j







IX

TABLE OF CASES CITED

Page

Abbott Laboratories v Prudential Grace Line 14 SRR 165 00000000 321

Agreement 7700Establishment of a Rate Structure 10 FMC 61 0000 118 137

Agreement 8765 9 FMC 333 n nnn nnnnnnn 76 80

Agreement No 9025 Dockage Agreement 8 FMC 381 n nCnnnnnn 79

Agreement No 9431 Hong Kong Tonnage Ceiling Agreement 10 FMC

134 316

Agreement No 9835 14 FMC 203 00 un nn n n nnnn n 132

Agreements Nos T 2108 and T 2108A 12 FMC 110 00 nn nnn 77

Alabama Great Southern R R Co v FMC 379 F2d 100 nn nnn 309

Alcoa Steamship Co v FMC 348 F2d 756 n n nnnnnn 225

Aluminum Products pf Puerto Rico Inc v Trans Caribbean Motor

Transport Inc 5 FMB 1 oooonnnnn nnnnnn 137

American Export Isbrandsten Lines v FMC 33 F2d 185 00 00 0000 118

American Trucking Assn v Atchison Topeka Santa Fe Ry Co 387 US

397 125 140

Armour Co v Atchison Topeka Santa Fe Ry 254 F2d 719 unn 12 17

Atlantic GuWWest Coast and South America Conference 13 FMC 121 309

Atlantic Seaboard Corp v FPC 404 F2d 1268 00 0000 0000 0000 322

Atchison Topeka Santa Fe Ry v Robinson 233 US 173 00 000000 17

Ballmill Lumber v Port of New York 11 FMC 494 un n nn nn 10 11

Boston Maine R R v Hooker 233 US 97 nn n n u n nn 323

Beaumont Port Commission v Seatrain Lines Inc 2 USMC 699 00 126

Bernstein Bros Pipe Machinery Co v Denver Rio Grande Western

R R 193 F2d 441 umnm oom mm nmm mmnm 12

Bluefield Co v Public Servo Comm 262 US 679 nn nOOnn n 97

Browser V Hamilton Glass Co 297 F2d 341 0000 nnnnn nn 18

Bull S S Lines V Thompson 45 F2d 242 nn nn n nnn 12

California S B CO V Stockton Port Dist 7 FMC 75 u n u nn 79

Carborundum Co v Venezuelan Line 14 SRR 166 nUnnn 321

Central Warehouse Co v Chicago Rock Island Pacific Ry 20 F2d 828 12

City of Nome v Alaska S S Co 321 F Supp 1063 nn n n 12

City of Portland v Pacific Westbound Conf 4 FMB 664 n 119 127 128

Clyde Mallory Lines v Alabama 296 US 261 nn n n nOO 272 275 276

Colgate Palmolive Co v United Fruit Co Dkt 115 Sept 30

1970 nnn n nmn oo n n oon n n umnnn 144 175 189

Colgate Palmolive Peet Co v United Fruit Co 11 SRR 979 00 60 201 246

Commonwealth of Puerto Rico V FMC 468 F2d 872 nun nn n 96 241

Consolo V Flota Mercante Grancolumbiana 383 US 607 n nnn 10

Crown Steel Sales Inc v Port of Chicago 12 FMC 353 00 nnnn 25 39

Dayton Coal Iron Co v Cincinnati N O Texas Pac Ry 239 US 446 12

D C Transit System V Washington Metro 350 F2d 753 00 0000000000 98

D C Transit System V Washington Metro 466 F2d 394 00 00000000 242

Delaware River Port Auth v United States Line Inc 311 F Supp 441 108

Disposition of Container Marine Lines 11 FMC 476 un OO n 130



FEDERAL MARITIME COMMISSION

DOCKET No 7253

GENERAL MILLS INC

v

STATE OF HAWAII DEPARTMENT OF AGRICULTURE

The State of Hawaii is found to have charged and collected unjust unreasona

ble and discriminatory freight charges while operating SS CALIFORNIAN

under charter contrary to section 16 First of the Shipping Act 1916

Reparation granted

Sylvester J Jablonski for General Mills Inc complainant

George Pai Attorney General and R Dennis Chong Deputy

Attorney General for State of Hawaii Department ofAgriculture

defendant

David Fisher and Donald J Brunner Hearing Counsel

July 3 1973

REPORT

By THE COMMISSION Ashton C Barrett James V Day and

Clarence Morse Commissioners

General Mills Inc GMI filed a complaint on September 14

1972 alleging that the State ofHawaii Department ofAgriculture

State charged and collected unjust unreasonable and discrimina

tory rates in violation ofsections 16 and 18 a ofthe Shipping Act

1916 while operating SS Californian under charter The State

answered claiming its rates just and reasonable and its tariff not

discriminatory The case was handled under the Rule 11 Short

ened Procedure 46 CFR 502 181 et seq

Administrative Law Judge Ashbrook P Bryant rendered an

Initial Decision dismissing the complaint on February 21 1973

Hearing Counsel thereafter petitioned for leave to intervene and

file exceptions and on April 2 1973 the Commission granted

intervention

1

17 F MC
2 FEDERAL MARITIME COMMISSION

BACKGROUND

The Pacific Coast Longshoremen s strike of 1971 caused a

critical shortage of food and sanitary products in Hawaii The

State chartered the SS Californian for carriage of vital shipments

from Vancouver B C to Hawaii

On September 13 1971 the State issued a Fact Sheet for

Shippers and Consignees l which stated

The following information is provided to assist shippers and consignees in

booking stuffing and payment of container cargo designated for SS Californian

Freightcharges areto be collected and based on the existir lr West Coast Matson

Tariff oJ plus additional charges which will be adjusted after the conclusion of

the charter

On September 20 1971 the State filed its tariffll which became

effective by special permission onSeptember 24 1971 4GMI on the

17th 20th and 29th of September 1971 delivered eight containers

totaling 322 594 pounds of stacked and baled unprepared flour

from Great Falls Montana toVancouver BC forlihipmerit on SS

Californian to Hawaii s The State charged and collected 6 613 18

freight based on its 2 05 per cwt minilllum weight 40 000 pounds

rate in Item 50 of the Hawaii tariff Item 50 was the only rate in

the Hawaii tariff applicable toGMls shipment and both parties

intended that tariff to apply to the shipment

However GMI alleges that it had been unable to analyse and

object to the Hawaii tariff in the brief interval between its filing

and effective date and contends that that tariff should have

included astraight containerload rate as didthe Matson tariff s

The 2 05 per cwt rate is 41 percent higher than the Matson

tariffs per cwt rate The Hawaii tariff is much more limited in

scope than the Matson tariff and its straight containerloadrates

average 37 percent higher than the Matson tariftsi per ewt rates

average 39 percent higher The combination of the general in

crease in the Hawaii tariff with the shiftfrom a containerload rate

to a per ewt rateresl llts inGMls

freight on the shipment in

question being 85 percent higher than under the Matson tariff

The theory ofGMI s suit is that the relatively greater increase

1 Attachment No 6 to complaint

2Westbound CQntainer Freight Tariff No 14b F M C F No 146 i8lued by H O Pott r the Mabon

tariff

3

State of Hawaii Weatbound Container Fret htTarittNo F M C F 1 the Hawaii tarift

4 Special Permluion No F 134 9

N

IIAttachments 16 to complain Bills ofLading

Item 1166 448 per container

Item 205 145 per cwt

17 F MC
GENERAL MILLS INC v STATE OF HAWAII

in the applicable rate on its shipment is unjust unfair and

unreasonable Relief sought is reparation of 1 548 45 B

Administrative Law Judge Bryant decided in favor ofthe State

dismissing the complaint on February 21 1973 He stated that

under section 18 a no greater lesser or different freight could be

charged or collected than that specified in the Hawaii tariffs only

applicable rate and that a lesser charge would have been unlaw

ful Further he stated

The facts do not establish unreasonable preference or advantage or unreasona

ble prejudice or discrimination There is no showing of competitive damage to

complainant or that any other shipper was charged a lower rate or that

complainant was subject to unequal or unfair or unreasonable treatment That

no containerload rate for flour was included in the Erskine Hawaii tariff while

such rates were included for other commodities is insufficient to establish

violation of either section 16 orsection 18 a of the Act

The only exceptions filed are those accompanying Hearing

Counsels intervention petition They are That section 18 a is

inapplicable since there was no finding of interstate commerce

that the text of that section does not support the Administrative

Law Judge s decision that GMI s primary allegation ofan unjust

and unreasonable rate violative of that section was ignored and

that the conclusion of no section 16 violation is contrary to

Commission precedent and unsound

Section 18 a begins That every common carrier by water in

interstate commerce shall and each subsequent paragraph

refers back to such carrier It is clear that the finding of a

section 18 a violation must be predicated on a finding that

interstate commerce is involved Were this the only violation

asserted we would remand for a decision on that issue however

the section 16 claim provides a sufficient basis for our disposition

ofthe case

Section 16 First makes it unlawful for any common carrier or

other person subject to the Act alone or in conjunction with

another directly or indirectly to make or give any undue or

unreasonable preference to any particular person locality descrip

tion of traffic or to subject any particular person locality or

description of traffic to any undue or unreasonable prejudice or

disadvantage in any respect whatsoever

The Administrative Law Judge used a competitive damage

8

The figure was arrived at as follows The 448 per containerload rate Matson s Item 1155 converts

to 1 11 per wt the average containerload was 4000 pounds If that figure is increased by the same

amount as the per wt rate 41 percent w from 145 to 2 05 the applicable ratewould be 157 per wt

and the total freight 5 064 73 The freight charged was 6 613 18 and the difference is 1 548 45

9

Initial Oeeision at 5

17 F MC

3
1

4 FEDERAL MARITIME COMMISSION

test in concluding that section 16 First had not been violated As

therewas only one unprepared flour rate in the Hawaii tariff and

no showing of any detriment to GMI vis avis a competitor no

competitive injury was found

We recently held in another description oftraffic case Valley

EvapoNting Co v Grace Line Inc 14 F MC 16 1970

Without deciding the validity of respondent s allegation that no competitive

relationship has been demonstrated herein we find that the unlawful preju

dice W which complainant and its shipments have here been subjected is no

dependent on the existence of such a relationship 14 F MC 21

In that case a commodity rate was inadvertently omitted in a

tariff revision designed to eliminate paper rates on non moving

items and the shipper charged a higher N Q S rate We required

no proof of competitive damage because of the carrier s duty to

apply its criteria fairly and impartially and awarded reparation

under section 22

The State has not indicated what if any criteria it used in

determining which containerload rates to include in the Hawai

tariff nor has it advanced any explanation of its action Hawai

seeks to distinguish Valley Evaporating 8fpra by arguing that

since no criteria were disclosed and the Hawaii tariff approved

without the containerload rate competitive disadvantage must be

shown However it is fairness and impartially not described

criteria which are determinative and it would be nonsensical to

award reparation for accidental discrimination while denying it fo

apparently deliberate prejudice

the State propounds a formal argument that the per cwt rate

applied to GMls shipment was the same magnitude greater than

that in the Matson tariff and thus there was no discrimination

However Hawaii had advised shippers its rates would be

based on the West Coast Matson Tariff 10 which certainly

implies a proportionate increase in rates As indicated above l1

there was a straight containerload rate in Matson s tariff which

covered GMls shipment In the Hawaii tariff there WaS no such

rate although there were numerous other straight containerload

rates There is no evidence indicating the added cost of handling

GMls shipments in containers wall relatively greater than that o

other shipments in containers The shift from a containerload rate

in the Matson tariff to a per cwt rate in Hawaii s plus the

generally higher rate level in the State s tariff meant GMI paid 85

percent more not 39 percent as Hawaii s argument implies

10 State of Hawaii Fact Sheet fot Shippers and Consignees September 13 1971 See note 1 8Upra

11 See note 6 and accompanying text 8upra

17 F M C
GENERAL MILLS INC v STATE OF HAWAII 5

Accordingly on the basis of the above we find and conclude

that

1 Respondent s failure to include a containerload rate on

stacked and baled unprepared flour in the Hawaii tariff wasundue

and unreasonable prejudice in violation of section 16 First ofthe

Act and

Reparation to GMI for injury caused by that violation oftheAct

is awarded as allowed by section 22 of the Act in the amount of

1 548 45

An appropriate order will be entered

Vice Chairman George H Hearn Dissenting With Whom

Chairman Bentley Joins

Idissent with respect to the grant ofreparation in this case

While I

agree with the majority s discussion ofsection 16 First I

believe the majority has placed too much reliance on the State s

Fact Sheet For Shippers and Consignees and too little weight

on the particular conditions which existed

The Fact Sheet made only the broadest possible statement that

the State s tariff would be based on the existing Matson

tariff From this the majority concludes that the State was bound

to follow the Matson tariff by offering the same type of rate e g

per container or per cwt for the same commodities as offered by

Matson With this Icannot agree

The State of Hawaii was in a critical situation because of the

Pacific Coast longshoremen s strike of 1971 and certain vitally

needed commodities were in dangerously short supply Conse

quently the State undertook at great expense to itself to obtain

those commodities by chartering a vessel and offering the required

ocean transportation For any shipper or consignee to now com

plain of the State s tariff when otherwise the goods would not

have moved at all is to bite the hand that feeds you

The State s Fact Sheet was merely an announcement that

waterborne service would be available with the tariff structure to

be based upon certain broad guidelines The State did not thereby

bind itself to offer any particular type or level ofrate

The Valley Evaporating case12 is not determinative There is no

evidence that the State acted unfairly or with partiality either

accidentally or with apparent deliberateness The State was react

ing to an emergency affecting the well being of its residents and

under such circumstances cannot be attributed with discriminat

12Valley Evaporating Co v Grace Line Inc 14 F M C 16 1970

17 F M C
6 FEDERAL MARITIME COMMISSION

ing against aparticular shipper To have done so would have 

contrary to the State s purpose in providing vitally needed 

modities for those cut offby the strike Icannot ascribe suc

action to the State under the then prevailing conditions

Consequently I would find no violation of section 16 Firs

any other violation

SEAL 8 FRANCIS C HURNEY

Secreta

17 F MC
FEDERAL MARITIME COMMISSION

17 F MC 7

DOCKET No 7253

GENERAL MILLS INC

v

STATE OF HAWAII DEPARTMENT OF AGRICULTURE

ORDER

This proceeding being at issue upon complaint having been duly

heard and full investigation had and the Commission on this day

having made and entered a Report stating its findings and

conclusions which Report is hereby referred to and made a part

hereof

Therefore it is ordered That respondent be and hereby is

directed to pay to General Mills Inc on or before 60 days from the

date hereof 1 548 45 with interest at the rate of 6

percent per

annum on any amount unpaid after 60 days as reparation for the

injury caused by respondent s violation of section 16 First ofthe

Shipping Act 1916

By the Commission

SEAL 8 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET No 71 12

UNITED STATES OF AMERICA

v

COLUMBIA STEAMSHIP COMPANY INC

Respondent found to have violated section 18 b 3 Shipping Act 1

charging a rate higher than the tariff rate published and on file w

Commission

Award of reparation found not warranted

Alfred H O Boudreau Jr for complainant United Sta

America

Kennth E Robert for respondent Columbia Steamship Com

July 11 1973

REPORT

By THE COMMISSION Helen Delich Bentley Chairman G

H Hearn Vice Chairman Ashton C Barrett and Jam

Day Commissioners

This proceeding is before us on respondent s exceptions 

Initial Decision ofAdministrative Law Judge Herbert K Gre

that decision Judge Greer determined that notwithstand

prior agreement between the parties fixing the rate tobe ch

respondent had by error charged a rate not published or o

with the Commission in violation of section 18 b 3 ofthe Sh

Act 1916 Judge Greer further found that complainant was 

tled to an award ofreparation

In excepting to the Initial Decision respondent argues 

neither the conclusion that respondent had violated the A

the award of reparation was warranted by the facts as fou

Judge Greer

Respondent s exceptions constitute nothing more than a re

ment of the same issues allegations and contentions conside

8

17 F MC
UNITED STATES v COLUMBIA S S COMPANY

the Administrative Law Judge in his Initial Decision After a

careful review and consideration of the record in this proceeding

we conclude that with one exception the Administrative Law

Judge s disposition ofthe issues waswell founded and proper Our

disagreement with the Administrative Law Judge lies in his

award ofreparation to complainant

Since the decision in Mueller v Peralta Shipping Cor 8 F M C

361 1965 the Commission has uniformly refused todeviate from a

strict application of section 18 b 3 except pursuant to statutory

authority provided by the amendment to that section affected by

P L 90 298 Heretofore we have steadfastly refused to be tempted

by applications for relief addressed to some undefined well spring

ofequity in the Commission rather than to any basis in law

Mueller supra at p 364 fn 10 However we concur with respond

ent that this particular factual situation is in some important

respects distinguishable from most cases following Muller s hold

mg

Here complainant and respondent had agreed upon a certain

negotiated rate at which complainant would ship the vehicles in

question This negotiated rate had no counterpart in any tariff of

respondent on file with the Commission not unlikke the situation

in the Swedish American Line Application to Refund 8 F M C

142 1964 case The negotiated rate was clearly intended by

respondent and expected by complainant to be the rate filedwith

this Commission In a clearly warranted determination the Ad

ministrative Law Judge found that because of administrative

error an inaccurate rate was filed on behalf ofrespondenta rate

which was not the negotiated rate expected by both parties That

application of the negotiated rate was a foregone conclusion by

both parties is clearly shown by subsequent issuance of respond

ent s Bill of Lading No 1 and the payment by complainant ofthe

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 additionalfive months thereafter Complainant here prays that

it be awarded reparation Pursuant to section 22 of the Act the

Commission is authorized to award this avenue of relief and

may direct the payment of full reparation to the complainant

for the injury caused by violation oftheAct

This avenue ofrelief provided by section 22 however as clearly

stated and maintained is discretionary and permissive and the

I Atthis point for an understanding of the facts of this case and our disposition of the question of

reparation wewould recommend areading ofthe Initial Decision acopy of which is attached

17 F M C

9
10 FEDERAL MARITIME COMMISSION

j

I

mere fact that a violation of the Act has been found does n

itself compel a grant of reparations Consolo v Flota Mer

Grancolombiana 383 U S 607 1965 Ballmill Lumber v Po

New York etal 11 F M C 494 510 1968 In this case and lim

strictly to the peculiar facts of this case it is our determin

that an award ofreparation is not warranted To permit com

ant to collect reparation here would be to grant complaina

10 384 50 windfall which it neither anticipated nor bargaine

A decision permitting this sort ofwindfall profit to be reaped 

not commend itself to us We are of the opinion that unde

facts here presented to remedy one evil is to foster anothe

that the record shows that it would be inequitable to do so In 

regard we note also that Judge Greer also found respond

argument that no discrimination among shippers has 

developed on the record is well taken 2 Rather than permi

sort of unwarranted windfall we prefer to leave the parti

they were found parsons Whittemore Inc v Johnson L

al 7 F M C 720 732 1964

Our action does not nor can it excuse a party from 

statutory penalties to which he maybe subject but s

indicates our disinclination to award reparation in light o

compelling facts of this case Insofar as Judge Greer foun

respondent violated section 18 b 8 ofthe Act we accept and 

his finding However insofar as Judge Greer further conc

ipso facto that such a violation entitles complainant to an a

ofreparation we do not adopt his conclusion We find that 

respondent violated section 18 b 8 y charging and acc

payment ofa rate other than the tariff rate on file the comp

facts of this calie militate against reparation That gra

reparation awarded below is hereby overruled and the com

in this proceeding is hereby dismissed

Commissioner Clarence Morse Concurring and Dissenti

I concur in the majority s conclusion that no deviation f

strict application of section 18 b 3 except pursuant to the 

tory authority provided by P L 90298 is sound

I dissent from the majority s conclusion to deny reparation

In my judgment this Commission s discretion under Sec

to grant or deny reparations is limited by the test whether 

exercise of its sound judgment the Commission may concl

grant reparations or may conclude to deny reparations The 

JID p 9

17 F MC
UNITED STATES v COLUMBIA S S COMPANY 11

may in Section 22 does not permit of the denial or grant of

reparations in the mere whim of the Commission

There are at least two factual situations involved where our

sound discretion comes into play one being the necessity of

establishing to the sound satisfaction of the Commission that

there has been a violation of the Shipping Act 1916 as for

example proof ofan act ofunjust discrimination under Section 17

But having established the unjust discrimination claimant must

additionally establish to the sound satisfaction ofthe Commission

that it has in fact been damaged and the actual monetary amount

ofthat damage Ballmill Lumber v Port ofNew York 11 FMC 494

1968 In such case the Commission does exercise its sound

discretion in concluding whether reparations should be denied or

granted but does so initially in determining whether claimant has

proven a statutory violation and secondly in determining

whether claimant has proven monetary damage and the actual

extent thereof Those are the only areas in which we have

discretion to grant or deny reparations Having scaled those two

obstacles a claimant in my opinion is entitled to reparations as a

matter ofright not as amatter ofour discretion

In the instant case an admitted or proven statutory violation

exists and an undisputed proven amount of damage here the

spread between the rate as assessed claimant and the only lawful

rate published in respondent s tariff The majority conclude under

the circumstances it would be a windfall to claimant and

inequitable to the respondent to award reparations I

say we may

not deny reparations under these circumstances Difficult cases

often make for bad law and on the equities of the case alone I

sympathize with the views of the majority But to me to deny

reparations is to do violence to Section 18 b 3 for we the

appointed guardians of S ction 18 b 3 by our action in denying

reparations are permitting respondent to assess and retain a

freight rate in excess of its valid and lawful rate on file with the

Commission all in direct violation of the statute In my opinion

the need to protect the inviolability of a duly filed tariff rate

clearly overrides the other grounds asserted by the majority for

denying reparations

To deny reparations here results in our permitting respondent

to violate the stricture of Section 18 b 3 which in unequivocal

language compels the carrier to charge only the tariff rates

lawfully on file with the Commission and for violation thereof the

Congress has seen fit even to impose a civil penalty Section

17 F MC
12 FEDERAL MARITIME COMMISSION

18 b 6 The effect ofthemajority decision is to make this Comm

sion party to the violation

LouiB Ville Nash Ville Ry v Mottley 219 U S 467 1911 at 4

in discussing whether deviation from a rail carrier s filed ta

rate on the basis of equitable grounds should be permitted he

The court cannot add an exception based on equitable grounds wh

Congress forbore to make such an exception

United States of America v Pan American Mail Line Inc 

Civ 2381 SDNY September 11 1972 1973 AMC 404 holds

The Supreme Court has held that the only lawful rate which a carrier m

charge is that rate appearing in the carrier s flied tariff Dayton Coal Iron 

v Cincinnati New Orleans Tewas pacifw Ry 239 U S 446 1915 Louisvill

Nashville Ry v Mawwell 237 U S 94 1915 Louisville NashvilleRy v Mott

219 U S 467 1911 Tewas Pacific Ry v Mugg Dryaen 202 U S 242 19

New York New Haven Hartfora Ry v ICC 200 U S 361 1906 Gulf Color

Sante Fe Ry v Hefley Lewis 158 U S 98 1895 This rate must be char

and paid regardless of seemingly Innocent justifications for departure such 

mistake inadvertence or contrary intention of the parties Louisville Na

ville Ry v M ell supra at 97 1915 Swthern Pacifw Co v Miller Abat

Co 454 F 2d 357 359 60 3d Cir 1972 Johnson Maohine Works Inc v

Burlington ana Quincy R R 297 F 211 798 791 fJ5 8th Cir 1962 It has b

reoognizea that such strict interpretation may work haraship Louisville

Nashville Ry v Mawwell supra Southern Pacific Go v Miller Abattoir 

supra Silent Siouw Corp v Chwago ana North Western Ry 262 F 2d 474 4 5 

8th Cir 1959 Bull S S Lines v Thompson 123 F 2d 943 944 5th Cir 19

Prince Line Ltd v Amer Paper Ewports Inc 45 F 2d 242 S D N Y 19

Central Warehouse Co v Chicago Rook Islana Paoifw Ry 2 F 2d 828 

Cir 1927 Feraco Inc v Gerogia Paoifw Corp 313 F Supp 660 6628 D 

1970 It has also been recognized that suchinterpretation may require decis

which areth reverse of those which would have obtained had the principle

equity been applied to the suit United States v Associated Air Transport I

275 F 2d 827 832 4 5th Cir 1960 Armour Co v Atohison Topekka Sa

Fe Ry 254 F 2d 719 728 24 7th Cir oert aenied 358 U s 840 1950 Berns

Bros Pipe Machinery Co v Denver Rio Granae Western R R 193 F 2d 

444 10th Cir 1951 Prinoe Line Ltd v Amer Paper Ewports Inc supra Fera

Ino v Georgia Pacific Corp supra Yet the courts have adhered consistent

their strict reading of the tariffs in question in order to effectuate the cong

sional scheme against rebating and collusive pricing

Taking the last points first the fact that many of the above cited cases were 

Shipping Act decisions is of noconsequence in the instant context The langu

and congressional intent of the regulatory statutes under consideration not

the Interstate Commerce Act Part I 49 U S C 6 are sufficiently similar t

U S C 817 to warrant congruent construction See United States Naviga

Co v Cunam S S Co supra at pp 480 s1 City ofNome v Alaska S S Co 

F Supp 1063 1065 no 5 D Alas 1971 Prince Line Ltd v Amer Paper Ewp

Inc supra Compare 49 U S C U 6 lH7 817 1373 wit 46 U S C 817 b lH

See also 46 U S C 844 49 U S C 906 aHd 1005 The fact that in man

the Commission decisions cited shippers were suing for refunds is also irrelev

to the construction of 817 b 3 It has been held many times that in an ac

17 F M C
UNITED STATES v COLUMBIA S S COMPANY

predicated on failure to comply with a published tariffthe balance of equities as

between the parties is not at issue the principle to be vindicated is that of

compliance with the filed tariff See the Louisville Nashville R R line of cases

cited supra

SEAL 8 FRANCIS C HURNEY

Secretary

17 F M C

13
FEDERAL MARITIME COMMISSION

No 71 12

UNITED STATES OF AMERICA

v

COLUMBIA STEAMSHIP COMPANY INC

Reparation awarded

Alfred H O Boudreau Jr for complainant

Kenneth E Roberts for respondent

INITIAL DECISION OF HERBERT K GREER

ADMINISTRATIVE LAW JUDGEl

Complainant United States of America represented by 

Department of Justice seeks reparation from respondent Co

bia Steamship Company Inc acommon carrier by water eng

in the foreign commerce of the United States alleging an 

charge on a shipment of unboxed trucks from San Franc

California to Pusan Korea in violation of section 18 bX3 o

Shipping Act 1916 the Act which provides

No common carrierby water in foreign commerce or conference of such c

shall charge or demand or collect or receive a greater or less or dif

compensation for the transportation of property or for any service in conn

therewith than the rates and charges which are specified in its tariffs 

with the Commission and duly published and in effect at the time

THE FACTS

1 On or about April 2 1969 Mr Kent Dodge a transport

management specialist with complainant s General Services 

ministration GSA and acting on behalfof theAgency for Inte

tional Development AID solicited Wall Shipping Company W

1 This decision will become the decision of the Commission in the absence of exceptions th

review thereof by the Commission Rule 18g Rules of Practice and Procedure 46 CFR 502 227

14

17 F M C
UNITED STATES v COLUMBIA S S COMPANY 15

known by him to represent respondent to obtain transportation of

unboxed trucks from San Francisco California to Pusan Korea

2 Mr Frank Swartz ofWall contacted respondent to ascertain

whether vessels were available and the rate which would be

applicable to the shipment During Mr Swartz s discussion with

Mr Dodge Mr Dodge had stated that he could not pay more than

the rate of the Pacific Westbound Conference Mr Swartz re

sponded that they were nonconference and could do better than

the conference rate He submitted a rate of 1150 50 per vehicle

which was lower than the conference rate of 48 25 W M

3 By Jetter dated April 9 1969 Mr Swartz confirmed a tele

phone c mversation with respondent s Mr Irv Thayer that space

had been reserved on COLUMBIA EAGLE for 76 unboxed trucks

at the rate of 1150 50 per unit This rate was accepted by Mr

Dodge and the booking confirmed at the agreed rate

4 On about April 15 1969 respondent by teletype requested

Consolidated Steamship Agencies Consolidated an agent and

steamship broker to assist respondent in filing an amendment to

its tariff The teletype recited a rate of 1 000 00 per vehicle for

Group 1 ports which included Pusan and a rate of 1 150 50 for

Group 2 ports Consolidated filed the tariff amendment West

bound Freight Tariff No I third revised page 12 correction No

11

5 On April 25 1969 respondent issued a bill of lading for

transportation of 69 unboxed trucks measuring 64 170 cubic feet

and weighing 418 485 pounds at the agreed rate of 1 150 50 per

unit GSA paid respondent a total of 79 384 50 in accordance with

the terms ofthe bill oflading

6 During December of 1969 GSA Transportation Division au

dited the shipment This resulted in a claim for overcharges

against respondent dated May 22 1970 Respondent on June 3

1970 declined the claim stating that the shipment had been

carried at the rate accepted by GSA and

We do acknowledge to clerical error in tariff filing which involved a transposi

tion This rate was filed after cargo was booked However when this error

became apparent we could not petition for correction because the entire tariff

had been cancelled

8 The rate on file with the Commission as of the date of the

shipment was 1 000 00 per unit for Group 1 ports which included

Pusan

17 F MC
16 FEDERAL MARITIME COMMISSION

POSITION OF THE PARTIES

Complainant

Complainant takes the position that section 18b 3 of the 

should be strictly construed and that regardless of an error 

mistake in filing a rate the rate as filed is the only lawful one

Cited is Louis Nash R R v Maxwell 237 U S 94 97 19

wherein the Court held

Under the Interstate Commerce Act the rate of the carrierduly filed is the 

lawful charge Deviation from it is not permitted under any pretext Ship

and travelers arecharged with notice of it and they as well as the carrier m

abide by it unless it is found by the Commission to be unreasonable Ignora

or misquotation of rates is not an excuse for charging either less or more t

the rate fillld This rule is undeniably strict and it obviously may work hard

in some cases but it embodies the policy which has been adopted by Congres

the regulation of interstate commerce in order to prevent unjust discrimina

Argument that the Commission has adopted the strict const

tion rule is supported by citing Mueller v Peralta Shipping Corp 

F M C 361 365 1965 and Ocean Freight Consultants Inc v Ba

Line Lid 9 F MC 211 215 1966 In Mueller the Commiss

overruled prior decisions which permitted a carrier to volunta

refund freight charges or waive collection of a portion of 

charges and held

In light of the rules recited in the Maxwell case unless there is some o

statutory basis for relief in these cases and we can find none the construc

we have placed on section 18 b 3 of the Act is dispositive of special do

applications grounded on rate or tariffdeviations in ourforeign trades

Also cited is Midstate Co v Penna R Co 320 U S 356 361 19

and theCourt s statement that

Accordingly in respect to many matters concerning which variation in ac

ance with the exigencies of particular circumstances might be permissib

only the parties private interests or equities were involved rigid adherenc

the statutory scheme and standa ds is required

With regard to the fact that there had been an agreem

between complainant s representative and respondent to tra

port the shipment at the rate of 1 150 50 complainant argues 

verbal agreements or negotiated rates are invalid Cited is No

ern Transfer Inc v IC C 192 F Supp 600 604 1961 and 

Court s conclusion

It is conceded that the rates charged by Northern Valley for its shipmen

wadding from Rockleigh N J to New York N Y from June 2 1956 thr

January 16 1957 were orally agreed upon by and between the carrier an

shipper and that the rates charged pursuant to that agreement were 

disclosed by the carriers tariff on file with the Commission at the time 

shipments weremade Such rates so arrived at were illegal Citations om

17 F MC
UNITED STATES v COLUMBIA S S COMPANY 17

Further that in Atchison c Ry Co v Robinson 233 U S 173 181

1914 it was held that

To maintain the supremacy of such oral agreements would defeat the primary

purposes of the Interstate Commerce Act so often affirmed in the decisions of

this court which are to require equal treatment of all shippers and the charging

of but one rate to all and that the one filed as required by the Act

Respondent

Respondent delineates the issue as

Whether the general rule of strict construction as embodied in Section 18 b 3

of the Shipping Act will preclude Columbia Steamship Company from

charging a rate which is above the filed tariff rate but equal to the negotiated

lawful rate where the rate filed was the result of a mere typographical error

It is acknowledged that generally a carrier is held to the tariff

rate as filed regardless ofwhether there was amistake or clerical

error which resulted in an incorrect filing Respondent quotes

from Silent Sioux Corp v Chicago North Western Ry Co 262 F

2d 474 475 the Court s determination that

The principle is firmly established that the rate of the carrier as dulyfiled

is the only lawful charge Emphasis supplied by counsel

Also quoted is the holding in Johnson Machine Works Inc v

Chicago B Q R Co 297 F 2d 793 794 1962 that

It is well established when the shipper designated the routing the rate set out

in the published tariff covering such route is the only lawful charge that can

properly be made

Respondent argues that although these cases express the gen

eral rule ofstrict compliance they are not directly in point as they

did not involve an error made in the filing ofa tariff Additionally

respondent cites Magnolia Provision Co v Beaumont S L W

Ry Co 20 F 2d 384 1927 affd26 F 2d 72 1928 Armour Co v

Atchinson Topeka Santa Fe Ry Co 254 F 2d 719 723 1958

and National Van Lines Inc v United States 355 F 2d 326 1966

where the strict construction rule wasapplied but argues that the

rule was applied regardless ofequities It is pointed out that the

Courts have recognized that the rule produces hardships but have

applied it regardless of unfairness and regardless of the relation

ship between the carrier and the shipper Yazoo M Valley R Co

v Marx 135 So 64 1931 cited in 83 ALR at page 263 is said to

represent an inroad into the doctrine of strict compliance In that

case an error in construction ofa tariff by an agent ofthe railroad

was held not to estop the railroad from applying the true rate

Respondent argues

l7 F MC
18 FEDERAL MARITIME COMMISSION

that mistakes made in filing tariffs shouldbe afforded the same trea

as errors in the construction of tariffs If a carrier i8 not precluded 

charging the lawful rate when an agent erroneously construed the nature 

shipment the carrier should not be precluded from charging the lawfu

when its agent makes an inadvertent error infiling

Respondent contends that complainant knew what rate 

going to be filed because it had specifically agreed to the ra

1 15050 per unit and is now repudiating a contract which it f

negotiated and which was confirmed by the bills of lading Un

State8 v Bloornj ield Steamship Co 859 F 2d507 1966 is cit

support the contention that the United States should be 

strictly to the contract The argument that relief shoul

granted when a contract contains a unilateral mistake and 

other party is aware of the mistake is supported by citatio

United State8 v Jones 176 F 2d 278 1949 and Brows

Hamilton GlaS8 Co 297 F 2d 341 1953

Further on the issue of strict compliance with ection 18 b 

the Act respondent contends that the reason behind the rule 

assure equal treatment of all shippers and prevent discrimina

and that as no discrimination will result from application o

agreed rate the strict construction rule should not apply R

ence is made to a recent amendment to section 18b 3 P

Law 90298 which authorized the Commission

for good cause llhown tol permit a common carrier by water in fo

commerce to refund a portion of freight chargell collected from a ship

waive the collection of a portion of the chages from a shipper whllre it ap

that there is an error in the tariff of a clerical oradministrative nature 

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

waiver will not result in dilibrimination among shippers

Respondent sees in this amendment justification for the Com

sion toconsider inequities when arate is too low as well as wh

is too high

DISCUSSION

The record establishes that complainant s authorized repre

ative agreed with respondent that the shipment would be ca

at the rate of 1 150 50 per unit The agreement was not unla

Complainant s reliance on Northern Tramfer 8upra to esta

that an agreement of this nature is unlawful is not sound In 

case the decision was based on the factthat no rate was on f

the time fif the shipment Here a rate had been filed Mid8ta

Penna R Co supra did not involve an erroneoUs rate filing 

rather applied the rule of strict construction set forth in Lou

17 F MC
UNITED STATES v COLUMBIA S S COMPANY 19

Maxwell supra to a statute which limited the time in which claims

against carriers must be filed and an agreement contrary to that

statute The Act does not prohibit agreements between shippers

and carriers provided that prior to shipment a rate is filed in

accordance with the agreement which rate is available to all

shippers

The issue is simply whether the agreed rate is the lawfulrate or

whetherthe erroneously filed rate must be applied It would strain

reason to doubt that respondent did not intend to file a rate which

would serve to carry out the terms ofthe agreement and that due

to administrative error the rates for Group 1 and Group 2 were

transposed In effect complainant has elected to repudiate its

agreement with respondent Regardless ofthe possible inequity of

so doing it seeks to recover reparation by applying the rule of

strict construction to section 18 b 3 Under that rule respondent

is in violation ofthe section by charging more than the rate on file

The precedent which respondent would have applied here is

found in Martini Rossiet al v

Lykes Bros S S Co 7 F MC 453

455 1962 wherein the Commission stated

The paramount question il1 Ollses of this type is whether granting the requested

relief will result in discrimination This is because the primary purpose of the

new tariff filing provisions of the Shipping Act 1916 as with similar provisions

on which it was bllsed is to prevent discrimination If this purpose will not be

defeated we thiI1k We are unquestionably clothed with discretion to permit

corrective action under the rule We have the responsibility for administering

that Act and also the Intercoastal Shipping Act 1933 and are empowered

among other things to see that equity and justice are done in the matter of

reparations

In Mueller v Peralta supra the Commission repudiated this

doctrine and in specifically rejecting its authority to accord relief

on the basis ofa bona fide rate mistake held 2

page 364

We areaware that ourdecision in these two cases will result in some hardship

but we adopt the position that strict adherence to filed tariffs is mandatory

Moreover we believe that strict construction of the statute will result in more

careful tariff administration and management by carriers and conferences and

the obviation of possible undue or unfair preferences or advantages and

discriminations

The only variation from published rates recognized by the

Commission in foreign commerce is pursuant to Public Law 90

298 quoted above This recent amendment to section 18 b 3

satisfies the condition set forth in Mueller v Peralta that there

2

The Commission has not disclaimed authority to exercise discretion in cases involving misfiled rates

in the domestic offshore commerce because in that area if has statutory authority to establish

reasonable rates authority which it does not have in foreign commerce

17 F M C
20 FEDERAL MARITIME COMMISSION

must be a statutory basis for relief from strict adherence to 

rate on file

Respondent applies too broad a purpose to Public Law 90 

The legislative history3 makes clear that its purpose is to pe

voluntary refunds to shippers by carriers It does not autho

the Commission to sanction a violation of section 18 b3 for 

other purpose or as here proposed toenforce an agreement wh

provides for a rate other than the rate on file at the time 

shipment United State8 v Bloomfield 8upra does not alter 

conclusion for it did not involve the issue here presented tha

an erroneously tiled rate and section 18 b 3 of the Act

Respondent s argument that abasic purpose of section 18 b 

to prevent discrimination and that no discrimination among s

pers has been developed on the record is wen taken But to pe

a deviation from the plain language of the section in this proc

ing would be to establish an exception to the rule of s

construction because of equitable considerations As the law 

stands the Commission may permit deviation from the rate

file only when expressly authorized by statute There is no sta

authorizing an exception to section 18 b 3 under the circums

ces here appearing The strict construction of the statute undo

edly works a hardship on respondent but it is the result of its 

error

ULTIMATE CONCLUSIONS

Respondent violated section 18 b 3 of the Act by chargi

rate for the transportation of property different from that 

lished in its tariff on file with the Commission

Complainant is entitled to reparation in the sum of 10 38

which is the difference between the charges paid at the rat

1 150 50 per vehicle and the rate of 1 000 00 per vehicle w

was on file with the Commission at the time ofthe shipment

Under the circumstances here appearing interest is 

awarded provided that respondent shan pay the sum due w

60 days of the final disposition of the proceeding Ifnot paid w

that period interest at the rate of 6 percent per annum 

thereafter apply

S HERBERT K GREER

Admini8trative Law Jud

WASHINGTON D C

March 2 1973

3 U S Code Congressional and Administrative News 90th Congress Second Session 1968 V

page 1911

17 F M C
v

FEDERAL MARITIME COMMISSION

DOCKET No 6539

EMPIRE STATE HIGHWAY TRANSPORTATION INC

AMERICAN EXPORT LINES INC ET AL

DOCKET No 6546

TRUCK LOADING AND UNLOADING RATES ATNEW YORK

HARBOR

ADOPlION OF INITIAL DECISION

August 14 1973

By THE COMMISSION George H Hearn Vice Chairman Ashton

C Barrett and James V Day Commissioners

These are two consolidated proceedings involving essentially the

same subject matter Docket No 6539 was initiated with the filing

ofa complaint by the Empire State Highway Association Empire

State an association of motor carriers alleging violations of

sections 15 16 and 17 ofthe Shipping Act 1916 The complaint was

prompted by a general rate increase in truck loading unloading

rates published by the New York Terminal Conference Confer

ence an association of marine terminal operators organized

under approved Commission Agreement No 8005 in the amount

of17 percent

The Commission initiated a companion investigation Docket No

6546 into the same truck loading unloading rates to determine

whether these rates and the practices and ratemaking activities

of the Conference are lawful under sections 15 16 and 17 of the

Shipping Act 1916 and also to determine whether Agreement No

8005 under which the Conference issues its Truck Loading and

Unloading Tariff should be disapproved cancelled or modified

Administrative Law Judge Charles E Morgan concluded that

since the matters in the complaint in Docket No 6539 are no

longer in controversy and since the present rates for truck loading

and unloading at the Port ofNew York had not been shown to be

unlawful the complaint in that proceeding should be dismissed In

21

17 F MC
22 FEDERAL MARITIME COMMISSION

so doing he noted that Complainant Empire which is also 

intervener in Docket No 6546 no longer challenges the leve

the rates for truck loading and unloading as now published 

Respondents Tariff No 7 and that no other party to the proce

ing questions the present level ofthose rates

In his Initial Decision in Docket No 6546 Judge Morgan fo

and concluded that a proposed new tariff rule which defines 

composite hourly cost of labor and forklift truck for truck load

and truck unloading at the Port of New York is reasonable 

lawful that the present truck loading and truck unloading ra

and the practices and ratemaking activities of the Confere

pursuant to Agreement No 8005 are not shown to be unlaw

and that Agreement No 8005 insofar as it is in issue herein 

lawful and finally that the investigation should be discontinued

The tariff rule which Judge Morgan found reasonable 

lawful and accordingly approved was proposed by Hearing Co

sel This rule would be published in the Conference s tariff as 

amendment to that item relating to Disposition ofRequests 

Complaints and would provide as follows

Any shipper consignee or other ratepayer subJect to the rates and cha

published in this tariff may submit a statement in accordance with the p

dures set forth in this rule requesting that a new rate be negotiated based u

costs in the amount of 12 71 per man hour and 3 25 per hour for forklift t

and the time spent in loading or unloading a particular volume of the partic

commodity In case the partie are unable to agree upon the time factor 

factor will be determined by a board of arbitration consisting of a

repreeenta

of the ratepayer a representative of the terminal operators and a third par

be selected by the parties or by an impartial arbitrator selected by the par

or by the Federal Maritime Commission Upon determination of the time fa

a new rate will be published in the tariff

Underthe above proposal the composite hourly cost for com

ing new rates would be the same for all commodities but this c

would be multiplied by varying time factors resulting from neg

ations agreements or arbitration

In summary the Administrative Law Judge concluded 

found that reasonable items of cost factors to be considered 

arriving at the hourly costs in the proposed tariff are

1 VVages 

2 Fringe benefits n n n

n

n n

n

n 

3 Payroll taxes at 8 85 percent of wages item 1 n n n 

4 VVaterfront commission assessment at 185 percent of wages nn

5 Insurance at 9 percent of wages n

n

n n

n n 

I The per manhour and forklift trucKper hour coat figures which Hearing Counsel oriKinally pro

in their suggested rule were 10 10 and a ou respectively

17 F MC
EMPIRE STATE HGWY vAMERICAN EXPORT CO 23

Subtotal of items I 2 3 4 and 5 hh

U nnu nn

n 7 81

6 Overhead at 18 percent of wages nnnnn nnnn n nn 93

7 Dead time at 31 percent of the sum of items 1 2 3 4 and 5 hnn 242

8 Indirect labor at 20 percent of wages hnn n hh nnn u 103

9 Profit at 10 percent of wages U h nnnnu nnnn Uhnn 52

Total of factor per man hour nn nnn h nnn Uh n 12 71

Factor per lieft truck hour n U n nn nnnn

nnnn 3 25

In directing that the above factors of 12 71 per man hour and

3 25 per lift truck hour should be included in the Conference s

tariff Judge Morgan reemphasized that these figures effective

September 3D 1972 are subject to changes such as wage changes

approved by labor contracts or the Pay Board Social Security law

changes labor contract fringe benefit changes etc

Empire filed the only exceptions to Judge Morgan s decision to

which replies were filed by the Conference and Hearing Counsel

Empire s exceptions voice a general opposition in principle to the

proposed rule and to specific items comprising the composite cost

factor to be included in the rule Many ofthese exceptions advance

arguments which have already been considered and properly

rejected by Judge Morgan

At the outset Empire believes that costs utilized in establishing

rates must be proven presumably in every instance and cannot

be fixed by a tariff provision Thus the truckers fear that ifthe

rule is adopted the Conference would be absolved from justifying

any future rate increases and that the public would be forbidden

to contest the Conference s cost data Also Empire contends that

the rule in fixing a cost factor makes no allowances for changed

facts such as increases in productivity

Empire has obviously misinterpreted the effect and purpose of

the tariff rule at issue here The composite cost factor established

in the tariff rule is designed as Hearing Counsel have explained

to assist shippers and terminaloperators in their negotiations and

hopefully to obviate the necessity for litigation by providing to

shippers more effective means to obtain acceptable rates It is not

designed to relieve terminal operators oftheir reasonable rate and

practice obligations underthe Shipping Act 1916

Nor are the specific items of cost which comprise the composite

cost factor intended to be fixed in perpetuity as has been sug

gested All the component cost items are subject to change as

conditions at the port itself may change and productivity improve

17 F MC
24 FEDERAL MARITIME COMMISSION

This is not to suggest however that all component items of c

are subject to change under the same terms and conditions Th

a change in a cost item which is by nature subject to an unde

ing collective bargaining agreement or tq a particular law 

wages fringe benefits payroll taxes waterfront commission 

sessments insurancewould be an automatic type ofadjustme

For example whenever the wage figures included in the contr

between employers and members of the International Longsho

men s Association are changed by subsequently negotiated c

tracts as they were on October 1 of last year the hourly c

factor will be correspondingly adjusted

Similarly if payroll taxes should by law be increased t

composite hourly cost item could without more be adjusted 

reflect the change in that component item

Improvement in operating conditions andor productivity at 

piers may also warrant adjustments in those component c

items which relate to overhead profit indirect labor and de

time While these items of cost unlike those which are read

determinable from prevailing contracts or statute are not subj

toautomatic adjustment they are nevertheless subject to revis

where costs and productivity so dictate The basis of such revis

would of course be the terminal operators own financial data 

the need for such revision arises we believe that we can exp

the full cooperation ofthe terminal operators who have been mo

cooperative with the Commission s staff in furnishing financ

data and information in this proceeding

Since the present cost factor is based only upon current ope

ing conditions it is obviously contemplated that all items of c

are subject to future adjustments Clearly and contrary to E

pire s unwarranted fears the shipping public will not be fore

wedded to current costs and productivity despite future ope

tional changes

Moreover Empire s opposition to the tariff rule on the groun

that the establishment of acost factor does not allow for improv

ments in productivity ignores one very important fact Wh

Empire has obviously overlooked is that the established compos

cost factor is only one element in the rule the other being t

negotiable time factor Clearly whatever changes in productiv

occur will to some extent be reflected in the time factor Thus t

final commodity rate arrived at under the rule will of necess

decrease as the volume of cargo handled per hour increases

Empire in addition to its general objection to the tariff rule 

issue and its concurrent challenge to the component cost factor 

17 F M C
EMPIRE STATE HGWY v

AMERICAN EXPORT CO 25

principle also takes exception to those specific items of cost which

relate to overhead profit indirect labor and dead time there

presumably being no objection to the first five items of cost On

exception Empire also questions the soundness ofthe accounting

procedures followed in arriving at the challenged items of cost

Most of the cost items excepted to were confirmed by experi

enced terminal accountants while the remainder were properly

established by the Administrative Law Judge on the basis of the

evaluation ofall relevant and probative evidence All items of cost

determined by Judge Morgan are clearly supportable on the

record Thus we conclude that Judge Morgan s findings regarding

the challenged items of cost were under the circumstances en

tirely proper and well founded and Empire conte ntions to the

contrary are rejected While many ofthe specific exceptions raised

by Empire constitute merely rearguments of objections already

considered and properly rejected by the Administrative Law

Judge some ofthe contentions advanced merit further discussion

Empire opposes the 10 percent profit factor found reasonable by

Judge Morgan on the ground that no regulatory agency has

sanctioned a profit of 10 percent This argument in addition to

being factually incorrect reflects a lack of understanding regard

ing the application ofthe profit factor itself While as noted by the

Conference and Hearing Counsel the Commission in Croum Steel

Sales Inc v Port of Chicago 12 F MC 353 1967 approved a 10

percent profit margin for a terminal and stevedoring operation

Empire s challenge fails for an even more fundamental reason As

Judge Morgan s initial decision clearly indicates the so called

profit margin or factor constitutes only a

percentage ofwages and

not a percentage of total costs Expressed as a percentage oftotal

cost the profit margin would as indicated bY Judge Morgan

amount to only 3 7 percent

As regards dead time Judge Morgan found that a factor of31

percent was reasonable In so doing he found that 2 5 hours out of

every eight hour day were nonproductive at the piers owing to

such conditions as rainy days early departures late arrivals

extra lunch time and coffee breaks Empire continues to oppose

any factor for dead time which it views as an unjustified expense

Essentially Empire s position is that there is no item ofexpense

in the croporate books and records of the terminal operators for

dead time and that in any event the shipping public should not

be made to subsidize the terminal operators inefficiences

We find Judge Morgan s allowance ofa dead time factor and the

amount thereof to be wholly proper and reasonable under the

17 F M C
26 FEDERAL MARITIME COMMISSION

circumstances While we certainly do not advocate idle labor tim

the inescapable fact of the matter is that such nonproductive tim

does exist And to the extent that terminal operators are pay

wages for the full eight hour day but are receiving something le

than eight hours of revenue o producing work dead time is a

ve

real cost which must be recouped if a terminal rate is to 

compensatory

In conclusion we find that Empire on exception has advanc

no argument or proposition which would warrant our rejection 

Judge Morgan s findings as they relate to the adoption of t

proposed much needed tariff rule Accordingly we are adopt

the Initial Decision in this proceeding subject only to its updat

to reflect ILA wage rate increases to 5 55 which became effect

on October 1 1972 some two days after the issuance of Jud

Morgan s decision Applying the cost factor percentages of 

Initial Decision and adjusting the composite cost factor to ref

current wages we derive a figure of 13 53 per manhour w1ich

was computed as follows

Wages 

Fringe benefits n

nn

n

n

n n 

Payroll taxes 8 86 percent of wages n n n

n 

Waterfront commission assessments 1 88 percent of wages n 

Insurance 9 percent of wages nn n

Subtotal 

Overhead 18 percent of wages n

n

n

Dead time 81 percent of 1st 6 items

Indirect labor 20 percent of wages n

nnnn n

n

Profit 10 percent of wages n

n

nn

n

Total cost per manhour n n nn

n

n 

The 3 25 per lift truck hour cost found proper by Judge M

gan remains unchanged

ULTIMATE CONCLUSION

The Administrative Law Judge s findings and conclusions in 

proceeding being proper and well founded we are adopting 

Initial Decision updated as indicated herein to reflect increase

ILA wages as our own and making it a part hereof Thus 

provision we are approvingfor publication in the Conference ta

as an amendment to Item 21 Disposition of Requests 

Complaints would read as follows

17 F MC
EMPIRE STATE HGWY v AMERICAN EXPORT CO 27

Any shipper consignee or other ratepayer subject to the rates and charges

published in this tariff may submit a statement in accordance with the proce

dures set forth in this item requesting that a new rate be negotiated based upon

costs in the amount of 13 53 per man hour and 3 25 per hour for forklift truck

and the time spent in loading or unloading a particular volume of the particular

commodity In case the parties are unable to agree upon the time factor this

factor will be determined by a board of arbitration consisting of a representative

of the ratepayer a

representative of the terminal operators and athird party to

be selected by the parties or by an impartial arbitrator selected by the parties

orby the Federal Maritime Commission Upon determination of the time factor

a new rate will be published in the tariff

Commissioner Clarence Morse Concurring and Dissenting With

Whom Chairman Helen Delich Bentley Joins

Iconcur in the majority opinion subject to the following reserva

tion

The Administrative LawJudge authorized 31 of labor costs to

cover the item of dead time ID 14 The main testimony on this

item was thatof Mr St John Tr 1474 Ex 20 p

16 who admitted

that in New York there was at least two hours of nonproductive

labor to cover late morning starts early evening departures extra

lunch time and morning and afternoon coffee breaks out of the

eight hours of employment Le 25ooand the testimony of Mr

Talbot Tr 1409 1410 Ex 20 p 17 who estimated an additional

one hour of dead time three hours out of eight hours ie

3712 to cover nonproductive time due to factors such as rainy

weather awaiting trucks paper work etc The term dead time

therefore encompasses both controllable and noncontrollable non

productive labor time Controllable nonproductive labor time in

cludes late morning starts early evening departure extra lunch

time and morning and afternoon coffee breaks ID 13 14 Con

trollable nonproductive time results in large part from failure of

management to insistupon and obtain strict adherence by employ

ees to the contract ofemployment

The Administrative Law Judge allowed the full two hours of

25 for dead time covering controllable nonproductive time plus

30 minutes or approximately 6 to cover noncontrollable non

productive time To my thinking an allowance of25 for controlla

ble lost time is unjustified compensates management for failing to

demand and obtain strict adherence by employees to their terms

ofemployment and places that much additional and unnecessary

burden on the commerce of the United States In these days of

2 The word item has been substituted for the rule as used in the rule approved by the

Administrative Law Judge to make it clear that the application procedures are those contained in Item

21

17 F M C
28 FEDERAL MARITIME COMMISSION

spiralinginflation and deficits in our balance of payments Iwo

put management s feet tothe fire to assure that they receive 

honest day s work for an honest day s pay and therefore wo

limit dead time toamaximum of25 inclusive of both contro

ble and uncontrollable nonproductive labor time

SEAL 8 FRANCIS C HURNEY

Secretary

17 F M C
17 F M C

29

FEDERAL MARITIME COMMISSION

No 6539

EMPIRE STATE HIGHWAY TRANSPORTATION INC

v

AMERICAN EXPORT LINES INC ET AL

No 6546

TRUCK LOADING AND UNLOADING RATES AT NEW YORK

HARBOR

In No 6539 present truck loading and truck unloading rates at Port of New

York found not shown to be unlawful and the complaint should be

dismissed In No 6546 proposed new tariff rule as modified herein

defining composite hourly cost for labor and machinery for truck loading

and unloading at Port of New York found lawful present truck loading and

truck unloading rates and the practices and rate making activities of the

New York Terminal Conference pursuant to Agreement No 8005 found not

shown to be unlawful Agreement No 8005 found lawful and the investiga tion in No 6546 should be discontinued

Elkan Turk Jr and Joseph A Byrne for respondents New York

Terminal Conference and its members

Arthur Liberstein for complainant and intervener Empire State

Highway Transportation Association Inc

Samuel H Moerman and Douglas W Binns for intervener The

Port Authority ofN ew York and New Jersey

Seymour Granbard and Mwhael H Greenberg for intervener

American Institute for Imported Steel Inc

Robert C Gawley for intervener Niagara Frontier Tariff Bu

reau Inc

Warren D Mulloy for intervener Eastern Railroads

Samuel W Earnshaw for intervener International Latex Corpo

ration its subsidiaries and affiliates

Bryce Rea Jr and Thomas W nebel for intervener Middle

Atlantic Conference

William F Hoffman for intervener the Cooper Development

Association

Norman D line Paul J aller and Donald J Brunner as

Hearing Counsel
30 FEDERAL MARITIME COMMISSION

INITIAL DECISION OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

These are two consolidated proceedings In No 6589 the co

plainant Empire State Highway Transportation Association I

Empire by its complaint served October 28 1965 alleged that 

rates of the respondents the New York Terminal Conference t

Conference and its members for truck loading and truck unlo

ing at the Port of New York were unlawful A cease and des

order but not reparation was sought

In No 6546 by original order served December 14 1965 

Commission instituted an investigation of the same truck load

and unloading rates to determine whether these rates and t

practices and rate making activities of the Conference are law

under sections 15 16 and 17 of the Shipping Act 1916 the A

Also to be determined is whether Agreement No 8005 und

which the Conference issues its Truck Loading and Unload

Tariff should be disapproved cancelled or modified 2

Many parties have been active in these proceedings as shown 

the list of appearances and in footnote 2 In the more recent stag

of these proceedings there have been fewer active parties

In the earlier stages of these two proceedings certain hearin

were held and challenges were made by the respondents again

the subpenas issued by the former presiding officer which s

penas had directed the respondents to produce certain da

Issuance of the subpenas was upheld by the United States Distr

Court for the Southern Dilitrict ofNew York on December 2 19

and affirmed by the United States Court ofAppeals for the Seco

Circuit on February 15 1967

After the subpenali had been upheld it was discovered that t

production of the data required by the subpenas would n

advance the purpose for which they were sought which was 

determination of the profit and loss results of the truck load

and truck unloading operations at the tariff rates

At a meeting of representatives of the active parties t

respondents offered to have a profit and loss study made by 

reputable firm of Certified Public Accountants Price Waterhou

Co wasengaged It concluded that it would not be possible 

I This decision became the decision of the Commission Auuat 14 1973

2In afirst supplemental order in No 664 served April 4 1966 United 8tIlts Line and Cu

Steamship Company were made parties respondent but the e two parties weredlsmiued aa relpond

by orders respectively of January 13 1970 and February 5 1970 Previously in No 6539 Cu

Steam hip Company and Packet Shtppinl Corporation order of NOlember 16 1965 HoUard Ame

Line Qlder amending complaint of January S 1966 and Transoceanic Terminal Corporation ord

March 7 1966 were dismi8sed 88 respondents

17 F M C
EMPIRE STATE HGWY v AMERICAN EXPORT CO 31

produce a statement of past profit and loss because the records

kept by the respondents for their own purposes did not allocate

costs in such a fashion as to separate those costs attributable to

truck loading and unloading from the aggregate costs ofstevedor

ing and terminaloperations Price Waterhouse proposed aprospec

tive study under test conditions to be established by Price Water

house All active parties agreed with appropriate reservations

The study was for a period of six months It showed that during

this test period the respondents experienced costs of 125 for each

100 oftruck loading and unloading revenue earned

The study then was sought to be impeached on the ground that

it included the cost ofcertain services which should be charged to

the ocean carriers for terminal services rather than be charged to

the shippers and receivers ofcargo for truck loading and unload

ing services Price Waterhouse had used the existing tariff defini

tion oftruck loading and unloading services in its study but it was

at this time asserted that the tariffdefinition itself was faulty

The issue of the proper tariff definition ofthe truck loading and

unloading service was referred to the Commission all parties

having agreed to do so in order to progress the proceeding By its

decision served September 18 1969 the Commission decided that

the then existing tariff definition was indeed faulty to the extent

that it included any movement of the cargo between the place of

rest on the pier and a place reasonably adjacent to the tailgate of

the truck Truck Loading and Unloading Rates at New York

Harbor 13 F MC 51 6OB1

The respondents filed in the United States Court ofAppeals for

the District ofColumbia Circuit a petition to review that decision

The respondents voluntarily dismissed this petition subject to

reopening upon the final decision of the Commission New York

Terminal Conference v Federal Maritime Commission No 23 644

D C Circuit per curiam order filed January 21 1970

Efforts next were made to determine whether it would be

possible to make adjustments in the Price Waterhouse study so as

to eliminate from it only such costs as were attributable to

activities excluded from the tariff service as redefined by the

Commission Both Price Waterhouse and the Staff ofthe Commis

sion concluded that this could not be done

Also it wasevident that the books and records ofthe members

ofthe Conference were maintained in such a fashion that by using

only these books and records no determination could be made of

costs and profit and loss data relative to truck loading and

unloading as redefined

17 F M C
32 FEDERAL MARITIME COMMISSION

Some other means of determining these costs appeared advis

ble Furthermore in view ofthe very substantial expense it w

deemed impractical to undertake a second study of costs along th

lines of the test study previously made by Price Waterhouse

Also it appeared virtually certain that any attempt to condu

the necessary time studies of the newly defined truck loading a

unloading services at the waterfront terminals would produ

labor stoppages and efforts todistort the result ofthe time studie

The parties and their counsel informally met from time to tim

and endeavored to reach some method or agreement to progre

the proceedings and thanks to their most diligent efforts t

recent stages of the hearings herein commenced on May 5 19

before the presently presiding Administrative Law Judge Gen

ally the parties now are agreed that the matters heard in t

recent stages of these proceedings substantially should be t

basis for decision on the present issues and that a detailed revie

ofthe evidence in the earlier hearings is unnecessary for a prop

resolution ofthe remaining issues

In the recent stages of these proceedings and in the rece

hearings the active parties have included the respondent Termin

Conference and its members the complainant and interven

Empire the Port Authority of New York and New Jersey f

merly known as The Port of New York Authority the Americ

Institute for Imported Steel and Hearing Counsel In addition 

the recent hearings anumber ofshippers were called as witness

by Hearing Counsel Although these shippers did not intervene 

parties to the proceedings they presented varying views as 

what should or should not be done concerning the truck load

and unloading rates and practices

In the final stages ofthese proceedings briefs were filed by o

three parties namely Empire the respondents and Hear

Counsel

In fact the complainant Empire which is also an intervene

No 6U6 at the present time does not question the level of 

rates for truck loading and unloading as now publishedin respo

ents Tariff No 7 Nor does any other party on brief question 

present level ofthese rates

Accordingly it is found that the matters in the complaint in 

6539 are no longer in controversy and it is found that the pres

rates for truck loading and unloading at the Port of New York 

not shown to be unlawful The complaint in No 6539 should 

dismissed

In view ofthe above circumstances the investigation in No 

17 F MC
EMPIRE STATE HGWY v AMERICAN EXPORT CO 33

46 conceivably now might be discontinued without more But the

respondents and Hearing Counsel urge that there should be some

constructive result from the time and effort ofall the parties and

that certain other findings should be made and a new tariff rule

prescribed Only Empire of the other parties still active in the

proceedings opposes the procedure urged by the respondents and

Hearing Counsel The latter two parties disagree as to details ofa

proposed new tariff rule and Empire contests certain details of

the rule as well as opposing it

Before settling on the now proposed solution ofa new tariffrule

there was another proposal It was suggested that there be

determined the composite hourly cost of the manpower and lift

trucks employed in truck loading and unloading and thereupon

the Conference s tariffwasto have been revised to reflect acharge

for truck loading and unloading based on time in 15 minute

increments This proposed charge was intended to replace the

existing tariffs individual commodity rates and charges which of

course vary with the quantities ofcargo handled and the type of

commodity handled

Representatives of the respondents conferred with Hearing

Counsel and Commission staff members and a list of factors

entering into a composite hourly cost was determined It was

agreed that Messrs Robert A St John and Harry Chuback ofthe

Commission s Staff would be allowed to examine the records of

respondents to verify the suggested factors of the composite

hourly cost and to verify the values of the factors suggested by

the respondents on the basis of confidential treatment of the

underlying data

Mr St John verified that the composite hourly cost should

include among others the factors ofwages fringe benefits payroll

taxes Waterfront Commission assessment insurance overhead

and standard lift truck Mr St John did not dispute the existence

of factors of dead time and profit but did not in his first

testimony confirm any particular figures for these factors The

respondents had initially suggested a factor of25 percent for dead

time or two hours out of each eight hour day computed on the

basis of 15 minutes late arrival for work 30 minutes morning

coffee break 15 minutes early departure for lunch 15 minutes late

return from lunch 30 minutes afternoon coffee break and 15

minutes early departure from work

The respondents also initially suggested 26 percent of direct

labor costs wages as acombination ofthe two factors ofoverhead

and profit Mr St John confirmed 18 percent as overhead and

17 F M C
34 FEDERAL MARITIME COMMISSION

thereby there wasderived a factor of 8 percent for profit Mr 

John did not support either the 25 percent dead time factor or t

8 percent profit factor because he could not confirm the 25 perce

figure from the records of the respondents and because it wasn

within his area of competence to express an opinion as towhatt

profit should be

It wasassumed that the respondents would later offer substa

tiation of these two factors Also the respondents had assert

that there should be included a factor for indirect labor that is 

supervisory employees at the piers such as timekeepers a

mechanics who are not included in either the direct labor 

overhead categories of costs The records ofthe respondents we

not broken down so as to identify this indirect labor cost or 

provide a basis for its allocation It was understood that t

respondents would present evidence as to any differences from M

St John s figures which they believed justified

At subsequent hearings in New York a considerable amount 

shippers and consignees testimony wasadverse tothe suggest

time based charge for truck loading and unloading These shippe

and consignees were concerned that their charges would 

uncertain because of the uncertain element of the time of tru

loading and unloading which time obviously might vary even 

between two identical shipments Other shippers supported t

suggested time based charge The trucking interests and the Po

Authority of New York and New Jersey also opposed the su

gested time based charge for the same reason of uncertainty 

charges including the fact that different piers may vary 

efficiency in their loading and unloading operations Furthermo

a lawful tariff should provide definite and certain charges so th

any two shippers each shall pay the same charges if their sh

ments are identical

At this stage ofthe proceedings the ime based tariff suggesti

was withdrawn and several meetings of the active parties we

held in February and March 1972 to consider other possib

resolutions of these proceedings These meetings culminated in t

present proposal of a new tariff rule suggested by Hearing Cou

sel and embodied in Exhibit No 19

Hearing Counsel propose divorcing the time element above fro

the composite hourly cost and leaving the time element to futu

negotiations and determinations by the respondents shippe

consignees and truckers Hearing Counsel retain in their propos

the composite hourly cost for truck loading and unloading A

seen the Conference agrees in theory but not in the cost detai

17 F MC
17 F MC

EMPIRE STATE HGWY v AMERICAN EXPORT CO 35

and Empire on brief opposes this last proposal both as to the

theory and as to cost details

This composite hourly cost would be a composite cost of the

labor and the machinery needed in the truck loading and unload

ing operations

Hearing Counsel propose that a rule be published in the Confer

ences tariff as an amendment to Item 20 Disposition ofRequests

and Complaints The proposed rule Exhibit 19 is

Any shipper consignee or other ratepayer subject to the rates and charges

published in this tariff may submit a statement in accordance with the proce

dures set forth in this rule requesting that a new rate be negotiated based upon

costs in the amount of 10 10 per manhour and 3 00 per hour for forklift truck

and the time spent in loading orunloading a particular volume of the particular

commodity In case the parties are unable to agree upon the time factor this

factor will be determined by a board of arbitration consisting of a representative

of the ratepayer a

representative of the terminal operators and a third party to

be selected by the parties or by an impartial arbitrator selected by the parties

orby the Federal Maritime Commission Upon determination of the time factor

a new rate will be published in the tariff

The Conference supports the above rule but would insert other

figures in lieu of 10 10 and 3 00

Under the above proposal the composite hourly cost for comput

ing new rates would be the same for all commodities but this cost

would be multiplied by varying time factors resulting from negoti

ations agreements or arbitrations The time factor or productiv

ity subject to negotiation and arbitration etc would be how long

it takes to load or to unload a given quantity of a particular

commodity The resulting rates per 100 pounds reached by agree

ment or arbitration would be published in the tariff and would

from time to time change existing commodity rates presently in

the tariff

Presumably ashipper satisfied with his present commodity rate

would not avail himself of the proposed tariffrule but a shipper or

consignee of another commodity might seek action underthe rule

if he believed the provable time element would result in a rate in

his favor as compared with the existing tariff rate on his commod

ity

All parties are agreed that they are free to contest in these

proceedings the actual figures of 10 10 and 300 suggested for

listing in the proposed rule However it is the general concensus

that once this rule were to be adopted the figures would be

binding except that individual component parts of the figures

would be changed from time to time when labor contracts social

security laws etc change as for example when longshoremen s
36 FEDERAL MARITIME COMMISSION

wages were to be increased from 4 60 per hour to 5 15 per hou

On the other hand there would be no changes allowed fo

example in the profit percentage resulting from findings in th

proceeding If each component part such as the percentage f

profit or the percentage for overhead were to be renegotiate

each time a commodity rate were to be changed then the effect 

the proposed rule would be anullity

Outside of Empire s general opposition to the propoiled tar

rule there is little or no disagreement about the first five items 

the composite hourly cost These five items are Wagell Fring

Benefits Payroll taxes Waterfront Commission Assessment a

Insurance

The results of the Pay Board s action with respect to the ne

contract between employers and members of the Internation

Longshoremen s Association ILA are known and the approv

figure for wages as of September 1972 is 5 15 per hour for straig

time wages and 165 per hour for fringe benefits Whenever the

figures are changed by approved ILA contracts or by pay boa

action the figures in the proposed tariff rule in these proceedin

would be adjusted accordingly This would be an automatic a

non controversial type of change in one of the component costs 

the total man hour cost of 10 10 shown in the proposed tariff Ite

20

Insurance of nine percent of wages 5 15 per hOl lr amounts 

46 cents per hour Overhead ofeighteen percent of wages amoun

to 93 cents per hour Waterfront Commission aSllessment of 1

percent of wages amounts to 9 cents per hour Effective October 

1972 this assessment apparently will be increased to 188 perce

ofwages

The respondents compute payroll taxes at 94 percent a

Hearing Counsel at 8 3 percent of wages U sing the figure of 5 

per hour for wages payroll taxes as computed by respondents a

48 cents and by Hearing Counsel they would be 43 cents At t

time of Mr St John s audit the payroll tax rate was 8 3 perce

and Hearing Counsel insist on this rate On the other ha

respondent s witness stated without going into details that t

8 3 percent should be changed to 9 4 percent because 94 perce

was the across the board average of payroll taxes for New Yo

and New Jersey Since the parties are not far apart on this ite

and to resolve this relatively minor issue a figure in between 

above two figures will be used namely 8 85 percent or 46 cen

This figure will be subject tofurther audit and agreement betwe

respondents and Hearing Counsel It is suggested that these t

17 F M C
EMPIRE STATE HGWY v AMERICAN EXPORT CO 37

parties meet at their earliest convenience and resolve their differ

ences as to the proper percent for payroll taxes and advise the

Commission of their conclusions

As between respondents and Hearing Counsel there remain

differences in calculations concerning the items of dead time and

profit and also whether or not there should be an item ofindirect

labor Empire opposes any factor for dead time or for indirect labor

and disagrees with the computation of the profit factor Empire

also disputes the factor for overhead

Overhead is computed by Hearing Counsel and by respondents

as 18 percent ofwages Overhead of18 percent of direct labor was

confirmed by Mr St John from the books and records of five

terminal operators who represented about 84 percent of total

revenues derived from truck loading and unloading by the Confer

ence Empire challenges the 18 percent figure for overhead on the

ground that each item ofoverhead wasnot established as properly

attributable to truck loading and unloading as for example the

items of overhead of president s salary and of advertising How

ever to the extent that Mr St John was cross examined on

overhead each item was substantiated The overhead factor

herein wasbased on sound accounting procedures Overhead by its

nature is a general factor which cannot be related to any particu

lar operation of an enterprise and overhead must be distributed

generally to all ofthe activities of the enterprise It is concluded

that the factor for overhead of 18 percent ofwages is reasonable

Accordingly the factor herein found proper for overhead based on

wages of 5 15 is 93 cents

Dead time is computed by Hearing Counsel and by respond

ents as a percentage of the sum ofthe five items of 1 wages 2

fringe benefits 3 payroll taxes 4 Waterfront Commission As

sessment and 5 insurance Using 5 15 for wages 165 for fringe

benefits 46 cents for payroll taxes 9 cents for Waterfront Commis

sion Assessment and 46 cents for insurance the sum ofthese five

items as of September 30 1972 would be 7 81

Hearing Counsel support dead time of 25 percent of the above

five items and respondents contend that dead time should be 37 5

percent of the five items Empire opposes any factor for dead time

Mr St John s opinion was that a total of two hours of dead time

or of nonproductive time is aminimum at the Port of New York

for the morning and afternoon coffee breaks late morning starts

early evening departures and extra lunch time Two hours out of

an eight hour day amounts to 25 percent

Mr Durel J Talbot an experienced terminal operator agreed

17 F MC
38 FEDERAL MARITIME COMMISSION

with the two hours of dead time described by Mr St John bu

pointed out an additional element of dead time in his opinion

composed of idle time when the direct labor employed for truc

loading and unloading is idle while other employees are comple

ing paper work related to truck loading and unloading jobs an

while the truck loading and unloading labor has nothing to d

while a truck to which it is assigned is moving to the loading o

unloading position or when some of the trucks anticipated t

present themselves for service on the day in question fail t

appear Mr Talbot estimated one hour f idle time per day i

addition to two hours for coffee breaks lunches early departure

and late arrivals or a total of three hours of dead time or 37 

percent ofan eight hour day An experienced trucker Mr Gense

it was stipulated would have testified that there has not been an

delay in the loading or unloading of trucks at the piers in hi

experience as a trucker where one ofhis trucks was not availabl

to receive or discharge cargo Respondents point out to back u

Mr Talbot s testimony of idle time while awaiting trucks that i

Empire State HWYTransp Ass n v American Export Lines 

F M B 666 680 1969 the Commission s predecessor found that i

hiring longshoremen for truck loading and unloading the term

nals had to estimate the following day s demand for truck loadin

labor and that the magnitude ofthis problem was indicated by the

variation in the number of trucks loaded and unloaded per day a

some of the terminals in July and August 1957 which was from

none to 68 1 to 10 8 to 126 11 to 86 46 to 167 and 58 to 154

Respondents now contend that a condition shown to have existed

is presumed tocontinue until the contrary is shown

It is clear that at times on rainy days for example truck loadin

and unloading laboris idled and cannot be assigned to any othe

tasks on the piers 01 terminal areas It is concluded that credenc

must be given to the testimony of Mr St John Mr Gensel and

Mr Talbot and carefully weijhing all their testimony as to dead

time it is concluded that there is about 8Q minutes of time when

truck loading labor is idle in addition to the two hours for earl

departures late arrivals extra lunch times and coffee breaks

This amounts to a total of 2 6 hours of dead time or about 31

percent of an eight hour day It is concluded that the factor fo

dead time should be computed as 81 percent of 7 81 the sum o

the five items above or 2 42

A profit factor of six percent at most is supported by Empire

eight percent is supported by Hearing Counsel and 10 percent b

the respondents Empire would compare the Conference s truc

17 F MC
EMPIRE STATE HGWY v AMERICAN EXPORT CO 39

loading and unloading operations with the operation of a public

utility and argues that historically the rate for a public utility

would be at most six percent This argument appears unrealistic in

view ofthe present costs ofborrowing money and in any event the

Conference s members are in a competitive business not compara

ble with public utilities

Hearing Counsel point out on brief that the profit of eight

percent which they propose actually is not a profit margin in the

usual sense in that it is merely eight percent of wages direct

labor or considerably less a margin ofprofit on the total cost per

hour of the truck loading and unloading operation The original

cost of direct labor used in Exhibit 19 of 4 60 times eight percent

would give a factor of37 cents profit out ofthe total cost including

profit as per Exhibit 19 of 10 10 Thus the profit margin would

amount on this basis to only 3 7 percent

Respondents urge that the eight percent profit figure derived by

Mr St John from the books of five principal terminal operators is

a minimum reasonable figure that it is unduly depressed by

competition and that the risks involved and cyclical nature ofthe

truck loading and unloading business fully justify a figure of 10

percent for profit Hearing Counsel counter that the terminal

operators should not be given the 10 percent profit by regulation

which they are unable to achieve in the competitive market place

and that the substitution of regulation for competition would

result in a greater burden on rate payers and that the 10 percent

goal of the respondents is rarely likely to be attained in their

overall terminal operations In Crown Steel Sales Inc v Port of

Chicago 12 F M C 353 1967 at pages 370 and 371 a finding as to

profit margin was made

the terminal operators 10 percent before tax profit margin is found to

become about 5 6 percent after federal income taxes resort to return on

invested capital would not be appropriate as most of the terminals facilities and

