character of the entire NVO industry

Other alleged benefits that would flow from approval ofthe Agreement

establishing a CONFICO NVO service merely show that all NVO

services are beneficial and helpful to small shippers who do not have

enough cargo to fill a full container Thus the benefits concerning

substantial savings to LCL shippers reducing pilferage conges

tion providing split delivery offering single carrier responsibility

are fine objectives However these benefits can and do flow from the

operations of any NVO In other words it is not necessary for 39

forwarders to form a CONFICO NVO to attain these benefits Any

NVO including the four shareholders of CONFICO who are already

operating under NVO tariffs presumably are providing substantial

savings to LCL shippers reducing pilferage providing split deliv

ery service offering single carrier responsibility strengthening

their forwarder business etc and there is no showing why any

individual NVO forwarder cannot establish an international network if

it wishes In other words as Protestants correctly note these benefits

are inherent in the operation of any NVO Even Proponents admit

this 15 What is missing is evidence showing that it is necessary for all

39 forwarders to form a CONFICO to provide NVO services It is not

necessary for Proponents to go outside the evidence of record to cite

reports and studies praising the services of the NVO industry as Pro

ponents have done No one is disputing the fact that NVOs provide

fine services and fulfill needs for small LCL shippers Indeed this

Commission itself has specifically lauded NVOs and found their oper

ations to be in the public interest to such an extent that the Commission

forbade a number of conferences from discontinuing so called consoli

dation allowances paid to NVOs under their existing conference agree

ments See Cancellation of Consolidation Rules Published in the Freight

15 Thus Proponents state

While other NVOs provide the same basic services as CONFICO Proponents Open

ing Brief p 22 Proponents then try to distinguish CONFICO as unique because of purport

ed expertise special competency and financial responsibility accruing to CONPICO because

it is owned by 39 active forwarder signatories
926 FEDERAL MARITIME COMMISSION

Tariffs of Conferences 20 F MC 858 867 868 1976 see also the

discussion of the advantages and benefits ofoffpier NVO consolidation

contained in Docket No 77 23 Agreement No 10294 19 SRR 1113

1135 1136 10 1979 proceeding discontinued as moot September 17

1980 23 F MC 246

Perhaps the most disturbing aspect of the evidence proffered by

Proponents witnesses and their arguments is that the first alleged

benefit which appears to be the main reason for the 39 forwarders to

attempt to operate an NVO service is based upon an allegation tha

NVOs with whom the 39 forwarders deal are not trustworthy and are

unethical because the NVOs will attempt to wean away business

from the forwarders by approaching LCL shippers directly and bypass

ing forwarders once these NVOs get LCL business via the forwarders

Proponents claim that there is danger to the forwarder when he

employs non CONFICO NVOs but no such danger to the forwarde

when he employs CONFICO as the NVO Proponents Opening

Brief p

14 Proponents even insinuate that these non CONFICO

NVOs are unethical stating that the CONFICO arrangement is needed

so that all forwarders shareholders or non shareholders of CONFICO

will feel free to use CONFICO without fear that their cargo will b

unethically solicited Proponents Reply Brief p

19 Are Proponents

really alleging that the NVO industry is unethical and untrustworthy

If so where is the evidence supporting this aside from the genera

accusations ofCONFICO s two witnesses IfNVOs are really that bad

moreover why would forwarders who are not shareholders of CON

FICO give CONFICO their business as Proponents claim they would

dO 16 Why wouldn tCONFICO also try to wean away the busines

from non shareholder forwarders Furthermore even if there is some

type of unethical jungle out there in the NVO industry why do th

four forwarder signatories to CONFICO who operate their own NVO

service need a CONFICO to protect their accounts Do they fear tha

their own NVO will wean away cargo from themselves as forward

ers This is one ofthe many contradictions in Proponents evidence an

arguments which destroy the credibility of that evidence and belief in

the validity ofthe arguments

If we put aside for the moment these allegations about un

trustworthy unethical NVOs whom the 39 forwarders purportedly

fear we can consider the argument on a different basis but again 

offers no support for approval of the Agreement As Protestants hav

16 Proponents stale

Other NVO services obviously are available but Confice is unique in one respectnit is the

only NVO service owned by forwarders and as such it will encourage forwarders share

holders and nonshareholders alike to obtain the benefits of an NVO service for their export

ers without fear that their cargo will be unethically solicited Proponents Reply Brief p

19
CONSOLODATED FORWARDERS INTERMODAL 927

CORPORATION AGREEMENT NO 10235

pointed out see especially the NAM group Answering Brief p 22 the

argument merely means that the forwarders wish to be insulated from

the threat of competition In other words by providing a safe

neutral NVO such as CONFICO supposedly would be the forward

er owner of CONFICO would feel free to give its business to CON

FICO keep it away from other NVOs and therefore not live in fear of

losing that business to the non CONFICO NVO But is protection

against competition adequate justification for approval of a 39 party

agreement especially when some of the 39 already operate as NVOs

themselves and presumably would have no need for a CONFICO

Does the shipping public benefit because the forwarder shareholder of

CONFICO fears outside NVOs and will be motivated to keep shippers

cargo away from them if possible even if such NVOs offered superior

service and lower charges Remember too that Proponents had argued

earlier that their Agreement does no violence to antitrust laws because

it is not anticompetitive and should not be subjected to the Svenska test

What then do they call this type of restraint of trade an agreement

whose main purpose is to alleviate fears of forwarders by giving them

reason to steer business to one NVO and avoid doing business with

outside NVOs whose competition they fear Again we have a contra

diction in Proponents evidence and arguments which undermines their

case

As in the case of Proponents arguments that the benefits of an NVO

service could be provided by approval of the CONFICO agreement

and the argument that approval of CONFICO is necessary to protect

the 39 forwarders from unscrupulous NVOs Proponents case contin

ues to be undermined by a single recurring question i e why can t

these purported needs or benefits be achieved without concerted action

by 39 forwarders In other words why can t

any forwarder offer an

NVO service individually thus avoiding the need to seek section 15

approval The record contains confusing answers to this question

First Proponents themselves reiterate that anybody with desk space

and a telephone can establish an NVO operation even though he has no

knowledge ofthe business nor adequate working capitaL Proponents

Opening Brief p

16 But then Proponents argue that some forwarders

need CONFICO because they are too small to offer a frequent and

regular container service Proponents Opening Brief p

19 Propo

nents thus argue than CONFICO will be a reliable trustworthy finan

cially sound NVO unlike those outside NVOs with their desks and

telephones but then imply that maybe those NVOs are really not so

weak and unattractive since they must be attracting enough business to

offer a frequent and regular NVO container service which some of the

39 Proponents apparently cannot do by themselves

Of course there is another question that should be asked namely

does the record show a serious transportation need for the establish
928 FEDERAL MARITIME COMMISSION

ment ofanother NVO especially a

super NVO fed by 39 forwarders

No shippers testified or as far as I can tell from the record were even

asked if they wanted or needed another NVO The fact that 39 for

warders fear competition from non CONFICO NVOs does not mean

that the shipping public is suffering from inadequate NVO service

presently On the contrary Proponents themselves argue that the

Commission s records will show a steady flow of NVO tariffs being

filed Proponents Reply Brief p

4 But even if the record

showed a shortage ofNVO service it is not clear that the establishment

of the joint venture CONFICO NVO with its inherent tendency

common to all joint ventures to discourage the forwarder owners o

CONFICO from commencing new NVO services in competition with

their offspring would ultimately ensure that shippers would have a

greater selection ofcompeting NVOs from which to choose

But argue Proponents even if any NVO offers essentially the same

service as CONFICO CONFICO would be unique because it would

be backed by 39 licensed forwarders and would consequently possess

expertise and would be financially responsible Furthermore they

argue only CONFICO with its forwarder connections could establish

an international network offorwarders to handle each others s contain

ers to ensure efficient handling of freight to destination Proponents

Opening Brief pp 22 23 Here again the argument is short on facts

undermined by inconsistencies and based in part on unsupported allega

tions Again it is apparently charged that non CONFICO NVOs are

somehow financially unsound apparently Proponents desk and tele

phone characterization of NVOs implicitly returning But does the

record contain facts showing the financial condition of the NVO indus

try Are they supported by large backers are they well capitalized

corporations Have they been going bankrupt and causing shippers to

suffer financial harm If so where is the evidence I cannot officially

notice all of these alleged facts or rely upon some hidden knowledge o

which Protestants are unaware and which they have no chance to

refute The courts strongly condemn this type of decisionmaking See

United States Lines Inc v Federal Maritime Commission cited above

584 F 2d at 533 535

Furthermore as some Protestants have noted see NAM group An

swering Brief pp 24 25 the fact that CONFICO is owned by numer

ous forwarders does not establish that the corporation CONFICO wil

necessarily be financially responsible A prime reason for the informa

tion of a

corporation in the first place is to limit the liability of its

shareholders But note again another contradiction in Proponents argu

ments Proponents claim that they are merely forming one NVO and

are not planning to engage in rate fixing among several NVOs or to file

joint NVO tariffs In other words CONFICO is supposed to be 

single corporate NVO with one tariff serving shareholders and non
CONSOLODATED FORWARDERS INTERMODAL 929

CORPORATION AGREEMENT NO t0235

shareholders alike But now Proponents argue that the knowledge and

skills of the 39 forwarders will be utilized by CONFICO to assure

shippers of competency and financial soundness and also enable CON

FICO to establish inland services and an international network with

other forwarders in destination countries Does this not tend to confirm

the findings of the Commission in it s Interim Report and Order as well

as the contentions of Protestants that what we have here is an ongoing

cooperative working arrangement among active forwarder participants

who will be continually meeting to make joint decisions Moreover

will the forwarders be providing the skilled labor to operate the NVO

service Are outside non CONFICO NVOs presently unable to find

skilled labor or administrative help to operate their businesses without

turning to forwarders to assist them Are all present NVOs unable to

make arrangements with overseas forwarders for efficient movement of

containers to inland destinations in foreign countries Are not some of

them corporations or forwarder owned or affiliated themselves or even

if not don t

foreign forwarders talk to them Ihave no reason to doubt

that CONFICO could provide a

responsible sound NVO international

service But Ialso have no record evidence that such NVO services are

not already being provided that they cannot be provided without

approving CONFICO s arrangement or that there is a serious transpor

tation need for CONFICO to commence such services because of a

present dearth of them In short since there are so many inherently

anticompetitive effects to this joint venture I cannot find probative

evidence to offset those considerations or as the Commission stated in

Mediterranean Pools Investigation cited above 9 FMC at 290 find

the circumstances and conditions existing in the particular trade in

volved which the anticompetitive agreement seeks to remedy or pre

vent

The final category of arguments proffered by Proponents again are

deficient in factual support and suffer from more inconsistencies Thus

Proponents contend that there are at least three NVOs operating in the

United States who are owned by foreign forwarders namely Scan

freight Inc Ecca and Unimodal Inc The last named as noted

previously now employs CONFICO as its general agent Proponents

complain that these foreign forwarders assuming that they are also

engaged in joint ventures did not have to go through section 15

proceedings to commence operations so why can tProponents begin to

start their CONFICO service without all this litigation There are of

course several answers to this question First we are in an American

forum and must observe American law until that law is changed If

each of the named NVOs is operated by a consortium of foreign

forwarders rather than a single forwarder or holding company there

may be no foreign antitrust laws that hinder those companies from

acting concertedly Furthermore foreign freight forwarders are not
930 FEDERAL MARITIME COMMISSION

licensed by this Commission Does that mean that we should suspen

our antitrust laws or the Shipping Act when 39 forwarders in th

country enter into a joint venture that is highly suspect under Amer

can antitrust law Should we also suspend the licensing requirement

and other regulations applicable to American freight forwarders unde

section 44 of the Act because foreign forwarders are not so regulated

or indeed because American NVOs are not required to be licensed I

American laws are causing some unfairness or are hindering America

companies from competing with foreign businesses the answer is not to

stop administering the laws which implement current national policy

and congressional will but to seek amendment of them Moreover in

this case the record does not even show that the three foreign owned

NVOs are causing competitive harm to American NVOs or forwarders

Indeed one of them Unimodal Inc is not only an American corpora

tion but also employs CONFICO All that Proponents complain abou

is the fact that being in America and subject to American laws they

have to show that they satisfy the requirements ofthose laws whereas

their foreign counterparts are supposedly free of such restrictions But

to repeat neither Inor this Commission is free to ignore the prevailing

national policies embodied in our antitrust laws favoring free and open

competition including competition among the 39 forwarders and

strongly suspecting joint ventures such as Agreement No 10235 17

Proponents argue also that approval of CONFICO would assist the

American merchant marine and our national balance of payments

These are valid regulatory purposes according to Proponents Such

arguments are also defective however The Agreement does not prom

ise that CONFICO when it tenders full containerloads to underlying

vessel operating carriers will always select American carriers Indeed

Proponents keep telling us that their Agreement is not restrictive o

competition another inconsistency in their arguments Therefore there

is no assurance that in the real competitive world CONFICO will not

select foreign vessel operating carriers Indeed as Proponents them

selves have argued the ocean carrier Conferences are dominated by

1

Proponents also complain that some 32 steamship conferences dominated by foreign lines and

representing every major trade have employed their resources and legal talent in adetermined bid to

prevent CONFICO from getting off the ground Why should these conferences be allowed to us

their cartel powers to prevent an NVO operation by afirm owned by U S forwarders while NVOs

owned by overseas forwarders canoffer aservice practically overnight Proponents Opening Brief

p

24 I do not know how an attack on the motivation or right of these Conferences to protest ap proval will help determine the merits of approvability of the Agreement in question The case fo

approval must rest on the evidence introduced by Proponents in support thereof not on unarticulated

innuendoes about the motives of Protestant Conferences Moreover as Proponents must be aware

American law permits groups of people to seek legislative or administrative help concertedly from

their Government under their First Amendment rights without fear of antitrust prosecution absent un

usual circumstances See Eastern Railroad Presidents Conference v Noe Motor Freight 365 US 127

1961 United Mlneworkers v Pennington 381 U S 657 1965 Calif Motor Transport v Trucking Un

limited 404 U S 508 1972
CONSOLODATED FORWARDERS INTERMODAL 931

CORPORATION AGREEMENT NO 10235

foreign carriers Therefore isn t it more likely that CONFICO will

have to select the best available ocean carrier service regardless of

flag Yet Proponents argue that CONFICO being American owned

will without doubt support our carriers whenever possible Proponents

Opening Brief p

25 Emphasis added Why will CONFICO be any

more likely to do this than are American exporters In short while this

objective aside from antitrust considerations inherent in a

policy seek

ing to avoid doing business with certain carriers might seem like a

valid regulatory purpose this Agreement is far from a guarantee that

assistance to the American merchant marine is probable Also the old

question returns namely why establish a CONFICO for this purpose

Can t

individual American owned NVOs or forwarders try whenever

possible to use American carriers without acting in a

joint venture

Proponents argument that approval of the CONFICO agreement

will help our balance of payments is similarly strained Proponents

contend that unlike foreign owned NVOs a large share of revenue

earned by CONFICO will remain in this country But a large portion

ofany NVO s costs is the ocean freight it pays to the underlying ocean

carrier which as noted may well be a

foreign carrier Also converse

ly if a foreign owned NVO selects an American carrier and pays its

rates that carrier s revenue will also stay in this country But again

aside from these problems with the argument and the unproven assump

tions on which it is based why must the 39 forwarders form a CON

FICO to keep revenue in this country Do not four of them who are

also NVOs already keep revenue derived from their individual NVO

operations in this country

Finally Proponents argue that CONFICO would serve a valid regu

latory purpose because unlike NVOs owned by overseas forwarders

CONFICO s records would be available to the Commission Even if

one assumes that there will be a need to scrutinize the records of an

NVO like CONFICO any more than there is a need to look at any

NVO s records was it a purpose ofthe Shipping Act to require a single

NVO as Proponents claim CONFICO would be to set up records Is

this what is supposed to benefit the shipping public Do shippers care if

CONFICO makes its records available to the Commission or are they

more interested in a selection ofgood NVO services in a climate of free

and open competition Accessibility of records is of course important

and possibly could be required as a condition of approval But justifica

tion of an anticompetitive agreement requires probative evidence of a

specific need benefit or purpose which is relevant to specific condi

tions and problems which the agreement will remedy as the Commis

sion noted in Mediterranean Pools Investigation cited above I

am not

aware from this record that there is currently a problem or harm

resulting to the shipping public or competing NVOs because three

foreign owned NVOs one of which is a corporation chartered in this
932 FEDERAL MARITIME COMMISSION

country are owned by foreign companies whose records are located

overseas Again however if there is such a problem do we solve the

problem of obtaining overseas records by approving this joint venture

CONFICO arrangement Ifail to see the relevance

SUMMARY OF WEAKNESSES AND CONTRADICTIONS IN

PROPONENTS CASE

As Ihave indicated above and discuss more fully below there seem

to be a sound idea underlying the CONFICO arrangement but the

subject Agreement is simply too large and inherently anticompetitive to

be supported by the type of case which Proponents have introduced 

cannot overlook the many contradictions in the evidence and argu

ments which undermine the case for approval and have already alluded

to a number of them For example Proponents argue that anyone can

easily become an NVO with a desk and telephone but they also sa

that small forwarders cannot become NVOs because of lack of suff

cient cargo Also Proponents argue that non CONFICO NVOs ar

feared by the 39 forwarders because these NVOs allegedly will wea

away business from the forwarders Therefore they say the forward

ers need a safe neutral NVO like CONFICO But they also con

tend that outside forwarders have and will use CONFICO s NVO

service But why didn t or won t these outside forwarders fear tha

CONFICO would wean away their business and why will CON

FICO unlike al1 other NVOs who are alleged to be weaners behav

differently Then too Proponents argue that the 39 forwarders nee

the neutral CONFICO NVO But they also argue that their Agree

ment is not anticompetitive because these forwarders do not promise t

give all oftheir business to CONFICO and indeed assert that only 3

percent of these have supported CONFICO Then what is this allege

need for CONFICO Apparently 67 percent ofthe shareholders did no

feel it Also Proponents argue that an individual forwarder has a grea

incentive to offer its own NVO service because of the large revenue 

derives from such an operation aided by consolidation allowances an

lower FAK containerload rates offered by ocean carriers to NVOs

Indeed Proponents argue that the Commission s tariff records wi

indicate a steady flow ofNVO tariffs being filed many of which are b

forwarders oraffiliated firms Proponents Reply Brief p

4 But the

why argue that CONFICO is necessary to motivate the forwarder t

begin an NVO business or that CONFICO will provide an examp

which other forwarders will wish to emulate as Proponents also argue

Proponents Reply Brief pp 4 S Proponents call it pure conjectur

that the shareholders will lose their incentive to become NVOs if an

are so inclined Proponents Reply Brief p

3 In other words wha

is the need for a CONFICO if there is so much incentive for forward
CONSOLODATED FORWARDERS INTERMODAL 933

CORPORATION AGREEMENT NO 10235

ers to become NVOs individually as indeed four forwarder Proponents

have become

There are more contradictions For example Proponents argue that

their joint venture will not give the shareholders of CONFICO any

competitive advantage contradicting the Commission s

findings in its

Interim Report and Order Proponents Opening Brief pp 10 11 If

so then why would any forwarder wish to form CONFICO and why

especially would small forwarders whom Proponents claim cannot

form NVO services by themselves wish to be parties to CONFICO If

there is no advantage to CONFICO why don t these small forwarders

stay out of it And if the offering of a financially sound expert NVO

service is one of the objectives of CONFICO why do four forwarders

who already offer NVO services have to be parties to the CONFICO

arrangement

In their final brief Proponents repeat their attempts to persuade that

their Agreement is really very beneficial with minimal anticompetitive

consequences They ridicule the idea that the 39 forwarders who con

stitute perhaps only 6 percent of all New York located forwarders will

constitute any type of monopoly and emphasize that the burdens of

proof imposed on Proponents by the Svenska doctrine which applies to

per se violations of antitrust laws should not be applied to this joint

venture having such little impact on competition Again however

Proponents ignore the problems which courts and other authorities

have consistently recognized as characteristic of joint ventures which

are inherently anticompetitive and furthermore overlook the fact that

during 1978 Proponents handled not less than 8 2 percent of U S

exports via the Port of New York to Northern Europe and the Medi

terranean as Ihave earlier noted lsAs the Court noted in the Penn

Olin case furthermore section 7 of the Clayton Act was enacted to

stop incipient anticompetitive activity not just monopolies before harm

could develop As the Court stated

18 Proponents ridicule the idea that their Agreement has any tendency to monopoly because of

the relatively small number of forwarders involved compared to all forwarders operating in the rele

vant market areas perhaps 6 percent of all New York area forwarders and what they consider only

minimal traffic handled by these 39 forwarders not less than 8 2

percent of traffic moving out of New

York to North Atlantic and Mediterranean destinations No one is arguing that the Agreement will

produce only one NVO and destroy all other NVOs But the courts and Congress are concerned over

anticompetitive tendencies and are much more fearful of joint ventures ormergers under section 7 of

the Clayton Act than Proponents indicate As the NEC group have shown it is not enough merely to

show only 8 2 percent or 6 percent of a market but one must carefully analyze the relevant market

both quantitatively and qualitatively Sometimes amerger is found unlawful even if there are numer

ouscompetitors to amerged company and that company would handle only 75 percent of themarket