equipment are rented The fact that overthe past 3 years these terminals have

not been making 10 percent before taxes on their overall operations including

stevedoring is not determinative and the record does not otherwise show the

allowance to be unjust or unreasonable for this type of business

In examining certain contracts between the terminal operators

and the ocean carriers Mr St John saw an elementoften percent

for profit This ten percent appeared invariably on these stevedor

ing contracts While the stevedoring and the truck loading and

unloading are two different operations and the same profit is not

necessarily common to both nevertheless there are substantial

similarities such as in the labor contracts Also in the earlier

stages of this proceeding a

representative of Price Waterhouse

17 F MC
40 FEDERAL MARITIME COMMISSION

Co stated that in his opinion a 10 percent before tax profit wa

appropriate based on 10 percent ofgross income Here we now ar

dealing with the cost of direct labor or wages only and in all th

circumstances a ten percent add on to direct wages does no

appear unreasonably high It is concluded that 10 percent o

wages or 52 cents is not unreasonable for the so called prof

factor in this proposed tariff rule

Indirect labor is one of the necessary costs of operation of th

members of the Terminal Conference Indirect labor costs resu

from the wages of personnel which are not reflected either i

direct labor s wages or in wages and salaries listed as overhead

Indirect labor includes various categories ofpier superintendent

and of foremen timekeepers checkers and mechanics Mr S

John made no attempt to verify an amount or percentage fo

indirect labor inasmuch as he had been informed that there wa

no way of specifically allocating indirect labor to the truck loadin

and unloading operation The checkers timekeepers dock bosses

and tallymen usually are engaged in other activities in addition t

their activities regarding truck loading and unloading In othe

words indirect labor at the Port of New York is an overall cos

factor generally allocable to various operations including the

truck loading and unloading operation

In fairness to the respondents if the composite hourly cos

figure in the tariffrule now proposed is toreflect fully distribute

costs it must include as one component a factor for indirect labo

Mr Talbot caused a study to be made ofgross payroll payment

by International Terminal Operating Co Inc lTO a substantia

terminal operator and stevedore in the Port ofNew York t

personnel in the indirect labor category for one year The payro

expense ofITO for indirect labor for the entire terminal operatio

was 29 2 percent of payroll expense for all direct labor at the

terminal

In Mr Talbot s opinion a lesser degree of supervisory effort i

required in connection with the loading and discharging of ship

than is needed in connection with the direct labor engaged in

truck loading and unloading He concluded that a fair ratio o

indirect labor expense to direct labor expense in connection with

truck loading and unloading should be 33 33 percent

Hearing Counsel acknOWledge that 33 3 percent for indirec

labor may be the experience of ITO but question whether it may

or may not be representative of the entire Conference membe

ship and whether the overall company payroll indirect labor cos

is useful here in determining the cost of indirect labor for the

17 F M C
EMPIRE STATE HGWY v AMERICAN EXPORT CO 41

truck loading and unloading function which comprises only four

percent of ITO s total revenue

Hearing Counsel also question whether the indirect labor which

respondents allocate to truck loading and unloading is not reim

bursed already by allocations to the costs of providing stevedoring

and terminal services to the ocean carriers

Substantial credence must be given to Mr Talbot s

testimony It

is concluded that there are indirect labor costs associated with the

truck loading and unloading operation In accordance with sound

accounting principles general costs not allocable to particular

operations may be allocated generally to all the operations of an

enterprise on an equal percentage basis This means 29 2 percent

for indirect labor for ITO But since no studies or verifications

were made ofthe five principal terminal operators except for the

study by ITO it is concluded that a conservative figure for the

Conference as awhole would be 20 percent for indirect labor Mr

Talbot testified that he believed ITO to be the most efficient

operator at the Port of New York His statement may have been

colored somewhat because he had been ITO s president for ten

years until February 1972 It is concluded that the proper figure

for indirect labor in the proposed tariff rule is 20 percent ofdirect

wages or 103 as ofSeptember 30 1972

For the hourly charge for a fork lift truck to be used in the

truck loading and unloading operation Hearing Counsel support a

charge of 3 and respondents support a charge of 4 Mr St John

made a study ofthe actual charges billed to the ocean carriers by

the terminal operators in the various contracts negotiated be

tween these parties He found that the charges varied from 3 to

4 that some contracts had gone as high as 4 one was 3 50 but

that overall the operators as awhole felt at the time that the 3

figure would be appropriate Respondents now contend in view of

the lapse oftime since the Staff study was made and in view ofthe

general increase in costs ofall kinds during that period that the

factor of 4 per hour for the use of a fork lift truck is reasonable

In all the circumstances giving some weight to the passage of

time it is concluded that the proper factor as of September 30

1972 for fork lift truck is 3 25 per hour

In summary it is concluded and found that reasonable factors

for the proposed tariffrule as ofSeptember 30 1972 are

1 Wages 5 15

2 Fringe benefits nn UU h

n n nu h nn nn Uh nnn 165

3 Payroll taxes at 8 85 percent of wages item 1 n U hnnnn u 46

4 Waterfront commission assessment at 185 percent of wages hnnn 09

17 F MC
42 FEDERAL MARITIME COMMISSION

5 Insurance at 9 percent of wages n 4

Subtotal of items 1 2 3 4 and 5 n

7 

6 Overhead at 18 percent of wages n 

7 Dead time at 31 percent of the sum of items 1 2 3 4 and 5 24

8 Indirect labor at 20 percent of wages n 1 

9 Profit at 10 percent of wages n 

Total of factors per man hollr n

n n

n 12 

Factor per lift truck hour n

n 3 

Grant total per hour n nn n

n n 15 

The above factors of 12 71 per man hour and 3 25 per lift truck

hour should be included in an amended Item 20 Disposition o

Requests and Complaints in the Conference s tariff again sub

ject to the understanding that these figures are effective Septem

ber 30 1972 and are subject to changes such as wage changes

approved by labor contracts or thePay Board Social Security law

changes labor contract fringe benefit changes etc but also

subject to the understanding that the percentages found reasona

ble above for overhead dead time indirect labor and profit are no

subject tochange insofar as the proposed tariff rule item 20 herein

is concerned

It is concluded that the proposed tariff rule is consistent with

the past history at the Port of New York insofar as the earl

tariffs of the terminal operators contained truck loading and

unloading rates which were the results of negotiations betwee

the terminal operators and the truckers The proposed rule wil

continue to provide for rate negotiations and help the parties to

avoid future litigation The proposed rule will have a firm bas

upon which to conduct these rate negotiations in that there wi

be a firm figure for the hourly cost of loading and unloading

trucks Of course there will remain in probable dispute the tim

element for any particular commodity The negotiations and an

agreements and ifnecessary any arbitrations as provided by the

proposed rule presumably will take care ofremaining disputes a

to the time elements

It is concluded also that truck loading and truck unloading ar

labor intensive services and that the usual ratemaking factors

applicable to rate making for the ocean portion of atransportatio

service are not applicable in a substantial degree to rate makin

for the truck loading and unloading services or that if such usua

rate making factors are applicable to the truck loading and un

loading services these factors are entitled toamuch lesser weigh

For the purposes of the proposed tariffrule it is concluded that 

17 F MC
EMPIRE STATE HGWY vAMERICAN EXPORT co 43

is reasonable and proper to rely on uniform cost factors per man

hour and per lift truck hour for all commodities loaded and

unloaded in and out of trucks at the piers at the Port ofNew York

The flexible time element will in the largest part take care of

whatever differences in rates may be justified by the differences in

the other rate making elements associated with the various com

modities

ULTIMATE CONCLUSIONS AND FINDINGS

It is concluded and found in No 6539 that the present truck

loading and truck unloading rates at the Port ofNew York are not

shown to be unlawful and the complaint should be dismissed In

No 6546 it is concluded and found that the proposed new tariff

rule as modified by previous findings herein which defines the

composite hourly cost for labor and fork lift truck for truck loading

and truck unloading at the Port of New York is reasonable and

lawful and it is further concluded and found that the present

truck loading and truck unloading rates and the practices and

rate making activities of the New York Terminal Conference

pursuant to Agreement No 8005 are not shown to be unlawful

and Agreement No 8005 insofar as it is in issue herein is lawful

and the investigation should be discontinued

S CHARLES E MORGAN

Administrative Law Judge

WASIDNGTON D C

September 29 1972

17 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 457

COMMERCIAL PRINTING INC

v

SEA RIDERS INC

NOTICE OF ADOPTION OF INITIAL DECISION AND ORDER

PERMITTING WAIVER OF CHARGES

August 29 1978

No exceptions having been taken to the initial decision in th

proceeding and the Commission having determined not to revie

same notice is hereby given that the initial decision became th

decision ofthe Commission on August 29 1973

Itis ordered That applicant is authorized to waive collection 

431 20 of the charges previously assessed Sea Riders Inc

Itis further ordered That applicant shall publish promptly in it

appropriate tariff the following notice

Notice is hereby given as required by the decision in Special Docket 457 th

effective June 2 1973 for purposes of refund orwaiver of freight charges on a

shipments which may have been shipped during the period from June 2 19

through June 19 1973 the rate on Phone Directories is 32 00 W M subject 

all applicable rules regulations terms and conditions of said rate and this tar

Itis further ordered That waiver of the charges will be effe

tuated within 30 days of service ofthis notice and applicant sha

within five days thereafter notify the Commission ofthe date an

mannerof effectuating the waiver

By the Commission

SEAL S JOSEPH C POLKING

Assistant Secretary

44

17 F M C
17 F M C

45

FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 457

COMMERCIAL PRINTING INC

v

SEA RIDERS INC

Application to waive a portion of freight charges granted

INITIAL DECISION OF STANLEY M LEVY

ADMINISTRATIVE LAW JUDGE

Pursuant to Public Law 90298 90th Congo section 18 b 3

Shipping Act 1916 Sea Riders Inc respondent on July 10 1973

applied for permission to waive 43120 being a portion of freight

charges for transporting telephone directories from Miami Flor

ida to Jamaica

On bill of lading No 1847 dated June 2 1973 Commercial

Printing Inc complainant shipped telephone directories measur

ing 2157 cubic feet which respondent rated at 32 00 per measure

ment ton 40 cubic feet for a total of 1 725 60 At that time

respondent s applicable tariff rate was 40 00 per 40 cubic feet for

the commodity At 40 00 per 40 cubic feet the freight charge

would total 2 150 80 However two months prior to actual ship

ment a rate of 32 00 on phone directories wasnegotiated with the

shipper but respondent inadvertently failed to publish the reduc

tion which could have become effective before shipment Unmind

ful ofthe oversight and believing the new lower rate wasin effect

respondent billed and collected at the 32 00 rate

Since the shipment and prior to the filing ofthis application for

waiver of a portion ofthe freight charges respondent has filed 1st

revised page 23A to Sea Riders Inc Freight TariffNo 2 F M C

No 2 effective June 19 1973 which establishes a rate of 32 00

per 40 cubic feet for phone directories

No shipments other than complainant s of the same or similar

commodity moved via respondent during the same period of time

at the rate applicable at the time ofthe shipment involved in this

proceeding

I This decision became the decision of the Commission August 29 1973
46 FEDERAL MARITIME COMMISSION

The facts demonstrate a situation within the purview of Pub

Law 90298 which authorizes the Commission for good caus

shown towaive collection of a portion of the freight charges whe

there is an inadvertent failure on the part of acarriertofile a ne

tariff The application was filed within 180 days of the date ofth

shipment

Good cause appearing and applicant having complied with th

provisions of Public Law 90298 permission to waive collection 

431 20 ofthe freight charges on the shipment above described 

granted Applicant shall publish notice in its tariff as required b

the statute The waiver of the charges here authorized shall 

effectuated within 30 days ofthe service ofthe notice and within 

days thereafter applicant shall notify the Commission of the da

and manner of effectuating the waiver

S STANLEY M LEVY

Administrative Law Judge

WASHINGTON D C

August 1 1973

17 F M C
17 F M C

47

FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 456

PLAZA PROVISION COMP ANY AND PUEBLO SUPERMARKETS INC

v

MARITIME SERVICE CORPORATION

Application to settle certain demurrage accounts ie to waive collection from

Plaza and Pueblo of 10 percent of certain demurrage charges to allow

certain ocean carriers to depart from the credit provisions of their tariffs

and to make like arrangements with shippers in Puerto Rico similarly

situated to Plaza and Pueblo approved subject to two conditions

John Mason and Paul J McElligott for Maritime Service Corpo

ration

Mario Escudero and Dennis N Barnes for Plaza Provision

Company Inc

MichaelfStanton and Neal Schwarzfeld for Pueblo Supermar

kets Inc

DonaldJ Brunnerand Charges J Haslup as Hearing Counsel

September 10 1973

REPORT

By THE COMMISSION Helen Delich Bentley Chairman George

H Hearn Vice Chairman Ashton C Barrett James V Day

and Clarence Morse Commissioners

This special docket application was filed by Maritime Service

Corporation MSC in fulfillment of agreements with Plaza Provi

sion Company Plaza and with Pueblo International Inc and

Pueblo Wholesale Pueblo MSC seeks permission to 1 waive

collection of 10 percent of container demurrage charges assessed

against Plaza and Pueblo before December 31 1972 2 depart

from the credit provisions of the applicable tariffs and allow

installment payment ofthe remaining 90 percent of the accumu

lated charges 3 make like arrangements with similarly situated

shippers receivers and consignees in Puerto Rico and 4 refund

I

The amount due from Plaza is 169 597 50 and from Pueblo 215 560 00 Attachments I and VIto

application of MSC
48 FEDERAL MARITIME COMMISSION

10 percent of the demurrage collected from shippers who paid

promptly

According to MSC s application and in accordance with thei

agreements Plaza and Pueblo joined in the application but n

appearances were filed for them Hearing Counsel petitioned to

intervene MSC did not object and leave to intervene was granted

In general the circumstances giving rise to this application ar

known tous from the records in No 7132 Agreements DC 8 an

DC 8 1 Puerto Rico Ocean Service Association No 7227 Mar

time Service Corporation v Plaza Provision Company No 7228

Maritime Service Corporation v Pueblo Supermarkets Inc an

No 732 Plaza Provision Company Inc and Pueblo Inc Possibl

Violations ofSection 16

Uniformity in the practices of ocean common carriers in th

allowance of free time and the collection of container demurrage

including the publishing of appropriate tariff rules relative to fre

time and container demurrage is both desirable and necessary t

insure that shippers and consignees are treated equally and fairl

MSC was formed in the summer of 1970 totake over the task 

billing and collecting container demurrage charges for the fou

carriers herein on all arrivals at and all sailings from Puerto Ric

on and after September 6 1970

MSC s first invoices were mailed in October 1970 but its colle

tion efforts were met with widespread shipper and consigne

resistance It is not necessary herein to delve into the matter 

whether or not such resistance was justified By mid 1972 th

situation was worse than ever before As of June 30 1972 co

tainer demurrage invoices presented by MSC but unpaid for 60 

more days totalled over 3 000 000

A number of lawsuits were filed by MSC in Puerto Rico f

recovery ofcontainer demurrage charges as invoiced None hav

come to trial because of the crowded docket in the U S Distri

Court for Puerto Rico That Court had a backlog of nearly 2 0

cases as of January 31 1982 and has been plagued by illnesses 

sitting judges Because of these and other circumstances it a

pears unduly optimistic to expect an early liquidation of th

backlog which includes the lawsuits filed byMSC concernin

container demurrage

Plaza and Pueblo contend that 20 to 3011ercent of all demurrag

charges at issue were due to bunching cancelled bookings 

verted shipping routes and other shipping conditions MSC co

tends that these things per se are not grounds for waiver 

collection of container demurrage in whole or in part MS

17 F M C
PLAZA PROVISION v MARITIME SERVICE 49

concedes however that a laborious and expensive container by

container investigation would disclose some instances of things

proximately caused by faults of the ocean common carriers or

other conditions for which Plaza and Pueblo would not be respon

sible

The massive scale of possible litigation herein is found in the

fact that MSC s invoices to Plaza and Pueblo from October 1970

through December 1972 involved 808 invoices and 6 065 containers

upon which demurrage was billed by MSC

The parties have agreed to this application as a reasonable

settlement of the measure of carrier fault in the outstanding

demurrage accounts here at issue The settlement also reflects the

costs toall parties ofinvestigating or litigating the issues

MSC is not actually seeking to waive collection of amounts

properly charged and due Rather MSC recognizes that certain

amounts may not be due and that the cost of ascertaining the

exact due amounts is prohibitive

The application covers demurrage invoices through December

31 1972

As to invoices presented on and after January 1 1973 Plaza and

Pueblo will promptly audit them promptly pay undisputed items

and as to disputed items which cannot be resolved in negotiations

with MSC a review procedure will be resorted to promptly The

review procedure above includes a Review Committee of three

members with the third member nominated by the other two

members these two consisting of one representative of MSC and

one representative of the shipper or consignee

Plaza and Pueblo join with MSC in asking for authority to

depart from the carriers tariff rules and settle for 90 percent of

the unpaid demurrage balances as of December 31 1972 in equal

installments monthly with the last installment to be paid on or

before June 30 1974 Ifthe payment ofthe above demurrage were

to be made in a lump sum this would seriously disrupt the

business affairs of the companies and in the circumstances the

payment schedule of monthly installments ending June 30 1974

appears reasonable and necessary

To avoid the discrimination which would result if collection was

waived of 10 percent of the December 31 1972 accumulations of

demurrage as to Plaza and Pueblo but not as to other shippers

and consignees in Puerto Rico similarly situated the same ar

rangements will be made available to other shippers and consig

nees similarly situated Likewise the same extensions ofcredit or

payment arrangements will be made to other shippers and consig

17 F M C
50 FEDERAL MARITIME COMMISSION

nees similarly situated To this end MSC has caused to b

published in many ways its offer ofequal treatment tothese othe

shippers and consignees by publishing the agreements betwee

MSC Plaza and Pueblo in the four main Puerto Rican newspaper

in magazines or periodicals of various shipper organizations an

chambers of commerce and on television and radio station

Letter tothe parties dated June 8 1978 with attachments

The Commission s special docket procedure is with respect 

common carriers by water in interstate commerce based on th

last paragraph of section 18 a of the Shipping Act 1916 2 Th

reasonable rate power grantedin that paragraph buttressed b

section 4 of the Intercoastal Shipping Act 1988 3

has historica

been interpreted as empowering the Commission to authoriz

carriers to waive or refund a portion of the tariff charges 4

Both Acts require as a oondition precedent to the order a

enforcement of the lower nontariff rate findings of unjust 

unreasonable rates fares practices etc and that the approv

rate fare practice etc be just and reasonable See MueUer 

Peralta Shipping Corp 8 F MC 361 1966

As we recently said

Since the decision in Mueller v Peralta Shipping Corp 8 F MC 861 1965 

Commission has uniformly refused to deviate from a strict application of sect

18 b8 except pursuant to statutory authority provided by the amendment 

that section affected by P L 90298 Heretofore we have steadfastly refused 

be tempted by applications for relief addressed to some undefine l

well sprin

equity in the Commission rather than to any basis in law dueUer 8upra 

p

864 en 10 S

Likewise section 18 a should be strictly applied s

a

Section 18 8 of this Shlppin Act 1916 reads s

tonows Whenever the board finds that any 

fare charge clasalflcation tariff reKulation orpractice demanded charaed collected orobaerve

such carrier i unjuat or unreasonable it may determine prescribe and order enforced ajust 

reasonable maximum rate fare orcharge orajust and reasonable classification tariff rellUlatio

practice 46 V S C 817 a

3Section 4 of the Intercoaatal Shipping Act 1988 reads aa foUows Whenever the Commission 

that any rate fare charge clesification tariff regulation orpractice demanded charged collecte

observed by any carrier subjectto the provilio s of thi Act I unjuat orunreasonable it may determ

prelcribe and order enforced ajUllt and reasonable maximum orminimum ormaximum and mini

rate fareorcharge orajust and reasonable classification tariff rei Ulation orpractice Provided 

the minimum rateprovisions ohhis Bection shall not apply to common carriers on the Great Lakes 

U S C 846o

Section 5 of the Intercoastal Shipping Act 1933 readl as follows The provisions of this Ac

extended and shall apply to every common carrier by water in interstate commerce 1 defined in se

1 of the shipping Act 1916 46 U S C 846 b

Rule 6 b b 48 CFR A 602 92b implement the two Bections llCommon carriers by wat

interstate orintercoastal commerce orconferences of luch carriefl may f11e application for permis

to refund aportion of freight charges collected from a

hipper orwaive collection of a

portion offre

charges from ashipper All luch applications ehall be rued withinthe 8

yearstatutory period referr

in fi 502 68 Rule 5 cand Ihall be made in accordance wi h the form prescribed in Appendix 11 5 

applications wiU be considered the equivalent of a compl int and answer thereto admitting the 

complainaed of Ifallowed an order for payment of w iver win be issued by the Commil lsion

17 F MC
PLAZA PROVISION v MARITIME SERVICE 51

The record before us will support the necessary findings MSC

admits that it has billed Plaza and Pueblo and inferentially

others similarly situated for demurrage resulting from carrier

fault and other conditions beyond its control Some portion ofthe

demurrage is therefore not properly charged and due and the cost

of determining that portion exactly would be prohibitive The

parties have agreed that 10 percent is afairestimate ofthe invalid

billings

It is unnecessary to determine whether the demurrage rates

themselves are unjust or unreasonable Rather it is the practice

of billing for demurrage resulting from carrier fault which is

unjust and unreasonable This is a case of first impression

heretofore we and our predecessors have only used the special

docket procedure to declare rates or charges unjust or unreasona

ble and then to set and order enforced just and reasonable ones

But the two sections7 explicitly authorize the same action as to

the regulations and practices of common carriers by water in

interstate commerce Thus we think it clear that the special

docket procedure extends to the adjustment ofunjust and unrea

sonable rules and regulations as well as rates always of course

assuming a proper case for adjustment

In view of the amounts involved and the resulting commercial

dislocations application ofthe tariff credit provisions 8 would work

an injustice and the installment arrangement would be just and

reasonable Finally since the same arrangement will be available

to others similarly situated and refunds made to those who have

already paid no discrimination will be created

Carrier Tariff Item Numberofdays

Sea Land Service Inc uuuuNo 158 FMC F No 21 un 540

Seatrain Lines Inc u No 1 FMC F No 1 u 70

Transamerican Trailer Trans No 1 FMC F No I u 400

port

Not to exceed 15 d

Not to exceed 10 d

May extend credit in those

caseswhere financial re

sponsibility has been re

sponsibility has been fur

nished

Not Gulf Puerto Rico Lines Inc No I FMC F No 1 540 toexeeed 15 d

5

Report UnitedStates of Ame1 ca v Columbia Steamship Company Inc Dokno 71 12 July 12 1973

at 2 Both Columbia and Mueller involve common carriers by waterin foreign commerce and section 18h

3 rather than interstate ommel ce and section 18 a

6

Additionally Commission Rule 13 e46 CFR fi 502 225 require All initial recommended tentative

and final decisions will include astatement of findings and conclusions as well as the reasons orbasis

therefor upon all the material issues of fad law 01 discretion prpsented on the record and the

appropriate rule order sandion relief 01 denial thereof A

OPY of eah decision when issued shall be

served on the parties to the proceeding

7 Section 18 a

of the Shipping Act 1916 and spction 4 of the Intercoastal Shipping Act 1933 Quoted

8upra notes 6 and 7

8

The applicable tariff creditprovisions of the ocean carriers are

17 F MC
52 FEDERAL MARITIME COMMISSION

Hearing Counsel intervened in this proceeding and in t

reply to the application recommend conditional approval Hea

Counsel propose two conditions

a Production of the list of paid up shippers mentioned in paragraph 9 

of the application prior to approval and not at the time of approval

b Submission to the Commission s Bureau of Compliance of the deta

each settlement entered into pursuant to paragraph a of the application as 

settlement is concluded and the details of each situation in which an applic

for similar treatment pursuant to that paragraph is denied

The suggestion of Hearing Counsel as to their second condi

b above appears appropriate and is approved

The other condition suggested by Hearing Counsel relate

those shippers such as Grand Union Stores Sears Roebuck 

R J Reynolds Industries which apparently have currentl

periodically paid in full MSC s invoices As to shippers and co

nees such as these MSC proposes to refund 10 percent o

amounts already so paid MSC states that upon approval o

application it will provide a listing of these paid up shipp6rs 

consignees and ofthe amounts involved

Hearing Counsel however would condition approval o

application on the prior submission of this list The list shou

furnished as promptly as possible to the Commission but in 

event not later than 30 days after approval of the applica

Prompt approval of this application appears desirable to b

some order and direction to a

very chaotic situation exi

regarding the payment of container demurrage in Puerto Ric

This special docket application is hereby approved subject to 

two conditions

1 That a list of so called paid up shippers as per paragraph 

the application be furnished to the Commission s Bureau of

pliance as soon as possible and not later than 30 days afte

approval of this application and

2 That the details of each settlement entered pursua

paragraph 8 ofthe application and the details ofeach situati

which an application for such treatment pursuant to that 

graph is denied be promptly furnished to the Commission s 

reau of Compliance

The record in this proceeding will be held open pending 

compliance with the above conditions

SEAI S FRANCIS C HURNEY

Secreta

17 F MC
17 F MC

53

FEDERAL MARITIME COMMISSION

No 7331

ROHM AND HAAS COMPANY

v

FLOTA MERCANTE GRANCOLOMBIANA S A

NOTICE OF ADOPTION OF INITIAL DECISION

September 20 1973

This proceeding wasinstituted by complaint served May 30 1973

seeking reparation as a result ofalleged overcharges by respond

ent in the assessment of ocean freight rates

In his initial decision served July 10 1973 the Administrative

Law Judge concluded that Marasperse N 22 and Toranil B are dry

lignin pitch and entitled to classification as such per respondents

tariff which classification would result in an award ofreparation

to complainant in the amount of 2 489 18

No exceptions have been filed Upon review of the record we

conclude that the Administrative Law Judge s

findings and con

clusions were proper and well founded Accordingly we hereby

adopt the initial decision acopy ofwhich is attached to and made

a part hereof

By the Commision

SEAL S FRANCIS C HURNEY

Secretary

Out adoption of the Administrative Law Judge s finding as to Torani B is based on the evidence of

record in this proceeding and is not inconsistent with ourdecision in Docket 7319 Rohm Haas Co v

Moore McCmomack Lines Inc also served today in which acontrary conclusion is reached by virtue of

claimants failurethere tosustain its burden ofproof as to the exact nature of thecommodity shipped
FEDERAL MARITIME COMMISSION

NO 7331

ROHM AND HAAS COMPANY

v

FLOTA MERCANTE GRANCOLOMBIANA S A

Reparation awarded

Joseph S Petralia for complainant

G Pavia Rizzo for respondent

INITIAL DECISION OF STANLEY M LEVY

ADMINISTRATIVE LAW JUDGEl

Complainant seeks reparation totalling 2 489 18 arising ou

two shipments from New York to Barranquilla Colombia 

first shipment was described on the bill of lading dated June 

1971 as 700 Paper Bags Agricultural Chemical Formulat

Chemicals NOS Marasllerse N 22 Thseconq ship ent 

describe on the bill of tldin q tell ln 3q Wl s s

contai hlg 704 Bag i gricl lltup l Clwmicals For ulat onlChe

cal NOS Toranil B Respondent assessed the shipments as 

6th revised page 75 item class 9 Tariff No 8 of the East C

Colombia Conference

Complainant contends that Marasperse N22 and Toranil B

lignin pitch and as such should be rated as per item 685 

revised page 52 ofTariff No 8Pitch Lignin Dry The differe

in the assessment between Chemical N O S and Pitch Lig

Dry for the two shipments is the amount ofreparation sough

Respondent defends its rating by reliance on the bill of lad

description Chemical NOS It says it is not incumbent on 

carrier s clerk to consult reference works such as a chem

dictionary to augment the description provided by the shippe

the bill oflading

Pursuant to request of camplainant to which respondent 

not object this proceeding was conducted in accordance with 

Commission s Rule 11 shortened procedure

Are Marasperse N22 and Toranil B in fact lignin pitch and 

entitled to the specific commodity rate published in responde

I

This decision became the decision of the Commission September 20 1973

54

17 F M C
ROHM AND HAAS CO v FLOTA MERCANTE 55

tariff the matter was carefully and thoroughly considered in

Rohm and Haas Company v Moore McCormick Lines Inc po ket

No 7319 Initial Decision served June 8 1973 In that case it was

held that Marasperse N22 was lignin pitch but the claim for

Toranil B failed for lack ofsufficient prooftosustain complainant s

heavy burden

In this case as in Docket No 73 19 complainant has met his

burden ofestablishing that Marasperse N22 is dry lignin pitch In

addition in the instant proceeding the complainant has furnished

a straight bill of lading from complainant s supplier under which

said supplier shipped the goods from place of manufacture to

respondent carrier Attachment 11 to complaint This document

establishes that the commodity delivered to the carrier on behalf

of complainant for transport to Barranquilla pursuant to the bill

of lading dated June 30 1971 was lignin pitch dry Accordingly

the evidence in this proceeding establishes that Toranil B is

entitled to the rate for pitch lignin dry

ULTIMATE CONCLUSIONS

Marasperse N 22 and Toranil B are dry lignin pitch and entitled

to classification as such per respondent s tariff Complainant is

awarded reparation totalling 2 489 18 with interest at the rate of

six percent per annum ifnot paid within thirty days

S STANLEY M LEVY

Administrative Law Judge

WASHINGTON D C

July 10 1973

17 F M C
FEDERAL MARITIME COMMISSION

No 7819

ROHM AND HAAS COMPANY

v

MOORE MCCORMICK LINES INC

NOTICE OF ADOPTION OF INITIAL DECISION

September 26 1973

This proceeding was instituted by complaint served April 

1973 seeking reparation as a result of alleged overcharges 

respondent in the assessment of ocean freight rates

In his initial decision served June 8 1973 the Administrati

Law Judge found

1 Having established that a shipment of a product known 

Marasperse N22 consisted of Lignin Pitch and wasmisclas

fied by respondent as Chemicals N O S complainant is award

reparation in the sum of 2 208 19

2 Having failed to establish that a shipment of a produ

known as Toranil B consisted of Lignin Pitch and wasthere

misclassified by respondent as Chemicals N O S complainant 

not entitled to reparation thereon

No exceptions were filed Upon review of the record we conclu

that the Adminlstrativti Law Judge s

finding and conclusio

were proper and well founded Accordingly we hereby adopt t

initial decision a

copy of which is attached to and made a p

hereof

By the Commission

SEAL 8 FRANCIS C HURNEY

Secretary

Compare decision in Docket 7331 Rohm and Haas Co v Flata Mercante Crancolombiana B A s

today

56

17 F M C
FEDERAL MARITIME COMMISSION

No 73 19

ROHM AND HAAS COMPANY

v

MOORE MCCORMICK LINES INC

Reparation awarded in part

Joseph S Petralia for complainant

J D Straton for respondent

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

By complaint served April 19 1973 complainant seeks repara

tion in the sum of 4 284 90 from respondent claiming that

respondent incorrectly classified and rated two shipments carried

on respondent s vessels in June and August 1971 as Chemicals

N O S rather than as Lignin Pitch with the result that com

plainant was assessed freight rates which were higher than those

published in respondent s tariff in violation of section 18 b 3 of

the Shipping Act 1916 the Act

In answer to the complaint respondent admits that the two

shipments were classified and rated as Chemicals N O S but

contends that the shipments were correctly classified and rated

because they actually consisted of Lignin Sulfonates for which

no specific commodity rate waspublished in respondent s tariff

Pursuant to request of complainant to which respondent con

sents this proceeding was conducted in accordance with the

Commission s Rule 11 shortened procedure

The two claims are described as follow

The first shipment consisted of 794 bags of chemicals which

moved from New York to Santos Brazil on respondent s bill of

lading dated June 25 1971 The shipment was declared on the bill

of lading as Agricultural Chemical Formulation Chemical NOS

and was assessed a rate of 87 50 per 40 cubic feet which was the

rate applicable to Chemicals N O S as per respondent s tariff 2

Complainant contends that the shipment actually consisted of

I

This decision became the decision of the Commission September 20 1973

lInterAmerican FreiKht Conference Section A Tariff No 3 F M C No 7 1st rev page 92

57

17 F M C
58 FEDERAL MARITIME COMMISSION

Marasperse N22 Lignin Pitch and should have Qeen rated o

the basis of 74 000 per 2240 lbs which was the applicable rate f

Lignin Liquor Pitch or Powder as per respondent s tarif

Complainant claims that it was overcharged in the amount 

2 208 18 which is the difference between the freight computed 

the 87 50 rate and the freight computed at the 74 00 rate

The second shipment involved 1 059 bags of chemicals whic

moved from New York to Santos on respondent s bill of ladin

dated August 19 1971 The shipment was declared on the bill 

lading as Agricultural Chemical Formulation Chemical NO

Toranil B and was assessed a rate of 87 50 per 40 cubic fee

which was the rate applicable to Chemicals N O S as note

above Complainant contends that the shipment actually consiste

of Toranil B Lignin Pitch and should have been rated on th

basis of 74 00 per 2 240Ibs the rate applicable to Lignin Liquo

Pitch or Powder as noted above Complainant claims that it w

overcharged in the amount of 2 076 71 which is the differenc

between the freight computed at the 87 50 rate and the freig

computed at the 74 00 rate

In total the two claims amount to 4284 90

DISCUSSION AND CONCLUSIONS

The only issue raised by the pleadings and supporting docume

tation submitted by the parties is whether Marasperse N22 a

Toranil B the commodities involved in the two shipments are 

fact Lignin Pitch and thereby qualify for the specific commod

rate published in respondent s tariff under that designation

As mentioned it is respondent s contention that these commo

ties are actually Lignin Sulfonates for which no specific rate 

published in respondent s tariff

In support ofits contention that the commodities in question a

in fact Lignin Pitch complainant relies upon descriptions co

tained in invoices extracts from a chemical dictionary and 

telegram indicating that the Toranil B involved in the seco

shipment was shipped as a substitute for Marasperse N22

Although complainant contends that both Marasperse N 2

and Toranil B are in fact Lignin Pitch there is no definitio

contained in any ofthe supporting documents as to Lignin Pitch

Indeed in all ofthe basic source materials which complainant h

furnished the only reference to Lignin Pitch appears in t

invoice of American Can Company the manufacturer of Mara

perse N22 which identifies this product as Lignin Pitch and 

a

Ibid 2nd rev page 129

17 F M C
ROHM AND HAAS CO v FLOTA MERCANTE 59

the dictionary reference to Toranil B which states that this

product is similar to lignin pitch The dictionary extracts fur

nished by complainant nowhere define Lignin Pitch

The supporting documentation conclusively establishes that

Marasperse N 22 is actually Sodium Lignosulfonate and that

Toranil B is Calcium Lignosulfonate This is shown both by the

manufacturers and complainant s invoices and in the case of

Toranil B by the dictionary definition ofthat product According

to the dictionary furthermore Lignosulfonates are also identi

fied as Lignin Sulfonates hence respondent is correct in con

tending that the two shipments consisted of such chemicals This

does not however determine whether Lignin Sulfonates or

Lignosulfonates are in fact Lignin Pitch

As tothe commodity involved in the first shipment Marasperse

N 22 the manufacturer s invoice clearly identifies this product to

be Lignin Pitch Respondent does not specifically dispute this

evidence but instead contends that the product consists of Lignin

Sulfonates a fact which may be true but as mentioned is

inconclusive 4

Accordingly it is found and concluded that Maras

perse N 22 is in fact Lignin Pitch thereby qualifying for the

specific commodity rate published in respondent s tariffunderthat

designation

In the case of the second shipment there is no clear and

convincing evidence that Toranil B is in fact Lignin Pitch The

manufacturer s invoice fails to identify it as such and the fact that

it may have been shipped as a substitute for Marasperse N 22

as complainant contends does not necessarily mean that the two

products are identical As mentioned Toranil B actually consists

of Calcium Lignosulfonate unlike Marasperse N 22 which is

Sodium Lignosulfonate The dictionary definition furnished by

complainant do not establish that Toranil B is Lignin Pitch

On the contrary the dictionary specifically states that Toranil B

is similar to lignin pitch Similar is not identical

Itis true as complainant contends that ashipper is not forever

bound by the description of the shipment contained in a bill of

lading The test is what aclaimant can now prove based on all the

evidence as to what wasactually shipped Western Publishing Co

Inc v Hapag Lloyd AG 13 SRR 16 1972 Where the shipment

has left the custody of the carrier however and the carrier is

thereby prevented from personally verifying the claimant s con

4

Respondent also states that the pertienent export dedaration forms described the shipments in the

same manner as did the bills of lading but also contained Schedule B numbers which relate to Sulfite

Lye and TallOil These facts are inconclusive and in any eventthe forms were not furnished for the

record

17 F MC
60 FEDERAL MARITIME COMMISSION

tentions as is the case herein the claimant has aheavy burde

proof to establish the validity of his claim Ibid Johnso

Johnson International v Venezuelan Lines 13 8RR 586 1973 

order to sustain this burden claimant must set forth suffic

facts to indicate with reasonable certainty and definiteness 

validity of the claim United States v Farrell Lines Inc 13 

199 202 1972 Colgate Palrrwlive Peet Co v United Fruit Co 

8RR 979 981 1970 A finding that a carrier has violated the 

should not be made lightly or perfunctorily Johnson Joh

International v Venezuelan Line 12 8RR 880 833 1972

The evidence submitted by complainant does not establish 

reasonable certainty and definiteness that Toranil B is in 

Lignin Pitch Accordingly it is found and concluded that 

plainant has failed to sustain its heavy burden of proof that 

particular shipment was incorrectly classified and rated by 

spondent

ULTIMATE CONCLUSIONS

Having established that a shipment of a product know

Marasperse N 22 consisted of Lignin Pitch and wasmisc

fied by respondent as Chemicals N O 8 complainant is awa

reparation in the sum of 2 208 19 with interest at the rate 

percent per annum if not paid within thirty days

Having failed toestablish that ashipment ofaproduct know

Toranil B consisted of Lignin Pitch and was thereby misc

fied by respondent as Chemicals N O 8 complainant is 

entitled to reparation thereon

8 NORMAN D KLINE

Administrative Law Jud

WASIDNGTON D C

June 8 1973

17 F MC
17 F M C

61

FEDERAL MARITIME COMMISSION

DOCKET No 7157

AGREEMENT No 8760 5MoDIFICATION OF THE WEST COAST

UNITED STATES CANADAINDIA PAKISTAN BURMA

CEYLON RATE AGREEMENT

ADOPTION OF INITIAL DECISION

September 21 1973

By THE COMMISSION Helen Delich Bentley Chairman Ashton

C Barrett James V Day and Clarence Morse Commission

ers

This proceeding is before us on Hearing Counsel s exceptions to

the Initial Decision of Administrative Law Judge Ashbrook P

Bryant In his decision Judge Bryant determined that the amend

ment to Agreement 8760 making it No 8760 5 providing explic

itly for previously implicit general overland ratemaking authority

should be approved and that such approval should be premised on

a standard less stringent than a demonstration that the amend

ment is required by a serious transportation need or in order to

secure important public benefits

In excepting to that Initial Decision Hearing Counsel argue

that justification of overland ratemaking authority on grounds of

some lesser standard is not supported by any previous Commission

decision and particularly not by the decision in FMC v Svenska

Amerika Linien 390 U S 238 1968

As a result of the warranted adoption by Judge Bryant of

various stipulations of the parties to this proceeding and the

unopposed findings ofJudge Bryant in the Initial Decision there

remained at the time of oral argument before us on exceptions

only two issues for resolution

1 Whether future approval ofspecific authority for India Group

to discuss and agree upon overland rates must be justified on the

basis of a showing by respondent of transportation need public

benefit or furtherance ofthe regulatory purposes ofthe Shipping

Act 1916 or whether a lesser justification of a showing on the

record as a whole of serving the transportation and competitive

needs of respondent with no detriment to the public interest is

acceptable and
62 FEDERAL MARITIME COMMISSION

2 Ifthe lesser standard is acceptable do the facts in the re

taken as awhole show adequate justification of continued 

land ratemaking authority without detriment tothe public

Hearing Counsel in exceptions to the Initial Decision con

that Judge Bryant erred in applying the lesser standard 

further that even were that lesser standard acceptable the 

in the record do not show adequate justification for the nee

perpetuate respondent s overland ratemaking authority

After a careful review and consideration of the record in 

proceeding and having heard oral argument on the exception

Hearing Counsel we are of the opinion that the applicable st

ards justifying continued overland ratemaking authority 

spelled out in section 15 itself As indicated by Svenska the s

and depth ofproof required from case tocase may vary in rela

to the degree ofinvasion ofthe antitrust laws Here and app

the section 15 standards to the record in this proceeding 

conclude that the burden of such a showing has been me

respondent

VICE CHAIRMAN GEORGE H HEARN CONCURRING AND

DISSENTING

I

agree with the conclusion of the majority that the pr

standards for approval ofoverland ratemaking authority are t

of section 15 and the Svenska case and in applying those st

ards the conference has met its burden ofjustification

However I do not agree with the Judge s

finding that 

general overland ratemaking authority herein approved was 

viously implicit in the conference agreement Such authority m

be explicitly set forth in the agreement as it is now and fa

that our original approval of the agreement did not encom

approval for overland ratemaking authority 1

SEAL S FRANCIS C HURNEY

Secreta

1

Investigation ofOverlandlOCP Rates andAbsorptions 12 F M C 184 2289 1969

17 F MC
FEDERAL MARITIME COMMISSION

No 71 57

AGREEMENT No 8760 5MoDlFICATION OF THE WEST COAST

UNITED STATES CANADA INDIA PAKISTAN BURMA

CEYLON RATE AGREEMENT

The proposed amendment to the preamble of Agreement No 8760 as it relates

to transshipment covers foreign countries only The language suggested by

the Commission s staff should be approved

The language enabling members of the agreement to agree on brokerage should

be approved

Authority to discuss and agree upon overland rates is an integral part of the

operation and functioning of the India Group and should be approved

No violations of the Shipping Act 1916 have been established as to past

operations of the India Group

Eward D Ransom for respondents and interveners

Donald J Brunner and Charles L Haslup III Hearing Counsel

INITIAL DECISION OF ASHBROOK P BRYANT

ADMINISTRATIVE LAW JUDGE

1 On May 14 1971 the Commission instituted this investigation

to determine 1 whether the preamble and Article 2 b 1 2 and

3 of Agreement No 8760 5 incorporating specific grants of

authority with respect to overland rates brokerage equalization

absorption and transshipment arrangements should be approved

disapproved or modified pursuant to section 15 of the Shipping

Act 1916 the Act and 2 whether and to what extent the

activities of the member lines in relation thereto are beyond the

scope of Agreement No 8760 Hearings were held in San Fran

cisco California on July 11 and 12 1972

2 The original agreement No 8760 the agreement was en

tered into on January 19 1962 by American Mail Line Ltd

AML 2 American President Lines Ltd APL Java Pacific and

Hoegh Lines predecessor of Nedlloyd and Hoegh Lines NLHL

and approved by the Commission on July 2 1962 Great Eastern

Shipping Co Ltd Great Eastern signed the agreement on June

22 1963 Scindia Steam Navigation Co Ltd on March 6 1968 and

the Shipping Corporation of India Ltd SCI on June 15 1969

I

This decision became the decision ofthe Commission Septebmer 21 1973

l AML no longer isamemberof the IndiaGroup

17 F M C

63
64 FEDERAL MARITIME COMMISSION

Collectively they constitute the West Coast United States

CanadaIndia Pakistan Burma Ceylon Rate Agreement 

India Group Four prior amendments of the agreement have b

approved by the Commission The present amendments were f

with the Commission for approval on December 17 1970 

refiled December 31 1970 and February 1 1971

3 On May 14 1971 the Commission approved Articles 2 a an

of the amended agreement clarifying the parties rate mak

authority and conforming to General Order 7 Revised

4 The arrangement enables the India Group to agree am

themselves on the various rates charges classifications practic

and related tariff matters in the India trade Any party may a

for itself any rate or other tariff matter by giving 48 hours no

to the other parties of its intention to do so Each carrier m

tains and files its individual tariff

5 The India Group as the name implies is involved in 

maritime trade from the West coast of the United States 

Canada to ports in India Pakistan Ceylon and Burma 

current members are APL NLHL Great Eastern Scindia 

SCI

6 The india Group differs structurally and operationally 

several ways from an ordinary conference Unlike a conferen

which usually publishes a common tariff each member of 

India Group as earlier stated publishes and maintains its o

tariff In a conference there usually is uniformity of rates Un

the present agreement this mayor may not be so The In

Group does not require uniformity of rates The India Group me

about once a month to discuss matters of mutual interest wit

the purview of the agreement Rates are agreed upon subjec

the 48 hour rule referred toabove The secretary ofthe agreem

performs no duties in connection with the tariffs published by 

individual members but does check to see whether they conf

to the agreements reached among the members and whether t

conform tothe 48 hour rule He also receives communications fr

the members makes appropriate inquiry and keeps the memb

advised with regard to matters within the agreement

7 The amendments to the agreement presently under consi

ation were not initially proposed by the India Group They w

submitted following suggestions initiated by the Commissio

staff as the result of examination of the applicable tariffs of 

member lines which according to the staff involved cert

variations between the rates and rules and regulations contai

in the tariffs and the authority conferred by the terms 

17 F MC
WEST COAST U SlINDIA et al AGREEMENT 65

conditions ofthe agreement particularly with respect to overland

rates and absorptions brokerage equalization and transshipment

arrangements With regard to overland rates the staff called

attention to the Commission s

report following investigation of

overland OCP rates The India Group was informed that if it

intended to continue to use overland rates an appropriate modifi

cation of the Agreement must be filed with the Commission for

approval under Section 15 ofthe Shipping Act 1916

8 Also it was pointed out that there is no authority in

Agreement 8760 under which the carriers may consider and agree

on matters related to the payment of brokerage and that if the

members desired to provide for such authority their understand

ing must be incorporated in the agreement

9 In addition if the members intended to continue to provide in

their individual tariffs for equalization and absorption an appro

priate modification of the agreement must be filed for approval

under section 15 3

Each of the areas covered in the staff inquiry and in the

subsequent Commission order ofinvestigation on approval will be

separately discussed

Stipulation ofthe parties

10 The parties on May 3 1971 entered into astipulation which

on motion of Hearing Counsel with the agreement of counsel for

the respondents was made a part of the record The stipulation

noted that upon request ofthe Commission s staff the secretary of

the India Group submitted for section 15 approval various clarify

ing amendments to the agreement designated as No 8760 5The

stipulation further noted that two basic issues were set down for

investigation by the Commission

a Whether certain amendments should be approved for the future These

amendments were adding transshipment as well as direct call at foreign ports to

the preamble inclusion of a specific overland rate authorization 2 b 1 and

inclusion of provisions with respect to equalization and absorptions 2 b 2 and

brokerage 2 b 3

2

nvestigation of OverlandlOCP Rate8 and Abs01 pfions 12 F M C 184 1969 The commission found

that overlandlOCP rates were ineluded in routine ratemaking authority hut added pp 208 209

wenowwish to require that agreements become more explicit in order to avoid any confusion and to

avoid lengthy litigation in the future as in the case Thuf we will require the conference to update

their basic agreements to reflect the full structure of its rate making and absorptions practiced

pursuant thereto Accordingly the conferences shall add language to their section 15 agreements to

il1dicate that the general ratemaking authority includes the power to fix rates to orfrom interior

points at levels different from those applicable otherwise to absorb certain terminal costs to enter

into arrangements regarding such movements to orfrom interior points with inland carriers and to

conduct other functions incidental thereto

3

In Pacific Coast Port Equalization Rule 7 F M C 623 1963 the Commission held that port

equalization is not conventional orroutine ratemaking but is an arrangement forthe regulation and

control of competition whi ch mustbe expressly approved pursuant to section 15 of the Act

17 F MC
66 FEDERAL MARITIME COMMISSION

b To what extent the respondent carriers activities as reflected in t

tariffs wth respect to overland rates brokerage equalization and absorp

and transshipment arrangements are beyond the scope of their existing R

Agreement and hence whether there have been past violations of Section 

with respect thereto

Stipulations as to future approval

a Hearing Counsel stipulates

a That the proposed amendment adding transshipment language in 

preamble is meant to cover transshipment in foreign countries only 

the language was suggested by the Commission staff and should be 

proved Hearing Counsel will notcontest its approval

b That Article 2 b 3 the clause enabling the carriers to agree 

brokerage is similar to that approved by the Commission in other Sectio

agreements and should be approved Hearing Counsel will not contes

approval

b Counsel stipulated on behalf of respondents that a 

request for approval of authority of the amendment set forth 

Article 2 b 2 relating to authority for equalization and abs

tions be withdrawn b Each of the respondent carriers who 

parties to the agreement will file cancellation of provisions 

their tariffs relating to equalization and absorptions prom

upon the signing and filing of this stipulation and in any ev

prior to date set for hearing c American Mail Line has w

drawn and is accordingly unaffected by issues concerning fut

approval ofthe rate agreement

Pursuant to the foregoing it was stipulated that the o

remaining issue concerning future approval is with respec

Article 2 b 1 the clarifying amendment involving overl

rates

The issues as to whether and to what extent the carri

activities as reflected in their tariffs with respect to overl

rates brokerage equalization and absorption and transshipm

arrangements are beyond the authority granted by the prese

approved agreement and therefore in violation ofsection 15 s

remain as issues to be tried and determined

Overland OCP rates and tanJJs

11 The principal controversy is whether and to what exten

organic agreement permits establishment of overlandlOCP ra

tariffs practices and regulations A brief historical statement 

be useful

12 In February 1969 the Commission issued its report i

comprehensive investigation ofoverland OCP rates and practic

4 Note 2

pp 189204

17 F M C
WEST COAST U SJINDIA et al AGREEMENT

After reviewing the history and functioning of overland OCP

tariffs and practices including absorptions in connection there

with the Commission concluded that competition is the basic

distinguishing factor in the establishment of overlandJOCP rates

and that overland OCP tariffs have been established pursuant to

normal ratemaking factors and constitute routine ratemaking

duly authorized under conference agreements approved under

section 15

13 As overland OCP rate making authority traditionally is in

cluded within normal rate making no specific agreements clothing

a conference with authority to issue overlandJOCP tariffs is re

quired As indicated earlier the Commission initiated a

require

ment that conference agreements add language to indicate that

the general rate making authority include overland rates absorp

tions and arrangements to or from interior points with inland

carriers and to conduct other functions incidental thereto 5

14 Overland rates are as common and indigenous in the in

bound and outbound trades between the Pacific coast and the

Orient as are local rates Simultaneous offering of local and

overland rates is the established and historical method of rate

making throughout the Pacific Basin It is routine The Commis

sion and its predecessors were well aware when various confer

ence agreements were approved that this method of rate making

was the established practice in the Pacific trades The Commission

intended to sanction these activities when the agreements were

approved 6Approval was not based upon any language of the

agreements other than the general authorization to fix rates

collectively which would encompass all cargo moving within the

conference trade

15 As indicated above in ordering conferences to update their

agreement to make specific reference to the overland OCP system

the Commission emphasized that no violations of section 15 were

involved 7

16 The agreement from its inception has provided for independ

ent action by the member lines However it also has contained

authority for the parties toconfer and to agree among themselves

on the various rates charges classifications and related tariff

matters to be charged or observed by each of them in the carriage

ofcargo in the India trade

Rates prior to the agreement

17 Each respondent who formed or later joined the India Group

Note 2 ante

612F M C at 2079

7

d at 210

17 FMr

67
68 FEDERAL MARITIME COMMISSION

had both overlandlOCP and local tariffs on file with the Comm

sion before the agreement was approved or before those wh

subsequently joined became members

18 American President Lines APL had entered the India

trade in 1932 resumed operations after the war in 1946 and h

continued in the trade ever since It published tariffs from th

start which included overland also called proportional rates an

local rates Thus APL has had overland rates in its tariff contin

ously from at least 19898 to the present

19 American Mail Line AML concurred in APLs tariff in th

early period of its activity in the trade 19481951 and again aft

it reentered the trade from 1958 until 1960 It issued its own tar

in November 1960 which also named local and overland rates a

had rules and regulations applicable to each Thus AML has ha

loeal and overland tariffs by concurrence in APLs tariff or 

issuing their own tariffs as early as 1948 and continuously fro

1958 to the present

30 Nedlloyd Nedlloyd has had tariffs naming local and ove

land rates for a long time Its witness assumed that it had bo

local and overland rates from the time of their entry into the trad

in the 1920 s Nedlloyd s tariff presently names both local a

overland rates and has done so continuously since before th

agreement was approved

21 The following respondents joined the India Group after 

formation

a Scindia Scindia operated nonconference from 19641968 a

joined the India Group in 1968 Its tariff effective August 81 196

quotes overlandlOCP rates Scindia continued to have overlan

rates untilApril 7 1972

b Shipping Corporation ofIndia SCI issued its firsttariff in th

trade on June 9 1968 and it contained both a local and overlan

rate section SCI became a party to the agreement on June 1

1968 It canceled its overland rate section in June 1972 large

because it also serves India from the Atlantic and Gulf and th

was competing with themselves for overland cargo

c Great Eastern Shipping Co Great Eastern issued its fir

tariff in this trade in September 1962 had its first sailing 

January 1968 and joined the India Group in July 1963 It had fiv

sailings before joining the India Group Its tariff contained bo

local and overland rate sections continuously until March 197

when they canceled partly because of this proceeding but al

se their overland cargo dropped off

I

Theearliest such tariffwhich APL could find and introduce as evidence was effective October 1 19

17 F MC
WEST COAST V S INDIA et al AGREEMENT 69

22 Thus each of respondents had local and overland tariffs

before and at the time of the forming of or joining the agreement

and continuously thereafter tothe present except for cancellations

which occurred in 1972 after this proceeding commenced

The agreement was intended to cover local and OCP rates

23 In the overland rate decision the Commission said that an

important factor for consideration was whether parties who filed

their agreements for approval intended to encompass within their

rate making authorithy both local and overland rates 9

24 Two of respondents witnesses participated in drafting the

agreement in 1962 Morris of APL testified

Q What was your intention in getting approval Insofar as what rates did you

intend to get approval to discuss and agree

A Our intentwas to be able to talk discuss and agree on everything that was

in the tariff

Q Did you have any distinction as to local and overland rates in that regard

A None whatsoever

Q Was any question raised when you filed the agreement

A Never entered our minds that there would be any question about it

Q Did you have in fact at that time yourtariffs on file with the agency I

guess it was then the FMB

A Oh yes This was subsequent to the 61 amendments They had to be filed

yes We all had our tariffs on file We have always filed our tariffs in the

outbound trades

Purnell of AML testified

Q Did you have both local and overland rates in your tariff

before the agreement was formed

A Yes sir

Q And you continued them after the agreement was formed

A Yes sir

Q And when you formed the agreement did you intend that it

should cover all the rates in your tariff

A Yes sir

25 Itis uncontroverted that those who formed the India Group

agreement intended and understood that it conferred both local

and overland rate making authority

Alleged past violations of the act

26 As stated earlier the Commission s order requires determi

nation as to past violations of the Act in several specific areas 1

brokerage 2 equalization and absorption 3 transshipment ar

rangements and 4 overland rates

912 F M C at 207

17 F M C
70 FEDERAL MARITIME COMMISSION

27 In its briefs Hearing Counsel concedes that no violations 

the Act have occurred The record sustains that conclusion T

facts are substantially as follows

28 Unlike conferences where concerted action is the nor

method of handling even the smallest details affecting the tra

under rate agreements such as the present one concerted actio

the exception and individual action the norm Even though 

member lines as individuals through their separate tariffs 

otherwise may have provided for brokerage equalization abso

tion and transshipment they neverin fact gave consideration 

these matters within the India Group or took any concerted ac

with respect tothem

a Brokerage

29 There is at present no specific language enabling the par

to the greement to discuss or agree upon the payment of frei

brokerage or freight forwarder compensation Payment of brok

age and freight forwarding commissions and related matters 

not included within the scope of the usual conference or r

agreement language authorizing agreement upon rates and ru

and regulations relating thereto Thus if members of a con

ence or rate agreement wish toagree upon brokerage matters 

act pursuant to such agreement they must have separate spec

language enabling them to do SO 10

30 The only evidence offered in support of agreement am

the parties with respect to the payment of freight forwar

compensation or brokerage was the tariff pages ofeach of the 

carriers concerning brokerage and freight forwarder compen

tion However no two are alike Some duplicate in part 

language of another carrier s tariff but bear no resemblance 

others in language Some refer tofreight forwarder compensat

some to brokerage and some to both

31 Three of the lines adapted their language from the Pac

Westbound Conference PWC tariff but there are differences T

PWC tariff wasused only as a guideline Other witnesses had 

idea where the language came from the language was already 

their tariffs before the agreement was drawn But the witnes

unanimously testified that there had been no agreement to h

uniform brokerage language in their tariffs Indeed the variat

in language tends toindicate lack ofany agreement on uniform

32 It is true that the members uniformly pay 11 4 perc

brokerage but this figure is standard and historical The testimo

10 us Pacific Coa8t Australia etc Unapproved Agreements 13 F M C 139 1969

17 F M C
WEST COAST U SlINDIA et al AGREEMENT 71

shows that there was neverany agreement to pay 11 4 percent and

that the member lines never had any agreement as to whether

they would or would not pay any brokerage or provide for it in

their tariffs Payment of brokerage on particular commodities was

not a subject of discussion The secretary ofthe India Group and

its staff never had anything to do with brokerage or with checking

whether or not brokerage was or was not charged With two

exceptions noted below there was never discussion or considera

tion of any kind on the subject of brokerage or freight forwarder

compensation

33 There were two occasions when brokerage came to the

attention of the members to the agreement One arose from an

inquiry from Adnac International Forwarders Ltd ofVancouver

B C as to what ifany freight forwarder commissions were paid

under the conference regulations on shipments from Vancouver

to the ports served underthe agreement The India Group staff on

reviewing the tariffs ofthe members found considerable variation

both as to freight forwarder and brokerage and as to whether

Vancouver was served at all The matter was docketed to deter

mine the type of answer to Adnac The result was a letter

advising Adnac that this subject was beyond the scope of the

agreement and amatter for individual carrier consideration

34 The otherincident involved arequest by AML for considera

tion by the parties to the agreement of 21 2 percent brokerage

commissions on Indian Government shipments Before the matter

could come up for discussion by the India Group the secretary was

advised and in turn advised the members that one of them had

independently determined to pay 2112 percent at that point the

subject wasautomatically terminated as amatter for India Group

consideration

b Equalization and Absorption

35 Until after this proceeding was initiated five ofthe member

lines tariffs contained rules concerning the payment of equaliza

tion at loading ports

36 The equalization rules were largely adapted form PWC s

tariff but there was no agreement on or discussion within the

India Group as to uniform language The question whether an

equalization rule should or should not be included in the tariffs of

the individual lines was never brought up in the India Group

Testimony also shows that equalization was not commonly prac

ticed by the members Only APL some years ago had actually

practiced equalization on a

very small percentage of its cargo in

17 F M C
72 FEDERAL MARITIME COMMISSION

order to equalize between Oakland and San Francisco to co

with Nedlloyd which loaded in Oakland

37 Generally when equalization is practiced by a confere

is carefully monitored and controlled by the conference st

insure that the members practices are uniform In PW

example equalization payments are without exception ha

and carefully checked by the chairman of the conference 

staff In contrast under the present agreement the secretar

his staff have had no duties concerning equalization a

knowledge whether the members have equalized

0 Transshipment Arrangements

38 Respondents and Hearing Counsel agree that the 

transshipment arrangements refers to activities in foreign 

tries and not in American ports

39 Transshipment takes place when the initial carri

ranges with another carrier totransport cargo from an inter

ate port tothe destination port named in the initial carrier s 

lading Such arrangements may involve an agreement be

the twocarriers for division of the total charge paid by the s

which agreement would be subject to section 15 or the 

carrier may simply act as a shipper and pay the tariff rate 

oncarrier without any special agreement In either cas

original shipper pays only the initial carrier s tariff rate t

mate destination which rate is not affected by any transship

arrangements These transshipment arrangements are 

spelled out in the tariff ofthe initial carrier

40 Respondents point out that transshipment arrange

should be distinguished from the arbitrary sections in the 

ofthe members of the India Group which should more prope

called outport sections for they involve rates charged be

base ports and outports

41 RespondElJlts assert that two essential points must be 

stood with respect to the distinction between transship

arrangements and arbitrary rates First the arbitra

outport rate is a tariff rate offered to the shipping public j

much as the base port rate The combination ofthe base po

and the outport or arbitrary rate is the tariffrate paid tog

goods from loading port to ultimate destination port Respo

contends that the agreement in authorizing agreement on 

was intended to and did include an authorization to agree 

the rates not only to base ports but also tooutports as well 

17 F M C
WEST COAST U SJINDIA et al AGREEMENT 73

rules and regulations pertaining thereto contained in the arbi

trary sections of the tariff

42 Second the transshipment arrangements by which each

carrier gets the cargo from base port to outport is a matter of his

own cost responsibility just like fuel provisions wages stevedor

ing etc Individual carriers costs are not amatter of agreement

underthe agreement or any otherrate agreement Transshipment

arrangements made by one carrier of the India Group for oncar

riage of its cargo whether by a division of a rate by employing a

carrier at its tariffrates or in any other manner are made by the

individual lines are not and never have been a subject of discus

sion with the India Group and are treated as a private business

matter and on the basis that it is none ofyour business

43 Transshipment provisions are not contained in the tariffs of

the members of the India Group To the extent that the carriers

may choose to act as shippers and employ the same local oncar

riers they do so underthe local carriers tariffs and each presum

ably would pay the same rate but that rate appears in the local

oncarriers tariffs and not in the India Group members tariffs

The India Group has no say at all as to what the local oncarriers

tariffs contain

44 In summary the record establishes that neither equaliza

tion nor transshipment arrangements were ever the subject of

group discussion or action Similarity in tariff provisions relating

to equalization wasexplained by the fact that they were adopted

from the tariffs of other conferences particularly the PWC There

are no transshipment arrangements reflected in the carriers

tariffsonly arbitrary rates which usually apply to transship

ments but may apply to a direct call if the volume warrants

Agreements between members to enter into a further transship

ment agreement with for example alocal Indian conference have

been found not to be subject to section 15 11

DISCUSSION AND CONCLUSIONS

There is no evidence of concert among the India Group in

establishing rates for brokerage There were two instances when

brokerage was docketed for the attention of the India Group but

neither involved violation ofthe Act

As stated earlier an inquiry from Adnac with regard to freight

forwarder and brokerage rates wasanswered by aletter informing

that rates were beyond the scope of the agreement and a matter

II Transshipment Agt cement Indonesian United States 10 F M C 183 196 1966 Transshipment

Ag1 eement Betwee l Thailand ami US 10 F M C 201 215 1966

17 F M C
74 FEDERAL MARITIME COMMISSION

for individual carrier consideration The inquiry as to the b

age rate to be charged for Indian Government shipments re

to earlier herein was terminated before it could come u

discussion when one of the members as an individual c

agreed to pay the requested two and one halfpercent rate

The Commission has held that conference arrangement

garding brokerage are subject to section 15 approval 12 How

no agreement or arrangement for payment of brokerag

been established on this record There are no transship

arrangements reflected in the carriers tariffsonly arb

rates and also no discussions or agreements among memb

the agreement to enter into further transshipment agree

have taken place Hearing Counsel agree that such is the ca

The members to the agreement assert Hearing Counse

cede and the record herein establishes that authority to d

and agree upon overland rates is included in the present 

ment by virtue ofthe rationale ofthe overland OCP decision 

section 15 was not violated by discussion or agreement on 

subject

Hence the record fails to establish past violations of sect

ofthe Act with respect to overland rates brokerage equaliz

absorption and transshipment and counsel agree The sole 

tions remaining to be determined therefore are 1 wh

Article 2 b 1 ofthe amended agreement requires approval 

it may become effective or whether as respondent conten

merely constitutes clarifying language which under the Co

sion s decision in the overland rate case does not require sect

approval and 2 ifArticle 2 b 1 does require such approval 

standard or criteria should be applied in the determination

Hearing Counsel say that the Commission s order of inve

tion leaves no doubt of the Commission s intention tha

designated portion of the amendment be approved disapprov

modified in the light of the facts and circumstances disclos

the record Hearing Counsel further assert that the onus is 

respondents tojustify continuance of discussion of and agree

on overland rates by the members of the India Group and 

that on the record Article 2 bX1 should not be approved be

respondents have failed tomeet the threefold test laid down 

Commission and approved by the Supreme Court in the Sv

case 13

Ii us Pacific Coast Australia etc Unapproved Agreements 13 F M C 189 148 1969

13 FMC v SV6 nska Amerika Linien 390 US 288 1968 F M C Docket No 878lnv8 tig

Passenger Travel Agents 10 F M C 27 1966 The Commisllion siad at page 46 II The tie

impo8es restraints upon three groups not parties to the conference agreement the age

17 F MC
WEST COAST U SJINDIA et al AGREEMENT 75

Respondents argue that the Commission s decision in the over

land case is determinative of the issue and that Article 2 b 1 is

similar in intent and overall effect to several of the conference

agreements considered in the overland case Here as there it is

urged that the language in question is simply by way of clarifica

tion which the Commission stated to be its sole purpose in the

overland case Respondents further contend however that if

Article 2 b 1 does require it the record establishes ample basis

for such approval under section 15

There seems to be no doubt that the order in unmistakable

terms requires a determination whether Article 2 b1 merits and

hence should be accorded section 15 approval

Respondents correctly assert that in the overland case the

Commission went out of its way to emphasize that no violation

of section 15 resulted from the failure of the conference agree

ments to clarify and explain the authority conferred with regard

to overlandJOCP rate making As such authority traditionally and

historically has been included within routine rate making re

spondents conclude that approval of conference agreements con

ferring rate making authority ipso facto confers authority over

overlandJOCP rates To facilitate the practical operation of the

conference agreement and to inform shippers and other interested

parties what authority the agreement encompasses in the area of

overlandJOCP rates the Commission has required that each such

agreement be clarified by addition of appropriate language to

reflect and clarify the structure and application of overland rate

making

There is nothing inconsistent or incompatible between the Com

mission s holding that routine rate making authority normally

includes overlandJOCP rates and the exercise by the Commission

in the present case of its duty under section 15 to exercise

continuous surveillance over approved agreements and in appro

priate cases to require justification for their continuance Indeed

it is the statutory obligation ofthe Commission to subject to the

scrutiny of a specialized government agency the myriad ofrestric

tive agreements in the maritime industry 15 Ifapproval ofrate

making authority in an original agreement foreclosed further

consideration of that phase of the agreement in the light of

conference carriers and the traveling public The record here demonstrates tnat these restraints

have operated SKainst the best interests of all three of these groups Once this was shown it was

encumbent upon the conferences to bring forth such facts as would demonstrate that the tieing rule

was required by a

serious transportation need necessary to secure important public benefits or

furthereance of avalid regulatory purpose of the Shippinit Act

14 Note 2 ante

15 Volkswagenwerk v FMC 390 U S 261 276 1968

17 F MC
76 FEDERAL MARITIME COMMISSION

different or changed circumstances the authority and duty o

Commission under section 15 to exercise continuing surveill

over maritime agreementsconference agreements rate a

ments or otherwisewould be unduly restricted Hence to 

clude as respondents would have it that the proposed amend

should be considered only as clarifying language as required i

overland case and not as an amendment or modification o

agreement would be to place an unwarranted and inadmis

interpretation on the plain language and specific direction o

Commission s order

Nor may the implication be accepted that once having app

an agreement which either implicitly or expressly authoriz

conference or a rate agreement to discuss and agree upon 

land OCP rates etc as part of routine rate making auth

the Commission may not later require justification for the con

anceofthat authority A mere reading ofsection 15 precludes 

a conclusion The second paragraph of that section provide

pertinent part

The Commission shallby order after notice and hearing disapprove can

modify any agreement or any lnodification or cancellation thereof whet

not prevwusly approved by it that it finds to be contrary to the 

interest Emphasis supplied

The Commission has held that both initial and continue

proval ofany agreement under section 15 are dependent upo

actual existence or reasonable probability of circumstance

the trade which justify the agreement within the frame of r

ence set out by the Commission for the justification of anticom

tive agreements under section 15 16 The fact that the agree

here under consideration deals with overland rates which 

been held to be part of routine rate making and that 

agreements were merely required to be eJarified by the Com

sion in the overland rate case does not negate the Commiss

authority and perhaps duty to reexamine in a proper cas

approval of any section 15 agreement inclUding of course A

ment No 8760 Therefore in light of the express comma

section 15 ofthe Act and of the Commission s order in this ca

must be concluded that the Commission not only was autho

to but in this case did require respondent tojustify the nee

Article 2 b I

17

18 Agreement 878S 0rderto Show CauBe 9 F M C 333 335 1966 Mediterranean Pool s

Investig

F M C 264 28790 1966 18brandtB8n Co v

United State8 211 F 2d 51 D C Cir 1954 cert de

nom Japan Atlantic GulfCont v US 847 U S 990 194

11 Pacific Westbound Conference v Federal Maritime Com n 440 F 2d 1303 1312 1971 cert d

U S 881 1971

17 F M C
WEST COAST U SINDIA et al AGREEMENT 77

Itdoes not follow however that Article 2 bXl should be disap

proved summarily unless respondents can demonstrate the need

for continuance of authority to discuss and agree upon overlandJ

OCP rates etc It is sufficient if on the basis of the whole record

the authority to discuss and agree upon such rates may reasona

bly be expected to serve the transportation and competitive needs

ofthe respondents and to be compatible with the public interest 18

Concededly the agreement confers upon respondents authority

to discuss agree upon and for each to establish in its tariff

overlandJOCP rates pursuant to normal recognized rate making

factors and hence to constitute a part of routine rate making

Respondents contention that the burden of proving a negative

i

e that there is not adequate justification for authority to agree

on overlandJOCP rates in these circumstancesshifts to Hearing

Counsel in these circumstances is not valid

The history ofoverland OCP rates and the Commission s actions

with regard to them indicate thatwhile the burden ofjustification

rests on respondents a less stringent quantum of proof may be

accepted in theirjustification than in the case ofother anticompe

titive agreements Respondents contention that the amendment

or clarification here involved is different both in kind and its

potential effect on commerce and the public interest from the

particular agreement considered in Svenska is well taken It is

important to distinguish between the kind of proof necessary to

justify approval of a routine rate making agreement and that

required for approval of a particular agreement with antitrust

overtones The Commission s discussion in Svenska points up this

difference Agreements on rates are indigenous to the conference

system in maritime commerce

19 Particular rules or collateral

agreements of a highly anticompetitive type such as that consid

ered in Svenska are subject to a different and more exacting

evidentiary standard of justification than the amendment before

us which simply continues existing authority presently contained

in the agreement to discuss and agree inter se on overlandJOCP

rates and regulations which as has been said have traditionally

be considered as part of routine conference rate making

Justification for continuation of overland rate making

As stated earlier respondents produced evidence to justify

approval of the amendment Respondents say that although in

18 Svel1ska 8upm

19Seatrain Lines Inc v F M C 8 SRR 715 at 755 1971 Latin AmericaPacific Coast Steamship

Confenmce v FM C 8 SRR 20 807 at 20 819 Tmnsshipment Ag eement lndonesia United States 10

F M C 183 1966 Ay eeme lts NOB T IOB andT l108A 12 F M C 110 1968

17 F M C
78 FEDERAL MARITIME COMMISSION

general the quantity of overland cargo in the trade is considera

less than local cargo

20 it is generally good and profitab

cargo and is of sufficient quantity and quality to be importan

carriers in the India trade as well as shippers who are furnis

this service Itis a traditional service offered toshippers and t

expect it also it provides shippers with a greater choice 

transportation routing and a flexibility not otherwise available

Respondents say experience in the trade shows that i

important not only for the individuals to continue to quote o

land rates which Hearing Counsel concedes but that the m

bers of the India Group have the right to discuss and agree 

overland rates This they argue is true even though only twoli

in the India Group provide such rates at present

A principal purpose of the agreement as any other agreem

or conference respondents say is to provide stability for 

benefit of shippers and carriers alike According to responde

irrespective ofwhether agreement is reached stability is attai

by the right tohave discussion It is important if one line chan

a rate for the others to know the reasons for doing so in orde

determine whether both carriers and shippers needs are b

served by that rate Control of competition within the India Gr

is a strong stabilizing factor

At present there is only one independent carrier in the tra

other than AML quoting overland rates namely the newco

National Shipping Corporation of Pakistan But AML being 

outside the India Group is itself a strong reason to conti

overland rates as part of the agreement AML made it quite c

that ifit resumed active direct service in this trade it would 

rejoin the India Group unless the Group was authorized 

consider overland rates

Overland and local rates respondent say are not based on 

same principles because the former are aimed at competition w

services from the Atlantic and Gulf but there is necessarily 

interraction or effect between the two types of rates Accord

to respondents a disproportionately low overland rate wo

affect the ability of the local territory exporter of the same 

similar commodities to move his cargo and vice versa

Hearing Counsel while agreeing that overlandJOCP rates 

to According to respondent that the quantity of overland cargo II les8than local cargo does not 

the basic need to include bothwithin the authority of the aareement Ifquantity wereto be the t

when the conference system is de irable ornot then it could be contended that only the predom

cargoes in the tnde ought to he under the conference Yltem and that where BtatiBticB show o

small quantity of particulartype of carlO move that commodity would be removed from confe

ratemaking

17 F MC
WEST COAST U SJINDIA et al AGREEMENT 79

be proper and economically justified in the tariffs ofthe individual

carrier assert they are no longer justified and should not be

approved as matters for discussion and concurrence by the India

Group under the agreement They assert that free competition is

the rule and anticompetitive agreements are the exception which

require justification This basic rule is well established by both

Commission and court decisions 21 Also the Commission has a

statutory responsibility tokeep continuous supervision and control

over section 15 agreements initially approved by it 22 The applica

ble standards and thus respondents burden ofdemonstrating that

the agreement is required by a serious transportation need or to

secure important public benefits are identical whether respond

ents are seeking initial or continued approval under section 15 23

Hearing Counsel concede that the authority presently granted

by the agreement as amended encompasses the right to discuss

and agree upon overland rates 24 and that all ofthe carriers had

overland rates as well as local rates in their tariffs when they

become parties to the agreement

According to Hearing Counsel respondents have failed to show

that authority to discuss or agree upon overland rates is necessi

tated by the circumstances ofthis trade for the following reasons

First overland traffic constitutes but a small percentage of this

trade s cargo and the amount and percentage are decreasing

Second three ofthe five current members ofthe agreement have

canceled the overland portions of their tariffs since becoming

members of the agreement One carrier explained that its over

land cargo had dwindled to an inadequate amount a second

testified that its overland tonnage had always been nominal and a

third witness did not know why his company had canceled its

overland section According to Hearing Counsel transportation

circumstances have changed dramatically since approval of the

agreement in 1962 The present situation is not one in which five

carriers would be cutting each other s throats for cargo should the

right to agree be denied but rather one in which there would be

competition between the two carriers who were originally in this

trade with no rate agreement whatsoever for an increasingly less

significant segment ofthe cargo Third and probably most conclu

sive ofthe stability issue according to Hearing Counsel is the fact

that the level ofrates charged overland customers is competitively

21 Calif S B Co et aI v

Stockton P01t Dist 7 F M C 75 84 1962 Medite1Tunean Pools

Investigation supra Svenska supra

221n Reo Pacific Coast European Conference 7 F M C 27 32 1961 Agreement No 902 5 Dockage

Agreement 8 F M C 381 386 1965

23 Investigation of Passenger Travel Agents supra

24 Overland OCPRates supra

17 F MC
cosdeoead ates ad pot out tat te Cossoas

previously rejected the argument that a possible future need

should justify section 15 approval In Agreement 8765Order to

Show Cause supra the Commission said at page 336

Respondents however urge that the circumstances may recur and that they

should not be forced to seek approval of a new agreement in that event But who

is to judge when they do Respondents would have themselves be the judge for

continued approval if the agreement would permit respondents to invite each

independent to become a signatory as it entered the trade without the necessity

of securing our approval We think it clear that the statute will not permit this

Continued approval of Agreement 8765 would constitute nothing but a delega

tion of authority in derogation of our responsibility under the Shipping Act to

protect the public interest by fostering competition insofar as compatible with

the regulatory purposes of that Act Citations omitted

Hearing Counsel conclude that Article 2b1should be disap

proved and that the agreement should be restricted to those

matters affecting local rates Should circumstances hereafter

change whereby the members can demonstrate the need for this

overland authority their agreement could be amended at that

time after proper showing of its need Meanwhile the authority to

discuss or agree upon these rates where no transportation benefits

have been shown would be contrary to the public interest

In rejoinder respondents say that the contention that instabil

ity in overland rates cannot exist because the rate level is

dependent on competition with East and Gulf coast operators is

illusory While such competition sets a ceiling within a range it

does not prevent the West coast carriers from dropping the rate

below East coast parity and conducting a rate war among them

selves which could ultimately embroil West Gulf and East coast

carriers

Rates on U S Covenunent Cargoes 11 FM0 263 286287 1967

17 FMC
WEST COAST U SJINDIA et al AGREEMENT 81

Also respondents say that stability at the present time under

the agreement is no indication that it would continue if overland

rates were excluded from consideration under the agreement

Without an agreement the same potential for instability exists as

with any trade having two or more competing ocean carriers Nor

would it be wise to adopt a wait and see policy todo so would be

to let the horse out of the barn before closing the door That

respondents say is not the position which the Commission has

taken in approving or disapproving conference agreements 26

Respondents argue that to eliminate overland rates from the

agreement would not only create the usual potential for instability

ofthese rates but would seriously jeopardize the existence ofthe

agreement and hence threaten stability of local rates as well

APL one of the two original operators in this trade and a

mainstay of the conference would undoubtedly resign if over

land rates would not continue to be covered by the agreement

While Nedlloyd s agent could not speak as to whether his princi

pals would withdraw he left no doubt ofthe importance he placed

on overland rates as a subject ofthe agreement

The risk according to respondents of leaving the entire trade

wide open without the stabilizing effect of any rate agreement if

overland rates were expunged from its coverage is a matter to be

taken seriously and alone outweighs whatever minimal detriment

anyone could conceive by continuing to authorize discussion and

permissive agreement on overland rates with right ofindependent

action under the agreement

In summary respondents have presented evidence and put

forward arguments which sustain the following conclusions

1 Overland rates generally constitute a traditional service

offered to shippers in the United StateslPacific trades who expect

it Such rates provide shippers with agreater choice oftransporta

tion routing and a flexibility not otherwise available to them 2

Overland rates aid in meeting competition from the AtlanticGulf

carriers Itwould be much more difficult for West coast carriers to

compete for cargo with AtlanticGulf carriers if they did not offer

overland rates and absorptions 3 Authority to discuss and agree

on overland rates and absorptions provides the India Group with

stability for the benefit of shippers and carriers alike Such

stability is to some degree influenced by discussion among the

members although no actual agreement is reached Also it is

26 See Rate Agleement United States Persian Gulf Trade 8 F M C 712 724 1965 The Commission by

favoring anticipated rate stability whereratestability exi sts accepts the theory that predictability of

rates overa

foreward term is desirable and by approving rate fixing agreements on such ground

agrees that some limitations on market forces are essential for this purpose

17 F M C
82 FEDERAL MARITIME COMMISSION

useful and important for one carrier member to know the 

for another carriermember changing his rates Control of c

tion within the India Group is astrong stabilizing factor A

overland and local rates are not based on the same pr

there is an interaction of effect between them 4 Ifthe ag

continued to provide authority to discuss and agree up

rates without the right to consider overland rates there w

the ever present problem of how to insure that the dis

would be limited to local rates This would place a sub

burden upon the functioning of the India Group 5 Overla

have been considered an integral part of rate making 

India Group has been operated on that assumption 6 Dis

and agreement at the level of the India Group of local 

desirable 80 equally is a similar procedure with regard 

land rates 7 To deny discussion and agreement with re

overland rates to the India Group would create the pot

instability of overland rates without any offsetting benef

public 8 There is no evidence of damage to the public 

flowing from the right of members to the India Group to 

and agree upon overland rates 9 Authority to discuss an

upon overland rates has been exercised by the India Gro

the inception of the agreement and is an essential par

operation of the India Group

ULTIMATE CONCLUSIONS

a The proposed amendment adding transshipment lang

the preamble was intended to and does cover transship

foreign countries only It should be approved

b Article 2 bX1 of the agreement regarding overla

should be approved as filed

c Article 2 b 3 enabling agreement on brokerage is c

by counsel to be similar to that approved by the Comm

other section 15 agreements and should be approved

d Respondents are not guilty of any past violations o

15 with respect to overland rates brokerage equalizat

absorption or transshipment arrangements

8 ASHBROOK P BRYAN

Administrative Law 

WASHINGTON D C

March 1 1973
FEDERAL MARITIME COMMISSION

No 731

ROI IMAND HAAS COMPANY

v

SEATRAIN LINES INC

Complainant found not entitled to have three shipments of synthetic resin

assessed a containerload rate becavse of failure of the shipmenta to meet

the value and measurement criteria required by respondenYs tariff

Reparation denied

Joseph S Petmlia for complainant

Harvey M Fdittar for respondent

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

By complaint served August 10 1973 complainant Rohm and

Haas Company seeks reparation in the amount of243 92alleging

that respondent Seatrain Lines Inc overcharged complainant on

three shipments of synthetic resin by failing to apply container

load rates published in respondent stariff to the shipments in

question in violation of section 18bx3of the Shipping Act 1916

the Act

Respondent denies that tkeshipments were improperly rated

contending that for the most part they did not qualify for the

containerload rates

Pursuant to request of complainant to which respondent con

sents this proceeding was conducted in accordance with the

Commission sRule 11 shortened procedure

The first shipment consisted of a container loaded with drums

and pails of synthetic resin which moved from Philadelphia

bill

Pennsylvania

of lading dated

to Rotterdam

September

the

2

Netherlands

1971 This

under

shipment

respondent s

weighed

41073 pounds Respondent rated the shipment in two portions the

first portion weighing 1256 pounds at 38 per weight ton the

Thie decision became the decision afthe Commieaion October 11 19T3

17 FMC 83
H4 FEDERAL MABITIME COMMISSION

second portion weighing 28917 pounds at 4275per weight t

The 38 rate applied to synthetic resin valued under 750 per o

ton measuring up to and including 100 cubic feet per long ton T

4275rate applied to synthetic resin valued over 750 up to a

including 1500 per long ton measuring up to and including 

cubic feet per ong ton These rates were published

tarrif in effect at the time ofthe shipment 2Complainant

in respond

s

conte

that the entire shipment should have been rated at 34 per wei

ton which was the rate applicable to a minimum containerlo

weighing 44800 pounds 3

Under such a rate complainant wo

have saved 6816in freight

The second shipment consisted of a container loaded with dru

of synthetic resin which moved from New York NYto Rot

dam under respondent sbil of lading dated August 19 1971 T

shipment weighed 44680 pounds Respondent rated the shipm

in two portions The first portion weighing 410 pounds 

rated at 457 per weight ton The second portion adjusted 

44800 pounds was rated at 344The 457 rate applied 

synthetic resin valued over1500 up to and including 4000 

long ton measuring up to and including 100 cubic feet per l

ton sThe 34 rate applied to aminimum containerload of44800 

noted above Complainant contends that the entire shipm

should have been rated at 34 per weight ton Under such a r

complainant would have saved 954 in freight

The third shipment consisted of a container loaded with dru

of synthetic resin which moved from New York to Rotterd

under respondent sbill of lading dated August 6 1971 

shipment weighed 43557 pounds Respondent rated the shipm

in two portions The first portion weighing 39432 pounds 

rated at 38 per weight ton The second portion weighing 41

pounds was rated at 5025 per weigMt tonThe 38 rate applie

synthetic resin valued under 750 per long ton measuring u

and including 100 cubic feet as noted above The 5025 r

applied to synthetic resin valued over50 up to and including 

cubic feet per long ton sComplainant contends that the en

North Atlantia Continental Freight Conference Teriff No 28 FMC 3rd Reviaed PaRe 233 B

Noa 2928 and 2929 The retee indude e

10 pereent increeae ea provided in NoteA

Ibid Item Na 2928 1

AlthouRh thie portion ottheehipment weiRhed under44800 pounde and thue apparendy did not 

the minimum weight requirement end edjuatment is permitted which resul4 in increesing the e

weight to the minimum ifailwe to do hie would result in a ahipper Deying more freiRht for ae

quantity

tanR cited

of gooda

above

ahipped

3rd Reviaed

under a

Page

higher

e

lesethan containedoed

See also Docket No 4219

rate See

the

Rule

propaaed

4 D 1

reision

0

reepone

t

Commission sGenerel Order 13 46 CFR 538A b11 viii

Ibid Icem No 2930

ReepondenPe teri f

cited vbove Item Noe 2929 123

17 FMC
ROHM AND HAAS C0 vSEATRAIN LINES INC H5

shipment should have been rated at 34 per weight ton ie the

minimum containerload rate Under such a rate complainant

would have saved 7982in freight

DISCUSSION AND CONCLUSIONS

There are two issues raised by the pleadings and supporting

documentation 1 whether respondent sminimum containerload

rate 34 per weight ton could properly be applied to shipments

without regard to valuation of particular portions of the ship

ments and 2 ifvaluation criteria were applicable to such rate

whether the shipments did in fact comply with these criteria

Complainant contends that the minimum containerload rate

should have been applied to the three shipments without regard to

valuation and in the alternative that if valuation requirements

were applicable the shipments did in fact comply with such

requirements Respondent on the other hand contends that the

shipments in question were not entitled to the minimum contai

nerload rate because such rate was applicable only to synthetic

resin valued under750 per long ton and portions of the shipments

exceeded that value

Analysis of the pleadings and supporting documentation submit

ted by the parties demonstrates that complainant s

contentions

lack merit and that complainant sclaims must accordingly be

denied

As shown in respondent starrif in effect at the time of the

shipments in question a shipment of synthetic resin was entitled

to acontainerload rate of 34 per weight ton 31 plus 10 percent

if the shipment weighed a minimum of 44800 pounds per con

tainer Item No 2928 1However this tariff item appears di

rectly below a description of syntNetic resin valued up to and

including 750 per 2240 bs net weight up toincl 100 cft per 2240

lbsItem No 2928 Below the minimum containerload rate were

published a number of items applying to synthetic resin at various

categories ofvalue and cubic measurement ranging between 751

to 4000 per240 pounds and 100 to 160 cubic feet per 240

pounds No minimum containerload rates were published applica

ble to synthetic resin in these categories There is therefore no

basis to complainant scontention that any shipment of synthetic

resin qualified for the minimum containerload rate if it weighed

44800 pounds regardless of value and measurement for clearly

such a rate was applicable only to resin valued up to and including

For ready referenee the poverninR ariR Oege ia ettached es Appenidx A

14FMC
HG FEDERAL MARITIME COMMISSION

750 per long ton measuring up to and including 100 cubie 

long ton In interpreting a tariffneither shippers nor carr

permitted to engage in strained and unnatural constr

United States vFarrellLines Ina 13 SRR 199 203 1972

Even if respondent s

tariff did not clearly show that th

mum wntainerload rate was restricted in its application 

lowest category of synthetic resin in terms of value and m

ment this fact became clear when the tariffwas later amen

April 4 1972 long after the time of the shipments in ques

this amendment the minimum containerload rate now 3

7

weight ton was published in a position below all the va

measurement categories of synthetic resin Item 

581 0001 588 8It was now clearly respondent s

intention t

the containerload rate to any shipment ofsynthetic resin w

44800 pounds ofwhatever value and measurement As resp

correctly contends therefore complainant is attempting 

shipments which moved during August and September 

ratedunder aprovision which was not published in the tar

April 4 1972

Accordingly it is found and concluded that complainant 

entitled to the containerload rate published in respondens

without regard to valuation and measurement criteria ap

to synthetic resin

Although complainant scontentions and supporting doc

tion are devoted almost exclusively to its contention t

containerload rate should have been applied to all three sh

i

of synthetic resin without regard to value and measu

I

complainant makes brief reference to an alternative arg

namely that each shipment did in fact qualify for the co

load rate since they were all valued at less than 750 per 

and measured less than 100 cubic feet per 240 pound

argument accepts the proposition that the containerload r

restricted to synthetic resin falling within that category o

and measurement

Respondent denies that each shipment is valued under 7

long ton in its entirety Thus one portion of the first sh

according to respondent weighing 26775 pounds is va

78420 per 240 pounds one portion of the second sh

weighing 4050 pounds is valued at2160 44per long ton 

portion of the third shipment weighing 3750 pounds is va

1299 40per240 pounds

For reedy reference the governing teriffpege isatLChed ea Appendix B

1
ROHM AND HAAS C0 vSEATRAIN LINES ING 87

Apparently complainant is ignoring the differences in valuation

attached to the particular types of synthetic resin shipped inside

the containers and in some fashion is attempting to determine

average value of the containerload There is no explanation by

complainant in support of its conclusory statement that each

shipment value less than 750 per ton

The documentary materials submitted by complainant support

respondent scontentions that portions of the shipments in ques

tion exceeded the 750 per ton limitation in value and thereby

failed to qualify for the containerload rate Regarding the first

shipment for example a Rohm and Haas document acknowledg

ing an order for 51 drums of the subject resin shows that 26775

pounds net of resin were valued at9371 25This converts to 784

per 240 pounds Regarding the second shipment a similar Rohm

and Haas document shows that 9 drums contained resin weighing

4050 pounds net valued at3888 or2150 40per240 pounds

On the third shipment respondent sbill of lading shows 25 drums

of resin weighing 3750 pounds net valued at2175 or129920

per 240 pounds Since respondent stariff clearly provides a

graded scale of rates for resin according to value and cubic

measurement attention must be given to the component parts of

containerized shipments ifthe carrier is to rate the shipments in

conformance with its tariffThere is therefore no justification for

the practice on which complainant appears to be basing its

argument namely that the entire shipment should be valued and

measured on an average basis without regard to the fact that

different varieties of resin were included in the shipment Such a

system of rating would constitute an outright nullification of

respondent stariff which provides a series of rates based upon a

graduated scale of values and measurements

Accordingly it is found and concluded that complainant was not

entitled to the minimum containerload rate on the three ship

ments in their entireties since some portions of the shipments

consisted ofsynthetic resin which was valued too highly to qualify

for the containerload rate under the provisions of the governing

tarifff

As a final matter mention should be made oF the fact that the

third shipment in question moved under a bill of lading dated

August 6 1971 which was more than two years prior to the filing

ofthe complaint on August 10 1973 Section 22 of the Act requires

that a complaint seeking reparation must be filed withintwo years

after the cause of action accrued A cause of action accrues at the

time of shipment or payment of the freight whichever is later

17FMC
8H FEDEkAL MARITIME COMMISSION

TlerPipe Ind Inc vLykea Broa Steamahip Co Inc lbFMC

28 30 1971 There is no indication as to the exact date w

I payment was made however the documents furnished by 

plainant indicate that freight was prepaid Under aeach cir

stances complainant sthird claim could not be entertaine

being time barred even if such claim were not otherwiae defe

on the grounds diacusaed aboveUSBorax Chem Corp v

i Coaat European Conf 11FMC4b1 471 1968

ULTIMATE CONCLUSIONS

Complainant was not entitled to have three shipmenta of 

thetic resin rated on the basis of a minimum container

provision in respondent stariff because certain portions o

shipments exceeded the permissible value limitation publishe

the tariff Accordingly the claims for reparation which are b

upon the contention that the minimum containerload rate 

applicable ta the ahipmenta in their entireties are denied and 

complaint is diamisaed

S NORMAN D KLINE

Admin iatrativeLaw Jud

WABHINGTON DC

September Ik 1973

17 
N

Printed inUSA

APPENDIX A

North Atlantic CONTINENTAL Freight Conference

Tariff No 28 FMC

FROM EASTPORT MAINE HAMPTON ROADS RANGE TO ANTWERP ROTTERDAM AMSTERDAM

HAMBURG BREMENREMERHAVEN

Except

As Otherwise Provided Herein Rates Apply Per Ton of240 Lbs or 40 Rate 

Cubic

Feet Whichever Producesthe Greater Revenue Basis 

Commodity Description

and PackaginR 

OPEN RATES SECTION Continued

SEATRAIN LINE SFILINGS Continued

Resin SyntheticNOSincludinR Plastic Monomers Rates only apply

toRaw Materials in volume form that

is Liquid Powder Chips

Lumps or

Pellets Articles orMaterials manufactured therefrom are

NOT to be assessed these rates

Up to and

including 750 per

2240 Ibs net weight

Up toincl 300 cft per

229016s

Minimum 448001bs perContainer

Over 100 cft up taincl 130 cft per224016s

Over 110 ck up toincl 120 cft per2240 Ibs

Over 120 cft up toincl 130 cft

per 22401bs

Over 130 cft up toincl 140 cft per224016s

Over 140 cft

up

toincl 150 cft

per

224016s

Over 150 cft

up

toincl 160 c@ per2240Ibs

Over

160 cft per224016s

Over g750 up to incl 1500 per2240lbs net weight

Upto inc1 l00cft per224016s

Over 100 cft up toincl 130 cft

per 224016s

Over 110 cft

up

toincL 120 cft

per

2240 Ibs

W 

W 

W 

W 

W 

W 

W 

W 

W 

W 

W 

W 
0

Over lE0 6k u toncL130 cft r 2PA016s

P Pe

W 

Over 130 cft uPtofinel

140 dt

per

E2Wlba W 

Over 190 ek up

tofincl 150 cft

per

224016s W 

Over 150 ef4 up bofincl 160 eti

per

22401bs W 

Over160 eFt per

YYtO lba W 

Over500uptolnel4000 per2YAO Iba netweight

Up

tafincl 100 cft per2PAO lbs

eW 

Over 100 cft

up

tafincl 110 cft per2E40 Iba w 

Over 110 cfL

up tofincL lEll cft per224016s

W 

Over 120 eft

up

tolnel 130 cft per2AOlba W 

Over 130 cft

up

tohncl190 eFt per224016a p 

Over310 cft

up toAnd 150 cft PerEAOlbs W 

Over150 eft uptolncl 160 cft per221016s R 

Over 160 cR

per

Ibs W 

Over

f4000 per

224016a net weight

RM 

A EffectiveAugust 1 1971AllOPEN Rates as

indicated above will be increaced ten penent 

rounded offto the next loweat 25c perton

xi AS PEE TELEGRAPHIC

ADVICE TO FMC

C7 For Explanstion ofAbbrevationa

Referenee Slarka 
APPENDIX B

Printed inUSA

North Atlantic CONTINENTAL Freight Conference 

Tariff No 29 FMC I

MAINE HAMPTON ROADS RANGE TO ANTWERPBOTTERDAMI FROM EASTPORT

AMSTERDAM HAMBURG BREMEN

BREMERHAVEN

Except

As Otherwise Provided Nerein Aates App y

Per Ton of 2290 Rate

Lbs or

40 Cubic Feet Whiche erProduces tne Creater Revenue Basis S

Commodity Description and packaging

1 

OPEN RATES SECTION Continued

SEATRASN LNEContinued

Resin SymetheticNESinclud ng

Plastic Monomers Rates only ap

ply to Raw Materials in volume form that is LiqU dPowder Chips

Lumps orPeilets Articles orMateriats manufactured therefrom are

NOT Lo be assessed these rates

Up to and including 750 per 2240 Ibs net weight

Up toincl

100 cft per 2290 Ibs

Oer

100 cft

up toincl

110 cft per

224016s

Oer

130 cft

up toincl

120 cft per224016s

Over

120 cit up toincl130 cft per 22401bs

Over

130 cft up Wlnci140 cft per

2240 Ibs

Over

140 ch up tolincl150 cft per2240Ibs

Over 1b0 cft up toincl

I60 cft per

2240 Ibs

Over 160 cft per 224016s

Over 5750 uptofinc

1590 per224016s net weight

UP toincl

l0U cft pec2240bs

Over 100 cft up toincl

110 cft per 22401bs

Oer

110 cft

up toincL 120 ctt per

2240 Ibs

Oer

120 cft up toincl

130 cft per224016s

RatesA

April

3 

y 357 

y

5525 

y

560 

W 560 

W

560 

W

65U0 

W 6500 

W 6500 

W 510 

W 6075 

W 6075 

W 6675 
v

O

Over 130 eft

up toind790 cft per

2290 Ibs W 6075 

Over 140 cft

up

fofind150 cft per

224016s w 6925 

Over 150 ck up tofincl 160 ck per

22401bs K 6925 

Over 160 cft

per

224016s

w 6925 

Over1500 up tofincl j4000 Per

C240 bs net weight

Up

toflncl 00cft per

224016s R 5525 

Over100 eft up

tofinel 110 cft

per

2240Ibs W 6400 

Over 110 cft up tofincl

120 cft per224016s W 6400 

Ovet 120 cft up

tofincl 130 eft

per

2240 Ibs W 6400 

Over 130 cft up

tofincl 1d0 ck

per

224016s W b400 

Over140 dt up

Wfind 150 cft per2290 lbs W 7250 

Over 150 eft up to incl 160 cft per

2240 Ibs W 7250 

Over 160 cft

per

2290 Ibs A 7250 

Over4000per

224016s net weight

p 5675 

Resin Synthetic including Plastic Monomeis Rates only apply to Raw

ASaterials in volume form that

is Liquid Powder Chips Lumps or

Pellets Articles orMaterials manufactumd therefrom are NOT to be

assessed these rates

K 75 R38

Minimun 49SOOlbs perContainer

Value Rule 4 L 7 Applies

As perTelegraphic Advice toFMCApril 4 1972

For Explanation ofAbbrnviations

Reference MarksandSym
93

FEDERAL MARITIME COMMISSION

DOCKET No 70 28

GENERAL INVESTIGATION OF PICKUP AND DELIVERY RATES

AND PRACTICES IN PUERTO RICO

INTERPRETATION OF ORDER SERVED JUNE 6 1973

October 18 1973

Transamerican Trailer Transport Inc TTT a respondent in

this proceeding seeks an interpretation of our report and order

served June 6 1973 16 FMC 344 in which we ordered respondents

to cease and desist from permitting shippers on consignees who

use respondents pickup and delivery service in Puerto Rico to

designate the truckers to be used in such service TTT inquires as

to whether or not it may use F B Trucking Co F B for pickup

and delivery for Luis F Caratini Son Inc Caratini a TTT

customer Caratini asserts that F B has performed pickup and

delivery for it in an efficient manner

The answer to the inquiry is as follows

1 TTT may select any trucker it wishes including F B to

perform the pickup and delivery service for which TTT makes

itself responsible so long as TTT does not select truckers in a

mannerwhich is unreasonable or unduly preferential See Portala

tin Velazquez Maldonado v Sealand Service Inc 10 F M C 362

37183 1967

2 So far as the Commission is concered Caratini may use any

trucker it wants including F B to perform pickup and delivery

for it but it cannot designate any trucker if it uses TTTs pickup

and delivery service

As we pointed out in our report ofJune 6th

Since respondents pickup and delivery service is optional shippers consig

nees in effect have three choices 1 to perform the pickup and delivery

themselves using their own equipment and personnel 2 to hire independent

truckers and pay them directly for the service frequently at lower rates than

those charged in respondent s

tariff or 3 to avail themselves of the pickup

and delivery service offered by respondents at page 7

17 F M C
94 FEDERAL MARITIME COMMISSION

Shippers and consignees are and should remain insofar as this Comm

concerned fully free in the matter of contracting for the services of any 

they desire or to furnish their own trucking services for pickup and 

purposes We are not here concerned with pickup and delivery serv

formed by shippers and consignees or by truckers for them We a

concerned with the pickup and delivery service offered by respondents 

outlawed trucker designation when used as a part of that service be

facilitates a rebating for which respondents are in law and under t

tariffrepresentations responsible at page 11

There would be nothing necessarily improper in TTI s using F B to 

pickup and delivery service for Caratini where Caratini chose to utilize 

pickup and delivery service The question of who the shipper mayor 

have selected had he the right to select the trucker is irrelevant 

relevant consideration is that all truckers used by TIT to furnish its pi

delivery service be used in a manner which is lawful under the Shipping 

On the other hand if Caratini chose not to use TTT s pickup and 

service there would be nothing improper so far as we are conce

Caratini s exclusively retaining F B to perform pickup and delivery 

tinis cargo and informing TTT of this fact TTTwould then assess Ca

rate listed in TIT s tarifffor ocean transportion andF B would assess 

F B s applicable rate for pickup and delivery

The only thing that TTT may not do is engage in a practice wher

provides a service including both ocean transportation and pickup and 

and at the same time allow Caratini to designate a trucker to be used b

performing TTI s pickup and delivery service

By the Commission

Seal S FRANCIS C HURN

Se

1
95

FEDERAL MARITIME COMMISSION

No 69 21

TRANSCONEX INCGENERAL INCREASE IN RATES IN THE U S

SOUTH ATLANTIC PUERTO RICOVIRGIN ISLANDS TRADES

No 692

CONSOLIDATED EXPRESS INC GENERAL INCREASES IN RATES

IN THE U S NORTH ATLANTICIPUERTO RICO TRADE

On remand respondents Transconex Inc and Consolidated Express Inc

Nonvessel Operating Common Carriers in the trade between United States

Atlantic Ports and Puerto Rico found to have sustained their burden of

proving their rates to be just and reasonable

Arthur Liberstein for respondents

Mario F Escudero Edward J Sheppar IV and Dennis N

Barnes for the Commonwealth ofPuerto Rico

Donald J Brunner and Paul J Kaller Hearing Counsel

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

These proceedings were instituted by orders of the Commission served April 28

and June 6 1969 to determine the lawfulness of rate increases which had been

filed by respondents Tansconex Inc Transconex and Consolidated Express

Inc Consolidated nonvessel operating common carries by water NVOCCs

pursuant to sections 18 a and 22 of the Shipping Act 1916 and sections 3 and 4

of the Intercoastal Shipping Act 1933 The Commonwealth of Puerto Rico

intervened to oppose the Transconex increases and filed a protest to the

Consolidated increases

On August 27 1970 the Commission issued its decision affirming the initial

decision of Examiner Herbert K Greer who had found that the increased rates

had not been shown to be unjust and unreasonable 14 F M C 35 Although the

Commission had found evidence that tended to support its conclusion that the

rate increases were just and reasonable because of cost increases and other

factors the basis for the decision was the holding that the parties contesting the

rate increases had failed to sustain their burden of proving such increases to be

unlawful 14 F M C at page 45 The Commonwealth of Puerto Rico appealed this

I

This dedsion became the decision of the Commission October 23 1973

17 F M C
96 FEDERAL MARITIME COMMISSION

decision to the U S Court of Appeals for the District of Columbia Circu

contending that the burden of proving the lawfulness of the subject ra

increases remained upon the carriers whether or not the Commission ha

suspended the increases at the time the investigation was instituted The Cou

agreed with the Commonwealth and on September 29 1972 remanded th

matter of the Commission for further proceedings not inconsistent with th

Court s opinion The Commonwelath ofPuerto Rico v Federal Maritime Commi

8ion 468 F 2d 872

On October 17 1972 the Commi8sion reopened the8e proceedings for th

purpose of allowing for the submi88ion of whatever matter respondent carrie

wish to present in justification of their rates here under inv

addition the Commission expanded the investigation to include the question 

the lawfulness of further rate increases which were filed by Comolidated an

Transconex and became effective on December 14 1971 and April 7 197

respectively Finally the Commission orderedthat these proceedings include t

issues of 1 the proper standard to be applied in determining the reasonab

ness of respondents rates with particular reference to the concept of operati

ratio 2 the expensesto be allowed prior to calculation of such ratio and 3 t

existence and degree of need on the part of respondents for additional capi

and revenue

In response to the Commission s order allowing for the submission of matt

by respondents in justification of their rate increases respondents submitt

financial statements and underlying datawhich were reviewed and ana

ed 

the staff of the Commission and were used by the staff to compute operati

ratios and returns on rate base pertairiing to the operations of both responden

overseveral years period of time These computations are shown in table fo

in the appendix attached hereto They show that Consolidated experienc

operating ratios varying between 97 69 and 107 18 percentover a period exten

ing from March 21 1968 to March 31 1973 and earned a return on rate bas

before taxes of 241 19 95 and 7 81 percent in 1968 fiscal 1970 and fiscal 19

respectively Transconex was shown to have experienced operating ratios va

ing between 98 82 and 100 03 percent oVer a period extending from Decembe

1967 to September 30 1972 and to have earned a return on its rate base befo

taxes of 19 13 20 59 and 2108 percent in fiscal 1970 1971 and 1972 respective

In addition to the financial material submitted into the record all part

stipulated that certain factual findings made by the Commission in its decisi

of August 27 1970 14 F M C at page 44 are valid at the present tim

Specifically it was stipulated that respondents have experienced increased co

but operate efficiently that their operations are increasing that competition 

the trade is sharp and that the value of the services rendered by respondents 

small shippers is substantial

DISCUSSION AND CONCLUSIONS

Respondents contend that the evidence which they have subm

ted leaves no doubt that therates under investigation are just a

reasonable and accordingly that they have sustained their bu

den of proof as required by law Respondents contend specifica

that the high operating ratios experienced by Consolidated 

fiscal 1972 and 1973 98 68 and 107 18 percent and by Transcon

17 F M 
TRANSCONEX INC AND CONSOLIDATED EXPRESS 97

for fiscal 1971 and 1972 99 03 and 98 82 percent demonstrate

beyond question that the rates are lawful expecially considering

the fact that these computations were made in a manner least

favorable to respondents because ofthe omission of certain items

ofexpense Similarly ifreturn on rate base is considered although

the Commission held that such a standard should not be the sole

criterion 14 F MC at page 44 the same conclusion regarding the

lawfulness of respondents rates must be reached again consider

ing the fact that the computations were made by the Commission s

staff in a manner least favorable to respondents

Hearing Counsel do not take issue with respondents contention

that the rates underinvestigation have been show to be just and

reasonable They contend essentially that although operating

ratio alone does not ordinarily determine the reasonableness of

the rates of an NVOCC the evidence in these proceedings demon

strates such an unfavorable operating ratio for respondents i e

approximately 99 percent or higher that any reduction of reve

nues would push respondent Transconex into a loss position and

increase the losses of respondent Consolidated Hearing Counsel

argue therefore that it is unnecessary to look beyond operating

ratio into the rate ofreturn standard

The Commonwealth ofPuerto Rico similarly takes no issue with

respondents contentions regarding the reasonableness of their

rates and furthermore agrees with Hearing Counsel that these

proceedings are not the appropriate vehicle for determining gen

eral ratemaking standards applicable to NVOCCs in view of

respondents unfavorable financial situation

Operating ratio which has been defined as the ratio ofoperating

expenses to operating revenues is recongized as a useful standard

to employ in determining the reasonableness of rates of carriers

such as NVOCCs which have little investment in equipment 14

F MC at page 44 General Increase Middle Atlantic New

England Territories 332 LCC 820 837 1969 Increased Common

Carrier Truck Rates in the East 42 M C C 633 647 note 5 1943

The objective in rate regulation however is not merely to deter

mine legitimate expenses but to ascertain whether a carrier s

rates will generate sufficient revenues so as to assure confidence

in its financial integrity thereby maintaining its credit and at

tracting capital Bluefield Co v Public Servo Comm 262 U S 679

1923 Federal Power Commission V Hope Natural Gas Co 320

U S 591 1944 The operating ratio standard is notably deficient

with regard to determining the existence and degree of need for

additional capital and revenue 14 F MC at page 44 General

17 F M C
98 FEDERAL MA ITIME COMMISSION

Increase Middle Atlantic and New England Territories cited ab

at pages 8378 1969 D C Transit System v Washington M

Area Trans Comn 350 F 2d 753 778 779 D C Cir 19

Therefore in the ordinary case consideration must be given 

Hearing Counsel contend both to operating ratios and to meth

which determine capital needs such as return on investment

Similarly in the ordinary case evidence would be addu

establishing meaningful standards against which the opera

ratio and return on investment of the particular NVOCC wh

rates were under investigation could be tested This could be d

for example by examining the experience of NVOCC industry 

whole or perhaps the experience of businesses having compar

risks 2Federal Power Commission v Hope Natural Gas Co c

above at page 603 All parties concur however that on 

present record there is no justification for the continuance of th

proceedings for the purpose of adducing such evidence The Pre

ing Judge agrees

The record shows that Consolidated suffered a loss of 193 30

fiscal 1973 and that Transconex despite two rate increases 

efficient operations wasable to earnea profit ofonly 25 420 be

taxes out ofrevenues amounting to 2 159807 in fiscal 1972 Th

calculations moreover were made in a mannerleast favorab

the carriers since income taxes and financial costs were disallo

as expenses although the Commission has held that income ta

at least are allowable as expenses in calculating operating ra

14 F M C at page 43 As Hearing Counsel observe furtherm

the cost torespondents ofpresenting economic witnesses tote

as to appropriate standards and their application to the pre

case might well eliminate even the slim profit which Transco

was able to enjoy in 1972 There is furthermore no question 

that respondents have demonstrated aneed for additional reve

which the subject rate increases were designed to satisfy Un

such circumstances it seems clear that these proceedings are 

the appropriate vehicle toexamine or establish general ratema

standards and that it would be an injustice to burden th

respondents one already in a loss postition the other operatin

awafer thin margin of profit with further costs of litigation

t The Commission has instituted aproceeding in which it proposes to promulgate arule which 

require an NVOCCs to file periodic financial reports Docket No 73

16 Financial Reports b

Ve8sel Operating Common Camerll b1 Water intheDomelltic Off hore Trade Federal Register 

published April 18 1973 Should such arule he Issued the Commis8lon s ataffwould acquire pe

information which could be used to calculate operating ratios and returns on investment 

industry wide basis thereby enabUnr the Commission to develop tandards ar inst which to t

reasonableness ofthe ratesof any individual NVOCC

17 F 
WASHINGTON D C

September 27 1973

TRANSCONEX INC AND CONSOLIDATED EXPRESS 99

ULTIMATE CONCLUSION

Respondents have sustained their burden of proving that the

subject rate increases are just and reasonable as required by law

Accordingly the proceedings are hereby discontinued

8 NORMAN D KLINE

Administrative Law Judge

17 F MC
100

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102 FEDERAL MARITIME COMMISSION

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IOG FEDERAL MARITIME COMMISSION

FEDERAL MARITIME COMMISSION

DocxET No 7019

INTERMODAL SERVICE TO PORTLAND OREGON

October 23 1973

Agreement ofTtans PacificFreight Conference of Japan Agreement No 150 a

approved at time of hearing did not authorize indirect service to Portlan

Oregon from Far Eastern ports in which cargo is discharged from vessel 

Seattle Washington and transported by overland carrier to Pottland a

port of destination at ocean carrier s

expense Agreement No 150 49

specifically providing for such service approved Agreement of Tran

Pacific Freight Conference Hong Kong Agreement No 14 does authoriz

such service Agreement 142updating Conference agreement wi

respect to indirect overland service has been lodged inCommission ees 

interest of clarity to avoid future problems

Upon approval of Agreement No 150 49indirect overland service found le

under sections 15 16 and 17 of Shipping Act 1916 on condition that ea

member of Conferences providing such service to Portland serves Portlan

directly by water with afrequency no less than alternate sailings abse

emergency situations such as strikes weather conditions or port conge

tion

Conference members regular indirect overland service to Portland if provide

as conditio edabove found not ineonsistent with section 8

Mercha

Marine Act 1920 and not rendered unlawful by section 205 Mercha

Marine Act 1936

Prior to agreement approval granted herein tariff of Trans Pacific Freig

Conference of Japan unlawful since regular indirect service to Portlan

unauthorized by approved agreement Tariffs of both Conferences former

unlawful under section 18bShipping Act 1916 as not plainly showi

when and in what manner absorptions orindirect service would apply b

lawful as amended to require absorption of overland transportation costs 

water carriers when regular indirect service is provided

Quarterly reports detailing direct and indirect service at Portland required f

three yearperiod

Charles FWrren and John H Caldwell for respondents Tran

Pacific Freight Conference ofJapan Trans Pacific Freight Confe

ence Hong Kong and member lines of these two conferences

John MsonWarren Priee Robert L Dauserut and Bradley R

Coury for respondent and intervener Sea Land Service Inc

17 FMC
INTERMODAL SERVICE TO PORTLAND OREGON lO7

Gerald Grinstein Michael B Crutcher and Richard D Ford for

intervener Port of Seattle

EdwardSchmeltxer EdwardAptaker Denntis N Barnes Thomas

P White and Nornzan ESutherland for petitioner City ofPortland

Oregon

Francis A Scanlan and Leo F Glynn for interveners Philadel

phia Marine Trade Association The Port of Philadelphia Marine

Terminal Association and Boston Shipping Association Inc

Martin A Heckscher and George F Mohr for intervener Dela

ware River Port Authority

NeitLLynch and Chester H Gourley for intervener Massachu

setts Port Authority

Philip G Kraemer for intervener Maryland Port Administration

Aibert E Cronin Jr and J Richard Townsend for intervener

Stockton Port District

John J Hamlyn Ir for intervener Sacramento Yolo Port Dis

trict

Joseph D Patello for intervener San Diego Unified Port District

JKerwin Rooney for intervener City ofOakland California

J Robert Bray and Arthur W Iacocks for intervener Virginia

Port Authority

Arthur LWinn JrPaul M Donovan and Douglas W Binns for

intervener The Port of New York Authority

Richard W fCu rrus and Howard ALevy for intervener American

Export Isbrandtsen Lines Inc

Donald J Brzcnner Paul J Caller and Stephen T Rudman as

Hearing Counsel

REPORT

BY THE COMMISSION Helen Delich Bentley Chairman Ashton

C Barrett and JamesV Day Commissioners

Our purpose in this proceeding is to determine whether the

establishment of a regular service to Portland Oregon from Far

Eastern ports under which cargo destined to Portland is dis

charged from a vessel at Seattle Washington and transported by

inland carrier to Portland Oregon at ocean carrier sexpense

1 Is authorized by the approved agreements of the Trans

Pacific Freight Conference of Japan TPFC Japan Agreement

150 and the Trans Pacific Freight Conference Hong Kong

TPFC Hong Kong Agreement No 14 and if so whether the

agreements to the extent they authorize such practice should be

disapproved cancelled or modified pursuant to section 15 Ship

ping Act 1916 the Act

17 FMC
lOH FEDERAL MARITIME COMMIS9ION

2 Violates section 16 of the Act by subjacting a peraon loc

or description of traffic to undue or unreasonable prejudice 

disadvantage

3 Violatea section 17 of the Act by reulting through 

absorption ofinland transportation costs in demanding char

or coliecting rates or charges which are unjuatly discrimina

between shippers or ports

4 Violates section 18b of the Act by providing services 

authorized by the Conferences tariffa or

5 Is contrary to the policy of section 8 Merchant Marine 

192Q of encouraging the movement of cargoes through theUn

States porta through which they would naturally paas

Our order of investigation named the two conferences and t

member linea as respondenta The City of Portland Fortls

which had prior to the issuance of the order of investiga

petitioned the CommissiQn to inveatigate the challenged ser

became a party petitioner Numeroua persons repreaenting for 

most part port interesta in various sectiona of te United St

intervened reaponding to our declaration in the order that

The determination of theae mattera ia oY prime importance for the guidan

the ahipging industry and shauld be made the eubject of a full hearing

Those hearings were held in Washington DCbefore Admini

tive Law Judge Charlea E1VIorgan who issued an initial deci

in which he found Ehe challenged service unlawful but held 

auch aervice would be lawful 1 if resgondenta tariffs w

modified to indicate unambiguously whether and to what ex

the carriera will absorb the coat of inland transportation f

Seattle to Portland and 2 if the rteof any ocean carrier 

scheduling direct service to Portland for its aervice to Portl

indirectly from Seattle ia diflFerentially higher than the s

carrier srate for direct water service to Seattle by 150 

revenue ton

Pursuant to a petition of Portland we reopened the procee

for the receipt of additional evidence with reapect to conta

movements in the Pacific Northweat after December 11 1

Following a hearing in the reopened proceeding in FVashing

DCAdminiatrative Law Judge Morgan issued an Initial D

sion on Reopening andRemand in which he affirm dhia ndin

and conclusions in his earlier deci ionExceptions tothe Adm

While eection B ie not epecitlcally edminietered 6y the Commlaeion 1t ie properly conaide

Commieeion deli6eratione aince ae an set aP ConQreee it reflects s leielstlve pronauncement 

public intereat 3ee ePort of New York AuEh vFederdlMariGime Comn428 F 2d 883 870 6

1970 certdn401US908 1971 Delnware River Port Auth v UnfEed Statea 4ine lnc 317 F 

441EDPa 1971

17 FMC
INTERMODAL SERVICE TO PORTLAND OREGON IO9

trative Law Judge sdecisions were filed by Portland Sacramento

Yolo Port District Sacremento Stockton Port District Stockton

Delaware RiverPort Authority Delaware Maryland Port Admin

istration Maryland the Conferences Sea LandService Inc Sea

Land a member of both Conferences and Hearing Counsel and

replies thereto by Portland Seattle the Conferences and Hearing

Counsel We have heard oral argument

FACTS

The Port of Portland is located on the Columbia River about 90

miles east of the Pacific Ocean The Columbia River lightship is

about seven to eight miles out in the open sea and it marks the

entrance to the Columbia River from the sea The Columbia River

bar extends about five miles in from the lightship as the water

changes from a deep sea depth of1200 feet to a river mouth depth

of 48 or 50 feet During some storm conditions particularly in

winter months during ebb tide periods the bar is considered

impassable for an average time of about six hours From the

lightship at the Columbia River bar it is 101 miles to Portland

Similarly from Cape Flattery Washington where the Pacific

Ocean abuts Juan de Fuca Strait it is 132 miles to Seattle Seattle

and Portland are closer by land than by water Portland is 175

highway miles 182 rail miles and 359 nautical miles from Seattle

Water service to Portland after calling at Seattle in the Seattle

Japan trade involves 422 extra nautical miles computed as fol

lows 151 miles from Cape Flattery Washington to Astoria 83

miles to Portland 83 miles to Astoria and 105 miles from Astoria

to a point in the Pacific Ocean equidistant with Cape Flattery to

Japan

The 166 miles total up and down the Columbia River to and from

Portland are traversed at restricted speeds and with the services

of a river pilot who comes aboard near Astoria Approximately 12

miles of the Columbia River channel are dredged to only 35 feet

below mean water level In time this will be increased to 40 feet

About 108 course changes are required in piloting the vessel up

the Columbia River to Portland In certain areas the river must be

traversed at reduced speeds Average transit time on the Colum

bia River between the Columbia River lightship and Terminal No

2 at Portland is about nine hours inbound and seven hours

outbound The Columbia River is also subject to periodic bar

closures and crossing the bar requires the service of a bar pilot

who comes aboard near the lightship

17 FMC
1O FEDERAL MARITIME COMMISSION

A vesael degtined to Seattle and entering the Puget Sound 

the Juan de Fuca Strait would pick up a pilot who comes ab

near Port Angelea Washington Because of the confined are

the Columbia River more akill ia required to transit it tha

requrred to transit Puget Sound but pilots akilled in naviga

the Columbia River tend tooffaet any diPferences in hazards o

iver and the Puget Sound

The Port ofPortland has two container terminals Termina

2 the newercontainer facility was completed inFebruary 197

a cost ofover8Q00 00 not including apecialized container e

ment This terminal has two ship berths one of whieh is desi

for full container vesaels The other berth can handle contain

breakbulk veasels On the apron of Terminal No 2 are th

cranes including one Hitachi container crane uhich cost86

00

and two revolving gantry cranes which cost 26000each 

yard area ofTerminal No 2 has rail facilities and a ahed at w

containers are stuffed and unstuffed For handling eontainer

this site the Port ofPortland owna four 331 ztonstraddle car

which cost a total of 632000 and two 26ton straddle car

costing about 46000 each and a container lift truck of2to

capacity Also amobile crane of 176 toncapacity coating 40

0

can handle containers and other large units of cargo at an

i Portland sfacilities

Portland seontainer facility Terminal No 4 was complete

November 1968 and ia presently aubject to a preferential use 

Mataon Navigation Company Terminal No 4 has a Hitachi 

tainer crane similar to the one at Terminal No 2 Port

maintains over13000 square feet of covered storage space 

about 70000 aquare feet ofUS Cuatoma bonded warehouse a

The Port of Seattle has four major terminals to handle conta

cargo Terminal b is used by Sea Land on a preferential basis 

has three bridge typecontainer cranes Terminal 18 is used by 

Japanese lines and by Matson Line Terminal 18 has two Hita

i bridge typecranea Terminal 20 is a combination container 

j breakulk facility used by numerous ocean carriers It has 

whirley cranes and two lifting cranes Terxnina146 services Am

can Mail Line the Johnaon Line and Foss Alaska Line and 

two whirley cranea All four terminals have rail and numer

other faeilities ThePort of Seattle has a deep harbor al

weath

port with unlimited accesa at all tides and at all times of the y

Portland operates the largest grain eIevator capacity800

bushels on tidewater west of the Misaissippi River Wheat 

grain are the largest volume items among bulk commod

17 FMC

i
INTERMODAL SERVICE TO PORTLAND OREGON 111

handled Portland stotal export and import harbor commerce to

and from all areas ofthe world in 1969 was5484739 short tons of

which 4377538 tons or about SO percent were bulk cargoes and

10721 tons or about 20 percent were general cargoes including

breakbulk

world commerce

and container

or2791553

general

tons

cargoes

in 1969

About

was

half

to and

ofPortland s

from the

Far East defined as Japan Korea Okinawa Taiwan and Hong

Kong Japan sshare ofthis commerce in 1969 was182402 tons

Principal exports ofPortland toJapan in 1969 in short tons were

wheat logs and scrap metal respectively amounting to 844368

tons 492300 tons and 54462 tons or a total ofthese threeexports

ofabout 95 percent ofall exports ofPortland to Japan Wheat logs

and scrap metal moved in bulk from Portland to Japan

In Portland stotal export and import trade with Japan bulk also

predominates amounting in 1969 to 143693 tons or about 79

percent ofthe total PortlandJapanese commerce of182402 tons

Most ofthe Portland tradewith Japan are exports Total Portland

exports to Japan in 1969 were 146567 tons of which 1393635

tons were bulk cargoes and only 72040 tons were general cargoes

Eastbound total imports from Japan to Portland in 1969 were

35847 tons of which 43298 tons were bulk cargoes and 315049

tons were general cargoes Portland sgeneral cargo trade with

Japan in 1969 amounted to38709 tons ofwhich 315049 tons were

eastbound toPortland and 2040 tons werewestbound to Japan

Only eastbound to Portland from Japan has there been a high

percentage of general cargo In 1969 some 221897 tons of east

bound general cargo from Japan to Portland consisted of heavy

lowrated iron and steel articles not moving in containers

The Conference carriers principally serving Portland in the

trades here under consideration consist of a six line Japanese

consortium a full containership service American Mail Lines

AML Barber Lines ASBarber Knutsen Line Knutsen and

States Steamship Company States Prior to December 11 1970

when the first call was made by a consortium containership at

Portland there had been no direct full containership service from

Japan to Portland and when this record was closed there was still

no direct full containership service to Portland from Hong Kong

The consortium now serves Portland directly about every 20 days

and provides indirect overland service via Seattle about every 10

days In the past AML has served Portland both to and from

Japan each way about three sailings per month AML has sailed

between Portland and Hong Kong on most ofthese same voyages

to and from Japan States has served Portland eastbound from

17 FMC
112 FEDERAL MARITIME COMMISSION

Japan about two sailings per month on the average plus 

one or two sailings from Hong Kong per month and Stat

served Japan weetbound from Portland about one or two s

per month and Hong Kong weatbound about one sailin

month from Portland Barber has offered no weatbound 

from Portland toJapan but provided about twoeastk ounds

per month from Japan and two eastbound from Hong Ko

well as two westbound to Hong Kong Knutaen provided Po

service eastbound from Japan and Hong Kong with sailings 

twice amonth but noweatbound aervice toJapan AML inte

time to have four full containershipa and at that time 

provide weekly service to and from Japan with all veasels 

at Seattle and probably every other voyage calling at Po

Its actual operating plan however will depend upon its e

ence in developing sufficient cargo to and from Portland 

vessela not calling at Portland on a particular voyage 

handle containers at Seattle for movement overland to and 

Portland Knutsen and Barber have increased the contain

pacity of eight of their vessels and during the period Dec

197Q to June 1971 called at Portland with all ofthese shipa

On or about April 20 1971 Sea Landdiscontinued the in

overland service to Portland via Seattle which it had main

since the beg inning of 1969 Sea Land plana to serve Portl

the future by means of one or two amall class containership

relay or feeder service between Paci cCoast ports

There were 126 consignees in the Portland area who u

Sea Land sindirect container service from Japan via Sea

general the consignees in the Portland area prefex direc

tainer service by water to Portiand because this eliminates 

i

ing and custom delays at Seattle and because these cons

can communicate directly with the personnel at the Pn

public docks and at the Portland customs whereas long dia

communication with Seattle people ia comparatively undes

But many conaignees in the Portland area as seen from 

Land s

indirect

success

service

in

very

obtaining

useful if

their

not essential

cargoes deemed

to their

SeLas

busin

Sea Land provided a weekly direct senvice to Portland a

cause Sea Land carg oea from Japan to Portland moved i

tainer there resulted aminimum of damages and aminim

lossea due to pilferage Portland consigneea generally prefe

would patronize regular and frequent container service dir

Portland over acomparable indirect service atthe same tra

17 
INTERMODAL SERVICE TO PORTLAND OREGON 113

tation costs but their main concern is to obtain a frequent and

regular container service which is necessary to their operations

In 1969 TPFC Japan Conference members carried 504656 reve

nue tons of cargoes between Japan and Seattle and 160384

revenue tons between Japan and Portland Totals for the Puget

Sound gateway including Tacoma Washington were 51971 tons

and for the Columbia River gateway including Longview and

Vancouver Washington were 30933 tons In 1969 the above

totals included 346675 revenue tons ofOCP cargo carried through

Seattle and only 20327 tons of OCP cargo through Portland and

also 124015 tons of OCP cargo through Longview These gures

show that in thistrade Seattle cargoes exceeded Portland cargoes

and very much so in the case of OCP cargoes ie cargoes destined

for points generally east of Denver Colorado

In 1969 Seattle handled both inbound and outbound a total of

93724 containers For the same year Portland handled 11037

containers In the first six months of 1970 Seattle handled 64599

containers while Portland handled only 7178 The major type of

cargo moving in containership service has been OCP cargo Seattle

attracts vastly more OCP traffic than does Portland Very little of

the overland container traffic is transhipped at Portland

When Sea Land provided its indirect service to Portland via

Seattle it handled about 22 containers to Portland per sailing

during its 22 voyages in the first six months of 1970 and also 409

containers per sailing indirectly to Vancouver BC via water to

Seattle thence overland via railroad to Vancouver Similarly

containers discharged by Sea Land at the Port of Seattle in the

first six months of 1970 and handled overland to other destina

tions averaged 123 to Anacortes Washington 186 to Tacoma

Washington 32 Longview Washington and 76to Astoria Ore

gon On these same 22 sailings in 1970 out oftotal containers to all

destinations of4349 there were 2657 containers destined for

Seattle delivery including 825 local and 1832 OCP or an average

per sailing to Seattle of 120 8containers

In the first five months of 1970 Sea Landcargoes from Japan to

Portland were 9719 tons local and zero tons OCP Commencing in

December 1969 Sea Landwasprecluded by Portland from moving

freight into Portland spublic warehouses unless handled by water

to Portland In the same five months of 1970 Sea Land scargoes

to Seattle were 10894 tons local and 44774 tons OCP Sea Land

served Vancouver BCin these five months of 1970 with 9300

local tons and 10556 OCP tons

Total container cargo gures for all members of the TPFC

17 FMC
114 FEDERAL MARITIME COMMISSION

Japan show that for 1969 there were 7641 containers diach

at Seattle by other than Jaganeae member linea and 2496 

tainers diaeharged at Seattle by the Japanese linea or a to

1037 containera handled eastbound from Japan to Seattle in 

by all conference membera

Corresponding figurea to Portland are only 123 containe

nonJapaneae lines and only 36 by Japanese line membera 

total of only lb9 containers diacharged at Portiand eastbou

1968 carried by all members of TPFC Japan The conta

eastbound toVancouver BCin 1969 were 1080 byno

Japan

linea plus 1060 by Japanese lines or a total of2140 Eaatb

containera to Portland increased moderately in 1970 Durin

first three montha of 1970 containers handled from Jap

5eattle totalled 2766 and those to Portland totalled only 34

figvre to Vancouver BCfor the same three montha was 87

For the period December 1970 through June 1971 inclusi

the two trades in isaue herein the total of loaded coeitainer

foot equivalents handled inbound and outbound at Seattle 

40891 On the otherhand at Portland the total ia 6739 conta

of which the Japanese aix linea handled 4992 AML Statea 

Knutaen 674 and Barher about 200 containers AML State

Knutaen carried a total of 386 containera inbound

During the period from December 8 1870 through June 27 

the Japanese six lineconaortium vessels made 22 calls at S

Eleven of these same veasels every other one of the twe

w

aleo called at Portland during the period from December 11 

through June 24 1871 For the same period at Seattle the nu

of loaded containers 20foot equivalents totailed 9319 east

or inbound and 6b87 weatbound oroutbound For the eame 

at Portland the loaded containers totalled 168 eaatbou

inbound and 3824 containera outbound or westbound The 

nese six lineconaortium vesaels handled via Seattle contain

or from Portland totalling in the period in iasue 362 conta

eastbound or inbound and 182 containera weatbaund oroutb

Whem these last figurea are added to the totals of cont

handled by water directly to or from Portland the grand to

Portland containers handled by the Jaganeee aix lines i

December 1870June 1971 period are 4006 westbound or outb

and 1630 eastbound or inbound and the averages per vo

using 22 voyagea are 182 containera weatbound or outboun

70 containera eastbound or inbound

In the Hong Kong trade alone between December 197

17 
INTERMODAL SERVICE TO PORTLAND OREGON IIrJ

June 1971 AML States and Knutsen carried a total of 59 con

tainers to and from Portland 58 inbound and 1 outbound

During the year 1970 the member lines ofTPFCJapan carried a

total of 614 792 revenue tons ofgeneral cargo to Seattle ofwhich

1616 was local cargo and 453662 wasOCP cargo and a total of

14899 revenue tons ofgeneral cargo to Portland ofwhich 128731

was local cargo and 19468 was OCP cargo During the first ten

months of 1971 the member lines ofTPFC Japan carried a total of

581277 revenue tons ofgeneral cargo to Seattle of which 130522

was local cargo and 45075 was OCP cargo and a total of71030

revenue tons of general cargo to Portland of which 64851 was

local cargo and 179 was OCP cargo

THE ADMINISTRATNE LAW JUDGE SDECISIONS

A The initial decision

The Administrative Law Judge found the indirect overland

service to Portland via Seattle to be authorized by the Conference

agreements and tariffs but held that the provisions of the tariffs

relating tothe absorption ofoverland expenses in connection with

the indirect service to Portland are not in conformity with section

18bofthe Shipping Act 1916 since they do not plainly show what

charges will apply He would require that the tariffs be modified to

indicate unambiquously whether and to what extent the carriers

will absorb the cost of inland transportation from Seattle to

Portland Administrative Law Judge Morgan determined that

container service from Japan and Hong Kong to Portland was

inadequate prior to December 11 1970 and that the indirect

service was therefore at the time lawful He additionally found

that since that time container service at Portland in both the

Japan and Hong Kong trades did not appearto be inadequate and

that the Conferences indirect services were unlawful under sec

tions 15 16 and 1 of the Shipping Act 1916 He held however

that the services would be lawful ifthe rate of any ocean carrier

not scheduling direct service to Portland for such indirect service

as it provides via overland movement from Seattle were differen

tially higher than the same carrier srate for direct water service

to Seattle by 150 per revenue ton Finally Administrative Law

Judge Morgan concluded that the indirect Portland service was

not contrary to the policy ofsection 8 Merchant Marine Act 1920

ifsubjected to the tariff clarifications and rate differentials which

he required

17 FMC
116 FEDERAL MARITIME COMMISSION

B The initialdeciaion on reopenircg and remand

After considering the operations atPaci cNorthweet ports 

respect to container movements after December 11 1990 

Administrative Law Judge afPirmed his earlrer findinga and 

clusions

DLSCUSSION AND CONCLUSION9 2

IAuthorixation for indirect aervice to Portland via tinland c

fmom Seattle to Portla ndwith abeorpttion afinland tra

or

tion coata under the preaently appraved conference agree

Hearing Counael Portland and Maryland maintain tha

Administrative Law Judge erred in holding that a

regular in

service to Fortland via overland tranaportation from Seattle 

absorption of inland transportation coats ia authorized b

Conferences presently approved agreements More ap

ca

Hearing Counsel assert that the agreements prohibit absorp

unless a tariPf provision aathorizing absorptions is agreed 

the Conference members and that there has been no showing 

any tariff rulea of the Conferences were intended to auth

such aervice at the time they were adopted Portland main

that the Conferences indirect aervice to Portland is atype of

equalization which is not authorized becauae it is noC speci

provided for in the Conference agreements which Portiand 

tains do not authorize the absorption of inland freight charge

only the absorption of charges assessed for funetions au

wharf geand storage which are confined tothe oeean termin

basea this contention upon the use in the ConPerence agreem

i

oflanguage reatricting the ratea snd charges to which they 

tothose for or in connection with tranaportation inve

emphasis supplied and indicating that abaorption is to ap

wharfage storage or other charges against carg o Po

also asserts that the fact that the Conferences led duxin

course of this proceeding changea in their agreements w

specifieally referred to overland freight absorptions conatitut

I

The City of Oakland Oaklandintervened and partlcipated inthe hearinge Although itfiled 

with the Admin etrative Law Judge nor exeeptiana orrepliee to thie initial declaiona Oak

eupport the initial decieioqa at the oral erRUment The Philadelphie Marine Trede Aeeociation 

Philadeiphie Merine Terminal AeeociaEion and Boston Shipping Aeeocietion InoPhiladelp

SoaLoN maintained betore the Administretlve Lew Judge that the Indireet eervice LoPor

i meana oP the abeorRtion of inlend trnnaportation coete wae unlawtul becauee it artifically 

cargo which ehould have moved through the Port o4 Portlend 6y waterin violation of eectlo

and 17 oP the Shipping Act 1918 and contrary to eection Bof the Marehant Merine Act 18E0A

Philedelphie end Boeton did not except to the initial decieione they reitersted thie poeition 

argument

17 
INTERMODAL SERVICE TO PORTLAND OREGON 117

admission by the Conferences that indirect overland service to

Portland is unauthorized by the Conferences presently approved

agreements

Only the Conferences respond to these exceptions maintaining

that their indirect overland service to Portland is authorized by

their approved agreements 3The Conferences contend that similar

language in Conference agreements with respect to absorptions

was found to authorize port equalization which they contend is

indistinguishable from the overland absorption practices here in

issue They assert that the language for or in connection with

transportation in vessels is broad enough to cover the Conference

service which involves continuous movements to Portland on

Portland bills of lading and that wharfage storage or other

charges against cargo include absorption of the costs of inland

transportation since wharfage and storage like charges for inland

transportation are generally assessed by persons other than the

ocean carrier Finally the Conferences maintain that the modifi

cations which they made in their agreements were not admis

sions that the service here under investigation is not authorized

but were made only in the alternative and in the event that the

Commission found that the present language in the agreements

needed updating or in fact did not authorize the service

The mere fact that the Conferences have filed amendments to

their agreements which contain language specifically authorizing

overland transportation at the Conference members expense does

not of course constitute arecognition by the Conferences that

authority for assumption ofthe expenses ofsuch transportation is

presently lacking in the Conferences approved agreements Not

only did the Conferences in filing the amendments represent that

they were filed for approval only if they were found to be

necessary to authorize their overland service to Portland but is

clear that the question of whether certain concerted activity

requires approval not already granted by the Commission is not a

question to be determined by the parties to the agreement It is a

matter to be determined by the Commission itself in the exercise

of its regulatory responsibilities

An agreement approved pursuant to section 15 is not simply a

private contract between private parties the intent ofthe parties

is only one relevant factor and the Commission not only can but

must weigh such considerations as the effect ofthe interpretation

on commerce and the public Moreover the agreement existed

Seattle apecifically takes no poaition on the issue of whether theConference agreements authori2ed

the service under investiRation

19FMC
118 FEDERAL MARITIME COMMISSION

legally only because approved by the Commiasion The C

miasion muat be given reasonable leeway in delineating the ac

of the agreement and therefore the extent of its prior appro

Swift Company vFederal Maritime Commiasion 306 F 2d 

281DCCir 1962

The language of the presently approved agreementa of 

Conferences in the light of the atandards which we have evo

for determination of the scope of a prior approval demonatr

that TPFC Japan Agreement No 160 doea not authorize 

service here atissue In general authorization for particular ty

of anticompetitive conduct requirea apeci clanguage in an ag

ment The proper performance ofthe Commission sduty to ac

nize agreements prior to approval to insure that they do 

invade the antitrust lawa to agreater extent than ia necessary 

the effectuation of a legitimate regulatory purpoae requires t

adquate notice be given on the face of agreements as to 

activities which they wili cover to allow all interested parties 

participate in an informed manner in pre approval proceedi

See Paci tc Coaat European ConferenceRulea 10 and 12 

FMC266 278 1971 Joint Apreement FarEast Cmand P

WB Conf 8FMC663 bb8 1985 Aqreement 7700Establi

ment of aRate Structure 10FMC61 66 1986 cfdaub n

Persian Gul Outward Freipht Conf v Federal Mar Com n

F2d 335 3412DCCir 1967 Specific authorization is requ

for any conference system under which members wiah to serv

port by other than avesael call at such port ieby asaumptio

the coat ofoverland transportation See Pacif x Coaat PortEqu

xation Rule 7FMC623 1963 afd aub nom Ameri canExp

Isbrandtsen Linea vFederal Marttime Commisaion 334 F 2d 

9th Cir 1964 6

leb undteen Co vUnited Statea 211 F 2d 6167D0Cir 1964 certden edeu6 nomJapa

Atlan

Gud Conf vUS347UB990 1B64

Inveati0ation ofOver ndCPRatee andAbaorptiona 12FMC184 qpdeu6 nomPort of New 

Auth vFsderal Maritime Com n429 F 2d B88970 6thCir 1870 cert den 401US908Q971 

authorlty Por the propoeition that epecific lenguege in a conference aQreement ie unneceeae

euthorize apraetice like that here in ieaue The OCP ceee merely held that conferencee ope

between the United Statee Pscific Coeet and the Far Eaat did not require approval in eddition to 

general retem4king authority to eeteblleh ee earoup loweroceen rfltee forcargo maving ta and 

the midweet portion othe United Statee overlsndlOCP retee then Por cergo moving to and 

areas weet ofthe Rocky Mountaine local retee Caoee Ifke the preeentone which involve the que

of the euthority oP individuel conference linea to asaumetha expenee oP inland trsneportation bet

poMa were dietinguiahed on the ground that he practice oP eeeumption af Inland traneport

expeneea unlike OCP ratee did not involve conventional competitive concerted ratemsking o

parta oP all conPerenee mem6ere to obtain cargo but rather conetituted an exception to the 

meking proceee whieh givee the individual conPerence mem6er a

diecretionary powerto divert 

from eportwhich ie eerved by the aqme conPerence on the eame trade route at the aame ratee e

port to which the cergo id diverted 12FMCat 212

17 FMC
INTERMODAL SERVICE TO PORTLAND OREGON 119

The language ofAgreement No 150 does not authorize assump

tion by Conference members ofthe cost of overland transportation

as a part of a regularindirect service Agreement No 150 does not

contain any language with respect to Conference activities relat

ing to charges for overland transportation The only wording the

Conferences can point to as alleged support for such authority

relates to the absorption of wharfage storage or other charges

against cargo Article 3a In the light ofthe requirement of

specific authorization with respect to expenses for overland trans

portation such language can hardly suffice even were it not the

case that the more normal reading of such language would seem

to indicate that it relates solely to charges pertaining to terminal

facilities

Agreement No 14 of the TPFC Hong Kong unlike Agreement

No 150 does contain reference to absorptions ofcharges relating

tooverland transportation explicitly providing for absorption

at loading or discharging ports of rail or coastal steamer freights

or other charges when agreed to by the Conference members

Article 6c

While the quoted language does not specifically

mention freights relating to transportation by truck amethod

frequently used to provide the indirect overland service here

under consideration the words other charges read in conjunc

tion with the words rail or coastal steamer freights are certainly

broad enough to be interpreted as including such truck freights

and the Commission has consistently acted in accord with such

interpretation See egCity of Portland v

Pacif a Westbound

Conference 4FMB664 667 1955 modified 5FMB118 1956

affd sub nom Pacif z Far East Line v United States 246 F 2d 711

DCCir 1957 Pacific Coast Port Equalization Rule 7FMC

supra at 630 31

During the course ofthe proceeding the Conferences filed with

us agreement language relating to indirect overland service to

Portland which we will act upon here eNotice ofthese filings was

published in the Federal Register and Portland alone commented

upon them maintaining that the Commission should not act upon

the lings until a decision had been reached in this proceeding

and that any action on them should be taken within the context

sTPFC Japen propoaes to add to Article 3aofAReement No 150 the italicized words The

ebsorption ofwherfage etorage orother charges against cargo indudzng 6aorptions at lodingand

diachargingyorte of rail truck orwaterfreighta is prohibited ezcept as may be agreed between the

partiea hereto and ahown in the Conference CarifC Agreement 15049J

TPF0 HongKong proposes to insert the word truck in its Article 6cso that it would read

absorption at loading or dishcarging ports of rail truck orcoastal steamer or other charges

Agreement1432

17 FMC
1LO FEDERAL MARITIME COMMISSION

ofthe formal proceeding there being no need for the reco

be reopened for conaideration of the proposed modifica

We will therefore approve the modi cation to Agreement N

because as we have seen such modification ia necessa

authorize the indirect overland service and because as we 

demonatrate hereinafter such Conference service is not othe

unlawful Having found that Agreement No 14 presently au

izes the indirect overland aervice we will not approve the 

made by TPFC Hong Kong but will lodge the filing in our a

ment les as an updating of the Gonference agreement tom

it more explicit and avoid problems in the future e

II Law fulnese under aection 15 IB and 17 of the ahippinp 

1916 of regular indirect aervice to Portland involving o

carriera abaorption of coat ofinland tranaportation from 

tle toPortland

decisiona

A All parties

object

taking

to his

isaue

conclusion

with the

aside

Adminiatrative

from the

Law Ju

s

queatio

section 16 authorization with reapect to the lawfulneas o

indirect service to Portland Qn the one hand Portland Hea

Counsel Sacramento Sea Land Stockton Delaware River P

delphia Boston and Maryland asaert that the indirect ove

service to Portland at least as it has been carried out in the 

is not only unlawful under the Shipping Act 1916 as Admin

tive Layv Julge Morgan found but in addition cannot be lega

by the imposition for sueh eervice as he suggested of a diffe

tially higher rate than that asaesaed for direct water servic

Seattle The Conferences on the other hand contend that 

indirect overland service to Portland is lawful even witho

differentially higher rate for such service than for direct w

service to Seattle

1 The fundamental ground of those other than the Co

ences objecting to establishment of a differential rate 

condition for a lawful indireet overland service to Iortland ia 

a rate differentiai system is contrary to the standards which 

Commission and ita predeceasors have evolved fQr determining 

Cf nveat patdon of Ovarland OCPRatee and A6eorptione eupra at 2088 where we re

reapondent con erencea to upadatetheirayreemente to add lenattsge dealing with OCP rate

though we faund that the general ratemaking authoriEy of theee conterencee already cover

fixing aPeuch ratee

a

HeerlnQ Couneel econtention thet the preaently approved Con4erenro aRreemente do not au

indirect overland eervice becauae the Confereneea hsve Plled no tarifte which can be ehown t

been intended 6y the ConPerencee to ba ueed Por eueh eervice goee not to Lhe queetion o4 

authority to provide a conYerenee eervice but to the matter of whether ornot CariPP provielo

eufieientin lew Eo allow Conference membere to provide indirect oveTland aervice Aceordingly 

be treated in our diecueeion oP teriPP pro6leme relating to the indirect service in Part V infia