See United States v Von s Grocery 384 U S 270 1966 Vertical mergers are evenmoredangerous ie

manufacturer acquiring retailer analogous to the present Agreement whereby the forwarder would

acquire the NVO In Brown Shoe Co v United States 370 US 294 1962 avertical and horizontal

merger was found unJawful even though the combined market share of the two merging wholesalers

and retailers of shoes was only 4 5 percent and 8 percent respectively
I

1

I

934 FEDERAL MARITIME COMMISSION

The grand design of section 7 was to arrest incipient

threats to competition which the Sherman Act did not ordi

narilyreach It follows that actual restraints need not be

proved The requirements of the amendment are satisfied

when a tendency toward monopoly or the reasonable like

lihood of a substantial lessening of competition in the rele

vant market is shown Congress made it plain that the validity

ofsuch arrangements was to be gauged on a broader scale by

using the words may be substantially to lessen competition

which indicate that its concern was with probabilities not

certainties 378 U S at 170 171

But Proponents argue that CONFICO is a necessary joint venture

because the 39 forwarders fear giving their business to outside NVOs

who wean away business as Ihave noted Is it not the case then

that in fact as well as in theory there will be restraints on competition

namely a tendency for the 39 to steer cargo to CONFICO rather than

outside NVOs and conversely that CONFICO will not attempt to

obtain a freight forwarder s license As the Court also noted in the

Penn Olin case in a passage Ihave cited earlier

Inevitably the operations ofthe joint venture will be frozen to

those lines of commerce which will not bring it into competi

tion with the parents and the latter by the same token will be

foreclosed from the joint venture s market 378 U S at 169

In their Reply Brief however Proponents contend that the various

parties opposing approval of their Agreement are relying upon pure

speculation or pure conjecture when these Protestants argue that

approval of the Agreement will most likely result in having the 39

forwarders steer cargo to CONFICO and not to outside NVOs and

that approval will discourage forwarder shareholders of CONFICO

from beginning their own NVO services But to repeat Proponents

themselves feed these contentions by arguing that the 39 need a safe

NVO and that small forwarder shareholders cannot enter the NVO

business by themselves Proponents also deny that CONFICO would

use information from outside non shareholder forwarders to assist its

forwarder owners in obtaining the business of these outside forwarders

Yet as noted previously Proponents argue that the nature of NVOs is

to wean away business from unaffiliated forwarders As discussed

the courts and other authorities on joint ventures continually point out

the very dangers that Proponents claim to be supported only by spec

ulation or conjecture on this record and their own evidence and

arguments often contradict their denials of these anticompetitive ten

dencies Moreover the Supreme Court itself in the Svenska decision

recognized that the Commission was entitled to draw reasonable infer

ences from the record as a whole absent positive proof or complete

evidence stating
CONSOLODATED FORWARDERS INTERMODAL 935

CORPORATION AGREEMENT NO 10235

Conjecture of this kind when based on inferences that are

reasonable in light of human experience generally or when

based on the Commission s special familiarity with the ship

ping industry is fully within the competence of this adminis

trative agency and should be respected by the reviewing

courts 390 U S at 249

As Proponents have argued and as I have agreed all joint ventures

are not unlawful or evenper se violative of antitrust law Proponents

cite the Penn Olin case among others to support that contention But

in Penn Olin the Court did demonstrate that it expected the lower

court to consider a number of factors before deciding whether the joint

venture violated law among them as Proponents themselves state

Proponents Reply Brief pp 12 13 I the reasons and necessities for

the existence of the joint venture 2 the joint venture s line of com

merce and the relationship thereof to that of its parents and 3 such

other factors that might indicate potential risk to competition in the

relevant market 378 U S at 177 Perhaps as Proponents state there is

no tendency to monopoly involved in this joint venture But the tend

ency to prefer CONFICO whenever possible has been shown by Pro

ponents own witnesses and arguments Certainly there should be evi

dence of the reasons and necessities for all 39 forwarders including

those who already provide NVO services to be included in the joint

venture I fail to see such evidence On the other hand a smaller

agreement limited to those forwarders who really need a CONFICO

NVO service to compete effectively but who cannot provide such

service on their own may be approvable as Inow discuss

WHAT TYPE OF ALTERNATIVE AGREEMENT COULD BE

APPROVED

I

agree with Hearing Counsel that it is not necessarily wrong if a

group of freight forwarders wish to offer a

joint NVO consolidation

operation at least under Shipping Act principles Such an idea appar

ently has been suggested by a noted authority on freight forwarders

who happens to be Proponents counsel in this case Mr Gerald H

Ullman 19 The idea apparently was discussed in Mr Ullman s work

The Ocean Freight Forwarder the Exporter and the Law p40 Cornell

Maritime Press Inc 1967 See Answering Brief of the NAM group

p

12 In that work however Mr Ullman conceded that the forward

ers may be regulating or controlling competition with respect to the

shipments each furnishes to the NVOCC entity in that each will in all

likelihood be agreeing to use the NVOCC container service and not an

19 After having criticized Proponents case and arguments I canat least recognize that Mr Ullman

the author of awork on the freight forwarder industry and along time advocate and spokesman for

that industry is I believe a

recognized authority in this field as well as a

respected practitioner before

this Commission
936 FEDERAL MARITIME COMMISSION

outside competing service Mr Ullman replies that the quoted passage

was speaking generally and not about this particular Agreement which

he asserts contains no agreement by the forwarders to use the CON

FICO NVO service exclusively Proponents Reply Brief p

14 Be

that as it may as I have already noted the likelihood of the 39

forwarders steering their business to CONFICO is strong notwith

standing the absence of any specific language in the text of the Agree

ment However the underlying idea may not be so bad if it wil

enhance or preserve competition in the forwarder as well as NVO

industry

The reader may notice that Idid not address myself to two of the

alleged benefits that would flow from approval of Agreement No

10235 These are Nos 7 and 9 namely benefitting the smalI forward

er and strengthening the forwarding industry Of all the alleged

benefits these appear to be the only ones which may not be achievable

by separate action on the part of certain individual forwarders In other

words any forwarder who can establish an NVOservice by himself

can offer the many inherent benefits of an NVO consolidation service

which Proponents have itemized or can set up his own NVO service if

he fears loss of business to outside NVOs But if there are so called

small forwarders whose existence is in jeopardy because they need to

offer an NVO service in connection with their forwarding operations in

order to remain competitive but cannot do so relying on their own

resources they may need to act jointly The preservation of competi

tion was certainly one of the objectives of the Shipping Act 1916 as

the Alexander Report illustrates in its discussion of the reasons for

recommending section 15 of the Act 20 It is also beyond argument that

the antitrust laws have the same objective As the Supreme Court

stated in the Penn Olin case

OveralI the same considerations apply to joint ventures as to

mergers for in each instance we are but expounding a national

policy to preserve and promote a free competitive economy

378 U S at 170

In United States v Brown Shoe Co 370 U S 294 344 1962 another

leading case arising under section 7 of the Clayton Act the Court

stated

It is competition not competitors which the Act protects We

cannot fail to recognize Congress s desire to promote competition

through the protection of viable small locally owned businesses

Emphasis added

0

See the Alexander Report p415 quoted in Pike Fischer Shipping Regulation p 513

The Committee expressed adesire to preserve open competition and aconcern over elimination of

the weak ocean carriers unless the conference system were permitted albeit under careful regulation
CONSOLODATED FORWARDERS INTERMODAL 937

CORPORATION AGREEMENT NO 10235

In the one previous case involving an agreement among forwarders

to establish a corporation for the purpose of offering an added carrier

service in a joint venture the Customs Forwarders Inc case cited

above 17 FM C 302 the Commission found that the joint venture

would enhance the six forwarders competitive viability without signifi

cant anticompetitive effects the six needing to add an inland IC C

Part IV forwarder ie carrier operation to their forwarding serv

ices to remain competitive The Commission paid careful attention to

the Penn Olin case however to make sure that the evidence of need

offset the anticompetitive effects inherent in joint ventures

If a new Agreement is submitted which is not based on fear of

competition from unethical or unscrupulous NVOs and related alle

gations and which is shown to be necessary to enable certain small

forwarders to remain competitive it may merit approval as did the

agreement among the six forwarders in the Customs Forwarders Inc

case Such an agreement might preserve competition not endanger it

The record in this case however is not adequate to establish that there

is a need for such an Agreement nor if so what particular forwarders

need to be parties to remain competitive

As with the rest of the record the evidence concerning the question

whether the subject Agreement would benefit the small forwarder or

strengthen the financial position of the forwarding industry is thread

bare and contradictory It consists essentially of general statements of

Mr Bowen Chairman of CONFICO that some of the forwarder

members of CONFICO are too small to offer a

regular NVO service

because they do not attract enough cargo to consolidate into containers

and his further statement that an added NVO service would enhance

forwarders financial positions There is also some evidence that a

number of the original forwarder parties to Agreement No 10235 are

insolvent or inactive Exhibit 7 and some statistical data offered by

Hearing Counsel showing that a few forwarders control a majority of

the total business of CONFICO s shareholders and that only six for

warder shareholders out of 38 answering interrogatories tendered full

containerload shipments in 1978 Hearing Counsel s Answering Brief

p 4 These statistics do not show by themselves exactly what forward

ers need an added NVO service Nor do they show the financial

position of each of the 39 forwarders nor how much traffic they need

to attract to offer an NVO service whether their history shows them

capable or likely of attracting sufficient business on their own to set up

their own regular NVO service nor whether any particular forwarder

is in competitive trouble because he cannot offer an NVO service etc

There is also the problem mentioned above namely that Proponents

also assert that anyone with a desk and telephone can start an NVO

business an assertion which undermines their argument that some small

forwarders need a CONFICO NVO service because they cannot start
938 FEDERAL MARITIME COMMISSION

one themselves This particular state of the record concerning small

forwarders is understandable since the case did not focus on thei

particular needs but on many other considerations as discussed

Ifa new Agreement is submitted which is truly needed to preserve a

certain number of small forwarders and which will notwithstanding its

nature as a joint venture on balance preserve and promote competition

rather than destroy it such an Agreement if clearly and understand

ably drafted and supported by specific probative evidence regarding the

needs of each forwarder would deserve favorable consideration under

either the Shipping Act or even section 7 of the Clayton Act As the

Penn Olin case shows the Clayton Act does not forbid joint ventures

provided that adequate evidence showing enhancement of competition

is shown 21 Furthermore since the jurisdictional issue will not delay

any subsequent proceeding and since the courts have advised the Com

mission that it has flexibility to fashion an efficient proceeding which

may avoid the need for trial type hearings 22

any new proceeding need

not consume anywhere near the length of time that the present one has

consumed especially if the Commission advises needy forwarders of

the type of evidence required to support approval and the individual

proponents furnish that evidence promptly 28

ULTIMATE CONCLUSIONS

Proponents seek approval of a joint venture Agreement by which 39

freight forwarders have formed a corporation which will perform NVO

and consolidation services As a joint venture among parties some of

whom are also NVOs such an enterprise is considered by authorities in

the field of antitrust law to be inherently dangerous to competition

iii1 On remandfrom the Supreme Court the District Court in the Penn Olin case dismissed the Gov

ernment s complaint against thejoint venture there under consideration The District Court s decision

was later affirmed by the Supreme Court See 246 F Supp 917 affirmed 389 US 308 1967

U

See e

g

the comments of the court in United States Lines Inc v Federal Marilme Commission

cited above 584 F 2d at 536 537

U

As I noted earHer Proponents have offered some Jimitingamendments to their Agreement in an

effort to gain approval They offer to restrict operations to the North Atlantic trade limit intermodal

authority east of the Mississippi limit the term of the Agreement to 5 years and deJete the authority

to carryon discussions with other persons subject to the Act Proponents Reply Brief p

20 These

suggestions are heJpfuJ but inadequate The record 8tiJJ does not contain sufficient evidence to justify

an Agreement among aU 39 forwarders even with such limitations since it still depends upon the

sameaJ egations and general conclusions and does not specify forwarders who really need to add an

NVO serviceby means of CONFICO rather than by means of their own individualresources

Another serious problem which I have not discussed before because theAgreement is otherwise not

approvable is the fact that the Agreement is unclear in certain respects The NEC group of Protes

tantscorrectly point out deficiencies and inconsistencies between Agreement No 10235 and the previ

ous FICO agreement The Commission s Interim Report and Ordernoted sOme of the problems Fur

thermore it is unclear as to what happens to shareholders of the CONFICO corporation who are not

signatories to the Agreement or who are not actively forwarding In other words one cannot be sure

exactly what the entire Agreement consists of nor how the 39 Proponents wiU be acting in relation to

other sbarebolders of CONFICO As the NEC group correctly states the Commission must know

exactly what it is authorizing See discussion in the NEC Answering Brief pp H 33 Any future

Agreement should eliminate these ambiguities
CONSOLODATED FORWARDERS INTERMODAL 939

CORPORATION AGREEMENT NO 10235

having tendencies to freeze competition by discouraging the parents of

the corporation from competing in the same line of business with their

offspring and vice versa encouraging the parents to deal preferentially

with the offspring NVO to the detriment of outside NVOs and ex

changing information relating to the forwarders businesses among

other things For that reason joint ventures are highly suspect under

the Clayton Act and must be carefully scrutinized to ensure that they

enhance rather than prevent competition

In view of the suspicion in which joint ventures are held under

antitrust law this Agreement must be carefully examined under the

Svenska test to determine if the evidence shows a need benefit or valid

regulatory purpose which will offset the significant invasion ofantitrust

policies The Svenska test which was actually created by the Commis

sion applies whether or not an agreement is per se violative of antitrust

law or policies Furthermore the courts and the Commission expect not

only a careful scrutiny ofthe antitrust consequences but specific proba

tive evidence showing need benefit or purpose Such evidence is not

present in this case

The evidence proffered by Proponents in support oftheir Agreement

is long on argument but short on facts and is replete with generalities

and weakened by contradictions Most of the purported benefits of the

Agreement would be achieved by any NVO without the need for this

joint venture Moreover the main reason for the establishment of

CONFICO namely to set up a neutral or safe NVO is based

upon an allegation that NVOs today cannot be trusted not to wean

away business from the 39 forwarders Approval of the Agreement

therefore would be tantamount to giving credence to this allegation

thus casting aspersions on an entire NVO industry on the basis of self

serving accusations and moreover would merely be insulating Propo

nents from the fears of competition from an NVO industry which the

Commission has previously lauded as serving the public interest

Proponents evidence and arguments do not answer the recurring

question namely why cannot these various alleged benefits of a CON

FICO NVO service be achieved by any individual Proponent forward

er by such forwarder s merely expanding into the NVO business

Among the many contradictions in their evidence is the dual assertion

that CONFICO is necessary to enable these 39 forwarders to com

mence an NVO service but that anyone with a desk and telephone can

become an NVO and that indeed the Commission s tariff records will

show a plethora ofNVO tariffs being filed without the need for section

15 agreements There is in short no persuasive evidence that shows

that all 39 forwarders must be parties to CONFICO or that indeed the

shipping public even needs another NVO service In place ofevidence

furthermore Proponents complain about the fact that they are required

to seek approval under section 15 of the Shipping Act whereas foreign
940 FEDERAL MARITIME COMMISSION

forwarders who have formed a few NVOs did not have to seek such

approval Proponents also claim that approval of CONFICO would aid

the American merchant marine and help our balance of payments and

that CONFICO should be approved because its records would be

available to this Commission None of these arguments withstands the

slightest critical analysis There is still no showing of need for a 39

forwarder owned NVO and there is no persuasive evidence showing

that CONFICO would deal exclusively with American vessel operating

carriers nor a showing that revenue cannot be kept in this country by

any forwarder who establishes an NVO service without entering into a

multiple party joint venture The solution to the problem of obtaining

documents from overseas locations furthermore is not solved by ap

proving a 39 party Agreement

Although the 39 party Agreement under consideration is too large

and inherently anticompetitive to be supported by the type of thin

evidence and contradictory arguments presented in its support the

basic idea of smalI forwarders organizing a joint venture to provide an

NVO service without which they might not be able to survive in their

competive market is not unsound provided that the individual forward

ers are unable to provide the NVO service by means of their own

resources If a more limited agreement among truly needy forwarders

were submitted backed by specific probative evidence showing need

and enhanced competition it would deserve favorable consideration

No such agreement or evidence has been submitted in this proceeding

however

8 NORMAN D KLINE

Administrative Law Judge

Washington D C

November 6 1980
FEDERAL MARITIME COMMISSION

DOCKET NO 79 74

JAPAN KOREA ATLANTIC GULF CONFERENCE

INTERMODAL AMENDMENT AGREEMENT NO 3103 67

A

steamship conference serving Japan and Korea via US Atlantic and Gulf ports failed

to demonstrate a

legitimate transportation need public benefit or regulatory purpose

for an agreement authorizing the members to set rates for intermodal traffic moving

through such ports The Proponents particularly failed to justify the agreement s

unlimited geographic scope its indefinite duration and its 120 day restrictions on

member lines wishing to offer intermodal services not offered by the conference

Charles F Warren and George A Quadrino for Japan Korea Atlantic Gulf

Conference

Neal M Mayer Paul D Coleman and Peter J King for Seatrain Pacific Services

SA

J Robert Ewers Paul J Kaller and C J Swedarsky for the Bureau of Investigation

and Enforcement

REPORT AND ORDER

June 17 1981

BY THE COMMISSION LESLIE L KANUK Acting Chairman RICH

ARD J DASCHBACH JAMES V DAY THOMAS F MOAKLEY AND

PETER N TEIGE Commissioners

On July 20 1979 the Commission instituted an investigation into the

approvability ofAgreement No 3103 67 under section 15 of the Ship

ping Act 1916 46 U S C 814 1

Agreement No 3103 67 is a proposal

to amend the organic agreement of the Japan Korea Atlantic Gulf

Conference JKAG by permitting its eleven member lines to agree

upon rates and practices for through intermodal transportation from

ports in Japan and Korea to interior points in the United States via

Atlantic and Gulf Coast ports 2

Approval of the Agreement was pro

Commissioner Daschbach only concurs in the result and will issue aseparate opinion

I The Agreement was filed March 22 1978 followed by the Proponents justification statement on

June 9 1978 On November 29 1978 the Commission issued an Order disapproving the Agreement

unless JKAG made atimely request for further hearing Such a

request was fiJed by JKAG in which

it also requested that the proceeding be limited to an exchange of affidavits and memoranda on the

question of whether its proposed intermodal service would be commercially accepted by shippers The

Commission s July 20 1979 Order of Investigation and Hearing stated that implementation of aconfer

ence intermodal service alone could not justify price fixing and that all aspects of the Agreement and

its competitive impact would be examined

2

The JKAG member lines are Barber Blue Sea Line Japan Line Ltd Kawasaki Kisen Kaisha

Ltd Korea Shipping Corporation Lykes Bros Steamship Company Inc Mitsui O S K Lines Ltd
942 FEDERAL MARITIME COMMISSION

tested by Seatrain Pacific Services S A a non conference ocean carrie

then participating in the trans Pacific trades via U S Pacific Coa

ports 3

Seatrain and the Commission s Bureau of Investigation an

Enforcement Protestants participated in this proceeding as opponen

ofapproval

BACKGROUND INFORMATION

JKAG has previously possessed intermodal ratemaking authority

From January 18 1973 until its fourth short term extension agreemen

expired on November 18 1978 the Conference could lawfully discus

and take action with respect to intermodal service to interior point

located anywhere in the United States 4

During this period JKAG failed to carry any intermodal cargo an

only one of its members established an intermodal service of its own

despite the fact that a September 1976 JKAG study revealed that 27

of the Conference s cargo ultimately moves to ascertainable inlan

destinations beyond port areas and is susceptible to intermodal ca

riage 6

A Conference intermodal tariff was first published effectiv

November 15 1977 and offered service via Atlantic Coast ports to fou

interior points East St Louis Chicago Louisville and Cleveland a

rates which simply combined JKAG s all water rates with railroad Pla

II 12 rates This combination rate service did not achieve comme

cial acceptance because shippers could frequently negotiate more favo

able inland rates than JKAGs Plan II 12 rates and because JKAG 

service generally took longer than Pacific Coast routings The JKAG

intermodal tariff was cancelled on November 18 1978 upon the expira

tion ofAgreement No 3103 64

A p Moller Maersk Line Nippon Yusen Kaisha Orient Overseas Container Line Inc United Stat

Lines Inc and Yamashita Shinnihon Steamship Co Ltd

3

Seatrain was purchased in early 1981 by interests controlled by C Y Tung and continues to ope

ate as anonconference carrier in the Far EastlU S Pacific Coast trades under the name of SeaPac

4

The Commission s

approval of Agreement No 3103 64 was remanded and then reversed in Se

train International S A v Federal Maritime Commission 584 F 2d 546 D C Cir 1978 and 598 F 2

289 D C Cir 1979

li Lykes Bros began offering barge ocean railocean and motor ocean service to a

large number 

inland points via Gulf Coast Ports in 1976 Tariff FMC Nos 95 99 and 103 It has emphasized th

first of these services because of its experience and capabilities for providing LASH type services o

inland waterways

October 5 1979 Opening Affidavit of Robert D Grey at 6 7 and Appendix B JKAG s stud

failed to reveal theactual destinations of any of this inland cargo however Between 1972 and 197

JKAO s containerized carryings increased from 32 to 90 of its total cargo Minilandbridge MLB

and other intermodal cargo is virtually 100 containerized In 1978 JKAO offered 90 vessels 70 

which were containerships 305 sailings 378 772 twenty foot equivalent units of container space an

72 336 401 cubic feet of breakbulk space d at 4 5

JKAO s evidence consisted of six affidavits by Conference Chairman Robert D Grey These wer

dated June 9 1978 July 31 1978 October 5 1979 Opening October 5 1979 Supplemental Octo

ber 13 1979 Paragraphs 39 41 only and March 26 1980 and will hereafter he cited as Grey Affida

vits I VI
JAPAN KOREA ATLANTIC GULF CONFERENCE 943

INTERMODAL AGREEMENT

The JKAG carriers all belong to the larger Trans Pacific Freight

Conference of Japan Korea PFC which competes with JKAG s all

water service through Pacific Coast ports of entry

7

Until recently

carriers in the PFC trade did not offer intermodal service to U S

interior points 8

Cargo ultimately destined to the interior was handled

under Overland Common Point OCP or minilandbridge MLB rates

and moved inland under separate bills of lading at the shipper s ex

pense

9

Nonconference carriers in the TPFC trade such as Seatrain

Fesco Neptune Orient Lines and more recently Sea Land Service

Inc have aggressively and successfully competed for MLB cargo by

offering attractive Freight All Kinds rates with quantity discount provi

sions 1 0

JKAG s carryings dropped from 4 million to 2 3 million revenue tons

between 1971 and 1979 11 Although JKAG faced competition from 11

nonconference Atlantic and Gulf Coast carriers when the record

closed this decline in business is attributable more to intermodal com

petition from Pacific Coast carriers than to local competition 2

The

shorter and frequently faster MLB routings to Atlantic and Gulf ports

have grown impressively since they were first instituted by Seatrain in

1972 3

Six JKAG lines operate the same vessels in both the TPFC and

JKAG trades and do not appear to have favored MLB cargo over

JKAG cargo

4

The five remaining JKAG lines are required by the

Japanese government to operate separate ships in each of these trades

and therefore have an interest in preserving the viability ofboth routes

7

TPFC has 18 members In addition to the JKAG lines these are American President Lines East

Asiatic Line Hapag L1oyd AG Knutsen Line Korea Maritime Transport Company Phoenix Con

tainer Lines and Showa Line

8

Eg Star Shipping A S g interior point tarifffirst took effect on July 4 1979 and offers service to

Denver Kansas City 81 Louis Minneapolis and Chicago TPFC did not begin aconference interior

point service until June 25 1980 FMC Tariff No 8

9 OCPcargo is rated on a

port ta port basis and is restricted to cargo which subsequently moves to

interior points east of the Continental Divide OCP services have existed for many years See Over

land OCP Investigation 12 F M C 184 1969 MLB cargo is intermodal cargo rated on a

through

route basis to Atlantic or Gulfport cities In 1977 54 ofTPFCsrevenue tonnage moved under OCP

or MLB rates Grey Affidavit I at 4 This TPFC non Pacific Coast traffic totalled 3454 622 revenue

tons and exceeded JKAG s total carryings for that year by 128 Id at 7

10 Sea Land resigned from both the JKAG and TPFC conferences in March 1980 and operates

exclusively through Pacific Coast ports with all water OCP MIB and interior point services Seatrain

has not beJonged to either conference since it began intermodal operations

IIGrey Affidavits II III and VIConference carryings have fluctuated appreciably in recent years

In 1978 JKAG handled 34 million revenue tons compared to 2 7 million in 1977 and 2 3 million in

1979 Id

12 Id A

significant portion of today s MLB cargo previously moved by all water service in the

JKAG trade Only one nonconference carrier in the JKAG trade Evergreen Line is afully contain

erized operator although Yangming Marine Line also possesses significant container capability Other

probable causes for JKAG s decline in tonnage include temporary trade conditions such as United

States import quotas and its members shift from breakbulk to specialized container vessels

13 Grey Affidavit II at 7 8

14 Grey Affidavit III at 13 15 and Appendix F Grey Affidavit V and Grey Affidavit VI at 5 6
944 FEDERAL MARITIME COMMISSION

POSITION OF THE PARTIES

The Proponents

JKAG contends that Agreement No 3103 67 has been justified unde

the Svenska doctrine because 15

1 Competition for cargo moving in intermodal configurations

has been intense especially on the part of nonconference carr

ers which charge discount rates and have steadily increase

their capacity in the TPFC trade These practices could caus

instability in the TKAG trade

a JKAG presently faces interior point competition from

four carriers Lykes Bros Evergreen Line United State

Lines and Maersk Line in the JKAG trade Several othe

nonconference lines with partial container capacity migh

easily expand into intermodal operations Moreover inte

rior point service via Pacific Coast ports was recentl

instituted by TPFC and several substantial nonconferenc

lines such as Seatrain

b Sea Land and Zim Navigation Company have withdraw

from both JKAG and TPFC increased their carryin

capacities and compete as independents Hanjin Containe

Line also resigned from TPFC

c The trade is unbalanced in favor of eastbound whic

exacerbates the economic effects of JKAG s cargo losse

to Pacific Coast carriers

2 A JKAG interior point service would be a better quality

service than MLB for cargo ultimately destined to mterio

points Even without price inducements the ability to offer a

interior point service would assist JKAG in its fight to reta

the cargo it has been losing to the lower priced OCP an

MLB services ofPacific gateway carriers

3 Through intermodal carriage provides many advantages t

shippers

4 JKAG will promptly implement an intermodal service featu

ing an additional service point Detroit and rates reduced b

8 00 a ton from those charged in its 1977 1978 tariff Th

intermodal tariff would also contain a relatively low Carg

N O S rate which should attract many items now assesse

higher commodity rates under JKAG s all water tariff

5 JKAG lines are firmly committed to all water service an

none of them favor the intermodal cargoes they carry 

Federal Mariime Commission v Aktlebolage Svenska Amerlka Linlen 390 U S 238 1968 

firmed the need for proponents of anticompetitive section IS agreements to demonstrate the existen

of offsetting transportation or other public benefits Agreement No 3103 67 provides for price fix

which is anticompetitive per

se United States v Socony Vacuum Oil Co Inc 318 US ISO 194
JAPAN KOREA ATLANTIC GULF CONFERENCE 945

INTERMODAL AGREEMENT

TPFC members they wish to maximize their carryings and

preserve a stable environment in both trades

6 JKAG would extend its selfpolicing activities to intermodal

cargo thereby increasing the effectiveness of its policing of

port to port cargo It is now possible for port to port rebates

to take the form of concessions on inland transportation ar

rangements which are beyond the Conference sjurisdiction

7 JKAG would accept conditions limiting the Agreement s term

to a period as short as 18 months

8 The number ofinterior points served should increase as JKAG

gains experience and shipper acceptance Present authority is

therefore required to set rates for the entire United States so

the Conference can respond to customer needs promptly and

discourage its members and other competitors from serving

points adjacent to those it is authorized to serve Competition

of this sort would be inconsistent with a stable trading envi

ronment

9 At least 120 days notice of member line services not covered

by the Conference tariff is necessary because member lines

should share all of their new service plans with the Confer

ence instead of developing them unilaterally Cooperation is

what conference membership is all about

The Protestants

Seatrain and the Bureau of Investigation and Enforcement oppose

approval because

1 It is not enough that interior point service be generally useful

to the shipping public it must be demonstrated that a confer

ence service is necessary to produce the benefits in question

JKAG has not done this

2 There is no evidence of present rate or service instability in

the JKAG trade which requires an extension of the Confer

ence s price fixing authority

3 Although JKAG tonnage has declined since Pacific Coast

intermodal service began there is no evidence that the JKAG

carriers are operating at a loss or at injurious utilization levels

a All water cargo losses have been offset by the large

cargo gains of the Trans Pacific Freight Conference to

which the JKAG lines also belong JKAG vessels may

also be carrying cargo from Hong Kong or the Philip

pines which offsets any loss ofJapan Korea cargo

b There is no significant interior point competition in the

trade The intermodal service offered by Lykes Bros and

Evergreen is restricted to Gulf Coast ports and Ever

green s carryings have been insubstantial The new inter

modal tariffs filed by Sea Land Zim Yangming U S
946 FEDERAL MARITIME COMMISSION

Lines Maersk Line and TPFC are not necessarily attrac

ing any cargo

4 Approval would prevent intermodalism from developing 

the JKAG trade The propohent lines have intentionally f

vored their TPFC car o over theirJKAG cargo and genera

ly demonstrated a disinterest in developing successful inte

modal services through Atlantic and Gulf Coast ports

a JKAG s proposed price reductions will not be larg

enough to match the better rail divisions and multipl

container discounts available from MLB carriers

b No convincing evidence of shipper support has been pre

sented for the limited type ofintermodal service propose

by JKAG

c A Conferenceintermodal service using Plan II 112 ra

road rates would further discourage railroads from negot

ating lower inland rate divisions with nonconference ca

riers or shippers

d The Agreement contains needlessly restrictive provision

such as the 120 day notice clause

S Further evidence inust be adduced before the Commission ca

conclude that a sufficient tran ortation need public benefit o

regulatory purpose is present l

I

DISCUSSION

Many of JKAG s arguments were considered and found wanting o

November 29 1978 when Agreement No 3103 67 was conditional

disapproved The Conference s more recent submissions tend to b

repetitious and sparse on substantiating facts as are Seatraln s asse

tions Although the further hearing hils produced updated statistic

concerning cargo trends a proposal to reduce JKAOs anticipate

intermodal rates by 8 00 per ton and a description of significan

competitive developments in the JKAO and TPFC trades this informa

tion is insufficient to establish the presence of a serious transportatio

need important public benefit or valid regUlatory purpose justifyin

control by JKAO ofintermodal services in this trade

16 Seittatn and the Bureau of Investigation and Enforcement submitted contingent hearing and d

covery requests on September 25 1979 and October I 1979 respectively Although disparaging th

quality of evidence JKAO had Introdu led and c1aiminsthat he Areement was unapprovable und

thecircumstances the Protestants nonetheless ltated that they wish to further examine current trad

conditions tn the event the Commission was not mcUnedto disapprove tho Agreement These reques

do not comply with the procedures established in the July 2l 1979 Order of Investigation either 

lel f1s of specifICity or chronology and will be denj The burden of iomg forward in this investig

tion is on JKAG and ifProtestanls believe that particular aspects of JKAQs case are factually inco

rect or inadequate the burden shifts to them to clearly demortstrate these deficiencies to the Commi

sion Discovery and hearing requests must be unequivocal specific and immediate They are not de

vices by which litigants may establish ahedge position
JAPAN KOREA ATLANTIC GULF CONFERENCE 947

INTERMODAL AGREEMENT

Conference control of intermodal rates and practices cannot be justi

fied exclusively on the grounds that through intermodal service gener

ally benefits shippers and the commerce ofthe United States Individual

conference members and nonconference carriers can also provide this

type of transportation service Some particular need for conference

control over interior point service is necessary Seatrain International

SA v Federal Maritime Commission 598 F 2d 289 D C Cir 1979

Similarly the probability that an anticompetitive practice that is a

conference intermodal tariff will actually be implemented cannot alone

justify the practice Seatrain International SA v Federal Maritime Com

mission 584 F 2d 546 D C Cir 1978 Another circular and therefore

unacceptable argument advanced by JKAG concerns the advantages of

an intermodal service subject to selfpolicing Effective self policing is a

statutorily mandated aspect ofall conference agreements The mere fact

that approval ofAgreement No 3103 67 would result in the self polic

ing of JKAG s proposed intermodal service is not sufficient to justify

approval 17

The most meaningful portion of JKAG s case pertains to actual

operating conditions in the trade but even this information does not

support the broad authority requested by the Conference

The fact that the tonnage handled by JKAG lines has declined since

1971 is not itself proof that these lines are economically threatened

needed vessel capacity is being withdrawn from the trade regular port

to port service is being disrupted or other benefits inherent in the

conference system are likely to become unavailable to the shipping

public 1s Even with the resignation of Sea Land and Zim Israel from

JKAG early in 1980 this record does not support a finding that the

continued availability offrequent dependable service in sufficient quan

tity and variety to meet the needs of the trade is jeopardized by the

absence of conference intermodal authority 19

Because OCP and certain MLB cargoes move to inland destinations

only under separate inland bills of lading and at the shipper s expense it

is unnecessary for JKAG to obtain additional ratemaking authority to

meet these types ofcompetition JKAG s position relative to OCP or

MLB services is controlled by the relationship between the Pacific

gateway rates and JKAG s all water rates to Atlantic and Gulf Coast

17 Ifport to port rebates by JKAG members are going undetected because they involve inland

transportation concessions this suggests that the Conference s current selfpolicing practices may be

inadequate

18 JKAG has not revealed its share of the all water market for containerized cargo projected its

share of the intermodal cargo market orfurnished vessel utilization orrevenueinformation

19 The Shipping Act 1916 is premised on the Congressional finding that steamship conferences

typically produce important transportation benefits but it does not follow that the expansion oreven

preservation of any particular arrangement will always serve the public interest This is especially true

when aconference complains of pressure from naturally competitive forces arising outside of its own

trade area
948 FEDERAL MARITIME COMMISSION

ports ao Yet JKAG has chosen not to compete by means of ra

reductions and it is apparent that JKAG s previous intermodal ta

was designed more to protect the level of the Conference s all wa

rates than to attract new intermodal traffic See Grey Affidavit II at 

III at 18 19 When faced with inflexible pricing decisions by particip

ingrailroads JKAG refused to reduce the ocean portion of its inte

modal through rates and limited its intermodal service to points cons

erably distant from the port communities to which the majority of 

cargo has historically been destined 21

Accordingly there is no basis for concluding that JKAG s limit

and indirect intermodal service at prices which would at best equ

those of MLB can attract sufficient cargo to materially affect t

Conference s fortunes This is especially true when the proposed JKA

railwater service via Atlantic Coast ports is compared with the new

established interior point services of Pacific Coast carriers No matt

how much JKAG promotes its indirect route to Chicago it will 

hard pressed to compete with the much shorter service available fro

Pacific gateways 2 2

In short JKAG has not justified its Agreement A

proposal 

provide an intermodal service from the Far East to any inland point 

the United States via Atlantic and Gulf Coast ports23 and to preve

member lines from instituting intermodal service innovations on statut

ry notice24 is unduly broad in its potential for anticompetitive resu

20 See Grey Affidavit IIat 14 A shipper wishing cargo delivered to Cleveland Ohio via an OC

MLB orJKAG all water service must compute its total transportation cosls the same way in e

case The ocean carrier s tariffrate is determined and added to an inland carrier s tariff rate for se

rately arranged transportation from the ppJicabJe portter inaJ to Cleveland

21 Carriers which offer competitively pr ced through rates to interior points within 100 300 miles 

AtJantic and Gu f Coast ports are most likely to reap the fruits of intermodaIism in the JKAO tra

See Grey Affidavit III Appendix 0 Marubeni Corporation However shorter interior point routin

at viable rates could have the effect of enticing port to port shippers away from JKAO s all wa

service and putting downward pressure on its all water rates

22 This conclusion has adouble edged impact It discredits the claim that the proposed Agreem

will be JKAO s salvation inits struggle wi h independent lines for containerized cargoes and also in

cates that the limited intermodal service JRAG initially proposes may not significantly impair 

competitive opportunities of West COll8t intennod carriers

21

JKAG does not propose an intermodal service via Gulf ports or aservice destined to any co

munity located west of the Milsissippi River or east of the AJlegheny Mountains There are no tra

portation benefits associated with JKAG control over intermodal practices in large areas of the co

try which the conference does not wish to serve or from which shipper demand wiU not develop 

destination points west of the Continental Divide

24 Article lb of Agreement No 3103 67 allows JKAG members to commence individual inter

point servicel of atype not offered by the Conference only after providing JKAG 120 days advan

notice of their decision whereas section 18 b of the Shipping Act 1916 46 US C 817 b and 

Commission s

tariff regulations 46 CF R Part S36 allows public tariffil covering new services 

become effective 30 days after filling The Commisaion has held that any requirement for advan

notice to a

conference other thlln customary tarifftiling is unreasonable because it hinders the develo

ment of intermodal innovations American West Africa Freight Canterence Agreement No 7680 36 

S RR 339 342 1978 The present record includes no information supporting JKAO s assertion t

advance notice of member line innovations i8 necessary to accomplish Agreement No 3 103 67 s ba

objective of ameliorating excess rate competition The availability of 120 days advance notice is 
JAPAN KOREA ATLANTIC GULF CONFERENCE 949

INTERMODAL AGREEMENT

and has insufficient potential for transportation benefits The public

interest in developing intermodal transportation does not extend to

services ofunjustified anticompetitive scope which would unnecessarily

impair the fulI economic fruition oftechnological innovations

Conference control of intermodal ratemaking is most likely to pro

vide public benefits not available from intermodal service provided by

individual carriers and can therefore be justified under section 15 when

such authority will result in efficient geographical routings operational

economies and improvements e gfaster voyages and turnarounds

better utilization of vessels better cargo handling methods more regu

lar and reliable service and commercialIy attractive rates covering a

wide variety of commodities Such control may also be justified when

there is evidence of record concerning cargo availability and service

trends which make it clear that to deny the conference its requested

intermodal authority will inevitably jeopardize the regular and depend

able service currently provided by the conference FinalIy the Com

mission must be satisfied that there is an absence ofpredatory intent on

the part ofthe conference or particular anticompetitive effects reaching

beyond the generalized prohibition against price fixing When reliable

evidence establishes the presence of these factors section 15 favors the

extension of the regulated open conference system prescribed by the

Shipping Act to include intermodal transportation naturalIy associated

with the port to port trade served by an existing conference

As with other types ofjoint through traffic an effective conference

intermodal service will ordinarily be priced so as to offer the shipper a

discount from otherwise applicable combination rates and provide the

carrier with cargo it would not otherwise receive at its port to port

rates Based upon the present record the JKAG trade does not appear

suited for the implementation of a broad based intermodal service In

any event JKAG has failed to demonstrate that it would provide such

a service

THEREFORE IT IS ORDERED That Agreement No 3103 67 is

disapproved pursuant to section 15 of the Shipping Act 1916 and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S JOSEPH C POLKING

Acting Secretary

necessary to permit the JKAG member lines to freely and thoroughly discuss intermodal proposals

with each other
950 FEDERAL MARITIME COMMISSION

DOCKET NO 79 74

JAPAN KOREA ATLANTIC AND GULF CONFERENCE JKAG

INTERMODAL AMENDMENT AGREEMENT NO 3103 67

ORDER OF DISAPPROVAL

Commissioner Richard J Daschbach concurring

Iconcur only in the result of the Commission s June 17 1981 Orde

disapproving JKAG s application for intermodal ratemaking authority

Agreement No 3103 67 The proponents have offered little probative

evidence to support their request for intermodal authority since the

Commission conditionally disapproved their proposed agreement o

November 29 1978

However I cannot subscribe to the Gommission s rationale for disap

proval In its June 17 Order which would establish criteria for th

approval of conference intermodal agreements which stifle rather tha

stimulate the growth of intermodalism in the U S foreign COmmerce

extend beyond the scope ofthe Commission s statutory authority and

conflict with previous Commission decisions see e g Pacific Wes

bound Conference Agreement No 57 96 Extension of Interl110dal Au

thority 19 F MC 291 1976

My views on the principles which should guide the Commission 

evaluation of applications for conference intermodal authority are ex

pressed in greater detail in my dissent to the Commission s June 8 198

Order conditionally disapproving the American WestAfrican Freigh

Conference s AWAFC extension of interl lOda authority Agreemen

No 7680 39 These principles underscore the need for different ap

proaches to AWAPC srequest for intermodal authority which th

Commission should have approved and JKAG s instant application

My dissent to the AWAFC Order stated that it is unnecessary for 

conference to demonstrate that it is the best vehicle for the develop

ment of intermodalism in a given trade if it can make the showing tha

its intermodal authority is more likely to promote than impede inte

modal traffic in the trade Such a showing is made more compelling 

the conference demonstrates that intermodal service will be necessar

to preserve its continued competitive viability

JKAG has failed to make any such showing and its request fo

intermodal authority is thus clearly distinguishable from the request o

the American West African Freight Conference in Agreement 7680 39

JKAG s capacity to develop a viable intermodal service in the trad

has been rendered suspect by its failure to use its intermodal authorit

during the five year period 1973 1978 ofits existence

Furthermore the suspicion that JKAG s intermodal authority migh

impede rather than stimulate the growth ofintermodal traffic is heigh
JAPAN KOREA ATLANTIC GULF CONFERENCE 951

INTERMODAL AGREEMENT

ened by its proposed 120 day notice restriction on member lines

wishing to offer intermodal services not offered by the conference The

Commission has consistently rejected such provisions in the past due to

their pre emptive nature and the potential they create for a conference

to sit on its intermodal authority an frustrate its member lines efforts

to develop intermodal service in a given trade AWAFC had no such

provision in its proposed agreement

Further suspicion is cast upon JKAG s ability to foster intermodal

growth in the trade due to the membership of all JKAG s carriers in

the larger Trans Pacific Freight Conference TPFC and the conse

quent possibility that they are more deeply committed to TPFC s new

intermodal service Although no single conference must prove that it is

the best vehicle for developing intermodalism in a given trade the

JKAG carriers participation in TPFC s active intermodal service clear

ly distinguishes their request for intermodal authority from that of the

American West African Freight Conference whose member lines have

no such divided loyalties

Finally there is no evidence that JKAG s competitive viability will

be seriously impacted by denial of its request for intermodal authority

These points alone form a substantial basis for disapproving Agree

ment No 3103 67 However the Commission s June 17 Order incorpo

rates most of the same complex and unrealistic proposed criteria for

approval contained in the AWAFC Order of Conditional Disapproval

These criteria are so harsh that if used as a precedent for future

Commission action they could prevent approval of intermodal rate

making authority for any conference

These criteria also exceed the boundaries of the Commission s statu

tory authority The proposed requirement that conferences demonstrate

that they will offer commercially attractive rates covering a wide

variety of commodities see Order at pp 14 15 would invest the

Commission with authority over rates in the U S foreign commerce

which we statutorily do not possess The condemnation ofthe commer

cial feasibility ofJKAG s proposed geographical routings see Order at

pp 12 14 second guesses the parties judgment and implies Commission

authority over route selection and licensing another authority we do

not possess

The Commission s June 17 Order reaches the only reasonable result

possible in the instant case disapproval However the Order s cumber

some rationale for arriving at this result shows that the Commission has

not yet established fair reasonable and relevant criteria for evaluating

applications for intermodal authority
FEDERAL MARITIME COMMISSION

46 C F R PART 510 DOCKET NO 80 44

LICENSING OF INDEPENDENT OCEAN FREIGHT

FORWARDERS

PUBLICATION OF APPLICATIONS

ACTION

SUMMARY

June 17 1981

Discontinuance ofproposed rulemaking

On July 7 1980 the Federal Maritime Commission

published a notice of proposed rulemaking 46 F R

45599 to eliminate the requirement of publishing in

the Federal Register notice of the filing of applica

tions for independent ocean freight forwarder li

censes After fullconsideration ofthe issues and com

ments from interested parties the Commission has

decided not to adopt the proposed rule

DATE Effective June 22 1981

SUPPLEMENTARY INFORMATION

This proceeding was instituted by Notice of Proposed Rulemaking

published on July 7 1980 to eliminate from section 510 6 of the

Commission s General Order 4 46 C F R 510 the requirement o

publishing in the Federal Register notice of the filing of applications fo

independent ocean freight forwarder licenses Section 510 6 currently

reads as follows

510 6 Publication ofapplications

After application has been filed the Commission shall cause

to be published in the FEDERAL REGISTER a notice ofthe

filing ofeach application stating the name and address of the

applicant and if the applicant is a corporation association or

partnership the names of the officers or members thereof

Parts 1 and 2 ofthe application shall be public information and

available for inspection at the office of the Commission in

Washington D C

In its Notice of Proposed Rulemaking the Commission stated tha

there is no statutory requirement for such publication in the Federa

Register and that the rule requiring such publication had been adopte

to allow interested parties to comment on the eligibility of applicant

for independent ocean freight forwarder licenses The Commission als

stated that since interested parties seldom commented on such applica

tions and in an effort to eliminate an apparently unnecessary regulatio

and to improve cost effectiveness it was proposed to delete the Federa

Register notice requirement
LICENSING OF INDEPENDENT OCEAN FREIGHT 953

FORWARDERS PUBLICATION OF APPLICATIONS

The proposed rulemaking generated four comments Two individual

forwarders and one forwarder association IC Harris Company

Arthur J Fritz Co and the Customs Brokers and Forwarders

Association of Miami Inc oppose deletion of the Federal Register

notice of applications In general those commentators believe that

application notices in the Federal Register constitute an important

source of information which enables the freight forwarder industry to

monitor prospective entrants into the industry Those commentators

point out that the notice requirement serves to protect the integrity of

the ocean freight forwarder profession by enabling knowledgeable indi

viduals to inform the Commission of facts concerning the eligibility of

particular applicants which facts may not otherwise come to light but

which would be of value to the Commission in processing applications

for licenses

As to the issue that few comments have been received as a result of

the notice requirement one of the commentators explained that most

applicants have established themselves through years of experience

while in the employ of other freight forwarders and may be worthy of

entrance into the profession under their own licenses Such applicants

naturally would not generate comment It is only in the case ofthe odd

applicant who perhaps unknown to the Commission should not be

granted a license that the notice requirement serves its intended pur

pose The commentator also points out that it is important just to have

the opportunity to inform the Commission concerning applicants for

licenses

The fourth and final commentator the National Customs Brokers

Forwarders Association of America Inc did not object to the propos

al per se However it recommended that the same information currently

published under the notice requirement be made available to it so that it

has an opportunity to furnish information when available that may be

helpful in the processing of applications

After thorough consideration of the comments received it is the

Commission s belief that the proposal to eliminate the publication of

applicants in the Federal Register should not be adopted and that any

alternate method of making this information available to the public

would place a greater burden upon the staff Accordingly this pro

posed rulemaking proceeding will be discontinued

THEREFORE IT IS ORDERED That the proposed rulemaking in

Docket No 80 44 is hereby discontinued and
954 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED That noti e of this Order be pub

lished in the Federal Register

By the Commission

S JOSEPH C POLKING

Acting Secretary

I

CommissionerDaschbach dissent I would delete the requirement that filing of applications for inde

pendent ocean freight forwarders licenses be published in theFederal Register and would instead adop

the proposal of the Nadonal Customs Ilroken and Forwarders Asaociation of America Inc that 

monthly list of such applications be furnished to interested parties by the Commission on a

subscrip

tion basis
FEDERAL MARITIME COMMISSION

DOCKET NO 80 81

KELCO DIVISION OF MERCK COMPANY

v

JOHNSON LINE

NOTICE

June 25 1981

Notice is given that no appeal has been taken to the May 20 1981

dismissal of the complaint in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has

become administratively final

8 JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 81

KELCO DIVISION OF MERCK COMPANY

v

JOHNSON LINE

SETTLEMENT APPROVED COMPLAINT DISMISSED

Finalized June 25 1981

This is a motion to approve a settlement agreement between th

complainant Kelco Division of Merck Company a shipper and the

respondent Johnson Line a common carrier by water between United

States Pacific Coast Ports and Ports in the United Kingdom Ireland

Scandinavia Continental Europe and the Mediterranean The motion

filed by respondent on behalf of both parties also asks that upon

approval ofthe settlement the complaint be dismissed

In my judgment the settlement should be approved and the com

plaint should be dismissed with prejudice

BACKGROUND

On November 26 1980 Kelco filed a complaint against Johnson Line

alleging that the respondent violated section 18b 3 of the Shipping

Act 1916 46 U S C 817 b 3

1

in connection with two shipments

described in the bills of lading as synthetic resin which Johnson Line

was alleged to have carried from Los Angeles California to Rotter

dam The Netherlands on November 8 1978 and January 8 1979 

The complaint asks for reparation in the amount of 15 722 67 with

interest pursuant to the provisions of section 22 of the Shipping Act

1916 46 D S C 8213

The amount sought for the first shipment is

1 Section 18b 3 provides as pertinent

No common carrier by water in foreign commerce or conferences of such carriers shall

charge or demand orcollect or receive agreater or less or different compensation for the

transportation of property or for any service in connection therewith than the rates and

charges which are specified in its tariffs on file with the Commission and duJy pUblished and

in effect at the time nor shall any such carrier rebate refund orremit in any manner or by

any device any portion of the rates or charges so specified norextend ordeny to any person

any privilege orfacility except in accordance with such tariffs

2

There were two crates of wooden office furniture weighing 200 pounds and measuring 40 cubic

feet included inthe second shipment Thesetwo crates are not at issue inthis proceeding