17 FMC
INTERMODAL SERVICE TO POR TLAND OREGON 1LI

lawfulness of the conditions under which carriers may provide

service to ports without actually making vessel calls at those

ports They contend moreover that even if a rate differential

system were a proper means of determining the legality of an

indirect overland service the particular system here adopted by

the Administrative Law Judge has no support in the record They

maintain that no reason is given by the Administrative Law

Judge for the adoption of the 150 rate differential other than

that itis proposed now in the absence ofanyother firm figure for

such a differential and that no evidence of record dealt in any

way with the propriety ofa150 rate differential or indeed any

rate differential Thus it is urged that adoption ofthe differential

would violate the requirements of the Administrative Procedure

Act that agency decisions be supported by substantial evidence

and set forth the basis for their conclusions 5USC 557 c

706 2E

Those challenging the differential contend that the proper

standards to be applied in determining the validity of any system

designed to allow carriers to provide service to ports without

actually making vessel calls there are the adequacy of service at

the port at which carriers desire to avoid calling directly and the

economic and natural relationships between the port at which

carriers desire to call and that at which they do not Ifservice at

the latter is adequate and if that port is not in the same harbor

complex or geographic area as the port at which direct calls are

made or does not serve an areawhich is centrally economically and

naturally served by the direct callport then these parties main

tain any absorption of the expense of inland transportation is

unlawful

The Administrative Law Judge erred it is contended in failing

to nd that Portland and Seattle are separate gateways in the

Pacific Northwest from the standpoint of actual traffic move

ments geography and history and that Portland is a significant

general cargo as well as bulk cargo port and hence is able to

generate amounts of containerized cargo sufficient to justify

regular water service to the Port It is asserted that the paucity of

record evidence supporting the validity of indirect service to

Portland subjects the Port ofPortland the shippers who would use

the Port and the traffic which would move through it in the

absence of adsorptions to undue disadvantage and prejudice in

violation ofsection 16 and unjustly discriminates against Portland

and the shippers who would use the Port in violation ofsections 15

and 17 Continuation ofthe indirect service will be detrimental to

17 FMC
1Z2 FEDERAL MARITIME COMMIS3ION

the commerce of the United States it is aaserted since 

overland routing of traffic toPortland wil cauae the port fac

to dry up This in turn will result in losa of governmen

private inveatment in these facilitiea lose ofemployment to 

in water transportation related occupations and congeation a

water facilitiea of the ports at which vessels call Finally 

ultimately after the drying up ofports like Portland is com

even the absorptions themselves will be eliminated since 

alternative of water tranaport through auch ports having 

foreclosed they would no longer be necessary

Stockton takes an approach somewhat different from thato

other partiea objecting to the conclusion that the indirect se

to Portland would be lawful if conditioned upon ttie 150 

differential Stockton asserts that the major error of the i

decision is ita failure to diatinguiah between transshipmen

port equalization Port equalization Stockton maintains o

when acarrier catla inbound at a

port ot her than thst neares

consignee provides for transportation ofthe cargo overlxnd t

consignee and abaorbs that portion ofthe coat ofinland tran

tation which exceeds what the conaignee would have paid had 

cargo been delivered at the port nearest him Transahipm

Stockton asserts occurs when inbound cargo ia diacharged 

port other than that named as the destination port iM the b

lading and transported at the ocean carrier sexpense tb the 

facilities of the deatination port by another carrier by water 

truck or rail According to Stockton the Conferences tariff

authorize both transshipment and equalization The conclu

Stockton contends that the Conferences present practice w

Stockton says is equalization is unlawful is proper but 

Adminiatrative Law Judg eshould have found that the asaeas

of the 1b0 charge for the indirect service only served to a

vate the unlawfulnesa of the practice If however Stockton m

tains the Conference transshipa rather than equalizea 

transports the cargo by land or water to the terminal facilitie

Portland rather than to the conaignee at his prernises or a p

other than the Portland terminal facility and does so at the s

rates which apply to its direct aervice to Portland the Co

encea activities will be lawful aince they would not then diac

nate againat or in any way prejudiCe the Port of Portland

2 The Conferenees quite underatandably praise the initial 

sion as an attempt to develop new atandards for determining 

validity of water carrier services to a

port by meana other 

direct vessel call They maintain that the thesis of the in

17 FMC
INTERMODAL SERVICE TO PORTLAND OREGON 123

decisions is not so much whether under the old standards the

cargo is naturally tributary to a port but whether in the con

tainer era a ban on the absorption of inland transportation costs

or inland feeder operations would be unduly restrictive

The Conferences except however to the condition of a differen

tially higher rate The rationale for the differentially higher rate

the Conferences assert is the need to protect the Port ofPortland

and the consignees who receive cargo there from diversion away

from the Port through the use of the absorption of overland

transportation costs where water service to Portland is adequate

NoConference member now schedules an indirect Portland service

without also scheduling a regular direct call service Therefore the

needs of Portland and Portland consignees are fully protected

they maintain if Conference lines which regularly call at Portland

are allowed to provide an indirect service at the same rates

Portland consignees would derive great benefit from the availa

bility ofcontinuous direct and indirect service as they would have

unrestricted freedom to choose which carriers and type of service

best satisfy their varying needs The Port ofPortland will benefit

from both direct and indirect conference service to Portland since

carriers providing a direct service will endeavor to fill their vessels

to offset the high costs ofmaking direct vessel calls

TPFC Hong Kong also excepts to the conclusion that as of

December 1970 water service from Hong Kong to Portland has

been adequate and thus no absorptions of the cost of inland

transportation from Seattle absent rate differentials would be

lawful That Conference contends that Portland is an inadequate

container port in the Hong Kong trade since direct full container

ship service has neverbeen available to Portland from Hong Kong

Further the Conference asserts there is no showing in the record

in this proceeding thatTPFC Hong Kong members are presently

providing overland deliveries via Seattle in the Hong Kong Port

land trade

Lastly the Conferences except to the failure to find that all

cargo moving on Portland bills oflading including cargo destined

for local points near Portland is naturally tributary to Seattle as

well as Portland Seattle the Conferences maintain is the con

tainer load center in the Northwest which the record shows is

used by Portland as well as Seattle consignees The close land

proximity of Portland and Seattle the heavy container volume at

Seattle past and present Seattle sability to service the Pacific

Northwest as the Northwest scontainer load center the use of

Seattle shown in the record by Portland as well as Seattle

17 FMC
124 FEDERAL MARITIME COMMISSION

consigneas and the treatment by the maritime regulatory a

of the Pacific Northwest as one inseparable geographic ar

ahow the Conferences assert that any cargo deatined for Po

or nearby points ia naturally tributary to Seattle as w

Portland Furthermore the Conferencea maintain import 

does not move naturaily in the direction of any particula

and the Commission and ita predecessora have never so hel

B Of the parties addresaing themselves to the initial de

only Seattle maintaina that the Administrative Law Judg

correct in holding that indirect service toPortland would be 

ifconditioned upon a rate differentially higher than that as

for direct water service to Seattle Seattle argues that the s

tion ofthe differential rate offers the moat hope ofresolvi

many conflicting interesta which appear in this case

Seattle contends that with respect to container movemen

the natural port as between Portland and Seattle since 

during the period which Portland claims shows the rapid in

in the percentage of containerized cargo moving to Po

nearly all containerized cargo moved through the Port ofS

Both Seattle and Portland moreover Seattle asserts a

container purposes in the same gateway The differentia

approach Seattle asserta will itself determine when ser

adequate and hence abaorption ofinland tranaportation coa

no longer justi ed

The 150 gune for the differential is supported Seatt

tends by teatimony with respect to the differential between 

rates for cargo imported to the area in the immediate vici

Portland local cargo and oeean rates Por cargo deatined for 

further inland OCP cargo The differential may be adjus

the Commission if a few yeara experience shows that the 

figure ia too high or too low to achieve the result of term

in

indirect service to Portland where direct water aervice i

quate In the meantime Portland has little to fearfrom eq

tion since onlyapaltry number of containers was equ

during the period of December 1970 through June 1971 

there was no additional surcharge on equalized traf c

Fina lySeattle while favoring the differential rates estab

for indirect overland to Portland objects to the present cou

action ofthe Conferencea member lines in limiting indirec

land sarvice to Portland to thoae lines also providing dixect 

service there Seattle asserts that to restrict indirect ov

service to Portland to those linea serving only Portland dire

water would have the undesirable effect of depriving Po

17 
INTERMODAL SERVICE TO PORTLAND OREGON 125

shippers who desired to use the overland service ofacarrier which

called only at Seattle of the ability to do so Moreover the

restriction would raise factual problems with respect to the fre

quency with which a carrier would have to serve Portland directly

before it could provide an indirect overland service

The distinction made by Stockton between transshipment and

equalization Seattle contends is a distinction without a differ

ence for the purposes ofthisproceeding Since Seattle asserts the

absorption ofinland freight as conditioned by the 150 differential

is justified it makes no sense to require that such absorption

apply only with respect to transportation to the port facilities at

Portland and not the consignees premises or other inland loca

tion 9

This proceeding places squarely before us the issue ofthe extent

to which the peculiar features oflarge highly specialized contain

erships should alter the criteria which we have evolved for

examining the lawfulness of practices under which carriers serve

ports without making direct calls by means of the assumption of

inland transportation expenses 10In determining the validity of

such practices we of course recognize our regulatory obligation to

be flexible in adopting our procedures to new developments in the

transportation art As the Supreme Court has observed

this kind of flexibility and adaptability to changing needs and patterns of

transportation is an essential part of the office of a regulatory agency Regula

tory agencies do notestablish rules of conduct to last forever they aresupposed

within the limits of law and of fair and prudent administration to adapt their

rules and practices to the Nation sneeds in a volatile changing economy They

are neither required nor supposed to regulate the present and the future within

the inflexible limits of yesterday

The difficult problem is of course determining how much of our

present approach is still ofvalue and to the extent it is not how

s

Hearing Counsel and Portland assert that the absorption of inland transportation expenses which

Stockton would allow with reapect to transhipment to Portland sterminal facilities would be

unlawful as unduly prejudicial and unjustly discriminatory to the Port of Portland since Portland

would not have advantaRes of direct weter service but would be relegated to the status of an inland

terminal

While as indicated by om order of investigation we shall attempt to provide guidance Cor the

shipping industry generally in ouranalysis of the indireet overland service here involved wecannot

adopt the position of Maryland that this proceedinR ahould be treated as arulemaking procceding and

that weshould use it as a

vehicle to establish ruleswith respect to all kinds of indirect waterand Iand

services to and from all porta As all other parties recognize this proceeding is designed to investigate

only the lawfulness of certain practices of certain conferences at acertain port Toehange the nature

of the proceeding in the way sought by Marylend would be contrary to the language of the order of

investigation and violative of the notice requirement established with respect to rulemaking proceed

inga

U

by the Administrative Procedure Act See 5 USC553 Yacific Coast Eva opean Conference

nitedStates 350 F 2d 197 20469th Cir 1965 cei dett 382 0S958

Amevdcan Trucking Axaociationa 1nc vAtchiso iTopeka Santa FeRihuay Co et aL 387 US

397 416 1967

17 FMC
126 FEDERAL MARITIME COMMISSION

much ofit we may discard within the limits oflaw and offai

prudent administration

It is obvious at the outset that a certain tacit asaumption w

seema to have been made with respect tothe concept ofnatu

tributary cargo is notwarranted Both parties arguing in fav

the application ofthe concept to this proceeding and those arg

in opposition to it or maintaining that Portland and Seattle 

the same tributary area appear to assume that the co

extends to all cargo moving in or out of a port In actu

however the concept does not apply tothe type ofcargo whic

record herein shows to be the kind which constitutes the 

majority moving through Pacific Northwest ports for which 

land and Seattle wish to vie

The concept ofnaturally tributary cargo has as its purpos

maintenance ofthe movement ofcargo through those ports w

because ofacombination ofgeographic commercial and econ

considerations would naturally serve such cargo See eg

S

ton Port District v Pacific Westbound Conference 9FMC

1965 affd su6 nom Stockton Port District v Federal Mar

Commiasi on369 F 2d 380 9th Cir 1966 cert den 386 US

1967 Sea Land Seruice Inc v South Atlantic and Carib

Line Inc 9FMC338 1966 Pacific Coaet European Co

enceRules 10 and 12 14FMC266 2868 1971 It ca

rationally be applied and has in fact been speci cally rejected 

situation in which the cargo for which ports compete is des

for or moving tothe central United States ieOCP overlandc

As we observed in Inveatigation of Overland OCP Ratea 

Abaorptions aupra The naturally tributary concept based 

section 8 of the 1920 Act has to do with the territory lo

tributary to aparticular port not with the general territory w

an entire range ofports or more than one range or seaboard 

serve competitively at224 The Court ofAppeals fothe 

Circuit affirmed this approach to the naturally tributary 

cept stating we are not prepared tohold that them

west

portion of the United Statea is naturally tributary to petit

porta No authority has been called to our attention which w

extend the natural tributary scope of 8 to such limitsPo

New York Authority v Federal Maritime Commisaion 429 

supra at 670

With respect to the relatively small amount of local c

moving through the Port of Portland the concept of natu

tributary cargo retains its validity We have applied the conce

a

See elso Beaument Port Commisaion vSeatrain Linee Inc 2U3MC898 708 1943

17 
INTERMODAL SERVICE TO PORTLAND OREGON 127

the past to containerized cargo geographically commercially and

economically related to a particular area See eg

Sea Land

Serv eceInc vSouth Atlantic Caribbean Line Inc supra Cargo

does not cease tobe naturally tributary toan area merely because

it is containerized The interest of developing ports which the

Congress sought to foster in section 8 and the protection of ports

from unjustly discriminatory or unduly prejudicial treatment

under sections 16 and 17 ofthe Shipping Act cannot be thwarted

simply by placing cargo in containers Nor as the Conferences

contend does the naturally tributary concept apply only to

outbound movements There is no indication in section 8 of the

Merchant Marine Act 1920 the source ofthe concept that it is to

apply only tooutbound cargo and no reason in logic why it should

Surely the development of port facilities depends a much upon

inbound cargo as it does cargo moving outbound Cargo destined

for the local area around a port does not cease to be naturally

tributary within the meaning of section 8 merely because of the

direction in which it moves

Contrary to the Conferences contention moreover there is an

area which can historically geographically economically and com

mercially be considered naturally tributary to Portland and not

equally tributary to Seattle The geography of the two ports as

outlined supra clearly demonstrates that they constitute two

separate and distinct harbor complexes one situated on the

Columbia River about 90 miles from the Pacific Ocean and an

other separated by nearly 200 land miles and over 350 nautical

miles located on Puget Sound about 132 miles from the ocean

Historically cargo from the surrounding area of each port has

moved through that port and this has been recognized by our

predecessor See egCity ofPortland vYacif aWestbound Confer

ence supra The record in this proceeding moreover establishes

that a separate economic and commercial hinterland exists for

cargoes moving to and from areas near each of the two ports

areas where the proximity of local industries and lower inland

mileages suggest the naturalness of movements through one

rather than the other port

TheConferencea are incortect in wntending that City ofPortla idshows that the Pacitic Northwest

canstitutes one inseparable geographic area That proceedings involved attempts by aconference to

avoid cailing atNorthweat Pacific Coast ports generally by absorbing inland transportation expenses

to San Francisco It thua containa general language concerning discrimination against the Pacific

Northwest To theextent thatproceedingexamined the geographic commereial and economic structure

ofspecific ports within the Pacific Northweat area it indicflted an awareness thatSeattle and Portland

constituted aepatate port areasthat certain commerce naturally ilowed through one as distinct from

the other port and that the pattern of costa of inland transportation to and Gom areas near each of

theee twa ports created aaeparate economic hinte iandfor each port See especially 9 FMB667

689 673 67575FMB130 134

17 FMC
1LH FEDERAL MARITIME COMMISSION

The only justification which has been recognized for draw

away cargo from ports to which it is naturally tribut ry

inadequacy of steamship aervice at such porta to handle th

cargo See egCity ofPortland vPac fxc WeatboundCon ferenc

aupraProportional Commodit Ratea on Cigarettea and Tobacco 

FMB48 1980 Stockton Port District v Pacific Weatbou

Conference aupraSea Land Service Inc v South Atlantic a

Caribbean Li ne Inc aupra Sureiy there can be no serious conte

tion that the present quantity of steamship aervice is inadequa

to handle even the relatively amall amount of local Portla

cargo and indeed no party to this proceeding ao contends

As we have stated above we have applied the naturally trib

tary concept to containerized cargoin the past and would contin

to do so here were only local cargo involved But as ahown by t

OCP case aupra the concept has no materiality to cargo movi

to or from the central United Statea Such cargo cannot be said 

move naturally through any particular ocean gateway T

problem with respect to such cargoea ia not one of determini

through which gateway they would naturaliy move but rath

one ofattempting to define the extent towhich carriera may ado

various practices designed to enable them to compete for the

cargoes

In the OCP case we held that a system oflower rates for wat

transportation between the Far East andUSPacific Coast po

than the rates obtaining for transportation between the Far Ea

and USAtlantic and GulfCoast ports was a legitimate means 

competing for cargo from the central portion of the United State

Our holding was based upon our findinga that the system of OC

overland ratea acted to allow porta to maintain their competitiv

positiona to preserve for shippera an alternate transportatin

route and to provide carriers calling at Facific Coast ports wi

the means to obtain additional traffic See Inveatipation of Ov

land OCP Ratea and Abaorptiona aupra at2212

The same conaiderations which led us to permit the syatem 

OCP overland rates in that proceeding convince ua that a

regul

indirect service to Portland by the member lines of the Conf

ences would not be violative oP the Shipping Act 1916 if subjecte

to certain conditions Evide nce of record in this proceeding in

cates that consignees in the Pflrtland area nd an indirect ov

land service very useful to their businesaea and the Conferenc

lines nd it economically preferable to serve Portland indirect

some of the time A type of indirect service may be prescribe

17 FMC
INTERMODAL SERVICE TO PORTLAND OREGON 129

which will adequately protect the Port of Portland slegitimate

competitive interests

Although we cannot here devise a neatly precise formula which

will definitively solve the problem of the extent to which carriers

at ports generally may compete for containerized OCP cargo the

evidence of record indicates a method which we feel will ade

quately protect the carrier and shipper interests in the Pacific

Northwest for the foreseeable future while at the same time

allowing Portland fully to develop its ability to function as a load

center for containerized cargo moving to the centeral United

States The extent to which the approach we here follow can be

applied to other cases will of course depend upon the facts and

circumstances ofthose cases

First of all we wish to make clear that we do not here require

that any line serve Portland at all ifit does not wish to do so The

naked authority to require a carrier to call or to continue to call

at a particular port is one which we do not possess See eg

Lucking vDetroit Cleveland Nav Co 265 US346 1924 McC

ormick Steamship Co vUS16 F Supp 45NDCal 1936 Gulf

Puerto Rico Rates 2 USMC410 1940 San Diego Harbor

Commission vMatson Navigation Co 7FMC394 1962 We do

however possess the power to insure that ports are not unduly or

unreasonably prejudiced or disadvantaged West Bound Intercoas

tal Rates to Vancouver 1 USMC770 77341938 particularly

through the collective force of an agencypproved agreement

Investigation ofPrac ret LakeslJapan Trade 8 FMC 270

27451964 To insure that Portland is not subjected to such

prejudice or disadvantage we will require that to the extent any

of the Conference lines desires to serve Portland via indirect

overland service it provides a certain level of direct service The

record herein shows that Portland generates substantial amounts

of local cargo and that the present level of water service is

adquate to handle such cargo Thus the Conference carriers

cannot obtain access tolocal cargoes by refusing to call directly at

Portland by water

Secondly the record in this proceeding shows that all interests

will be amply protected at least in the foreseeable future by a

requirement that each line serving Portland by means of an

indirect overland service serve that port by direct water service 14

with the frequency ofat least alternate sailings A major consider

Direct water servie as used herein encompaases any system whereby carriers move cargo

between ports solely by water and includes but is not limited to smalLclass containerships in arelay

orfeeder service of the type which the record shows is contemplated by Sea LandUse of such small

17 FMC
iSO FEDERAL MARITIME COMMIBSION

ation in this proceeding aside from the matter of the righta 

Portland with respect to naturally tributary local cargo ia th

extent to which each port ahould be allowed to develop into a s

called container load center We have always atriven to admin

ter our regulatory authority in a manner moat conducive to th

development ofthe full potential ofnewly emerging transportatio

phenomena See egDie7 oait4nof Container Martne Linea 

FMC476 48A83 1968Freight Ratea and PractiaeaFlorida

Puerto Rico Trade 7FMC686 69486 1984 Reduction 

RateaPaa Coaat Hawii 8FMC268 284 1984 The reco

before Adrniniatrative Law Judge Mor an particularly in t

reopened proceeding shows an increasing demand for contain

services at Portland and areaponae tohis demand in the increa

of container service provided at Portland For the sevemont

period beg inning on December 11 1970 alone when direct f

containerahip service was instituted at Portland by the first c

there of the Japaneae six lineeonsortium over6000 containe

and more tan 70000 revenae tona of containerized general car

were generated in the two trades involved in this proceeding T

Japanese consortium handled 1630 containers eastbound for th

period including 362 tranaported overland via Seattle as co

pared with only 169 containers diacharged at Portland eaetbou

in 1968 carried by all membera of TPFC Japan and 341 by 

membera for the firstthree montha of 1970 The cargo with reape

to which competition between Portland and 3eattle is prope

directed namely OGP cargo is aa Administrative Law Jud

Morgan found the cargo moat likely to move in containers in t

subject trades When general cargo moving to Portland fro

Japan during the period between December 1970 and 1971 

examined it appears that containerized cargo represents 41 p

cent ofall such cargo When the proportion ofcontainerized car

moving to Portland from Japan during this period ia compar

with the reapective proportion for the year 1989 the last who

year for which the record contains data the reault is an increa

ofover 22 times Moreover during the period from December 19

to June 1871 additional direct container service at Portland w

instituted by AML Knutaen and Barber

While such statistics certainly suggeat a great increase in t

ability of Portland to generate containerized cargo they do n

neceasarily indicate the ability ofPortland to attract cargo to su

claea veeeele by member linea cennot be prevented by ConPerence eetion aee Docket No 1

SacramentaYolo Port Diatii cvPacdJ icCoaetEuopeanCo njerence et aL report eerved Auguat 

1871 Moreover whatever Lhe probleme inherent in the uee oP euch relsy orfeeder ehipa may 6e t

are amatter outeide the ecope ofthe preeent proceeding

17 FMC
INTERMODAL SERVICE TO PORTLAND OREGON 131

an extent that it is likely to overtake Seattle as the dominant

general cargo facility in the Pacific Northwest In fact the record

herein shows that while the percentage of containerized cargo at

Portland is increasing for the first ten months of1971 at any rate

the amount of total general cargo the source from which contain

erized cargo is drawn moving to Portland in the Japanese trade

reveals a fairly strong downward trend when compared to the

amount oftotal general cargo moving to Portland in that trade in

1970 a trend moreover which is particularly marked in the case

of OCP cargoes The significance of this downward trend is

emphasized when it is noted that during the first 10 months of

1971 Seattle continued to expand the amount of general cargo

handled over the 1970 level particularly with respect to OCP

cargces

The concept of adequacy of service is a troublesome one In a

very real sense it is the ocean carriers themselves who because of

a desire to serve a port indirectly can theoretically make service

inadequate merely by refusing to serve that port directly and

then unlawfully divert cargo from thatport by an indirect service

Our requirement here that no carrier can absorb inland transpor

tation costs to Portland who does not directly serve Portland by

water on alternate sailings should remove this theoretical possibil

ity

Adequacy of service is a general rather than a particularized

concept and the mere fact that service at Portland may not be

completely adequate with respect to all cargoes and all trades does

not adversely affect a finding ofadequacy ofservice Cf Sea Land

Service Inc vSAtlantic Caribbean Line Inc 9FMCsupra

at 349 50Stockton PortDistrict vPacif x Westbound Conf et al

9FMCsupra at 334Whatever may have been the condition

of service at Portland prior to the institution offull containership

service at Portland we agree with Administrative Law Judge

Morgan that the present level ofservice in the subject trades now

appears to be adequate When the expansion of direct container

ship calls at Portland in the subject trades is viewed together with

the small amount oflocal cargo moving through Portland and the

decreasing trend with respect to containerizable ifnot container

ized cargo moving through that port there is certainly ample

foundation for a finding of adequacy In fact Portland itself

contends that if adequacy of service is used as a standard for

determining the lawfulness of an indirect overland service the

17 FMC
132 FEDEftAL MARITIME COMMISSION

present level of service at Portland should be found to be 

quate la

Adminiatrative Law Judge Morgan sattempt at adetermina

ofadequacy of service through utilization ofaformula which c

be applied in a mannerwhich would be larg ely self effectuatin

underatandable but unfortunately unaupported by the record 

the Administrative Law Judge himself recog nized there is 

evidence upon which the 160 differential can be grounded 

fact that the 150 is as indicated by Seattle one halfthe aver

differentia between local and overland OCPrates has no sig

cance with reapect to a differential which might be establia

between ratea for an overland visaa direct water service

A more fatal defect however is that such a differential pe

izes a shipper who uses the indirect service Shippers should 

free to chooae between the member line sdirect and indi

services in order to elect the one which best suits their ne

Moreover to allow the Conference to impose an additional 

5

for the indirect service would be violative of the mandate 

section 205 Merchant Marine Act 1936 forbidc3ing carriera co

tively toprevent service at Portland atthe same rates which a

to service at Seattle See egPacific CoaatEuropean Confere

Rulea 10 and 12 aupra Sacramento Yolo Port Diatrdct vPa

a

CoastEuro ean Conference et al suraStockton Port Diatric

Pacif acWeatbound Conference 9FMCaupra at2918

The distinction made by Stockton between tranashipment 

equalization is one without a difference inaofar as this proc

ing is concerned As we observed inSea Land Service Inc v

Atlantic Caribbean Line Inc 9FMCaupra at 34

equalization and transshipment are merely variations on 

common theme ofserving a port without directly calling there 

the extent auch practices act to deprive a port of natur

tributary cargo or subject it toundue prejudice orut just discr

nation they are unlawful See Sea LandService Inc v s Atla

Caribbean Line Inc sura at346 Where the indirect servic

not unlawful to deny the use of equalization but permit tra

shipment would merely serve to deny the consignee a ser

under

premises

which

and

a

require

carrier

him

would

to pick

tranaport

up cargo

cargo

at the

to

Portland

a consign

s

do

Since the cost of the transportation between the Portland do

and the consignees premises would be borne by the consign

1

See eleoAgreement No 88J3 14FMC203 209 208 1971 in which Portland withdrewite exc

to approval of the aerviee agreement of the six line7apaneae coneortium following the linee dec

eerve Portland in the trade flrom Jepan on direct eailinga every 20 deye

Aa wehflve held in Saoramento Yo1osection206 appliee to indireet ae well se direct eervice
INTERMODAL SERVICE TO PORTLAND OREGON 133

under the Conference tariffs the denial of such service would

foreclose

Although

a significant

we certainly

bene t

agree

to

with

consignees 1

Portland that the drying up

of port terminal facilities is to be prevented if possible there is

absolutely no indication on the record in this proceeding that such

is even remotely likely As we have seen and as Portland itself

admits the present level of service is adequate to meet the needs

of consignees desiring to use Portland as a destination port The

absolute prohibition of absorption with respect to the indirect

service by Conference members while not helping Portland in any

concrete way would deprive consignees of a valuable service

which many of them desire to use Portland must bear in mind

that although its interest is one which we are bound to protect

and we feel our decision here does so the carriers and consignees

also have interests which we must strive to protect and that the

public interest is much larger than the needs or desires of a

particular port area Stockton Port District vPacif x Westbound

Conference 9FMCsupra at 28

Similarly the Conferences must realize that there is more at

stake in making determinations with respect to the public interest

than the profitability of carrier operations Alternate direct calls

at Portland as a condition to indirect service should not endanger

the financial position ofthe carriers as they themselves appearto

admit 1eNo conference member now schedules an indirect Port

land services without also scheduling a regular direct call service

see page 24 supra and alternate direct calls in conjunction with

indirect calls is the form of service which the lines themselves

appear to provide and in their managerial discretion seek to

provide see pages 89 supra In any event we do not here

require any carrier to call at Portland if in its managerial

discretion it feels it should not do so

III Consistency with section 8 Merchant Marine Act 1920 of

regular indirect seraice to Portland

Portland Hearing Counsel and Delaware River except to Ad

ministrative Law Judge Morgan sconclusion that the indirect

overland service toPortland is consistent with the policy ofsection

8 Merchant Marine Act 1920 They contend that the policy

enunciated in this section requires that cargo be routed through

the ports to which it is naturally tributary so long as service at

AsStockton recognizes the preaent Conference Lariffs authorize bothtransahipment and equali

zation aee page 138 infrfn 22 Por text of relevant tariftprovisioN

aAccordingly we find it uneceseary to make afinding with respect to the socalled break evenpoint

iethepointatwhieh it ia as economical for thecarrierto provide adirect serviceas it isforit to provide an

indireet service
134 FEDERAL MARITIME COMMI83ION

such ports is adequate and that since service at Fortla

adequate absorptions of all or any part of the inland trans

tion expensea from Seattle are unlawful Hearing Counsel a

cally contend that although there may in fact be aome co

between the goals of promotion of development of porta 

promotion of development of intermodal transportation such 

flict is properly reconciled by Congreas and that unless and 

Congress makes a determination that development of interm

transportation is to be favored over preservation of our pr

port atructure we are bound by the current Congressional 

ration of policy embodied in section 8 which favors the prom

encouragement and development of ports

The Conferences and Seattle on the ather hand assert 

section 8 Merchant Marine Aet 1920 only enunciatea a ge

policy of developing ports and tranaportation facilities and 

not require that euch policy be followed if the result hinder

development of container technology They contend that 

powers are granted to the Commission to develop rationa

meaningful standards for the development of itermodal tran

tation and section 8 is but one of those atandards S

maintaina moreover that the differential rate syatem for ind

service to Portland is fully consistent with the policy of sec

since it encouragea the use of Seattle which provides the 

adequate service of Northwest porta and through which con

cargo would naturally pass

As will appear from our discuasion in Part II aupra we fee

the impact of he policy embodied in section 8 Merchant M

Act 1920 upon this proceeding is slight becauae of the rela

small amount oflocal or naturally tributary cargo involv

this proceeding Moreover as obaerved by the Court ofAppea

the Fifth Circuit in Port of New Yoxk Auth v Federal Ma

Com n429F2d aupra at 670 section S is only astatem

congressional policy to be given weight by the Co

sion It dces not unlike section 205 Merchant 1VIarine 

1936 for example proacribe any particular conduct See Pa

Coaet European ConferenceKulea 10 and 12 14FMCaup

2801In such circumstancea we feel that the policy ofaec

is amply served in thia proceeding by our requirement 

Conference carriers serving Portland call there directly by 

on at least every other sailing This will prevent carrier

calling at Portland by water from abaorbing any inland tran

tation costs and inaure a level of water service by those c

17 
INTERMODAL SERVICE TO PORTLAND OREGON 135

there sufficient so far as the record here appears to handle local

Portland cargoes

IV Effect ofsection 205 Merchant Marine Act 1936 upon regular

indirect service to Portland

Sacramento Portland and Stockton except to Administrative

Law Judge Morgan sfailure to find the overland service to

Portland as presently provided by the Conference lines contrary

to section 205 Merchant Marine Act 1936 and hence unlawful

This statutory provision they contend is an overriding statement

of Congressional will and by its own terms invalidates such

overland service irrespective of the power and authority other

wise vested in the Commission Section 205 they maintain

requires that the Conferences refrain from collective action which

prevents or attempts to prevent service at Portland at the same

rates for service at Seattle Sacramento and Portland maintain

that any conference line indirect service prevents direct service to

Portland and that the differential rate aggravates the violation of

section 205 by resulting in higher rates for service to Portland

than for service to Seattle Stockton maintains that indirect

overland service via Seattle to the water terminal facilities at

Portland is lawful under section 205 ofthe Merchant Marine Act

1936 since it would constitute service at the Port but that indirect

overland service to a consignee spremises or other place away

from Portland sterminal facilities would be unlawful as prevent

ing service atthe Port Stockton also contends that the indirect

service to the Port ofPortland must be at the same rates as those

assessed for the direct service at Portland or Seattle to be

consistent with section 205

The Conferences and Seattle on the other hand maintain that

indirect overland service to Portland via Seattle is completely

consistent with the requirements ofsection 205 Commission deci

sions they contend show that section 205 wasintended to encour

age indirect as well as direct service and the record contains no

evidence that anyone has been prevented by the indirect service

from providing a direct water service to Portland

Section 205 Merchant Marine Act 1936 does as noted supra

present an absolute prohibition against collective action prevent

ing service to a port or service to a port at the same rates as those

applicable to the next regularly served port As we have seen a

Conference imposed rate differential between direct water service

and indirect overland service would be violative of such prohibi

tion Absent such rate differential however there is nothing in

17 FMC
136 FEDERAL MARITIME COMMISSION

the manner of serving Portland by the indirect overland se

here under consideration which would be contrary to section 

First of all the rates applicable to service at Portland 

Seattle for both the indirect overland service and direct w

service would be the same 18Moreover the system of ind

service which we here authorize doea not prevent servic

Portland but in fact provides for an increase in servic

requiring any carrier serving Portland indirectly by ove

service also tomake direct water calls at Portland

Lastly section 206 relatea not to conditions imposed by a

regulation but tovoluntary agreementa between carriera Ev

section 20b were applicable to an indirect service ofthe type 

involved there is nothing in that atatutory provision which w

make it applicable to the imposition of requirements respe

service when made by the Commission rather than by conae

arrangement between carriera

V Tariffproblema under aeetd on18b Shipping Act 1916 

ing to the regular indirect aervice to Portland involvinp 

carriera abaorption of cost ofinland transportation from 

tle toPortland

Hearing Counsel and Maryland maintain that Administ

Law Judge Morgan erred in failing to findthat the indirect s

here in iasue is unauthorized by the Conferences tariffs 

speci cally Hearing Counsel contend that the abaorptions o

cost of inland transportation involved in the indirect Po

service are not lawfully provided for in the Conference tariffs 

there is no indication that the tariff provisiona with reape

absorptione were intended by the Conference members to a

ize absorptions in connection with a regular indirect servic

that here involved Hearing Counael also maintain that sinc

service involves an intermodal movement under a through 

the tariffs are deficient for failing expressly to describe the n

of the service provided and failing separately to state the i

and

General

ocean

Order

portions

13 46

of

CFR

the rate

536 16

as is required by the Commis

The Conferences on the other hand assert that their t

provide for the service here at issue With respect to He

Counsel sargument that the Commission sGeneral Ord

requires a separate statement of the rates and aervices 

respect to ocean and inland tranaportation the Conferences 

aAa we have held in Stockton Port Diatrict vPacific Weet6ound Con et a9FMCauy

equelizstion of infllandtraneportation chargea does not result in diPferent retee

17 

C
INTERMODAL SERVICE TO PORTLAND OREGON 13rI

tain that no such separate statements are required because 1

their rates are not through intermodal rates but simply port t

port rates 2there is no single factorrate arrangement between

Conference members and connecting land carriers and 3 there is

no holding out ofservice to points beyond port terminal areas The

Conferences do not except however to the Administrative Law

Judge sholding that tariffs indicate unambiguously whether and

to what extent carriers will absorb the cost of inland transporta

tion from Seattle to Portland and have submitted tariff revisions

requiring absorptions on all commodities transported in regular

indirect overland service to Portland via Seattle

In light of the result we have reached with respect to the issue

of the authorization vel non in the basic agreements of the two

Conferences to provide an indirect overland service see Part I

supra we need not dwell at any great length upon the matter of

tariff authorization for such service To the extent such service

has been outside the authorization furnished by the basic Confer

ence agreement as is the case with respect to the Trans Pacific

Freight Conference ofJapan no tariff provision can be used as a

basis for the indirect service See egAgreement 7700Establish

ment of a Rate Structure 10FMCsupra affd sub nom Persian

Gulf Outward Freight Conference v Federal Maritime Commis

sion 375 F 2d supra Moreover to the extent that indirect

overland service is provided in the future it will be lawful if

performed in accordance with the modification to the Conference

agreement which we have here approved and the tariff require

ments which we here impose To the extent on the other hand

that a conference s

approved agreement has always authorized

the establishment of an indirect overland system as is the case

with the Trans Pacific Freight Conference Hong Kong the fact

that a tariff provision may not have originally been designed to

apply to the type ofservice here in issue is irrelevant ifin fact the

language in the tariff can be reasonably read to cover such

service See egAluminum Products ofPuerto Rico Inc vTrans

Caribbean Motor Trans7 ortInc 5FMB1 VII1956 Na

tional Cable and Metal Co vAmerican HawaiianSCo 2

USMC470 473 1941 Thomas G Crowe et al v SouthernS

et al 1 USB145 147 1929 20 We feel that the language may

reasonably be construed as broad enough to cover an indirect

service whether performed on aregular or irregular basis

The situation here ia not to be confused with that in which tariff provisions are construed against

heir draftamen because of ambiRUity The wordinR arthe taritf isclear The problem with the tarifis

not the meaning of unclear language but how far it can reasonably be construed to cover an indirect

overland service

17 FMC
138 FEDERAL MARITIME COMMISSION

As Administrative Law Judge Morgan found howeve

tariffs relating to the indirect service were unlawful inasmu

they failed to ahow with certainty what chargea would apply 

reapect to the indirect service The tariff provisions aliowe

sorption at the carriers option and thua both failed to co

with the mandate ofsection 18bxlof the Act requiring apla

and separate statement ofcarriere chargea and opened the 

to posaible discrimination among consignees desiring to us

indirect

As indicated

service l

in the Conferences exceptions to Administ

Law Judge Morgan sdecision tariffa have now been filed w

eliminate any uncertainty or possibility for diacriminatio

making mandatory the absorption of inland transportatio

pense whenever the indirect service is provided

Contrary to Hearing Counsel scontention our regulation 

respect to the ling of through routes and through ratea wa

intended to apply to a service like that here under consider

As will appear from a reading of the regulation its covera

limited to arrangements for the continuous carriage of 

between points of origin and deatination either or both of w

lie beyond port terminal areaa 46 CFR 636 16aemp

supplied and does not apply to situations where as here ca

merely provide services between twoports

CONCLUBION

We are confident that the result we have reached in 

proceeding will adequately grotect all interesta while allowin

the fullest poasible development of the use of these interests 

tranaportatation bene tato be derived from the container re

tion Both Portland and Seattle will so far as appears from 

record in this proceeding have adequate direct water serv

handle their local cargo as well as to allow them to compe

OCP cargoea to the extent that it appeara herein they are o

a CP Intercoaetal Ratea ofAmerXawaiian SS Co 1US3HB949 861 1834

aThe relevant teMPf rulee nowprovide When the ocean cerrier dieehareee cergo et sterm

other than the port named in the ocean Bill of Leding the oceen carrier ehell arrangeat ite 

Por movement via rail truck orwater oP the ehipment hom part oP actualdiecharage anly ae 

hereunder

qlTo the carrier eterminal dock at port oY deetination declared en the Bill of Lading in th

cergo which hae been entered throughcuetome st the port of diecharge

The carrier msy forward euch cargo direct to a point deeiQnatad by the coneignee pro

conaignee peya the coet which he would normally heve incurred either by rail truck orwate

point iP the carQohee heen diecharged at the terminel port named in the ocean Bill ot Lading

or

2To the terminal oP the bonded OmCerrier neareet to the port of deetination declare

cerrier sBill oYLading in the caee oPcergo which haa not been entered through Cuetome at th

diacharge

17 
INTERMODAL SERVICE TO PORTLAND OREGON 139

in the foreseeable future be able The Conference carriers will

retain their managerial discretion with respect to whether or not

to serve either Seattle or Portland and the amount of service to be

provided at each port but the requirement that lines serving

Portland call at Portland directly on at least alternate sailings will

prevent unlawful overland diversion oflocal Portland cargoes and

adequately preserve the right of Portland to compete for OCP

cargces Finally Portland and Seattle will have so far as appears

from this record entirely adequate service to meet their transpor

tation needs and Portland consignees moreover will have the

flexibility of choosing between the direct and indirect services

based upon their particular transportation requirements

We realize however that nothing especially conditions with

respect to an industry as dynamic as water transportation has

become in recent years remains immutable We will therefore

require quarterly reports from the Conferences with respect to the

circumstances relating to the performance of the direct and

indirect services to Portland overthe next three years in order to

allowus to maintain continuing surveillance over the effects ofthe

indirect service and its concomitant absorptions in order that we

can take any further steps which may in the future appear

appropriate Specifically we shall require a listing of the total

number of containers and amount of tonnage together with the

proportions of such totals represented by local and OCP

cargoes for each direct sailing to Portland and a listing for each

sailing on which Portland is served indirectly by overland service

of the total number of containers and amount of tonnage trans

ported to Portland together with the proportions of such totals

represented by local and OCP cargoes and the total cost of

absorptions on each indirect vessel call

Any matters raised by the parties tothis proceeding not speci

cally discussed herein have been considered and rejected as

immaterial or unnecessary for purposes of decision

An appropriate order will be entered 1 approving Agreement

No 150 49of the Trans Pacific Freight Conference of Japan

authorizing a

regular indirect overland service 2requiring that

to the extent an indirect overland service is provided to Portland

by any Conference line that line also call directly by water at

Portland on at least alternate sailings except when it is unable to

do so because of emergency situations such as strikes weather

conditions or port congestion 3 requiring that to the extent an

indirect service is provided it is offered pursuant to the tariff

provisions which insure that it be granted to all consignees who

17 FMC
1QO FEDERAL MAftITIME COMMISSION

are aimilarly situated insofar as transportation conditiona 

concerned and 4 ardering the filing of quarterly reporta for 

three year period beginning January 1 1874 and ending Dce

ber 31 1977 due 45 days after the end of each quarter deta

the operations of the direct and indirect services toPoland

VICE CHAIRMAN GEORGE H HEARN AND COMMI39IONER

CLARENCE MORSE CONCURRING

The current facts of the Portland sittaation are that b

combination ofjudicial and commercial action the parties to 

case immediately affected have satisfied theirdif cultes by 

carriers agreeing to provide alternate direct calls to Portland 

conference member now achedules an indirect Portland se

without also making direct calls Thus the alternate direct 

which the majority is requiringin conjunction with indirect ca

the form of service the lines appear to provide as a manag

choice

The majority discusa the naturally tributary concept i

spect both tolocal and to overland cargo For the purposes o

discussion we may assume the reasoning of the majority is s

but even were we to apply thisconcept here we nevertheless 

and conclude that the direct service being provided to Portlan

the Japanese lines on alternate voyagea defeats any claim 

Portland of undue preferenee or undue prejudice in respe

indirect service prof ided by thoae lines Likewise if any othe

in that trade elects to provide direct service to Portlan

alternate voyages such direct service would defeat any clai

Portland of undue preference or undue prejudice by such lin

respect to ita indirect service toPortland

Hence we nd it unnecessary to enter into discuseions o

concepts of adequacy of service or naturally tributary 

establish any standards or guidelinea which would indicate 

indirect service would be found either lawful or unlawful in 

situations unleas direct service of some kind is also offered

In all events we ahould encourage activitiea which are i

public interest and within the limit of the law and fair 

prudent administration Weare neither required nor supp

to regulate the present and the future within the inflexible l

of yesterday American Trucking Asan vATSF Ry Co 

US39 at416 1967

9EAL S FBANOIB C Hi3RNEY

Seereta

iv
FEDERAL MARITIME COMMISSION

DoCKET No 7019

INTERMODAL SERVICE TO POR TLAND OREGON

ORDER

This proceeding having been instituted by the Federal Maritime

Commission and the Commission having fully considered the

matter and having this date made and entered ofrecord a report

containing its ndings and conclusions thereon which report is

hereby referred to and made a part hereof

Therefore it is ordered That

1 Agreement No 150 49of the Trans Pacific Freight Confer

ence ofJapan be and it hereby is approved

2 To the extent an indirect overland service is provided to

Portland Oregon by any member line of either the Trans Pacific

Freight Conference of Japan or the Trans Pacific Freight Confer

enceHong Kong that line also call directly by water at Portland

on at least alternate sailings except when it is unable to do so

because of emergency situations such as strikes weather condi

tions or port congestion

3 To the extent an indirect service is offered by the member

lines of the two aforesaid Conferences the tariff provisions relat

ing to such service must not allow such member lines an option

with respect to whether such service will be afforded but must

insure that it be granted to all consignees who are similarly

situated insofar as transportation conditions are concerned and

4 The Trans Pacific Freight Conference of Japan and the

Trans PacificFreight Conference Hong Kong each file quarterly

reports for the period beginning January 1 1974 and ending

December 31 1977 due 45 days after the end of each quarter

separately listing the total number of containers total amount of

tonnage and proportions ofsuch totals represented by local and

OCP cargoes for each direct sailing to Portland and the total

number of containers and total amount of tonnage transported

17 FMC 141
142 FEDEBAL MARITIME COMMI98ION

overland to Portland oneach sailing on which Portland is se

indirectly by overland service together with the proportion

such totals represented by local and OCP cargoes and the t

coat of abaorptiona on each indirect vesael call

By the Commisaion

SEAL S FRANCIS C HURNEY

Secreta

17 FMC
FEDERAL MARITIME COMMISSION

DocxET No 7239

OCEAN FREIGHT CONSULTANTS

v

ROYAL NETHERLANDS STEAMSHIP COMPANY

ADOPTION OF INITIAL DECISION

October 28 1979

This proceeding is before us on exceptions to the Initial Decision

of Administrative Law Judge Stanley M Levy served September

26 1972 in which the Administrative Law Judge in dismissing the

complaint determined that the claimant had failed to sustain its

case He concluded that any mistake in description in this instance

was made by the shipper not the carrier and the shipper claim

ant was on notice to describe its merchandise to conform with the

merchandise descriptions appearing in the tariff orbe assessed the

cargo NOSrate Accordingly the Administrative Law Judge

found no inadvertent misdescription rather he determined the

cargo to be properly rated according to the commodity description

selected by the shipper equating this case to the facts in Informal

Docket 261 I

served November 18 1971 which claim was rejected

for the same reasons

On exception claimant takes issue with the Administrative Law

Judge sfindings and urges that his conclusions in the case open

the door to the very discriminations and prejudices that section

18bof the Shipping Act was designed to preclude OFC cites

pertinent portions of the Harter Act in an attempt to show that

the carrier has certain responsibilities to determine that what is

actually shipped is in fact described on the bill of lading argving

that the carrier should not be permitted to profit from its failure to

assure that the bill of lading properly describes the shipment

Claimant argues that it has shown uncontroverted evidence as

ivFMc 143
144 FEDERAL MARITIME COMMISSION

to what wasahipped since respondent has not raised any iss

tothe proofof what wasactually transported

Lastly claimant cites the practices of another conferen

rating thia cargo as silicon dioxide as further proof ofits cas

Respondent maintaina the position that the applicable pro

in the Conference stariff providea that on articles describ

trade names the carrier can only assess the cargoNOSrat

The single iasue whether the cargo as described should 

been rated other than cargoNOSturns onwhether claima

proved its case

Informal Docket 261 IJohnaon Johnson Internatio

Prudential Grace Linea served March 18 1971 is the ide

case In that case the Administrative Law Judge found a

1

the claimant stating at page 2 ofhis Initial Decision

The Commission has held that claima for reparation involving alleged e

weight meseurement or deacription of necesaity involve heavy burd

proofl once the shipment has left the custody of the carrier It is often th

as it is here that the carrier in clasaifying and rating a ahipment must 

the information given him by the ahipper or freight forwarder Fairnesa 

seem to entitle the carrier in moat caeea to rely on auch information 

charge and collect freight in accordance with the deecription provided 

shipper Nor in theae circumstancea can it tie expected that the carrie

s

will make a detailed and expert independent ittvestigation by use of a c

dictionary or otherwise to attempt to supplement or clarify the wm

I deacription provided by the shipper It ia the elsimant not the carrier wh

i

bear the heavy burden of prooP and establiah aufPicient Yacta to indica

reeaonable certainty or definitenesa the validity of the claima Aleo w

controlling in all cases the provieion found in many tariffe auch ae the o

involved that trade namea will not be recognized ae valid for claseificat

I

rating purposea may be presumed to be known to the ahipper and sh

given weight in evaluating the validity of a claim for reparation

More recently in Docket No 711 Ocean Fredght Conau

Inc v

Italpac fic Line the Commission adopted the Admi

tive Law Judge sInitial Decision On page 5 of that decisio

Administrative Law Judge atated

The importance of declaring in bille of lading the correct deacription 

cargo shipped cannot be overemphssized The carrier has a right to exp

a ahipper willproperly identify the ahipment The ahipper eimilarly has t

to expect the carrier to charge the proper rate for the actual goods 

Where a mietake occura the partywho commita it has khe heavy burden 

to support a claim for rectification

It is undiaputed by the parties that the shipper initiate

commodity description used on the bill of lading Itis also o

Colqate PaEmodive CompanyvUnited Fruit Company In4ormal Docket No 116 Commie

aerved 3tptember 30 1870

17 
OCEAN FREIGHT vROYAL NETHERLANDS SS 145

that the carrier charged the rate as specified in the tariff for that

commodity as described by a trade name on the bill of lading Itis

further apparent that the consignee had taken possession of the

cargo without voicing any claim at that time

Claimant also attempts to show that the carrier has a responsi

bility to assure that the bill of lading properly describes the

commodity actually shipped citing what it believes are pertinent

portions ofthe Harter Act to this end

The Harter Act requires inter alia that the carrier issue a bill

of lading to the shipper such bill to contain the marks necessary

for identification number of packages or quantity stating

whether it be carrier sor shipper sweight and apparent order or

condition of such merchandise or property delivered toor received

by the vesselWe take no issue with this duty however

counsel would urge that when the shipper prepares the bill of

lading and presents it to the carrier as actually happened here

the carrier has some further duty to go beyond the shipper sown

description to determine if the shipper is in fact properly describ

ing his own shipment

This Commission at one time attempted to place a similar

burden of further investigation into what was actually shipped

upon a carrier but such approach was rejected by the Courts In

Royal Netherlands Steamship Co v Federal Maritime Board 304

F 2d 938 1962 the United States Court ofAppeals for the District

of Columbia reversed that portion of the Board sorder which

found a duty upon the carrier to rely on their own processes of

discovery and on their own personnel The Board found that

the carrier had by intent avoided this duty and had placed

complete reliance on shippers or forwarders who have an incen

tive toconceal and had thus violated section 16 oftheAct The

Court in rejecting that conclusion found that the carrier did not

have anything like adequate notice that the shipper and freight

forwarder had made false and improper classifications at 943

Furthermore the Interstate Commerce Commission in a letter

opinion L308 172976 March 25 1946 has established the position

that if the misdescription is attributable to the shipper that

shipper has the burden ofshowing the proper description

Additionally we can give little weight to a letter detailing the

treatment given this cargo by another conference for rating

purpose as proving that silicon dioxide was in fact shipped

Neither this carrier nor the carrier involved in 261 Iwere mem

See generally Miaclaeaification andMiabillinp ofGasaAnicles 6FMB155 1980

17 FMC
146 FEDERAL MARITIME COMMISSION

bera of that latter conference at the times in question and 

would have no knowledge ofthe other conference spractices

One additional matter requirea our attention On page 2 

Initial Decision the Administrative Law Judge reempha

respondent stariff provision providing for the aaseasment 

cargoN05rate for commodities deacribed by trade namea 

not decide toplace emphaais on that tariff provision but den

claim on the basis of Informal Docket No 261 Ito whic

Adminiatrative Law Judge refera on page 1 ofhis decision 

case we have previously diacussed

In summation claimant has failed to sustain ita case A

ingly upon careful consideration of the record the exception

the replies thereto we conclude that the Adminietrative 

Judge sfactual findinga and his concluaiona with reapect th

were supported and correct We therefore adopt the 

Decision as our own and make it a part hereof with the com

hereinbefore stated

VICE CHAIRMAN GEORGE H HEARN DL98ENTING WITH W

COMMIS9IONER CLARENCE MORSE JOINS

As correctly atated by the majority the single isaue is wh

the claimant has proved his case I believe he has done so

In denying the claim the Administrative Law Judge rel

two factora First is the tariff rule of respondent relating 

application of the NOSrate to trade name description

ma jority correctly rejects that basis for the decision The s

factor is an earlier Initial Decision which the Commisaion 

mined not to review Docket No 261 IIt is in ita reliance o

ground for decision that themjority errs

In the inatant case the respondent presented no defenae 

than the tariff rule rejected by the majority Reapondent s

ofAugust 28 1972 There was no denial ofthe assertiona ma

the claimant or refutation of claimant sevidence Rather 

the Adminiatrative Law Judge who asaerted that this case 

be decided upon the record ofanot ierNo 281 I

In No 261 Ithe respondent a

difPerent one than he

swered and refuted the claimant sassertions and evidenc

spondent sletter ofJune 10 1971 Thus the Adminiatrativ

Judge concluded

It ie the claimant not the carrier who muet bear the heavy burden o

and establieh sufficient facts to indicate with reaeonable certainty or d

ness the validity of the clsima

w w r t w

17
OCEAN FREIGHT v ROYAL NETHERLANDS SS 14T

In all the circumstances herein it mustbe concluded that the claimant herein

has not established the validity of his claim with reasonable certainty or

definiteness

In the instant case the Administrative Law Judge made no

such conclusion as indeed he could not because the claimant did

introduce new evidence unrefuted by the respondent Conse

quently the presiding Judge could only cite the lack ofsuf cient

evidence in No 261 Iand say

The claim in No 261 Iwas rejected for the reasons set forth in the decision

Those reasons lead to the rejection of the claim herein

A mere cursory reading ofthe briefrecord in both cases reveals

that they are not so similar as to warrant the same conclusion

First in No 7239 thereis a letter from the manufacturer ofthe

commodity Cab OSiIwhich clearly and unequivocally states that

Cab OSiIis 99 silicon dioxide the tariff commodity description

which claimant would apply That letter also refutes much of

respondent ssubstantive defense in No 261 Iieas todictionary

denitions

Second the remaining substantive defense in 261 I

is refuted by

nqther letter in No 729one from a conference chairman

st Eing that Cab OSiI should be rated as silicon dioxide The

tnajority gives short shrift to that letter because the respondents

in Nos 739and 261 I

were not members of that conference

However the letter was not introduced as evidence of what the

respondents should have known about the commodity involved

The letter is rather evidence as to whether Cab OSiIis silicon

dioxide ie as to what wasactually shipped

The Administrative Law Judge in No 261 Irejected evidence of

the practice of other conferences because no examples were

offered Now in No 7239 there is such an example

Thus as demonstrated by the foregoing the two cases Nos 72

39 and 261 I

while similar contain different offers ofproof While

the respondent in No 261 I

met its burden of disproving the

claimant sprimafacie case the respondent herein has not done so

The evidence in this case clearly refutes the defenses of the

respondent in No 261 I

and the respondent herein has offered no

rejoinder Had the evidence here been introduced in No 261 I

I

would have found for the claimant there as well

The majority rejects any adherence to procedural formality in

order to uphold the claim herein As Ihave shown the failure of

the present respondent to deny the facts ofthe claim and support

ing evidence does in fact warrant an award to the claimant The

majority cites our obligation to look beyond procedure and admin

i7FMC
14S FEDERAL MARITIME COMMISSION

isterjuetice and equity It inot juat or equitak letoadhere 

to the formality of precedents when we ahould acknowled

similar cases may indeed be different

By the Commission

SEAL S FRANCI3 C HURNEY

Secre

17 
149

FEDERAL MARITIME COMMISSION

NO 7239

OCEAN FREIGHT CONSULTANTS INC

v

ROYAL NETHERLANDS STEAMSHIP COMPANY

Claim denied

Henry S Wegner for complainant

A J Rosner for respondent

INITIAL DECISION OF STANLEY M LEVY

ADMINISTRATIVE LAW JUDGE

Complainant Ocean Freight Consultants Inc as assignee

claims 383 44 from Royal Netherlands Steamship Company re

spondent arising out of a shipment of 27 bags ofCab O Sil aboard

respondent s ship Chiron from New York to Puerto Cabello

Venezuela on April 23 1971

Respondent rated the shipment as Cargo N O S at 86 00 per

cubic feet whereas complainant alleges it should have been rated

as Silicon Dioxide at 53 00 per 2000 pounds 2

As Cargo N O S the

charges totalled 395 60 for Silicon Dioxide the charge would be

12 16

Except for the volume date and carrier involved the facts

herein are identical with the claim in Informal Docket No 261 1

served November 18 1971 In that case the claim was supported

by reference to a chemical dictionary and a letter from the

manufacturer of Cab O Sil supporting the contention that the

product was silicon dioxide The claim wasrejected for the reasons

set forth in the decision Those reasons lead to the rejection ofthe

claim herein

1

Thisdecision became the decisionof the Commission October 23 1973

2 United States Artlantic and Gulf Venezuela and Netherlands Antilles Conference Freight Tariff

F M C No 2
150 FEDERAL MARITIME COMMISSION

In rejecting the claim herein it is desirable to reemphasize 

provision of the tariff which supports the rate assessed b

spondent

Item 2 n ofthe tariffprovides

Bills of lading describing articles by trade name are not acceptable for co

ity raing Shippers are required to describe their merchandise by its co

name to conform to merchandise descriptions appearing herein Bills of L

reflecting only trade names will be automatically subject to application 

rate specified herein for Cargo N O S as minimum

This provision clearly provides that trade names are not acc

ble for commodity ratings and that bills oflading reflecting 

trade names will be rated as Cargo N D S Shippers are specif

warned to describe their merchandise to conform to mercha

descriptions appearing in the tariff otherwise they are told 

rate applicable is that specified for Cargo N D S To all

commodity rate for cargo described by trade name in the b

lading would not only be in derogation of the published tari

would confer a higher status on one part of the tariff to 

derogation of another

This is not Ii Case of an erroneous rating The cargo was rat

accordance with the tariffprovision It is not acase ofinadve

misdescription The choice of description was clearly befor

shipper It elected aparticular description The tariff pro

different rates in accordance with the description selected b

shipper

Claim denied

S STANLEY M LJJVY

Administrative LawJud

WASHINGTON D C

September 26 1972

17 
17 F MC 151

FEDERAL MARITIME COMMISSION

DOCKET No 70 9

BOLTON MITCHELL INC INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE No 516

SUPPLEMENTAL REPORT

November 5 1973

By THE COMMISSION George H Hearn Vice Chairman James V

Day Clarence Morse Commissioners

On June 9 1972 the Commission issued its decision in this

proceeding finding that Bolton Mitchell Inc BMI

1 Was not independent of shipper connections as required by

section 1 ofthe Act

2 By retaining a proprietary interest in the merchandise and

collecting compensation from the carrierfor shipment thereof did

willfully obtain transportation by water at less than the rates or

charges than would otherwise be applicable violating section 16

opening paragraph ofthe Act

3 Violated certain sections ofGeneral Order 4 to wit

510 5

e

failing to show license number on invoices and

shipping documents

510 23 d imparting false information to its principals

510 23 e withholding information as to actual price ofmer

chandise

510 23 tfailing to promptly account to its principals

510 23 h filing false documents

510 23j

failing to use invoices which stated separately the

actual amount ofocean freight price ofmerchandise and

510 9

c willfully making false statements in connection

with an application for a license orits continuance in effect

Although not revoking respondent s ocean freight forwarder

license No 516 we did order respondent to
152 FEDERAL MARITIME COMMISSION

1 cease and desist from the activities found to have violated the Act a

specific sections of General Order 4 if it desires to maintain its license an

2 submit within 90 days from the date of service of the Report and O

full report to the Commission on the manner in which it has complied w

requirements to cease and desist

Pursuant to thisorder respondent filed with the Commissio

affidavit of compliance setting forth the procedure it inten

use in its freight forwarding activities and which it believes w

in compliance with the Commission s order The individual 

tions and the proposals of BMI to correct them are disc

below seriatim

BMI s shipper connections

We found that BMI had acted as a principal purchasing 

chandise marking up its value and retaining a profit on rec

income from the mark up and subsequently transferring its 

prietary interest in the commodities to the consignee From 

activity we concluded that BMI was not independent beca

acted either as a purchaser of shipments to foreign countrie

purchasing agent of the consignee or as a person hav

beneficial interest in shipments as a financier of shipments 

seller and shipper of shipments to foreign countries as one 

has exercised proprietary rights over the merchandise

From a reading of BMls affidavit we find that BMI view

decision as condemning only the secret profit which BMI 

on those shipments from which BMI pocketed the mar

Consequently BMls compliance with the Commission s 

consists in the main of clearly revealing to its principals 

charges imposed by BMI Thus

BMI states that it will no longer retain any discount norwill it increa

American suppliers price of the goods for the purpose of being compensa

its start up service Instead BMI will show in its invoice to its ov

principal the net price of the merchandise as charged by the American s

and it will also show a charge either as a percentage oron a fixed fee ba

its service in furnishing start up information to our principals

While BMI will make every effort to persuade its ove

principals to place purchases in their own name with Ame

suppliers it will nevertheless continue to act as a

purch

agent when those efforts fail and a principal specifically req

that it act as agent When it does act as a purchasing agent

I On March 8 1973 the Commill8ion issued Its Report on Reconsideration approving and 

verbatim its Report and Order of June 9 1972

2 Start up serviceconsist ofcanvasaing markets furnishina information which permits acon

start a manufacturing or sellina proce88 in a foreilln country gathering 8ales literatu

journals etc and obtaining samples fortesting etc

17 
BOLTON AND MITCHELLFREIGHT FORWARDER 153

BIlJ states that on all purchase orders in the future it will not only include its

FMC number on the purchase order form and on all communications with the

American supplier but to be doubly sure that the supplier understands that

BMI is not a principal at the outset of each transaction BMI in a separate

letter will advise the American supplier that it is acting as an agent only for an

overseas customer that it is not a principal in the transaction and that it has no

equity orother beneficial interest in the goods

BMI takes the position that it is entitled tocompensation for time

and effort spent in arranging for the purchase of the goods as

agent for the overseas principal just as it is entitled to be paid for

its services in arranging for the forwarding insurance cartage

etc To BMI purchasing is merely another supplemental service

performed at the customer srequest

Finally BMI would still in some instances finance the purchase

ofthe shipments The reasons for this are

BMI does not seek from its consignees the right to advance the purchase price

On the contrary BMI prefers that its principals deal directly with American

suppliers and either pay for the goods on delivery or arrange for payment under

usual letter of credit procedure But the situation in international sales is not so

simple As the attached Delaney letter conclusively shows consignees particu

larly those in South American countries are unable in many instances to deal

directly with American suppliers Consignees frequently cannot obtain the

necessary dollar funds prior to the shipment of the goods because of complicated

currency regulations and often the delay and expense in obtaining American

dollars in advance of exportation or in arranging for a letter of credit is not

justified by the value of the merchandise purchased Furthermore even under

letter of credit transactions many American suppliers are in DeLaney s lan

guage extremely reluctant to become involved in international transactions

Because of these and other reasons BMI is frequently asked to confirm to the

American supplier that it will pay for the goods on shipment from the plant or

upon exportation Suppliers are willing to enter into such an arrangement since

they aredealing with anAmerican firm BMI there is no risk involved to them

and a new sales market is being opened BMI has been confirming payment to

suppliers for 35 ormore years and there have been no difficulties whatsoever in

the purchase and shipment of the goods It is of immeasurable benefit to our

foreign commerce if BMI and other forwarders are permitted to render this

service

BMI contends that neither the Shipping Act nor General Order 4

prohibits BMI from being a financier of merchandise as that

language was used by the Commission It is BMIs position that

even when it finances the purchase of the goods for an overseas

customer it has no beneficial interest in the goods because it does

not retain any lien or other security for the repayment of its

advance BMI ships on an open account and in due course

receives payment from its principal overseas

In order to satisfy the Commission that it has no equity

17 F MC
154 FEDERAL MARITIME COMMISSION

ownership or other beneficial interest in the goods when it ac

purchasing agent BMI proposes that

BMI will in each instance where it is asked to confirm payment or ad

the purchase price obtain prior written confirmation from its overseas pri

that BMI is being requested to render this service that the principal ow

goods that BMI has no ownership or security interest in them and th

compensation for BMJs service in confirming payment to the supplier is 

profit on the sale of the goods but interest for the use of its money Third

confirming paymentto the supplier BMI will indicate in writing that it is 

only as a forwarder on the transaction and as agent for an overseas cus

and that it has no interest equity orlien in the goods Fourthly the charg

BMI makes to its principal will be an interest charge only at usual bank 

and will not be a profit or mark up on the goods itself Finally in transm

the shipping documents overseas BMI will state to the collecting bank 

foreign country and all other parties concerlled that it is not the owner

goods and has no beneficial interest or security in them for payment

We disagree that BMI has no beneficial interest in the goo

Section 1 of the Shipping Act defines an independent o

freight forwarder as

a person carrying on the business of forwarding for a consideration 

not a shipper or consignee or a seller or purchaser of shipments to f

countries nor has any beneficial interest therein nor directly or ind

controls or is controlled by such shipper or consignee or by any person h

such a beneficial interest

The term beneficial interest includes but is not limited t

any lien interest in right to use enjoy profit benefit or receiv

advantage either proprietary orfinancial from the whole or any pa

shipment or cargo arisirl Iiy financirl ofthe shipment orby operation of 

by any agreement express or implied provided however that any obli

arising in favor of the licensee by reason of advances of out of pocket ex

incurred in dispatching of shipments shall not be deemed a beneficial in

Italic ours

BMI will no longer profit by pocketing the mark up it 

however continue toenjoy financial benefit from the financi

the shipment since by its own admission when it advances f

for the purchase ofgoods the charge BMI makes to its prin

will be an interest charge only at usual bank rates and will n

a profit on the mark up on the goods it elf AortJingJy it i

view that BMI so long as it continues to guarantee payme

actually finances the purchase ofthe goods in return for bank 

interest has by definition a beneficial interest in contraventi

flection 1 of the Shipping Act and Rule 510 21 L

BMls proposed compliance with our order would appear 

based on the misconception that a lien is the only for

beneficial interest prohibited and that only common law lien

17 
3

See Sen Rept No 691 87th Cong 1st Sess 4 wherein Congress in order to prevent the collection

of compensation from acarrier by persons who have any interest in the goods shipped deleted the

phrase other than alien from the words beneficial interest therein other than a

lien as originally

proposed andthusdefined beneficial interest to include any lein interest of a

forwarder arisingby

financing of the shipment

See New York F01eign Freight F B A88n v F M C 337 F 2d 289 297 1964 wherein the court in

clearly distinguishing a

lien arising from financing state that the financing of export shipments

belongs primarily to the exporter orafinancial instituion not the freight forwarder

11 See Port of NY Freight Forwarders Investigation 3 U S M C 157 164 1949 wherein the Commis

sion s predecessors stated that a

forwardermay be aresident buyer foraforeign purchaser however

if he has any beneficial interest in the shipment and accepts brokerage thereon he is guilty of

accepting a

rebate in violationof section 16 of the Act Emphasis added

BOLTON AND MITCHELL FREIGHT FORWARDER 155

prescribed The legislative history of Rule 510 20 L

3

of General

Order 4 and pertinent case law 4

clearly show that statutory liens

are also incorporated within the term lien However it would

appear that BMI would in fact waive any lien interest in ship

ments forwarded by it by 1 denying any interest equity or lien

in the goods to the supplier and 2 by informing the collecting

bank and all other parties concerned that it is not the owner ofthe

goods and has no beneficial interest or security in them for

payment BMI still would retain a beneficial interest within the

meaning of General Order 4 howeVer because of its interest

charges discussed supra

Additionally by accepting brokerage while being shipper con

nected BMI is obtaining transportation by water at less than the

rates or charges as would otherwise be applicable in violation of

section 16 First ofthe Act 5

We see nothing improper or incompatible in BMIs

receiving

compensation for services rendered in furnishing start up infor

mation and the services being performed by BMI as an independ

ent freight forwarder so long as the consignee is both aware ofand

agrees to pay for such services

510 5 e failing to show license number on invoices and shipping

documents

BMI states it will in the future show its license number on all

documents in accordance with the rule

510 23 d imparting false information to its principals

BMI will henceforth in its invoice to the principal at all times

show the actual merchandise value and its fee for the start up

service as a separate charge

510 23 e withholding information as to actual price ofmerchan

dise

BMI will hereafter comply

510 23ffailing to promptly account to its principals

17 F MC
156 FEDERAL MARITIME COMMISSION

BMI will hereafter comply

510 28j failing to use invoices which state separately th

tual amount ofocean freight price of merchandise

Discussed under 510 28 h infra

510 9 c willfully making false statements in connection wi

application for a license orits continuance in effect

Compliance in part See discussion under 51O 28h infra

510 29 h filing false documents

Evidence of record shows that on occasion BMI had 

request of its principals inflated the ocean freight and insu

rates on invoices BMI does not specifically state that it will 

again inflate such charges but BMI merely implies that its p

of complete honesty with its principals in such things a

actual purchase price of the goods and start up fees will exte

insurance and freightrates However BMls proposed proc

of re invoicing casts considerable doubt on the extent 

compliance with section 510 28 h As to re invoicing BMI s

On occasion its overseas principals request that BMI show itself a the s

the goods to the principal s overseas customer at a price higher than the a

that the principal through BMI pays the American supplier Re invoicing 

fashion is frequently done not only by BMI but by many other forarders 

principals areoverseas In the trade this is known as consignee routed t

Re invoicing is requested by the principal in order that it be protected 

price the source of supply or to prevent the principal s local competitor

knowing how much the principal is paying for the goods in thE United 

The practice Is so common with forwarders that it is covered in Illegal te

Ocean Freight Forwarder The Exporter and the Law pp 46 4f writ

BMls counsel

BMI engages in the re invoicing procedure to accommodate its princip

derives no revenue from the addition to the American supplier s invoice 

The difference between the invoiced and re invoiced price will be remitted 

principal as it always has in the past As an added protection and in o

satisfy the Commission that BMI is not a seller of the goods BMI will 

invoice unless it has a written request from the principal to do so and afte

invoices BMI will confirm in writing to the principal that it has re invoic

it will indicate the difference between the American supplier s price alld 

invoiced price BMI believes that with this procedure and confirming doc

in each file the Commission will have strong assurance that there is no p

BMI as a seller of the merchandise in a re invoicing transaction

Section 51O 28 h in its entirely reads

No licensee shall file or assist in the filing of any claim affidavit 

indemnity orother paper or document with respectto a shipment handle

be handled by such licensee which he has reason to believe is false or frau

While in our Report we did not dwell at length on the r

17 
17 F MC

BOLTON AND MITCHELLFREIGHT FORWARDER 157

behind BMIs inflating of the merchandise price the freight rate

and insurance rate the Administrative Law Judge dwelt at some

length on this reason

Respondent argues that since Spencer at all times was candid with respondent s

consignees in Latin America and since the ocean freight and insurance was

misstated on specific instructions of its consignees they were not deceived and

theCommission s

regulation was not violated But third parties who might have

acted entirely differently had they known the true facts in the transaction were

deceived These arethe banks which honored letters of credit which included the

inflated ocean freight and insurance and the customs officials in Latin Ameri

can countries and others who approved the transactions in connection with their

currency control regulations The Commission s regulation is not aimed entirely

at consignees but is for the protection of third parties as well The Examiner

finds that respondent failed to use invoices with respect to the involved

shipments which stated separately the actual amount of ocean freight assessed

by the common carrier the actual insurance rate and the actual price of the

merchandise purchased for its consignees

Some further discussion is warranted Spencer testified that for periods of up to

20 years respondent believed that certain of its consignees were engaged in

violation of their respective country s laws currency exchange regulations

Respondent believed that one of the methods used by its consignees to violate

their respective country s laws currency exchange regulations was the use by

respondent of invoices which failed to state the actual amounts for ocean freight

and insurance involved in these transactions

Thus at the very least it would appear that BMI is assisting its

principals in the filing of false documents and perhaps in the

violating ofthe currency exchange laws ofother countries

We think it highly improper for the Commission to lend itself to

violations of currency exchange laws ofother countries as it would

be doing ifit sanctions BMIs re invoicing practice Moreover we

again concur with the Administrative Law Judge when he noted

that General Order 4 specifically section 510 23 h is for the

protection not only of BMIs principals but also for third persons

and cannot be waived merely by agreement between the forwar

der and his principal that both understand the clandestine

character ofthe operations

Consequently BMI will be allowed to retain its license provided

that BMI in conducting its future forwarding operations

1 waives any and all liens on the goods being shipped

2 does not finance the shipments

3 discontinues its practice of re invoicing and

4 gives assurance to the Commission that it BMI will not

inflate the charge s for ocean freight insurance and accessorial

services

The record in this proceeding will be held open for thirty days
158 FEDERAL MARITIME COMMISSION

within which respondent is to apprise the Commission o

acceptance ofthese conditions

HELEN DELICH BENTLEY CHAIRMAN AND ASHTON C

BARRETT COMMISSIONER DISSENTING

We adhere to the view expressed in our dissenting opinion i

Commission s Report on Reconsideration of March 8 1973 

BMls license should be revoked

SEAL 8 FRANCIS C HURNEY

Seoreta

17 
17 F M C 159

FEDERAL MARITIME COMMISSION

DOCKET No 73 23

KRAFT FOODS

v

PRUDENTIALGRACE LINE

ADOPTION OF INITIAL DECISION

November 5 1973

By THE COMMISSION Helen Delich Bentley Chairrrwn George

H Hearn Vice Chairman Ashton C Barrett James V Day

and Clarence Morse Commissioners

This proceeding is before us on exceptions to the August 13

1973 Initial Decision of Administrative Law Judge James F

Reilly in which the Administrative Law Judge concluded that

complainant s bills oflading showing only the separate weights of

the pallets and the articles shipped thereon are not to be consid

ered compliance with the mandatory provisions of the legally

filed applicable tariff and consequently denied reparation Com

plainant excepted to the Initial Decision

We find that the exceptions of complainant are essentially a

reargument ofcontentions which were considered by the Adminis

trative Law Judge in his Initial Decision Upon careful considera

tion ofthe record exceptions and reply thereto we conclude that

the Administrative Law Judge s factual findings and ultimate

conclusions with respect thereto were correct While the Adminis

trative Law Judge summarily dismissed the complaint for the

complainant s failure to strictly adhere to the requirements of

respondent s tariff we believe a further elaboration in support on

denying reparation is in order

The crux ofthe complainant s quarrel with the Initial Decision

is its conclusion that the failure of complainant to include the

measurements as well as the weight of the pallets on which the

carg was shipped constituted a failure to comply with the
I

160 FEDERAL MARITIME COMMISSION

requirements of respondent s tariff which failure precluded 

plainant s recovery of reparation To the complainant since 

cargo was freighted on aweight basis any requirement that 

bill of lading include the measurements as well as the weigh

the shipments called for the performance of a useless act On 

record we think not

A tariff should be considered in its entirety when asses

freight charges on a commodity See Storage Practices at 

ngview Washington 6 F M B 178 182 1960 To do other

would result not only in discrimination towards the carrier 

also would defeat the purpose of Item 26 which is to insure 

ability of the carrier toverify that palletized shipments confor

the requirements of Items 26e g

and h

Thus Item 26 when read as awhole sets forth the condi

under which the pallet allowance Item 26 e and rate dedu

Item 26g will be granted i e

1 that the minimum accepted pallet dimensions are 32 x 4Y 2 8 x 

Item 26 paragraph 4

2 that the gross weight of the cargo and pallet shall be not less than 

pounds or the overall cubic measurement of the cargo and pallet shall not b

than 40 cubic feet Item 26 b

3 In assessing freight charges for pallets containing a single comm

when cargo is freighted on a measurement basis the actual height of the 

but no more than 6 inches will be deducted from the overall height 

package when computing the cubic measurement however this allowance 

be limited to not more than 10 of the overall height of the entire pac

When cargo is freighted on a weight basis the actual weight of the pallet sh

deducted but not in excess of 10 of the gross weight of the cargo and 

Shipper must furnish at the time of shipment the weight and measureme

the pallets Item 26 e

4 Provided pre palletized cargo complies in all respects with the rule

forth herein the carrier will allow a discount of 2 60 per ton weig

measurement on the same basis as cargo is being freighted except o

palletized cargo moving via The Sea Land Joint Service this discount w

allowed only when cargo is loaded on four way pallets with dimensions o

48 Item 26 g

6 If the height of the pallet exceeds 6 inches shipments freighted 

weight basis will be assessed on the gross weight of pallet and cargo an

discount of 2 60 as per sub paragraph g wtll not be allowed Item 26 h

The record is void of facts to conclude that the complainan

submitted evidence as to the measurements of the palle

question We agree with respondent that such information 

essential ingredient ifthe carrier is to determine ifthe pallet

of the accepte ldimensions to qualify for a pallet dedu

pursuant to Item 26h j

i e whether a pallet has exceeded 

maximum height when the commodity is freight on aweight 

17 
KRAFT FOODS v PRUDENTIAL GRACE LINE 161

so as not to qualify for a rate deduction provided for in Item 26 g

Consequently we have no alternative but to disallow any pallet

allowance or rate deduction asked for by complainant To conclude

otherwise would give the complainant adeduction not provided for

in the tariff contrary to the provisions of section 18 b 3 of the

Shipping Act 1916

Accordingly we hereby adopt the Initial Decision as modified

herein as our own and make it a part thereof

SEAL S FRANCIS C HURNEY

Secretary

Section 18 b 3 ofthe Shipping Act 1916 provides No common carrier by waterin foreign commerce

orconference of such carriers shall charge ordemand orcollect orreceive agreater orless ordifferent

compensation for the transportation of property orfor anyservice in connectiotl therewith than the rates

and charges which are specified in its tariffson file with theCommission and duly published and effect at

the time

17 F M C
FEDERAL MARITIME COMMISSION

No 732

KRAFTS FOODS

v

PRUDENTIAlrGRACE LINE

Reparation denied and complaint dismissed

John J Lavaggi and William Levenstein for complainant

Lilly Sullivan Purcell P C for respondent

INITIAL DECISION OF JAMES FRANCIS REILLY

ADMINISTRATIVE LAW JUDGE

Complaintant Kraft Foods Division ofKraftco Corporati

Delaware corporation with its principal offices in Chicago 

and it is engaged in the business ofdistribution offoodstuf

The respondent is a common carrier by water enga

transportation of cargo from U S Atlantic and Gulf ports t

in Panama Canal Zone Colon Panama City and as such is 

to the provisions of the Shipping Act of 1916

Pursuant to agreement of complainant and responde

proceeding was conducted in accordance with the Comm

Rule 11 shortened procedure

Complainant seeks reparation totaling 579 85 involving 

shipments from New York to CristobaVPanama under 

lading dated July 16 1971 alleged overcharge 249 19 De

31 1971 alleged overcharge 88 72 and January 21 1972 

overcharge 24194

Complainant s claim is based solely on the alleged fa

respondent to apply S B PAN 10 Rule 26 of a filed tarif

three shipments and allow the pallet allowance and th

discount to each shipment stating that all three shipmen

qualified for the pallet allowance in respondent s tariffs 2

1

This decision became the decision of the Commiulon November 5 1973

a

Complainant alleges that under the provisions of Item 26 7th revised page 22 A of the 