3

Section 22 was not mentioned in the complaint but it is not necessary to do so explicitly A

complaints are deemed to involve section 22 See Saipan Shipping Company Inc v Is and Navigation

Co

Ltd 18 SRR 223 227 1978 Section 22 provides as pertinent
KELCO DIVISION OF MERCK CO V JOHNSON LINE 957

7 584 04 The alleged overcharge for the second shipment IS

8 138 62 4

Each shipment consisted of two forty foot containers packed with

drums of products described on accompanying packing lists as one or

another type of Kelzan Kelcoloid Dariloid Keltone Kelcosol or

Kelgin There were 720 drums weighing 38 565 kilos and measuring

71557 cubic meters in the first shipment In the second shipment there

were 444 drums weighing 37 771 kilos and measuring 82 233 cubic

meters

The complaint alleges that the various trademark products described

in the packing lists are in fact natural and not synthetic resins

Attached to the memorandum of argument annexed to the complaint

are documentary materials in support of the contention that the ship

ments wereimproperly rated as synthetic resins

At the time of both shipments the ocean freight rate on synthetic

resins was 292 25 W 5At the same time there was an emergency rate

of 111 00 W for natural resins 6Also at the same time there was a

rate of 206 75 W for algins 7

In its answer ofDecember 15 1980 Johnson Line denied that it was

the owner or operator of the vessel which carried the first shipment It

also denied that there was any overcharge on the second shipment and

therefore no violation of statute and no liability to complainant Prior

to the time the complaint was filed Johnson Line rejected Kelco s

claims because of the Pacific Coast European Conference s tariff rule

Rule 19 1 barring consideration of claims requiring verification of

cargo description before the cargo leaves the carrier s possession In

apparent awareness that a tariff rule of this type which in effect

infringes on the rights granted by section 22 is invalid insofar as it

governs filing of claims before the Commission Kraft Foods v Federal

Maritime Commission 538 F 2d 445 D C Cir 1976 Johnson Line

does not rely on this rule in its defense ofthe complaint

That any person may file with the board asworn complaint setting forth any violation of

this Act by acommon carrier by water orother person subject to this Act and asking repa

ration for the injury ifany caused thereby The board shall furnish acopy of the complaint

to such carrier or other person who shall within a reasonable time specified by the board

satisfy the complaint or answer it in writing Ifthe complaint is not satisfied the board shall

except as otherwise provided in this Act investigate it in such manner and by such means

and make such order as it deems proper The board if the complaint is filed withintwo years

after the cause of action accrued may direct the payment on orbefore aday named of full

reparation to the complainant for the injury caused by such violation

4

The computation made by complainant incorrectly failed to include acurrency adjustment factor

of 11 50 then in effect Had it been included the amount of reparation sought would have been

reduced to 7596 13

5

Pacific Coast European Conference Tariff No FMC 16 2nd revised p

187 A Item No 581 1060

d Item No 292 2400

7

d 7th revised p 89 Item No 581990 The trademark items are alginates The documentary ma

terial attached to the argument purports to show that alginates are natural resins
958 FEDERAL MARITIME COMMISSION

THE SETTLEMENT AGREEMENT

Confronted with the uncertainty and expense of litigation of at leas

three complex factual issues some of which would involve the need fo

cross examination of expert witnesses 8

the parties agreed to settle th

proceeding Following the conditions enunciated by the Commission

for settlement of section 18b 3 complaint proceedings in Organi

Chemicals Glidden Durkee Division of SCM Corporation v Atlanttraflk

Express Service 18 SRR 1536a 1979 Organic Chemicals the partie

submitted a signed settlement agreement entitled Agreement of Settle

ment and Mutual ReleaseD and a Joint Affidavit10 setting forth th

reasons for the settlement and attesting that the settlement is a bona fid

attempt by the parties to terminate their controversy and not a devic

to obtain transportation at other than the applicable rates and charge

or otherwise circumvent the requirements ofthe Shipping Act 1916 a

amended

Under the terms of the settlement agreement Johnson Line wi

refund to Ke1co the difference between freight charges based on th

synthetic resin rate and the natural resin rate for the second shipmen

giving effect to the currency adjustment factor see n 4

supra Thus

Johnson Line agrees to pay 7 596 13 in full settlement of the tw

claims which comprise the complaint without admitting liability o

admitting to any violation oflaw 11

DISCUSSION AND CONCLUSION

In Organic Chemicals the Commission reaffirmed the principle tha

the law encourages settlements and that every presumption is indulge

in that favors their correctness fairness and validity However i

section 18b 3 cases the Commission insisted upon a balancing of th

policy of settlement against the possibility of discriminatory ratin

practices which might result if settlements are conditionally approve

in the absence of a finding of violation Nevertheless the Commissio

enunciated a policy that piUties should have the opportunity to sett

disputes but emphasized that in order to prevent abuses certain cond

tions had to be met Those conditions are Organic Chemicals supra 1

SRR at 1539 1540

1 A signed agreement is submitted to the Commission

2 The parties file With the settlement agreement an affidavit

setting forth the reasons for the settlement and attesting that

8

Those iS8ues are 1 whether the respondent was the owner or operator of the vessel which c

ried the fint shipment 2 whether the commodity actually carried was a

synthetic ornatural res

and 3 whether the commodity actually carried if not asynthetic resin was anatural resin oralg

g

The Agreement of Settlement and Mutual Release iS8ttached as Appendix I

0

The Joint Affidavit i atched as Appendix II

11 Ifnot approved the settlement agreement wiU be null and void and of no effect whatsoever 

any purpose
KELCO DIVISION OF MERCK CO V JOHNSON LINE 959

the settlement is a bona fide attempt by the parties to terminate

their controversy and not a device to obtain transportation at

other than the applicable rates and charges or otherwise cir

cumvent the requirements of the Shipping Act 1916 or ofthe

Intercoastal Shipping Act 1933 as amended as the case may

be

3 The complaint on its face presents a genuine dispute and

the facts critical to the resolution of the dispute are not rea

sonably ascertainable

The signed agreement and affidavit meet the requirements of Organic

Chemicals See also e g Ellenville Handle Works Inc v Far Eastern

Shipping Company 23 F M C 707 1981 Celanese Corporation Inc v

The Prudential Steamship Company 23 F MC I 1980 Ifind that the

agreement reflects a rational valid and fair solution of the dispute and

obviates the need for further extensive and expensive litigation The

complaint presents a genuine dispute and the facts critical to the resolu

tion ofthe dispute are not reasonably ascertainable without such further

litigation It appears that the settlement is a bona fide attempt by the

parties to terminate the controversy and not a device to obtain trans

portation at other than the applicable rates or charges or otherwise

circumvent the requirements of the Shipping Act 1916 as amended

Accordingly it is ordered that the settlement be approved and the

complaint be dismissed with prejudice It is further ordered that within

ten 10 days after this order becomes final the parties file an affidavit

ofcompliance with the terms ofthe settlement

S SEYMOUR GLANZER

Administrative Law Judge
960 FEDERAL MARITIME COMMISSION

APPENDIX I

BEFORE THE FEDERAL MARITIME COMMISSION

KELCO DIVISION OF MERCK

COMPANY

v Docket No 80 81

JOHNSON LINE

AGREEMENT OF SETTLEMENT AND

MUTUAL RELEASE

IT IS HEREBY AGREED by and between the undersigned Kelc

Division ofMerck Company Kelco Complainant in Commissio

Docket No 80 81 and Rederiaktiebolaget Nordstjernan Johnso

Line Respondent in said Docket that Docket No 80 81 will b

terminated by mutual accord on the terms and conditions hereinaft

set forth and for the reasons stated in the accompanying Memorandu

in Support ofSettlement and Motion to Dismiss

1 Johnson Line will pay to Kelco the sum of Seven Thousand Fiv

Hundred and Ninety Six dollars and Thirteen cents 7 596 1

00

2 Kelco will in consideration of the action of Johnson Line 

provided in paragraph I above withdraw its Complaint in Commi

sion Docket No 80 81 and will refrain from further pursuing its claim

in this proceeding

3 Neither Kelco Johnson Line nor any successor or assignee 

interest of either such party will initiate any new claim against th

other party arising in connection with the complaint in this proceedin

except for enforcement of any provision of this Agreement of Settl

ment and Kelco and Johnson Line each hereby releases the otherfrom

without limitation all sums ofmoney accounts actions suits proceed

ings claims and demands whatsoever which either ofthem at any tim

had or has up to the date of this Agreement of Settlement against th

other for or by reason of any act cause matter or thing arising from

the transactions giving rise to this proceeding

4 It is understood and agreed that this Agreement of Settlement an

Mutual Release is in full accord and satisfaction of all disputed claim

in this proceeding Docket No 80 81

5 This Agreement of Settlement will be submitted for any necessa

approval to the appropriate governmental authorities and will becom

effective and binding upon the parties when such final approval 

obtained
KELCO DIVISION OF MERCK CO V JOHNSON LINE 961

6 It is further understood and agreed that this Agreement of Settle

ment is in no sense to be understood as constituting any admission of

liability of any party or of any admission of any violation of law by

any party

7 This Agreement of Settlement and Mutual Release constitutes the

entire agreement between the parties

8 In the event this Agreement of Settlement and Mutual Release is

disapproved by the Commission or is approved on conditions which

are unacceptable to either party then this Agreement will be null and

void ab initio and of no effect whatsoever for any purpose

DATED April 2 1981

KELCO DIVISION OF MERCK COMPANY

By

Title Manager of Distribution

and Sales Service

REDERIAKTIEBOLAGET

NORDESTJERNAN

JOHNSON LINE

By

Title Vice President

Axel Johnson Corp
962 FEDERAL MARITIME COMMISSION

APPENDIX II

THE FEDERAL MARITIME COMMISSION RECEIVED

KELCO DIVISION OF MERCK

COMPANY

v Docket No 80 81

JOHNSON LINE

JOINT AFFIDAVIT

The undersigned A W Risch and William F Horton being respec

tively the Manager ofDistribution and Sales Service ofKelco Division

of Merck Company and Vice President Axel Johnson Corp o

Rederiaktiebolaget Nordstjernan Johnson Line depose and state a

follows

1 This affidavit is made in connection with the accompanying

Agreement ofSettlement and Mutual Release in this proceeding

2 Said Agreement of Settlement in Commission Docket No 80 81 i

a reasonable commercial settlement ofthis proceeding

3 The complaint in this proceeding on its face presents a genuine

dispute raising genuine issues and the facts and information critical to

the resolution of the dispute are not reasonably ascertainable withou

further lengthy and costly litigation

4 The above mentioned Agreement of Settlement is a bona fide

attempt to avoid the time and expense of such litigation and to term

nate this controversy and said Agreement is not a device to obtain

transportation at other than the proper rates and charges or otherwis

circumvent the requirements of the Shipping Act 1916 as amended

S AW RISCH

Name A W Risch

Sworn to before me a Notary Public this 2nd day of April 198

S LINDA L WEISHOHN

Notary Public

My Commission Expires Dec 16 1983

SEAL
KELCO DIVISION OF MERCK CO V JOHNSON LINE 963

S WILLIAM F HORTON

Name William F Horton

Sworn to before me a Notary Public this 10th day ofApril 1981

S JOHN F JACOBS

Notary Public

My Commission Expires October 7 1982

SEAL
FEDERAL MARITIME COMMISSION

DOCKET NO 80 76

HEIDELBERG EASTERN INC

v

CONTAINER OVERSEAS SERVICE INC AND

CONTAINER OVERSEAS AGENCY INC

ORDER ADOPTING INITIAL DECISION

June 26 1981

This proceeding wasinstituted by the filing of a complaint by Heide

berg Eastern Inc against Container Overseas Service Inc and Con

tainer Overseas Agency Inc alleging an overcharge on a shipment o

Photographic Equipment transported from New York to Denmar

and seeking reparations in the amount of 9 194 00 On May 7 198

Chief Administrative Law Judge John E Cograve issued an Initia

Decision finding for Complainant and awarding reparation in th

amount of 9 794 No exceptions to the Initial Decision have bee

filed The Commission however has determined to review the Initia

Decision pursuant to Rule 227 d ofthe Commission s Rules of Practic

and Procedure 46 C F R 502 227 d

Upon review the Commission has determined that the Presidin

Officer s findings and conclusions are correct The Initial Decision w

accordingly be adopted with the modification discussed below

The Presiding Officer did not include interest on the reparatio

awarded In order to make the Complainant whole and compensate 

for the loss of the use of freight charges improperly assessed th

Commission believes that interest on the amount ofreparations awarde

should have been included as an element of damages U S Borax

Chern Corp v Pac Coast European Conf 11 F MC 451 470 1968

The Commission will therefore modify the Presiding Officer s award t

include interest at a rate of 12 per annum from November 28 197

the date the excess freight charges were paid by Complainant Allie

Stores Int Inc v United States Lines

Inc

22 F M C 839 1980

THEREFORE IT IS ORDERED That the Initial Decision serve

on May 7 1981 in this proceeding is adopted and made a part hereo

The Presiding Officer inadvertently stated the improperly assessed rate to be 158 00 per cu

foot The evidence of record indicates that the rate assessed was 158 00 per 40 cubic feet
HEIDELBERG EASTERN INC V CONTAINER OVERSEAS 965

FURTHER IT IS ORDERED That Respondents pay to the Com

plainant Heidelberg Eastern Inc reparation in the amount of 9 794

plus interest at the rate of 12 per annum from November 28 1978

By the Commission

S JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 76

HEIDELBERG EASTERN INC

v

CONTAINER OVERSEAS SERVICE INC AND

CONTAINER OVERSEAS AGENCY INC

Respondent found to have violated section l8b 3 of the Shipping Act Reparatio

awarded

Albert S Lefkowitz for complainant

Janison Foreman for respondents

INITIAL DECISIONl OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Adopted June 26 1981

Complainant Heidelberg Eastern Inc charges respondents Contain

er Overseas Services Inc COS and Container Overseas Agency

Inc with violations of sections 18b and 18b 3 of the Shipping Ac

1916 which are said to arise out of a shipment of Photographi

Equipment from New York to Denmark 2

Respondent Containe

Overseas Services requested and was granted a thirty day extension o

time within which to answer the complaint In my notice granting th

extension Idirected the parties to consult with each other and attemp

to arrive at a stipulation of fact and authenticity of documents whic

would allow the case to be handled by the shortened procedure provid

ed in Subpart K of the Commission s Rules of Practice and Procedure

46 C F R 502 181 et seq The consultations were to be initiated b

respondent and the parties wereto notify me by December 15 1980 o

the results oftheir consultations

On December 22 1980 counsel for complainant advised me that h

had not heard from respondent but that he saw no reason why th

matter could not be submitted on documents alone In a telephon

conversation with Mr Janison Foreman the Vice President of COS 

i

1 This decision wlll become the decision of the Commission in the absence of review thereof by t

Commission Rule 227 Rules of Practice and Procedure 46 C P R 502 227

2

The shipment in question was in foreign commerce and thus section 18 a which applies only 

the offshore domestic commerce is inapplicable here Complainant appears to have realized the err

and has abandoned the 18 a allegation on brief
HEIDELBERG EASTERN INC V CONTAINER OVERSEAS 967

was told that attempts were made to discuss the case with counsel for

complainant but they were unsuccessful and that he did not have an

attorney Mr Foreman also said that he was having difficulty gathering

documentary evidence and that he would greatly appreciate being

given time to put together his defense because he felt complainant was

in error All of this was confirmed by letter On February 19 1981 I

issued a procedural notice which provided

1 By March 16 1981 complainant shall file a memorandum of facts

and of arguments separately in compliance with Rule 182

2 By March 27 1981 respondent shall file its answer to the com

plainant and its memorandum of facts and of arguments separately

stated in compliance with Rule 183

3 By April 10 1981 complainant shall file its reply memorandum in

compliance with Rule 184

Complainant has complied with my order but respondent has not I

have heard nothing further from respondent to date The following

facts are established by the documentary evidence submitted by com

plainant

On November 24 1978 Container Overseas3 accepted two container

ized shipments of photographic equipment and issued a bill of lading

bearing the heading Container Overseas Service Inc The bill of

lading described the shipment as two 40 containers of Photographic

Equipment n 11500 measuring 4000 cu ft The bill was numbered

0592 0593 4but was not freighted Container Overseas charged com

plainant 16 194 00 or 158 00 per cubic foot Complainant paid the

total freight

Attached to the complaint is a page from the Container Overseas

Services Inc Freight Tariff No 2

showing that the rate on Photo

graphic Equipment from U S Atlantic ports to Scandinavian ports was

at the time of the shipment in question 64 00 per 40 cu ft At 4000

cubic feet the total freight should be 6400 not the 16 194 paid by

complainant Respondents have offered no explanation for their applica

tion of the 158 00 rate They have offered no evidence to show either

that the 158 00 was applicable or that the 64 00 rate was inapplicable

3

Complainant uses Container Overseas to mean both respondents Container Overseas Service

and Container Overseas Agency

4

There also is attached to the complaint a

copy of the Shipper s Export Declaration showing the

shipment to be Photographic Equipment
968 FEDERAL MARITIME COMMISSION

Accordingly on the record before me I

find that respondents have

violated section 18 b 3 of the Shipping Act Complainant is hereby

awarded reparation of 9 794 6

8 JOHN E COORAVE

Administrative Law Judge

Washington D C

May 7 1981

6

Complainant actually asks for only 9 194 00 apparently because a

sampling of competitive tariff

showed the rates on Photographic Equipment to range from 65 00 to 70 00 However sectio

18 b3 requires that the proper tariffrate be applied in this case the 64 00 rate
FEDERAL MARITIME COMMISSION

DOCKET NO 81 21

BEKAERT STEEL WIRE CORPORATION

v

SEA LAND SERVICE INC

ORDER ADOPTING INITIAL DECISION

June 26 1981

This proceeding was instituted by the filing of a complaint by Be

kaert Steel Wire Corporation against Sea Land Service Inc alleging an

overcharge and seeking reparations on a shipment of empty bobbins

spools carried by Sea Land from New Orleans to Tokyo On May II

1981 Chief Administrative Law Judge John E Cograve issued an Initial

Decision finding for Complainant and awarding reparation in the

amount of 5474 93 No exceptions to the Initial Decision have been

filed The Commission however has determined to review the Initial

Decision pursuant to Rule 227 d ofthe Commission s Rules ofPractice

and Procedure 46 C F R 502 227 d

Upon review the Commission has determined that the Presiding

Officer s

findings and conclusions are correct The Initial Decision will

accordingly be adopted with the modification discussed below

The Presiding Officer did not include interest on the reparation

awarded In order to make the Complainant whole and compensate it

for the loss of the use of freight charges improperly assessed the

Commission believes that interest on the amount ofreparations awarded

should have been included as an element of damages US Borax

Chern Corp v Pac Coast European Conf II FMC 451 470 1968

The Commission will therefore modify the Presiding Officer s award to

include interest at a rate of 12 per annum from August 18 1980 and

August 26 1980 respectively the dates the excess freight charqes were

paid by Complainant Allied Stores Int Inc v United States Lines Inc

22 F MC 839 1980

THEREFORE IT IS ORDERED That the Initial Decision served

on May 11 1981 in this proceeding is adopted and made a part hereof
970 FEDERAL MARITIME COMMISSION

FURTHER IT IS ORDERED That Respondent Sea Land Service

Inc pay to the Complainant Bekaert Steel Wire Corporation reparatio

in the amount of 5 474 93 plus interest at the rate of 12 per annum

on 697 29 from August 18 1980 and on 4 477 64 from August 26

1980

By the Commission

S JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 81 21

BEKAERT STEEL WIRE CORPORATION

v

SEA LAND SERVICE INC

Reparation awarded under section 18 b 3 of the Shipping Act 1916

Russell W Deitch for Bekaert Steel Wire Corporation

John M Ridlon for Sea Land Service Inc

INITIAL DECISIONl OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Adopted June 26 1981

The Bekaert Steel Wire Corporation alleges that it was overcharged

by Sea Land Service Inc on a shipment of empty bobbins spools

carried by Sea Land from New Orleans to Tokyo Complainant has

requested and respondent has consented to the shortened procedure

provided for in Subpart K of the Commission s Rules of Practice and

Procedure 46 C F R 502 181 et seq

According to complainant it was due to an honest error in classifi

cation that Schedule B number 207 0025 was used on the Shipper s

Export Declaration instead of the correct Schedule B number of

657 2180 Number 207 0025 covers wooden bobbins while number

657 2180 covers steel bobbins Based upon the Export Declaration clas

sification Sea Land rated the shipment under Item No 207 0025 80 of

the Pacific Westbound Conference Tariff PWC 708A applicable to

wooden bobbins as follows

67 961 cu meters at 144 00 cu meter 9 786 38

67 961 cu meters at 14 50 cu meter 985 44

9 786 38 at 6 currency surcharge 587 18

Total 11 359 00

Complainant argues that what it actually shipped were steel bobbins

which should have been rated under Item 657 2180 80 of the Confer

ence s tariff as follows

67 961 cu meters at 68 00cu meter 4 621 35

67 961 cu meters at 14 50 cu meter 985 44

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

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227
972 FEDERAL MARITIME COMMISSION

4 621 35 at 6 currency surcharge 277 28

Total 4 884 07

Attached to its complaint are Bekaert s specification sheets showing

the specifications of steel bobbins and acopy of the export declaratio

in which although the bobbins are described as steel the wrong Sched

ule B number was used

In its answering memorandum Sea Land agrees that the article

actually shipped were empty steel bobbins By affidavit Richard B

Hopkins a Sea Land rate audit supervisor after being duly sworn

says that he is personally familiar with the claim of Bekaert and he ha

reviewed all documentation billings tariff provisions and other pert

nent information regarding this claim and he states

On the basis of all available documentation information from

the shipper and information contained in the Complaint and

overcharge claim lodged with Sea Lalld Service Ihave deter

mined the claim of Bekaert is justified and correct

As the Commission said in Western Publishing v Hapag Lloyd A G

l3 SRR 16 FMC 1972

The description on the bill of lading should not be the

single test in what claimant can now prove based on all the

evidence as to what was actually shipped even if the actual

shipment differed from the bill oflading description

When the cargo has left the custody of the carrier a complainan

must establish the nature ofthe actual shipment by a preponderance o

the evidence Pacific Freight Audit Inc v American President Lines 2

F MC 207 at 209 1979 Pan American Health Organization v Moor

McCormack Lines Inc 22 F MC 98 1979 On the basis of th

evidence ofrecord I conclude that complainant has met its burden o

proof that the commodity actually shipped was steel bobbins and tha

complainant is entitled to reparation

Accordingly Sea Land Service Inc is ordered to pay Bekaert Ste

Wire Corporation reparation in the amount of S 474 93 2

8 JOHN E COGRAVE

Administrative Law Judge

Washington D C

May 11 1981

2

There is a

typographical error in paragraph III of the complaint and reparation should 

5 474 93 instead of 5 473 93
FEDERAL MARITIME COMMISSION

DOCKET 80 43

BEHRING INTERNATIONAL INC

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE NO 910

ORDER OF ADOPTION

June 30 1981

On April 20 1981 the Commission determined to review the Presid

ing Administrative Law Judge s Initial Decision in the above captioned

matter Upon review the Commission determined that the Initial Deci

sion is well reasoned and supportable both in law and in fact

THEREFORE IT IS ORDERED That the Initial Decision served

March 17 1981 in this proceeding is adopted as the decision of the

Commission

By the Commission

S JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 80 43

BEHRING INTERNATIONAL INC

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE NO 910

An investigation was begun to determine whether past payments of excess compensa

tion from certain ocean carriers to respondent freight forwarder showed that re

spondent had violated sections IS and 16 of the Shipping Act 1916 by carrying ou

unapproved agreements passing on such compensation to shippers or otherwise

obtaining transportation at less than applicable charges whether respondent was fit

to retain its forwarder s license and whether civil penalties should be assessed In

large measure because of respondent s cooperation with the Commission s staff

evidence has been developed on which to base a just and reasonable settlement and

on which it can be found that respondent is eminently fit to retain its license

There is evidence largely developed by respondent itself that respondent did receive

compensation different from that published in a certain few carriers tariffs from 1976

to 1978 however respondent voluntarily terminated the practice long before this

case began never passed on such compensation to shippers so as to violate anti

rebating law and never violated its strict fiduciary duties to its shipper customers