162 1
KRAFT FOODS v PRUDENTIAL GRACE LINE 163

There is a plethora of Commission decisions that the respond

ent s contention that the claim of complainant did not complain

within six months is without merit and requires no discussion

here

However respondent s contention that complainant failed to

furnish dimensions and weights ofthe pallets prior to shipment as

required by Items 26e and 26 g

ofS BPAN 10 are crucial to the

disposition ofthe complaint

Respondent points out that 1 S BPAN 10 Item 26 e provides

as follows

In assessing freight charges for pallets containing a single commodity when

cargo is freighted on a measurement basis the actual height of the pallet but no

more than 6 inches will be deducted from the overallheight of the package when

computing the cubic measurement however this allowance is to be limited to

not more than 10 of the overall height of the entire package When cargo is

freighted on a weight basis the actual weight of the pallet shall be deducted but

not in excess of the 10 of the gross weight of the cargo and pallet Shipper

must furnish at the time of shipment the weight and measurement ofthe pallets

Italic supplied

and 2 S B PAN 10 Item 26 g provides as follows

Provided pre palletized cargo complies in all respects with the rules set forth

herein the carrierwill allow a discount of 2 50 per ton weight or measurement

on the same basis as cargo is being freighted except on pre palletized cargo

moving via The Sea Land Joint Service this discount will be allowed only when

cargo is loaded on four way pallets with dimensions or40 x 28

Admittedly complainant did not comply with the mandatory

provisions of 26 e of the aforesaid tariff in not one of the three

shipments but in its complaint attempts to exculpate itself from

such failures by pointing to the bills oflading copies ofwhich are

attached to the complaint as showing the separate weights ofthe

pallets and the articles shipped thereon This is not a compliance

with the duly legally filed tariffofthe carrier under consideration

herein

The filing oftariffs is a mandatory statutory requirement and

the Commission under this statutory mandate and the Commis

sion s rules and regulations issued thereunder are a proper legal

implementation of its congressionally delegated authority The

tariffs are amatter of public record readily available to all And

we are not concerned here with a naive occasional shipper but

tariffapplying S BPAN tO there are palletallowances provided forshipments that are pre palletized

cargo the unit loads weighing not less than 1500 Ibs orthe unit load overall measurements not less

than 40 cft In 26 e of Item 26 the tariff allegedly provides that the commodity rate listed should be

applied against the gross weight or gross measurement less the weights or measurements of the

pallets not to exceed 10 percent of the gross weight ormeasurement of the unitloads Item 26g of the

tariffellegedly states further that a

2 50 discount offthe listed commodity rate shall be allowed for

pre palletized cargo that qualifies

17 F MC
164 FEDERAL MARITIME COMMISSION

with a large distribution company whose personnel undoub

work daily with all fOlms oftransportation rail water and 

and who necessarily must be continuously aware of the tari

each form oftransportation and their provisions These perso

must in the best interest of its company attain and maintai

expertise in all tariffs ofeach transportation media

And while it has hereinabove been ruled that the six mo

limitation needs no discussion it is difficult to understand 

this experienced knowledgeable complainant waited almos

years from date of first shipment July 16 1971 complaint 

May 1 1973 to file this complaint

The failures of the complainant here tocomply with the ma

tory provisions of the legally filed applicable tariff in an

themselves are sufficient to require dismissal of its comp

Legal tariffs should either be strictly adhered to3

or the filing 

maintaining of tariffs become an act of futility and ma

mockery of the will of Congress and of the Commission and 

the public interest in constant jeopardy and at the mercy o

carriers

In view of the above it is unnecessary todiscuss the eviden

questions which might be raised with respect to certain p

attached tothe complaint that is that fairness and due proce

law might require respondent be given an opportunity to c

examination ifit so desired

ULTIMATE CONCLUSION

The claim of the complainant for reparations should be d

and its complaint in its entirety be dismissed

8 JAMES FRANCIS REILLY

Administrative LawJud

WASHINGTON D C

August 18 1978

3 As Chief Justce Hughes said for the majority in LouisviUe NR R Co v MaxweU 237 

Ignorance ormisquotation of rateli8 not an excuse forpaytng or charging either le88 or more 

rate filed This rule ill undeniably strict and it obviously may work hardship in 80me case

embodies the policy whi hr has been adopted by Congress in the reulation of interstate com

orderto prevent dillcriminatlon See Ludwig Mueller Co Inc v Peralta Shipping Corporation 

for Torm Lines 8 FMC361 365 1965

17 
165

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 174 1

COLGATE PALMOLIVE COMPANY

v

MOORE MCCORMACK LINES INC

ORDER ON REVIEW OF INITIAL DECISION

November 12 1973

This proceeding involves aclaim for reparation said to be due as

a result of an alleged incorrect measurement of a shipment The

Examiner denied the claim of 1113 on the basis of insufficient

evidence inasmuch as the measurement figures contained on the

bill of lading and export declaration submitted in support of the

claim are not legible

Upon review ofthe evidence the Examiner s denial on grounds

of insufficient evidence seems proper and accordingly the initial

decision is hereby adopted

Copy ofinitial decision attached

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

17 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 1741

COLGATE PALMOLIVE COMPANY

v

MOORE MCCORMACK LINES INC

Complaint dismissed

DECISION OF HE BERT GREER PRESIDING

EXAMINER

Claimant Colgate Palmolive Company alleges incorrect me

ment of a shipment carried on a vessel operated by respo

Moore McCormack Line and an overcharge of 11 93 The 

lading submitted with the claim as well as the export decla

show ameasurement that is unclear and may be read 9 cub

the meaaurement used by tlte respondent in assessing the f

While those documents could be read Elither 3 or 9 cub

such evidence is insufficient to support the alleged misme

ment beyond a reasonable doubt Further the applicable 

rate is based on valuation of the cargo and value is not sho

the bill oflading The rate charged is consistentwith the va

shown on the export declaration submitted with the claim

Complaint dismissed

S HERBERT K GREER

Presiding Exam

WASHINGTON D C

February 10 1971

I

The partie consented to the informal procedure of Rule 19 46 eFR 502 3014 and th

shall be final unless the Commission elect to review itwithin 15 days from the date of servic

166 1
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 198

COLGATE PALMOLIVE COMPANY

v

MOORE MCCORMACK LINE

ORDER ON REVIEW OF INITIAL DECISION

November 12 1973

In this proceeding claimant Colgate Palmolive Company alleges

an overcharge on an ocean freight shipment carried by Moore

McCormack Line claiming that on 49 pallets ofchemicals respond

ent failed to make an allowance of100 pounds for each pallet when

computing the gross weight The Examiner denied the claim based

on the claimant s failure to prove that the conditions set forth in

the applicable tariff for entitlement to the pallet allowance were

complied with

The tariff provides that cargo loaded on pallets is entitled to an

allowance when subject to other requirements the unit load

shall not be less than 1800 pounds rwr cube less than 45 ft

Emphasis added The Examiner correctly found that this condi

tion has not been met inasmuch as claimant has not shown the

measurement of the unit

Inasmuch as claimant has not provided measurement of the

unit either to the carrier or to the Commission in pursuing its

claim it cannot be determined that the shipment qualifies for the

pallet allowance Accordingly the Examiner should be upheld and

the initial decision is hereby adopted

Copy ofinitial decision attached

By the Commission

SEAL S FRANCIS C HURNEY

Secretary

17 F MC 167
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 198 1

COLGATE PALMOLIVE COMPANY

v

MOORE MCCORMACK LINE

Complaint dismissed

DECISION OF HERBERT K GREER PRESIDING

EXAMINER

Claimant Colgate Palmolive Company claims an overcharge 

shipment made on a vessel operated by respondent Moore Mc

mack Line alleging that on 49 pallets of chemicals respon

failed to make an allowance of 100 pounds for each pallet w

computing the gross weight The tariff of InterAmerican Fre

Conference of which conference respondent is amember prov

as to pallet allowance that the unit load shall not be less 

1 800 pounds nor cube less than 45 feet and maximum weigh

4 480 pounds The claimant has not shown the measurement o

unit load In the absence of proof that the conditions set fort

the tariff as a basis for pallet allowance were complied with 

claim must be denied

Complaint dismissed

WASHINGTON D C

February 11 1971

S HERBERT K GREER

Presiding Examine

j

I Both parties having consented to the informal procedure of Rule 19 46 CFR 502 8014 

decision shall be final unless the Commission elects to review it within 15 days from the date of 

hereof

168 17 F 
17 F MC 169

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 2391

COLGATE PALMOLIVE COMPANY

v

ROYAL NETHERLANDS STEAMSHIP COMPANY

ORDER ON REVIEW OF INITIAL RECISION

November 12 1973

This proceeding involves claims by Colgate falmolive Company

alleging that Royal Netherlands Steamship Company overcharged

Colgate in the amount of 148 80 for the carriage of certain

commodities described on the bills of lading as Vel Ajax Deter

gent Liquid Respondent acknowledged error in applying its

tariff and the Examiner recognized the validity ofthese claims

The Examiner nevertheless denied reparation because the bills

of lading submitted with the claims reveal that respondent

apparently undercharged claimant on other commodities in

cluded in the same shipments

Our review of the record in this proceeding discloses no valid

basis for concluding that undercharges existed on other commodi

ties on the bill of lading The Examiner found that commodities

described as Fab Ajax Detergent Dry and Fab Ajax Cold

Power Detergent Dry should have been rated as Detergent

N O S at the rate of 4100 and were incorrectly rated at 32 00W

This conclusion is speculative The record shows these commodi

ties were assessed a 32 00W rate but nowhere does the record

show underwhatdescription the commodities were actually rated

Without knowing what description was applied it cannot be con

cluded that Detergent N O S would be a more applicable de

scription

Accordingly since no undercharges are proven to exist com

plainant is entitled to reparation on the proven overcharges of

148 80 Itis so ordered

By the Commission

SEAL S FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 2391

COLGATE PALMOLIVE COMPANY

v

ROYAL NETHERLANDS STEAMSHIP COMPANY

November 12 1973

Reparation denied

DECISION OF HERBERT K GREER PRESIDING

EXAMINER

This proceeding involves four claims by Colgate Palmolive 

pany against Royal Netherlands Steamship Company A porti

the shipments concerned a commodity described on the bi

lading as Vel Ajax Detergent Liquid and on this comm

respondent assessed a rate of 53 00 per 40 cubic feet applicab

Soap Liquid N O S The applicable tariff set forth an item a

lesser charge of 4100 weight on Detergent N O S As to t

commodities respondent has acknowledged error in applying 

tariff and has agreed to pay reparation on confirmation 

your Office The total amount involved is 148 80 overcharg

that commodity

However the bills of lading submitted with these four cla

insofar as legible reveal that respondent apparently un

charged claimant On February 8 1971 the parties were advis

this apparent undercharge and their comments solicited Claim

was requested to furnish a legible bill of lading on its claim 

8044 More than two months have elapsed and the parties 

failed to respond It is therefore found that the commo

carried described as Fab Ajax Detergent Dry and Fab 

Cold Power Detergent Dry were incorrectly rated at 3

weight and should have been rated as Detergent N O S an

I Both parties havlnK consented to the finformal procedure under Rule 19 46 CFR 002 30

8

decision shalt be final unless the Commission elects to review it within 16 days from the date of 

hereof

170 17 
COLGATE PALMOLIVE CO v NETHERLANDS S S 171

rate of 4100 applied Undercharges on these commodities

amounted to a total of 683 13 thus on the shipments set forth in

the complaint 489 33 is due respondent Whether the bill of lading

attached to claim No 8044 would add or detract from the amounts

set forth herein cannot be determined

In this situation it cannot be found that claimant is entitled to

reparation on the shipments set forth in the claims Respondent is

admonished that section 18 b3 of the Shipping Act 1916 re

quires the charging ofthe rates set forth in the applicable tariff

and that charging less than the applicable rate is a violation of

that section Respondent will report to the Examiner within 60

days of the date of the service of this decision what action has

been taken to effect compliance with section 18 b 3

Reparation denied

S HERBERT K GREER

Presiding Examiner

WASHINGTON D C

April 13 1971

17 F MC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 240 1

UNION CARBIDE CORPORATION

v

PORT LINE LTD

ORDER ON REVIEW OF INITIAL DECISION

November 12 1978

This proceeding involves a dispute as to the proper descri

and thus proper ocean freight rating which should be applied 

commodity which had been listed as Methyl Isoamyl Ketone 

the bill oflading in question Claimant contends that the com

ity was a solvent and that the rate of 63 00 on solvents N 

should have been applied In support of its contention claim

submits an extract from a chemical dictionary defining Me

Isoamyl Ketone as a solvent

Respondent had rated the commodity in accordance with 

73 00 rate for chemicals N O S Respondent did not reply to

merits ofthe claim

The Examiner upheld respondent s classification and dism

the claim on the basis that it was the claimant who origi

improperly described the cargo and that claimant s exercis

semantics in its supporting documenation fails to meet 

burden ofproof standards required for claims based onmisdes

tion

We chose to review the Examiner s decision to insure co

ency with another decision previously endorsed by the Com

sion See Informal Docket No 217 1 Union Carbide Corpor

v Columbus Line Inc served March 3 1971 determined n

review March 16 1971

In217 1 the Examiner awarded reparation tothe claimant 

shipment of the identical commodity Methyl Isoamyl Ket

which had incorrectly been rated as cargo N O S As in this 

172 17 F 
UNION CARBIDE v PORT LINE LTD 173

ceeding claimant there contended the commodity shipped should

have been rated as a solvent and submitted a similar chemical

dictionary description ofthe properties ofthe commodity in support

ofits claim

While the Commission has imposed a heavy burden ofproof on

claims of this nature it has also attempted to insure that when

ever justly possible what is actually shipped must determine the

applicable rate Having authorized reparation in 217 1 under

essentially identical circumstances we conclude that the Examiner

must be reversed in this proceeding and reparation be awarded

5440 Itis so ordered

By the Commission

SEAL 8 FRANCIS C HURNEY

Secretary

17 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 2401

UNION CARBIDE CORPORATION

v

PORT LINE LTD

Complaint dismissed

DECISION OF HERBERT K GREER PRESIDING

EXAMINERl

Union Carbide Corporation seeks reparation from Port 

Ltd alleging misapplication of the tariff on a shipment 

Newport News to Melbourne Australia under a bill of la

dated September 21 1969 which described the goods as M

Isoamyl Ketone measurement 64 cubic feet weight 2 520 po

Claimant alleges that We find no authority in the tariff fo

rates as applied said to be 77 00 per 40 cubic feet Respo

states that the rate applied was 97 00 per 40 cubic fee

chemicals N O S The rate applied was as stated by responde

Claimant now contends that the commodity was a solven

that the rate of 63 00 on solvents N O S should have 

applied In support ofthis contention it submits an extract fr

chemical dictionary which defines Methyl Isoamyl Ketone as

METHYL ISOAMYL KETONE 5 methyl 2 hexanone M

CH COC H CH CH

Properties Colorless stable liquid pleasant odor Sp gr 0 8132 20 

refractive index 14062 n 20ID b p144 C f

p

73 9 C wtiga16 77 lbs 

pt 110 F open cup Slight soluble in water miscible with most o

solvents

Grade 97 5

Containers Drums tank cars

Uses Solvent for nitrocellulose cellulose acetate butyrate acrylics and 

copolymers

I Both parties having consented to the informal procedure of Rule 19 46 eFR 602 30184 

decision shall be final unless the Commi8sion elects to review it within 15 days from the date o

hereof

174 17 
UNION CARBIDE v

PORT LINE LTD 175

The gravamen of any complaint filed pursuant to section 22

Shipping Act 1916 which includes informal claims is that the

carrier has violated the Act here section 18 b 3 by failure to

charge and collect the applicable rate set forth in the tariff on file

with the Commission To find acarrier in violation ofthe Act is not

amatter to be lightly treated in view ofthe penalties which may

be involved In recognition ofthis implication the Commission has

held

The emphasis in terms of evidence has been in setting forth sufficient facts to

indicate with reasonable certainty or definiteness the validity of the claim

Claims involving alleged errors of weight measurement or description of

necessity involve heavy burdens of proof once the shipment in question has left

the custody of the carrier Colgate Palmolive Company v United Fruit Company

Informal Docket No 115 1 Order served September 30 1970

This claim being based on misdescription requires a heavy

burden of proof Claimant engages in an exercise in semantics to

discharge this burden citing an exerpt from a chemical dictionary

to show that a commodity classified as a Chemical N O S was a

solvent that is one of the innumerable chemicals which may be

used as a solvent

It appears that the shipper a large organization engaged in

shipping its products on a large scale prepared the bill of lading

The shipper or its agent had detailed knowledge ofthe nature of

the commodity shipped The bill of lading was signed by both

parties

A bill oflading is a contract and here the shipper seeks to avoid

the terms ofthe contract which he prepared by reason ofa failure

to set forth therein something within his peculiar knowledge Itis

especially true that when a shipper during a long period has been

preparing bills of lading involving chemical products he may be

charged with knowledge of the nature of the shipments See

Carriers 13 Am Jur at page 781 While as ageneral rule certain

matters set forth in a bill of lading may be shown to have been in

error the circumstances here appearing do not warrant an award

ofreparation The claimant made frequent shipments ofchemicals

and no doubt as a large shipper employed experts in shipping

matters who frequently prepared bills of lading involving chemi

cals A shipper preparing a bill of lading is charged with the

responsibility for furnishing the carrier aproper description ofthe

commodity shipped The carrier was informed that the commodity

was a chemical There are innumerable chemicals the nature and

properties of which are known only to chemists or other experts

engaged in handling or manufacturing them Respondent s tariff

17 F M C
176 FEDERAL MARITIME COMMISSION

U S Atlantic GuWAustralia New Zealand Conference doe

set forth a rate on Methyl Isoamyl Ketone Insofar as the b

lading and respondent s tariff disclosed it was a chemical N 

The fact that the commodity could be used as asolvent for ce

compounds was a matter pecularily within complainant s k

edge The exercise in semantics upon which this alaim is found

deemed insufficient to support the burden imposed on claima

establish that respondent has violated section 18b 3 ofthe A

Complaint dismissed

S HERBERT K GREER

Presiding Examin

WASHINGTON D C

April 15 1971

17 
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 251 I

UNION CARBIDE CORPORATION

v

AMERICAN AND AUSTRALIAN STEAMSHIP LINE

ORDER ON REVIEW OF INITIAL DECISION

November 12 1973

This proceeding involves two overcharge claims alleging misap

plication by respondent of its published ocean freight tariff The

items shipped were described on the bills of lading as solvent

N O S F P 1200 F Claimant contends that both shipments

should have been rated under tariff item No 825 for solvents

N O S Flash Point over800 F at 63 00 instead ofunder item No

752 for chemicals N O S not drugs or medicines at the rate of

97 00

Respondent replied and the Examiner held that whereas the

complainant s bill oflading did not provide the specific name ofthe

solvent in accordance with item No 825 ofthe tariff of the U S

Atlantic and GulfAustralian New Zealand Conference of which

respondent is amember the complainant was not entitled to the

lower rate for solvents N O S Flash Point over 800 F but was

correctly charged a rate of 97 00 under item No 752

The Commission has frequently stated in informal dockets that

it will adhere to the concept that it is not the declaration on the

bill of lading but what is actually shipped that determines the

applicable rate so long as a reasonable standard ofburden ofproof

is upheld between the shipper and the carrier see Docket No 70

47 Union Carbide Inter America v Norton Line 14 FMC 262

This result has been accomplished while recognizing at the same

time that whenever reasonable a conference s tariffs rules

should be upheld and enforced by the Commission

The tariffrule in question provides Specific name ofthe solvent

17 F M C 177
178 FEDERAL MARITIME COMMISSION

not trade name must be shown on the bill of lading While 

requirement appears reasonable enough and wasproperly invo

at the time of rating it should not constitute an absolute 

against later recovery upon a showing of proper proof 

complaint before this Commission

In the present case it appears unreasonable to deny repara

based on the tariff rule The bills oflading in question describe 

goods shipped as solvent N D S F P 120 F The attache

voices specifically describe the item as Diisobutyl Ketone and 

claimant through its documentation shows Diisobutyl Keton

be a solvent Therefore it would seem unreasonable in this 

for the Commission to sanction the assessment ofa rate for w

it has been rather conclusively shown the carrier would no

entitled other than on the basis of the shipper s failure to inc

the specific name of the solvent on the bill of lading

In Informal Docket No 223 1 Union Carbide Inter Ameri

Grace Line Inc served on January 13 1971 the Commi

determined not to review the Examiner s denial ofa claim w

involved a similar tariff description requirement However 

present case is distinguishable in light ofthe degree of informa

which was provided on the bill of lading and the document

submitted by the claimant in support of its claim The clai

here appears to have met the required burden of proo

reparation involving alleged errors of description on shipm

which have left the custody of the carrier To deny recovery w

be contrary to the concept that charges must be based on wh

actually carried Therefore we conclude that claimant is en

to reparation in the amount of 272 86 It is so ordered

By the Commission

SEAL S FRANCIS C HURNEY

Secreta

17 
17 F M C 179

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 251 1

UNION CARBIDE CORPORATION

v

AMERICAN AND AUSTRALIAN STEAMSHIP LINE

Complaint dismissed

DECISION OF HERBERT K GREER PRESIDING

EXAMINERl

This proceeding involves two claims submitted by Union Carbide

Corporation against American and Australian Steamship Line a

member of the U S Atlantic GulfAustralia New Zealand Con

ference

The first claim involves a shipment pursuant to a bill of lading

dated October 10 1969 which describes the shipment as 10 Drs

Solvent NOS F P 1 F The second claim is on a shipment also

made pursuant toa bill oflading dated October 10 1969 and which

described that portion of the shipment upon which the claim is

based as 20 Drs Solvents NOS F P 1200 F Claimant contends

that both shipments consisted of Diisobutyl and should have

been rated at 63 00 instead of 97 00 which rate the carrier

applied

The tariff of the conference of which respondent is a member

contain an item No 825 for Solvents NOS Flash Point over 800

F at 63 00 however this item provides that the specific name of

the solvent not the trade name must be shown on the bill of

lading The tariff also sets forth an item No 752 for Chemicals

NOS not drugs or medicines at the rate of 97 00 Respondent

contends that as complainant s documentation did not give the

name of the solvent as required by item 825 the 63 00 rate was

not applicable

1 Both parties havingconsented to the informal procedure of Rule 19 46 CFR 502 3014 this decision

shall be final unlesg the Commission elects to review it within 15 days from the date of service hereof
180 FEDERAL MARITIME COMMISSION

It appearing that claimant failed to provide the name o

solvent which wasa prerequisite underthe tarifffor obtainin

63 00 rate the rate of 97 00 under item 752 was the appli

rate

The complaint is dismissed

8 HERBERT K GREER

Presiding Examin

WASHINGTON D C

May 12 1971

17 
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET NO 256 I

UNION CARBIDE INTER AMERICA

v

VENEZUELAN LINE

ORDER ON REVIEW OF INITIAL DECISION

November 12 1973

This proceeding involves aclaim for overcharge of ocean freight

on a shipment carried on respondent s vessel The cargo in ques

tion was described as Synthetic Resin and was rated as Syn

thetic Resin N O S at 49 2000 lbs Claimant now seeks to have

applied a rate of 37 2000 lbs the rate for Polyvinyl Chloride

Resin

The Examiner denied the claim not only because the proof is

deficient but also because it would be inequitable to award

reparation underthe circumstances appearing

The Examiners equity theory is that even if a misrating is

proven before the Commission it would be inequitable under the

circumstances to award reparation because the carrier is without

fault in regard to the misrating Claimant a large corporation

engaged in marketing products as to which the exact technical

description is known to it furnished the carrier with the syn

thetic resin description The carrier relying on this information

applied the rate appearing in its tariff for this exact description

The carrier then according to the Examiner should not be

penalized for the mistake ornegligence ofaknowledgeable shipper

in failing to provide the proper or more exact description

While we are not without sympathy for the carrier it is submit

ted that the Examiner s theory breaks down when he concludes

that the carrier is being penalized In this case for example the

carrier held itself out of carry Polyvinyl Chloride Resins at a rate

of 37 This becomes the lawful rate for that commodity Ifit is

17 F M C 181
182 FEDERAL MARITIME COMMISSION

shown in a proceeding here that the commodity actually ship

was Polyvinyl Chloride Resin the carrier is not penalized 

having to refund the overcharge Rather the carrier is me

being required to adhere to its lawful rate To permit the carrie

retain the overcharge would in fact provide the carrier awind

Accordingly we hereby disavow the Examiners equity the

and reiterate our position that what is actually shipped de

mines the rate to be applied Equities of the kind involved her

course can be and are taken into consideration in determin

whether enforcement penalties are sought against the carrier

The Examiner would also deny the claim on the basis of lac

proof as to what was actually shipped Claimant has submitte

commercial invoice dated April 16 1969 in its attempt toshow t

the shipment consisted of Polyvinyl Chloride Resin Marks 

numbers on the bill oflading are identical to those on the invo

Union Carbide s order number 184599 2

appears on both do

ments Each document lists the quantity as 440 bags The Ex

iner found that the weight on the invoice differed from that on 

bill of lading 22 000 Ibs v 22 880 Ibs However our examina

shows that while the 22 000 Ibs figure does appear on the invo

as the net weight the same invoice also shows a gross weigh

22 880 Ibs the same as on the bill of lading

Itmust therefore be concluded that the invoice and bill oflad

refer to the same shipment

The invoice describes the commodity as Union Carbide V

Resin QAHR Claimant correctly points out that the Commiss

in Informal Docket 93 1 determined that a Union Carbide V

Resin Q series qualified tobe rated as Polyvinyl Chloride Res

the rating sought here by claimant

Under these circumstances we conclude that the burden of p

has been met and the claim should be awarded 147 57 It is 

ordered

By the Commission

SEAL 8 FRANCIS C HURNEY

Secretar

17 F 
FEDERAL MARITIME COMMISSIQN

INFORMAL DOCKET No 256 1

UNION CARBIDE INTER AMERICA

v

VENEZUELAN LINE

Complaint dismissed

DECISION OF HERBERT K GREER PRESIDING

EXAMINERl

Complainant Union Carbide Inter America asks for an award of

reparation alleging misapplication of the rate on a shipment

carried by respondent Venezuelan Line from Philadelphia to La

Guaira pursuant to bill of lading dated June 8 1969 which

described the commodity shipped as 440 bags Synthetic Resin

N O S weighing 22 880 pounds The rate set forth in the tariff of

U S Atlantic and GulfVenezuela and Netherlands Antilles Con

ference of which respondent was a member for Synthetic Resin

was 49 00 per 2 000 pounds Respondent rated the shipment in

accordance with that tariff item

Complainant contends that the correct bill of lading description

should have been 440 bags Polyvinyl Chloride Resin that the

rate of 37 00 per 2 000 pounds for that commodity should have

been applied and that respondent is required to refund the

difference between that rate and the rate on Synthetic Resin

Itis well established that carriers must charge the rate applica

ble to a commodity actually shipped and that afailure to do so is a

violation of section 18bX3 ofthe Shipping Act 1916 A review of

the decisions issued under the Informal Docket Procedure indi

cates atrend to award reparation where possible and at times on

highly technical tariff interpretations where there is evidence

that a commodity was misrated but without regard to equitable

considerations However it is proper to consider the equities in

1 Both parties having consented to the informal procedure of Rule 19 46 CFR 502 3014 this

decision shall be final unless the Commission elects to review it within 15 days from the date of service

hereof

17 F M C 183
184 FEDERAL MARITIME COMMISSION

volved in a complaint proceeding In discussing aremand by aF

eral Court the Commission stated in Parsons Whittemore In

Johnson lIine et al 7 F M C 721 731 1964

The Court while agreeing with the Board s finding of violations remanded 

case to this Commission to consider whether under all the circumstances 

inequitable to force Flota to pay reparations The Court explained it was ta

this action because inter alia The Board may have erroneously believe

that it was required to grantreparations once it found a violation of the Act

The fair and equitable treatment of both shipper and carrier

no doubt been the motivation for decisions heretofore issued 

Informal Docket proceeding but the question has not been f

treated The Commission has held that claims based upon erro

weight measurement or description are subject to a heavy 

den of proof when submitted after the goods have left the carr

possession The equitable implications of that requirement 

evident Claims based on errorin weight measurement or desc

tion are filed months in some cases as here almost twoyears a

the carrier has lost possession of the cargo The carrier is pra

cally defenseless having noway of checking the nature weigh

measurement of the cargo other than as set forth in the bi

lading which is prepared by the shipper itself Here the ca

rated the cargo in accord with the description furnished by 

shipper who later comes in toallege that although he wasin e

the carrier is responsible

Equitable considerations to be applied when the shipper 

small concern inexperienced in transportation matters may 

differ from such considerations when related to large corporat

with broad experience in shipping and either employing indiv

als with expertise in the field or forwarders who are exp

Practically all of the Informal Docket proceedings involve la

corporations the small shipper seldom filing a claim Carr

publish their tariffs and knowledge of the tariff provisions ma

imputed to the shipper or its agent Although a tariff is to 

interpreted against the carrier who prepared it it is freque

not only the tariff interpretation which is involved but a hi

technical interpretation of the nature ofthe commodity in rela

to atariff item When a shipper who manufactures an item w

may be variously described and who has knowledge of the e

technical description of that commodity and also has Il 

tariff available a failure to inform the carrier of the pro

desciption of the commodity to say the least is negligence par

larly where an experienced shipper is involved

There are other factors which should not be overlooked w

17 F 
UNION CARBIDE v VENEZUELAN LINE 185

considering informal claims Itwas stated in the decision issued in

Docket No 2401 that the matter of finding a carrier in violation

of the Act was not to be taken lightly because of the penalties

involved It is also evident that each claim must be be carefully

dealt with from not only the standpoint oftariffinterpretation but

also in view ofthe legal principles involved Section 18 b 3 must

of course be considered but section 16 Second cannot be over

looked A decision ordering a carrier to refund an alleged over

charge when it is not shown beyond a reasonable doubt that the

claim stands on firm ground might constitute an order requiring

the allowance oftransportation at less than the established rate

The claim here under consideration fails not only because the

proof is deficient as respondent contends but also because it

would be inequitable to award reparation underthe circumstances

appearing Complainant a large corporation engaged in market

ing products as to which the exact technical description is known

to it furnished the carrier with a description which wasapplicable

to an item set forth in the tariff Insofar as may be determined

the carrier had no reason to doubt the veracity ofthat description

That carrier waswithout fault Complainant was solely responsi

ble for the error ifan error was made amatter as to which doubt

arises An invoice dated April 16 1969 is presented which pur

ports to describe a shipment made under a bill of lading dated

June 8 1969 as Vinyl Resin not Polyvinyl Chloride Resin the

description which complainant seeks to substitute The weight in

the invoice is stated as 22 000 pounds whereas the weight in the

bill of lading is stated as 22 880 pounds The photostatic copy of a

letter which is also relied upon to prove the nature of the

commodity shipped the writer s affiliation or position not shown

refers to another letter not attached in which allegedly a refer

ence was made to PVC Resin

To deem the evidence submitted as proving beyond areasonable

doubt that the commodity shipped was misdescribed would strain

reason To grant reparation on a claim submitted almost two years

after the shipment had been made because ofan alleged error in

description made by the shipper well acquainted with thisproduct

and matters relating to ocean shipments would offend equitable

principles

The complaint is dismissed

S HERBERT K GREER

Presiding Examiner

WASHINGTON D C

May 25 1971

17 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOC KET No 262 1

ABBOTT LABORATORIEI l

v

PRtrDENTIAlrGRACE LINES

OltDER ON REVIEW OF INITIAL DECISIO N

November 1 1978

This proceeding involves a dispute as tothe effect the following

tariff provision regarding the use oftrade names in a bill of lad

will have on a claim before this Cimmission for alleged oc

freight overcharges

Trade name8 Bills describlll a commodity by tradename only arenot acc

ble Shippers are required to describe their merchandise by its eommon n

but may In addition Include trade name

Claimant herein used the trade name Nacconal on the bi

lading and the carrier subsequently rated the shipment as ca

N O S Claimant now alleges that Nacconal is adry detergent 

seeks to have the shipment rated according to the descriptio

detergent not liquid for industrial use Respondent car

relying on the above tariff provision denies the validity of 

claimed reparation The Examiner upheld the carriers positio

his decision and dismissed the claim on the basis of the t

provision

We believe that the above quoted tariff provision Clannot be u

to barrecQvery in this case The tariffclearly states that biU

lading describing commodities by trade name only are not acc

able Thus if the carrier chooses to invoke this provision it w

be incumbent upon the carrier to return the lading prio

shipment as not acceptable per the tariff item Otherwise 

carrier by accepting alading with atrade name description wa

the right to use the item for declining claims The item states 

the bills are unacceptable not the trade names but the entire 

186 17 F
ABBOTT LABORATORIES v PRUDENTIAL GRACE 187

Accordingly the claim must be considered on its merits Claim

ant has rather conclusively shown through chemical dictionary

and manufacturer s statements that Nacconal is in fact a trade

name for a dry detergent commonly used industrially Respondent

does not dispute on the merits

According we conclude that the initial decision should be re

versed and an award ofreparation is due on the merits 199 60 It

is so ordered

B the Commission

SEAL 8 FRANCIS C HURNEY

Secretary

17 F M C
FEDERAL MARITIME COMMISSION

INFORMAl DOCKET No 262 1

ABBOTT LABORATORIES

v

PRUDENTIAL GRACE LINE

Complaint dismissed

DECISION OF ASHBROOK P BRYANT PRESIDING

EXAMINERl

Abbott Laboratories claims 199 60 reparation from Prudent

Grace Line for alleged freight overcharge on a shipment from N

York New York to Istanbul Turkey moving vis SS Biddef

Victory on bill of lading dated May 19 1969 claim No 73922 T

bill of lading describes the consist of the shipment Nos 150 1

Item 2 1 24 13 FD No of Pkgs LC No 294635 KAR Advice 

3221 968 06 KG NACCONOL NRSF Description ofPackages a

Goods 134 0 Measurement 2358 Gross Weight in pounds Sh

ment was rated by carrier on Bill of Lading as 134 ft at 88 

40 cu ft 294 80 based on classification as Cargo N O S listed 

tariff No 10 of the North Atlantic Mediterranean Freight Con

ence

Claimant asserts that nacconol is a trade name for dry de

gent for industrial use as shown on page 774 of the Chem

Dictionary and which it is alleged describes the item shipped a

its various uses Also submitted by claimant is a statement sign

by R D Young IntI Distribution Analyst ofAbbott Laborator

which certifies that the Nacconol shipped on the Biddefo

Victory B L 46 dated May 19 1969 is Detergent not liquid 

industrial use At the time of shipment the rate for that item 

listed on the tariff was 90 75 per 2240 lbs total for the shipm

1

Both parties having consented to the informal procedure of Rule 19 CFR 602 80134 this de

shall be final unles8 the Commission elect to review it within 15 days from the date of serviceher

a

By letter of December 10 1970 respondent deneid this claim among others as made moret

months after sailing in accordancewith the filed tariff

188 17 F M 
ABBOTI LABORATORIES vPRUDENTIAL 189

of 2350 lbs was 95 20 instead of 294 80 as rated by the carrier

This includes a rate differential of 150 per ton weight or

measurement for shipment destined to Turkish ports as listed on

pages 68 and 44 g

oftariff No 10

Prudential Grace points out that item 5 K of the applicable

tariff contains the following provision

K Trade names Bills describing a commodity by trade name only are not

acceptable Shippers are required to describe their merchandise by its common

name but may in addition include trade name

Prudential Grace takes the position that it is not incumbent on

their rate clerks to seek definitions from outside source such as

chemical dictionaries etc but may rely on the description pro

vided by the shipper and incorporated in the bill of lading It has

been so held in prior cases

The Commission has uniformly held that claims for reparation

involving alleged errors ofweight measurement or description of

necessity involve heavy burdens of proof on the part of the

shipper once the shipment has left the custody ofthe carrier To

recover claimant must establish sufficient facts to indicate with

reasonable certainty or definiteness the validity of his claim

Also as one subject to the Shipping Act the carrieris obligated by

law to assess and collect the applicable freight charges as estab

lished by the filed tariff 3Ifa carrier charges a different amount

for freight be it more or less than the tariff permits it has

violated the law

The carrier in determining the proper tariffrate for a particular

shipment is almost uniformly dependent on the commodity de

scription provided him by the shipper or his agent In the usual

case the carrier must rely upon the description in the bill oflading

in assessing and collecting the correct and lawful amount of

freight Hence at a later time when the facts are often in

substantial dispute and evidence not practicably available absent

the clearest proof that the actual shipment wasdifferent and that

an illegal charge has been made the description in the bill of

lading must stand Nor is it incumbent on the carriers clerk to

consult reference works such as the Chemical Dictionary to

augment the description provided by the shipper and incorporated

in the bill of lading 4

Note 4 post

See intel alia Colgate Palmolive Co v United F uit Informal Doeket No 1151

Commission order

served September 30 1970 Upjohn Intel Amel ican C01poration v Venezuelan Line Informal Dotket No

244 1 Commis ion order served July 16 1971

Inter alia see Unicm CU1 bide Intel America v Prudential Groce Lines Inc Informal Docket No

241 1 Commission order served March 29 1971

17 F MC
190 FEDERAL MARITIME COMMISSION

As stated above the applicable tariff specifically provides tha

description of a commodity by trade name only renders the 

oflading not acceptable There is no doubt that NACCONOL i

trade name for a series of alxyl sodium sulfate detergents 5

The tariff indicates that trade names should not be used as 

basis for rating cargo That is precisely what claimant here insi

that the carrier should be required to do If the carrier were 

accept claimant s contention it would do so in derogation of 

express provision ofthe tariff and might well involve aviolation 

law

Complaint dismissed

8 ASHBROOK P BRYANT

Presiding Examine

WASHINGTON D C

September 24 1971

5 See copy of page 774 Chemical Diationary submitted by claimant

17 F M C
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 274 I

ABBOTT LABORATORIES

v

MOOREMcCORMACK LINES INC

ORDER ON REVIEW OF INITIAL DECISION

November 12 1973

Claimant Abbott Laboratories seeks to recover for the alleged

misapplication ofa rate on an ocean shipment described on the bill

of lading as Animal and Poultry Feed Supplement and rated by

Moore McCormack under the tariff rate applicable to chemicals

N O S The rate sought here is that applicable to Fodder and

feed supplements animal

The evidence shows that the shipment consisted of Arsanilic

Acids and that the primary ifnot sole use ofArsanilic Acid is as

an animal and poultry feed supplement

The Examiner denied the claim based on the following rule

appearing in the conference tariff on Clarification ofCommodity

Description

Description of commodities shown on all copies of bills of lading shall be verified

by comparison with the Export Declaration In the event descriptions are

dissimilar and not analogous the description including the export Schedule B

classification shown on the Export Declaration shall govern the rate to be

applied Supplementary guarantee of any kind shall not be sufficient to warrant

application of rate other than that required by description of Export Declara

tion

The Examiner reasoned that although the export declaration

was not furnished for the record the correspondence furnished

showed that the Schedule B number used by claimant was

512 0325 which number appears in Schedule B under the head

ing of chemical and refers to Arsanilic Acid Medicinal Grade

Based on the quoted rule the Examiner found the Chemical

N O S rating applicable and denied the claim

17 F MC 191
192 FEDERAL MARITIME COMMISSION

We conclude that the Examiner erred in applying the quo

tariff rule and denying the claim The Commission has attemp

to insure thatwhenever reasonable burden of proof standards 

met a commodity will be rated for transportation purposes acc

ing to what is actually shipped In the present case there is 

question that what was shipped was Arsanilic Acid and t

Arsanilic Acid is an animal and poultry feed supplement FMC 

ICC precedent establish the idea that where a commodity 

represented in more than one tariff description the more spe

description will apply Here fodder and feed supplements anim

is more specific than chemical N O S Here the description in 

bill oflading correctly designates what was in fact shipped an

should have been rated accordingly Actually the cargo 

initially rated by the carrier as feed supplement The rating un

chemicals N O S was a subsequent change by the carrier 

cited tariff rule should not be used to deny a claim where it i

clearly shown what wasactually shipped

Additionally it is questionable whether the cited rule shoul

any event apply to this situation The rule is totake effect In 

even descriptions are dissimilar and not analogous Eve

the export declaration described the commodity only as Arsa

Acid the Export Declaration wasnot attached to the claim 

thus the alleged description cannot be verified it is question

whether that description is dissimilar or not analogous to 

bill of lading description of Animal and Poultry Feed Sup

ment Analogous is defined in the dictionary as meaning s

lar or comparable in certain respect On the evidence subm

here there is no basis for arguing that Arsanilic Acid is 

similar or comparable to an animal food supplement In 

they appear to be one and the same

Accordingly the Examiner s denial should be reversed and 

feed supplement rate be found applicable resulting in an awar

complainant of 469 63 Itis so ordered

By the Commission

SEAL S FRANCIS C HURNEY

Secretar

17 F MC
FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 274 1

ABBOTT LABORATORIES

v

MOOREMcCORMACK LINES INC

November 12 1973

Claim denied

DECISION OF HERBERT K GREER PRESIDING

EXAMINER

Claimant Abbott Laboratories seeks reparation from respondent

Moore McCormack Lines Inc a member of the Inter American

Freight Conference conference alleging misapplication ofa rate

on a shipment transported from Brooklyn New York to Sao

Paulo Brazil The bill oflading dated July 24 1969 set forth the

description furnished by claimant as a shipment of Animal and

Poultry Feed Supplement 578 cubic feet 13310 pounds The

conference tariff provides a rate of 55 00 W M on Fodder and

Feed Supplements Animal with or without vitamin or anti biotic

contents N O S not including Phosphoric Acid value up to

3 000 00 per 2400 lbs gross weight Respondent originally applied

the 55 00 rate but upon checking the invoice found that the

shipment consisted of acid arsanilic and rerated the commodity

at 87 50 W M applicable to chemicals N O S

Claimant contends that the end use of the commodity was an

animal feed supplement and that the 55 00 rate was applicable

Attached to the claim is claimant s catalogue definition of Arsan

ilic Acid toinclude

USES Arsanilic Acid is recommended for use in feeds for swine turkeys and

chickens at 45 to 90 grams per ton

1

Both parties having consented to the informal procedure of Rule 19 46 CFR 502 3014 this

decision shall be final unless the Commission elects to review it within 15 days from the date of service

hereof

17 F M C 193
i

1

The conference tariff at the time ofthe shipment also set fo

the following rule

Clarification ofcommodity description Description of commodities shown o

copies of bills of ladina shall be verified by compari on with the Ex

Declaration In the event descriptions are dissimilar and not analogous 

description including the export Schedule B classification shown on 

Export Declaration shall govern the rate of the Ipplled Supplementary gua

tee of any kind shall not be sufficient to warrant application of rate other 

that required by description of Export Declaration

Claimant did not attach the Export Declaration to the claim 

the correspondence furnished shows that the Schedule lOB n

ber used by claimant was 5120825 wnich number appears 

Schedule B under the heading of Chemicals and refers 

Arsanilic Acid Medicinal

Pursuant to the above quoted rule respondent properly app

the Chemical N O S rate as the tariff did not provide a spe

rate for Arsanilic Acid

The claim is denied

HERBERT K GREER

PreBidi1lf Examine

WASH GTON D C

November
FEDERAL MARITIME COMMISSION

DOCKET No 7238

THE CARBORUNDUM COMPANY

v

VENEZUELAN LINE

November 9 1973

ON REVIEW OF INITIAL DECISION

By THE COMMISSION Helen Delich Bentley Chairman George

H Hearn Vice Chairman Ashton C Barrett James V Day

Clarence Morse Commissioners

This proceeding is before us upon respondent s exception to the

May 18 1973 Initial Decision of Administrative Law Judge Nor

man D Kline Pursuant to the request of complainant all parties

agreed to a shortened procedure without oral argument Rule 11

as set forth in 46 CFR 502 181

On July 28 1972 Carborundum Company filed a complaint with

the Commission seeking recovery of reparation in the amount of

505 11 from Venezuelan Line The basis of the complaint alleges

an overcharge on four shipments from New York to Puerto

Cabello Venezuela carried on respondent s vessels between Sep

tember 1970 and June 1971 such overcharge being in violation of

section 18 b 3 ofthe Shipping Act 1916

We concur in the Judge s denial of respondent s argument of

lack ofjurisdiction Upon carefuly consideration ofthe record and

the exceptions we conclude that the factual findings and conclu

sions with respect thereto as set forth in the Initial Decision were

except as hereinafter noted well supported and correct Accord

1 Section 18b 3 of the Shipping Act 1916 provides Nocommon carrier by water in foreign commerce

orconference of such carriers shall charge ordemand orcollect orreceive agreater orless ordifferent

compensation forthe transportation ofproperty orfor any servicein connection therewith than the rates

and charges which are specified in its tariffs on file with theCommission and duly published and in effect

at the time

17 F MC 195
196 FEDERAL MARITIME COMMISSION

ingly with those exceptions we hereby adopt it as our own a

make it a part hereof

We find that the record reflects no valid reasons to just

departing from the firmly established rule that a tariff should 

considered in whole and not in part when applying freight charg

on a commodity See Storage Practices at Longview Wash 

F M B 178 182 1960 Pursuant to the latter rule oflaw a read

ofrespondent s tariff reveals that prior to the granting of eithe

pallet allowance or rate deduction certain conditions must be m

Le 1 that the minimum acceptable pallet dimensions are 32 

40 2 that the gross weight of a single pallet plus the ca

stowed thereon shall not be less than 1 500 Ibs and 3 that 

overall cubic measurement of cargo and pallet shall not be l

than 40 cubic feet Both Items 26 1 and i must therefore be re

in conjunction with the latter conditions

Hence with the latter in mind and as detailed infra we do 

agree with the Judge s conclusions in the following respect

Judge Kline with reference by claim No 3 agreed with c

plainant s contention that since the bill of lading for the th

pallets of fluorspar claim No 3 showed the gross weight of 

shipment 6 150 Ibs and the net weight of the cargo 6 000 Ibs 

the respondent could by subtracting one from the other arrive 

the weight of the pallets 150 Ibs and by dividing the gr

weight of the shipments by three the respondent should h

concluded that the minimum weight requirement ofItem 26 i 

been met as to each palletized shipment

The basic flaw in such a contention is that although 

complainant did furnish the carrier with the weight of both 

pallets and cargo thereon there is no evidence ofrecordto sugg

that the pallets in question subscribe tothe minimum accepta

pallet dimensions under either Item 26 1 or Item 26 i Con

quently the carrier has no way of knowing whether all of 

requirements of Item 26 have been met 3 This would also appl

the Administrative Law Judge s treatment of claim No 4 wh

he used the average gross weight ofthe 27 shipments toConcl

that they met the minimum weight requirement of Item 26 i

Moreover we find that the assumption that each of the 

The bill of lading reveals that each of the three pallets was loaded with 20 IOO pound b

fluorspar

3

In ita brief on exception the respondent submits forthe first time that Item 26 Note 2 Item 

6th Rev page 22B Corr 970 22B effective July 3 1978 of its tariff specifically excludes fluo

fluorspar from the 2 50 per ton pallet discount proviqed for In Item 26i Although Judae Kline d

have an opportunity to rule on respondent s reference weare not precluded from taking judicial 

of the aforementioned tariffprovi8ion to conclude that thi8 deduction a8 it relate8 to claim No 2 s

be di8allowed

17 F M C
SEAL 8 FRANCIS C HURNEY

Secretary

CARBORUNDUM COMPANY v VENEZUELAN LINE 197

individual shipments meet the minimum weight requirements

cannot be sustained by simply dividing the gross weight of the

cargo by 27 We interpret Item 26 to require that each pallet

receiving the rate deduction must meet the minimum weight

requirement ofnot less than 1 500 pounds Computing the average

load unit falls short ofsuch requirement Also because the record

is void of facts to the contrary and assuming the shapes were all

of the same size and weight it can be strongly argued that at least

two ofthe twenty seven pallets were under the minimum weight

requirement 4 And thus the shipper is getting a deduction not

provided for in the tariff Consequently for us to approve such a

faulty interpretation of respondent s tariff would be to render

meaningless the phrases shipper must furnish the actual

weight and measurements of the pallet of Item 26 f

and pro

vided prepalletized cargo complies in all respects with the rules set

forth herein ofItem 26i

As a result of the above reasoning we conclude that the refund

due the complainant should be reduced to 422 76 which repre

sents 108 43 claim No 1 239 93 claim No 2 and 74 40 claim

No 3 We have computed the amount of claim No 3 on the

assumption from a

reading of the pertinent shipping documents

that there is assessed against the shipper for each pallet a 1 25

and a 03 surcharge package charge

However because of the possibility that these charges may

not be precisely the same on the shipment in question we will

leave the record open for 30 days to allow the parties to provide

the precise charges if any Absent any correction by the parties

reparation as hereinafter ordered will be paid within 45 days from

the date ofservice with interest thereon at six percent per annum

ifnot paid within said 45 days

The bill of lading reflects that of the 27 pallets 25 were loaded with 238 shapes each while 2 were

loaded with only 150 shapes each and thus these latter2 panets could not qualify forthe rate deduction

because they would weigh less than the 1 500 pounds each 56 876 pounds 6250 shapes 9 1 pounds per

shape differed in weight and measurement there is no basis upon whi ch an average unit load canbe

established or in fact the actual weight of any single loaded pallet

17 F M C
FEDERAL MARITIME COMMISSION

o 7238

THE CARBORUNDUM COMPANY

v

VENEZUELAN LINE

Claims filed within two years of accrual cannot be barred by carrier s

imp

six month time limitation

Complainant having furnished requisite information relating to we

pallets is entitled to pallet allowances prescribed by respondent 

regulations however where such information was not flrnished co

ant is entitled only to a partial allowance

Reparation awarded

H A Harrington for complainant

G E MoNamara and Ivan DeAngelis for respondent

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

By complaint served August 1 1972 complainant seeks re

tion in the sum of 505 11 from respondent claiming that o

shipments carried on respondent s vessels between Sept

1970 and June 1971 it was assessed freight rates which 

higher than those published in respondent s tariff in violat

section 18 b3 ofthe Shipping Act 1916 the Act

In answer to the complaint respondent states that the 

claims were denied because complainant failed to file its 

within the six months period prescribed by respondent s 

Item 11 and because on two occasions involving prepall

shipments complainant failed to provide information relat

the weight ofthe pallets as required by tariff Items 26 1 and 

Pursuant to request of complainant to which responden

sents this proceeding was conducted in accordance wit

Commission s Rule 11 shortened procedure 2

I Thi decision will become the decision of the Commission in the absence of exceptions 

review thereof by the Commission Rule 18g Rules ofPractice and Procedure 46 CFR 602 22

2By letter of May 7 1978 respondents both to the shortened procedure as pre cribed by R

CFR li02 181 and to the informal procedure 8et forth In Subpart 8 46 CFR 502 801 Since co

has not consented to the Subpart S procedure the Rule 11 procedure was followed

17 F MC

19
CARBORUNDUM COMPANY vVENEZUELAN LINE 199

The four claims are described as follows

1 This shipment consisted of 7 pallet cartons of fluorspar

moving from New York to Puerto Cabello Venezuela bill oflading

dated September 11 1970 The shipment was rated on the basis of

53 00 per 2 000 Ibs which was the applicable rate for Chemicals

N O S Class rate 7 according to the respondent s tariffin effect

at that time 3 The shipment according to complainant should

have been rated on the basis of 3100 per 2 000 Ibs the applicable

rate for fluorspar 4 The shipment weighed 9 857 Ibs Complain

ant claims that it wasovercharged in the amount of 108 43 which

is the difference between the freight computed at the 53 00 rate

26142 and the freight computed at the 3100 rate 152 99 5

2 This shipment consisted of 16 cartons ofnonclay firebrick and

2 cartons high temperature bonding motar and moved from

New York to Puerto Cabello bill of lading dated May 7 1971

Complainant does not question the description and rating of the

high temperature bonding motar However it alleges that the

nonclay firebrick was incorrectly classified as Glass Brick and

assessed a rate of 43 50 per 2 000 Ibs whereas it should have been

classified and rated as Brick or Bricks viz Fire including plastic

packed or skidded as per respondent s tariff at arate of 27 00 per

2000 Ibs 6

The shipment weighed 29 082 Ibs Complainant claims

that it was overcharged in the amount of 239 93 which is the

difference between the freight computed at the 43 50 rate

632 53 and the freight computed at the 27 00 rate 392 60

3 This shipment consisted of 3 pallets of fluorspar declared as

Crude Abrasives Fluorspar and moved from New York to

Puerto Cabello bill oflading dated May 7 1971 The shipment was

rated on the basis of 57 50 per 2 000 Ibs which was the applicable

rate for Grinding Compounds as per respondent s tariff 7

The

shipment according to complainant should have been rated on

the basis of 33 50 per 2 000 Ibs which was the rate applicable to

flourspar as per respondent s tariff 6

In addition it is alleged

that the shipment wasentitled to special allowances for prepalle

tized cargoes amounting to 2 50 per 2 000 Ibs applied against the

weight ofthe shipment less pallets as provided in tariff Item 26

The net rate would therefore amount to 3100 per 2 000 Ibs The

3 US Atlantic and Gulf Venezuela and Netherlands Antilles Conference Freight Tariff No 2 8 B

Ven llRev page82

4

Ibid 3rd Rev Page 94

6

Page 79

7

Page 85

e

Page 94

17 F M C
200 FEDERAL MARITIME COMMISSION

gross weight of the shipment was 6 150 lbs Complainant c

that it was overcharged in the amount of 84 41 which i

difference between the freight computed at the 57 50 

18125 and the freight computed at the 33 50 rate plu

pallet allowances 96 84 9

4 This shipment consisted of 27 pallets Refractory Sh

declared as such and rated as such The shipment moved 

New York to Puerto Cabello bill of lading dated June 4 197

gross weight of the shipment was 56 876 lbs Complainant a

that the shipment wasentitled to a partial pallet allowance 

amount of 2 50 per 2 000 lbs as provided in Item 26 of the 

The shipment was assessed total charges in the amou

989 03 on the basis of56 876 lbs at a rate of 33 50 per 2 00

plus surcharge and packing charge Complainant claims th

correct freight should have been 916 69 on the basis of 56 8

at 3100 per 2 000 lbs 33 50 less 2 50 pallet allowance 

surcharge and packing charges Complainant claims that i

overcharged in the amount of 72 34 989 03 less 916 69

In total the individual claims amount to 505 11

DISCUSSION AND CONCLUSIONS

As mentioned respondent does not dispute the fact tha

commodities involved in Claims 1 2 and 3 flourspar and no

firebrick were misclassified However respondent states t

denied all claims because they were not submitted to the c

within six months of date of shipment and furthermor

regards Claims 3 and 4 for the additional reason the compla

did not furnish information relating tothe weight ofthe palle

Respondent s tariff Item 11 provides in pertinent part as fo

Claims by shippers for adjustment of freight charges will be considere

when submitted in writing to the carrierwithin six months of date of sh

Item 26fprovides in pertinent part as follows

When cargo is freighted on a weight basis the actual weight of the pall

be deducted but not in excess of 10 ofthe gross weight of the cargo and 

Shipper must furnish at the time of shipment the actual weight and m

ments of the pallet

Item 26i provides in pertinent part as follows

Provided prepalletized cargo complies in all respects with the rules se

herein the carrier s will allow a discount of 2 50 per ton weight or m

ment of the cargo as freighted

9

Thesecomputations al80 include asmall amount representing asurcharge and packing ch

17 F MC
CARBORUNDUM COMPANY v VENEZUELAN LINE 201

The pleadings and supporting documentation submitted by the

parties raise the followingissues

1 whether complainant s failure to comply with the tariff

regulation imposing a six month s time limitation on the filing of

claims involving alleged errors of weight measurement or de

scription constitutes a valid defense to a complaint filed within

the twoyear period prescribed by section 22 ofthe Act

2 whether as regards Claim No 3 complainant furnished

sufficient information relating to the weight of the pallets as

required by respondent s Item 26 f

and i

thereby qualifying the

shipment for the pallet allowances prescribed therein

3 whether as regards Claim No 4 complainant s falure to

furnish information relating to the weight of the pallets disquali

fies the claim both as to the allowance prescribed by Item 26 i

2 50 per ton as well as to the prescribed by Item 26 fwhich

allows a deduction for the weight ofthe pallets

4 whether as regards Claims 3 and 4 the shipments involved

can be found not to have qualified for pallet allowances under

Item 26 either in whole or in part because of the use of an

improper type ofpallet

It is now well settled that claims filed within two years of

accrual cannot be barred by tariff regulations imposing a shorter

time limitation but must be considered on their merits In Pro

posed Rule Time Limit onFiling Overcharge Claims 12 F MC 298

308 1969 the Commission stated

Furthermore once a claim has finally been denied by acarrier the shipper may

still seek and in a proper case recover reparation before the Commission at any

time within 2 years of the alleged injury and this is true whetherthe claim has

been denied by the carrier on the merits oron the basis of a time limitation rule

See also Colgate Palmolive Company v United Fruit Company

11 SRR 979 1970

Respondent s Contention that all four claims should be denied

because offailure ofthe complainant to submitthem tothe carrier

within six months must be rejected This conclusion does not

completely dispose ofthe matters in controversy however since as

regards claims 3 and 4 respondent contends that complainant

failed to qualify for the pallet allowances prescribed by Items 26 f

and i because the requisite information relating to the weight

and measurement ofthe pallets was not furnished to the carrier

and because the type of pallets involved might have been im

proper

As can be seen from the provisions of Item 26 f

and i a

shipper is entitled to two allowances on prepalletized shipments

17 F M C
202 FEDERAL MARITIME COMMISSION

the first on the weight of the shipment and the second on the 

Thus in the case of a shipment freighted on aweight basis 

here involved Item 26f allows a reduction for the weight 

pallets so that the ocean rate is applied only against the wei

the cargo Item 26i provides a further reduction agains

ocean rate itself in this case 2 50 per weight ton

In the case of Claim No 3

respondent contends that com

ant is not entitled to the pallet allowances because it di

furnish at the time of shipment the actual weight and mea

ment ofthe pallets as required by Item 26 fand has not com

in all respects with the requirements ofltem 26 f

Further

respondent contends that there is a reasonable doubt as t

type of palletinvolved and that it cannot verify this point sin

pallets have left its custody

Contrary to respondent s contention an examination o

documentation submitted by complainant indicates that the 

necessary to determine the weight of the pallets was furnish

the carrier at the time of shipment The applicable bill of 

under which the shipment in question moved clearly ind

both the gross weight ofthe shipment 6 150 Ibs and the we

the cargo 3 loads consisting of 20 100 bags per load The we

the pallets is easily determined to be 150 Ibs 6 150 less 6 00

As to the contention that the pallet allowances shou

disallowed because there is reasonable doubt as to the ty

pallet involved respondent offers no evidence in support th

Instead it refers to Claim No 1 where complainant did no

the pallet allowances and states that Claim No 3 is of a s

nature However Claim No 1 involved a shipment which 

not qualify for the pallet allowances since it failed to me

minimum weight requirement 1 500 Ibs per palletized loa

prescribed by Item 26 b

lO Claim No 3 on the other ha

clearly distinguishable since the shipment consisted of three 

tized loads amounting of 6 150 Ibs or 2 050 Ibs per load th

meeting the minimum weight requirement

Itis found and concluded that as regards Claim No 3 com

ant furnished the requisite information regarding the we

the pallets as required by Items 26 f and i and did oth

meet the requirements of Item 26

In the case ofClaim No 4 complainant admits that it fa

provide the weight of the pallets as required by Item 26

nevertheless claims it is entitled to the discount provided i

10 A noted previously Claim No 1 conlfated of7 paJletlzed loadsweighing atotal of 9 81571b

Iba per load

17 F MC
11 As noted previously cno 4 involved 27 palletized loads weighing atotal of 56 876Ibs or2 1071bs per

load

CARBORUNDUM COMPANY v VENEZUELAN LINE 203

26 i 2 50 per ton citing Informal Docket No 268 1 Union

Carbide Inter America v Prudential Grace Line the decision in

which was served August 20 1971

Respondent raises the same defenses to this claim as it did in

the case of Claim No 3 and further contends that complainant

may not interpret Item 26 to suit his own convenience in order to

claim a self calculated allowance while admitting that the weight

ofthe pallets wasnot provided

Again as in the case of Claim No 3 it would appear that the

shipment involved in Claim No 4 qualifies for the palletized

allowance insofar as it was a prepalletized shipment which met

the minimum weight requirement 11 Furthermore the rate dis

count provided under Item 26 i 2 50 per ton is a separate

allowance applicable to the ocean rate which can be determined

without regard to the information required by Item 26 f concern

ing the weight of the pallets There is therefore no reasonable

basis to deny the allowance provided by Item 26 i because of

failure to comply with requirements which relate to a separate

allowance provided by Item 26 f Respondent s contention could

only be sustained by interpreting Item 26 in a manner most

favorable to the carrier It is well settled however that in

questions oftariffinterpretation any ambiguity is construed most

strongly against the carrier United Nation s Children s Fund v

Blue Sea Line 12 SRR 1067 1069 1972

Even if respondent s contentions were not untenable for the

foregoing reasons it would appear that they could not be sus

tained in view of Union Carbide supra In that case complainant

sought reparation alleging that it should have received the pallet

allowance provided in respondent s tariff which were virtually

identical to those provided by Items 26 f

and i As in the present

case however complainant had failed to provide information

relating to the weight of the pallets although in every other

respect the shipment had qualified under the applicable regula

tions It was held that the shipment wasentitled only to the rate

discount which as in the present case amounted to 2 50 per ton

and the reparation wasawarded on that basis

Itis found and concluded that as regards Claim No 4 complain

ant having failed to provide information relating to the weight of

the pallets as required by Item 26 fis not entitled to the

allowance prescribed therein Complainant is entitled however to

17 F MC
204 FEDERAL MARITIME COMMISSION

the allowance prescribed by Item 26 i 2 50 per weigh

applied against the gross weight of the shipment

ULTIMATE CONCLUSIONS

The claims having been filed within two years of accrual 

be barred by the carrier s tariff imposing a six month time 

but must be considered on their merits

Having furnished information relating to the weight 

pallets involved in connection with Claim N 3 complainan

plied with the provisions of Item 26 0 and i and is the

entitled to the pallet allowances prescribed therein

Having failed to furnish information relating to the we

the pallets involved in connection with Claim No 4 complai

not entitled to the pallet allowance prescribed in Item 26 0 

entitled to the allowance prescribed in Item 26i

Complainant is awarded reparation in the sum of 505 1

interest at the rate of 6 percent per annum if not paid 

thirty days

8 NORMAN D KLINE

Administrative Law Ju

WASHINGTON D C

May 18 1978

17 F M C
7 F M C 205

FEDERAL MARITIME COMMISSION

DOCKET No 73 18

POSSIBLE BREACH OF PACIFIC COAST EUROPEAN CONFERENCE

RATE AGREEMENT

Dispute between Pacific Coast European Conference and certain dual rate con

tract signatory shippers as to whether such shippers had the legal right to

select the carrier at the time certain shipments of cotton were made on

non Conference vessels directed to be submitted to arbitration pursuant to

the terms of Conference s Shippers Rate Agreement

Pending the outcome of arbitration Conference ordered to cease and desist from

1 assessing or attempting to assess penalties against the cotton shippers

under the Agreement and 2 suspending orthreatening to suspend any of

those shippers rights under the Agreement

Conference also directed to refrain from circulating any notices to its contract

merchants which may be interpreted to require such merchants to ship all of

their goods on Conference vessels even to the extent offoregoing sales where

the right to select the carrieris vested in another person

Leonard G James for Respondent Pacific Coast European Con

ference

Robert E Patmont for Intervenor Calcot Ltd

Alex C Cocke Sr for Intervenor Geo H McFadden Bro Inc

Thomas D Wilcox for Intervenor Starke Taylor Son Incorpo

rated

Donald J Brunner and David Fisher Hearing Counsel

REPORT

November 20 1973

BY THE COMMISSION Helen Delich Bentley Chairman George H

Hearn Vice Chairman Ashton C Barrett and James V Day

Commissioners Commissioner Clarence Morse concurring

By order served April 18 1973 the Commission directed the

Pacific Coast European Conference to show cause why 1 a

dispute between it and five specified cotton shippers arising under
206 FEDERAL MARITIME COMMISSION

the Conference s Shippers Rate Agreement dual rate con

and involving the issue of whether such shipper signatorie

the legal right to select the carrier at the time certain ship

of cotton were made on non Conference vessels should 

submitted to albitra ion 2 it should not be ordered to cea

desist from suspending andor threatening to suspend its S

Rate Agreement with such shipper signatories as well a

other shipper signatories who mllY be smilillrly situated a

the Commission should not disapprove the Conference s Sh

Rate Agreement for failure to abide by its terms as requi

section 14b of the Shippil1g Act 1916

The facts leading up to the initiation of this proceed

recited in the Commission s Order to Show Cause are su

tially as follows

On January 8 1970 the Conference circulated a Notice 

Contract Shippers in which it was stated that contrac

would be grimted only to shippers whose cllrgoes are tende

Conference vessels exclusively This unilateral interpre

was to apply regardless of the shippers terms of sale w

FOB FAS C F ClF or otherwise

Thereafter on No ember 28 1972 the Conference 

Notice to Shippers of Cotton in which it ADVISEQ a

tract shippers THAT SHIPMENT ON ANY VESSEL OF 

SPANISH LINE IN ITS PRESENT STATUS that of 

Co ference carrier WILL CONSTITUTE A VIOLATIO

THE SHIPPER S OBLIGATOINS UNDER the Agreem

This latter notice was prompted by tpeannouncement 

inauguration of an indepenc lent monthly Service bi Spanis

from U S Pacific Coast ports to ports in Spain Fl8J1ce and 

Subsequently and in response to this latest Notice 

signatory cottonshipperllnamely Geo H McFaqden 

McFadden Starke Tayior Son Starke Taylor Jess S

Sons Calcot Ltd Calcot and the Allenberg Cotton Co he

ter collectively referred to as Shippers notified the Con

pursuant to Article 2 c ofthe Agreement a

that certain shi

l ThiB Shipper Rate Agreement was approved by the CommiaAlon pUTluantto section 

Shipping Act 196 and tlJe Comml 8ion B decialon in The Dual Bate C IlElI 8 F M C 1

December 9 1966 With the exception of one modification not material orrelevant here this 

haa remained unchan ed sinee ita approval The A eement i8 aform of ocean rate contra

aignatory shippers agree to confine the carrlar of thi carlO in certain designated 

exeluaively to Confere ce member Iinel ln return for rate lower than the publi hed tariffra

IIArticle l

o require Idlnatory Ihi perlto notity th Conferenceof anY lhlprnentJ withwh

involved made on a

non Conferen evellaeI where thelelalrirht to select thecarrier III veste

penon
PACIFICCOAST EUROPEAN CONFERENCE 207

ofcotton were to be carried by non Conference vessels 3

The terms

of sale ofthese shipments were aJJegedly FOB and the routingvia

nonConference vessels was according to the Shippers dictated

by the Spanish consignees pursuant to aSpanish decree As such

the Shippers took the position with the Conference that they did

not have the legal right within the meaning ofthe Agreement

to select the carrier at the time ofthe shipments in question and

therefore the non Conference shipments were not made in viola

tion ofsuch Agreement

The Conference however has held to the interpretation an

nounced in its circular letter of January 8 1970 claiming that

regardless ofthe terms ofsale the Shippers were obligated under

the Agreement to utilize Conference vessels on all their shipments

of cotton As a result during January 1973 the Conference sent

similar letters to the Shippers in which it demanded certain

enumerated money damages for the loss of cotton shipments to

non Conference vessels In addition the Conference has an

nounced its intention to suspend the Shippers contract privileges

and apply noncontract rates to all future shipments of those

signatories unless the requested damages were forthcoming

DISCUSSION AND CONCLUSION

Section 14b of the Shipping Act 1916 in authorizing ocean

common carriers and conferences thereof to enter into effective

and fair dual rate contracts requires that such contracts

contain certain specified safeguard clauses Thus under the third

numbered provision ofsection 14b all approved dual rate contract

forms must embody aclause which expressly limits their coverage

to

only those goods of the contractshipper as to the shipment of which he has

the legal right at the time of shipment to select the carrier Provided however

that it shall be deemed a breach of the contract if before the time of shipment

and with the intent to avoid his obligation under the contract the contract

shipper divests himself or with the same intent permits himself to be divested

of the legal right to select the carrier and the shipment is carried by a carrier

which is not a party to the contract

The question of the shipments to be encompassed by a contract

system was one of the most difficult and troublesome problems

3 The following cotton shipments have admittedly been made on non Conference vessels

Starke Taylor Son Inc 3152 bales loaded on 58 STAR HERANGER on November 17 1972 6148

bales loaded on S8 STARTARNAGER December 28 1972

Jess Smith Sons 1999 bales loaded on MS HOLSTENBANK December 15 1972

Coleot Ltd 2000 bales loaded on 58STAR HERANGER November 21 1972

McFadden 3604 bales on MS HOLSTENBANK December 12 15 1972

17 F MC
208 FEDERAL MARITIME COMMISSION

faced by the drafters of section 14b Priorto the enactmen

new section the terms of dual rate contracts varied widely 

the type of shipments covered by the contract Most ho

were all inclusive which meant that the contract mercha

required to first offer all of his shipment tothe contract ca

conference regardless of whether the merchant was a

vested with the right to select the carrier

Thus in attemptingto define for the future the specific 

contract coverage and the circumstances under which th

chant would be restricted to the use ofthe contract carrier 

goods he purchases or sells the legislators were confronte

two opposing considerations While Congress did not want to

dual rate contracts so rigid as to permit the carrier or conf

to dictate the terms upon which one merchant must 

another it also did not wish to make them so loose or flex

to invite evasion by the contract merchants The latter con

tion gave recognition to the argument advanced durin

Congressional hearings that unless specifically legislated a

some unscrupulous shippers would use conference vessels 

contractrates when it suited them or ship by non conferenc

without loss of contract rights merely by changing the te

sale 4

The legal rights clause ultimately adopted by Congres

embodied in section 14b 3 was intended to strike a fair b

between both carrier and shipper interests By prohibitin

rate contracts from covering shipments of goods where the 

chant has no legal right to select the carrier section 14b 3 a

that contract merchants will not be held toa breach ofcontr

doing business with anyone who will not surrender his ri

make his own shipping arrangements

Alternatively this section affords the carrier or conf

ample protection from unscrupulous shippers by makin

breach ofcontract for the merchant with the intent ofevad

contractual obligation to change the terms of sale or oth

improperly divest himself of the right to select the carrier 

contract merchant actually has the legal right to sele

carrier he is duty bound under section 14b 3 to select the co

carrier and he may be penalized for failure todo so

Thus as the House Committee on Merchant Marine and Fis

explained when it wrote the provided however claus

legislation

Fundamentally what the committee sought was a pro

4H Rep No 498 87th Ccmg lat Sea8 9 1961
PACIFIC COAST EUROPEAN CONFERENCE 209

that specified the good faith of the partiesneither too rigid or

susceptible of manipulation The committee feels that if a contract

shipper is in a

legal position to control the routing good faith

requires him to do so On the other hand the provision

prohibits a conference or carrier from requiring a contract signa

tory to forego a sale unless shipment is made via conference

vessels 5

Ii was in the light of this statutory background that the

Commission in The Dual Rate Cases supra prescribed the follow

ing clauses for use in approved dual rate contracts

1 If the Merchant has the legal Tight at the time of shipment to select a

carrierfor the shipment of any goods subject to this Agreement whether by the

expressed or implied terms of any agreement for the purchase sale or transfer

of such goods shipment for his own account operation of law orotherwise the

Merchant shall select one or more of the Carriers

2 If Merchant s vendor or vendee 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 the carrier

3 It shall be deemed a breach of this Agreement if before the time of

shipment the Merchant with the intent of avoiding his obligation hereunder

divests himself or with the same intent permits himself to be divested of the

legal right to select the carrier and the shipment is carried by a carrier not a

party hereto

4 For the purposes of this Article the Merchant shall be deemed prima facie

to have the legal right at the time of shipment to select the carrier for any

shipment

a with respect to which the Merchant arranged or participated in the

arrangements for ocean shipment or selected or participated in the selec

tion of the ocean carrier or

b with respect to which the Merchant sname appears on the bill of lading

orexport declaration as shipper or consignee

5 Nothing contained in this Agreement shall require the Merchant to refuse

to purchase sell or transfer any goods on terms which vest the legal right to

select the carrierin any other person

The first three clauses set forth above are uniformly required in

all dual rate contracts and define consistent with the provisions of

section 14b 3 and the legislative history thereof the circumstan

ces under which a signatory merchant is restricted to the use of

the contract carrier for the transportation of his shipments

Clause 5 of the foregoing provision also made mandatory by the

Commission was prescribed pursuant to the House Committee

ReplJrt s directive that nothing in any approved contract shall

requife a contract signatory to forego a sale unless shipment is

made via contract carrier or conference vessels

Ib

17 F MC
py p

merchant sobligation under a dual rate contract depends upon

whether he has infact the power to select the carrier and does not

necessarily hinge on the terms of shipment or the fact that the

merchant sname appears on the shipping documents

The dual rate contract approved for use by the Pacific Coast

European Conference to which the Shippers here are signatories

contains verbatim all of the clauses including the optional one

relating to presumptions prescribed by the Commission under

section 14b 3To this extent at least the Conference sAgreement

complies fully with the requirements of section 14b as interpreted

and implemented by us in The Dual Rate Cases supra 6

With all the above principles firmly in mind we move now to a

consideration of the matters placed at issue in this proceeding The

first matter raised in the Commission sOrder directs the Confer

ence to show cause why

1 the dispute between n and the Shippers as to whether such

shipper signatories had the legal right to select the carrier at the time certain

6 I so finding we specifically reject Strake Taylor scontention that the Conference sapproved dual

rate contract form is not in compliance with the statute because it does not expressly contain the specific

language of section 146 3Expressly as used in section 14b refers only to the subject matter of the

required contractual provisions and was not Intended to Indicate the precise wording of such provisions

Thus all that section 14b requires insofar as the third provision thereof is concerned is that an

approved dual rate contract contain a provision which expressly covers only those goods of the

contract shipper as to the shipment of which he has the legal right at the time of shipment to select the

carrier etc It does not require that such contract expressly embody the quoted language Since the

Agreement

mandatory

sets

legal

forth

rights

with suffifient

clause prescribed

explicitness

by

the

the

statutory

Commission

requirement

and contained

of section

in the

14b 3

Conference s

we see no

merit in the argument that such Agreement does not comply with that section

17 FMC
gg

decide the factual situation here involved and establish general

rules for the future guidance of the shipping industry and private

arbitrators

Were we dealing here with a dispute requiring a legal interpret

ation of one of the contractual provisions of the Conference

contract we might well be inclined to agree with Starke Taylor

See Swift Co v Federal Maritime Commission 306 F 2d 277

DC Cir 1962 As it is however the matter in dispute between

the Conference and the Shippers raises at least at this juncture a

purely factual issue which may appropriately be resolved by a

board of arbitrators ie whether the Shippers had the legal right

at the time of the challenged shipments to select the carrier In

fact this is precisely the type of dispute the Commission had in

mind when it approved arbitration clauses for use in dual rate

contracts generally Thus as the Commission explained in The

Dual Rate Cases supra p 44

Arbitration has developed as an efficient means of settling disputes under

commercial contracts and would appear to be an appropriate means of disposing

of routine disputes which arise under dual rate contracts

While the matter in dispute is obviously of some consequence to

the principals it nevertheless represents to the extent it involves

Article 12 of the Conference Agreement provides that In case of dispute the Shipper and the

Carner seach agree to submit the matter under dispute to arbitration each appointing an arbitrator

and the two so chosen shall select an umpire to which Arbitration Committee all data requirested in

connection with the matter in dispute shall be made available Decision of two or more members of the

said Committee shall be binding on the parties and the arbitration shall be made under and pursuant to

the terms and conditions of the United States Arbitration Act 9 U S0 1 et seq all of which terms and

conditions shall be binding upon the parties hereto

17 FMC
On the basis of the foregoing we are directing that the dispute

between the Conference and the aforenamed Shippers as to

whether such Shippers had the legal right within the meaning

of Article 1c of the Conference Agreement and the context of this

Report to select the carrier at the time certain aforementioned

shipments of cotton were made on non Conference vessels be

submitted to arbitration in accordance with the requirements of

Article 12 of that Agreement Of course if the Shippers are found

not to have had the legal right at the time of shipment to select

the carrier the arbitration board must of necessity also determine

consistent with Article 1c3of the Agreement whether the

Shippers prior to the time of shipment divested themselves or

permitted themselves to be divested of that right with the intent

of avoiding their obligations under the contract

Pending the outcome of the arbitration prescribed above the

Conference is ordered to cease and desist from 1 assessing or

attempting to assess penalties against the Shippers under the

Agreement and 2 suspending or threatening to suspend any of

the Shippers rights under that Agreement Failure of the Confer

ence to observe this directive and thus comply with existing law

and Commission regulations will be deemed to constitute a viola

tion of section 14b of the Act

To do otherwise would be tantamount to allowing the Confer

ence to unilaterally adjudicate the fact of breach and thereby

effectively circumvent the clear intent of the arbitral process

Breach of a dual rate contract much like a contract merchant s

17 FMC
PACIFIC COAST EUROPEAN CONFERENCE 213

right to select the carrier is never a matter to be presumed

conclusively by a carrier or conference Where as here assertion

of a breach is challenged by a contract signatory no penalizing

action 8

can be taken against that signatory under this contract

until such time as the fact ofbreach is formally determined either

by the Commission in the first instance or where so provided in

the contract by an arbitration board 9

Whether the Conference would be authorized to suspend the

Shippers rights and obligations under the Agreement for failure

to pay the damages adjudged by a proper body to be due and

owing notwithstanding the fact that it has failed to include in its

Agreement the Commission prescribed suspension clause 10 is a

matterthat need not be reached at this time since to do so would

require the Commission to assume that 1 the arbitrators will

find for the Conference and 2 the Shippers will subsequently

refuse to pay the adjudged damages Rather than indulge in such

speculation the Commission will defer any decision on that issue

until such time as the need arises Resolution of that question at

this time would at best be premature since there is no reason to

presume that the parties will not live up to their contractual

obligations

While Intervenors Calcot and McFadden are not actually op

posed to submitting their dispute with the Conference to arbitra

tion and stand ready to abide by the decision of the board they

feel that nothing can be accomplished by such arbitration unless

the Conference intends to retreat from the position taken by it in

its circular letter ofJanuary 8 1970 ie that its dual rate contract

applies to all shipments to covered destinations regardless ofthe

terms of sale Given what these parties characterize as the

Conference s refusal to recognize a shipper s lack of any legal

right to select the carrier as an exception to the Agreement they

believe that no meaningful purpose can be served from the

standpoint ofthe Conference by an arbitration proceeding held to

determine who actually had the legal right toselect the carrier

8The Senate Committee was clear in its statement that punitive suspensions orterminations by the

conferences of merchants contracts are notpermitted under the statute The Dual Rate Cases supra at

pp 367

9

The Commission of course always retains the ri ht of r view of any decision reached by an

arbitration panel convened pursuant to an approved contl 8ct As we stated in The Dual Rate Cases

Order Granting the Deletion of Certain Clauses 8 F M C 267 268 1964 citing the court s decision in

Swift Co v Fedeml Maritime Commission 8UP1 Cl the Commission may upset the decision of the

arbitrators where the decision is not in conformity with the Shipping Act notwithstanding the absence

of any provision to that effect in the contract

10 Although the Commission in The Dual Rate Cases supra did not requiJ e

that contracts contain an

express provision giving the carrier orconference the right to suspend amerchant s

right under the

contract for failure to pay adjudKed damages it did prescribe an optional suspension provision for use by

thosecarriers orconferences who desired overaKe ofthe subject

17 F MC
214 FEDERAL MARITIME COMMISSION

While there is some merit to this argument we find tha

Conference s interpretation of the legal rights clause 

tained in its Agreement as reflected in its Notice to All Con

Shippers of January 8 1970 and its Notice to Shippe

Cotton of November 28 1972 is not so much erroneous as 

misleading

Contrary to the assertions made by Intervenors herein 

aforementioned natices circulated by the Conference do nat c

tute an autright denial of the effectiveness of the legal r

clause Nor has the Conference in this proceeding taken 

pasition which neoessarily contravenes the requirements af 

clause What the Canference has dane by its natices however 

canvey certain false impressians toits cantract shippers as to 

rights and abligatians under the Agreement and specifically 

cle l c thereaf Shart af actually advocating any unlawful 

pretation af the Agreement these natices thraugh the u

subtle and ingeniaus language impart the mistaken natian t

cantract shipper is always baund and abliged toship canferen

af the goods which he awns and sells regardless of the circum

ces surraunding the sale

Thus there appears to be aconsciaus attempt an the part 

Conference to mislead its shippers as to their legal abliga

under their cantracts and caerce them into taking actian 

intended by such cantracts Whether intentianally arnat haw

the notices in questian are drafted sa as to leave the impre

that contract signataries are required to farega all sales af 

gaods where the right to select the carrier is vested in the bu

a result clearly prescribed by Cangress and this Cammi

Absent an intent by the merchant to avaid itscantractual a

tions to the carrier neither the statute nar the Commis

prescribed clauses allaw far the suggestian that a cantract 

chant may be penalized ar denied af cantract rights far failu

ship his goods via the cantract carrier ar conference where 

merchant is abliged to sell to a buyer on terms which giv

buyer the legal right to select the carriers or there will be no 

In view af the above we are directing that the Canfe

henceforth refrain from circulating any notices to its ca

merchants which may be interpreted torequire such mercha

ship all af their goods an Conference vessels even to the exte

foregaing sales where the right to select the carrier is vest

anather person To this end any future Canference natice i

to apprise cantract signataries af their rights and abliga

under the Agreement will categarically state consistent 

17 F MC
PACIFIC COAST EUROPEAN CONFERENCE 215

Article l

c5 thereof that Nothing in the Shippers Rate Agree

ment requires a contract signatory to refuse to purchase sell or

transfer any goods on terms which vest the legal right to select

the carrier in any other person

11 Future failure of the Confer

ence to fully apprise its contract signatories oftheir rights under

the Agreement will be taken as an attempt by the Respondent to

deny such signatories of those rights and will be dealt with

accordingly by this Commission

This brings us to the final matter raised in the Commission s

Order to Show Cause to wit whether

3 the Commission should disapprove the Conference s Agreement for

failure to abide by its terms as required by section 14b of the Shipping Act 1916

We see no reason at this time to disapprove the Agreement

especially in view ofthe fact that the Conference has stated on the

record that it is agreeable to submitting to arbitration the dispute

which fostered this proceeding With the possible exception ofthe

shipper notices which have been found herein to be ofquestion

able propriety ifnot legality and prospectively proscribed thereis

no evidence in this proceeding that the Conference might have

failed to abide by the terms ofthe Agreement A final determina

tion on this issue however will be withheld pending the outcome

and aftermath ofthe arbitration proceeding

An appropriate order will be entered

COMMISSIONER CLARENCE MORSE CONCURRING

I concur in the report Ifind the use ofthe word false and the

phrase through the use of subtle and ingenious language in the

second full paragraph on page 13 is unnecessary to the ultimate

conclusions and therefore gratuitously offensive to a degree with

which Ido not wish to be associated

SEAL S FRANCIS C HURNEY

Secretary

11 Nothing we have stated herein however prevents the Conference from also remindingits signatory

shippers consistent with Article 1 c

3 of the Agreement that It shall be deemed a breach of this

Agreement if before the time of shipment the Shipper with the intent of avoiding his obligation

hereunder divests himself orwith the same intent permits himselfto be divested of the legal right to

select the carrier and the shipment is carried by acarrier not aparty hereto

17 F MC
FEDERAL MARITIME COMMISSION

DOCKET No 7318

POSSIBLE BREACH OF PACIFIC COAST EUROPEAN CONFEREN

RATE AGREEMENT

ORDER

This procceding having been instituted by the Federal Marit

Commission and the Commission having fully considered 

matter and having this date made and entered of record aRe

containing its findings and conclusions thereon which Repo

hereby referred to and made a part hereof by reference

Therefore it is ordered That thePacific Coast European Co

ence cease and desist from 1 assessing or attempting to as

penalties under its Shippers Rate Agreement against Geo 

McFadden Bro Starke Taylor Son Jess Smith Sons C

Ltd AlIenberg Cotton Co and all other similarly situated con

signatories 2 suspending or threatening to suspend any of t

shippers rights under the ConferencesShippers RateAgreem

Further it is ordered That the record in thisproceeding rem

open pending the outcome of the arbitration proceeding spec

in our Report

Finally it is ordered That the Petition of American Co

Shippers Association for Leave to Intervene is denied as b

untimely filed

By the Commission

SEAL S FRANCIS C HURNEY

Secreta

216
REPORT

FEDERAL MARITIME COMMISSION

DOCKET No 71 94

EQUALITY PLASTICS INC AND LEADING FORWARDERS INC

POSSIBLE VIOLATIONS OF SECTION 16 FIRST PARAGRAPH

SHIPPING ACT 1916

Respondent Equality Plastics Inc as consignee found to have violated section

16 First of the Shipping Act 1916 as evidence sufficient to show a knowing

and willful consenting to misdescriptions by foreign shippers of various

commodities on the bills of lading in order to obtain transportation by water

of those commodities at rates less than those which would otherwise be

applicable

Respondent Leading Forwarders Inc found not to have violated section 16 First

of the Shipping Act 1916 as evidence of Leadings indifference to apparent

discrepancies of description between shipping documents insufficient to

constitute such violation by knowingly and willfully indirectly by means of

false classification attempting to obtain transportation by water of prop

erty at less than the rates or charges which would otherwise be applicable

and thus continues to qualify to be licensed as an oceanfreight forwarder

Rosemary Boyd Avery for respondent Equality Plastics Inc

Edward Schmeltzer and E J Sheppard IV for respondent Lead

ing Forwarders Inc

Gerald H Ullman for intervenor New York Foreign Freight

Forwarders and Brokers Association Inc

Timothy J May and Richard A Earle for intervenor National

Customs Brokers Forwarders Association of America Inc

Donald J Brunner Norman D line and Joseph B Slunt as

Hearing Counsel

November 26 1973

By THE COMMISSION Helen Delich Bentley Chairman George

H Hearn Vice Chairman Ashton C Barrett James V Day

and Clarence Morse Commissioners

We instituted this proceeding to determine whether Equality

Plastics Inc Equality and or Leading Forwarders Inc Lead

217

17 F M C
218 FEDERAL MARITIME COMMISSION

ing 1 violated section 16 of the Act by obtaining or attemptin

obtain transportation by water for property at less than the r

or charges which would otherwise be applicable

We also ordered that the proceeding determine whether L

ing who acted as the customhouse broker for Equality on ce

shipments consigned toEquality continues toqualify as a licen

ocean freight forwarder or whether its license should be revo

or suspended pursuant tosection 44 ofthe Act and section 510 

and e of the Commission s rules for licensing of indepen

ocean freight forwarders rules 2

The National Custom Brokers and Forwarders Associatio

America Inc NCBFAA and the New York Foreign Fre

Forwarders and Brokers Association Inc Association interve

in the proceeding

Exceptions were taken tothe initial decision in which Adm

trative Law JUdge Stanley M Levy concluded that respond

violated section 16 by knowingly and willfully indirectly by me

of false classification attempting to obtain transportation 

water of property at less than the rates or charges which w

otherwise be applicable Oral argument was heard

FACTS

The Administrative Law Judge s

findings of fact to whic

exceptions were taken are set forth below

Leading was established in 1924 and now employs app

mately 35 people It is an independent ocean freight forwa

licensed by the Commission and a customhouse broker license

the Bureau of Cust oms Department of the Treasury The l

majority of its business is as a customhouse broker Equality 

been a client ofLeading since about 1964

Leading acted on behalfofEquality as a customhouse broke

the cargo covered by Sea Land Service Inc Sea Land B

Lading Nos 955 453374 955 453375 955 453788 955 453555 

401313 and 905 401494 For each shipment Leading prepared 

Consumption Entry and filed with the Bureau of Customs 

I Both Equality and Leading are 80metimes collectively referred to aa respondents

I 46CFR 510 9statelthat alicense may be revoked suspended ormodifiedafter notice and hear

any of the following realonl

8Violation of anyprovision ofthe Shippin II Act I9l0 as amended Of of any other t

tuterel

carryin on the bUBiness of forwarding

e 8lch conduct a8 the Commission ahall find renders the licensee unfit orunable to carry 

business offorwarding

17 F M C
EQUALITY PLASTICS INC ET AL 219

document along with the Special Customs Invoice Commercial

Invoice Packing List and Bill of Lading

The shipments which are the subject of this proceeding were

typical of the Equality shipments handled by Leading Leading

neverhad any physical contact with the shipments in question its

function being concerned with the documents relating thereto

Equality is no longer actively engaged in the import business

though the parent organization may be tarrying on the business

underanother name

Equality purchased from the manufacturers the cargo covered

by Nos 955 453374 955 453375 955 453788 955 453555 905

401313 and 905 401494 The cargo covered by Nos 955 453374

955 453375 955 453788 and 955 453555 was shipped by Forda Mfg

Co Ltd ofHong Kong The cargo covered by No 905 401313 was

shipped by Taiyo Corporation ofOsaka Japan The cargo covered

by No 905 401494 was shipped by the manufacturer Okura Kogyo

Ltd of Osaka Japan All the bills of lading were to the order of

Fidelity Bank as consignee The arrival notice of each shipment

except that relating to No 905 401313 was addressed to both

Equality and Leading the arrival notice relating to No 905

401313 was addressed to Leading On the shipments covered by

Nos 955 453374 955 453375 955 453788 and 955 453555 Leading

paid the collect ocean freight charges applicable to Toys 3

The

shipment covered by No 905 401313 wasprepaid and ocean freight

charges were based on a shipment of Toys 4 The shipment

covered by No 905 401494 wasprepaid and ocean freight charges

were based on a shipment of Bags and Luggage N O S 5

No 955 453374 covered the shipment of 176 cartons listed on the

bill of lading as Plastic Toys from Hong Kong to Elizabeth N J

An inspection ofthe cargo at Elizabeth by employees ofSea Land

and the Commission revealed that it was Plastic Glass Battery

Operated MixO Matic Pourers The Bureau ofCustoms Consump

tion Entry described the cargo as 176 cartons containing Battery

Operated Mixer Other and Forda s invoice to Equality described

it as Plastic Toys and Plastic Glass Battery Operated Mix O

Matic Pourers

No 955 453375 covered the shipment of176 cartons listed on the

bill oflading as Plastic Toys from Hong Kong to Elizabeth An

inspection ofthe cargo at Elizabeth by employees ofSea Land and

the Commission revealed that the cargo was Plastic Car Vacuum

3

New York Freight Bureau Tariff No 23 FMC 4

Sea Land Service Inc Tariff No 145 FMC No 27

Ibid

17 F MC
220 FEDERAL MARITIME COMMISSION

I

j

Cleaners The Bureau of Customs Consumption Entry decr

the cargo as 176 cartons containing Plastic Car Vacuum Clea

Portable Battery Operated and Forda s invoice to Equ

described it as Plastic Toys and Plastic CarVacuum Cleane

No 955 453788 covered the shipment of 225 cartons listed on 

bill of landing as Plastic Toys from Hong Kong to Elizabeth 

inspection ofthe cargo at Elizabeth by employees of Sea Land 

the Commission revealed that the cargo was Best Ever Drin

Matic Cordless Electric Power Mixer Battery Operated The 

reau ofCustoms Comsumption Entry described the cargo as 

O Matic pourers as otherelectro Mech h h appliances other 

Forda s invoice to Equality described it as Plastic Toys 

Plastic Glass Battery Operated Mix O Matic Pourers

No 955 453555 covered the shipment of 648 cartons listed on 

bill of lading as Plastic Toys from Hong Kong to Elizabeth 

inspection ofthe cargo at Elizabeth by employees of Sea Land 

the Commission revealed that the cargo was Vacuum Clea

and Mix O Matic Pourers The Bureau of Customs Consump

Entry described the cargo as MixO Matic pourers as o

electric mech h h appliances and as vacuum Cleaners port

hand held type and Forda s invoice to Equality described 

Plastic Goods Plastic Glass Battery Operated Mix O M

Pourers and Plastic Car Vacuum Cleaners

No 905 401313 covered the shipment of 84 cartons listed on 

bill of lading as Toys from Kobe Japan to Elizabeth 

inspection of the cargo at Elizabeth by an employee of 

Commission revealed that the cargo was Electric Immer

Heaters The Bureau of Customs Consumption Entry descr

the cargo as Electric Immersion heaters other and Ta

invoice to Equality described it as Electric Immersion Heate

coiled ACIDC each in vinyl bags with header card

No 905 401494 covered the shipment of 203 cartons listed on 

bill of lading as Bags from Kobe to Elizabeth An inspectio

the cargo at Elizabeth by employees of Sea Land and theCom

sion revealed that the cargo was Plastic Garment Bags 

Bureau of Customs Consumption Entry described the carg

203 cartons containing Garment bags etc as h h art nsp

plastic other Okura Kogyo Ltds invoice to Equality desc

the cargo as 300 dozen suit bags made of 0 048 mm 

embossed clear vinyl film Size 241 x 421 with 341 21 zipper 

dozen Dress Bags 241 x 541 with 341 21 zipper made ofthe s

material as the suit bags and 462 dozen pastel colored La

17 F M C
EQUALITY PLASTICS INC ET AL 221

Shoe Bags made ofRoman embossed 0 2 mm vinyl Size 17 x 30

with 12 pockets

Leading made no attempt to correlate or justify the differences

in the descriptions which existed on the various documents sup

plied to them such as the bills oflading invoices and packing lists

other than was necessary for the purpose of customs entries

After inspection of the shipments Sea Land billed and Perfect

Film and Chemical Corp the parent of Equality paid an addi

tional 1 696 36 for ocean freight charges attributable to Nos 955

453375 955 453555 and 955 453788 Sea Land also billed and

Perfect Film paid 290 20 for additional ocean freight charges

However because the referenced bill of lading relates to a ship

ment of Mix O Matic pourers and the waybill refers to auto

vacuum cleaners it cannot be established to which shipment the

bill and payment relate

The battery operated drink mixers which were shipped as

Plastic Toys consisted ofa glass jar on which was embossed the

recipes for various cocktails calling for alcoholic beverages At

tached to the glass jar was a plastic top which contained batteries

and two switches one for a spout for dispensing the beverage and

the other for the operation of a stirring rod Equality did not

consider the battery operated drink mixers to be an electrical

appliance since with new batteries it would just barely stir water

However it was not considered a children s toy by Equality but

more ofa novelty item Similarly the plastic carvacuum cleaners

were not considered by Equality as electrical appliances or toys

They were believed to be novelty items

Equality did not question the freight rate applied to the battery

operated drink mixers until after they were contacted by Sea

Land For a number of years Equality had purchased the battery

operated drink mixers from a large importer J Gerber Co Inc

New York When Equality decided to entertheir own orders direct

with the manufacturer in order to save money no specific instruc

tions were given to the manufacturer concerning the manner in

which the item should be declared to the ocean carrier The item

had been shipped as Toys for years and though improvements

had been made to the item through the years no change had been

made in the bill oflading declarations by the exporters

Equality did not sell its imports to children stoy stores nor did

it solicit business from children s toy buyers

DISCUSSION AND CONCLUSION

We shall first dispose ofthe threshold question ofour authority

17 F M C
222 FEDERAL MARITIME COMMISSION

under section 22 of the Shipping Act 1916 to institute 

proceeding Section 22 provides in relevant part

That any person may file with the Comission a sworn complaint setting 

any violation of this Act by a common carrier by water orotherperson subj

this Act If the complaint is not satisfied the Commission shall inv

gate it in such manner and by such means and make such order as it d

proper

The Commission upon its own motion may in like manner and except 

orders for the payment of money with the same powers investigate 

violation of this Act

It is the Association sposition that the words in alike man

and with the same powerS ofthe second paragraph of sectio

limits the Commission s authority toinvestigate violations as 

allowed by the first paragraph ofsection 22 ie since a comp

may be filed only against a common carrier by water or o

person subject tothis Act the Commission can only investi

violations by the same persons who may be the subject 

complaint proceeding namely carriers terminal operators 

forwarders 7

We agree with Hearing Counsel and the Administrative 

Judge that the qualifying words in a like manner and with 

same powers appearing in the second paragraph of section 

are directed only to the procedural framework which appear

the first paragraph ofsection 22

We think it clear that since the second paragraph of sectio

empowers the Commission to concern itself with all violation

the Shipping Act 1916 we have jurisdiction to investigate v

tions of section 16 by persons or entities named in that sec

whether or not they are other persons subject to the A

Were this not the case there would have to be attribute

Congress a particularly anomalous piece of legislative draftsm

ship A violation oflaw wascreated but the agency entrusted 

the administration of the statute could not even investig

possible infractions

The Association further argues that no anomaly exists bec

Congress intended to leave section 16 violations to the courts 

contention is that because section 16 does not specifically d

8

Section 1 of the Act defines other peraon subject to this Act as any person notinclude

term common carrier by water Carrying on the business of forwarding orfurnishing wharfag

warehouae orother terminal facilities in connection with acommon carrier by water

1 The Administrative Law Judge entertained serious doubt 88 to whether the A lociation 

intervenor could raise this issue ainee Rule 5 L prohibits in intervenor from enlarging the proc

However rather than to deny the motion of this procedural ground he treated it on its merits 

shall we

8

Hohenberg Brothers Company v

Federal Maritime Com n316 F 2d 381 D C Cir 1968 whe

court upheld the Commission s

findin8 that both ashipper and carrier had violated section 16 of 

17 F M C
EQUALITY PLASTICS INC ET AL 223

the Commission to proceed administratively as contrasted with

the Commission s specific directions to take a particular action

found in section 14 17 and 18 a 46 D S C 813 816 and 817 the

Commission lacks primary jurisdiction under section 16 From

this it is somehow said to follow that it is for the courts not the

Commission to determine whether either of the respondents

violated section 16 9

In support of this contention the Association relies on United

States v American Union Transport Inc 232 F Supp 700 702

D NJ 1964 in that case the Justice Department charged the

defendants with some 20 counts of violating section 16 ofthe Act

Two of the defendants moved to dismiss the case on the ground

that the

Federal Maritime Commission has exclusive primary jurisdiction to deter

mine whether Carrier s alleged acceptance of Shipper s measurements a consti

tuted a knowing acceptance of Shipper s allegedly false measurements and b

resulted in an undue and unreasonable preference and advantage being givento

Shipper

The court denied the motion concluding that the Commission

did not have exclusive primary jurisdiction over what the court

found was a relatively simple factual situation and a legal

question ofthe construction of section 16 From this conclusion

the Association argues that the Commission is without any juris

diction whatsoever over violations

The American Union Transport case is altogether too narrow

While it is correct that the court in that case found that the

Commission did not have exclusive primary jurisdiction over

section 16 the Association rather conveniently ignores the court s

own acknowledgement that the court s jurisdiction is concurrent

with that ofthe Commission The court noted section 22

empowers the Commission to investigate on the complaint of any person or

on its own motion any violation ofthe Shipping Act 1916 including 815 16

and to make after a hearing an order to remedy any violation found Emphasis

added 232 F Supp at 702

That is precisely what was done in this case The court con

cluded that the Act did not authorize the Commission to assess

penalties for violations of section 16 First But to say that such

exclusion prohibits the Commission from investigating and elimi

nating conduct which involves the evasion of the proper applica

9

Section 14 contains two specific references to actions which the Commission may take after notice

and hearing Section 17 commands the Commission to prescribe ajust and reasonable regulation

whenever an existing regulation is found unjust orunreasonable Section 18 a

authorizes the Commis

sion to prescribe just and reasonable maximum ratesin domestic commerce Section 16 merely declares

certain conduct unlawful and imposes penalties on those found guilty of such conduct

17 F M C
224 FEDERAL MARITIME COMMISSION

I

tion of the rates which would otherwise be applicable is frivolou

at best

Additionally the Association questions the validity of Ru

51O 23 L of General Order 4 46 CFR 510 23 L which provide

that licensed freight forwarders shall make their records availab

upon request to representatives ofthe Commission 10 Theassoc

tion argues that sections 43 and 44 only grant general rulemakin

authority and not as the Administrative Law Judge found sp

cific authority to issue Rule 51O 28L 11 Relying on Federal Ma

time Camnv Anglo Canadian Shipping Co 335F 2d 255 9thC

1964 wherein the court struck down aCommission s prehearin

discovery rule founded upon its then rulemaking authority pu

suant to section 204 b of the 1936 Merchant Marine Act th

Association rationalizes that since there is nothing explicit 

sections 43 and 44 concerning the right of inspection any mo

than there was section 204 b on discovery both authorities a

similar and therefore the court s

reasoning in Anglo Canadia

supra is equally applicable tothis proceeding

As the Administrative Law Judge found the Association 

reliance on theAnglo Canadian case is misplaced There the cou

was concerned with the Commission exercising what had trad

tionally been an exclusive function of the judicial branch 

government ie discovery without a specific grant of author

from Congress In rejecting the Commission s discovery rule th

court concluded that the rule

does more than to merely fill in details within the framework of exist

legislation It adds thereto and hence is without authority in law 885 F 2d 

258

Rule 510 23 L is designed to insure the availability to th

Commission of information upon which it may base a determin

tion that the duties and obligations of freight forwarder license

are being appropriately discharged and that is of course nece

sary ifthe Commission is to discharge its responsibilities und

the Shipping Act See United States v Morton Salt Co 338 U 

632 6423 1950 Moreover section 43 was intended to and d

give the Commission authority beyond that which it may have h

i

10 Rule 510 2S L states Each Licensee shall make available promptly all records and books ofacc

in connection with carrying on the business of forwardinK for inspection orreproducing orother off

use upon the request of any authorized representative otthe Commission

11 Section 43 states The Commission shall make rules and reKUlations 8S may he necessary to c

out the provisions ofthis Act

Section 44 requires that aforwarder must be willinK and able to conform to the provision

this Act and the requirements rules and regu ations of the Commission issued thereunder 

Commission ahall prescribe reasonable rules and regulations to be observed by independent o

freight forwarders

17 F MC
EQUALITY PLASTICS INC ET AL 225

under section 204 of the 1936 Act Alcoa Steamship Company v

Federal Maritime Commission 348 F 2d 756 760 761 D C Cir

1965 New York Foreign Frgt F B Assn v Federal Mariti lne

Com n 337 F 2d 289 2nd Cir 1964

In the alternative the Ass ciation argues as erroneous the

Administrative Law Judge s

finding that Leading voluntarily

consented to the giving up ofits shipping documents In support of

thiscontention it is urged that since Rule 510 23 L applies only to

records in connection with carrying on the business offorward

ing and the documents received pertained to Leadings custom

house broker activties the information wasobtained as a result of

an illegal search and seizure under color of authority in violation

ofthe Fourth Amendment

We can only dismiss this argument as groundless since the

record shows that Leading voluntarily made the information

available to the Commission with no evidence ofcoercion As Mr

Shayne testified

Mr Johnston of the F M C called Leonard Shayne President of Leading in

November of 1969 and requested that I provide him with certain documents in

connection with an investigation he was making I told Mr Johnston that I

would cooperate with his investigation and that I would look for the documents

I provided the documents to Mr Johnston in December 1969

The fact that the records requested related to Leading s activi

ties as a broker does not render the request invalid Our jurisdic

tion over Leading lies in the standard of conduct required by a

licensed freight forwarder which is an other person within

section 16 And thus as the Administrative Law Judge found it is

irrelevant as to the capacity in which a licensee acts as his license

is still subject to revocation or suspension if he willfully violates

any provision of the Act We could not properly discharge our

responsibility to the shipping public if we interpreted our statu

tory authority to permit a licensee to avoid the requirements

under the Act simply by allowing a freight forwarder to don a

broker s hat as in this case and thereby claim he no longer is

bound by his forwarder obligations

Leading pointing out that it committed no positive act of

procurement oftransportation for the cargo in question urges us

to reject the Administrative Law Judge s conclusion that its mere

completion of the paper work to get the shipments through

customs falls within the ambit of obtaining transportation by

water within the meaning of section 16 It is Leadings position

that since it did not obtain possess or transport the goods in that

it had no contract with those who prepared the shipping docu

17 F M C
226 FEDERAL MARITIME COMMISSION

ments and contracts it has been found guilty by association 

since Equality obtained transportation so did Leading as 

agent

We must reject Leading s argument on two grounds F

Investigation ofStockton Elevators 8 F M C 181 1961 relied 

by Leading is iapplicable since it is not involved with obtain

transportation but only concerned with wharfage from atermi

Second the legislative purpose bethind the 1936 Amendm

section 16 First was to extend coverage of the Act bey

carriers and to any party who participates in the transportat

The virtually all inclusive language of the section makes 

abundantly clear it provides

That it shall be unlawful for any shipper consignor consignee forwarder br

orother person orany officer agent oremployee thereof knowinely and wilf

directly orindirectly by means of false billing false classification false w

ing false report of weight or by any other unjust orunfair device or mea

obtain orattempt to obtain transportation by water for property at less tha

rates orcharges which would otherwise be applicable Emphasis added

All parties agree and we concur that the Administrative L

Judge applied the proper standard for determining whethe

party has knowingly and willfully violated section 16 He re

primarily onMisclassification ofTissue Paper as Newsprint Pa

4 F MB 483 486 1954 where it was stated

T he phrase knowinely and willfully means purposely or obstinately 

designed to describe a carrier who intentionally disregards the statute 

plainly indifferent to its requirements We agree that a persistent failur

inform or even to attempt to inform himself by means of normal bus

resources might mean that a shipper or forwarder was acting knowingly 

willfully in violation of the Act Emphasis added

n 

To the Administrative Law Judge Leadings failure to m

diligent inquiry to insure that the bill of lading accura

described the goods shipped constituted plain indifference s

as toconstitute a knowing and willful violation of section 16

We think the term plainly indifferent as used by our prede

sors in Misclassijication of Tissue Paper supra

12

means so

thing more than casual indifference and equates with a wan

disregard from which an inference can be drawn that the con

was in fact purposeful a standard somewhat analogous to the 

concept of gross negligence For this reason we must disag

in part with Judge Levy that the facts ofthe record demons

an intentional disregard of or plain indifference by respond

comparable to what our predecessors have described as w

conduct tantamount to an outright violation

IIIbid

17 F MC
EQUALITY PLASTICS INC ET AL 227

Consequently for the reasons that follow we find that only

Equality and not Leading did knowingly and willfully indirectly

by means of false classification attempt to obtain transportation

at less than applicable rates in violation ofsection 16

The crux of this proceeding and the key issue to be resolved is

whetherrespondents were in possession ofsufficient facts to raise

a doubt as to the accuracy ofthe bills oflading descriptions

The Tariff Schedule of the U S TSUS was used by Leading to

prepare the Customs Consumption Entries The car vacuum

cleaners were listed underTSUS report number 683 3010 being the

number for vacuum cleaners portable hand held type the drink

mixers were classified under 683 3000 designated as 686 3200

other the immersion heaters were classified under TSUS re

porting number 684 4000 Furnace heaters ovens and parts

thereof All three of these TSUS designations were listed under

Part 5Electrical Machinery and Equipment of Schedule 6

Metals and Metal Products We are further made aware that in

contrast the custom entry for toys TSUS number 737 9000 was

never used by Leading On the basis ofthis Hearing Counsel ask

us to conclude that Leading did not believe the commodities to be

toys The Administrative Law Judge concluded that at the very

least the variations placed respondents on notice of possible

misclassifications and thus required them to conduct an investiga

tion however modest to ascertain whether a misclassification

had in fact occurred

This conclusion would seem to presuppose that the preparation

of Customs Consumption Entries require the examination and

knowledge of the bill of lading and that the ocean carrier tariff

has a relationship to the TSUS However the evidence of record

and the testimony by witnesses of respondents is a good deal less

than clear on this point The evidence indicates that variations in

commodity descriptions among shipping documents are more or

less routine and not cause for suspicion that customhouse brokers

consider the bill of lading as evidence only of the title to the

shipment and thus do not use the bill of lading to prepare its

custom entry form that ocean carrier tariffs have no real relation

ship to the TSUS and therefore there is no need to make a

comparison between the two and that consumption entries are

not prepared based on knowledge of the actual contents of the

shipments All of which in our view justifies the finding that

respondents were not put on notice tocheck on why the cargo was

shipped as toys

Additionally it is urged that the dictionary definition of novelty

17 F MC
228 FEDERAL MARITIME COMMISSION

items and toys in addition to the customs tariff sched

definition of toys substantiates the bills oflading description

the commodities in issue 13

The Administrative Law Judge rejected this contention on 

ground that the articles in question in terms ofutilization ha

more practical use than one chiefly for amusement

We can agree with the Administrative Law Judge insofar as 

vacuum cleaners and immersion heaters are concerned bu

think the drink mixers are another matter While we claim 

particular expertise in the art of drink mixing we think ev

day experience dictates the conclusion that the drink mixers 

the type involved here are toys or at least novelty items

Leading at no point in time actually got involved with 

shipments and Leading s only contact with the shipments 

through their respective documents Also the record does 

show basic questions as tohow many documents are handled d

by Leading as a customhouse broker whether one or sev

persons handled the shipping documents in question and whe

the papers involved were part of a package or separately rece

by Leading are neither asked nor explored by Hearing Couns

Accordingly on the basis of the record before us we conc

that as to Leading there wasno violation ofsection 16

While it may eventually prove true that a licensed fre

forwarder acting as a customhouse broker will be require

consult tariffs to determine proper classifications and to com

documents for possible misclassitications we will impose su

requirement only after a thorough investigation of the te

conditions and circumstances surrounding the handling of 

ported cargo including the duties and responsibilities ofexpo

and carriers facts missing from this proceeding Weare persua

that an investigation should be instituted to determine the f

bility of establishing a general standard of conduct for person

the situation ofLeading a standard heretofore lacking

Finally Hearing Counsel urge that the subsequent rebilling 

payment to Sea Land ofthe supplemental freight charges lead

the inference that both respondents knew or should have kn

that the articles were subject to a higher freight rate Lea

says that its payments were no more than a courtesy fo

clients Equality says that since the supplemental charges 

13 Websters Third New Dictionary l966 defined novelty items as a

small manufactured 

intended mainly for decoration or adornment and marked by unusual or novel design IItay

defined 88 something designed foramusement ordiversion ratherthan practical use

The TSUS definition of toys is any article chiefly used for amusement of children oradults

17 F M C
EQUALITY PLASTICS INC ET AL 229

minimal its lack of protest was due to the desire to maintain the

relationship between shipper and consignee and avoid litigation

As to Leading any such inference does not strike us as unwar

ranted However Equality presents a different situation That a

long time importer of such low priced merchandise in a highly

competitive market would without protest pay additional charges

implies to us a recognition that the shipments were improperly

rated Equality as an importer wasquite aware that the vacuum

cleaners and immersion heaters would receive a lower freight

rate if classified as toys But Equality did not seek or solicit

these items as toys but as what they in fact were vacuum

cleaners and immersion heaters The evidence leads us to the

inescapable conclusion that Equality has willfully and knowingly

consented to these misdescriptions by the foreign shippers

Accordingly we conclude that Equality has violated section 16 of

the Act with reference to the vacuum cleaners and electric

immersion heaters as to Leading we conclude that the record

does not show that it has violated section 16 of the Act The

proceeding is hereby discontinued

SEAL 8 FRANCIS C HURNEY

Secretary

17 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 458

COMMODITY CREDIT CORPORATION

v

LYKES BROS STEAMSHIP CO INC

December 11 1973

NOTICE OF ADOPTION OF INITIAL DECISION AND ORD

PERMITTING WAIVER OF CHARGES

No exceptions having been taken to the initial decision in 

proceeding and the Commission having determined not to re

same notice is hereby given that the initial decision became 

decision of the Commission on December 11 1973

It is ordered That applicant is authorized to waive collectio

f5170 ofthe charges previously assessed Commodity Credit Co

lation

It is further ordered That applicant shall publish promptly i

appropriate tariff the following notice

Notice is hereby given as required by the decision in Special Docket 458 

effective April 29 1973 for purposes of refund or waiver of freight charg

shipments which may have been shipped during the period from April 20 

through October 15 1973 the rate on Wheat Bulk with BNT incl

discharging and bagging at Beirut is 32 35 W subject to all applicable 

regulations terms and conditions of said rate and this tariff

It is further ordered That waiver of the charges will be e

tuated within 30 days of service ofthis notice and applicant 

within five days thereafter notify the Commission ofthe date 

mannerofeffectuating the waiver

By the Commision

SEAL S FRANCIS C HURNEY

Secreta

230

17 F M C
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 458

COMMODITY CREDIT CORPORATION

v

LYKES BROS STEAMSlDP CO INC

Permission to waive a portion of freight charges granted

INITIAL DECISION OF ASHBROOK P BRYANT

ADMINISTRATIVE LAW JUDGE

Lykes Bros Steamship Co Inc Lykes a common carrier by

water in the foreign commerce of the United States within the

meaning of section 1 of the Shipping Act 1916 as amended the

ct 46 U S C 801 has filed an application pursuant to section

18 bX3 of the Act 46 U S C 817 b3 for permission to waive a

portion of the freight charges on a shipment carried for the

Commodity Credit Corporation from Corpus Christi Texas to

Beirut Lebanon referred to below

Pursuant to a bill of lading dated April 20 1973 Lykes trans

ported a shipment of33 206 pounds of bulkwheat including bags

needles and twine BNT via its S S Howell Lykes at an agreed

rate of 32 35 per ton rate includes BNT and cost of discharging

and bagging at Beirut and a confirmation of this booking was

made by Lykes However through inadvertence the rate on BNT

wasnot timely filed with the Commission The errorresulted from

the failure of Lykes to notify the conference tariff filing agent of

the BNT matter BNT when they accompany a bulk shipment are

open rated in the tariff of Gulf Mediterranean Ports Conference of

which respondent is a member At the time of shipment the

applicable rate was 36 50 per ton GulfMediterranean Ports

Conference TariffNo 13 FMC 15

On October 15 1973 prior to submission ofthis application the

conference amended its tariffto include the 32 35 rate

1 This decision became the decision of the Commission December 11 1973

231

17 F M C
232 FEDERAL MARITIME COMMISSION

Applicant now seeks permission to waive collection of 

that being the difference between the rate in effect at the tim

shipment and the agreed rate

Section 18 b 3 of the Act authorizes the Commission for 

cause shown to permit a common carrier by water in the fo

commerce of the United States to waive collection of a portio

the freight charges where there is an error in atariff ofa cle

or administrative nature or an error due to inadvertence in 

a new tariff The facts as alleged in the complaint indicat

inadvertent failure to file the agreed rate prior to shipment 

agreed rate was filed prior to the application which was 

within 180 days of the shipment as required by the statute 

waiver will notresult in discrimination among shippers

Good cause appearing permission towaive collection of 51 

granted Applicant shall publish in its tariffthe notice require

the statute The waiver of the charges herein authorized sha

effectuated within thirty days of service of notice and appl

shall within five days thereafter notify the Commission o

date and manner ofeffectuating the waiver

WASHINGTON D C

November 16 1979

8 ASHBROOK P BRYANT

Administrative Law Jud

17 F MC
1 This decision became the decision of the Commission December 11 1973

2 Item 495 13th revised page 62 tariff No 11 U S Atlantic and Gulf Venezuela and Netherlands

Antilles Conference

3

Bill of Lading No 92

233

FEDERAL MARITIME COMMISSION

No 7365

UNION CARBIDE INTER AMERICA INCORPORATED

v

VENEZUELAN LINE

Reparation awarded

L F Leonard for complainant

F Lozada and G E McNamara for respondent

INITIAL DECISION OF STANLEY M LEVY

ADMINISTRATIVE LAW JUDGEl

Union Carbide Inter America Inc complainant seeks repara

tion of 1 4349 from Venezuelan Line respondent arising out of

a shipment of 102 drums ofpolyethylene synthetic resin from New

York to Puerto Cabello Venezuela 2

aboard respondent s ship La

Guara on October 6 1972 3

Pursuant to request of complainant to which respondent does

not object this proceeding was conducted in accordance with the

Commission s Rule 11 shortened procedure

Complainant challenges the classification of 102 drums Polyeth

ylene Synthetic Resin value 7 586 25 as Synthetic Resin N O S in

other packing Actual value over 500 but not over 700 per freight

ton The freight rate assessed was 73 50 per 40 cubic feet for a

total of 2 226 88 It contends the correct rate should be 56 50 per

2000 pounds for a total of 729 39

The claim was rejected by respondent solely on the basis that it

was time barred per tariff rule item 11 However the Commis

sion has repeatedly held that in an action such as this which is

brought under the Shipping Act 1916 a claim arising from over

charge cannot be barred from a determination on the merits by a

17 F M C
234 FEDERAL MARITIME COMMISSION

Conference rule if the claim is filed with the Commission w

two years ofits accrual This claim has been tiled within two

and consequently must be considered on its merits

Both the Union Carbide Invoice No 830398 2 PT2 and 

Venezuelan Line Billof Lading No 92 dated October 6 1972 

102 DRMS POLYETHYLENE SYNTHETIC RESIN These 

uments clearly specify that the commodity was Polyethy

Synthetic Resin and that it was shipped in drums The gove

tariff has a specific provision for RESINS SYNTHETIC P

ETHYLENE in fibre drums actual value over 500 but not 

700 per 2 000 lbs at 56 50 per 2 000 lbs The bill of lading fail

specify whether these drums were fibre on metal drums Res

ent assumed they were steel drums and selected the higher 

for Synthetic Resin N O S in other packing

Itwas an inadvertent error of omission on the part of comp

ant to leave out the word fibre on the Bill of Lading 

evidence establishes that the drums used in this shipment 

indeed fibre drums Itis further established by actual calcula

that the value of the shipment was 555 04 per 2 000 lbs 

qualifies for the rate on Polyethylene Resin in Fibre Dr

actual value over 500 but not over 700 per 2OOOlbs as fol

27336 lbs gross weight J 2000 lbs 13 668 tons 7586 25 

as shown on B L J 13 668 tons 555 04 per 2000 lbs

It is concluded that the record in this proceeding substant

that an error did exist that an overcharge was inadvert

made and that this is a

fully valid and supported claim Re

tion is awarded in the amount of 1 484 49 with interest a

rate of six percent per annum if not paid within thirty days

8 STANLEY M LEVY

Administrative LawJud

WASHINGTON D C

November20 1979

17 F MC
235

FEDERAL MARITIME COMMISSION

No 73 25

SEATRAIN LINES CAUFORNIA GENERAL INCREASES IN RATES

IN THE U S PACIFIC COAST HAWAIIAN TRADE

Respondent Seatrain Lines California found to have sustained its burden of

proving its general rate increases to be just and reasonable within the

meaning of section 18 a of the Shipping Act 1916 and sections 3 and 4 of

the Intercoastal Shipping Act 1933

S S Eisen for respondent

George Pai R Dennis Chong and Richard S Sasaki for the

State of Hawaii

Alan F Wohlswtter and Ernest H Land for Household Goods

Forwarders Association ofAmerica Inc

Donald J Brunnerand Joseph B Slunt Hearing Counsel

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGEl

This proceeding was instituted by order of the Commission

served May 4 1973 to determine whether certain rate increases

filed by respondent Seatrain Lines California to become effective

on May 12 1973 are just and reasonable within the meaning of

section 18 a ofthe Shipping Act 1916 and sections 3 and 4 ofthe

Intercoastal Shipping Act 1933 The subject increases generally

in the amount of 12 5 percent were published in respondent s

tariff FMCF No 4 applicable between U S Pacific coast ports

and ports in Hawaii

Protests to the subject increases were filed by six parties who

were named as complainants in the Commission s order namely

the State of Hawaii American Home Products Corporation The

National Small Shipments Traffic Conference Inc Drug and

I

This decision became the decision of the Commission December 20 1973

17 F MC
236 FEDERAL MARITIME COMMISSION

Toilet Preparation Traffic Conference Household Goods Forw

ersAssociation ofAmerica Inc and The Wine Institute 2

Hearing was held in 8an Francisco California on Octobe

and 24 1973 At the conclusion of the hearing the partie

attendance i e respondent and Hearing Counsel requested 

mission to waive the filing of briefs on the grounds that 

respective ultimate positions were not essentially adverse 

that the preparation ofbriefs would be superfluous in view o

clarity and brevity of the record Permission wasgranted to t

parties to waive the filing of briefs on the grounds stated 

Notice served October 30 1973 all parties not in attendance a

hearing were advised of this ruling and given an opportuni

request permission to file briefs No party has so requested

FACTS

1 Respondent 8eatrain Lines California is aCalifornia c

ration established by 8eatrairi Lines Inc to be a separ

operating domestic off shore entity Respondent instituted P

coast Hawaii service with an initial sailing on 8eptember 25 

2 In its initial operations respondent utilized the vessels 

Transoneida and 8 8 Transchamplain which were converted 

originally constructed as tankers for use during World Wa

each with a nominal capacity of 435 27 foot containers The 

vessels were and are time chartered from Hudson Waterw

Inc an affiliated company During the first six months of o

tion respondent offered 22 sailings between Oakland and H

lulu or just short of one round trip sailing per week

3 During the period July 3 1970 until May 1 1971 the a

mentioned vessels were joined by two other vessels the 

Georgia and the 8 8 Louisiana each with a nominal capac

304 container serving not only Hawaii but Guam Ma

Islands After May 1 1971 these two vessels were withdrawn 

the Hawaiian service and in lieu thereof respondent introd

the 8 8 Transontario a converted T with a nominal capac

392 27 foot containers This vessel like the 8 8 Transoneida 

8 8 Transchamplain was time chartered from Hudson W

ways On August 9 1972 the 88 Transontario was removed 

service and in lieu thereofrespondent substituted the Tran

aComplainanta did not attend the hearing orfile brhf8 The State of Hawaii adviaed that it w

participate at the hearing butdid not withdraw its protest to the rate IncreaseB The Househo

Forwarders Association ofAmerica Inc which had protested the increases as they applied to 

household goods and had filed a petition to the Commlaaion for clarification or amendmen

Commission s

order 80 asto make surethat issues pertaining tothose particularrates would be 

withdrawits petition and advised that itwould not actively participate in the proceeding

17 F M C
17 F MC

SEATRAIN LINES CAL GENERAL INCREASE 237

ana aconverted C4vessel originally constructed as aWorld War

II troopship having a nominal capacity of 506 containers also

time chartered from Hudson Waterways Respondent s present

Hawaiian fleet therefore consists oftwo converted T 2 s the S S

Transoneida and the 8S Transchamplain and one converted C4

the Transindiana In the aggregate this fleet has a capacity of

1 286 units a unit consisting of a 27 foot container a 40 foot

container or a 40 foot auto rack With this fleet respondent can

maintain a sailing every five days to Hawaii

4 Respondent s headquarters terminal is located at 1395 Middle

Harbor Road Oakland California The terminal consists of 48

acres and has a parking capacity for 1 100 27 foot containers and

460 40 foot containers Respondent can load and unload two ships

simultaneously at this terminal The terminal also has an office

building housing administrative operations and maintenance per

sonnel The terminal and building are owned by the Port of

Oakland and are leased to respondent under a 20 year renewable

lease

5 Respondent operates a terminal at Sand Island Access Road

Honolulu Hawaii which consists of41 acres with storage space for

900 containers and chassis A permanent office building is on the

premises housing administrative operations and maintenance

personnel The terminal building was constructed at a cost of

approximately 600 000 by Seatrain Terminals of California Inc

one ofrespondent s affiliates whose sole function is tooperate and

maintain terminals for respondent

nK Respondent s Hawaiian operations consist basically of two

types ofservice The first and by far the larger category consists of

joint services in conjunction with rail or motor carriers establish

ing routes and rates applicable between California Oregon and

Washington on the one hand and Hawaii on the other This

service is subject to regulation by the Interstate Commerce Com

mission IC C Respondent also maintains joint railwater routes

and publishes in connection therewith joint rates applicable be

tween large areas ofthe United States mainland and Hawaii The

remainder of respondent s Hawaiian service consists basically of

port to port transportation between Oakland and Honolulu subject

tothe jurisdiction ofthe Federal MaritimeCommission This latter

category includes the transportation of agricultural products ex

empt from IC C regulation by section 203 b 6 of the Interstate

Commerce Act For the calendar year 1972 the IC C regulated

portion of the Hawaiian service comprised 74 65 percent of total

Hawaiian revenue as compared to 6 68 percent for that portion
238 FEDERAL MARITIME COMMISSION

regulated by this Commission The remaining 18 67 percen

total revenue consisted of military and mail cargoes

7 Respondent has generally experienced rather high utiliza

of its vessel capacity in the subject trade Since the Oak

Honolulu trade is predominantly westbound the ratio being t

loaded containers westbound to each loaded container eastbo

the westbound ratherthan eastbound data are significant Fo

years 1970 1971 and 1972 respondent experienced an ave

vessel utilization of88 93 and 89 percent respectively based 

the ratio of container spaces used to total available cont

positions per voyage

3 This high utilization continued during 

even after the substitution of the S S T1ansindiana for the 

Transontario in August 1972 which had the effect of increa

fleet capacity by at least 114 27 foot container slots Ave

utilization seems to have declined somewhat for the period J

ary through June 1973 falling to an overall ratio of 81 per

although the voyages ofthe S S Transindiana continued to e

utilization at the upper 80 and 90 percent levels except fo

voyage These data however understate utilization to som

tent since on many voyages non containerizable cargoes move

deck or in garage space and for reasons relating to safety fa

and vessel stability 5 percent of nominal capacity is not a

usable In 1972 furthermore 28 percent of the total sailings 

loaded to 95 percent or more of capacity 52 percent were load

92 percent or more of capacity and 61 Dercent to 90 perce

more

8 Since 1961 there had been no general rate increases i

Pacific coastlHawaii trade until March 6 1971 when Ma

Navigation Company published a general revenue increase 

percent followed on June 20 1971 by an additional 31 2 pe

Respondent likewise increased its rates first by 9 percent on 

15 1971 and then by 3112 percent on July 9 1971 These 

increases were investigated both by the IC C and this Com

sion in accordance with their respective spheres of jurisdi

Matson s increased rates were found just and reasonable by 

Commission in Matson Navigation Company General Increa

Rates in the US PacificlHawaiian Trade 13 SRR 542 

Respondent s rate increases subject to IC C jurisdiction 

found just and reasonable by Administrative Law Judge G

a

Thell efigurel are based upon actual calculations derived from he data shown in E hlbit 

1971 utilization factor shown on pap 4 of Exhibit 1 B i e

89 percent should actually he 98 

based upon 19247 units dividedby 20717 total container pOlitions Theee fl re are expressed in 

27 foQt equivalent sloh although the units carried consl ted at 27 and 4ofoot containers as w

footauto racks

17 F MC
SEATRAIN LINES CALGENERAL INCREASE 239

A Dahan in an initial decision served May 9 1973 No exceptions

were filed 4In view of the present investigation into the lawful

ness of respondent s rates the Federal Maritime Commission s

investigation of respondent s 1971 rate increases Docket No 71

59 Seatrain Lines California General Increases in Rates in the

U S Pacific CoastHawaiian Trade was discontinued on June 7

1973

9 The current 12 1

2 percent general rate increases became

effective on May 12 1973 Excepted from the general increases are

Military Sealift Command cargo mail and lumber and paper

products from Portland Oregon and Seattle Washington The

military and mail traffic are handled under contract not tariff

rates The holddown on lumber and paper products is due to

competition from barge lines and from Matson Navigation Com

pany which published a reduction on those rates now under

investigation and suspension by the Commission 5

Effective Sep

tember 7 1973 respondent removed the increase applicable to

eastbound pineapple again in order to maintain parity with

Matsoin which had removed its proposed rate increase on this

commodity

10 The Hawaiian tradeis extremely competitive Three carriers

now compete for West coast Hawaii traffic namely respondent

Matson Navigation Company and United States Lines 6

All three

carriers offer comparable physical transportation services with the

result that the Hawaiian traffic is extremely susceptible to rate

fluctuations Since traffic will gravitate to the carrier offering a

rate advantage no one carrier can in general afford to maintain

rates at a level above those of its competitors For respondent to

retain its fair share of the Hawaiian traffic therefore it must

publish and maintain competitive rates irrespective of revenue

consequences In effect no carrier serving the trade can unilater

ally effectuate rate increases unless all three are permitted to do

so by the regulatory authorities concerned

11 Because of the rate holddowns described above respondent

estimates that the 121 2 percent rate increases will actually pro

duce an increase of only 8 97 percent against total revenue for the

The ICC is also investigating respondent s

present rate increases applicable to those services

subject to that Commission s jurisdiction Increased Rates and Charges Seatrain Lines Clujfamia

Docket No 35834 Sub No 1

Docket No 73 22 Matson Navigation Co Proposed Changes in Rates Between the US Pacific Coast

Hawaii order served April 20 1973 Also includedin this case is an investigation into the lawfulnessof

Matson s 12 5 percent general rateincreases

6

Respondent estimates that in terms of revenue Matson carries roughly 65 present of Hawaiian

traffic respondent 25 percent and United States Lines justunder 10 percent the remainder handled by

barge lines

17 F MC
240 FEDERAL MARITIME COMMISSION

period May 1 1973 through April 30 1974 This amounts t

additional 2 109 271 in revenue for all of respondent s Hawa

services and compares with an estimated loss of 3 292 399 fo

same time period which would result without the subjec

crease

7 For thatportion ofits services regulated by this Com

sion respondent estimates additional revenue of 227 199 fo

same time period as compared with a projected loss of 19

which would result without the subject increases

12 Spiraling costs have already dissipated the benefits o

spondent s 1971 rate increases and promise tohave the same e

on the subject increases as well Three items alone which re

sent better than 50 percent ofrespondent s operating costs 

increased substantially since 1971 The basic wage rate for IL

labor has increased from 6 321 per hour in 1971 to 9 080 in 

charter hire from 5 700 to 7 807 per day and pickup and del

costs from 13 50 to 15 50 per load The effect of these t

increases on respondent s total Hawaiian operations has bee

aggregate cost increase of 4 762 569 for the year 1973 as comp

with an anticipated increase in revenue of only 2 109 271 

calculation furthermore does not even consider increases in 

cost items such as ship pilotage container and auto parts 

minimum office salaries which increased 25 1 19 and 17 6 pe

respectively during the period 1971 to 1973 In addition Oa

terminal rental increased 4 9 percent

13 Uncontroverted evidence of record demonstrates tha

spondent s operations in the Hawaiian trade both intheir en

and for thatportion subject toregulation by the Federal Mar

Commission have never been profitable and will not be prof

in the immediate future even with the additional revenue g

ated by the subject rate increases The following tables illus

the financial results of respondent s operations from their i

tion through the projected period May 1 1973 through Ap

1974

Profit orloss in the Hawaiian trade aU Hawaiian services

September 1969 Dec 31 1969 uuuu uuu

uuuuu

1970

1971

1972 including related companies uu

u uu uu

Projected 1973 74 including rate increases including related

companies

1

It also compare with an actual 1972 1088 of 4 813 163 orall of the respondent s Hawaiian 

8

Seatrain Terminals of California Inc Ocean Equipment Corp and Hudson Waterways C

17 F M C
SEATRAIN LINES CAL GENERAL INCREASE

Profit or loss in the Hawaiian trade FMC regulated portion

September 1969 Dec 31 1969 h h

h

1970

1971

1972

Projected 1973 74 including rate increases h h

241

3 255

70 793

33 612

319 860

9

78 440

14 Statements filed by respondent in accordance with the

requirements of the Commission s General Order 11 46 CFR 512

for the periods of time shown indicate comparable results as

follows 10

Profit orloss in the Hawaiian trade FMC regulated portion

July I 1969June 30 1970 h h

n h h

July I 1970June 30 1971 hh nh h

h h

July I 1971June 30 1972 nh hn h h h

Calendar year 1972 h

h h

h hU

Projected 1973 74 including rate increases h

hn

103 371

181 562

463 554

270 427

2 673

DISCUSSION AND CONCLUSIONS

The ultimate issue is whether the subject rate increases are just

and reasonable withinthe meaning ofsection 18 a ofthe Shipping

Act 1916 and sections 3 and 4 of the Intercoastal Shipping Act

1933 Respondent is required by law to sustain the burden of

proving that its prosposed increases comport with the standards

enunciated in the cited statutes The Comvwnwealth of Puerto

Rico v Federal Maritime Commission 468 F 2d 872 D C Cir

1972

9

Originally respondent had projected asmall profit of 32 793 forthe period May I 1973 throughApril

30 1974 The original projection howevel did not account for two additional cost increases relating to

fuel and wages which when allocated to the FMC regulated service amountedto 96 659 It this added

cost isdeducted from net income before related companies shown on Exhibit 3 D 2 and income taxes 48

percent plus losses ofrelated companies are deducted respondeno would suffer anet loss of 78 440

10 Under General Order 11 procuedures interest is not allowed as an expense in calculating netincome

In the precedingtable interest was included to be consistent with IC C procedures A slight discrepancy

may therefore appear between the two tables with corresponding periods of time are shown Thedata in

the precedingtables relating to the years 1969 1970 and 1971 are drawn from exhibits which employ a

revenueallocation with regard to administrative and general expensesand to allocation among IC C

F M C and non regulated services Such amethod is not normal General Order 11 proceudre 46 CFR

512 7 c4 General Order 11 does however permit the use of alternative methods if the carrier

furnishes explanations 46 CFR 512 3 t

There is no evidence that the data furnished in conformance

with the reporting requirements of General Order 11 and shown in the final table depart from the

methodologies prescribed in that general order

II Originally respondent has projected anet incomeof 47 589 forthe periodMay 1 1973 through April

30 1974 Thiswould haverepresented areturn on ratebase of I 638 914 in the amount of2 9 percent If

additional cost increases relating to fuel and wages which had not been included in the original

projection are included however the projected net income becomes anet loss in the amount of 2 673

using the same method employed in footnote No 9 above transcript page 165

17 F M C
242 FEDERAL MARITIME COMMISSION

Uncontroverted evidence of record demonstrates convinc

that the subject rate increases are lawful Respondent s o

tions in the Hawaiian trade both in their totality and with re

tothat portion regulated by this Commission have neverturn

profit and as far as can be seen from this record will not do 

the reasonably foreseeable future Evidence of record indic

that respondent s total Hawaiian operation has produced op

ing losses from the first year of service 1969 through 1972 

will continue todo so for the period May 1 1973 through Apr

1974 when total losses including those of related compa

serving the trade will amount to an estimated 1 190 015 

with the rate increases That portion of respondent s ser

subject to regulation by this Commission has similarly prod

losses continuously over a corresponding period of time and 

continue to do so for the period May 1 1973 through April 30 

in an amount estimated by different accounting methods t

either 78 440 or 2 673 evenwth the rate increases

Spiraling costs have long since consumed the additional rev

generated by respondent s previous rate increases filed in 

and promise to have the same effect on the subject increas

well Three expense items alone comprising better than 50 pe

of respondent s operating costs i e ILWU wages charter 

and pickup and delivery costs have increased costs for the 

1973 by 4762 569 although anticipated additional annual rev

generated by the subject rate increases is estimated to be 

2 109 271 This calculation furthermore does not even con

additional cost increases relating to ship pilotage containe

auto parts and minimum office salaries

The record is utterly void of any evidence that responden

demonstrated grave mismanagement gross inefficiencies se

inadequacies of service or indifference tothe public need M

Navigation Go GeneralIncrease in Rates in the U S Pa

Hawaiian Trade 13 SRR 542 545 1973 D G TransitSys I

Washington Met A Transit Gam n 466 F 2d 394 D D Cir 

cert denied 94 S Ct 688 Nor is there any indication whats

that respondent s rate increases are necessitated by excess v

capacity On the contrary evidence of record demonstrates 

respondent has enjoyed rather high vessel utilization while 

operated in the Hawaiian trade experiencing load factors av

ing around 90 percent per voyage for the period 1969 through 

and 81 percent for the first six months of 1973 without taking 

account additional cargoes which moved on deck or in g

space

17 F M C
SEATRAIN LINES CALGENERAL INCREASE 243

ULTIMATE CONCLUSION

Respondent has sustained its burden ofproving that its general

rate increases in the amount of 12 1

2 percent are just and reasona

ble within the meaning ofsection 18 a ofthe Shipping Act 1916

and sections 3 and 4 of the Intercoastal Shipping Act 1933

S NORMAN D KLINE

Administrative Law Judge

WASHINGTON D C

November 28 1973

17 F MC
FEDERAL MARITIME COMMISSION

No 7359

MERCK SHARP DOHME INTERNATIONAL A DIVISION 

MERCK COMPANY INC

v

ATLANTIC LNES

I

I

i

Complainant found not to have sustained its burden of provingwith rea

certainty and definiteness that a commodity described on responde

of lading as Dextrose Anhydrous USP Glucose was in factdry co

which should have been rated as such instead of Cargo N O S

Reparation denied

Manuel Blasco for complainant

Edwin Longcope for respondent

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Complainant Merck Sharp Dohme International is a d

of Merck Company Inc whose principal business is the 

facture and distribution of httnicals and chemical produc

spondent Atlantic tines ilII tommon carrier by water enga

the transportation of cargo between U S Atlantic coast po

ports in Bermuda and as such is subject to the provisions 

Shipping Act 1916 the Act

By complaint served September 26 1973 complainant 

reparation in the sum of 1 170 70 from respondent claimin

respondent overcharged complainant on a shipment of a co

ity described on respondent s bill of lading as Dextrose 

drous USP Glucose in violation of section 18 b 3 of th

Complainant alleges that the overcharge resulted because 

fact that respondent incorrectly classified the shipment as 

N O S rather than Corn Sugar Dry

In answer to the complaint respondent contends that 

1

Thisdecision became the decision of the Commi8sion December 28 1973

244

17 F M C
MERCK SHARP DOH ME v ATLANTIC LINES 245

cargo in question was misdescribed that was the fault of com

plainant that respondent s tariff did not publish a specific rate for

a commodity such as that described in the bill of lading and that

complainant has not shown that the commodity in fact was Corn

Sugar not liquid which would entitle it to the assessment ofthe

rate published in respondent s tariff under that designation

In reply to respondent complainant contends that evidence of

record shows that the commodity actually shipped was dry corn

sugar and that respondent made an offer ofsettlement which fact

according to complainant demonstrates that the claim is valid

Pursuant to request of complainant to which respondent con

sents this proceeding was conducted in accordance with the

Commission s Rule 11 shortened procedure

The shipment in question consisted of390 drums of a chemical

described on respondent s bill of lading as Dextrose Anhydrous

USP Glucose measuring 2 200 cft and weighing 82 290 lbs The

shipment moved from New York N Y to Hamilton Bermuda on

respondent s bill of lading dated September 29 1971 Respondent

classified the shipment as Cargo N O S for which the applicable

rate published in respondent s tariff was 120 per cft 2 Complain

ant contends that the shipment should have been assessed the

rate applicable to Sugar Corn not liquid which was 180 per

100 lbs as per respondent s tariff 3

The resulting overcharge

according to complainant amounts to 1 170 70

DISCUSSION AND CONCLUSIONS

In cases involving alleged overcharges arising under section

18 b 3 of the Act the Commission has determined that the

controlling test is what the complainant can prove based upon all

the evidence as towhat wasactually shipped Informal Docket No

256 1 Union Carbide Inter America v Venezuelan Line Order on

Review of Initial Decision November 12 1973 Western Publishing

Co Inc v Hapag Lloyd A G 13 SRR 16 1973 Where the

shipment has left the custody of the carrier however and the

carrier is thereby prevented from personally verifying the com

plainant s contentions the Commission has held that the com

plainant has a heavy burden ofproof and must set forth sufficient

facts to indicate with reasonable certainty and definiteness the

validity of the claim Western Publishing Co inc v Hapag Lloyd

A G cited above Johnson Johnson International v Venezuelan

Lines 13 SRR 536 1973 United States v Farrell Lines Inc 13

2Atlantic Lines Ltd Freight Tariff No 13 FMC No 11 page 11

3

Ibid 1st reviRed page 24

17 F MC
246 FEDERAL MARITIME COMMISSION

SRR 199 202 1973 Colgate Palrrwlive Peet Co v United Fr

Co 11 SRR 979 981 1970

In support of its contention that the subject commodity was 

fact dry corn sugar complainant cites the bill oflading descriptio

the relevant invoice achemical dictionary definition aSchedule 

Classification a verified statement authorized by itself and 

letter offering tosettle None ofthis evidence however establish

the validity of its claim

Both the bill oflading and invoice describe the subject comm

ity as Dextrose Anhydrous USP Glucose Such a descript

does not establish that the subject commodity was in fact c

sugar Further inquiry as to the nature of Dextrose and G

cose is obviously necessary

The chemical dictionary definition for Dextrose furnished 

complainant is not determinative The dictionary defines D

trose to include grape sugar as well as corn sugar a

furthermore states that Dextrose is the sugar found in 

blood of animals and occurring widely in plants The Schedule 

number by which the subject commodity was classified pursua

to Bureau of the Customs regulations is similarly not conclus

The particular classification number in question 0619010 ref

to Dextrose including corn sugar except pharmaceuticaL

Underscoring added for emphasis The classification goes on 

include among other things grape sugar mild sugar a

sorghum grain sugar To further confuse the issue the n

Schedule B number 0619020 applies to Glucose including c

sirup except pharmaceutical and dextrose and specifies 

variety ofsubstances under the general heading of Glucose s

as corn sirup solids potato sirup Starch sugar and wh

sirup

None of the foregoing items establishes with reasonable 

tainty and definiteness that Dextrose Anhydrous USP Glucos

is in fact dry corn sugar It is at least as reasonable to concl

from the above evidence that the subject commodity was in f

grape sugar for which respondent s tariff provided no spec

commodity rate 4

In its reply to respondent complainant cites two additio

items which it contends establishes the validity of its claim 

first is a notarized statement in which complainant certifies t

Other authortieis appear to support the same conclusion Thus forexample Dextrose Is defin

Webster s Third New International Dictionary as follows dextrorotatory glucose obtained U8U b

hydrolysis of starch 8S sweet crystals of the anhydrous compound orof the monohydrate and 

chiefly in foodsand beverages called also cornsugar grape sugar added for emphasis

Glucose dextrose orgrape Ilugar added foremphasis

17 F MC
S NORMAN D KLINE

Administrative Law Judge

MERCK SHARP DOHME v ATLANTIC LINES 247

the subject commodity was corn sugar The second is the fact that

at one time respondent made an offer of settlement Neither fact

however constitutes probative evidence establishing the validity

of the subject claim The notarized statement is merely a self

serving reiteration of allegations by complainant s rate analyst

who filed the complaint and verified the same information therein

The offer ofsettlement incorporated in aletter ofOctober 17 1973

merely indicates that respondent desired to avoid further litiga

tion not that respondent admitted to a violation oflaw 5

The law

of course encourages settlements and every presumption is in

dulged in which favors their fairness correctness and validity

generally General Discount Corp v Schram 47 F Supp 845 D

Ct E D Mich 1942 Florida Trailer Equipment Company v

Deal 284 F 2d 567 571 5th Cir 1960 Parties would hardly be

encouraged to enterinto settlements if their efforts to settle were

to be used against them subsequently as admissions of liability 6

Accordingly the law considers the settlement ofa claim not as an

admission that the claim is valid but merely as an admission that

there is a dispute and that an amount is paid to be rid of the

controversy 15A C J S Compromise Settlement s 22

ULTIMATE CONCLUSION

The Commission has determined that where the goods have left

the custody of the carrier a complainant alleging amisclassifica

tion and an overcharge has a heavy burden ofproof and must set

forth sufficient facts to indicate with reasonable certainty and

definiteness the validity of the claim Complainant having fur

nished evidence which is uncertain and indefinite or otherwise

lacking in probative value has failed to sustain this burden

Accordingly the claim for reparation is denied and the complaint

is dismissed

WASHINGTON D C

December 3 1973

5

In pertinent part the letter rom respondent s agent states as follows We havehowever discussed

this matter in detailand in view of the time that has already been consumed and in the effort to bring

this matter to aswift and satisfactory conclusion are ready to offer the complainant without prejudice to

our case settlement As you can see from the enclosed answer to the complainant chrage we are fully

prepared to further eontest this matter before the Commission but forthe sake of time and good order

are prepared to make the foregoing settlement

6 Under the Commission s Rules offers of settlement are considered withoutprejudice to the rights of

the parties and are not admissible in evidence if any party objects Rule 6a46 CFR 502 91
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 459

A B BARONE FORWARDING FOR INTERLAKE INC

v

DELTA STEAMSHIP LINES INC

NOTICE OF ADOPTION OF INITIAL DECISION AND ORD

PERMITTING REFUND OF CHARGES

March 9 1974

No exceptions having been taken to the initial decision in 

proceeding and the Commission having determined not to rev

same notice is hereby given that the initial decision became 

decision of the Commission on January 9 1974

Itis ordered That applicant is authorized to refund 1 030 8

the charges previously assessed Interlake Inc

Itis further ordered That applicant shall publish promptly 

appropriate tariff the following notice

Notice is hereby given as required by the decision in Special Docket 459 

effective June 12 1973 for purposes of refund or waiver of freight charge

shipments which may have been shipped during the period from June 12 

through July 23 1973 the rate on Wire Plan and Wire Seals is 82W su

to all applicable rules regulations terms and conditions of said rate and 

tariff

It is further ordered That refund of the charges will be e

tuated within 30 days ofservice of this notice and applicant s

within five days thereafter notify the Commission ofthe date 

mannerofeffectuating the waiver

By the Commission

SEAL S FRANCIS C HURNEY

Secre

248

17 F MC
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET No 459

A B BARONE FORWARDING FOR INTERLAKE INC

v

DELTA STEAMSHIP LINES INC

Permission to refund a portion of freight charges granted

INITIAL DECISION OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

On November 27 1973 respondent Delta Steamship Lines Inc a

common carrier by water in the foreign commerce of the United

States withinthe meaning ofsection 1 ofthe Shipping Act 1916 as

amended the Act 46 U S C 801 filed an application pursuant to

section 18b 3 of the Act 46 U S C 817 b 3 for permission to

refund aportion ofthe freight charges collected in connection with

the shipment carried for the shipper Interlake Inc on respon

dent s vessel S S Del Rio as described below

The shipment in question consisted of38 packages ofgalvanized

steel wire and metal seals and one wire working machine In the

aggregate the shipment weighed 47 855 lbs and measured 382 47

cubic feet The shipment wastransported by respondent from New

Orelans Louisiana to Santo Tomas de Castilla Guatemala under a

bill oflading dated June 12 1973

When the shipment wasbooked on or about May 8 1973 respon

dent s tariff published no specific rate for galvanized steel wire or

wire seals Under such circumstances the applicable rate was that

published for Cargo N O S at 75 per 2 000 lb or 40 cubic feet 2

Respondent agreed however to carry these commodities at a rate

of 32 per 2 000 lbs and intended tofile an appropriate amendment

to its tariff prior to the sailing ofthe vessel providing for specific

commodity rates in that amount Through inadvertence however

respondent neglected todo so with the result thatthe shipment was

billed and the freight collected at the 75 rate

Since the shipment and prior to the submission ofthis applica

I

This decision became the decision of the Commission March 9 1974

2 Delta Line Tariff F M C No 6 3rd rev page 52

17 F MC

249
250 FEDERAL MARITIME COMMISSION

tion respondent did file an amendment to its tariff so as tospec

rate of 32 per 2 000 lbs applicable to Wire Plain and W

Seals 3

Respondent now seeks permission to refund a portion of 

freight collected on that portion of the shipment which compr

galvanized steel wire and metal seals so that the original ag

ment to carry those commodities at the rate of 32 per 2 000 

may be consummated The amount of refund necessary to 

complish this objective is 1 030 89 4

No shipments other than complainant s of the same or sim

commodities moved via respondent during the same period oft

at the rate applicable at the time of the shipment involved in 

proceeding

Section 18 b 3 ofthe Act as amended by Public Law 9029

authorizes the Commission for good cause shown to perm

common carrier by water in the foreign commerce of the Uni

States to refund a portion of freight charges collected from 

shipper where it appears that there is an error in a tariff 

clerical or administrative nature oran errordue toinadvertenc

failing to file a new tariff and that such refund will not resu

discrimination among shippers The facts demonstrate an inad

tent failure by the carrier to file anew rate prior to shipment S

rate was however filed prior to this application which was 

within 180 days of the shipment as required by the statute 

refund furthermore will not result in discrimination among s

pers

Good cause appearing and respondent having complied with 

relevant provisions of section 18bX3 of the Act permissio

refund 1 030 89 of the freight charges collected in connection w

the subject shipment is granted Respondent shall publish in 

tariffthe notice required by the statute The refund of the cha

herein authorized shall be effectuatedwithin 30 days ofthe ser

ofthe notice and within 5 days thereafter respondent shall no

the Commission ofthe date and mannerofeffectuating the refu

31bid 5th rev page53

of This represent the difference between thefreight collected on theseals and wire at the 75 W