In lieu of continuing with expensive litigation respondent and the Commission s Bureau

of Investigation and Enforcement have entered into a settlement agreement unde

which respondent will pay 70 000 in penalties and will among other things institute

strong measures to prevent recurrence The settlement meets all applicable criteria o

reasonableness and is approved

The record strongly supports a

finding of respondent s fitness to retain its license

Respondent has long enjoyed a fine reputation for first class service has fully

cooperated with the Commission s staff has long ago voluntarily terminated the

practices in question which moreover have never been definitively held to be

unlawful and has behaved impeccably in this proceeding Under the circumstances

even suspension of its license would be a gross travesty Moreover rejection of the

settlement would chill future enforcement efforts by discouraging regulated persons

from cooperating with the Commission s staff and would provoke needless expen

sive litigation in this and future Commission proceedings

Edward Schmeltzer and George J Weiner for respondent Behring International Inc

John Robert Ewers Joseph B Slunt Charna J Swedarsky and Charles C Hunter for

the Bureau of Investigation and Enforcement
BEHRING INT L INC FREIGHT FORWARDER 975

APPROVAL OF PROPOSED SETILEMENT AND INITIAL

DECISION OF NORMAN D KLINE ADMINISTRATIVE LAW

JUDGE

Adopted June 30 1981

This is an investigation begun by the Commission s Order ofInvesti

gation and Hearing served June 27 1980 The Commission began this

investigation because as stated in the Order its staff had developed

information which allegedly indicated that respondent Behring Interna

tional Inc an ocean freight forwarder licensed by the Commission

since February 7 1964 or its officers had received sumsof money from

ocean carriers in excess of the compensation normally paid by carriers

to forwarders as published in carriers tariffs for certain shipments

occurring between 1975 and 1977 The Commission questioned whether

receipt of such excess compensation constituted a number of viola

tions of the Shipping Act 1916 Specifically the Commission ques

tioned whether it may have reflected an agreement between Behring

and certain carriers which required approval under section 15 of the

Act may have resulted in Behring s receiving transportation for less

than applicable rates or charges if Behring passed allegedly excess

compensation to its shipper principals in violation of section 16 Initial

Paragraph or even if not passing on such compensation to its shippers

may nevertheless have enabled Behring to obtain transportation for less

than applicable charges also in violation of that provision of law

Finally the alleged receipt of excess compensation from carriers

caused the Commission to question whether civil penalties should be

assessed against Behring under section 32 a of the Act and whether

Behring s license should be suspended or revoked on a

finding of

unfitness because of willful violations of the law cited or such other

conduct that may show Behring to be unfit 2

1 This decision wi1l become the decision of the Commission in the absence of review thereof by the

Commission Rule 227 Rules of Practice and Procedure 46 C F R 502 227

2

The precise language of the Commission sOrder framing the issues described is as follows

1 Whether Behring violated section 15 Shipping Act 1916 by entering into and carrying

out without Commission approval any agreement subject to the terms of section 15 pro

viding for the receipt of payments from ocean carriers in excess of the amount of ocean

freight forwarder compensation specified in the ocean carrier sapplicable tariffs

2 Whether Behring violated section 16 Initial Paragraph by directly or indirectly passing

on any portion of monies received by it or its officers from ocean carriers in excess of

authorized ocean freight forwarder compensation to its shipper principals thus obtaining

ocean transportationuon behalf of its principals wat less than the applicable rates or

charges

3 Whether Behring violated section 16 Initial Paragraphneven if it did not pass any oran

of monies received by it orits officers from ocean carriers in excess of authorized ocean

freight forwarder compensation to its shipper principalsnby obtaining transportation by

water at less than the applicable rates and charges

4 Whether civil penalties should be assessed against Behring pursuant to section 32 e

Shipping Act 1916 for violation of the Shipping Act 1916 and or the Commission s
976 FEDERAL MARITIME COMMISSION

Although the formal investigation commenced on June 27 1980 as

noted the Commission had heard about alleged receipt of excess

compensation by Behring some time before institution of its formal

order On or about January 18 1979 the Commission had obtained

information concerning similar allegations in connection with a number

of freight forwarders Acting upon such information on January 18

1979 the Commission served an order pursuant to section 21 ofthe Act

directing employees of Behring and IS other forwarders to provide

more information concerning alleged excess compensation The Com

mission expressed concern that the alleged practices might be violative

ofthe Shipping Act as described above and desired the information to

determine whether this was the case and whether further proceedings

should be instituted 3Behring and several other forwarders asked the

Commission to reconsider its section 21 order without sucoess and

thereafter four forwarders including Behring requested review of the

order by the United States Court ofAppeals for the District of Colum

bia Circuit After the matter had been briefed to that Court but prior to

argument the Commission withdrew the Order and moved for volun

tary dismissal of the pending Court proceedings stating that the

Commission has recently obtained information which makes further

responses from certain of these employees no longer necessary See

Order November 19 1979 p

1 The Court granted the Commission s

motion as it affected Behring by order of January 2 1980 Thereafter

the Commission initiated formal investigations against Behring and at

least three other forwarders involved in the section 21 proceedings 4

Even before the proceeding against Behring was docketed Behring

cooperated with Commission investigators by providing a large amount

of information relating to its receipt of excess compensation More

over Behring was discussing means to furnish even more information

to the Commission when the Commission decided to commence this

proceeding on June 27 1980 The Commission s Bureau of Investiga

tion and Enforcement confirms these facts See Stipulation dated Feb

ruary 23 1981 The Commission however decided to commence

Rules and Regulations and ifso the amount of Bny such penalty which should be im

posed taking into consideration factors inpossible mitigation of such apenalty

S Whether Behrings independent ocean freight forwarder license should be suspended or

revoked for

a willful violations of the Shipping Act 1916 pursuant to section 44 d of the Ship

ping Act 1916

b such conduct as theCommission finds renders Behring unfit to carryon the business

of forwarding in accordance with section StO 9 e of Oeneral Order4

3

See Section 21 Order Independent Ocean Freight Forwarders Payment Received for the Securing o

Booking of Cargo in Excess of the Compensation Providedfor in the Iiffectlve Common Carrier Tariff on

File with the Federal Maritime Commission January 18 1979 p 2

See e

g Docket Nos 80 20 8057 80 6 investigating Kuehne Nagel Inc Cosmos Shipping

Co Inc and Daniel F Young Inc Orders served April 3 August 29 and September 19 1980 re

spectively
BEHRING INT L INC FREIGHT FORWARDER 977

formal proceedings stating in its Order that the information already

assembled indicated that one carrier had paid a vice president of Behr

ing about 27 719 in non tariff compensation from July 16 1975

through January 19 1977 in connection with shipments wherein Behr

ing had acted as forwarder

After the commencement of formal proceedings Behring continued

its policy ofcooperating with the Commission s staff Discussions began

forthwith aimed at facilitating discovery requests directed against Behr

ing and at formulating a record for settlement which would avoid

costly trial type hearings The record fully demonstrates the willingness

of Behring to aid the Comsission s staff in ascertaining relevant facts

pertaining to the activities of Behring in which certain carriers at

certain times in t1e past had paid Behring compensation above that

published in the carriers tariffs Because of Behring s cooperative atti

tude furthermore massive amounts of records relating to the years

1975 through 1977 were obtained by Behring and assembled into mean

ingful form complete with tabular summaries ofrelevant shipments and

payments

As a result of Behring s cooperation with the Bureau and its willing

ness to develop evidence from its old records in response to the Bu

reau s

requests the parties have developed the necessary evidentiary

record have negotiated and submitted a settlement agreement and

have submitted legal memoranda supporting the agreement The evi

dentiary record thus compiled has also enabled me to issue an initial

decision on the only issue in the case which because of Commission

precedent requires decision rather than settlement namely the issue of

Behring s fitness to retain its license 5

This evidentiary record consists

of the following 1 Behring s letter dated September 16 1980 setting

out the terms it offered for settlement 2 the Bureau s letter dated

November 14 1980 clarifying or conditioning certain ofthose terms 3

a stipulation showing that Behring cooperated with the Commission s

staff prior to inauguration of this proceeding 4 a proposed settlement

agreement based upon undertakings by Behring to pay 70 000 to the

Commission and not accept non tariff compensation from any ocean

common carriers in the future and 5 two affidavits from Merrill P

O Neal President of Behring setting forth uncontested facts concern

ing the disposition of non tariff compensation which Behring had for a

limited time in the past received from four carriers and attaching

tabular summaries and detailed information about Behring s

long history

and the many services it performs for shippers

5

As noted later in this decision the Commission in an interim order in another forwarder case has

stated that issues of fitness unlike other issues cannot be settled See Independent Freight Forwarder s

License E L Mobley IncOrder 21 F M C 845 1978
978 FEDERAL MARITIME COMMISSION

FACTUAL BACKGROUND

Because ofthe complexities involved in assembling and reconstitutin

old transactions from Behring s records it is not possible to establis

the preciae amount of the excess compensation which four carrier

had at certain times in the past paid Behring However certain fact

can be established with reasonable certainty in large measure owing t

Behring s efforts to reconstruct these events from various sources in it

records and from its employees in an effort to provide the Commissio

with as full a record as is humanly possible to assemble after the

passage of so much time In summary it appears that Behring s records

disclose that non tariff compensation in the aggregate amount of ap

proximately 115 000 was paid by four carriers Waterman Steamship

Company Lloyd Brasiliero P 0 Strath Services and Djakarta

Lloyd to Behring during the period January 1976 through February

1978 on approximately 500 shipments transported in various trade

between July 1975 and August 1977 It should be noted however tha

this sum reflects payments from a

relatively small number of carriers

compared to the total number of carriers for whom Behring handled

the shipments and that all such payments ceased in early 1978 more

than two years prior to the institution ofthe present investigation Se

Bureau s Memorandum of Proposed Settlement February 23 1981 pp

7 8

The record shows that only these four carriers out ofthe many with

whom Behring did business had the habit of paying compensation in

excess of that which their tariffs had published Of the four Waterman

paid 83 764 54 on 312 shipments between June 1976 and February

1978 Djakarta Lloyd paid 16 279 87 on 22 shipments between May

1976 and August 1976 P 0 Strath Services paid 4 877 91 on 68

shipments between August 1976anl1 April 1977 and Lloyd Brasiliero

paid 10 30194 on 86 shipments between January 1976 and Octobe

1977 See summary tables attached to affidavit of Merrill P O Neal

President of Behring February 23 1981 6 These amounts represented

o

Thesedata appear to have been put together after considerable effort by Behring and because o

the passage of time and difficulties of reconstructing past events from Behring s recordII do 110t pur

port to be perfect The Commission s Bureau however acknowledges that thlY are reliable bal

park figures However the Bureau states that based upon information which it has the nature o

which is not shown in the record the figures rel ting to Lloyd BrasiUero and Waterman may need to

be adjusted upward to some extent The Bureall and Behring have attempted to resolve the di8crepan oiea in figQres but have not ben able o do so and the Bureau recosnizes that Behring s records may

not be able to explain the differences In other words ifmay not be possibJeto determine tinal figures

more preci ely than h been done The Sureau doe not questionSehring good faith effort to re

solve these discrepancies On the contrary the Bur u

correctly sta e8 that the presence of such diffi

cult factual issues is afactor favoring settlement ie an issue very difficult orcostly or impossible to

resolve through litigation See Bureau s Memorandum p 7 n 1 On Behring s part Behrin explains

the difficulty it encountered in constrl1cting its tables from old records and memories Qf employees In

several instances Behring even addedfigures for compensatlon in an effort to be complete even though

the records werenotclearand such additions Vere against its own interests See affidavit of MerrillP

ONeal February 23 1981 paragraph S n 1
BEHRING INT L INC FREIGHT FORWARDER 979

two and one half percent of the freight charges except for a few

shipments for Djakarta Lloyd amounting to three and three quarters

percent As noted in the above footnote the Bureau indicates that

some ofthe payments from Lloyd Brasiliero may actually have amount

ed to five percent and that some payments from Waterman may have

exceeded two and one half percent contrary to the evidence submitted

by Behring but the Bureau does not question Behring s good faith

beliefs in its data nor recommend continued litigation as the means to

resolve this particular difference

In view of the Commission s concern that receipt of the excess

compensation from carriers may have resulted in rebating or other

benefits to shipper customers of Behring or may have caused Behring

to be influenced in its selection of carriers against the best interests of

its shipper customers further analysis ofthe above transactions is neces

sary As the evidence submitted by Behring which the Bureau does not

essentially challenge except as noted earlier shows Behring did not

rebate or otherwise pass this compensation through to shippers and did

not violate its obligations as a forwarder to select the best carriers

available for its shipper customers regardless of the four carriers past

practice ofpaying excess compensation

On the question whether Behring rebated any of this excess com

pensation Mr O Neal President of Behring explains why this did not

happen and why such rebating would have been nonsensical Behring a

forwarder for many years follows a policy of not refunding to shippers

any compensation received from carriers because this would be a clear

violation of FMC requirements O Neal affidavit February 23 1981

paragraph 5 This statement is selfserving but it is corroborated by

other facts which show that rebating would not be economical and

would not be good business practice This is because the cost of

recording such rebating in Behring s books would outweigh any advan

tage to such practice because such cost exceeds the amount of compen

sation in the large majority of shipments which compensation com

prised no more than 100 Thus for Lloyd Brasiliero 56 out of the 86

shipments involved non tariff compensation of 100 or less for Water

man 186 out of 312 shipments for Djakarta Lloyd 14 out of 22 for P

0 Strath 58 out of 68 O Neal affidavit paragraphs 5 and 6 Even

on larger shipments when compensation exceeded 100 the amount

was not substantial and Behring s President states persuasively that a

reputable forwarder like Behring would not insult a substantial shipper

customer by attempting to buy the customer s patronage by offering

minimal reductions in compensation derived from what the carriers

were paying This situation is totally unlike that in which carriers

induce large shippers to book cargo by making offers in reductions of

freight which could amount to thousands of dollars Id paragraph 7
I

j

980 FEDERAL MARITIME COMMISSION

There are even more reasons which demonstrate that Behring did not

and would not have passed any carrier compensation through to its

shipper customers One reason is that larger shipments which Behring

handled typically involved project cargoes that required specialized

forwarding services to ensure that various portions of the shipmen

were assembled from various points in the United States for subsequen

consolidated shipment to destinations overseas Coordinating such

project shipment is a time conauming expensive operation on which

Behring could not afford to pay back part ofits compensation Anothe

reason is the fact that Behring has 27 offices in various locations

throughout the world Bmployees at the field offices would quote fee

to shippers for forwarding services without always knowing in advance

how a particular shipment would be ultimately routed For example

although a shipment might be booked initially for a Lloyd Brasiliero

sailing the cargo might be delayed and might miss the ailing requiring

that it be booked on another carrier Behring would not therefore

authorize its field employees to offer reduced fees to shippers even if i

were completely proper to do so when there was no guarantee that the

cargo would ultimately move via a carrier paying excess compensa

tion to Behring Id paragraphs 8 9

Behring offers convincing evidence that the Capt that at one time fou

carriers paid more compensation to forwarders than that published in

their tariffs did not cause Behring to select those carriers when it wa

not in the best interests of Behring s shipper customersto do so That i

because in many instances the shipper chooses the sailing best suited to

the shipper s needs on the basis ofobjective data provided by Behring

relating to sailing and arrival schedules national flag requirements

reliability ofthe carrier and cheapest routing All ofthis has nothing t

do with the fact that four carriers happened to pay excess compensa

tion to forwarders at certain times in the past Behring s records

moreover corroborate these statements showing that the four carrier

did not enjoy any particularly outstanding share ofcarryings in particu

lar trades on shipments handled by Behring For example in 1976 th

full year encompassing the largest total of non tariff compensation by

the four carriers in the U S Bast and Gulf CoastBraziUan trade th

largest single share of shipments handled by Behring went to Delt

Line not Lloyd Brasiliero 42 2 percent for Delta compared to 31

percent to Lloyd with 17 2 percent to Moore McCormack and 8 

percent to Netumar Lines Id paragraph 11 Lloyd was unable t

attract a

greater share than Delta even though Lloyd enjoyed the statu

of the Brazilian national flag line enjoying benefits of Brazilian carg

preference laws and offered a greater frequency of service than eithe

Moore McCormack or Netumar Similarly as for the other three carr

ers paying excess compensation Waterman P OStrath and Dja

karta Lloyd in 1976 in the U S Bast and Culf CoastPersian Gu
BEHRING INT L INC FREIGHT FORWARDER 981

trade Waterman and P 0 Strath carried only 8 2 and 4 3 percent of

total shipments respectively while the remaining 87 5 percent were

shared by 22 other lines Id paragraph 12 Waterman carried this

relatively small percentage even though it was a principal American

flag carrier in the trade and many shipments moving to that area were

required to be carried on American vessels under cargo preference

laws In the Singapore Indonesia and Malaysia trade finally Behring

booked less than one percent of all 1976 shipments with Djakarta

Lloyd the remaining 99 percent moving via a dozen other lines All of

these facts hardly show that Behring was steering shipments to the four

carriers offering excessive compensation at that time Id Moreover

Behring s records show that asignificant portion of its shipments were

booked via conference carriers rather than on nonconference carriers

which offered higher compensation to forwarders Id Again this fact

confirms Behring s statements that it did not allow the practices of the

four carriers paying excess compensation to influence its choice of

carriers

To summarize there is no evidence that during the period between

1976 and 1978 when four carriers out of the many doing business with

Behring paid excess compensation to Behring that Behring passed

any of this compensation on to its shipper customers in any way nor

that Behring engaged in any rebating or gave any benefits to its shipper

customers because ofthe practice of the four carriers nor that Behring

in any way departed from its fiduciary duties toward its shipper cus

tomers in selecting carriers because of the peculiar practices of these

carriers Furthermore as the Bureau acknowledges whatever the legal

ity of the practice ofreceiving such compensation from the four carri

ers Behring voluntarily terminated the practice in early 1978 more

than two years prior to the institution of this formal proceeding about

a

year before the Commission issued its section 21 orders and as far as

the record shows without any prompting from the Commission s staff

which in early 1978 might not have known anything about these

practices of the four carriers

APPROVABILITY OF THE PROPOSED SETTLEMENT

My first task is to determine whether the settlement proposed by the

parties should be accepted Thereafter Imust determine whether Behr

ing should be found to be fit and should retain its license Ifind that the

settlement should be approved and that Behring is emphatically fit to

retain its license without suffering suspension or revocation

Both parties have submitted well argued memoranda which cogently

demonstrate that the proposed settlement is based upon relevant criteria

applicable to such agreements and would be a just and reasonable

means to terminate that portion of the litigation to which it pertains

Behring recites principles of settlement law which the Commission has
982 FEDERAL MARITIME COMMISSION

developed which are consistent with the law of settlement generally

This law encourages settlements in lieu of expensive litigation and

engages in presumptions that favor their correctness fairness and valid

ity Behring notes that these principles werecodified to some extent by

enactment ofPublic Law 96 25 in 1979 and in the Commission s regula

tions implementing that law General Order 30 46 C F R 50S Behring

argues that the proposed settlement meets the standards governing

settlements generally based upon the weighing of costs of litigation

against costs f settlement but more particularly follows certain specific

criteria set forth in the Commission sregulations concerning litigative

probabilities cost of collecting claims effects on enforcement policy

and settlements for a combination of reasons In these respects Behring

points out that the questions of law involved in this proceeding have

not been decided previously and accordingly that there is real doubt

that the Bureau s position would ultimately prevail Furthermore the

amount of penalty to which Behring agrees 70 000 is substantial

compared to the amount of non tariffed compensation received in the

past thus giving the Commission considerable money notwithstanding

the real doubts that exist as to whether the Bureau could ever establish

that violations ofthe several sections oflaw enunciated in the Commis

sion s Order did occur as a matter of fact and oflaw Behring argues

furthermore that the settlement would avoid substantial costs of col

lecting the claims i e of pursuing this litigation to ultimate conclusion

both from Behring s point of view and from that ofthe commission s

staff Further litigation would entail development of evidence at pains

taking trial type hearings at considerable cost to both sides not to

mention subsequent stages after the Initial Decision As for the effect

of the settlement on enforcement policy Behring shows not only that it

will pay a penalty of 70 000 which effectively eliminates any profit

from Behring s

receipt of non tariff compensation but will undertake

strict measures to prevent recurrence of the practices under investiga

tion Furthermore by its policy of cooperation and assistance in devel

oping critical evidence and in formulating a careful settlement llgree

ment Behring states that it has assisted the Commission by providing a

model by which future cases involving forwarders can be resolved

without the expense of protracted litigation Thus Behring contends

that there are a combination ofreasons fully supporting approval o

the proposed agreement a standard which the Commission sregulations

specifically invoke for evaluation of such agreements

The Commission s Bureau ofInvestigationcand Enforcement strongly

supports approval of the settlement for a number of carefully stated

reasons Ina thoroughly researohed memorandum of law supporting

the settlement the Bureau cites countless decisions of the Commission

encouraging settlements rather than expensive litigation as a satisfactory

means of terminating formal proceedings The Bureau demonstrates
BEHRING INT L INC FREIGHT FORWARDER 983

furthermore that it has given careful consideration to numerous criteria

applicable to evaluation of the reasonableness of settlements and be

lieves it has served both the public interest in deterring future violations

as well as in being fair to Behring The Bureau also recites certain

factors discussed by Behring and generally agrees for example that

there is a lack of case law establishing clear precedent that Behring s

past activities constituted violations of law and agrees that Behring s

cooperation in developing evidence saved the Bureau considerable ex

pense that would otherwise have been consumed in lengthy discovery

processes The Bureau contends that Behring sreceipt of excess com

pensation was willful and suggest that if litigation were to continue

the Bureau would attempt to establish that receipt of such compensa

tion did violate law in some fashion However the Bureau suggests

numerous mitigating factors that convince the Bureau that further liti

gation is not sensible and that the settlement agreement should be

approved For example the Bureau acknowledges that Behring did not

pass any excess compensation on to shippers did not engage in rebat

ing and did not allow receipt of such compensation to affect its duties

to its shipper customers to serve their best interests Moreover the

Bureau states that Behring cooperated fully with the Commission s

staff that Behring voluntarily terminated the practices in question long

ago that its agreement to pay 70 000 as a penalty represents more than

60 percent of the amount which had been received years ago that it

has agreed to institute strong preventive internal measures to prevent

recurrence and that Behring by observing a reasonable attitude toward

the Commission and its staff has enabled the Commission to resolve

this proceeding rapidly and inexpensively so that the Commission s

limited resources can be better allocated in contested cases The

Bureau quite correctly in my opinion contends that Behring s coopera

tive conduct is something that should be encouraged in future cases and

that approval of the settlement in recognition of Behring s helpfulness

will serve that purpose

The memoranda of law which both parties have submitted to me in

support of their proposed settlement are thorough and persuasive that

the settlement meets all standards of approvability and should be ap

proved promptly Both parties have taken great pains to study applica

ble case law and the Commission s

regulations and have cogently

shown how the law and regulations apply specifically to the facts in

this case Briefly the governing principles are as follows

It is well settled that both the law and Commission policy encourage

settlements and engage in every presumption which favors a finding

that they are fair correct and valid See Old Ben Coal Company v

Sea Land Service Inc 21 F MC 505 511 1978 Adopted by the

Commission December 29 1978 Organic Chemicals v Atlantrafik Ex

press Service 18 S R R 1536a 1539 1979 This principle is especially
984 FEDERAL MARITIME COMMISSION

important in administrative proceedings and has been codified in both

the Administrative Procedure Act APA and in the Commission s

Rules ofPractice and Procedure See Rules 91 and 94 46 C F R 502 91

and 502 94 and the APA on which Rule 91 is patterned 5 V S C

554 c I

7

The courts view this principle and its legislative history as it

applies to administrative agencies as being of the greatest importance

to the functioning of the administrative process Pennsylvania Gas

Water Co v Federal Power Commission 463 F 2d 1242 1247 D C Cir

1972 As the legislative history to the APA shows furthermore Con

gress encouraged agencies to make use of settlements and wished to

advise private parties that they may legitimately attempt to dispose of

cases at least in part through conferences agreements or stipulations

Senate Judiciary Committee APA Legislative History S Doc No

248 79th Cong 2d Sess at 24 The general policy favoring settlements

is summmarized in the following passage adopted by the Commission in

the Old Ben Coal Company case cited above 21 F MC at 512

The law favors the resolution of controversies and uncertain

ties through comprorriise and settlement rather than through

litigation and it is the policy ofthe law to uphold and enforce

such contracts if they are fairly made and are not in contra

vention of some laws or public policy The courts have

considered in their duty to encourage rather than to discour

age parties in resorting to compromise as a mode of adjusting

conflicting claims The desire to uphold compromises and

settlements is based upon various advantages which they have

over litigation The resolution of controversies by means of

compromise and settlement is generally faster and less expen

sive than litigation it results in a saving oftime for the parties

the lawyers and the courts and it is thus advantageous to

judicial administration and in turn to government as a whole

Moreover the use ofcompromise and settlement is conducive

to amicable and peaceful relations between the parties to a

controversy 15A American Jurisprudence 2d Edition pp

777 778 1976 Footnote citations omitted

Consistent with these policies the Commission has in recent years

approved a wide variety of settlements and discontinued numerous

complaint cases under various provisions ofthe Shipping Act 1916 See

list and description of settled cases recited in el Monte Corporation v

Matson Navigation Company 22 F MC 365 368 369 1979 As those

cases show it is possible to settle cases without admissions of violations

7

Section SS40fthe APA provides

c The agency shall give all interested parties opportunity for

1 the submission and consideration of facts arguments offers of settlement or propos

als of adjustment when time the natUfe of the proceeding and the public interest

permit
BEHRING INT L INC FREIGHT FORWARDER 985

of law and for amounts of reparation less than those originally sought

in the complaint

As explained in Old Ben the Commission recognizes the advantages

to settlements but exercises some judgment before approving them

Mainly the Commission is concerned that the settlement not contravene

any law or public policy for example that it not be the result offraud

duress or mistake that it not constitute a discriminatory device or

consummate a desire to contravene tariff law embodied in section

18 b 3 of the Shipping Act 1916 and that if it fails under section 15

the settlement be filed for approval under that law and pertinent regula

tions Old Ben 21 F M C at 513

In considering settlements which parties submit with requests that

their cases before the Commission be dismissed the Commission has

followed the traditional view that the settlement deserves approval if it

avoids wasteful litigation and if it appears that the parties have correct

ly made an economical judgment that continued litigation would cost

more to each side regardless of who ultimately prevailed on the merits

than the amount of money which complainant had agreed to accept and

respondent had agreed to pay in exchange for a release Old Ben 21

FM C at 514

The principle of encouraging settlements was furthered by the enact

ment in 1979 of Public Law 96 25 93 Stat 71 which among other

things amended section 32 ofthe Shipping Act 1916 46 US c 831 to

authorize the Commission to assess civil penalties Following enactment

of that law the Commission issued regulations governing the compro

mise assessment settlement and collection ofcivil penalties See Gener

al Order No 30 46 CFR 505 entitled Compromise Assessment Settle

ment and Collection of Civil Penalties Under the Shipping Act 1916 and

the Intercoastal Shipping Act 1933 Docket No 79 66 22 F MC 238

I

979 The Commission explained that in formal proceedings its

Bureau shall have full authority to enter into stipulations and settle

ments provided among other things that such proposed settlements

be submitted to the presiding officer for approval 46 CFR

505 3 The Commission did not intend to frustrate settlements in its

formal proceedings but wished to formalize the settlement in the body

of the Initial Decision in lieu of making findings of violations and

determining assessments of penalties when settlements were not possi

ble Thus in the preamble adopting the regulations cited the Commis

sion stated that it intends no extraordinary impediment to settlements

and that its Bureau as a party to the stipulation of settlement will

not be approving agreements but rather will be joining with respond

ents in submitting agreements for approval Moreover the Commis

sion stated that the inclusion of the settlement agreement in the

Initial Decision and final decision replaces findings of violations and

assessment of penalties Docket No 79 66 22 F MC 238 240 241
986 FEDERAL MARITIME COMMISSION

1979 The regulations set forth particular criteria by which settlements

were to be formulated and evaluated These criteria were those formu

latedby the Comptroller General and the Attorney General under the

Federal Claims Collection Act of 1966 31 U S C 952 and are pub

lished in 4 C F R 103 These criteria were not intended to be all

inclusive The Commission specifically stated that the criteria for

compromise settlement or assessment may include but need not be

limited to those which are set forth in 4 C F R Part 101 105 46

C F R 505 1 Moreover they had been followed by the Commission

for some time when the Commission s General Counsel had settled

claims prior to the enactment of P L 96 25 See Eastern Forwarding

International Inc Independent Ocean Freight Forwarder Application 23

F MC 206 213 1980 Among the criteria that are set forth in 4

C F R Part 103 are those relating to a

respondent s ability to pay

103 2 Iitigative probabilities 103 3 cost of collecting the claim

103 4 effect on enforcement policy i e deterrent effect 103 5 and

settlement for a combination of these stated reasons 103 7 See also

Eastern Forwarding International Inc 23 F MC at 213

The Commission does not rigidly adhere to fixed standards in evalu

ating reasonableness ofpenalty settlements Rather it specifically recog

nizes the need to consider mitigating factors and has recognized that as

it develops experience in settlement cases even more factors may enter

into considerations in particular cases Thus in promulgating the settle

ment regulations the Commission specifically refused to box itself for

ever into fixed standards or guidelines See Docket No 79 66 cited

above 22 F MC at 267 As experience has developed moreover the

Commission has been careful to consider mitigating factors when pass

ing upon penalty settlements for example considering a

respondent s

history of good behavior its cooperation with the Commission s staff

and its prompt remedial action See Continental Forwarding Inc Inde

pendent Ocean Freight Forwarder Application and Possible Statutory Viola

tions Docket No 803 23 RUe 623 630 H K International Forward

ing Inc Independent Ocean Freight Forwarder License Application 22

F MC 623 627 1980 cooperating with Commission staff agreement

to terminate activities in question absence of fraud deceit financial

misappropriations or violations of position of trust or responsibility

with respect to shipments under investigation See also Eastern For

warding International Inc

23 F M C at 212 no deliberate attempt to

defeat regulation no effort to conceal activities or to defraud anyone

cooperation with the Commission s staff full restitution of compensa

tion received after license had been revoked Finally it bears noting

that in this very proceeding the Commission directed the parties when

considering the issue ofthe amount of penalty to take into consider

ation factors in possible mitigation of such a penalty Order ofInvesti

gation and Hearing paragraph 4 p

3
BEHRING INT L INC FREIGHT FORWARDER 987

THE PROPOSED SERTLEMENT AGREEMENT MEETS ALL

STANDARDS OF REASONABLENES AND SHOULD BE

APPROVED

As I have mentioned the parties have given careful thought to the

various standards applicable to the formulation of settlements and have

shown with persuasive evidence and analysis that their proposed settle

ment meets these standards and emphatically merits approval

THE SUBSTANCE OF THE PROPROSED SETTLEMENT

A copy ofthe text of the proposed settlement and promissory note is

attached to this Initial Decision as an Appendix In summary it com

prises the following provisions

Behring does not admit that the past activities in which certain

carriers had paid compensation to Behring other than that published in

the carriers tariffs constituted violations of law However it admits

that it did receive such compensation in the past However in order to

bring litigation to a conclusion and to assist the Commission in its

efforts to enforce the Shipping Act Behring promises to cooperate

with the Commission in connection with other investigations to pay a

penalty in the amount of 70 000 to implement strict measures to

ensure that the old practices do not recur to submit annual reports

under oath to the Commission to conduct periodic audits and to waive

certain defenses to subsequent actions against it if it breaches the agree

ment If the agreement is approved moreover Behring promises to

furnish copies ofit or otherwise notify all of its directors officers and

field office managers within 30 days Both the settlement agreement and

promissory note establishing method of payment appear to conform

generally to the models set forth in the Commission s

regulations See

46 C F R 505 7 and model agreement and promissory note attached as

appendices S R R Current Service 144 7

HOW THE PROPOSED SETTLEMENT MEETS APPLICABLE

STANDARDS

I have summarized above the contentions of both Behring and the

Bureau in which they show that criteria applicable to settlements have

been carefully considered I find that their contentions are sound and

accurate The amount of the settlement 70 000 reflects the fact that

the parties after lengthy negotiations have determined that whatever

they could have achieved to vindicate their respective positions by

means of continued litigation would be outweighed by the costs of

litigation and the amount of settlement to which both have agreed

represents a satisfactory compromise and succeeds in terminating a

seemingly interminable proceeding Perry s Crane Service v Port of

Houston Authority 22 F M C 31 33 1979 footnote omitted
988 FEDERAL MARITIME COMMISSION

It is apparent that the amount agreed upon is well within a zone o

reasonableness and constitutes neither an attempt to extract an exorbi

tant amount of money from a

respondent without necessary basis in

facts nor a giveaway in which the government s case is clearly

shown to be worth mucjI more than it has agreed to receive As both

parties acknowllege the law relevant to the transactions in question is

open to dispute and lacks a clear definitive decision from the Commis

sion or the courts 8

Furthermore the amount is sufficient to act as a

deterrent to other forwarders and thus aids the Commission s enforce

ment policies By paying 70 000 Behring has reaped no profit from

i

the compensation in question The compensation only amounted to

115 000 If we assume that to have been sheer profit above related

expenses Behring would have remitted about 50 percent in federal and

state talles The remainder about 58 00 has undoubtedly been con

sumed by legal fees and other expenses of litigation in both the section

21 Order proceedings and the instant case Moreover Behring is agree

ing to pay more than 60 percent ofthe original amount 70 Q out o

about 115 00 in penalties Finally by settling on this amount and

terminating litigation Behring has saved the Commission and the Gov

ernment from expending considerable funds such factor ie costs o

collecting the claim 4 C F R 103 4 being one of the criteria em

ployed by the Commission in evaluating amounts of penalties The fact

that Behring undertllkes to institute strict measures to ensure against

recurrence and promises to cooperate in other cases of similar nature

further demonstrates that the settlement agreement serves the Commis

sion s enforcement purposes As both parties point out furthermore

especially the Bureau there are numerous mitigating factors which

apply in the instllnt case among which are Behring s voluntary termina

tion of the practices in question long before this case began the tota

absence ofany evidence ofdiShonesty on Behring s part in its relations

with its shipper customers and in the carrying out of its duties to its

customers the high level of cooperation with the Commission s staff

both before and after the case began and as mentioned the fact that

legal precedent is unclear and that Behring promises to institute stric

controls promptly

Iconclude therefore that the proposed settlement agreement meets

relevant standards and emphatically deserves approval Such approval

moreover will have the added benefits of providing a model for future

cases and will serve the very desirable purpose ofencouraging forward

1

8

This observation applies not only to the status of the excess compensation under section 16 bu

also to the question whether these carriets practices in relation ta Behring showed that a section J 5

agreement existed in fact orin law No case has been cited to me nor am I awareof any in which this

80rt of happenina betwe nacarrier and forwarder has beon held to constitute asection IS agreemen

Furthermore ifthe matter were to continue into litigation it would be necessary to develop evidence

demonstrating an understanding oragreement between the two entities
BEHRING INT L INC FREIGHT FORWARDER 989

ers and other respondents in future Commission cases to cooperate with

the Commission s staff rather than to engulf the Commission in pro

tracted litigation

THE QUESTION OF FITNESS

There now remains the issue of Behring s fitness to continue to

operate under its license without suspension or revocation This was the

last issue no 5 framed by the Commission s Order and because of a

previous decision of the Commission this issue cannot be settled by the

parties See Independent Freight Forwarder s License E L Mobley Inc

Order 21 F MC 845 1978 9

The record is more than adequate to enable me to conclude that

Behring is eminently fit to continue to operate under its license Indeed

under the facts of this case including the many mitigating factors

discussed above even a suspension much less a revocation would in

my opinion be a gross travesty ofjustice The record amply demon

strates that Behring is a substantial and reputable company which has

provided avariety of useful services for many years that it has never

before been investigated by this Commission in its many years as a

licensed forwarder and that its behavior in this proceeding has been

impeccable The Commission s Bureau moreover strongly urges that

Behring be found fit

DESCRIPTION AND HISTORY OF BEHRING S OPERATIONS

Behring has been involved with transportation since 1917 The com

pany was established in that year by Peter Behring and was headquar

tered in New York City for many years In 1963 Behring merged with

South Ports Forwarding Co of Houston and operated as Behring

South Ports Shipping Co until 1970 In the intervening years the

company grew steadily adding offices in New Orleans and Los Ange

les In 1970 Behring acquired Leslie B Canion Customs Brokers Inc

with offices in several cities and a year later changed the company

name to the present Behring International Inc Another New York

office was opened that year and by 1973 Behring had added other new

offices in Beaumont Texas Lake Charles La Dallas and Chicago

Beginning in 1974 Behring opened six overseas offices in Singapore

Paris Saudi Arabia Dubai Manila and London More recently Behr

ing opened new domestic branches in Baltimore Edison N J Tulsa

Boston San Francisco Seattle Cleveland and Camden Del and pres

9

Although the Commission enunciated the doctrine that a

question of fitness cannot be settled a

reading of the Order cited indicates that the Commission was concerned about the forwarder s fitness

because of serious allegations that the forwarder had forged documents and believed that it had to

pursue the case to conclusion to assure itself and the public that the forwarder was trustworthy See

21 F M C at 847 The present case bears no resemblance whatever to the Mobley case there being no

allegations nor evidence that Behring engaged in any fraudulent or similarly reprehensible conduct
j

990 FEDERAL MARITIME COMMISSION

ently has 27 offices and more than BOO employees worldwide Behring

expects to employ more than 1 500 people by 1983

In its six decades offorwarding operations and especially in its recen

growth Behring has developed a full range of services facilitating th

movement of U S export shipments For eXllll1ple in addition to th

usual preparation ofshipping documents Behring s export packing divi

sion in Houston operates a 74 000 square foot enclosed structure and 2

additional acres of paved and fenced marshalling yards capable o

packing items ranging from 20 ton heavy lift pieces to specialized

vacuum packaging of perishable or moisture sensitive goods Behring

has also created a Management Information Services division utilizing

an IBM system to develop a computerized tracing system to allow

monitoring ofshipments and Behring has been innovative in the use o

computer software for that purpose Behring believes itself to be unique

in that it arranges forwarding of complete projects e g

6 500 ton o

drilling rigs on which it arranges component assembly in the U S

ocean transportation and in some CMes through its overseas offices

delivery to inland destinations

Behring has worked to stimulate exports directly through participa

tion in export groups for various countries the People s Republic o

China being a recent example and has made direct approaches to

foreign buyers to encourage their purchase of U S goods Behring

believes with apparent justification that itenjoys a reputation as one o

the largest most knowledgeable and proficient full service forwarder

in the world In support of this statement Behring has SUbmitted an

informational package showing its many years ofservice in many trans

portation areas induding not only ocean forwarding which is histori

cally the largest part of its business but air freight services import

customhouse services export packing air chartering and even mos

recently a non vessel operating carrier service

Behring received its present ocean freight forwarder license No

910 on February 7 1964 and prior to that time had received a

registration certificate No 566 on July 13 1951 Up to the time ofthe

present litigation Behring had not been involved in prQC edings ques

tioning its fitness There is furthermore no indication on this record

that shippers have ever complained about any aspect of Behring s

services

BEHRING IS FIT TO RETAIN ITS LICENSE

The preceding description of Behring s operation demonstrates clear

ly that it is a first class professional organization and that it enjoys a

fine reputation Nothing in this record detracts from that statement and

the Bureau does not challenge Behring s fitness From the inception o

this proceeding and even before Behring cooperated fully with the

Commission s staff even to the extent of developing evidence from its
BEHRING INT L INC FREIGHT FORWARDER 991

own records which identified old transactions in which four carriers

had paid excess compensation As has been made clear the types of

activities with which this investigation is concerned are not related to

fraud or dishonesty or violation of a forwarder s high fiduciary duties

What happened is that for reasons not eXplained in the record four

carriers out of the many with which Behring did business had the

practice of paying compensation to Behring during 1976 through early

1978 in amounts different from those published in the carriers tariffs

There is no indication that Behring suggested this practice to the

carriers but in any event Behring terminated the receiving of such

compensation voluntarily long before this case began and even long

before the Commission served its section 21 Order No shipper was

ever harmed by this practice nor was Behring ever diverted from its

strict fiduciary duties towards its shipper customers because of the

peculiar practice ofthe four carriers

Although the Bureau states that Behring s

receipt of the compensa

tion in the past was willful even the Bureau concedes that the

uncertainty as to whether the practice violated law at the time tends

to weaken the allegation that Behring acted in wanton disregard of

statutory authority Bureau s Memorandum p

6 Moreover as Behr

ing points out the Commission defines willfulness as something

which equates with a wanton disregard from which an inference can

be drawn that the conduct was in fact purposeful a standard somewhat

analogous to the tort concept of gross negligence Equality Plastics

Inc 17 F M C 217 226 1973 Previously the Commission had ex

plained with respect to the words knowingly and willfully that

T he phrase knowingly and willfully means purposely or

obstinately or is designed to describe a carrier who intention

ally disregards the statute or is plainly indifferent to its re

quirements We agree that a persistent failure to inform or

even to attempt to inform himself by means ofnormal business

resources might mean that a shipper or forwarder was acting

knowingly and willfully in violation of the Act Misclassifica

tion of Tissue Paper as Newsprint Paper 4 F MB 483 486

1954

In view of the fact that as even the Bureau concedes the Commis

sion had never decided or indicated that payments of compensation

from carriers to forwarders different from that published in carrier

tariffs were to be treated as unlawful as would be payments by carriers

to shippers which effectively reduce rates published in the tariffs it is

difficult to argue that Behring was plainly indifferent or showed

wanton disregard ofregulatory principles It could be argued that to

hold such a thing now may even result in retroactive policy making

which American principles of fairness and this Commission so justly

condemn For example in Mediterranean Pools Investigation 9 F MC
1

1

992 FEDERAL MAR1TIMB COMMISSION

264 304 1966 the Commission refused to penalize parties who ha

relied upon current case law which was later changed stating

The inequity of such an impact of retroactive policy making

upon arespondent innocent of any conscious violation of the

Act and who was unable to know when it acted that it was

guilty of any conduct of which the Board would take cogni

zance is manifest It is the sort ofthing the law abhors NLRB

v Guy F Atkinson Co 195 F 2d 141 9th Cir 1952 10

If Behring s conduct was not willful when it received compensa

tion more than two years before the case began there could be n

question of revocation or suspension of Behring s license The law

simply forbids such a drastic sanction unless Behring has been give

opportunity to demonstrate or achieve compliance with all lawfu

requirements and if such opportunity had been given before th

institution of agency proceedings Administrative Procedure Act 

U S C 558 c See discussion of this principle in E Allen Brown 2

F M C at 596 597 This is the so called second chance doctrin

enjoyed by persons holding licenses and it is not clear to me whethe

Behring had been given such an opportunity before this case com

menced However it is not necessary to decide the question whethe

Behring s activities were willful or not Even if they were willful

the record strongly supports a finding of Behring s fitness and Behring 

cooperative attitude including its promise to institute strict measures t

ensure non recurrence of the questionable practices satisfies any rea

sonable compliance effort Moreover the Commission has continuall

considered mitigating factors when fashioning sanctions and has at

tempted to tailor just and reasonable solutions to the facts in each cas

in the belief that section 44 the Freight Forwarder Law and it

regulations are based on remedial not punitive purposes avoiding th

drastic sanction of revocation or harmful suspension of licenses whe

possible to achieve regulatory purposes short of such action In tw

recent cases the Commission elplained its policy in this regard E L

Mobley Inc cited above 21 F MC 845 847 1979 and E Alle

Brown 22 F M C 585 586 1979 stating

Administrative sanctions should not however be blindly

or automatically imposed and even in cases where the viola

tion is clear evidence of mitigation will be considered in

tailoring the sanctions to the facts ofthe specific case Section

10 The Securities and Exchange Commission has only recently issued adecision in which it als

followed the principle that licensees should not be penalized when at the time they acted the agenc

had not clearly enunciated the legal principles which governed their conduct In the case the S EC

reversed its judge pnd refused to disci llne two attorneys practicing before the agency See In t

Matter of William R Carter and Chari J Johnson Jr SEA Relea eNo 17597 Februrary 28 198