1 788 93 and the freight on the e commodlites calculated at the 82 W rate 757 44 In its O

application respondent had mistakenly calculated the latter freight to be 763 03 and the refund 

1 025 81 buthas since advised that these flure are in errorand has requested that it sapplica

amended accordinly

NORMAN D KLINE

Administrative Law Judge

WASHINGTON D C

December 14 1973

17 F MC
FEDERAL MARITIME COMMISSION

DOCKET No 7132

AGREEMENTS NoS DC38 AND DC38 1 ASSOCIATION PUERTO

RICO TRADES1968

Agreement No DC88 granted continued approval for one year subject to the

parties adoption of certain procedures and submission of reports

John Mason and Paul J McElligott for respondent Association

Puerto Rico Trades

Edward J Sheppard IV Edward Schmeltzer and Mario Escu

dero for petitioner Commonwealth of Puerto Rico and for inter

venor Star Kist Foods Inc

Amadeo ID Francis for petitioner Puerto Rico Manufacturers

Association

J J Teale for intervenor Import and Export Council ofPuerto

Rico

Rafael Rivera Rodriguez for intervenor The Chamber of Com

merce of Puerto Rico

Donald J Brunner Margot Mazeau and Charles L Haslup Ill

Hearing Counsel

January 22 1974

REPORT

By THE COMMISSION Helen Delich Bentley Chairman James V

Day Vice Chairman Ashton C Barrett George H Hearn and

Clarence Morse Commissioners

The Commission instituted this proceeding pursuant to section

15 ofthe Shipping Act 1916 todetermine whether Agreement No

DC38 between GulfPuerto Rico Lines U S A GPRL Sea Land

Service Inc Sea Land Seatrain Lines Inc Seatrain and T

ransamerican Trailer Transport Inc TTT should be perma

nently approved disapproved or modified

Agreement No DC38 creates the Puerto Rico Ocean Service

17 F M C 251
252 FEDERAL MARITIME COMMISSION

Association PROSA and provides generally for the establishme

of selfpolicing procedures and uniform tariff rules regulatio

provisions and practices except ocean freight rates betwe

carriers serving the trade between Atlantic and Gulf ports a

ports in Puerto Rico The agreement wasapproved by the Comm

sion conditionally for a period of24 months on April 2 1969 In 

conditional order of approval the Commission noted that it w

aware that certain problems including but not limited to dem

rage detention of trailers credit and claims exist ed wh

require d prompt attention and directed the parties to notify t

Commission at least four months prior tothe agreement s ter

nation should they desire to extend the agreement beyond the 

month period submit a full report setting forth actions tak

under the agreement and indicate the positive transportat

needs and the public interest benefits which have resulted fro

operations under the agreement

Thereafter in compliance with the Commission s order ofcon

tional approval PROSA submitted a Report ofActivities de

nated Agreement No DC38 1 wherein it set forth the Assoc

tion s activities and accomplishments under conditionally 

proved Agreement No DC38 and requested its permanent 

proval Following the filing of comments and protests by 

Commonwealth ofPuerto Rico and thePuerto Rico Manufactur

Association against permanent approval of the Agreement 

Commission instituted this proceeding

The Commission s Order of Investigation directed that 

proceeding address itself towhether 1 the parties to Agreem

No DC38 have fulfilled or made reasonable efforts to fulfill 

terms ofthe agreement 2 the actions taken by PROSA satisf

transportation need and 3 Agreement No DC38 is detrimen

to the commerce of the United States contrary to the pu

intrest or otherwise violative of the Shipping Act 1916 Under 

public interest criteria the Commission advised that it w

particularly intersted in determining whether an agreement 

tween carriers in the domestic commerce ofthe United States 

in fact needed and whether there are problems in Puerto R

with respect to demurrage practices congestion terminal charg

and otherrelated matters which can be best solved by the carri

through permanent approval ofAgreement No DC38

The Commonwealth of Puerto Rico Commonwealth and 

Puerto Rico Manufacturers Association PRMA were designa

as petitioners in said Order Interventions were filed by 

granted to Star Kist Foods Inc Star Kist Import Exp

17 F M C
PUERTO RICO TRADES1968

Council of Puerto Rico lEG and the Chamber of Commerce of

Puerto Rico Chamber

Following extensive hearings and the filing of briefs by all

parties Administrative Law Judge Herbert K Greer issued an

Initial Decision in which he ultimately concluded that Agreement

No DC38 should be permanently approved Exceptions to the

Initial Decision have been filed by the Commonwealth the Cham

ber IEC PRMA Star Kist and Hearing Counsel to which PROSA

has filed aReply

THE AGREEMENT

Agreement No DC38 whose stated purpose is the promotion of

stability in the Puerto Rican trade encompasses

the establishment of all Tariff Rules Regulations and Provisions or

Terminal or Accessorial charges except ocean freight rates and the establish

ment of self policing procedures in connection with the common carriage of

property by water by the parties hereto between U S Atlantic and Gulf ports

and ports in Puerto Rico 1

Terminal and accessorial charges are defined as those

related to or connected with the receiving handling pick up and delivery

and storing of property within the areas covered by this agreement but shall

exclude ocean freight rates and charges which are directly related to ocean

freght rates such as surcharges heavy lift and long length charges

Specifically excluded from the Agreement s

rulemaking author

ity were

provisions for controlling regulating preventing or destroying competition

either between the parties or as between the parties and carriers not parties

allotting of ports or restricting or otherwise limiting the number and volume or

character of sailings between ports or the limiting or regulating in any way the

volume or character of freightto be carried

Under the Agreement the business affairs ofPROSA are vested

in the Executive Officers Committee which consists of one officer

I

The tariffrules and regulations indude

1 Rules and practiees relating to terminal services privilegel l

orfacilities granted orallowed by the

carriers

2 Rules and practices relating to the issuance and the substance of bills of lading the manner of

presenting marking pa cking delivering receiving handlingorstoring of property within the meaning

of section 18a of the Shippinl CAct 1916

3 Rules and practices relating to the extension of credit the payment of claims for cargo loss or

damage free timeand demurrage on cargoes and containers trailers

4 Rules and practices designed to avoid preferences orprejudices on other matters prohibited by and

within the meaning of section 16 First Shipping Act 1916

2 In this regard it must also be remembered that the PROSA members presently maintain anear

monopoly on the containerized trade between Puerto Rico and continental United Rtates Being a

protected domestic trade there is no foreign flag competition and the only other U S carriers in the

trade primarily barge operators have been described as marginal carriers

17 F M C

253
254 FEDERAL MARITIME COMMISSION

from each member line The Traffic Committee considers al

matters subject to the Agreement involving tariff rules regula

tions and charges and submits its proposals to the Executive

Officers Committee which takes into consideration the views o

individual members prior to arriving at a decision

Meetings of PROSA members are to be held two or more times

each year and meetings at which the public is invited to partici

pate are to be held at least four times each year Minutes of a

PROSA meetings are to be kept and copies mailed to the Secre

tary Federal Maritime Commission and the Executive Directo

Puerto Rico Port Authority within fifteen days of such meetings

Provision is made for the establishment and maintenance of 

PROSA office and the appointment of chairman to be in charge

The chairman is to adopt and maintain procedures for promptl

and fairly hearing shippers requests and complaints which relate

to rules regulations and provisions or terminal or accessoria

charges established under the agreement Copies of tariffs are t

be maintained for the convenience ofshippers

The parties may under the Agreement appoint ajoint agent t

collect terminal and accessorial charges Self policing rules ar

established Membership is available to any qualified carrie

regularly engaged in the trade Any party to the agreement ca

withdraw upon thirty days written notice

THE INITIAL DECISION

In approving Agreement No Dc 38 the Administrative La

Judge found that the Agreement 1 did not invade the prohib

tions of the antitrust laws more than is necessary to serve th

purposes ofthe Shipping Act 1916 and 2 wasnot contrary toth

public interest or otherwise in violation of the Act Judge Gree

also concluded that actions taken by PROSA under the subje

Agreement have served an will contim e to serve a transport

tion need and that while the parties to the Agreement have n

entirely fulfilled the terms thereof they have made reasonab

efforts to do so

All the parties excepting to the Initial Decision save Hearin

Counsel take the position that the Initial Decision should b

reversed and that Agreement No DCl8 should be disapprove

As an alternative to total disapproval however the Commo

wealth and PRMA would accept approval with certain restrictiv

conditions These conditions include alimitation ofthe scope of th
PUERTO RICO TRADES 1968 255

Agreement to include only demurrage activities a three year

limitation on approval open PROSA meetings and the require

ment that PROSA adopt certain demurrage rules and regulations

Hearing Counsel are ofthe opinion that PROSAs actions under

the Agreement during the twoyeartrial period do not warrant its

permanent approval They accordingly except to Judge Greer s

decision in thisproceeding as well as tothe ultimate conclusions

on which this decision was based and to his failure to impose

certain recommended conditions Hearing Counsel urge the Com

mission on exception to temporarily approve Agreement No DC

38 for a period ofthree years subject to certain conditions

DISCUSSION AND CONCLUSIONS

Agreement No DC38 is by PROSA s own admission an anti

competitive type of arrangement subject to section 15 of the

Shipping Act 1916 While the Agreement excludes ocean freight

rates it permits the member lines jointly to establish rates and

charges in every other area In fact as one party to this proceed

ing has pointed out Agreement No DC38 presently authorizes

the parties thereto to agree upon and fix uniform rates and

regulations in two ofthe three areas involved in the movement of

cargo from a point ofpickup in the continental United States to a

point of delivery in Puerto Rico and vice versa Thus while the

PROSA members may well remain competitive in the service

aspects of the trade as they have indicated in all other areas

Agreement No DCg8 clearly represents an all but absolute

elimination of competition as between the member lines 2 And

those other areas are as one of PROSA s own witnesses has

testified a significant consideration in the total picture of ocean

transportation

Agreement No DC38 in allowing the parties to act in concert

in establishing rules regulations and charges in every transporta

tion area except ocean freight rates which alone remain suscepti

ble tocompetitive pressures is clearly an anticompetitive arrange

ment subject to section 15 ofthe Act which ifpermitted at all by

this Commission must be scrutinized to make sure that the

conduct thus legalized does not invade the prohibitions of the

antitrust laws any more than is necessary to serve the policies of

the regulatory statute Isbrandtsen Co Inc v United States 211

F 2d 51 57 D C Cir 1954 Thus the law requires that a balance

be struck between the antitrust policies ofthis nation as reflected

2In this regard it must also be remembered that the PRaSA members presently maintain a near

monopoly on the containerized trade between Puerto Rico and continental United States Being apro

tected domestic trade there is no foreign flag competition and the only other U S carriers in the trade

primarily barge operators have been described as marginal carriers

17 F MC
256 FEDERAL MARITIME COMMISSION

in its antitrust laws and the regulatory considerations whic

underlie the Shipping Act 1916

The specific test for assessing whether an anticompetitive agre

ment may be approved was established by the Commission 

Investigation of Passenger Travel Agents 10 F M C 27 1966 an

approved by the U S Supreme Court in FMC v Svenska Amerik

Linien 390 U S 238 1968 and provides that agreements whic

violate the antitrust laws may be approved only if the proponent

can show that the agreements are required by aserious transpo

tation need necessary to secure hnportant public benefits or 

furtherance of avalid regulatory purpose of the Shipping Act 

so doing consideration must of necessity be given to the circum

stances and conditions existing in the particular trade involve

Mediterranean Pools Investigation 9 F MC 264 290 1966

When considering whether the circumstances and conditions 

thePuerto Rican trade justify the approval ofthe Agreement no

before us it must be remembered that the domestic trades a

unique as regards the need for ratemaking conferences 3 The lac

of foreign flag competition in the domestic trades coupled wi

the Commission s more extensive rate and other regulatory a

thority in those trades generally precludes the existence ofcond

tions and factors which normally give rise to the need for confe

ences and other ratemaking groups

This is not to suggest as some parties tothis proceeding believ

that the Commission has an established policy of excludin

ratemaking agreements in the domestic trades or even looks wi

disfavor upon such agreements In fact the Commission has 

occasion sanctioned rate making agreements in the domes

trades Nevertheless because the conditions in the domest

trades are generally what we might call controlled as aresult 

the Commission s broad regulatory influence the proponent of 

rate fixing agreement in those trades must clearly demonstrate 

greater need or justification for such concerted activity tha

would normally be the case were the agreement in the forei

trades

The record in this proceeding makes it abundantly clear th

demurrage practices congestion and related matters have lo

been a nagging problem in the Puerto Rico trade In this rega

there is considerable evidence that before the advent ofPROS

there were serious abuses in the Puerto Rico trade regarding t

3 While Agreement No DC 8 does not cover ocean freight rates it does permit the joint fixin

accessorial charges in connection with terminal operations pickup and delivery 8nl generally 

charges other than freight rates To the extent at least Agreement No DCl8 may clearly be class

8S a ratemaking agreement

17 F MC
PUERTO RICO TRADES1968 257

collection of demurrage As Judge Greer found III his Initial

Decision

prior to PROS A demurrage malpractices abounded Consignees were

accustomed to use the leverage of their ocean freight business to coerce carriers

into settling demurrage claims for less than the tariffrate There was whipsaw

ing between carriers

To eliminate the practice of shipper favoritism which naturally

flows from a system where compromises and concessions on

demurrage are obtained by playing one carrier against another

PROSA has amongother things established the Maritime Service

Corporation MSC a central collection agency which handles the

billing and collection ofall the demurrage charges due the member

lines Agreement No DC38 in permitting the consolidation of

demurrage in a central agency has served toeliminate a

very real

demurrage related malpractice which flourished when the individ

ual carriers billed and collected their own demurrage In so doing

Agreement No DC88 not only fulfills a positive transportation

need but to the extent it serves to curtail shipper discrimination

provides valuable shipper benefits as well

Demurrage collection however is but one ofa series ofproblems

endemic in the Puerto Rican trade since the advent ofcontaineri

zation As originally conditionally approved by the Commission

Agreement No DC38 was intended to remedy problems which

include not only demurrage but detention oftrailers credit and

claims as well Itwas because we agreed with PROSA that these

problems could best be resolved in a concerted manner under

section 15 that we conditionally approved Agreement No DC38

and authorized the parties thereto to jointly establish

all Tariff Rules Regulations and Provisions or Terminal or Accessorial

charges except ocean freight rates in connection with the common carriage

of property by water between U S Atlantic and Gulf ports and ports in

Puerto Rico

Under this authority granted it PROSA has to date promul

gated a number of needed uniform rules regulations and provi

sions which have contributed to the maximum utilization of the

carrier s equipment and also served to help reduce congestion at

the piers Thus in addition to establishing revised and uniform

New York area pickup and delivery charges the PROSA member

ship has acted jointly to eliminate the absorption of such charges

in New York and Puerto Rico Other examples ofPROSA activities

include a uniform 10 00 am rule for return oftrailers an averag

ing provision which benefits receivers of four or more containers

and a uniform free time rule for containers in trailer pools

17 F M C
258 FEDERAL MARITIME COMMISSION

PROSA s stated goals in seeking the reapproval ofits agreem

such as insuring the maximum utilization of carrier s equipm

and elimination of pier congestion through the adoption 

enforcement of uniform tariff rules and practices are cle

responsive to a serious transportation need especially in thist

of a continuing energy crisis And if a solution to the conges

and malpractice problems can be reached through an organiza

like PROSA then the public interest is we believe decidedl

favor of the continuation ofAgreement No DC38

As framed in our Order instituting this proceeding the cri

issue here at least insofar as the public interest is concerne

whether the problems existing in the Puerto Rican trade 

respect to demurrage practices congestion terminal charges 

other related matters can best be solved by the contin

approval ofAgreement No DC88 The Administrative Law Ju

found in the affirmative Short of accepting his recommenda

for permanent unconditional approval as opposed to tempo

conditional approval amatter which we shall consider more 

later we concur in his finding that the problems in the trade 

best be solved through the joint efforts of PROSA members 

as Judge Greer reasoned in reaching that conclusion

The agreement permits adoption of uniform rules and regulations whic

above found wlll benefit shippers Without the agreement uniformity coul

be achieved Elimination of malpractices such as the use of demurrage as a 

tool may best be accomplished by joint effort Pier congestion is a pro

requiring cooperation between carriers PROSA objectives such as establis

uniform credit practices and policies free time at North Atlantic ports re

tion of issues raised by shippers at public meetings including notificati

receivers elimination of export declarations uniform trailer inspection rep

as well as the development of United States markets for Puerto Rican prod

may best be carried out under the agreement Trailer pools and their imp

ment is a common problem To cancel the agreement would be to depriv

parties to the agreement of a fair opportunity to accomplish the purpose

which it was organized

Thus while joint action under the PROSA agreement may 

be a panacea for all the ills that have plagued the Puerto R

trade since the coming of containerization it continues to be 

most promising method of remedying abuses and bringing st

ity to the trade Certainly nothing presented in this procee

convinces us otherwise In fact to cancel Agreement No DC38 

this time would not only be to deny the parties thereto 

opportunity to accomplish its much needed objectives through 

best means available but would also force those parties to re

to a system under which shippers can take advantage of t

continued patronage to obtain concessions at variance with e

17 F M C
PUERTO RICO TRADES1968 259

lished carrier tariffs 4Such a system which is wholly unaccepta

ble from an operational standpoint and inevitably leads to viola

tions of the shipping statutes must obviously be avoided

The Agreement we are approving here today is only a means to

an end however and is not an end in and of itself Thus we will

expect PROSA to make more serious efforts to fulfill the terms of

theAgreement not only regarding the collection ofunpaid demur

rage and the promulgation of more extensive uniform rules and

regulations but also with respect to the enforcement ofthe self

policing obligations contained therein which in the past have

been to quote the Initial Decision less than desirable

While the record does demonstrate that PROSA under the

Agreement has alleviated certain demurrage related abuses and

thereby served a meaningful service the record also indicates as

Hearing Counsel has argued that PROSA has not made every

reasonable efforttocollect demurrage and also that it has failed to

take reasonably prompt action against shippers who have arbi

trarily refused to pay such demurrage

At the time the record in this proceeding was closed possibly as

much as 2 000 000 was due and owing the PROSA membership

Organized shipper resistance to PROSA MSC s inefficient and

inaccurate demurrage billings discriminatory enforcement of de

murrage rules internal strife and dissension have been variously

cited as contributing factors for PROSA s dismal demurrage collec

tion record Whatever be the reason or reasons behind PROSA s

past failure to enforce demurrage it is nevertheless clear as the

Administrative Law Judge found that PROSA has not entirely

fulfilled the terms ofthe agreement and that its efforts through

its agent MSC to collect demurrage have been less than desira

ble

This is not to suggest the PROSA has not been sincere in its

desires to accomplish the objectives ofthe Agreement While it is

not our intention here to sanction PROSA s less than satisfactory

collection record we realize that factors may exist such as initial

organizational problems and shipper resistance to a new system

which while they may not excuse PROSA s past record may serve

to explain it at least in part Nevertheless there can be little

question that PROSA s past demurrage collection record leaves

much room for improvement 5

4

Testimony in the record here indicates that shippers in the trade were withholding demurrage

payments hoping that the Commission s disapproval ofAgreement No DC38 will relieve them of their

demurrage obligation and will enable them to tryto cut their own deals again

II In this regard it shouldbe noted that the record does indicatethat since December 10 1970 the filin

date for permanent approval the demurrage collected by MSC has increased considerably and when

compared with the first few months of the trial period the figures are mostencouraging

17 F M C
260 FEDERAL MARITIME COMMISSION

Moreover while we recognize that PROSA s failure to generat

more activity in the area of uniform tariff rules regulations an

practices may be attributable in large measure to the fact tha

most ofPROSA s efforts in the past have been specifically directe

toward the demurrage problems and the establishment of a join

collection agency we will expect PROSA in the future to tak

fuller advantage ofthe broad mandate initially awarded it by th

Commission Thus with the grant herein of continued approval 

Agreement No DC88 we will look tothe PROSA membership t

adopt forthwith whatever joint and effective measures are nece

sary to achieve its stated objectives and goals

Therefore having carefully reviewed and examined the reco

in this proceeding and the many pages of testimony containe

therein and in light of general conditions existing in the Puer

Rico trade VlE conclude that Agreement No Dc 8 does provid

the best means of solving the problems exiJting in the tiBd

between United States Gulf and Atl 1ntic ports and ports in Puer

f

Rico In this regard we find as Judge Greer did that Agreeme

No DC38 is required by a serious transportation need and 

necessary to secure important public benefits 6

We cannot however concur in the Presiding Officer s grant 

unconditional permanent approval Such awholesale reapproval 

simply not justified by PROSA s record during the probationa

period or warranted by conditions existing in the trade Therefor

because PROSA has not entirely proven its merit during the tri

period we are permitting continued approval of Agreement N

DC88 but only for an additional period of one year This grant 

temporary approval is made without prejudice however and th

parties to Agreement No DC88 may apply for reapproval at th

end of the one year period

The additional one year period we believe is sufficient to allo

PROSA to take whatever steps are necessary to refine its demu

rage collection system eliminate any faults inherent therein an

otherwise accomplish the objectives of the Agreement Permane

approval or approval for longer than one year might not on

serve to perpetuate the present inadequate system but could we

generate new shipper resistance tothe complete frustration ofth

Agreement s objectives

Consistent with the Commission s continuing jurisdiction ov

any approved agreement and in order to enable it todetermin

6

In reaching this conclusion we support Judge Greer s reasoning that actions which may benefit 

shipping public are to be considered 8S potential when determining whether ornotthe agreementsho

have continued approval

17 F M C
PUERTO RICO TRADES1968 261

on a continuing basis whether PROSA is making reasonable

efforts to fulfill the terms of Agreement No DC38 as approved

herein we are requiring as conditions to its continued approval

that PROSA adopt certain demurrage procedures and submit to

the Commission on a quarterly basis various reports relating to

its demurrage collection activities These are essentially the same

conditions that Hearing Counsel has herein recommended be

imposed on any continued approval modified to provide for quart

erly rather than monthly filings

The Administrative Law Judge refused to impose any condi

tions 7

either in terms of time limitations or reporting require

ments on the continued approval of Agreement No DC38 on the

theory that since the Commission under section 15 of the Act

retains jurisdiction over any approved agreement it may at any

time cancel or modify the agreement and will have access to

MSC s records This reasoning ignores the fact that the Commis

sion originally limited PROSA s approval to atwoyeartrial period

and that PROSAs record during that period clearly does not now

warrant permanent approval Furthermore as we have men

tioned earlier permanent approval without conditjons might

easily perpetuate the present unsatisfactory system and based on

the testimony of record here could certainly result in strong

shipper resistance

While the Commission realizes that the mandatory periodic

filing of reports on demurrage activities under the Agreement

might cause PROSA some burden and inconvenience we never

theless believe that it is important to place a positive duty on

PROSA to keep the Commission informed of its progress in

fulfilling the objectives ofthe Agreement especially in view of its

past record in this regard Thus we agree with Hearing Counsel

that while it may be desirable at times to have local Commission

representatives inspect the original records such inspection

should not be in lieu ofproperly prepared and verified reports by

PROSA itself

There is one final but rather important matter that we must

consider in disposing of the exceptions now before us The Com

monwealth through its attorney has suggested that it has been

deprived of a fair hearing in this proceeding because of the

1 There is one proposedcondition rejected by the Administrative Law Judge with which weagree and

that is the proposal that all PROSA meetings be open to the public Such a

condition is as Judge Greer

properly conduded ill founded 8S it would be difficult even impossible for the members to transact

business if nonmembers could disrupt executive meetings by interjecting demands and arguments The

public meetings already provided for in the Agreement afford shippers ample opportunity to present

theirviews

17 F M C
262 FEDERAL MARITIME COMMISSION

Administrative Law Judge s bias his personal displeasure 

the opposition to PROSA raised by shipper interests an

general predisposition to approva PROSA regardless of th

dence of record In support ofthis serious and potentially da

ing charge the Commonwealth refers to certain passages i

hearing transcript and to alleged ex parte communications 

the Commission s office ofthe Secretary

We have carefully and dutifully considered all of the ma

relied upon by the Commonwealth in its attack on the Pres

Officer and we find that it falls far short of substantiatin

charges While we have herein departed from Judge G

findings and conclusions in a number of respects there is 

lutely no credible evidence either in the matters cited to us 

the record taken as a whole which would indicate tha

Commonwealth s right to a fair and impartial hearing was in 

way compromised by the Presiding Officer In short we 

singularly unimpressed by the Commonwealth s allegations

ULTIMATE CONCLUSION

On the basis of all of the foregoing we find and conclude 

PROSA s record under the Agreement during the origina

period has been less than satisfactory especially as todemu

and related activities In view of the fact however that A

ment No DC88 has tosome extent fulfilled apositive transp

tion need and provided important shipper benefits we are g

ing it continued approval for an additional one year period su

to the conditions set forth in the Appendix attached hereto

An appropriate order will be entered

SEAL S FRANCIS C HURNEY

Secret

17 F M C
APPENDIX

CONDITIONS ATTACHED TO TEMPORARY CONTINUED ApPROVAL

OF AGREEMENT No DC38

IPROSA shall submit the following on a quarterly basis

A A copy of MSC s aged demurrage account trial balance

B A status report of all pending suits for demurrage brought

by MSC This status report shall list

1 parties to the suit

2 amount involved

3 court and docket number and

4 disposition

C A list of adjustments made by MSC in demurrage billings

D A list ofMSC s billings and collections by carrier

II PROSA shall adopt and implement the following

A A uniform trailer interchange receipt to be implemented by

all carrier members ofPROSA

B A procedure which will guarantee that all Trailer Inter

change Receipts are surrendered by MSC promptly

C A procedure requiring that a copy of each applicable Trailer

Interchange Receipt be mailed to the customer along with his bill

from MSC with all pertinent spaces completely and accurately

filled in The date and hour set out and in should be machine

stamped

III PROSA shall if it has not already conduct a complete

study and investigation ofthe present demurrage rules in light of

the specific complaints disclosed in this proceeding and submit a

report to the Commission setting forth the facts justifying the

retention ofthe rules or indicating the charges made if any and

the reasons therefor This study and investigation should address

itself to the following shipper complaints

A Assessment ofdemurrage on Saturdays and Sundays

B Failure to grant free time credits for refrigerated containers

on the same basis as for other containers

C Computation offree time from receipt ofcontainer by consig

nee if container moves in carriers delivery service and consignee

has not designated a preferred trucker

D Credits for early return of trailers

17 F M C

263
264 FEDERAL MARITIME COMMISSION

E Toll demurrage to permit shipper to retain a partially lo

van when a sailing has been advanced or delayed The evid

shows that Sea Land has in the past given permission toreta

container for additional loading where a sailing wasdelayed

17 F MC
17 F MC

265

FEDERAL MARITIME COMMISSION

DOCKET No 7132

AGREEMENTS Nos DC38 AND DC38 1 ASSOCIATION PUERTO

RICO TRADES1968

ORDER

The Federal Maritime Commission instituted this proceeding to

determine whether Agreement No DC38 should be granted

continued approval pursuant to section 15 of the Shipping Act

1916 and the Commission having this date made and entered its

Report stating its findings and conclusions which Report is made

a part hereof by reference

Therefore it is ordered That Agreement No DC38 is approved

for a period of one year subject to the conditions contained in the

Appendix to said Report

It is further ordered That this proceeding be and hereby is

discontinued

By the Commission

SEAL S FRANCIS C HURNEY

Secretary
266

FEDERAL MARITIME COMMISSION

DOCKET No 71 76

BETHLEHEM STEEL CORPORATION

v

INDIANA PORT COMMISSION

Respondent s assessment of a Harbor Service Charge on every vessel en

the Burns Waterway Harbor where no services are provided nor be

conferred on every vessel entering the harbor is an unreasonable pr

relating to or connected with the receiving handling storing or deliv

of property in violation of section 17 of the Shipping Act 1916

Paul V Miller for Complainant Bethlehem Steel Corporatio

Theodore L Sendak Timothy J May and Richard A Earle 

Rel pondent Indiana Port Commission

Scott H Elderfor Intervenor Lake Carriers Association

Wesley A Rogers for Intervenor Waterways Freight Bureau

March 1 1974

REPORT

BY THE COMMISSION Helen Delich Bentley Chairman Jam

Day Vice Chairman Ashton C Barrett George H Hearn 

Clarence Morse Commissioners

This proceeding was instituted by Complaint from Bethle

Steel Corporation alleging that aHarbor Service Charge ass

by the Indiana Port Commission IPC on every vessel ent

the Burns Waterway Harbor including those proceeding to 

vate docks is unlawful

Specifically Bethlehem Steel Corporation Bethlehem al

that the Harbor Service Charge is an unjustly discrimina

charge resulting in an undue and unreasonable prejudice 

disadvantage to Complainant and the assessment of the char

an unjust and unreasonable practice relating toor connected 

the receiving handling storing or delivering of property an

therefore in violation of sections 16 and 17 of the Shipping 

1916 Complainant also contends that IPC may not lawfully c

the charge because it has not been filed with the Commissio

required by section 17 of the Shipping Act 1916 and by 

Commission s General Order No 15 Finally Complainant al

17 F MC
BETHLEHEM STEEL v INDIANA PORT COMM 267

that the charge is unconstitutional in that it is a duty on

tonnage in violation of Article 1 Section 10 Clause 3 of the

United States Constitution it would interfere with interstate and

foreign commerce and unduly burden same in violation ofArticle

1 Section 8 Clause 3 ofthe United States Constitution it would be

a denial ofComplainant s property without due process oflaw and

would deny to Complainant equal protection ofthe laws contrary

to the United States Constitution Amendment 14 Section 1

Waterways Freight Bureau WFB and Lake Carriers Association

LCA intervened

A motion to dismiss the case for lack ofjurisdiction was denied

by the Commission on November 10 1972

Prior to the filing ofthis complaint IPC brought suit in County

Court against Bethlehem to compel payment ofthe Harbor Serv

ice Charge Bethlehem removed the action to the U S District

Court for the Northern District of Indiana and at the same time

filed this complaint The action at the District Court has been

stayed pending the outcome ofthis proceeding

Administrative Law Judge Herbert K Greer issued an Initial

Decision in which he found the Harbor Service Charge to be in

violation of section 17 of the Shipping Act 1916 Exceptions and

Replies tothe Initial Decision were filed

FACTS

Complainant Bethlehem a Delaware corporation is engaged in

steel manufacture It operates a plant at Burns Harbor in the

State ofIndiana and in connection therewith owns and operates a

dock for the receipt of raw materials and the shipment of steel

products to points on the Great Lakes and on the Mississippi

Intervenor WFB is a nonprofit association of common carrier

barge companies operating barges in interstate commerce to and

from Respondent s docks

Intervenor LCA is a nonprofit corporation representing 21

steamship companies engaged in trade in the Great Lakes includ

ing Burns Waterway Harbor Indiana

Respondent IPC is an instrumentality of the State of Indiana

created to among other things construct a port on Lake Michi

gan

The pertinent portion of the Harbor Service Charge in issue

referred to hereafter as the charge levied by the IPC on every

vessel entering Burns Waterway Harbor with certain exceptions

not herein relevant reads as follows

17 F MC
268 FEDERAL MARITIME COMMISSION

All commercial vessels entering the physical limits of the Port of Ind

Burns Waterway Harbor engaged in import export and or lake traffic s

assessed a Harbor Service Charge to assist in defraying the expense 

administration and maintenance of the Port and Harbor including the s

sion of the shipping of the Port with the view of preventing collisions and 

policing the harbor and dock areas aidingin the extinguishing of fires in 

and their cargoes on wharves and in other facilities and equipment

Through December 1972 Complainant has been assessed n

35 000 under this charge and has not paid this to IPC

The facts relevant to the lawfulness of this charge ma

placed under twogeneral headings construction ofthe harbo

operation and maintenance ofthe harbor

Construction ofBurns Waterway Harbor

Burns Waterway Harbor wasinitiated early in the sixties 

the State of Indiana Bethlehem and Midwest Division ofNa

Steel Corporation Midwest also having a steel plant and do

the waterway formed a sort of loose partnership to creat

Burns Waterway Harbor Together they created a design w

met the approval of the Army Corps of Engineers Howev

order to secure the recommendations of the Army Cor

Engineers and their participation in the project certain elem

of local cooperation were required of each ofthe three pa

The salient elements were

1 Provide and maintain at local expense adequate public termin

transfer facilities open to all on equal terms

2 Provide depths in access area of berthing terminals

3 Construction of steel plants

Additionally in the contract between the United States an

State of Indiana dated September 15 1969 providing fo

reimbursement to the State by the Corps of Engineers for ce

construction done by the State the State agreed among 

things to

c Provide at its own expense and without cost to the Government all

easements and rights of way including dredge disposal areas required 

construction and dredging of said portions of the project and subs

maintenance thereof and for necessary aids to navigation

For its part the United States has agreed to reimburs

spondent for some costs pursuant to the Rivers and Harbors 

P L 89 298 Sec 301 79 Stat 1091 1965 which authorize

Secretary of the Army to reimburse the State of Indiana t

extent of 25 000 000 forthe expenditure offunds used tocon

such portions ofthe project as approved by the Chief ofEngi

and constructed under his supervision In addition the Co

17 F M C
BETHLEHEM STEEL v INDIANA PORT COMM 269

Engineers will maintain and dredge the federal parts of the

harbor

In 1962 IPC and Bethlehem entered into an agreement entitled

Agreement between the Indiana Port Commission the Indiana

Department of Conservation and Bethlehem Steel Corporation

This agreement set forth the responsibilities of each party with

respect to the construction of the harbor Among the features of

this agreement were ones involving Respondent purchasing some

of Complainant s land Respondent granting a request of Com

plainant for riparian rights to extend its land holding out into the

Lake Respondent waiving in perpetuity its right to condemn

Complainant s land and an agreement to allow Complainant s

vessels access to and across the waters of the outer harbor under

the same terms and conditions extended to all other vessels using

the harbor This in addition to the other undertakings ofRespond

ent and the other parties appears to be consideration for Bethle

hem agreeing to build much ofthe east harbor arm and for other

undertakings by Bethlehem

The harbor was initially constructed by the efforts of IPC

Bethlehem and Midwest IPC owns most of the land some of

which wasacquired by the State s use of eminent domain powers

including that under the harbor The harbor is bounded on the

north by a breakwater constructed by IPC which encloses the

outer harbor area The west end of the harbor is secured by a

bulkhead constructed by Midwest which runs from the southwest

end of the harbor north to the western extremity of the north

breakwater The east end ofthe harbor is secured by a bulkhead

constructed by Bethlehem running from the southeast end ofthe

harbor north to the harbor entrance Within the harbor is acenter

pier This pier and the bulkheads and rubble mound surrounding

it were constructed by IPC In addition IPC dredged the harbor

constructed a highway overpass bridge at a cost of 820 000 a

sewage disposal plant and distribution system for the collection of

sewage and sanitary waste and ships bilge water atransit shed of

6 000 square feet and six acres of paved area for open storage An

office building has been erected to house IPC s administrative

staff Service islands have been installed two in the east harbor

arm and two in the west harbor arm which are used to collect

sewage supply potable water electrical power and to provide fire

protection These items are on IPC s property and relate to the

public terminal Lastly the IPC has deeded to the Corps of

Engineers the land under the north breakwater and has extended

an easement to the Corps of Engineers to dredge the harbor and

17 F M C
270 FEDERAL MARITIME COMMISSION

place the spoils thereof on a 20 acre spoil area south of the 

harbor arm valued at 400 000

Pursuant to their promises Bethlehem and Midwest hav

structed steel mills adjacent tothe harbor

Since 1965 the General Assembly of Indiana has approp

approximately 27 540 000 for its part of the construction 

harbor Of this amount about 23 000 000 has been expend

the State for construction and purchase of the items abov

about 13 000 000 has been reimbursed by the Corps of Eng

under the Congressional authority previously alluded to 

reimbursement has been for the following work

1 Construction of the north breakwater

2 Alldredging except for a 100 foot strip immediately adjacent to IPC s 

The unreimbursed items thus aggregate roughly 10 0

The record fails todisclose how much ofthis 10 000 000 is at

able tothe cost of constructing the public terminal facilities 

appurtenances and how much of the 10 000 000 is attributa

the cost of constructing the harbor

Under the Indiana legislation IPC is expected to repay 

State unreimbursed appropriated money except

That no repayment need be made by the Commission in any event for su

used for the construction and dredging of the Harbor or the constructio

outer breakwater if and to the extent that the Congress of the United 

fails to reimburse the Commission or the State of Indiana for such cost

otherwise eligible for such reimbursement

Hence IPC must reimburse the State for expenditures 

construct the public terminal facility and its appurtenance

b the cost of construction and dredging of the harbor and 

breakwater etc except that no reimbursement tothe State 

b items is required to the extent the Congress fails to 

burse the State or IPC for such portion thereof as may be e

for reimbursement

Prior tothe construction ofBurnsWaterway Harbor the 

in the vicinity were not navigable It was the entering o

Bethlehem and Midwest into an enterprise to build this h

and the aid of the Corps of Engineers that made thi

navigable

Operation and maintenance ofthe harbor

The harbor has an administrative staff composed of nin

I

IPC Bethlehem and Midwest are each responsible for dreding this lOO foot strip adjac

respective piers TheCorps of Engineers will not dredge these areas

17 F M C
BETHLEHEM STEEL v INDIANA PORT COMM 271

ple 2 The cost of operation of the harbor in 1972 was about

850 0003 and the harbor revenue in that year was about 200

OOOhence there was a loss ofabout 150 000 In addition there is

testimony that shortly 16 more people will be provided for harbor

security There is further testimony to the effect that the adminis

trative staff is necessary to operate the harbor as apublic harbor

and the Corps of Engineers would not have expended money for

the construction of the harbor and would not now maintain it

were it not operated as a public harbor

As for supervising shipping entering the harbor and movement

of shipping in the harbor with an eye to avoiding accidents IPC

has not issued any regulations aimed at controlling shipping has

not exercised its authority in regulating vessel movement and has

incurred no expense in this area Additionally it appears that at

this time IPC does not have the capability to regulate vessel

movement into and within the harbor 4for it has not established

facilities to communicate with vessels and is not always aware of

their presence

5

In this regard it should be noted that detailed

supervision and regulation of harbor movements is not yet neces

sary

As for the maintenance of the harbor the Corps of Engineers

will maintain the breakwater and will do the dredging in those

parts ofthe harbor now a federal waterway as long as the harbor

is a public one The parties are responsible to maintain their

respective facilities

IPC plans several things in the future A police security force is

to be provided boats to police the harbor are also to be provided as

well as a communication facility and oil spill clean up gear

DISCUSSION AND CONCLUSIONS

The issue presented is whether or not the Harbor Service

Charge assessed by the Indiana Port Commission on every vessel

entering the Burns Waterway Harbor now a public federal water

way is violative of section 17 of the Shipping Act 1916 That is

whether or not it is a just and reasonable practice relating to or

connected with the receiving handling storing or delivering of

property The first question and in this case the determinative

one to be asked in resolving this issue is whether or not the

2

A Port Director aDeputy Port Director aDirector ofOperations aPort Engineer aComptroller a

Maintenance Engineer and three Secretaries

3Of this general administrative expense about 300 000 was allocable to construction in progress

4

Respondent apparently has on order some patrol boatswhich might be used to effectthis authority

t

1 r

Tariff Item 202 of the Harbor Tariff provides that vessel owners are to give advance notice of

vessel entry to the harbor including information sufficient to billthe Harbor Service Charge

17 F M C
272 FEDERAL MARITIME COMMISSION

Indiana Port Commission has demonstrated any basis on w

this charge may be assessed

As the following cases indicate the basis for a charge c

found either in an actual service performed for or some b

conferred upon the person assessed the charge In Clyde M

Lines v Alabama 296 U S 261 1936 the Supreme Court uph

charge assessed on vessels 500 tons and over entering M

harbor to help defray the expense to have a harhor m

regulate vessel movement in the harbor The Court foun

regulating and policing of the harbor a service inuring t

benefit of every vess l entering the harbor hence a reaso

basis onwhich toassess the charge Additionally the Court s

that c harges levied by state authority to defray the c

facilities afforded in aid of interstate or foreign commerce 

consistently been held to be permissible Clyde Mallory Lin

Alabama 296 U S 261 267 1935 Emphasis added See also 

v Glover 119 U S 543 1886 where the Court upheld 

imposed by the State of Illinois on vessels passing through 

the State constructed The facilities in Clyde Mallory Line

the locks in Huse v Glover clearly are benefits

In Volkswagenwerk v FMC 390 U S 261 1968 the 

discussed the reasonableness under section 17 of acharge as

to aid in building a Mech fund to mitigate the harm of me

zation to longshoremen In the discussion the Court stated

The question under f17 is not whether the petitioner has receive

substantial ben it but whether the correlation of that benefit to the 

imposed is reasonable the Commission has found violations of f

though the benefits received were clearly substantial The proper Inquiry 

f17 is in a word whether the charge levied is reasonably related to the 

rendered Volkswagenwerk v FMC 890 U S 261 282 1968 Empha

parentheticals added

Thus ifa basis exista and the charge is reasonably correla

the benefit received by the person charged and is approp

described in the tariff then the charge is reasonable under s

17

Of the two possible bases for a charge under section 17 

have been discussed services and benefits only benefits i

vant tothis proceeding The Administrative Law Judge foun

the Indiana Port Commission admits that no services 

provided which could be abasis for the charge here in issue 

is some mention that in the future the Indiana Port Comm

will provide perhaps with some aid from Complainant and 

west police security on the docks boats to police the h

17 F MC
BETHLEHEM STEEL v INDIANA PORT COMM 273

communications facilities and oil spill clean up gear Whatever the

situation might be with regard to the charge in issue if these items

are provided will have to be determined in a future proceeding

They cannot be a basis for the charge presently assessed How

ever Respondent offers several theories under which Complainant

has received benefits which justify the charge in question

The first theory is that the State in the construction of the

harbor has spent 10 000 000 which will not be reimbursed by the

federal government Respondent argues that these expenditures

and other less tangible items have conferred a benefit on every

vessel using the harbor in that these expenditures and contribu

tions have enabled navigation to occur where it could not before

Respondent contends that it has a statutory duty to repay this

money to the State and therefore this is an administrative cost

within the literal language ofthe tariff

A large portion ofthis 10 000 000 exactly how much is unclear

went to the construction of the public terminal operated by the

Port Commission This includes the money expended in the con

struction of the bulkheads and rubble mound enclosure surround

ing the public wharf the money expended on the transit shed

open storage areas administrative building the service islands for

vessels calling atthe public terminal and the overpass serving the

terminal The revenues torepay these expenditures ought to come

from dockage wharfage warehouse fees and the like assessed to

vessels shippers and others using the terminal who receive a

service or benefit therefrom These expenditures do not confer a

benefit on every vessel entering the harbor Additionally these

expenditures are not in our opinion converted somehow into a

benefit to every vessel entering the harbor hence a basis for the

Harbor Service Charge because the public terminal wasone ofthe

elements of local cooperation required by the Corps ofEngineers

in return for its participation in the project The public terminal

was not the only element oflocal cooperation required it waspart

of alarger quid pro quo arrangement

The remainder of the 10 000 000 and other less tangible items

consist ofthe deed to the Corps ofEngineers ofthe land underthe

north breakwater the easements to dredge the harbor and place

the spoils thereof on a 20 acre plot near the harbor the value of

the State s eminent domain powers to the project the fact that the

State initially made available the funds necessary toconstruct the

harbor and that but for these expenditures and the expenses in

building and administering a public terminal the Corps of Engi

neers would not have participated in the project We find these

17 F M C
274 FEDERAL MARITIME COMMISSION

contributions including the amounts expended on the p

terminal part of aquid pro quo arrangement and therefore 

basis for the charge

As the facts indicate the construction and administration 

public terminal and the granting ofthe deeds and easements 

elements of local cooperation required by the Corps ofEngin

for their participation in the project However other eleme

local cooperation were required among them the constructi

two steel plants by Complainant and Midwest in the ha

vicinity Were these other local contributions not made 

Corps of Engineers might not have participated in the pr

Additionally Complainant and Midwest undertook to con

bulkheads and enclosure walls as necessary in their respe

arms of the harbor which were an integral part of the o

construction of the harbor From this it seems that the e

Burns Waterway Harbor project wasmade possible by the e

offour parties each contributing something and receiving be

in return Complainant and Midwest receive among other th

benefits from the harbor which give ready access to their 

steel mills The State benefits mainly from the creation of a 

deep water harbor on which IPC operates a public termina

which in conjunction with the new steel mills should ser

generate commerce and bring industry tothe State Hence 

was consideration a quid pro quo for the undertakings of 

party The State and all the parties involved have rec

bargained for consideration in return for their contribution

ward creating this new harbor To allow these contributions b

State to be a basis for the Harbor Service Charge would in 

allow the State to have a double recovery Therefore 

contributions ofthe State cannot be a basis for the charge in 

It might also be noted that no party s contribution would 

been of value without the contributions of each of the 

parties Therefore the benefits flowing to vessels because o

existence of the harbor flow not from the individual contribu

but from the whole For this additional reason it is impossib

us to find any separate identifiable benefit conferred by Res

ent on vessels entering the harbor because of Respondent s c

bution to the project

The second alleged basis for the charge is the expend

incurred by the IPC in administering the harbor as a public 

This Respondent states is necessary for Corps of Engin

participation in the project and is an administration and m

nance cost within the terms of the tariff

17 F MC
BETHLEHEM STEEL v INDIANA PORT COMM 275

There is no evidence in the record that operatingthe harbor as a

public harbor involves anything more than operating and main

taining a public terminal on the harbor There is no evidence that

the nine employees ofthe Port Commission need do anything that

would not be done were this a private terminal except perhaps

administer the various charges ofthe harbor In other words the

administration ofthe harbor as a public port should require no

expenses except to collect the various charges that would not be

incurred were this a private terminal Hence the expenses in

curred by the Port Commission in this regard confer no benefit on

every vessel entering the harbor They should be met by revenues

from dockage wharfage warehousing and like charges imposed on

vessels shippers and others using IPC s terminal facilities That

this revenue may be insufficient to meet these expenses and the

capital expenses mentioned earlier in constructing the public

terminal facilities can be no basis to assess a charge to every

vessel entering the harbor for as this Commission said in Pittston

Stevedoring Corp v New Haven Terminal Inc 13 F M C 33 44

1969

The fact that respondent may lose an opportunity to earn revenue and profit

thereby does not relieve it from the statutory requirement that it mustestablish

and maintain just and reasonable practices rates in connection with receiving

property Nor is that fact justification for escape from the Supreme Court s

mandate that a

charge must be reasonably related to the services rendered

As for the maintenance ofthe harbor the Corps ofEngineers

dredges the harbor and maintains the breakwater and the other

parties maintain their respective facilities Respondent then does

nothing in the nature of maintenance which could be a basis for

this charge

A third alleged benefit conferred on every vessel entering the

harbor is the capability and authority ofthe Indiana Port Commis

sion to regulate the movement of vessels into and within the

harbor Assuming that the Port Commission has such authority

this should not be a basis for the charge The Port Commission has

done nothing to exercise this authority vessels control their own

movement Indeed the Port Commission has not the capability at

thistime to exercise this authority 6and has incurred no expense

in this regard No regulations are issued and additionally it is

admitted that at the present time there is no need to exercise this

authority In Clyde Mallory Lines v Alabama 296 U S 261 1935

a It has no communication facilities no patrol boats and has not always been aware of the presence of

vessels in the harbor The only capability that the Port Commi sion even alleges it has is that the

present staffof nine could assume this responsibility

17 F MC
276 FEDERAL MARITIME COMMISSION

one of the reasons the Court upheld the charge in issue 

because

The benefits which flow from the enforcement of regulations such 

present to protect and facilitate traffic in a busy harbor inure to all who 

it Clyde Mallory Lines v Alabama 296 U S 261 266 1935

At Burns Waterway Harbor no effort is made to regulate v

in the harbor there are no regulations and at present they 

be difficult toenforce hence how can there be any benefit in

to every vessel entering the harbor which could be a basis fo

charge The Court also said in that case charges lev

state authority to defray the cost ofregulation afforded 

of commerce have consistently been held tobe permis

Clyde Mallory Lines v Alabama 296 U S 261 267 1985 Ifth

no regulation there is of course no cost of regulation an

State cannot have acharge based thereon This is true even 

State has the authority toissue and enforce regulations som

in the future In HU8e v Glover 119 U S 543 1886 the Su

Court in discussing the locks built by Illinois increasing a 

navigability stated For outlays caused by such works the 

may exact reasonable tolls HU8e v Glover 119 U S 54

1886 Where there is no outlay as in this proceeding to re

vessel movement and no regulation is done no charge c

assessed We agree with the Administrative Law Judge s de

on this issue and find that naked authority to regulate 

movement into and within a harbor unexercised and incapa

being exercised where no regulations are issued and no expe

incurred in regulating vessel movement is not a benefit to 

vessel entering the harbor and is not a basis for the H

Service Charge in issue

Finally the Port Commission states that in the 1962 agre

which set forth the understanding of Bethlehem and the 

Commission with respect tothe construction of the harbor i

valuable rights to Bethlehem and it thereby owns the b

flowing to every vessel from Bethlehem s work as well as its 

This argument is specious Ifthe Port Commission wanted 

the benefits of Bethlehem s construction it should have purc

it from Bethlehem or not entered intoan agreement with th

companies and built all the docks and terminals itself Resp

did neither and does not own the benefits flowing to the 

from Bethlehem swork The rights relinquished toBethlehe

Bethlehem s undertakings were all part of the cooperative 

taking by the parties to this project whereby each party re

its quid pro quo

17 F MC
SgAL S FRANCIS C HURNEY

Secretary

BETHLEHEM STEEL v

INDIANA PORT COMM 277

Having found that the State of Indiana and the Indiana Port

Commission confer no benefits on every vessel entering the Burns

Waterway Harbor it is not necessary to consider whether there is

any language in the Harbor Service Charge which could be said to

include the benefits alleged Nor is it necessary to discuss the

reasonableness ofthe Harbor Service Charge

In the initial complaint it was alleged that the Harbor Service

Charge was also violative ofsection 16 First Shipping Act 1916 in

that it subjected Complainant to an undue and unreasonable

disadvantage The Administrative Law Judge found the Harbor

Service Charge not violative ofsection 16 because had the Harbor

Service Charge been otherwise lawful it would have been applica

ble to all vessels using the harbor No exceptions having been

taken to this finding of the Administrative Law Judge in this

proceeding and the Commission having determined not to review

same thisfinding is adopted as the finding ofthe Commission

ULTIMATE CONCLUSION

For the reasons discussed it is concluded that the Harbor

Service Charge assessed by the Indiana Port Commission Items

34856 of Tariff No 1 issued by the Port Commission is an

unreasonable practice relating to or connected with the receiving

handling storing or delivering ofproperty and is therefore unlaw

ful as a violation ofsection 17 Shipping Act 1916

17 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 71 76

BETHLEHEM STEEL CORPORATION

v

INDIANA PORT COMMISSION

ORDER

The Federal Maritime Commission has this day serve

Report in the subject proceeding which we hereby incorp

herein in which it found unlawful the Harbor Service Ch

assessed by the Indiana Port Commission

Therefore for the reasons enunciated in said Report

Itis ordered That the Indiana Port Commission cease and d

in every way from assessing or collecting the Harbor Se

Charge

It is further ordered That Items 348856 of the Port ofInd

Burns Waterway Harbor Port Charges Tariff No 1 filed by 

Indiana Prt Commission the Harbor Service Charge be de

from said tariff

By the Commission

SEAL FRANCIS C HURNEY

Secreta

278

17 F MC
279

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 194

COLGATE PALMOLIVE COMPANY

v

THE GRACE LINE

March 17 1974

ORDER ON REVIEW OF INITIAL DECISION

This proceeding involves five separate overcharge claims each

claim arising under a separate bill of lading covering ocean

carriage furnished complainant by respondent

In the original initial decision in this proceeding the examiner

denied reparation The examiner found in respect to Claim 7252

the undercharges exceeded the overcharges by a net 50503 In

respect to Claim 7257 he found the undercharges exceeded the

overcharges by a net 1 175 04 On Claims 7263 and 7264 he

found neither undercharge nor overcharge In respect to Claim

7265 he found an undercharge of 17 33 and no overcharge In

some mannerhe concluded the undercharges aggregated 1 192 37

and directed that appropriate adjustment as between shipper

and carrier should be made On review of this decision on

November 30 1970 we remanded the proceeding for reconsidera

tion in light of our decision in Informal Dockets Nos 139 1

through 156 MacMillan Company v United Cargo Company

which spoke to the issue of offsetting llndercharges and over

charges

We now have the decision on remand before us for review The

examiner on remand finds aggregate overcharges totaling 144 15

and aggregate undercharges amounting to 1 839 85 He thus

determines the net undercharges to be 1 695 70 and directs

respondent totake suitable action to collect from claimant the net

amount of undercharges No reparation is awarded for proven

overcharges

No Administrative Law Judge

17 F MC
280 FEDERAL MARITIME COMMISSION

We agree in part with the examiner s conclusions We recog

that our conclusions vary somewhat from our previous decis

and to the extent they do so prior decisions in conflict with 

decision are overruled Further comment is appropriate

Section 22 of the Shipping Act 1916 provides for an awa

reparation for 1 violation of the Act and 2 injury ca

thereby The five claims involved here are brought under se

22 Each claim in effect alleges aviolation of section 18 b 3 o

Act which requires carriers to adhere to published tariff r

Claimant alleges it is injured to the extent that the ca

charged a

greater compensation than the rates specified in 

tariff

Each ofthe five claims involved represents a separate shipm

and is covered by a separate bill of lading Each bill oflading 

separate transaction and the merits of each claim mus

considered in toto and independent of claims under any othe

oflading Analysis ofthe claims indicates that certain overcha

exist on portions of two of the shipments Claims 7252 

7257 To this extent claimant has shown a violation of the Ac

the carrier As indicated above however section 22 also requi

showing ofinjury before reparation can be awarded We conc

that claimant has not been injured by the violation becaus

Claim 7252 the proven undercharges exceeded the proven 

charges by 503 33 on Claim 7257 the proven undercha

exceeded the proven overcharges by 1 175 04 and on Claim

there was a proven undercharges of 17 33 and no proven 

charge

Our action here of offsetting overcharges and undercha

under a given bill of lading does not constitute an awa

reparation against the shipper We are merely considerin

elements of the total transaction i e the overcharges and un

charges under a single bill of lading in determining whe

injury to the shipper resulted from the carrier s violation

We hold that if proven overcharge under a single bill of la

exceeds proven undercharge under that bill of lading the

award of reparation is authorized for an amount by which 

overcharge exceeds the undercharge Conversely if the pr

undercharge under a single bill of lading exceeds the pr

overcharge under that bill oflading then the carrier is direct

collect from the shipper an amount by which the underch

exceeds the overcharge The net overcharge as just described 

arising under a single bill oflading constitutes the injury u

section 22 which claimant has suffered As indicated in MacM

17 F MC
CO

G

PALMOLIVE 

GC8

Company we do not and will not permit undercharges and

overcharges arising under separate bills of lading to be lumped

together and netted out for we conclude that each bill of lading

constitutes a separate transaction and must be treated as such

By rejecting such a netting out we avoid statute of limitation

problems arising under separately issued bills of lading and

problems of ownership of the claims under negotiated bills of

lading as well as the problem of our jurisdiction to award repara

tions for undercharges

The remaining two claims contain no proven overcharges or

undercharges

Under the circumstances no award of reparation can be made

against the carrier in this proceeding Neither can an award be

made to the carrier for undercharges as the statute does not

permit it under the circumstances of this case We do however

reiterate the examiner s direction that respondent take suitable

action to collect the net undercharges from claimant aggregating

1 695 70

By the Commission

SEALI 8 FRANCIS C HURNEY

Secretary

17 F M C
FEDERAL MARITIME COMMISSION

Washington D C

INFORMAL DOCKET No 194 1

COLGATE PALMOLIVE COMPANY

v

THE GRACE LINE

ORDER OF REMAND

In his initial decision in this proceeding the Examiner d

mined that various overcharges assessed by respondent shou

offset by undercharges determined to have been made on o

items involved in the same claim

In Informal Docket Nos 1391 through 156 1 MacMillan C

pany v United Cargo Corporation we endorsed the Exami

conclusion that the Shipping Act would not permit an awar

reliefto a carrierfor undercharges since todo so would requir

award of reparation against the shipper a person not subje

the Shipping Act

Accordingly we conclude that the Examiner erred in 

proceeding by assessing the shipper for undercharges of 

carrier

Therefore it is ordered That this proceeding is remanded to 

Examiner for reconsideration in light ofthe Commission s dec

in Informal Docket Nos 139 through 156 1 MacMillan Comp

v United Cargo Corporation

By the Commission

SEAL S FRANCIS C HURNEY

Secreta

282

17 F M C
17 F M C

283

FEDERAL MARITIME COMMISSION

INFORMAL DOCKET No 194 1

COLGATE PALMOLIVE COMPANY

v

THE GRACE LINE

November 12 1970

Set off of undercharges authorized

DECISION OF RICHARD M HARTSOCK PRESIDING

EXAMINER

This complaint involves several claims the first of which is

claimant s Claim No 7252 which involves the shipment of 100

cartons of toilet soap value over 400 but not over 800 per ton

which information was set forth on the bill oflading measuring 41

cubic feet and weighing 20 121 pounds 450 cartons Fab Ajax

detergent measuring 848 cubic feet weighing 15 318 pounds 175

cartons Ajax scouring cleanser measuring 244 cubic feet and

weighing 8 028 pounds and 120 cartons Vel Ajax detergent liquid

measuring 110 cubic feet and weighing 2 810 pounds which moved

from New York New York to Curacao Netherlands Antilles on

October 11 1968 in respondent s vessel Santa Paula The freight

rate assessed on the soap was 84 per 40 cubic feet on the Ajax

detergent 36 per 2 000 pounds on the scouring cleanser 41 per 40

cubic feet and on the detergent liquid 53 per 40 cubic feet

producing total revenues of 757 67 Complaint contends that the

soap should have carried the rate of 58 which is a valuation

rating for soap ofa value 400 but not over 800 per ton that the

detergent should have been rated as powder washing or soap

that the scouring cleanser should have been rated on a weight

basis and that the detergent liquid should have been rated as

detergents n o s

1 Both parties having consented to the informal procedure of Rule 19a

46 CFR 502 301 this decision

shall be final unless theCommission elects to review it within 15 days from the date of servicehereof
284 FEDERAL MARITIME COMMISSION

Respondent contends that this and the other involved cla

discussed later are based on claimant s allegations that shipm

of detergents should have been assessed the lower rate for w

ing powder despite the fact that arate wasprovided for deterg

and that this is the same claim as covered by Informal Docket 

125 involving these parties and should be denied for 

reasons stated therein Further respondent states that it app

that the claims involving liquid detergents and scouring clea

are in order and instructions have been given to its bi

department to refund on the claims presented

The applicable tariff provisions do not support responde

contentions and the basis and ratings of the commodities 

contended by claimant are incorrect in fact and not supported 

the applicable tariff provisions The commodities will be rerated

The involved tariff2 provides that charges will be assessed 

weight or measurement basis whichever produces the hig

revenue With respect to the soap the bill of lading corre

included the valuation involved and the applicable rate was 

and extending the measurement produces charges of 59 45 2

less than assessed With respect to the Fab Ajax detergent 

cannot be rated as a powder washing or soap as the t

specifically provides a rate for detergents of Class 11 which 

provides a rate of 41 Extending this figure to the measurem

involved which produces the higher revenue the charge sh

have been 869 20 rather than 275 72 as assessed or a differe

of 613 48 undercharge With respect to the scouring cleanse

cannot be rated as alleged on a weight basis because the b

lading wasnot properly annotated toshow the valuation It sh

properly be rated on a measurement basis at 36 which 

produces revenues of 20130 or an overcharge of 48 80 over 

assessed The rate here is Class 13 as used for powders 

cleansing or scouring household n o s The liquid detergent 

rated for freighting purposes at 53 but should have been rate

41 which is the rate on detergents n o s Extended this prod

revenues of 11275 or an overcharge of 33 On this claim o

charges aggregate 108 45 and undercharges 613 48 or a 

undercharge of 505 03

In Claim No 7257 complainant shipped 45 cartons of Fab 

detergent dry measuring 1 760 cubic feet and weighing 31 

pounds 275 cartons Ajax scouring cleanser measuring 388 c

feet and weighing 12 670 pounds and 200 cartons Vel Ajax d

gent liquid measuring 180 cubic feet and weighing 4 870 po

2 U S Atlantic and Gulf Venezuela and Netherlands Antilles Conference sa Ven li Freight 

FMC No 2

17 F MC
COLGATE PALMOLIVE v THE GRACE LINE 285

from New York New York to Curacao Netherlands Antilles on

respondent s vessel Santa Paula on November 8 1968 The freight

rate assessed on the Vel detergent was 36 per 2 000 pounds on

the scouring cleanser 36 per 40 cubic feet and on the liquid

detergent 53 per 40 cubic feet Complainant contends that theVel

detergent should have taken the rate of 32 per 2 000 pounds the

scouring cleanser 36 per 2 000 pounds and the liquid detergent

41 per 40 cubic feet The detergent n o s rate in the applicable

tariff is Class 11 or for this destination 41 rather than 36 as

assessed Thus the Fab Vel detergent on a measurement basis

would have produced revenues of 1 804 rather than the 574 96 as

assessed or an undercharge of 1 229 04 The scouring cleanser

claimant contends should have been rated on a weight basis

value not over 300 per 2 000 pounds however no valuation was

stated on the bill oflading as required in the tariff and the weight

or measurement basis therefore applies Respondent applied the

correct rate of 36 producing revenues of 349 20 With respect to

the liquid detergent respondent applied the rate of 53 producing

revenues of 238 50 However the n o s rate on detergent in the

applicable tariff is 41 which produces revenues of 184 50 or a

difference of 54 Thus in thisclaim there is a net undercharge of

1 175 04

The remaining claims Claim No 7263 No 7264 and No 7265

each involve the contention that Fab detergent dry is awashing

or cleaning powder which should take a rate of 32 per 2 000

pounds As here seen the tariffprovides a rate on detergent no s

ofClass 11 or 41 per 40 cubic feet No reparations are awarded in

these three claims However it is noted in Claim No 7265 that

claimant shipped 40 cartons of Fab detergent dry measuring 77

cubic feet and weighing 1 378 pounds from New York New York

to Aruba Netherlands West Indies on December 3 1968 on

respondent s vessel Santa Paula and assessed a rate of 32 per 40

cubic feet At the applicable tariff rate of 41 W M the correct

freighting charges should have been 78 93 on a measurement

basis or an undercharge of 17 33

As seen the above claims involve undercharges of 1 192 37 and

appropriate adjustment as between shipper and carrier should be

effected

Complaints dismissed

8 RICHARD M HARTSOCK

Presiding Examiner

WASHINGTON D C

November 12 1970

17 F MC
FEDERAL MARITIME COMMISSION

DOCKET No 7224

IN THE MATTER OF AGREEMENT No T2598

Agreement No T2698 as amended by Agreement No T2698 1 is the com

understanding or arrangement between respondents

The oral franchise agreement is subject to section 16 of the Shipping Act 

No memorandum of this franchise has been submitted for approval

Respondents have entered into and implemented egreements or arrangem

subject to section 16 of the Act

Neither Agreement No T2698 as amended byAgreement No T2698 1 no

franchise agreement grants an undue preference or subjellts anoth

undue or unreasonable prejudice or disadvantage in violation of section

and 16 First

CPA has not established unjust and unreasonable regulations and prac

relating to the receiving handling storing or delivering of proper

violation of section 17

Agreement No T2698 as amended by Agreement No T2698 1 is approve

Edward M Jackson for Canaveral Port Authority and Tho

D Wilcox for Eller and Company respondents

David C G Kerr and Stuart C Law for Luckenbach Steam

Co Inc petitioner

Donald J Brunner and PatriciaE Byrne Hearing Counsel

March 20 1974

REPORT

By THE COMMISSION Helen Delich Bentley Chairman Jame

Day Vice Chairman Ashton C Barrett George H Hearn 

Clarence Morse Commissioners

By Order served June 16 1972 and amended by Orde

December 12 1972 1

the Commission instituted this proceedin

I

By supplemental Order of December 12 1972 the Bcope of this proceeding waa broade

encampus an l mended aareement T2598 1 filed with the Commission after the initial o

investiaation WaB tiled As uud herein referenCe to uAI reement T 2598 or the Allreement the

is reference to theoriainal agreement a8 amdned This amendment does not alter the portions 

original alreement in any way relevant to i

aues currently beinar arlued and waa accompliahe

clarification of the original rather than as a substantive modification of the terma of the o

Agreement T2598

286

17 F MC
AGREEMENT PORT CANAVERAL AND LUCKENBACH 8 8 287

determine whether Agreement T 2598 and a preexisting fran

chise agreement between the Canaveral Port Authority CPA

and Eller and Company Eller were subject to section 15 of the

Act and if so whether such agreements were in violation of

sections 16 First and 17 of the Act At issue initially also was

whether or not if found subject to the Act these agreements

should be exempted from the coverage of the Act pursuant to

section 35

Hearings in these matters were held in Washington D C from

October 31 to November 2 1972 and in Port Canaveral Florida

from December 12 to December 14 1972 The Initial Decision ofthe

Administrative Law Judge was issued on July 16 1973 and

Exceptions thereto were duly filed by Hearing Counsel and Re

spondents CPA and Eller on July 31 1973 Replies to Exceptions

were filed on August 15 1973 by Hearing Counsel and Respond

ents and on August 17 1973 by Protestant Luckenbach Steamship

Company Inc By Order of October 5 1973 the Commission

scheduled oral argument on these Exceptions to be held on

November 14 1973 This proceeding comes before the Commission

on those Exceptions and Replies

FACT8

The Port of Canaveral Port a person subject to the Act is

located in Canaveral Florida and was created in 1953 by the State

ofFlorida The Port is governed by the Canaveral Port Authority

consisting offive elected Commissioners The CPA is abody politic

and corporate of the State of Florida The CPA pursuant to the

instrument creating it is vested with broad powers among which

are the power to own and operate warehouses and other terminal

facilities establish storage and terminal charges enfranchise

warehouse operations license stevedores as independent contrac

tors and appoint all other persons necessary to the proper transac

tion of shipping business atthe Port

The size ofthe Port in terms ofcargo passing through it can be

seen by these figures

Tonspel annum

1966

1967

1968

1969

1970

1971

For the first ten months of 1972 40 711 tons of cargo

through the Port facilities

17 F MC

9 599

10 582

18 000

23 080

28 284

36 191

passed
288 FEDERAL MARITIME COMMISSION

At present and for all relevant times involved virtually 

incoming cargo passing through the Port is newsprint used 

newspapers in Cocoa and Orlando5 and 65 miles respectiv

west of the Port The next nearest port toCanaveral is Tampa 

miles away on the Florida Gulf Coast There is and has b

virtually no outbound cargo from the Port except for a neg

number ofempty cores on which newsprint is rolled

From its creation in 1953 and unitl July 28 1965 CPA it

performed all required terminal operations at the Port 2

In J

1965 these operations were turned over to Respondent Eller 

a person subject to the Act on a contractual basis which i

dispute the so called franchise agreement Nonetheless f

July 1965 tothe present no person other than Eller has perform

these terminal operations at the Port of Canaveral with 

exception of small amounts of import cargo requiring spe

handling It its providing of such terminal services Eller 

ployed one terminal representative permanently stationed at 

Port and provided initially two forklifts which it purchased f

CPA in an apparently arm s

length transaction

Stevedoring 3continuously has been performed at the Por

any stevedoring company selected by the shipper or vessel ow

CPA in no way has directly interfered with or restricted 

number of such stevedore companies to whom it has gran

authority to perform stevedore operations at the Port Since 

demand for stevedoring services at the Port has been small s

stevedoring companies do not have personnel or equipment 

manently assigned tothe Port but transport personnel and eq

ment to the Port on an as necessary basis from other p

served by them such as Miami Port Everglades and Fort Lau

dale

The stevedoring charges at the Port for newsprint are unp

lished contract prices individually negotiated between the st

dore and the shippers of the newsprint and generally repre

about 83 percent of the total stevedore terminal charge for ne

print The remaining 17 percent ofthis combined costis attri

able to the 130 per ton terminalling charge levied by Eller 

appropriately filed by Eller in a tariff with this Commission 

present the major stevedoring companies active in the Port 

1As used herein performance of terminal operations terminalling providing termi

services and handling all denote the performance ofthaservice of the physical handling and 

out ofcargo from the CPA warehouses oropen storage areR8 ontotrucks for transportation from t

facilties to inland destinations

3 As used herein Ustevedoring means the physical handling of incoming cargo from the vessel t

ofrest in awarehouse orin open storage

17 F M C
AGREEMENT PORT CANAVERAL AND LUCKENBACH 8 8 289

Shaw Company Shaw the stevedoring division of Luckenbach

Steamship Company Luckenbach and Strachan Shipping Com

pany Strachan which together do virtually all stevedoring atthe

Port Luckenbach Shaw stevedores approximately 80 percent of

the inbound cargo and Strachan approximately 20 percent

In 1969 Shaw became the Shaw Division ofLuckenbach when it

was acquired by Luckenbach Thereafter in December 1970 or

January 1971 the date is in dispute Luckenbach on behalf of

Shaw as its Florida stevedoring division sought out the Port

manager to inquire into possible authorization from CPA allowing

Shaw to perform terminalling services on a nonexclusive basis

with Eller At thispoint in time terminalling had onlyjust become

a break even or possibly a profitable undertaking at the Port For

the previous years during which Eller only provided terminal

services terminal operations were conducted by Eller at a loss

Negotiations between CPA and Luckenbach proceeded from

early 1971 until approximately July 1971 During that period CPA

repeatedly made it clear to Luckenbach that in its judgment

neither the volume of traffic nor sound administration of a port

limited in space and capabilities justified authorization by CPA of

competing terminal agents Luckenbach however persisted in its

request for terminalling authorization by correspondence conver

sations and appearances before CPA at its regular meetings As a

result the CPA at its July 28 1971 meeting further discussed

Luckenbach s

request and decided that it was in the best interest

of port management to adopt a single operator concept with

regard to terminal services As a result of the decision of that

meeting Luckenbach was informed that CPA would adopt such a

position and would select its single terminal agent at the regular

meeting of October 13 1973 This sequence of events lies at the

heart ofthe main issue in dispute on exceptions to findings of the

Administrative Law Judge

The record discloses that the decision to adopt a single operator

concept was premised on the following grounds

1 Traffic volume was so low it was susceptible to satisfactory service by a

single man operation used to 60 70 capacity

2 A

single operation could economically employ one full time warehouseman

representative permanently stationed at the Port to render daily and if neces

sary holiday delivery service required by the nature of the cargo

3 The cargo involved was of such volume that a single operator would receive

sufficient business to enable it to keep terminal charges low and thus attract

business to the Port

4 Division of the business between or among terminal agents would result in

insufficient business to all with consequential deterioration of the quality of

service or increased costs or both
290 FEDERAL MARITIME COMMISSION

5 A single agent would permit single responsibility and accountability 

overall terminal operations including supervision and security of cargo

6 Multiple terminal agents would require CPA to employ a warehou

superintendent and

7 There had been a history of satisfactory results through use of a sin

terminal operator

The validity of these conclusions by the Commissioners of CP

was challenged by Luckenbach and is at issue before us

At the regular Port Commission meeting of October 13 1971 t

single terminal operator was selected That operator was Ell

Among the reasons cited in the record for the selection ofEller 

that time are the following

1 Past history of satisfactory service by Eller

2 The low cost of the Eller services attributable in part to non union la

use

3 The belief on the part of CPA that since Eller had provided such servic

previously when no one else wanted to do so and suffered losses in the proce

Eller deserved to be maintained as the terminal operator when there wa

possibility for a terminal operator to make a profit from these services

As a result of this selection of Eller as the exclusive operat

CPA and Eller thereafter on December 8 1971 executed t

exclusive franchise now known as Agreement T2698 That agre

ment was later amended on November 29 1972 in amanner n

here relevant By that franchise as now amended Eller w

granted the following authority

1 exclusive franchise for the following terminal operations at P

Canaveral Brevard County Florida

a Moving freight at rest in the open on the unleased property of C

either into the warehouse facilities of CPA or onto motor car

facilities

b Moving freight at rest in the warehouse facilities on CPA ou

said warehouse facilities onto motor carrier facilities

c Moving freight to a place of rest In the warehouse facilities of CPA

ormoving freight from one place of rest in the said clolled storage facilit

to another place of rest in the same

2 the incident of exclusiveness of this franchise Is characterized by 

condition that CPA will not grant to another terminal operator a franch

to carryon the aforementioned terminlll operlltion sell ll1ent without first hav

public hearing showing a convenience and necessity therefore as determined 

CPA

This franchise wasgranted in return for satisfactory performan

of the duties by Eller and payment by them to CPA of a certa

annual fee The duration of this franchise was set at a period 

4 InitialDecillion ID at p19

IIFranchiseAgreement as amended Exhibit No 84 Docket No 7224

17 F MC
AGREEMENT PORT CANAVERAL AND LUCKENBACH 8 8 291

one 1 year from the execution of this Agreement 6and to

continue from year to year thereafter until terminated by either

party 7pursuant to provisions in the Agreement

Throughout the period January 1971 to October 1971 during

which Luckenbach sought terminalling authorization it had con

sistently protested the single operator concept Its application to

provide services at the Port had consistently been intended to

allow multiple terminal operators rather than to substitute itself

for Eller as the sole operator at Canaveral 8

With the October selection of Eller and the execution in Decem

ber of the written franchise Luckenbach removed its protests

from CPA and directed them to this Commission

This December Agreement was brought to the attention ofthis

Commission and was informally protested by counsel for Lucken

bach in December 1971 This letter was followed by another in

which a

copy ofthe Agreement wasforwarded to the Commission 9

for review Thereafter onJanuary 21 1972 the Director ofBureau

of Compliance notified counsel for Luckenbach that on that date

the Commission had notified CPA of Luckenbach s informal com

plaint of the FMC staff opinion that the Eller CPA Agreement

was subject to section 15 and of its determination that CPA

should immediately file the Agreement 10 The FMC Bureau of

Compliance did in fact so notify the Port Manager ofCPA by letter

ofJanuary 21 1972 that the Agreement must be filed and that it

is illegal for CPA and Eller to carry out the agreement prior to its

approval by the Commission 11 Correspondence between FMC

and CPA ensued until on March 7 1972 this Commission informed

CPA that the staff had been informed that the parties may be

carrying out the Agreement in violation of the Act and stating

that it is illegal for the parties to carry out theAgreement prior to

its approval by the Commission Thereafter onMarch 8 1972 CPA

suspended the Agreement and considered the situation to have

reverted to that which had been in effect prior to the execution of

eld

7Id

S Also during this period Strachan evinced an intere t

in being granted authority to provide services

on amultiple operator basis However there is no record evidence which shows that this wasanything

more than ahypothetical interest On the contrary the record indicates that while Strachan supports

the multiple operator concept it would not be likely to provide the terminal services even were

authorization granted As aresult their participation in this proceeding for purposes of this analysis

may be absorbed in the positions espoused by Luckenbach

9 Letter of December 11 1971 from David C G Kerr Esq attorney for Luckenbach to N Thomas

Harris Exhibit 66C d

10 Letter of January 21 1972 from N Thomas Harris to David C G Kerr Exhibit 66D d

II Letter of January 21 1972 from N Thomas Harris to George J King Port Manager CPA Exhibit