1981 CCH SEA p
BEHRING INT L INC FREIGHT FORWARDER 993

44 and its regulations are based on an underlying remedial

public interest purpose and the sanctions imposed must serve

such a purpose and not be punitive in character 21 F MC at

847

In making the above statements the Commission was following

sound precedent Thus the courts as well as the Commission

have recognized that evidence of mitigation should be consid

ered when determining whether a license applicant should be

found to be fit although implicated in violations of the Act in

the past Furthermore in previous cases the Commission

has expressed its belief that the Freight Forwarder Law P L

87 254 was enacted as a remedial statute in order to correct

abuses in the forwarding industry

The principle that the Commission should not rush to extreme

sanctions without considering all factors of mitigation in an effort

to fashion a just and reasonable remedy is well supported by the

courts Although agencies are not required to impose sanctions

in a perfectly even manner because of the wide latitude they

are given by the courts as the expert bodies most skilled in

devising means to carry out specific legislative purposes the

agencies are nevertheless expected to consider less drastic al

ternative remedies and to base whatever remedy they select on

facts and reasonable interpretations of law Emphasis added

22 F M C at 598

As should be clear from a reading of this decision there is consider

able evidence of mitigation and as the Bureau states the Commis

sion measures the impact of past violations upon a person s fitness by

exploring the context in which the violations occurred Cargo Systems

International CSI Independent Ocean Freight Forwarder Application

and Possible Violations of Section 44 Shipping Act 1916 22 FMC 56

71 1979 I have cited numerous mitigating factors e gthe unclear

state of the law at the time of the practices in question Behring s early

voluntary termination of the practices the lack of any showing that the

practices affected Behring s strict duties toward its shipper customers

the high level of cooperation which Behring showed toward the Com

mission s staff both before and after this proceeding began the agree

ment to institute strict measures of control promptly the considerable

savings in Commission funds caused by a termination of protracted

litigation Behring s long history without blemish Furthermore the

context in which the old practices occurred was one in which four

carriers appear to have conducted their business in a

peculiar way for

their own reasons with no showing that Behring instigated these prac

tices which in any event the Commission had not declared to be

unlawful in any reported decision at the time
994 FEDERAL MARITIME COMMISSION

The Bureau argues that the extreme sanction of revocation could b

invoked in a case in which the future conduct of the forwarder coul

not be trusted In other words if by the nature of the violation

committed and the circumstances surrounding that conduct it could b

anticipated that a licensee would continue to engage in violative con

duct that licensee could be found to be unfit to continue to hold it

license See Independent Ocean Freight Forwarder Application Alvare

Shipping Co Inc 16 F M C 78 1978 G R

Minon Freight Forwarde

License 12 F MC 75 1968 In such a situation revocation would

constitute the only effective sanction This position is consistent with

the Commission s holding that it is crucial to his fitness that it appea

that the applicant intends to and will in good faith adhere to such high

standard of conduct and that he intends to and will obey the Commis

sion s rules and policies for the conduct of licensed freight forwarders

Harry Kaufman D B A International Shipper Co of N Y

etc

1

F MC 256 271 1973 In the instant case however the evidence i

overwhelming that Behring fully intendso to comply with law and Com

mission regulations and indeed intends to institute strict measures to

ensure that the old activities in question will not recur There is

therefore absolutely no showing that any sanctions are necessary out

side of the amount ofpenalty which Behring agrees to remit The fact

that Behring has provided a variety offirst class services to shippers fo

many years that it is an innovator in the industry and has operated

without complaints for many years certainly provide even more evi

dence ofits fitness

ULTIMATE CONCLUSIONS

I conclude therefore that this record shows persuasively that Behr

ing is fit to continue operating under its license and that implementation

of the terms of the settlement agreement will amply satisfy all regula

tory purposes Rejection ofthe settlement however would be extreme

ly imprudent would thrust the proceeding back into protracted litiga

tion and would chill any future efforts of the Commission s staff to

encourage forwarders and other regulated persons to cooperate with

the Commission thereby fomenting unnecessary antagonism and laying

the foundation for needless expensive litigation in the fture

8 NORMAN D KLINE

Administrative Law Judge

Washington D C

March 17 1981
BEHRING INT L INC FREIGHT FORWARDER 995

APPENDIX

BEFORE THE FEDERAL MARITIME COMMISSION

BEHRING INTERNATIONAL INC

INDEPENDENT OCEAN FREIGHT

FORWARDER FORWARDER LICENSE

NO 910

DOCKET NO 80 43

PROPOSED SETILEMENT OF CIVIL PENALTIES

This Proposed Settlement has been entered into between the Bureau

of Investigation and Enforcement Bureau and Respondent Behring

International Inc Behring It is submitted to the Presiding Adminis

trative Law Judge for approval pursuant to Rule 162 of the Commis

sion s Rules of Practice and Procedure 46 C F R 502 162 and section

502 3 ofthe Commission General Order 30 46 CFR 505 3 and is to

be incorporated into the Final Order in this proceeding if so approved

WHEREAS by Order of Investigation and Hearing dated June 27

1980 the Commission instituted the present proceeding to determine

whether Behring had violated sections 15 and 16 Intitial Paragraph of

the Shipping Act 1916 46 D S C 814 815 and whereas that

Order includes the issue of whether civil penalties should be assessed

for any violations of section 15 and 16 Initial Paragraph of the Ship

ping Act 1916 so found

WHEREAS the Order of Investigation alleges that Behring may

have violated sections 15 and 16 Initial Paragraph of the Shipping

Act 1916

WHEREAS Behring has admitted that it has engaged in specified

conduct which may be violative of sections 15 and 16 Initial Para

graph ofthe Shipping Act 1916 but denies that such conduct violated

that Act

WHEREAS Behring has indicated its willingness to cooperate with

the Commission in other investigations involving the payment of com

pensation by oceangoing common carriers in excess ofthe rate specified

in the carriers tariffs non tariff compensation see Appendix I II

attached hereto and whereas Behring s failure to so cooperate will

constitute a breach ofthis Agreement

WHEREAS Behring has terminated its receipt of non tariff com

pensation and has instituted and has indicated its willingness and

commitment to maintain measures designed to eliminate discourage

and prevent future receipt of non tariff compensation
996 FEDERAL MARITIME COMMISSION

WHEREAS the parties in order to avoid the delays and expens

which would be occasioned by further litigation of the issues specified

in the Order of Investigation and Hearing are desirous of settlin

expeditiously the issue ofthe appropriate amount to be paid by Behring

in accordance with the terms and conditions of this Agreement an

WHEREAS section 32 e of the Shipping Act 1916 U S C 831 e

authorizes the Commission to assess or compromise all civil penalties

claims under the Shipping Act 1916

NOW THEREFORE in consideration of the premises set forth

herein and in compromise of all civil penalty claims arising from the

conduct set forth in the factual record submitted in the present pro

ceeding Behring agrees as a condition of this settlement to comply

with all requirements set forth hereinafter subject to the stipulations

conditions and terms of settlement contained herein

1 Behring hereby agrees as a condition of the settlement agreement

to pay a monetary amount of Seventy Thousand Dollars 70 000 o

which Ten Thousand Dollars 10 000 shall be payable thirty 30 days

following approval by the Commission ofthis Proposed Settlement and

Sixty Thousand Dollars 60 000 shall be payable according to the

terms of the Promissory Note attached hereto as Appendix III in the

following installments

Fifteen Thousand Dollars 15 000 plus interest shall be paid

on or before six 6 months following approval by the Com

mission of this Proposed Settlement

Fifteen Thousand Dollars 15 000 plus interest shall be paid

on or before twelve 12 months following approval by the

Commission ofthis Proposed Settlement

Fifteen Thousand Dollars 15 000 plus interest shall be paid

on or before eighteen 18 months following approval by the

Commission ofthis Proposed Settlement and

Fifteen Thousand Dollars 15 000 plus interest shall be paid

on or before twenty four 24 months following approval by the Commission ofthis Proposed Settlement

2 Except as provided in paragraph six 6 below this Agreement

shall forever bar the commencement or institution ofany civil action o

other claim for recovery of civil penalties from Behring arising from

the conduct set forth and described in the factual record submitted in

the present proceeding It is understood by Behring that this Agree

ment shall not serve as a bar or defense to any criminal prosecution o

civil litigation by the Commission or defense to any other department

or agency of the United States Government for conduct engaged in by

Behring other than that reflected in the factual record submitted in the

present proceeding
BEHRING INT L INC FREIGHT FORWARDER 997

3 Behring agrees to preserve and maintain at the offices of

Schmeltzer Aptaker Sheppard P c 1800 Massachusetts Avenue

N W Washington D C through April I 1984 copies of all underly

ing oceangoing common carrier bills of lading applicable to the ship

ments listed in the factual record submitted in this proceeding and

upon reasonable notice to allow appropriate Commission representa

tives unimpeded access to such bills of lading and to allow the removal

of such bills oflading specifically requested by such Commission repre

sentatives

4 Behring agrees to take all reasonable measures designed to discour

age prevent and eliminate the receipt by it of non tariff compensa

tion unless the Commission the courts or Congress find that it is

lawful These measures shall include but need not be limited to the

following

i Behring s Chief Executive Officer will submit annually to

the Commission a statement made under oath certifying that

to the best of his knowledge based upon inquiry Behring had

not received non tariff compensation during the preceding

year

ii Behring will review its administration and procedures and

modify both to the extent necessary to safeguard through

periodic audits or other methods of control against the occur

rence of practices by Behring its officers employees and

agents which would result in the receipt of non tariff com

pensation

5 Behring agrees that within thirty 30 days following the approval

of this Proposed Settlement it will either furnish copies of this Agree

ment or will give affirmative notice ofthe terms and provisions there

of to all of its directors officers and field office managers

6 Behring hereby agrees as a condition of this Agreement that if it

breaches this Agreement it will not interpose the Statute of Limitations

as a bar or a defense in any action or proceeding instituted prior to

April 1 1986 by or on behalf of the Commission to recover civil

penalties for violations of the Shipping Act 1916 which apply to the

receipt of non tariff compensation arising out of the conduct set

forth in the factual record submitted in the present proceeding In the

event of such a breach by Behring if such noncompliance shall not

have been explained to the Commission s satisfaction within thirty 30

days after written notice to Behring by the Commission the Commis

sion shall have the option to seek enforcement of all terms and condi

tions of this Agreement or to declare this Agreement null and void

provided however that Behring s waiver of the Statute of Limitations

under this paragraph shall remain in full force and effect In the event

the Commission declares this Agreement null and void and such deter

mination is not reversed by a court of competent jurisdiction any
998 FEDERAL MARITIME COMMISSION

monies paid to the Commission shall remain the property of the United

States and Behring will not interpose any defense based on the Statute

of Limitations in any action which the Commission may institute to

recover civil penalties arising out ofthe conduct set forth in the factua

record submitted in the present proceeding

7 In the event changes in law or other circumstances occur during

the term of this Agreement which believes warrant modification o

mitigation of the Agreement Behring may petition for this purpose

8 It is expressly understood and agreed that this Agreement is not to

be construed as an admission by Behring of the violations alleged in the

Order of Investigation and Hearing by which this proceeding wa

instituted

9 The undersigned counsel for Behring represents that he is properly

authorized and empowered to execute this Agreement on behalf o

Behring and to fully bind Behring to all of the terms and conditions

herein

Edward Schmeltzer

PAUL J KALLER

Deputy Director

Bureau ofInvestigation

and Enforcement

George J Weiner

Counsel for Behring

JOSEPH B SLUNT

Attorney

CHARNA J SWEDARSKY

Attorney

CHARLES C HUNTER

Attorney

February 1981
BEHRING INT L INC FREIGHT FORWARDER 999

PROMISSORY NOTE

For value received Behring International Inc Behring promises to

pay to the Federal Maritime Commission Commission the principal

sum of Seventy Thousand Dollars 70 000 to be paid at the offices of

the Commission in Washington D C by bank cashier s or certified

check in the following installments

Ten Thousand Dollars 10 000 on or before thirty 30 days

following the approval by the Commission of the Proposed

Settlement in FMC Docket No 8043

Fifteen Thousand Dollars 15 000 on or before six 6

months lowing the approval by the Commission of the Pro

posed Settlement in FMC Docket No 80 43

Fifteen Thousand Dollars 15 000 on or before twelve 12

months following the approval by the Commission of the

Proposed Settlement in FMC Docket No 80 43

Fifteen Thousand Dollars 15 000 on or before eighteen 18

months following the approval by the Commission of the

Proposed Settlement in FMC Docket No 80 43

Fifteen Thousand Dollars 15 000 on or before twenty four

24 months following the approval by the Commission of the

Proposed Settlement in FMC Docket No 80 43

In addition to the principal amount payable hereunder interest on the

unpaid balance thereof shall be paid with each installment Such interest

shall accrue from the date upon which the Commission approves the

Proposed Settlement in FMC Docket No 80 43 and be computed at

the rate of twelve percent 12 per annum on the unpaid balance

If any payment of principal or interest shall remain unpaid for a

period of thirty 30 days after becoming due and payable the entire

unpaid principal amount ofthe Promissory Note together with interest

thereon shall become immediately due and payable at the option of the

Commission without demand or notice said demand and notice being

hereby expressly waived

If a default shall occur in the payment of principal or interest under

thisPromissory Note Behring does hereby authorize and empower any

U S attorney any of hiser assistants or any attorney of any court of

record Federal or State to appear for them and to enter and confess

judgment against Behring for the entire unpaid principal amount ofthis

Promissory Note together with interest in any court of record Feder

al or State to waive the issuance and service of process upon Behring

in any suit on this Promissory Note to waive any venue requirement in

such suit to release all errors which may intervene in entering up such

judgment or in issuing any execution thereon and to consent to imme
1000 FEDERAL MARITIME COMMISSION

diate execution on said judgment Behring hereby ratifies and confirms

all that said attorney may do by virtue thereof

This Promissory Note may be prepaid in whole or in part by Behring

by bank cashier s or certified check at anytime provided that accrued

interest on the principal amount prepaid shall be paid at the time ofthe

prepayment

BEHRING INTERNATIONAL INC

By

Date

i

nl
FEDERAL MARITIME COMMISSION

DOCKET NO 80 46

BELCO PETROLEUM CORP

v

LYKES BROS STEAMSHIP CO INC

PERUVIAN STATE LINE

ORDER ADOPTING INITIAL DECISION

June 30 1981

This proceeding was instituted by the filing of a complaiI t by Belco

Petroleum Corp against Lykes Bros Steamship Co Inc Lykes and

Compania Peruana de Vapores seeking reparation for freight over

charges on seven shipments of oil well drilling supplies and equipment

from Houston Texas to Talara Peru

On May 13 1981 Chief Administrative Law Judge John E Cograve

issued an Initial Decision finding for Complainant and awarded repara

tion in the aggregate amount of 11 387 22 No exceptions to the Initial

Decision have been filed The Commission however has determined to

review the Initial Decision pursuant to Rule 227 d ofthe Commission s

Rules ofPractice and Procedure 46 C F R 502 227 d

Upon review the Commission has determined that the Presiding

Officer s ultimate findings and conclusions are correct The Initial Deci

sion will accordingly be adopted with the modification discussed

below

The Presiding Officer did not include interest on the reparation

awarded In order to make the Complainant whole and compensate it

for the loss of the use of freight charges improperly assessed the

Commission believes that interest on the amount ofreparations awarded

should have been included as an element of damages us Borax

Chern Corp v Pac Coast European Conf 11 FMC 451 470 1968

The Commission will therefore modify the Presiding Officer s award to

include interest at a rate of 12 per annum payable by Lykes on the

amount of 3 343 87 awarded as reparation on two shipments covered

by prepaid bills oflading Nos 4 and 5 dated June 30 1978 and on the

amount of 3 238 62 awarded on the shipment covered by prepaid bills

of lading No 2 dated July 14 1978 With respect to the shipments

carried by Compania Peruana de Vapores award ofreparation is modi

fied to include interest of 12 per annum payable from July 18 1978

on the amount of 3 81124 on three shipments covered by prepaid bills
1002 FEDERAL MARITIME COMMISSION

i

of lading Nos C 2 11 and 12 and from July 31 1978 on 993 49 o

the shipment covered by prepaid bill oflading No 17

THEREFORE IT IS ORDERED That the Initial Decision serve

on May 13 1981 in this proceeding is adopted and made a part hereo

FURTHER IT IS ORDERED That Respondent Lykes Bros

Steamship Co Inc pay to the complainant Belco Petroleum Corp

reparation in the amount of 3 343 87 plus interest at the rate of 12

per annum from June 3D 1978 and the amount of 3 238 62 plu

interest of 12 per annum from July 14 1978

FINALLY IT IS ORDERED That Respondent Compania Peruana

de Vapores pay to Complainant Belco Petroleum Corp reparation in

the amounts of 3 811 24 plus interest at the rate of 12 per annum

from July 18 1978 and 993 49 plus interest of 12 per annum from

July 31 1978

By the Commission

S JOSEPH C POLKING

Acting Secretary

1
FEDERAL MARITIME COMMISSION

DOCKET NO 80 46

BELCO PETROLEUM CORP

v

LYKES BROS STEAMSHIP CO INC

PERUVIAN STATE LINE

Reparation granted

Bruce Leventhal for Beleo Petroleum Corporation

R J Finnan appeared for Lykes Bros Steamship Co Inc

INITIAL DECISION 1 OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Adopted June 30 1981

By complaint BeIco Petroleum Corporation an organization engaged

in the exploration for and the production of crude petroleum natural

gas and coal alleges that charges in excess of those lawfully applicable

for transportation in violation of section 18 b 3 of the Shipping Act

1916 were assessed on seven shipments of oil well drilling supplies and

equipment from Houston Texas to Talara Peru from June 30 1978

through July 31 1978 Total reparation in the amount of 1l 387 22 is

sought Disposition under shortened procedure is requested

The respondent Lykes Bros Steamship Co Inc and Compania

Peruana de Vapores common carriers by water in the foreign com

merce of the United States were also members of the Atlantic and

Gulf West Coast of South America Conference at the time of the

alleged violations Both have agreed to the requested shortened proce

dure

Complainant an industrial contract shipper with the conference since

1965 Contract no 10361 alleges it traditionally made its shipments of

oil well supplies and equipment under item 1050 2 which provided an

Industrial Contract Rate Schedule covering cargo of a

proprietary

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

Commission Rule 227 Rules of Practice and Procedure 46 C PR 502 227

2

Atlantic Gulf West Coast of South America Conference S B SA 13 Freight Tariff No 2

FROM U S Atlantic and U S Gulf Ports via the Panama Canal TO West Coast Ports in Colombia

and Ports in Ecuador Peru and Chile Page 218 Effective Date
j

1004 FEDERAL MARITIME COMMISSION

nature In order to qualify for that rate schedule the complainant s bills

oflading were generally claused as follows

The above described cargo is proprietary not for resale and in

all other respects forwarded in conformity with the provisions

of conference Tariff Item 1050

In 1978 however the conference tariff was amended by adding a

project rate for cargo of a proprietary nature under item 1036A

Special and Charitable Rates s

Nevertheless complainant continued to

annotate its bills of lading according to the terms of item 1050 instead

of item 1036A because

Complainant does not employ transportation personnel nor

does it have personnel familiar with freight tariffs According

ly complainant and its freight forwarder were not aware of

the existence of item 1036A nor that item 1036A often pro

duces substantially lower freight charges than item 1050 Com

plainant was advised of the application of Item 1036A rates

versus Item 1050 rates by its freight Auditor

Item 1036A provides as follows

Ta ara Oiwell and Production Project

Shipments of proprietary material and equipment to Talara or

Paita will be assessed base rate of 118 00 W1M plus all

additional charges Heavy lift charges as per tariff scale will

be applicable as per tariff scale W1M as cargo is freighted

Bills of lading shall be daused as set forth in Item 1001

Item 1001 required bills of lading covering shipments to Talara or Pait

under Item 1036A to be claused as follows

The shipper shown on this bill of lading certifies that the

cargo described hereon is forwarded pursuant to the terms and

conditions oftariff item No 1036A and that heis aware that

the Shipping Act 1916 declared it to be a violation of law

punishable by a penalty for a

shipper to utilize an unfair

device or means to obtain transportation at less than the appli

cable rates

Complainant admits that the bills of lading were improperly dause

to qualify for item 1036A rates but argues that in addition to qualifying

for industrial contract rates in item 1050 it also qualifies for the lowe

ptojectrate in item 1036A because it nas petroleum production facilitie

at Talara Peru Moreover complainant also argues that since what 

shipped determines the applicable rate rather than an erroneous bill o

lading description as long as complainant satisfies a reasonab

burden ofproor in support ofits allegation

9

Same tariffof rates as noted in Cn 2 10th Revised Page No 207 A Effective Date June 26 197

Republished July 31 1978
BELCO PETROLEUM CORP V LYKES BROS STEAMSHIP 1005

CO INC PERUVIAN STATE LINE

Lykes replies that the shipments were properly treated as industrial

contract rate materials under item 1050 and denies the contention that

the shipments also qualified for the project rate under item 1036A

Peruana did not answer the complaint

Briefly shortened procedure requires among other things an an

swering memorandum to be filed within twenty five days after the date

of service of the complaint Thereafter within fifteen days after the

date of service ofthe answering memorandum the complainant s memo

randum in reply may be filed However the times for the various filings

under that schedule have expired without compliance by any of the

parties Through a procedural notice served January 14 last the times

for filing respondents answering memoranda and complainant s memo

randum in reply wereadvanced to January 30 and February II respec

tively

The sole issue presented here is whether the absence from the bill of

ladings of the specific clause required by item 1036A precludes com

plainant from obtaining the lower rates provided for in that item

Respondents do not dispute the fact that the shipments in question were

proprietary and the bills of lading show that the s4ipments were to

Talara 4

In Durite Corp Ltd v Sea Land 20 FMC 674 1978 the Commis

sion found that the claimant was entitled to the lower project rate even

though the claimant failed to include on the bill of lading the required

statement that the cargo was proprietary The Commission specifically

noted that there is nothing to distinguish this case from the long line

of cases wherein we held what actually is shipped governs the rate to

be applied See also Cities Service International Inc v Sea Land 19

FMC 129 1976 Sun Co Inc v Lykes Bros Steamship Co Inc 20

F M C 67 1977

Since the essential facts are clear and undisputed ie the cargo was

proprietary and was destined for Talara the complainant has been

overcharged in violation of section 18b

3 Accordingly reparation is

awarded in the amount of 11 387 22 5

S JOHN E COGRAVE

Administrative Law Judge

Washington D C

May 13 1981

4 Neither respondent could of course deny that the cargo was proprietary since they freighted the

bills under 1050 Lykes in its answer states that 1050 was and is the correct item But Lykes argument

is based on the absence of the 1036A certification Complainant goes to some length to show that the

part of the certification requiring knowledge of the Shipping Act is unJawful It is unnecessary to deal

with that here since the requirement is at least redundant of an axiom of law and probably shouldn t

be apart of the certification at al1

See appendix for calculation underlying award of reparation
1006 FEDERAL MARITIME COMMISSION

APPENDIX

PROPERLY APPLICABLE FREIGHT ON SHIPMENTS VIA

LYKES BROS STEAMSHIP CO INC

B L No 2 Freight 147 893 lb 1 18 00 W 8 725 69

1 293 cft 118 00 M 3 814 35

Congestion 15 1 88101

Total 14421 05

B L No 4 Freight 2 518 cft 1l800 M 7 428 10

Congestion 15 1 114 22

Total 8 542 32

B L No 5 Freight 1 871 cft 1l800 M 5 519 45

Congestion 15 827 92

Total 6 347 37

Grand Total 29 310 74

PROPERLY APPLICABLE FREIGHT ON SHIPMENTS VIA

CaMPANIA PERUANA DE VAPORES

B L No C 2 Freight 1 1l3 cft 118 00 M 3 28335

39 962 lb 1l8 00 M 2357 76

Congestion 15 846 17

Total 6487 28

B L No II Freight 36 310 lbs 118 001W 2 142 29

Congestion 15 3214

Total 2463 63

B L No 12 Freight 1 284 cft 1l8 00 M 3 787 80

3 021 lb 1l800 W 178 24

Congestion 15 593 86

Total 4 522 90

B L No 17 Freight 1 304 cft 1l8 00 M 3 846 80

Congestion 15 577 02

Total 4423 82

Grand Total 17 927 63

Total A

Billed 58 625 59

Total Properly Applicable Freight 47 238 37

Overcharge 11387 22
FEDERAL MARITIME COMMISSION

DOCKET NO 81 32

AGREEMENT NO 10267 5

CONTAINER CARRIERS DISCUSSION AGREEMENT

ORDER OF DISCONTINUANCE

June 30 1981

A motion to discontinue this proceeding has been filed by proponents

of Agreement 10267 5 based on their formal withdrawal of that agree

ment from Commission consideration The proceeding is rendered moot

by withdrawal of the agreement Therefore the motion to discontinue

is granted

By the Commission

8 JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

INFORMAL DoCKET No 998 1

IDEAL Toy CoRP

v

EVERGREEN LINE

oRDER oN REVIEW

June 30 1981

The Commission determined to review the decision of Settlement

Officer Donald F Norris in which he denied the claim of Ideal Toy

Corp Ideal for freight overcharges collected by Evergreen Line

Evergreen on a shipment of pool1iners from Busan Korea to New

York and ordered Ideal to reimburse the 366 28 it had received from

Evergreen in settlement ofthe claim

Evergreen rated the shipment as Plastic Inflatable Pools under

Item 5920 00 of its tariff FMC 29 at 86 per cubic meter Ideal

contends that the shipment should have been rated under Item 5920 20

as Swimming Pools Collapsible Vinyl with Steel Wall at 77 per

cubic meter Following the filing ofthe complaint the carrier apparent

ly settled the matter by paying the claimed amount in full

The Settlement Officer however reviewed the merits of the claim

and noted that the tariff contained no provision on how to rate parts

ofspecific commodities when shipped separately Because Item 5920 00

includes Swimming pools collapsible among the sports and games

listed in that Item and also covers requisites of such sports and

garnes he concluded that the shipment had been properly rated and

ordered Ideal to reimburse to Evergreen the amount received as settle

ment together with interest For reasons stated below the Commission

finds that the Settlement Officer s decision is in error and must be

reversed

Section 22 of the Shipping Act 1916 provides that the Commission

may award reparation for injury caused by a violation of the Act by a

common carrier by water or other person subject to this Act The

definition of other person in section 1 of the Act does not include

shippers or consignees Therefore section 22 confers no jurisdiction on

the Commission to order the payment of reparation in any form by a

The SettlementOfficer erroneously referred toNo 9520 00
IDEAL TOY CORP V EVERGREEN LINE 1009

shipper or consignee As a result the Settlement Officer had no

authority to direct Ideal a shipper to pay to Evergreen any amount

Further the Commission finds that not only was Ideal improperly

directed to reimburse Evergreen but also that no amount was due

Evergreen in the first instance The determination that Ideal should

make reimbursement to Evergreen was based on the Settlement Offi

cer s

theory that the omission of any provision in the tariff on how

parts of listed commodities are to be rated when shipped separately

is remedied to some extent by the language of Item 5920 00 which

as mentioned covers requisites for indoor and outdoor sports and

games emphasis added while Item 5920 20 in his opinion contains

no such language However Item 5920 20 appears in the tariff as a

subheading of Item 5920 00 and it is unclear whether the provision on

requisites applies to all subheadings listed in Item 5920 00 including

Item 5920 20

Moreover it is uncertain whether the term requisites in this in

stance must be read as a generic reference to the components not

specifically described in the tariff of the games and sports listed in the

Item rather than an indication on how such requisites are to be

shipped ie whether separately or together with the main components

The absence ofspecific language to that effect creates an ambiguity in

the tariff which in accordance with established principles of tariff

construction must be construed against the carrier which prepared the

tariff See Coca Cola Inc v Atchison T S P Ry 608 F 2d 213 5th

Cir 1979 Moreover and in any event the description in Item 5920 20

Swimming Pools Collapsible Vinyl with Steel Wall of which the

shipped pool liners are a component is more specific than Swimming

Pools Collapsible in Item 5920 00

Consequently the shipment should have been rated under Item 5920

20 at 77 per cubic meter and Evergreen s assessment and collection of

freight charges on the basis of the 86 per cubic meter rate violated

section 18 b 3 ofthe Shipping Act 1916

THEREFORE IT IS ORDERED That the decision of the Settle

ment Officer served in this proceeding is reversed and the settlement by

which Evergreen Line delivered to Ideal a check in the sum of 366 28

in full payment ofthe claimed overcharges is approved

By the Commission

S JOSEPH C POLKING

Acting Secretary

See Maritime Service Corp v Plaza Provision Company Maritime Service Corp v Pueblo Supermar

kets Inc 13 S R R 524 1973

The separate opinion of Commissioner Richard J Daschbach is attached
1010 FEDERAL MARITIME COMMISSION

1

J

Commissioner Richard J Daschbach s separate opinion

I am not participating because Ido not believe that the Commission

should review the decisions of Settlement Officers in informal docket

proceedings Under Subpart S of the Commission s Rules of Practice

and Procedure 46 C F R 502 301 parties consent to waive the rights

and obligationS associated with normal adjudicatory proceedings for the

express purpose of receiving prompt consideration of a small claim

Commission review precludes the inexpensive and expeditious handling

of small claims which is the foundation of the informal docket process

The Settlement Officer s decisions in informal dockets do not have

precedential value Commission review therefore imposes unnecessary

expense and delay in an arbitration process designed to settle minor

commercial disputes in a prompt and responsive manner

i
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 38 AMENDMENT NO 3

GENERAL ORDER 13 AMENDMENT NO 9

DOCKET NO 80 37

PART 531 PUBLISHING FILING AND POSTING OF TARIFFS

IN DOMESTIC OFFSHORE COMMERCE

PART 536 PUBLISHING AND FILING TARIFFS BY COMMON

CARRIERS IN THE FOREIGN COMMERCE OF THE UNITED

STATES

June 30 1981

Final Rule

Filing of tariff material covering the movement of

used military household goods and personal effects

by non vessel operating common carriers in the do

mestic and foreign commerce of the United States is

exempted from the requirements of Part 531 and Part

536 of Title 46 C F

R

Such filings no longer serve

any regulatory purpose The exemptions will lessen

the regulatory burden on non vessel operating

common carriers

DATE Effective July 7 1981

SUPPLEMENTAL INFORMATION

The Commission instituted a

rulemaking proceeding in Docket No

80 37 on June 17 1980 45 FR 41024 for the purpose of considering

I the exemption of movements of used household goods and personal

effects by non vessel operation common carriers NVOCCs in both the

domestic offshore and foreign commerce of the United States from the

Commission s tariff filing requirements and 2 to require that rates for

used household goods and personal effects established by vessel operat

ing common carriers be stated on a weight or per container basis only

and that the weight of such shipments be substantiated by a

public

weigher s certificate furnished by the shipper

NVOCCs undertaking ocean transportation are subject to Federal

Maritime Commission regulation in both foreign and domestic com

ACTION

SUMMARY
1012 FEDERAL MARITIME COMMISIlION

merce

1 Several NVOCCs also operate as motor carriers under the

Interstate Commerce Act ICA and as inland freight forwarders

exempt from regulation under other provisions of the ICA These

carriers frequently specialize in the carriage of used household goods

and personal effects and maintain FMC tariffs providing for the port to

port segments of through ocean inland transportation services These

tariffs reflect only part of the total transportation costs incurred by the

shipper 2

Since July 6 1976 all NVOCCs providing ocean transportation for

used military household goods and personal effects for which there

was also an inland movement in the United States have been granted

continuing special permission to file tariff supplements and or revised

pages for such transportation on less than the statutory 3D day notice

requirement 3

A waiver ofthe general tariff format requirements stipu

lated in 46 C F R Parts 531 and 536 has also been granted This action

was intended to facilitate the intermodal movement of used household

goods and personal effects for the Department of Defense DaD

The Commission has now determined to exempt all filing require

ments for such movements as they relate to used military household

goods and personal effects In promulgating this exemption the Com

mission considered inter alia the comments of DaD which had re

quested the modification of existing regulations to permit it to require

NVOCCs to submit their through intermodal rate quotations to DaD s

Military Traffic Management Command MTMC and to require that

these quotations be approveQ by MTMC before they were to be filed

with the Commission but not later than their proposed effective date

The Household Goods Forwarders Association of America Inc ob

jected to DaD s petition and stated that such a proposed modification

in the Commission s regulations was unwarranted

The Commission has examined the impact of existing tariff filing

regulations applicable to NVOCCs naming through intermodal rates on

used military household goods and personal effects and believes these

procedures are no longer serving any regulatory purpose Since the

present rules took effect in 1976 only one NVOCC conference has

filed tariffs under the waiver provisions granted in Docket No 73 4

Although this tariff contains rates covering the entire through move

ment this information does not provide the Commission with any

greater ability to judge the lawfulness of the port to port segment than

1 See Common Carriers by Water StJJ1U S oj Express Companres Tnlck Lines and Other Non Vessel

Carriers 6 F M B 24S 1961 and Berna UlmannCo v Porto Rican Express Co 3 F M B 771 19S2

construing theapplicable provision of Ibe Shipping Act 1916 46 V S C 801 et seq

e

This transportation originates orterminJltea at interior United States points and moves in intermod

al services under through billsof lading

S Report and Order in Docket No 734 19 F M C 203 1976 See 46 C F R S36 1 c 2 previously

S36 1b 2
r

TARRIF FILING EXEMPTIONS 1013

it would have if the information were obtained after the cargo had

actually moved

Section 35 of the Shipping Act 1916 46 V S C 834 authorizes the

Commission to exempt operations of water carriers or other persons or

activities from statutory requirements where it finds that such exemp

tion would not substantially impair effective regulation be unjustly

discriminatory or be detrimental to commerce The Commission is

satisfied that the transportation of used military household goods and

personal effects by NVOCCs fall within the category of operations

which can be exempted from tariff filing requirements without detri

mental effects on any affected interest particularly because MTMC the

involved shipper has its own competitive bidding regulations

While the instant proceeding originally considered the proposed ex

emption of all used household goods and personal effects opposition to

the exemption of used non military household goods and personal ef

fects has prompted the Commission to exempt only used military

household goods and personal effects at the present time

The issue of revising the tariff filing regulations on used non military

household goods and personal effects will be deferred for possible

consideration in a future proceeding In addition the Commission has

decided not to require at this time that rates for used household goods

and personal effects established by vessel operating common carriers be

stated on a weight or per container basis or that the weight of each

shipment be substantiated by a public weigher s certificate furnished by

the shipper

Therefore pursuant to 5 V S C 533 section 2 of the Intercoastal

Shipping Act 1933 46 V S C 844 and sections 18 a and b 35 and

43 of the Shipping Act 1916 46 V S C 817 a 817 b 833a and

841 a it is ordered that effective upon publication in the Federal

Register Title 46 Code of Federal Regulations 531 1 and 536 1 are

amended as follows

1 Add a new section 536 1 f

which reads as follows

The following services are exempt from the tariff filing re

quirements ofthe Act and the rules ofthis part

f Transportation of used military household goods and

personal effects by non vessel operating common carriers

2 Section 536 1 c 2 is deleted

3 Add a new section 536 1 b 7 which reads as follows

The following services are exempt from the tariff filing re

quirements ofthe Act and the rules ofthis part
1014 FEDERAL MARITIME COMMISSION

7 Transportation of used military household goods and

personal effects by non vessel operating common carriers

By the Commission

8 JOSEPH C POLKING

Acting Secretary
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

SUBCHAPTER B REGULATIONS AFFECTING MARITIME

CARRIERS AND RELATED ACTIVITIES

GENERAL ORDER 13 AMENDMENT NO 10

DOCKET NO 80 56

PART 536 PUBLISHING AND FILING TARIFFS BY COMMON

CARRIERS IN THE FOREIGN COMMERCE OF THE UNITED

STATES

AGENCY

ACTION

SUMMARY

DATE

June 30 1981

Federal Maritime Commission

Final Rule

The practice of filing temporary amendments to tar

iffs published by carriers and conferences of carriers

in the foreign ocean commerce of the United States is

hereby prohibited The convenience of such filings is

outweighed by the benefits accruing from their dis

continuance which will eliminate an unreasonable pa

perwork burden for the Commission and simplify the

use of foreign commerce tariffs by shippers carriers

and otherinterested persons

Effective September 8 1981

SUPPLEMENTAL INFORMATION

The Commission s present regulations provide that changes additions

and deletions to existing tariffs shall be known as amendments and

shall be made in permanent form 46 C F R S36 1O a 1 However the

current regulations also allow carriers the privilege of facilitating rate

changes in their tariffs through the use of temporary tariff filing meth

ods such as telegrams cables or mail in the form of letters and rate

circulars under certain conditions 46 C F R S36 1O c

The current proceeding was initiated in response to petitions seeking

modifications to the Commission s regulations which would have fur

1 These regulations were promulgated pursuant to a

rulemaking proceeding in Docket No 964

General Order No 13 30 FR 7138 1965 Minor modifications to these rules were implemented on

January I 1979 see Report and Order in Docket No 72 19 General Order No 13 Publishing and

Filing Tariffs by Common Carriers in the Foreign Commerce of the United States 42 FR 59265
1016 FEDERAL MARITIME COMMISSION

ther broadened the circumstances under which temporary filings could

be made On September 5 1980 the Commission denied these petitions

and commenced a

separate inquiry into whether the practice of amend

ing foreign commerce tariffs by using a

temporary filing method should

be continued at all and if so whether the present regulations govern

ing this practice should be tightened Upon consideration of the com

ments submitted and for the reasons set forth herein the Commission

has decided to eliminate the privilege ofamending tariffs by any means

other than a permanent filing

Comments were sought on two specific proposals 1 elimination of

temporary tariff filings or 2 restriction of the privilege of filing

temporary amendments The elimination ofthe temporary filings would

prohibit this form qf amendment except pursuant to special permission

authority as provided in 46 C F R 536 15 The second option would

have forbidden temporary filings intended a to amend tariffs of con

trolled carriers as defined in section 18 c ofthe Shipping Act 1916 b

to increase the rates in any tariff c to change tariff commodity

descriptions or add new commodity descriptions d to change the

basis of assessing freight charges or e to publish temporary amend

ments with an expiration date Additionally the second alternative

clarified that portion ofthe existing rule which prohibits one temporary

amendment from amending another temporary filing

Comments were submitted by several ocean carriers and conferences

all ofwhich opposed the proposed rule The National Industrial Traffic

League League an organization of shippers and trade associations

stated that only temporary reductions should be permitted to be filed 3

The League did not support total discontinuance oftemporary amend

ments

Commentators on the proposed rule addressed the following issues

MailService Without the means of telegraphing amendments to the

Commission tariff filers would have to rely upon the U S Postal

2

During the past several years the Commission has observed that temporary tariff filings were

being used to amend many publishing carriers rules and regulations rather than their rates A Foreign

Tariff Advisory Notice was mailed to all carriers and conferences with tariffs on file which reminded

them of the filing requirements of section 536 1O c

stating that the Commission would strictly enforce

this rule The petitions for amendment of the temporary tarifffiling rules were the result of these en

forcement activities

The rulemaking petitions generally maintained that the existing rules are harsh burdensome and not

sufficiently streamlined to permit immediate implementation of certain tariff material The use of the

permanent method of amending tariffs was claimed to be unresponsive The Petitioners therefore re

quested an expansion of the use of temporary tariff filings The Commission did not accept this posi

tion because the rationale purpose and justification for temporary tariff filings did not support the

filing of temporary tariff amendments except to reduce the level of aspecific commodity rate orthe

leve of a class rate when filed under section 18 b of the Shipping Act 19 6 46 US C 8 7 b

3

The League s

position was that any means of amending atariff which would result in areduction

should be encouraged including temporaries amending temporaries and new commodity descriptions

filed by temporary amendments
FILING OF TEMPORARY AMENDMENTS TO TARIFFS

PROHIBITED

Service or commercial courier services It was contended by several

conferences4 that the U S mail service is unreliable and that first class

service is too slow They claimed that the cost of express mail or

courier service was disproportionately greater than the average cost of

a TELEX stating that these added costs will ultimately be passed on to

shippers in the form of increased freight rates whenever competitive

conditions permit They further contended that the delay and related

problems associated with filing permanent tariff pages create inconven

ience and economic harm

Special Permission Requests The proposed rulemaking mentions that

special permission relief for waiver from the tariff filing rules is avail

able to facilitate an amendment which is critical to the operations of

either carriers or shippers

Commenting conferences5 asserted that the alternative of continually

requesting special permission to file by TELEX is cumb rsome and

uncertain They claimed that there is no rational apparent basis for

distinguishing between amendments in rate levels which are permitted

to be filed by TELEX and amendments relating to charges surcharges

and rules which are not

Emergency Special and Project Rates Commentators also asserted

that the discontinuance of the temporary filing procedure as it relates

to special emergency and project rates would place added burdens on

carriers as well as shippers Carriers would lose the opportunity to

receive and carry cargo on short notice such as emergency supplies

moving to developing countries The carriers state6 that special emer

gency and project rates necessitate a TELEX filing with an expiration

date They claimed that prohibiting the filing of expiration dates in

connection with special rates which are temporary responses to imme

diate market problems would penalize shippers who have urgent needs

for such rate reductions

Financial Impact Certain commentators7 contended that the pro

posed changes would place substantial financial burdens upon them

1017

4

Trans Pacific Freight Conference of Japan Korea Japan Korea Atlantic and Gulf Freight Con

ference Associated Latin American Conference et at Far East Conference Atlantic and Gulf Indo

nesia Conference et al Pacific Coast European Conference North EuropelU S Pacific Coast Freight

Conference Latin America Pacific Coast Conference and Pacific CoastRiver Plate Brazil Confer

ence

5

Trans Pacific Freight Conference of Japan Korea and Japan Korea Atlantic and Gulf Freight

Conference

6 Waterman Steamship Corp Pacific Coast European Conference North EuropelU S Pacific

Freight Conference Latin America Pacific Coast Conference Pacific Coast River Plate Brazil Con

ference and Pacific Westbound Conference

1

Tr ns Pacific Freight Conference of Japan Korea Japan Korea Atlantic and Gulf Freight Con

ference Associated Latin American Conference Australia Eastern U S A Conference et al Pacific

Coast European Conference North Europe US Pacific Freight Conference Pacific CoastRiver

Plate Brazil Conference and Pacific Westbound Conference
lOt8 FEDERAL MARITIME COMMISSION

These carriers alleged that the temporary filing restrictions would force

them to hire and pay local tariff agencies on a continuing basis to

prepare and file tariff amendments They argued that even with correct

technology the process of preparation reproduction dissemination and

filing of permanent tariff pages still requires a minimum of fifteen to

twenty days The proposed rule would therefore reimpose delays and

paperwork burdens which the Commission had successfully eliminated

some fifteen years ago

Increases and Surcharges Commentators to the rulemaking8 ques

tioned the Commission s rationale in proposing to allow rate reductions

to be filed by TELEX but not increases or surcharges They alleged

that the fifteen to twenty days delay required between the date ofthe

decision to amend a tariff and the day the amendment is finally filed

with the Commission unnecessarily delays the effective date of sur

charges and rate increases It is also contended that surcharges are

subject to frequent and abrupt changes and are directly related to the

cost of providing freight service Unless carriers are able to react to

these cost changes quickly by appropriately adjusting a surcharge

either the carrier or its shippers will experience financial losses they

claimed

I

DISCUSSION AND CONCLUSIONS

Prior to 1961 common carriers were only required to file their

export rates with the Federal Maritime Board within a period ofthirty

days after they had become effective The enactment of section 18b of

the Shipping Act 1916 required ocean common carriers9 to file both

import and export rates adhere to the level of rates lawfully on file

give notice of changes to the filed rates and charge rates only in effect

The temporary method ofamending tariffs involves the double exam

ination of each amendment The filings are received as TELEX s

letters rate advices and circulars Upon receipt the temporary amend

ment is date stamped hole punched and sorted Since a single tempo

rary amendment may involve many pages or several tariffs it common

ly must be reproduced The temporary amendment is next examined for

conformity to the statute and is then compared to the superseded or

amended material Ifaccepted the temporary amendment is placed in a

tariff binder until it is replaced by a permanent tariff filing twenty or

thirty days depending upon whether the temporary amendment came

from an overseas source Upon receipt of the permanent filing to

replace the temporary amendment the examiner must typically sort

8

Far East Conference Australia Eastern US A Shipping Conference Trans Pacific Freight Con

ference of JapanKorea and Japan Korea Atlantic and GuJfFreight Conference

S

Surface land carriers and air carriers had long before been required to publish and adhere to filed

rates by the Interstate Commerce Act and Civil Aeronautics Act
FILING OF TEMPORARY AMENDMENTS TO TARIFFS 1019

PROHIBITED

through many seemingly identical messages to locate the referenced

temporary filing The content of the permanent page is then compared

with the temporary amendment to ensure that the two comport i

e

same effective date rate level etc Ifthe permanent page is accepted

the temporary amendment is removed and destroyed In cases where

the permanent page is deficient the temporary filing remains in the

binder until it is properly replaced

The Commission did not have a TELEX terminal for temporary

tariff filing purposes until the late 1960 s The installation of a TELEX

terminal for tariff filings was in part premised on the arguments that

I

temporary filings constituted a very small portion ofall tariff filings

2 temporary filings were almost always reductions and therefore in

the shippers benefit 3 temporary filings would not impose unmanage

able burdens on the Commission s staff and 4 the carrier industry was

very desirous of the opportunity to fully utilize this method of amend

ing tariffs

The carrier industry initially utilized temporary filings via TELEX in

the same manner they had used the more expensive telegrams cables

i e for extraordinary conditions dictating immediate rate relief in the

form of a reduction Soon however the industry realized that the

temporary TELEX tariff amendment could also be used to provide

thirty or ninety days statutory notice for an increase in rates as well as

the immediate notice of a reduction

When the Commission permitted temporary tariff filings in the initial

tariff filing rules the volume of tariff amendments was small compared

to their current extensive magnitude In a four month period in 1965

for instance there were but thirty two hand delivered messages Today

the Commission averages 115 messages per day affecting 244 individual

tariff pages Well in excess of 100 000 temporary rate changes are now

filed annually Single TELEX messages over ten feet in length are not

rare Moreover whereas the staff examined a total of83 776 tariff pages

in 1965 384 992 pages were filed with the Commission in 1979 A five

to sixfold increase in workload has been experienced

Tariffexamination is a labor intensive operation The burden imposed

upon Commission staff by temporary methods of amending tariffs is

magnified when these temporary filings are characterized by inferior

quality During the period September 1980 through January 1981

twenty eight percent of all tariff rejections involved a temporary

amendment while these filings represented less than ten percent of the

total number oftariff amendments

The elimination of temporary filings via TELEX may prove incon

venient to some overseas domiciled carriers pending further develop

ment of electronic data processing technology which enables carriers

to make their permanent filings expeditiously and cost effectively

However it is anticipated that the basic needs of these carriers can be
1020 FEDERAL MARITIME COMMISSION

satisfied by vendors of tariff filing services data processing services

sufficient prior planning involving lead times in tariff production couri

er services or Express Mail Service Such methods may be more costly

than TELEX but it is more reasonable that carriers wishing to accom

plish rapid tariff amendments bear this cost directly Moreover in cases

where good cause can be shown the Commission is empowered to

waive its tariff rules including the specific prohibition against tempo

rary tariff filings adopted herein see 46 C F R 536 15 and 46 U S C

817 b 3

Accordingly Part 536 of the Rules will be amended to eliminate the

acceptance of any type of temporary tariff filing Thus all amendments

to tariffs filed by carriers and conferences ofsuch carriers in the foreign

commerce of the United States must unless special permission is other

wise granted be made in accordance with the remaining provisions of

the Commission s General Order No 13 46 C F R Part 536

Therefore it is ordered that pursuant to section 4 ofthe Administra

tive Procedure Act 5 U S C 553 and sections 18b 22 and 43 of the

Shipping Act 1916 46 U S C 817 b 821 and 841 a effective sixty

60 days from the date this notice is published in the Federal Register

Title 46 Code ofFederal Regulations 536 10 c is deleted

By the Commission

S JOSEPH C POLKING

Acting Secretary

CommissJoner Peter N Teige s

dissenting opinion is attached
FILING OF TEMPORARY AMENDMENTS TO TARIFFS 1021

PROHIBITED

Commissioner Peter N Teige dissenting

The law requires ocean carriers to file their tariffs with the Commis

sion before they can be effective The Government having placed this

obligation on the ocean carriers has a duty to make this procedure as

speedy and efficient as possible In today s fast moving commercial

world rate changes or new commodity rates must be filed and put into

effect quickly The Commission has been accommodating this need for

many years by permitting telex filings followed by the receipt by mail

of the actual tariff pages This process has become burdensome for the

Commission particularly as available personnel shrinks due to budget

cuts

Nevertheless I would keep this function in place until we have

explored all other in house alternatives to its abandonment including

efforts to improve productivity in the Bureau of Tariffs through re

allocation of personnel firmer supervision and job reorganization of a

time and motion nature

I recognize that the whole tariff system is in need of simplification

and technological improvement But these changes will take time With

proper leadership the changes will come without punishing the industry

by terminating the present telex filing system

The Commission s action is a step backwards that will materially

inconvenience carriers and the shipping public particularly where for

eign based conferences are involved