66E d

17 F MC
292 FEDERAL MARITIME COMMISSION

the Agreementie from 1965 1971 under the oral franc

agreement

Matters stood as described above at the time the Orde

Investigation waspublished and this proceeding was commen

Because of the many exceptions to the Administrative 

Judge s factual findings in deciding this case we shall set fo

individually our findings of fact and conclusions of law 

fundamental determinations to be made involve the follow

issues

1 Whether or not the 1965 franchise agreement is subjec

section 15 of the Shipping Act 1916

2 Whether or not if that agreement is found subject tothe A

has been implemented by the partise without having rece

prior approval ofthis Commission

3 Whether or not Agreement No T 2598 is subject to sectio

ofthe Act

4 Whether or notAgreement No T2598 encompasses all un

standings and agreements between the parties

5 Whether or not Agreement No T2598 if subject to the 

should be disapproved

a Because it grants undue preference toone party and subj

another to unjust or unreasonable prejudice or disadvantag

violation of section 16 First ofthe Shipping Act 1916 and

b Because CPA has established unjust or unreasonable reg

tions and practices relating to the receiving handling storin

delivering ofproperty in violation of section 17 oftheShipping 

1916

Issue 1 Whether or not the 1965 franchise agreement is subje

section 15 of the Shipping Act 1916

It was determined by the Administrative Law Judge that 

CPA and Eller were persons subject to the Shipping Act w

the meaning ofthat term as defined in section 1 of the Act T

is before us no dispute as tothis determination nor in our opin

could there be We adopt that conclusion as our own

The arrangement or oral agreement of 1965 between Eller 

CPA permitted Eller to take over from CPA all termina

operations at Port Canaveral previously performed by the Por

that time 1965 no other firms had evinced any interes

assuming these duties and responsibilities While the spe

understandings pertaining to the arrangement are rather va

on the record it is clearly shown that the parties interpreted 

Agreement to provide that Eller was to assume the dutie

17 F M C
AGREEMENT PORT CANAVERAL AND LUCKENBACH 8 8 293

terminal operator rather than CPA and CPA would agree to

refrain from competing with Eller as to these services This

arrangement was to be renewable on a yearto year basis with

respect tothe parties Whether or not during these annual periods

other parties would be prevented from competing with Eller in

providing terminal services is not clear from the record

Much argument was heard both in hearing and before us as to

whether or not this arrangement was an exclusive franchise

whereby Eller alone was permitted to provide terminal services

We are of the opinion that the determination of that question is

unnecessary with regard to the arrangement in effect from 1965 to

1971 We therefore decline to reach this issue The fundamental

issue is rather whether or not this arrangement exclusive or not

is one which provides for the

giving or receiving special rates accommodations or other special privi

leges or advantages controlling regulating preventing or destroying competi

tion orin any mannerproviding for an exclusive preferential or co operative

working arrangement

within the meaning of section 15 We find it to be beyond argu

ment that at least as between Eller and CPA two persons

heretofore found subject to the Act the understanding that CPA

would not attempt to compete with Eller in providing terminal

services falls squarely within the confines of section 15 Clearly

the 19651971 arrangement is at the very least a cooperative

working arrangement between the parties which controls compe

tition as between them ifnot with reference to others

Issue 2 Whether or not the franchise agreement of 1965 has been

implemented by the parties without having received prior ap

proval ofthis Commission

Having determined that the franchise arrangement between

CPA and Eller is subject to the Act pursuant to section 15 the

issue as to its implementation is easily disposed of Nowhere in

this proceeding has it been contended by any of the parties that

the oral arrangement in question was not put into effect and

continued in effect from 1965 to 1971 Consequently the implemen

tation ofthis oral agreement no memorandum ofwhich has been

filed for Commission approval constitutes a clear violation of the

requirements ofsection 15 of the Shipping Act 1916

Issue 3 Whether or not agreement No Tf2598 is subject to section

15 ofthe Shipping Act 1916

As quoted above the pertinent provisions of Agreement No T

2598 as amended provide Eller with the following authority

17 F M C
i

1

294 FEDERAL MARITIME COMMISSION

1 exclusive franchise for the following terminal operations at Po

Canaveral Brevard County Florida

a Moving freight at rest in the open on the unleased property of CP

either into the warehouse facilities of CPA or onto motor carr

facilities

b Moving freight at rest in the warehouse facilities on CPA out 

said warehouse facilities onto motor carrierfacilities

c Moving freightto a place of rest inthe warehouse facilities of CPA

or moving freight from one place of rest In the said closed storage faciliti

to another place of rest in the same

2 the incident of exclusiveness of this franchise is characterized by t

condition that CPA will not grant to another terminal operator a franchi

to carryon the aforementioned terminal operation selllent without first havi

public hearing showing a convenience and necessity therefore as determined 

CPA

By its very terms this Agreement between twopersons heretofo

found subject to the Act provides exclusive terminal operatio

rights to Eller As such itis clearly one providng for an exclusiv

preferential or cooperative working arrangement within th

meaning of section 15 which must be filed for approval pursuant 

that section prior toeffectuation

Issue 4 Whether or not agreement No T2598 encompasses a

undersf andings and agreements between the parties

Inhis Initial Decision the Administrative Law Judge found th

the 1965 franchise arrangement and Agreement T2598 

amended represent all understandings arrangements and agre

ments between CPA and Eller regarding terminal operations H

also concluded that Agreement No T

2598 superseded the 19

franchise He held that since CPA and Eller have reverted to th

arrangement under the 1965 franchise pending action by th

Commission on Agreement No T2598 and are currently imp

menting that franchise arrangement Agreement No T2598 do

not represent all understandings or anangements between t

parties With this ultimate determination we are unable to agre

Agreement No T2598 in essence provides for precisely t

same authorizations to Eller as were cgranted orally to Eller 

1965 with one important addition The 1971 agreement provid

not merely that CFA will not compete with Eller but explici

grants Eller the terminal operation exclusive of competition fro

other terminal operators as long as the Agreement is not 

scinded pursuant to its terms In short Agreement No T2598

embodies all the understandings reached between Eller and CP

ItFranchiseAgrument 8 amended Exhibit No 84 Docket No 72 4

17 F M C
AGREEMENT PORT CANAVERAL AND LUCKENBACH 8 8 295

in 1965 but adds specific provisions not made clear or explicitly

provided for in the 1965 arrangement As such we are unable to

conclude as amatter offact or law that this Agreement does not

represent all understandings between CPA and Eller

Itis argued that the reversion tothe status quo which prevailed

prior to the execution of Agreement No T 2598 constitutes the

reinstitution ofan agreement not contemplated in Agreement No

T 2598 While in a technical sense this may be accurate our

adoption of so nice a distinction would serve no valid regulatory

purpose CPA has not implemented a new arrangement one not

contemplated under T2598 nor has it implemented Agreement

No T2598 prior to our action here It has merely continued to

provide for the necessary minimum services while refraining from

implementing an exclusive agreement which awaits our action

The practical reasons which underlie this reversion to the status

quo and which we do not see fit to gainsay will be discussed

below For purposes ofthis issue it is sufficient that we conclude

that Agreement No T2598 for all practical purposes encompasses

all understandings and agreements between CPA and Eller

Issue 5 Whether or not agreement No Tf598 should be disap

proved a because it grants undue preference to one party and

subjects another party to unjust or unreasonable prejudice or

disadvantage in violation of section 16 first of the act and b

because CPA has established unjust or unreasonable regula

tions or practices relating to the receiving handling storing or

delivering ofproperty in violation of section 17 ofthe act

For its determination this issue relies upon conclusions as to

the validity and reasonableness of the decisions made by CPA on

which it based its adoption of an exclusive terminal operator

concept and upon the effects ofthat adoption The decision made

by CPA in its adoption ofthe single operator concept waspremised

upon the seven grounds recited above in the Facts and others

discussed herein We will here scrutinize each of the grounds in

order to determine its reasonableness and its meaning relevant to

allegations that the resultant Agreement violates sections 16 First

and 17 of the Act

Traffic volume at Port Canaveral

The record herein shows this Port has experienced increased

traffic throughout its history since 1965 The rate of growth of

traffic inbound is shown to have been from approximately 9 600

tons per annum in 1966 to 40 700 tons for the first 10 months of

17 F MC
296 FEDERAL MARITIME COMMISSION

1972 It has been further shown that a single person with appr

priate equipment working at 6070 percent capacity can eff

ciently handle the volume ofcargo Also shown in the record is th

fact thatonly inbound traffic is here involved with the exception 

negligible amounts of outbound cores of empty newsprint rolls

In view of the history of growth at the Port it is tempting 

allow acertain amount of speculation toenter our consideration 

the need for or desirability of more than one operator her

However this is a luxury we deem both inadvisable and inappr

priate At issue is the soundness of a decision made in 1971 wit

regard to conditions prevailing then We therefore restrict o

consideration tothose conditions

Protestants LuckenbachShaw have urged consistently that th

current volume of traffic the consistent growth and the for

casted further growth all mandate the use at the Port of multip

terminal operators Respondents CPA and Eller conversely mai

tain that it is unreasonable to reach that conclusion when th

record shows that a single representative ofone terminal operat

can and does efficiently handle all cargo by using only 60 

percent of his available time

We conclude that Respondents position is the more realistic 

light of the facts shown on record Out conclusion here does no

however ignore the future growth potential of the Port or th

likelihood that at some future time the conclusion reached here

may nolonger be valid We are of the opinion however that a

public interest involved at the Port in the future is amply p

tected by twoseparate procedures Havingdetermined Agreeme

No T2598 to be subject to section 15 of the Act we have assume

continuing jurisdiction over that Agreement and its implement

tion Any future abuse which we do not foresee could be correct

readily by our continuing supervision

Further since the Agreement provides for termination witho

cause of Eller s favored positioJ we must assume that CPA 

public body charged with public trust will honor that trust we

future traffic to indicate a need for use of additional 

operators The Agreement permits and CPA sduty demands th

CPA act in the best interest of the Port and the public We cann

conclude that should future increased traffic volume so requi

CPA would arbitrarily renege on its duties and responsibilities 

disallowing additional terminal operators to work the Port

Quality ofservice

The parties involved here are in sharp disagreement as to t

17 F M C
AGREEMENT PORT CANAVERAL AND LUCKENBACH 8 8 297

future quality of services at Port Canaveral under a multiple

terminal operator system Protestants strongly urge that it is

academic that increased competition necessarily results in mainte

nance of quality services In a business such as terminal opera

tions it is urged the central factor of differentiation between

capable operators is the quality ofthe services one provides vis a

vis any other Therefore it is argued increased competition begets

increased quality of service

Respondents acquiesce to the general principle as to the effects

of competition on services quality but urge that that principle

must here be applied to an actual set ofcircumstances and cannot

be espoused in a factual vacuum They urge that given the

amount of business available at Port Canaveral competition for

terminal services would in fact result in adeterioration ofquality

of services with concomitant increases in rates for those services

Respondents claim that on the basis ofcurrenttraffic volume the

introduction of competing terminal operators would result in a

winner take alI battle for traffic which would not support two

concurrent operators This is urged to be so because multiple

terminal operators would cause economic loss to one and ofthose

competing the one least able to sustain losses would be forced out

In the process it is urged the quality of service to customers

would suffer from neglect and rates would be increased to cushion

impending losses Avoidance of this sort of risk is urged as a

legitimate concern of the Port Authority in whom rests the duty

and responsibility to maintain stable service capability at the Port

We find Respondents argument persuasive We are of the

opinion that under such circumstances as currently prevail at Port

Canaveral the duly authorized Port Authority is the proper body

to weigh and evaluate business risks related to that Port s effi

ciency in the first instance It is not our function to gainsay the

day today economic decisions ofthis Port nor would it be appro

priate for us to do so Given our continuing surveillance of the

Agreement under which Port Canaveral and its operator must

conduct their terminal operations we see no danger in leaving the

fiscal and business determinations in the first instance with the

duly authorized Port Authority Clearly it is not the function of

this agency to substitute its judgment for that of the Port It is

however our duty to direct appropriate changes upon finding that

the Port s action or inaction based on its own judgment is contrary

to the statutes we administer

17 F M C
298 FEDERAL MARITIME COMMISSION

Level ofcharges

Determination of the effect on rate levels caused by use 

multiple terminal operator system at Port Canaveral has b

alluded to above with regard to its relationship to the qualit

services provided The discussion there as to whether or 

current business volume would support two or more term

operators need not be belabored further However additio

factual questions regarding Port Canaveral s cost of operat

require attention here The record reflects that in addition to

factors discussed earlier in the case of at least one poss

competitor for the operation of terminal service union perso

would be used in Port Canaveral by that firm were it tobe gran

authorization to provide those services Use of union personne

virtue of certain union work rules would entail a multiple 

operation to accomplish the same work now done by one nonu

terminal operator The additional manning requirement woul

seems clear increase the cost of operations

Additionally the record indicates that union pay scales for s

workers would further increase costs With higher costs to 

operator even were he to handle all cargo it is reasonabl

conclude as did CPA that one operator could barely make ev

marginal profit at Port Canaveral and that therefore twoor m

could hardly be expected to operate profitably The current op

tor using nonunion labor and a single man has been show

have attained only very modest profits from the current tra

Thus the fear expressed by CPA that this lack of profitab

could result in increases in rates charged for terminal serv

seems to us to be ifnot irrefutable at least a reasonable con

ofthe Port Authority and one to be left toits peculiar compete

as the body charged with sound management of the Port

Responsibility and accountability

It has been urged by Protestants and accepted by the Adm

trative Law Judge that the use of multiple terminal opera

would neither reduce nor enhance the responsibility of CPA 

such concerns as cargo security and accountability damag

facilities storage reporting and proper cargo dispatch We 

unable to follow the logic which leads to that conclusion

In the conduct of terminal storage and dispatch of cargoe

seems inescapably clear that the fewer parties involved 

greater the ease of accounting for damage reporting and dispa

ing ofgoods While this conclusion ofcourse is not sufficient a

to justly maintenance ofa single operator at Port Canaveral 

17 F M C
AGREEMENT PORT CANAVERAL AND LUCKENBACH 8 8 299

at least a reasonable conclusion for CPA to reach Further with

regard to increased costs of operation the record shows that

multiple terminal operators presence at the Port would require

the Port Authority to hire additional supervisory personnel in

order to ensure proper accountability etc This would also increase

the cost of operation of the Port It is surely reasonable for the

CPA to take this into account in its deliberations and we must

admit to some difficulty in accepting any premise which asserts

the error ofthe stance taken by CPA in this regard

Expansion offacilities

This issue is the subject of sharp controversy In his Initial

Decision the Administrative Law Judge determined that the

central roadblock to further growth of Port Canaveral is the lack

of warehouse space at the Port While the Administrative Law

Judge found that there is no reason to believe that the CPA will

fail to construct facilities to keep up with and indeed to even

anticipate growth he somehow concluded that

Whatever reasons for an exclusive operator agreement it cannot be accepted

that a party thereto can be permitted to enter into such arrangement and

continue it in force on the ground that facilities arelimited when it itself is able

to control facility expansion If such ground is accepted the CPA can always

restrain competition by always keeping facilities construction one step behind

cargo growth

We fail to follow the logic of Judge Levy s

reasoning His

conclusion is not only clearly inconsistent with his own findings

but is also generally unsupported by the record Furthermore the

Administrative LawJudge s determination unjustifiably calls into

question CPAs motives in operating the Port

What the Administrative Law Judge appears to be saying is

that CPA is retarding port growth by its failure to expand

facilities and by its refusal to allow multiple operators who would

increase traffic through the Port To accept such a surmise first

presupposes that CPA is financially or otherwise capable of ex

panding its facilities at this time and then imputes to CPA a

refusal to allow multiple operators to work the Port even though

condiditions favored such a move Neither of these suppositions

are established by this record On the contrary we find considera

ble merit in CPAs argument that current traffic does not warrant

such expansion even in the face of solicitations by them of new

businessand that the locality of Port Canaveral in an area of

economic depression is not such as would attract great cargo

import increases even if facilities were expanded

17 F MC
300 FEDERAL MARITIME COMMISSION

In any event we believe that the economic conditions in 

geographic locality in which the Port is situated are first conc

of and peculiarly within the judgmental competence of CPA 

this regard whether or not increased terminal operators w

increase traffic volume in such a locality and whether or 

traffic volume and available funds for facilitiesjustify expansio

terminal capabilities are likewise concerns validly within 

mandated authority of CPA Absent a showing in the record 

CPA has abused its prerogatives we cannot impute to CP

willful intent torestrain competition in the face ofincreased tra

and required expansion Nor do we see any purpose to be se

by specualting as tothe futureconduct of CPA in these regard

light of the lack of any record evidence showing that CPA 

failed toexpand when volume required expansion or that CPA 

arbitrarily imposed restraints on competition which were un

ranted we must conclude that CPA s judgments were respon

reached by them as businessmen attuned to the economic clim

ofthe Canaveral area

In light ofour finding that CPA has acted reasonably as to 

of these considerations we cannot conclude that there has b

shown such undue preference undue or unreasonable prejudic

disadvantage unjust orunreasonable practices tothe detrime

Prostestants as warrants a finding of violation of section 16 F

or 17 of the Act

As we stated in Investigation of Free Time Practices Po

San Diego 9 F M C 525 547 1966

As used in section 17 and as applied to terminal practices we think that 

and reasaonble practice most appropriately means a practice otherwise la

but not excessive and which is fitand appropriate to the end in view

We are ofthe opinion that with regard to the actions ofCP

discharging its public responsibilities this definition of just 

reasonable practice is particularly appropriate The manag

decisions by CPA which led to adoption of an exclusive term

operator concept are on this record fit and appropriate to the 

in view to provide satisfactory and responsible termina

services at minimum cost to the public

With regard to the alleged violations of section 16 while 

forthrightly admit that the exclusive terminalling rights of E

constitute a preference and advantage to it over others we h

not been shown that under these peculiar facts those charact

tics are either undue or unreasonable What has been shown 

small but growing Port whose primary concern is stabilit

terminal services to perpetuate the meager traffic volume it 
SEAL S FRANCIS C HURNEY

Secretary

AGREEMENT PORT CANAVERAL AND LUCKENBACH S S 301

been able to attract through its facilities The introduction of a

discomfiting competitve atmosphere which could prove disastrous

to the Port in the judgment of its managing authority would

certainly seem to be adequate justification for disallowance of

such disruption under these prevailing circumstances When

proper administration and continued existence of asmall new port

is weighed against the disadvantage to competitors of Eller and

preferential treatment ofEller necessitated by existing conditions

at the Port we think the public interest is best served by allowing

this Port to ensure its survival by the means adopted

This is not to say that conditions at Port Canaveral are static or

that this conclusion would be perpetually valid As limited to the

prevailing conditions at the time of acts in controversy here

however we find no violation of section 16 First to have been

shown

ULTIMATE CONCLUSIONS

Based on our considerations discussed above it is hereby con

cluded that

Agreement No T2598 as amended by Agreement No T2598 1

is the complete understanding or arrangement between respond

ents

The oral franchise agreement is subject to section 15 of the

Shipping Act 1916 No memorandum of this franchise has been

submitted for approval

Respondents have entered into and implemented agreements or

arrangements subject to section 15 oftheAct

Neither Agreement No T 2598 as amended by Agreement No

T2598 1 nor the franchise agreement grants an undue prefer

ence or subjects another to undue or unreasonable prejudice or

disadvantage in violation ofsection 15 and 16 First

CPA has not established unjust and unreasonable regulations

and practices relating to the receiving handling storing or deliv

ering ofproperty in violation of section 17

Agreement No T 2598 as amended by Agreement No T 2598 1

is approved

17 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 7189

IN THE MATTER OF AGREEMENT FF 71 7 COOPERATIVE W

ING ARRANGEMENT

Agreement FF 71 7 among independent ocean freight forwarders the s

matter of which in part concerns oceancommerce and competition a

persons subject to the Shipping Act 1916 required to be filed wit

Commission

Agreement disapproved insofar as it is concerned with indefinite and unc

proposed operations

Agreement will result in increased competition between independent 

freight forwarders and customhouse brokers and is not contrary to 

trust policies

Agreement as modified is approved

The Bernard Customs agreement for the purchase of Bernard s Part IVrig

subject to section 15 of the Shipping Act 1916

Respondents have failed to file and have carried out an agreement subj

section 15 Shipping Act 1916 without Commission approval

Substitution of one new member to an agreement for a previous member 

such substitution has no competitive impact does not require se

hearings to be held regarding the substituted member

HaroldE Spencer for respondents Custonts Forwarders I

Abraham A Diamond for petitioner C S Green and Com

and intervenor D C Andrews International Inc

Harold E Mesirow for petitioner Alltran port Incorporate

H Neil Garson for petitioners Lyons Transport Inc 

Import Freight Carriers Inc

Donald J Brunner and C Douglass Miller Hearing Couns

March 20 1974

REPORT

By THE COMMISSION Helen Delich Bentley Chairman Jam

Day Vice Chairman Ashton C Barrett and George H H

Commissioners Commissioner Clarence Morse dissenti

302
FREIGHT FORWARDER AGREEMENT 71 7 303

This proceeding is before us on exceptions to the Initial Decision

of Administrative Law Judge Herbert K Greer As a result of

protests and requests for hearing filed by Lyons Transport Inc

Lyons Import Freight Carriers Inc Import Alltransport Inc

Alltransport and C S Greene and Company Greene the original

investigation was instituted That investigation was designed to

determine 1 whether Agreement FF 71 7 was a true and com

plete copy ofall agreements and arrangements among the parties

2 whether the parties carried out any agreements or arrange

ments subject to the Act without Commission approval and 3

whether FF 71 7 or any other agreements or arrangements

should be approved disapproved or modified under section 15

D C Andrews International Inc and Universal Carloading Co

Inc subsequently intervened 1

Administrative Law Judge Greer issued his Initial Decision on

December 19 1972 Exceptions to this Initial Decision were filed

appropriate replies to exceptions were duly filed and oral argu

ment was heard

FACTS

J E Bernard Co Inc Quast Co Inc E Besler Co Inc

KS A Illinois Inc Nettles Co Inc and William A McGinty Co

are all independent ocean freight forwarders IOFF s licensed by

this Commission They entered into a pre organization subscrip

tion agreement for the purpose of forming a corporation to be

named Customs Forwarders Inc Customs in which the signato

ries would be stockholders to the extent set forth in the agree

ment Customs was incorporated under the laws of Illinois on

August 3 1970 with the stated purpose of engaging in the

business of international and domestic freight forwarding On

September 1 1970 Customs entered into an agreement with

Bernard for the purchase by Customs of Bernard s domestic

forwarder rights issued it by the Interstate Commerce Commis

sion ICC pursuant to Part IV of the Interstate Commerce Act

Subsequently on September 23 1970 Customs Bernard applied

to the ICC for authority to consummate this purchase This

application is currently pending before the ICC

In early 1971 the Commission s staff became aware that re

spondents persons subject to the Act had entered into an agree

ment which had not been filed Respondents were advised that

1

Following the prehearing conference Universal withdrew and did not participate further in this

proceeding For the sake of convenience petitioners Lyons Import Alltransport and Greene and

intervenor Andrews are sometimes collectively referred to as protestants herein

17 F M C
304 FEDERAL MARITIME COMMISSION

they could be in violation of section 15 and after an exchang

correspondence FF 71 7 wasprepared and filed with the Com

sion The pertinent portion of FF 71 7 provides

the signatories hereto entered into a preorganization subscription a

ment for the purpose of forming an Illinois corporation to be named Cu

Forwarders Inc in which the signatories hereto will be stockholders 

extent set forth in that agreement The stated purpose of Custom is to e

in the business of international and domestic freight forwarding Said a

ment also provided that upon its incorporation Customs would enter in

agreement with J E Bernard Co Inc one of the signatories here

purchase upon the terms and conditions therein set forth the lomestic for

ing rights of the latter issued pursuant to part IVof the Interstate Comm

Act by the Interstate Commerce Commission ICC in its docket No FF 1l9 

subnumbered dockets Customs was incorporated under the laws of Illino

August 8 1970 On September I 1970 it entered into an agreement 

Bernard for the purchase of the Bernard rights By application filed wit

ICC on September 28 1970 Bernard and Customs applied for author

purchase the Bernard rights This application is presently pending befo

ICC Up to the present time Customs has conducted no operations nor d

propose to do so unless and until the ICC authorizes the transfer to it 

Befnard rights

The understandings and agreements set forth are

1 When and if the ICC approves purchase of the Bernard rights by Cu

Customs will institute and conduct operations pursuant to such rights 

domestic freight forwarder subject to regulation under part IVof the Inte

Commerce Act and will operate in the usual mimner in which such f

forwarders operate

2 The operations of Customs will be managed and directed by its duly e

officers and directors there being no unlerstandings or agreements be

the signatories hereto as to such matters except as set forth herein and 

presubscription agreement

3 When and if the ICC approves the purchase by Customs of the Be

rights orat such other time as its board of directors may determine the 

will consider whether to what extent and in what manner Customs 

institute additional operations within the scope of its corporate pur

including but not limited to the expansion of its operations under the r

tory jurisdiction of the ICC or the institution of operations under the regu

jurisdiction of the FMC or CAB

4 Customs will not engage in operations as an independent ocean f

forwarder ornon vessel owning common carrier by water orany other a

subject to regulations by the FMC ICC orCAB withouHirst having 

necessary approvals and authorizations of such agencies haying filed all 

or other documents necessary to such operation and having complied w

regulations applicable thereto

Of the parties to FF 71 7 Bernard is the only one ho

domestic freight forwarder rights under Part IV of the Inter

Commerce Act All of the parties also act as customhouse bro

and for these activities they are under the jurisdiction o

Treasury Department

17 F MC

i

1
FREIGHT FORWARDER AGREEMENT 71 7 305

Greene Alltransport and Andrews are freight forwarders li

censed by this Commission Lyons and Import hold Part IV

forwarder rights broader in scope than those held by Bernard

Alltransport has limited Part IV rights Andrews and Alltransport

has limited PartIV rights Andrews and Alltransport also operate

as customhouse brokers that being Alltransport s principal activ

ity

Green operates as a nonvessel operating common carrier

NVOCC and is affiliated with several other firms which operate

in various fields of transportation One affiliate C S Green

Company Inc an Illinois corporation Greene Illinois holds Part

IV forwarding rights broader in scope than those ofBernard

Lyons and Import are owned by Lyons Container Services

which also owns other transporation related firms including

Cargo in Containers Inc an NVOCC Lyons handles only export

traffic and Import handles only import traffic Lyons receives

traffic from most ofthe IOFFs in the Chicago area including the

parties to FF 71 7 Import receives substantial traffic from Besler

Schroff Bernard Nettles and McGinty in connection with their

customhouse operations

Except for Bernard the parties to FF 71 7 are regularly

requested by their customers to arrange inland transportation

with other firms This has caused problems They dislike referring

traffic to inland forwarders who compete with them because ofthe

risk of losing their IOFF customers Some inland forwarders

handling their business are unfamiliar with the requirements of

international traffic and make no effort to tailor their services to

meet the needs of the traffic or the shippers Difficulty has also

been encountered in tracing shipments

An IOFF and customhouse broker who is affiliated with an

inland forwarder has an advantage over one without such an

affilation because of the growing trend of shippers to deal with

firms who can provide multiple service Respondents will there

fore enhance their own competitive positions if they may offer

their customer inland forwarding services

DISCUSSION AND CONCLUSIONS

In his Initial Decision the Administrative Law Judge concluded

that while the ultimate agreement FF 71 7 as modified by him

was subject to section 15 Shipping Act 1916 the underlying

previous agreements were not so subject Judge Greer analyzed

these various agreements concluding that they were subject

neither to the Act nor to the Commission s jurisdiction because

17 F M C
FREIGHT FORWARDER AGREEMENT 71 7 305

Greene Alltransport and Andrews are freight forwarders li

censed by this Commission Lyons and Import hold Part IV

forwarder rights broader in scope than those held by Bernard

Alltransport has limited Part IV rights Andrews and Alltransport

has limited PartIV rights Andrews and Alltransport also operate

as customhouse brokers that being Alltransport s principal activ

ity

Green operates as a nonvessel operating common carrier

NVOCC and is affiliated with several other firms which operate

in various fields of transportation One affiliate C S Green

Company Inc an Illinois corporation Greene Illinois holds Part

IV forwarding rights broader in scope than those ofBernard

Lyons and Import are owned by Lyons Container Services

which also owns other transporation related firms including

Cargo in Containers Inc an NVOCC Lyons handles only export

traffic and Import handles only import traffic Lyons receives

traffic from most ofthe IOFFs in the Chicago area including the

parties to FF 71 7 Import receives substantial traffic from Besler

Schroff Bernard Nettles and McGinty in connection with their

customhouse operations

Except for Bernard the parties to FF 71 7 are regularly

requested by their customers to arrange inland transportation

with other firms This has caused problems They dislike referring

traffic to inland forwarders who compete with them because ofthe

risk of losing their IOFF customers Some inland forwarders

handling their business are unfamiliar with the requirements of

international traffic and make no effort to tailor their services to

meet the needs of the traffic or the shippers Difficulty has also

been encountered in tracing shipments

An IOFF and customhouse broker who is affiliated with an

inland forwarder has an advantage over one without such an

affilation because of the growing trend of shippers to deal with

firms who can provide multiple service Respondents will there

fore enhance their own competitive positions if they may offer

their customer inland forwarding services

DISCUSSION AND CONCLUSIONS

In his Initial Decision the Administrative Law Judge concluded

that while the ultimate agreement FF 71 7 as modified by him

was subject to section 15 Shipping Act 1916 the underlying

previous agreements were not so subject Judge Greer analyzed

these various agreements concluding that they were subject

neither to the Act nor to the Commission s jurisdiction because

17 F M C
306 FEDERAL MARITIME COMMISSION

their subject matter is Part IV forwarding a subject within 

jurisdiction of the Interstate Commerce Commission over wh

pursuant to section 33 of the Shipping Act this Commission 

prohibited from exercising concurrent jurisdiction This conclu

was cited by protestants as error and we agreewith respect to

agreement among respondents to purchase the Part IV right

Bernard

As the single operative factor among respondents subsid

agreements which upon execution would have a considera

effect upon the capabilities ofthe parties in commerce we ar

the opinion that the agreement to purchase these Bernard rig

is appropriately subject to this Commission s

jurisdiction I

other of the subsidiary agreements underlying FF 71 7 does 

this agreement to purchase Part IV forwarding rights with

question is one the consummation of which gives Customs 

special accommodations privileges and advantages inherent in 

acquisition of expanded forwarding activities As a result we 

that such an agreement must fall within the board scope of sec

16 Shipping Act 1916

While not in complete consonancewith our conclusion as to 

agreement the Administrative Law Judge in his Initial Decis

did conclude that the prime purpose of Agreement FF 71 7 

the enhancement ofrespondent s competitve positions by acq

tion ofrights allowing them to offer inland forwarding service

conjunction with their operations as ocean freight forward

With this conclusion we agree We simply extend the logic of 

finding to the agreement which provides the vehicle for 

competitive advantage Ifacquisition of inland forwarding rig

were the prime purpose of Agreement FF 71 7 then the ag

ment providing for that acquisition must be found tobe within 

scope of section 15 Moreover as to this purchase agreement 

find section 33 tobe no bar to our assumption ofjurisdiction T

section may not be used here toforeclose ourjurisdiction over 

agreement because the Interstate Commerce Commission sju

idiction over Part IV rights is in no way infringed upon by 

jurisdiction over the formation of Customs as to which 

purchase is crucial Of course if this Commission were to di

prove this agreement and thereby block the formation of Custo

there could be no application by Customs before the Inters

Commerce Commission Yet it may not be admitted that 

action would frustrate ICC regulation of inland forwarders 

toms application is not that of an inland freight forwarder 

17 F M C
FREIGHT FORWARDER AGREEMENT 71 7 307

Customs is not an inland freight forwarder until so authorized by

ICC Whether or not Customs may be formed to seek that authori

zation is a matter over which we may appropiately exercise

jurisdiction This action in no way infringes upon the province of a

sister regulatory agency nor is it to be so construed

As a result of our determination that the agreement for the

purchase ofBernard s Part IV rights is subject to ourjurisdiction

it must therefore follow that respondents have not filed it as

required and have implemented that agreement without Commis

sion approval This conclusion is inescapable from the record

Customs has filed its request with the ICC

In his Initial Decision the Administrative LawJudge concluded

that while Customs possible operation as an NVOCC was consid

ered by the parties the record was insufficient to determine

whether this joint operation would be lawful or unlawful The

agreement itself paragraphs 3 and 4 above is vague and indefi

nite on this question and is eqally vague on whatother operations

might be conducted by Customs in the future Citing Mediterra

nean Pools Investigation 9 F M C 264 294 1966 the Administra

tive Law Judge concluded that it would be contrary to effective

regulation to approve an agreement which is subject to various

interpretations and involves uncertainties As aresult he recom

mended modification of FF 71 7 by disapproval of paragraphs 3

and 4 thereby limiting respondent Customs operations toPart IV

forwarding This recommended mofification was not challenged at

oral argument and we agree with the determination of this

matter reached by Judge Greer Agreeing as we do with the

modification of Agreement FF 71 7 we must analyze the re

minder ofthat agreement to determine whether or not it is subject

to section 15 of the Act and if so whether or not it should be

approved

Itis evident that a central purpose ofthis agreement relates to

competition among persons subject to the Act The aims and

purposes of the parties to such an agreement are found in facts

and circumstances surrounding that agreement s creation they

are properly relevant to the issue of applicability of section 15

York Forwarding Corp et al F M C Docket No 704 mimeo

report served March 3 1972 page 10

Respondents testimony is

The reasons for formation of Customs Forwarders are found in the vast

changes which have been taking place in the field of international transporta

17 F M C
308 FEDERAL MARITIME COMMISSION

tion in recent years and which arenow accelerating at a very rapid rate T

result from the efforts of the industry of offer a total service to U S impo

and exporters Importers and exporters want a fast coordinated respon

service and to get it they want to deal with the fewest possible numb

persons The entire industry is rapidly moving in that direction The 

companies steamship lines foreign and domestic rail carriers motor car

and freight forwarders have moved and are moving with great rapidi

acquire subsidiaries and afiliates so they can offer in one package a 

transporation service

They seek control of

an inland forwarder we can use to secure inland transportation which 

be relied upon as an integral coordinated part of the services which we as o

freight forwarders and customhouse brokers can offer our exporter and 

porter customers

and

to respond to the highly competitive atmosphere of international tran

tation by a

group of IOFFs faced with the choice of joint participation i

increasingly important area of international trade or limited participation

They refer tothe interrelationship between protestants and o

transportation related firms as well as the growing num 

firms which through affiliates or associates are able to 

multiple transportation services and are

moving into areas served by independent ocean freight forwarders 

customho lStl brokers and are taking business away from them

Protestants Alltransport Greene and Andrews are IOFFs 

compete with respondents They also hold Part y forwar

rights Their ability to offer shippers a combined IOFF and in

forwarding service affords them a competive advantage an ad

tage which other firms enjoy because they also furnish mu

transportation services Respondents a group of IOFFs 

Part IV forwarding rights to respond to the competitive situa

which exists in the Chicago cOJl1m rcial zone The compe

impact of their agreement will not only affect IOFFs who 

Part IV forwarding rgiths individually or by association bu

affect as well their competitve position vis a vis Chicago IO

who have no such rights or associati ns

Intermodal transportation and the growing practice oftrans

tation related firms to furnish multiple services by obtaining 

necessary authority from all agencies coneerned with each p

of the services or by affiliation or association with other 

which have the necessary authority has brought about juri

tional problems InAtlantic GulflWest Coast and SouthAm

17 F MC
FREIGHT FORWARDER AGREEMENT 71 7 309

Conference 13 F M C 121 130 1 1969 thisCommission considered

the question of dual jurisdiction and held

In the absence of a

showing that the two sister agencies claim jurisdiction over

the same particular activity the two agencies may exercise concurrentjurisdic

tion over the same persons See e g Alabama Great Southern Railroad Com

pany

v

Fedeml Maritime Commission 126 D C Cir 323 379 F 2d 100 102

1967

As discussed above this Commission has jurisdiction over the

parties to FF 71 7 who are the co owners ofCustoms The ICC has

jurisdiction over them because through a jointly owned corpora

tion they are seeking Part IV forwarding rights The fact that the

ICC has jurisdiction over a portion ofthe subject matter ofFF 71

7 would not exempt the agreement from the requirements of

section 15 or deprive thisCommission ofits jursdiction and duty to

determine the lawfulness of that portion of the subject matter

which relates to competition between persons subject to theAct or

the joint operation by such persons ofan NVOCC

It would therefore seem clear that this Commission is amply

warranted in asserting its jurisdiction pursuant to section 15

Shipping Act 1916 over both the parties to and the subject matter

of this agreement Whether or not this agreement is to be be

approved by the Commission however is a determination which

must be made in light of the agreement s status vis avis the

antitrust policies ofthe United States

Section 15 provides

The Commission shall by order after notice and hearing disapprove any

agreement that it finds to be unjustly discriminatory or unfair as between

carriers shippers exporters importers or ports or between exporters from the

United States and their foreign competitors or to operate to the detriment of

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

be in violation of this Act and shall approve all other agreements

The competitive philosophy embodied in the antitrust laws is to be considered

when determining whether an agreement is contrary to the public interest

Investigation ofPassenger Travel Agents 10 F MC 27 34 1966 In FMC v

Svenska America Linien 390 U S 238 245 1968 the Courtconfirmed this policy

and held

Congress has it is true decided to confer antitrust immunity unless the

agreement is found to violate certain statutory standards but as already

indicated antitrust concepts are intimately involved inthe standards Congress

chose The Commission s approach does not make the promise of antitrust

immunity meaningless because a restraint that would violate the antitrust laws

will still be approved whenever a sufficient justification for it exists Nor does

the Commission s test by requiring the conference to come forward with a

justification for the restraint improperly shift the burden of proof The Commis

sion mustof course adduce substantial evidence to support a

finding under one

17 F M C
310 FEDERAL MARITIME COMMISSION

of the four standards of 15 but once an antitrust violation is established 

alone will normally constitute substantial evidence that the agreem

contrary to the public interest unless other evidence in the record 

detracts from the weight of this factor

The Commission s authority to exempt agreements betw

persons subject to the Act from the antitrust laws would 

little meaning if in fact a violation has not been demonstr

Protestants view FF 71 7 as anticompetitive per se presu

tively or by its very nature and thus contrary to the anti

policies They argue that as respondents have failed to ju

their agreement it must be disapproved They further con

that it violates section 7 ofthe Clayton Act 15 U S C 18 w

provides in part

No coporation engaged in commerce shall acquire directly or indirectl

whole orany part of the stock or other share capital and no corporation su

to the jurisdiction of the Federal Trade Commission shall acquire the wh

any part of the assets of another corporation engaged also in commerce 

in any line of commerce in any section of the country the effect of 

acquisition may be substantially to lessen competition or to tend to cre

monopoly

Respondents position is that no violation of the antitrust 

has been shown and in the absence ofevidence to support su

violation they do not have the burden to adduce justification T

contend that because the agreement does not permit Custom

operate as an IOFF or permit respondents to combine t

individual IOFF operations in any manner the effect ofFF 71 

not to reduce the number of IOFF competitiors available to 

shipping public but tothe contrary competition for IOFF busi

will be intensified since respondents as indivudal IOFFs wi

the first time be in a position to offer an affiliated inland fre

forwarder service to their international customers They w

limit the Commission s consideration ofthe competitive impa

the agreement to IOFFs Protestants and Wearing Counsel a

that the consideration of the public interest and the commerc

the United States requires that the competitve situation mus

related not only to IOFFs but also to customhouse brokers 

inland forwarders

The agreement not having been effectuated the possibility 

it will or will not result in a violation of the Clayton Ac

otherwise offend antitrust policies and the public interest is 

test to be applied United States v PennOlin Co 378 U S 158 

1964 FTC v Consolidated Foods 380 U S 592 595 1965 

contention that it is per se in violation of those policies is not 

founded The fact that a group of corporations has acquired 

17 F MC
FREIGHT FORWARDER AGREEMENT 71 7 311

stock of another corporation is sufficient to cause inquiry but it

must also appear that competition is lessened thereby or as

provided in section 15 competition is controlled regulated pre

vented or destroyed

Respondent corporations have formed a new corporation which

is to be ajoint venture and in thatrespect it is within the purview

of the Clayton Act In Penn Olin supra the Court in holding the

Clayton Act to have been violated found that at p

168

The test of the section is the effect of the acquisition Certainly the formation of

a joint venture and purchase by the organizers of its stock would substantially

lessen competition indeed foreclose itas between them both being engaged in

commerce This would be true whetherthey were in actual or potential competi

tion with each other and even though the new corporation was formed to create

a wholly new enterprise Emphasis suppled

and at page 169

The joint venture like the merger and the conglomeration often creates

anticompetitve dangers It is the chosen competitive instrument of two or more

corporations previously acting independently and usually competitive 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 inits line ofcommerce Emphasis supplied

Respondents are IOFFs and customhouse brokers who compete

with one another and how have formed a corporation which is to

engage in inland forwarding Thus the appropriate inquiry is

whether the agreement will serve to foreclose or substantially

lessen competition between the parties to the agreement or

whether absent the joint venture they would compete with each

other in the line of commerce the agreement concerns Also to be

considered is the impact of the agreement on protestants and

others who may be competitively affected and whether the result

ing competitive impact is contrary to the provisions ofsection 15

At present Andrews and Alltransport compete with the individ

ual respondents as IOFFs and customhouse brokers Both firms

are Part IV forwarders Greene not a customhouse broker com

petes with respondents as an IOFF It furnishes Part IV forward

ing through an affiliated firm There are other firms able to offer

multiple services including customhouse brokerage inland and

coean forwarding To what extent and whether individually or

through affiliation with other firms is not fully demonstrated on

the record The fact that there is a trend toward shipper prefer

ence to obtain needed services by dealing with the fewest number

of transporation related firms is undisputed Respondents seek to

meet this trend by extending the scope of services they now offer

to include Part IV forwarding They are not in immediate danger

17 F M C
312 FEDERAL MARITIME COMMISSION

of losing business or going out ofbusiness All are operating 

profit Nor may it be found that protestants will be forced ou

business jf F F 71 7 becomes effective They are too well es

lished and too well affiliated There is no basis tosupport afind

that a monopoly will created in the fields of cUlltomhouse bro

age inland or ocean forwarding if FF 71 7 is approved 

question is whether competition will be lessened or as respo

ents contend increaaed

Under the agreement as modified respondents joint intere

limited to Customs a Part IV forwarder Their testimony is 

they will remain as competitive as they now are as customho

brokers and IOFFs The contention that they will not d

assumes that this testimony is contrary totheir actual intent 

not so found Respondents principal source of revenue is f

customhouse brokerage A motive to divide that income o

lessen it by reason of failure to compete with each other as we

with customhouse brokers not privy to the agreement is 

reasonably apparent Under the agreement as modified sh

they in any manner resort to concerted action or pool t

resources in the areas of customhouse brokerage or ocean fre

forwarding they would violate the Act by extending their ac

ties beyond the scope ofthe agreement Comparison indicates 

protestants have been able to attract a substantial portion of 

IOFF business in Chicago because as individual firms or thro

affiliated firms they furnish both inland and ocean forward

Disapproval of FF 71 7 would serve to preserve their favor

competitive positipn and prevent respondents from offering to

shipping public both inland and ocean forwarding Approval w

permit respondents as rOFFs to overcome their present com

tive disadvantage Protestants and other IOFFs offering 

services would be faced with six new competitors as respond

would compete as individual firms because they are prohib

from acting jointly as IOFFs

In the field ofcustomhouse brokerage respondents are not 

competitive disadvantage Collectively they handle approxima

50 percent of the import traffic moving through Chicago T

have competed successfully with other customhouse brokers w

out the availability of an inland forwarding operation in w

they have ajoint interest They have been required to use in

forwarders who in some instances compete with them as cus

house brokers and Qr IOFFs But this has not adversely affe

their customhouse brokerage business to a significant extent

Although there is no apparent necessity for them to have 

17 F MC
FREIGHT FORWARDER AGREEMENT 71 7 313

affiliated inland forwarder to remain healthy the question is

whether they may be prevented from so enhancing their competi

tive position and thereby perhaps increasing their share of the

customhouse brokerage business They are prohibited from acting

jointly as customhouse brokers In this endeavor and as IOFFs

they must compete individually In having available an inland

forwarder they may offer their customers and the shipping public

a combined IOFF inland and ocean forwarding service Andrews

and Alltransport furnish that combination of services Greene is

not a customhouse broker but there are an undetermined number

of firms which also compete in the multiservice area affected by

the agreement The requirement that respondents may not act in

concert as customhouse brokers under the agreement as amended

requires the conclusion that they must compete in that area as

individuals Alltransport and other firms who furnish similar

services would be faced by six additional individual competitors

Competition would be increased not lessened

The impact of the agreement on the small operator is also

offered as a reason for disapproval ofthe agreement Alltransport

operating as an IOFF customhouse broker and inland forwarder

would prevent respondents from attaining the same advantageous

competitive position vis a vis the small operator which Alltrans

port now enjoys This is related to respondents pooling of re

sources in Customs and a concentration of their competitive

efforts on others rather than as between them As this record will

not support a finding that competition between respondents will

be lessened in any endeavor in which they have engaged prior to

the agreement the argument is not persuasive

To summarize in the areas ofcustomhouse brokerage and ocean

forwarding respondents must continue to operate as individual

firms The agreement will not serve to foreclose or lessen competi

tion between them The record permits only the conclusion that

they will as they have testified continue to compete in these

areas in the same manner they now do Their individual competi

tive positions as customhouse brokers and IOFFs will be enhanced

by the ability to extend the scope oftheir services to include inland

forwarding but only to the extent that they will have a compara

tively equal position with other firms who now offer a similar

combination ofservices In such a competitve situation the reten

tion or loss of patronage will depend primarily on salesmanship

the qualifty of the services rendered and shipper needs There

may be a shift in the market share from protestants to respond

ents but not among respondents because of a lessening of compe

17 F M C
314 FEDERAL MARITIME COMMISSION

tition among them in the fileds in which they have operated p

to FF 71 7 Penn Olin supra is not interpreted as preced

which requires disapproval of the agreement For a firm 

attempt to increase its market share in an endeavor in whic

engages is an essential element of competition provided of cou

in so doing it does not violate the antitrust laws

It is to be re emphasized that respondents are forbidden f

operating jointly orcoordinating customhouse or IOFF operati

No intent to divide these markets appears Inasmuch as they 

to remain competitive in those areas they will individually c

pete with other customhouse brokers and IOFFs who also furn

inland forwarding as individuals or through associates The ag

ment will result in increased not lessened competition in 

multiple service field Itis this increased competition which w

be precluded ifFF 71 7 is disapproved

It is concluded that approval of the agreement would no

contrary to antitrustlaws the public interest or be detriment

the commerce ofthe United States insofar as competition betw

ocean forwarders and customhouse brokers may be affec

Therefore we conclude the Agreement FF 71 7 as modi

should be approved

There remains for our disposal only one other issue At 

argument counsel for Customs advised that Nettles had sol

interest in Customs toa firm then understood tobe called Chic

Consolidators Inc Upon learning this fact petitioners and 

intervenor attempted to ascertain the location and corpo

character ofChicago Consolidators Inc but were unsuccessf

these attempts As a result petitioner Alltransport filed amo

on May 14 1973 requesting the production of additional 

regarding Chicago Consolidators so as to allow it and 

Commission to discover the nature of that company and 

operations

Lyons Transport Import Freight Carriers C S Greene and 

Inc and D C Andrews filed aseparate motion requesting a sta

the proceeding and further hearing

The petition of Alltransport merely requested that Custom

required to provide full information regarding the new entit

Customs and that the Commission postpone consideratio

Agreement FF 71 7 until such time as that information sha

forthcoming

The motion of Lyons et al however alleged that the subs

tion of one member of Customs for another

may completely alter that impact of the agreement thereby requirin

17 F M C
FREIGHT FORWARDER AGREEMENT 71 7 315

proceeding to be stayed and afurther hearing granted so that petitioners and

the Commission will have afull and fair opportunity to investigate and deter

mine the effect of the modification upon the petitioners and the public interest

Petitioners further alleged that section 15 Shipping Act 1916

requires that upon modification of an agreement subject to that

section such modification must be filed immediately with the

Commission They argued that until the complete identity of the

new member of Customs is known the agreement may not be

acted upon by the Commission because the new company may be

one not subject to the Act thereby destroying jurisdiction As a

result these petitioners requested a complete investigation and

further hearing to ascertain the identity and character ofthe new

entity

In its response to the two motions described above Customs

acknowledges error in its designation of its new member Rather

than Chicago Consolidators Inc the true name of the entity

involved is claimed by Customs to be Chicago Container Services

Inc hereinafter Services Included in the reply of Customs were

appendices which identify specifically the nature of Services its

ownership and principal officers and their business interests

Notwithstanding the assertion of Customs that it had previously

notified all protestants as to this relevant information a conten

tion disputed by protestantsCustoms in its reply contended that

having now provided this information nothing shown thereby

requires further hearings or proceedings

It is our opinion that Customs is correction its contention that a

further hearing is unwarranted

The information as to the corporate identity and characteristics

of the new entity Services is provided by respondent s

reply to

protestants motions By that information it is shown that Serv

ices is aDelaware corporation authorized to do business in Illinois

and that Chicago Illinois is its principal and only place ofbusiness

Further Services is not a common carrier an independent

freight forwarder or an other person subject to the Shipping

Act or the Interstate Commerce Act nor is it a customhouse

broker The sole function of Services is stuffing and unstuffing

containers offreight moving to and from overseas points loading

and unloading rail cars and miscellaneous packing services

As a result of the corporate nature of Services and of its

functions it seems clear that the substitution of Services for

Nettles as a member of Agreement FF 71 7 does not further

complicate the issues as to competitive effects of Customs with

regard to other freight forwarders in the area The issue of

17 F MC
316 FEDERAL MARITIME COMMISSION

competitive impact has been determined by our finding 

Customs existence would enhance competition rather than 

grade competition among freight forwarders That one memb

Customs has been removed and another entity substituted f

would appear to further enhance competition if it were to h

any different effect at all when viewed with respect to 

corporate nature ofthe substituted entity

We are reminded of various judicial admonishments whic

has been urged compel us to grant further hearings with reg

to the substitution of Services for Nettles Specifically our at

tion has been drawn toMarine Space Enclosures lite v FMC 

F 2d 577 1969 It is urged upon us that the holding therein pla

upon this Commission the burden to justify any departure f

the hearing process mandated by section 15 of the Shipping 

While we agree that we must indeed shoulder such a bu

generally we are of the opinion that Marine Space Enclosure

inaptly cited for the principle in light of the vastly differing 

situation facing us here as opposed to that facing us in that c

There at issue was a 70 year restrictive contractwith conseq

extremely serious antitrust ramifications Clearly a hearin

more than pro forma proportions wasthere required

Here however we are urged to hold full evidentiary hearing

some other sort of hearing to assist in a determination mad

full hearing already held We have found no serious anticom

tive effects when Nettles a freight forwarder was a membe

this arrangement Since we found no serious anticompet

effects when Nettles a freight forwarder was a member of 

arrangement we are unable to fathom how substitution o

entity of more limited capability than Nettles could be m

unfavorable tothe competitive atmosphere

The substitution of Services for Nettles introduces no 

dimensions Services simply performs the limited functions w

would otherwise be served by the agent We are therefore un

to conclude that the substitution of a member whose capaci

strictly limited tocontainer stuffing and unstuffing could resu

graver anticompetitive repercussions than membership 

freight forwarder As noted above we are constrained to find f

the record of hearings already held that if any effect of 

substitution is felt it will be rather a further enhancemen

competition

Substitution of a party as here accomplished would not ne

sarily oust Commission jurisdiction over the agreement 

situation here is distinguishable from Agreement No 9481 H

17 F MC
FREIGHT FORWARDER AGREEMENT 71 7 317

ong Tonnage Ceiling Agreement 10 F M C 134 1966 and Inter

American Freight Conference Cargo Pooling Agreements Nos

9682 9683 and 9684 14 F M C 58 1970 In the latter two cases

after the agreements were filed for approval but prior to Commis

sion action one or more parties not only withdrew from the

agreements but also opposed their approval The Commission

concluded in both cases that we could no longer exercise our

section 15 authority because no agreements remained before us

The present situation is different The agreement herein is a

subscription agreement in which the parties are shareholders in a

new corporate entity The withdrawal of one party did not result

in an agreement or situation involving any changed relationship

among remaining parties Instead the withdrawing shareholder

sold its interest to a new party with the concurrence ofthe other

parties leaving the overall relationship among the originally fixed

number of shareholders unchanged and all proponents of the

agreement continue to urge approval

In the Inter American Freight Conference case we said that the

withdrawal of party presents a whole new pciture and requires

that the remaining parties present the Commission with the new

agreement representing the readjustments made necessary by the

change in relationships emphasis added at 612 The present

case involves no change in relationships and requires no readjust

ments in the agreement No issues having been raised by the

substitution of parties other than that fact itself we see no value

in reinstituting hearings to replow the same earth

Therefore it is hereby ordered

That Agreement FF 71 7

among independent ocean freight

forwarders the subject matter of which in part concerns ocean

commerce and competition among persons subject to the Shipping

Act 1916 is required to be filed with the Commission

That the agreement is disapproved insofar as it is concerned

with indefinite and uncertain proposed operations

That the agreement as modified is approved

That the Bernard Customs agreement for the purchase of Ber

nard s Part IV rights is subject to section 15 ofthe Shipping Act

1916

That respondents have failed to file and have carried out an

agreement subject to section 15 Shipping Act 1916 without

Commission approval

That substitution of one new member to an agreement for a

previous member when such substitution has no competitive

17 F M C
318 FEDERAL MARITIME COMMISSION

impact does not require separate hearings to be held regard

the substituted member

COMMISSIONER CLARENCE MORSE DISSENTING

Idissent on three grounds

First The agreement as filed wasbetween six persons inc

ing Nettles each of whom were other persons subject to 

Act The withdrawal of Nettles and the substitution of Serv

terminates the agreement as filed and creates a new associa

and a new agreement That new agrement was never called to 

attention of the Administrative Law Judge and was first m

tioned during oral argument to the Commission on exceptions 

the Initial Decision I need only quote from Inter Ameri

Freight Conference 14 F M C 58 at 61 1970

Thus when prior to our approval of an agreement one of the parties the

repudiates or withdraws from the agreement a completely new set of rela

ships arises and normally a new beginning is required Should the rema

parties to the agreement desire approval evenwithout the withdrawing par

is incumbent upon them to reformulate the terms of the agreement so th

may be tested under the criteria of section 15

Second IfServices is a party the agreement is not approv

as a section 15 agreement because Service is neither a com

carrier by water nor an other person subject to this Act 

thus we have a mixed membership agreement See my con

ring and dissenting opinions in United Stevedoring Corporatio

Boston Shipping Association Docket 708 August 25 1972 

FMC 7 13 SRR 257 1972 and NYSA ILA Man Hour Tonn

Method ofAssessment Docket 7251 June 14 1973 16 FMC 381 

SRR 955 1973

Third While Marine Space Enclosures 420 F 2d 577 CA 

1969 may notrequire us to provide ahearing every time a pro

is filed to the approval of a section 15 type agreement no ma

how deficient the protest is in form a substance neverthel

absent an appropriate administrative proceedings and determ

tion that the class ofagreement is of such a de minimis or rou

character as to be exempt from the hearing process of section 

the burden is placed on this agency tojustify adeparture from 

hearing requirement of section 15 In my opinion we have not 

that burden by the simple recital ofthe pleadings and corresp

ence addressed tothis new agreement issue A casual readin

Marine Space Enclosures establishes that the least we should h

done was to have afforded interested parties an opportunit

submit affidavits and an outline of controverted issues that c

17 F MC
SEAL 8 FRANCIS C HURNEY

Secretary

FREIGHT FORWARDER AGREEMENT 71 7 319

be profitably explored in an evidentiary hearing This wasdenied

to the petitioners Marine Space Enclosures mandates that mini

mum procedure See also Persian Gulf Outward Freight Confer

ence v FMC 375 F 2d 335 341 n 4 1967

17 F M C
FEDERAL MARITIME COMMISSION

DOCKET No 7344

KRAFT FOODS

v

MOORE MCCORMACK LINES INC

Reparation denied

John J Lavaggi for complainant

J D Stratton for respondent

March 20 1974

REPORT

BY THE COMMISSION Helen Delich Bentley Chairman Jame

Day Vice Chairman Ashton C Barrett and Clarence Mo

CommiBsioners Commissioner George H Hearn dissen

This proceeding involves a claim by Kraft Foods for repara

from Moore McCormack Lines Inc as a result of an alle

overcharge on cargo shipped by Kraft Foods from New Yor

Mombasa on a vessel owned and operated by Moore McCorm

Lines Inc Administrative Law Judge James Francis Reilly 

issued an Initial Decision in which he found that 1 the claim 

not time barred and 2 an award ofreparation wasnot warra

on the record Exceptions tothat decision have been filed by K

Foods

FACTS

The shipment from which the complaint arose was transpo

on the S S Mormacbay of Moore McCormack which sailed 

New York on December 31 1972 arrived in Mombasa onFebr

3 1973 and left Mombasa on February 10 1973 Between Fe

ary 3 and February 10 1973 the disputed cargo wasunloaded 

accepted by the consignee customer of Kraft Foods

320

17 F MC
KRAFT FOODS vMOORE McCORMACK LINES 321

The transporation charges levied in this case were based upon a

measurement of 284 cubic feet shown on the reverse side of the

dock receipt and on the bill oflading As a result ofthese charges

the consignee notified Kraft Foods by letter of February 12 1973

that it seemed that the freight had been overcharged Thereafter

on February 23 1973 complainant Kraft Foods notified Moore

McCormack of the suspected overcharge and Kraft Foods chal

lenge to the measurements on which the charges were based

Complainant contended that the accurate measurement of the

shipment was 145 01 cubic feet as shown on various documents

including the face of the dock receipt Respondent countered by

asserting 1 that the 145 01 cubic foot measurement was not that

observed upon delivery of the cargo to the loading pier but that

the 284 cubic foot measure shown on the bill of lading and the

reverse side of the dock receipt was the measure observed upon

delivery and 2 that Kraft Foods complaint must be denied

because the shipment had left the custody of the carrier and

therefore the applicable tariff rules rule 16 precluded entertain

ment ofthe claim

DISCUSSION AND CCONCLUSION

Complainant alleges on exception that while paying lip service

to the rule that the two year statute of limitations provided in

section 22 ofthe Shipping Act 1916 1 may not be foreshortened by

the shorter limitation period provided by a tariff rule the Admin

istrative Law Judge in essence barred consideration ofthe merits

of this case on the ground that complainant s challenge was not

timely even though filed within the statutory period Further

complainant alleges that on the merits ofthe case ofrecord it has

sustained its burden ofproof nomatter the heft ofthat burden

We have reviewed this proceeding on these exceptions raised

and conclude that reparation should be denied The Administra

tive Law Judge denied reparation on the premise that complain

ant had failed to sustain its heavy burden ofproof on the merits of

the claim In so doing he relied on prior decisions ofthis Commis

sion 2 We deny reparation because complainant failed to comply

with Tariff Rule 16 and therefore need not consider whether

I Section 22 provides in pertinent part The Commission if the complaint isfiled within two years

after the cause of actionaccrued may directthe payment offull reparation to the complainant forthe

injury

2

For example Ocean F1 eight Consultants Inc v Royal NetherlandsSteamship Company Docket No

7239 1973 14 SRR 139 Abbott Labomto ies v Pmdenrial GraceLine Informal Docket No 2621 1973

14 SRR 165 Compare The Carborundum Co v Venezuelml Line Docket 7238 14 SRR 166 1973

17 F M C
322 FEDERAL MARITIME COMMISSION

complainant did or did not sustain its burden of proof as to 

correct measurement orweight of the shipment 3

South and East Africa Conference South Bound Freight T

No 1 F M C No 2 Original Page 110 provides in part

16 OVERCHARGES

Claims for adjustment of freight charges if based on alleged er

in description weight andor measurement will not be consid

unless presented to the carrier in writing before shipmen

volved leaves the custody of the carrier Any expenses incurre

the carrier in connection with its investigation of the claim 

be borne by the party responsible for the error or if no erro

found by the claimant

1 For purpose of uniformity in handling claims for ex

measurements refunds will only be made as follows

a Where an errorhas been made by the dock in calcula

ofmeasurements

b Against re measurements at port of loading prio

ship s departure

c Against re measurement by steamer s agent at des

tion

d By joint re measurement of steamer s agent and co

nee

e By re measurement of a marine surveyor when 

quested by steamer s agent

0 Re measurement fees and cable expenses in all cas

be paid by party atfault

Section 18 b 3 Shipping Act 1916 provides in pertinent pa

No common carrier by water in foreign commerce or conference of such ca

shall charge or demand or collect or receive a greater or less or dif

compensation for the transportation of property or for any service in conn

therewith than the rates and charges which are specified in its tariffs o

with the Commission and duly published and ineffect at the time nor sha

such carrierrebate refund orremit in any mannerorby any device any p

of the rates or charges so specified nor extend or deny to any perso

privilege or facility except in accordance with such tariffs

Section 18 b 3 makes it abundantly clear that a carri

strictly bound to adhere to the terms of the tariff as filed 

mandate applies not only tothe rates published therein but t

various terms rules regulations and conditions included w

that tariff which are as much a part ofthe tariff as are the 

3An agencymay modify oreven reverse ita past policies and announcements Atlanatic S aboa

v FPC 404 F 2d 1268 1278 CA DC 1968 SEC v Chen Corp 882 U S 194 1947 FCC v W

329 U S 223 228 1946 jand should do 80 to correct inconsistent holdinis

17 F M C
KRAFT FOODS v MOORE McCORMACK LINES 323

themselves 4Likewise unless in an appropriate proceeding we find

tariff rules and regulations to be in violation of the Shipping Act

1916 they must be strictly applied by us This of course does not

apply to tariff rules which attempt to limit to less than two years

the filing ofappropriate reparation actions with the Commission

explicitly provided by Congress in section 22 ofthe 1916 Act

Applying thismandate tothe case before us it can be seen that

Moore McCormack had no alternative here but to comply with the

rules of its tariff on file Therefore in order that Kraft Food s

claim be considered it was required to furnish its claim to Moore

McCormack prior to the time the shipment left Moore McC

ormack s custody The provisions of Rule 16 above are a reasona

ble attempt to eliminate a prime cause of dispute as to weight or

measurement by requiring that any re weighing or remeasuring

be conducted in a certain way and before the shipment at issue

leaves the custody ofthe carrier This rule represents a term and

condition of the tariff on file to which the carrierhas no choice but

to adhere scrupulously Because Kraft Foods did not comply with

these terms reparation here could not be granted

This conclusion in noway restricts the right ofany perons to file

a complaint pursuant to the provisions of section 22 of the

Shipping Act 1916 within two years after the cause of action

accrues However unless the shipper submits a claim involving

contested weight or measurement prior to the shipment leaving

the custody of the carrier Rule 16 the merit of any such claim

must be governed by the weights and measurements shown on the

document used to bill the shipper and or consignee for the trans

portation and the applicable tariff rates In this case the shipper

should have sought re weighing or re measuring prior to the

shipment leaving the custody ofthe carrier as required by Rule 16

ofthe Moore McCormack tariff

COMMISSIONER GEORGE H HEARN DISSENTING

Idisagree with the majority decision both on the ground that I

would not reverse the law of our prior decisions concerning

overcharge claims and Ifind that the complainant has met the

burden ofproof test established in those cases

First as to the question of whether we should entertain the

t

The shipper s knowledge ofthe lawful rate is conclusively presumed unsus City Southern Ry Co

v Ca1 l 227 US 639 1913 The same presumption isapplicable to tariffrules and regulations Neither

mistake inadvertence contrary intention of the parties hardship nor principles of equity permit a

deviation from the rates rules and regulations in the cat l iel S filed tariffLott isvile Nashville Ry v

Maxwell 237 U S 94 1915 Boston Maine R R v Hooker 233 U S 97 112 1914 United States of

America v Pan AmericanMail Line Inc 69 Civ 2381 SDNY September 11 1972 1973 AMC 404

17 F M C
324 FEDERAL MARITIME COMMISSION

claim regardless of the merits Ifindthe majority view contrar

law good sense and the public interest in positive regulation

Section 18b 3 of the Shipping Act states in relevant part

No common carrier shall collect or receive a greater or less or diffe

compen ation for the transportation of property than the rate specifie

it tariff Emphasis added

Ifthis provision extends as themajority contends to tariffr

as well as to rates its application torates must be strict The ra

must first be fixed before rules can create conditions limitat

or other qualifications on the applicability ofthe basic rates 

the words of the statute must be read to mean exactly what t

say a carrier may not charge a shipper an amount greater t

the tariff provides for carriage of a specific quantity of a cer

cargo

Ifthe carrier s weightmeasurement claim rule is allowe

bar all claims ipso facto the carrier will be complying with the 

by rejecting the claim but violating the statute by receiving a

greater than his tariffallows for the service performed There

by disallowing such claims as herein we will be compelling 

carrier to violate the law in those cases in which the shipp

allegation is well founded Every time a shipper s claim is reje

because ofthe tariff rule the Commission will need to charge 

carrier with violating the law by charging a greater rate tha

file by charging different rates to different shippers for the s

service and by Charging arate which is not on file The law ca

have been intended to produce such an absurd result

The majority seeks todistinguish this case from those invo

tariff rules limiting the time for submission of shipper claim

less than two years In fact both that type of rule and the ins

one involve time limitations The claim must be submitted to 

carrier before the expiration of a certain period or the occurra

ofa specific event The majority says that its decision here wil

restrict the right of shippers to file claims within the two 

provision of section 22 despite tariff rules limiting the claim f

period Thus the majority will permit carriers to accomplis

indirection what they cannot do directly prevent a shipper 

utilizing the full twoyear period

The majority contends that the distinction between the we

measurement claim rule here and the time limit rule is tha

twoyear statutory period is explicitly provided by Congress T

is however no less explicitness in the Congressionally prov

mandate that the carrier not collect a greater compe

o 17 F

C
KRAFT FOODS vMOORE McCORMACK LINES 325

tion for the transportation of property than the rates

specified in its tariff

Itis no answerto say that the shipper is presumed to know the

tariff rules The carrier is presumed to know the law but the

majority would let him defend against the shipper s neglect by

averring his own i e the carrier s failure to assess the proper rate

for the quantity actually shipped There is a wealth of cases

which require carriers to charge and collect only that amount

stated in their tariffs 5 U S v PanAmerican Mail Line Inc 359

F Supp 728 735 1972

Itis the Commission s obligation to apply the shipping statutes

so as to achieve the Congressionally intended result Itis not for

us tocreate contradictory circumstances which require a carrier to

violate the law in order to abide by it leaving the shipper having a

supportable case but with no remedy In this case the applicable

law is designed to ensure that shippers are on notice as to the

available rates and to prevent carriers from treating shippers

unfairly or unequally through the use of hidden charges or

rebates

Ifthe majority wishes to adhere strictly to the statute then we

must end with the anomalous result of the carrier simultaneously

adhering toand violating the law and ofthe shipper being unable

to rely on the published tariff rate

Further ifthe carrier wishes tocollect an undercharge from the

shipper for cargo allegedly under measured the majority decision

provides no answer to the question of whether the shipper may

plead the same defense as the carrier in overcharge cases In

either event we would have the same anomaly of the carrier

violating the law in order to comply with it

Thus the majority view of the tariff rule involved in this case

will have undesirable ramifications Although in a certain situa

tion a shipper will be unable to obtain redress for overcharges and

may avoid liability for undercharges the carrier in the same case

will be liable for collecting those overcharges and for discriminat

ing or may be liable for collecting those undercharges and for

discriminating Ifthat is to be the statutory interpretation then

the Congressional intent must have been to encourage negative

regulation which places both the carrier and shipper between the

Scylla of a strict tariff construction and the Charybdis of an

incorrect rate application

I See eg

footnote 4 The lawful rate isthat which the carrier must exact and which theshipper must

pay Kanaa8SouthernRy v

Carl 227 US 639 653 1913 The rateofthecarrier duly filed istheonly

lawful charge Deviation from it is not permitted upon any pretext Louis Nash RR v Maxwell 237

US 94 97 1915

17 F M C
326 FEDERAL MARITIME COMMISSION

The majority will permit the carriers to discourage some s

pers claims by maintaining a time limit rule but will acc

claims from shippers who are aware oftheir twoyear rights un

section 22 The majority will not however follow the same proc

with respect to the weight measurement claim rule shippe

claims are not only to be discouraged by the rule but unaccepta

to the Commission even from shippers who seek the aid of 

twoyear period under section 22 Only the shippers claims in 

latter instance will be time barred before the twoyear pe

expires Ibelieve both the time limit rule and theweightmeasu

ment claim rule now have a salutary effect which should 

maintained and increased

Shippers are on notice that they bear a heavy burden to pr

their claims of overcharges and the Commission is cognizan

the burden to carriers of defending claims brought long after 

transaction or after the carrier has released the cargo We sho

permit the shipper to pursue his claim so long as it is filed wit

two years but require not only the heavy burden ofproof of p

cases but also a strong justification for failure to abide 

relevant tariffrules This would encourage shippers tofollow th

rules knowing that unjustified failure to do so might be s

defeating thereby discouraging litigation of claims with sc

chance of success

The majority by rejecting shipper claims and charging 

carrier with violating the tariff statute will force the Commiss

to establish the legitimacy ofthe shipper s claimin order to pr

the violation The shipper however will be unable to avail him

ofthat proof to make himself whole because the carrier will h

had the forethought to provide insurance in the form of a cl

submission limitation unrelated to the validity of the claim C

riers will consequently have an incentive to devise all manne

tariff rules to short change the shipper at the risk only o

possible slap on the wrist from the Commission The final proba

result will be excessive litigation and cargo congestion Shipp

will be encouraged to file claims automatically on all shipme

while still in the carrier s possession in order to protect th

selves preventing an expeditious flow of cargo The Commiss

should not engage in such negative regulation

Finally Ifind that the complainant here has met his burde

proof We should not hold this shipper to a new requiremen

strong justification for failure to abide by the tariff rule 

application should be prospective only The carrier admitted 

number of packages in the shipment to be as the claim

17 F M C
KRAFT FOODS v MOORE McCORMACK LINES 327

contends and the claimant has proven that it uses only certain

size cases for the products shipped a fact not disputed Therefore

for all the foregoing reasons I would reverse the decision of the

Administrative LawJudge and grant reparation in full

SEAL 8 JOSEPH C POLKING

Assistant Secretary

17 F MC
FEDERAL MARITIME COMMISSION

DOCKET No 70g

BOLTON AND MITCHELL INC INDEPENDENT OCEAN FREIGH

FORWARDER LICENSE NO 516

SECOND SUPPLEMENTAL REPORT

May 21 1974

By THE COMMISSION George H Hearn Vice Chairman James 

Day Clarence Morse Commissioners

In its Report ofJune 9 1972 15 FMC 248 the Commission fou

that Bolton Mitchell Inc BMI

1 Was not independent of shipper connections as required 

section 1 ofthe Act

2 By retaining a proprietary interest in the merchandise a

collecting compensation from the carrier for shipment thereof 

willfully obtain transportation by water at less than the rates 

charges than would otherwise be applicable violating section 

first paragraph of the Act

3 Violated certain sections General Order 4 to wit

510 5

e

failing to show license number on invoices a

shipping documents

510 23 d imparting false information to its principals

510 23 e withholding information as to actual price ofm

chandise

510 23 ffailing topromptly account to its principals

51O 23 h filing false documents

510 23j failing touse invoices which stated separately 

actual amount of ocean freight price of merchandise an

510 9 c willfully making false statements in connect

with an application for alicense or its continuance in eff

Without revoking respondent s ocean freight forwarder lice

No 516 the Commission did order respondent to

328

17 F M C
BOLTON MITCHELL SUPPLEMENTAL REPORT 329

1 cease and desist from the activities found to have violated the act and the

specific sections of General Order 4 if it desires to maintain its license

2 submit within 90 days from the date of service of the Report and Order a

full report to the Commission on the manner inwhich it has complied withthe

requirements to cease and desist 1

Respondent filed an Affidavit of Compliance setting forth the

procedure it intended to use in its freight forwarding activities and

which it believed would be in compliance with the Commission s

order

Upon a review thereof the Commission issued its Supplemental

Report served November 8 1973 stating that BMI would be

allowed to retain its license on the condition that BMI

1 waive any and all liens on the goods being shipped

2 not finance the shipments

3 discontinue its practice of re invoicing and

4 assure the Commission that it BMI will not inflate the charge s for ocean

freight insurance and accessorial services

BMI notified the Commission that it would comply with all of

the aforementioned enumerated conditions except as concerns the

practice of re invoicing No 3 With its agreement not tofinance

shipments No 2 BMI coupled thereto a

request that it be

allowed a 90 day grace period in order to complete the exportation

of those shipments which were already in process on which

confirmation has been made or advances promised Further BMI

asked the Commission that BMls principals be allowed an addi

tional 90 days from the time of BMls notification that it will not

finance the shipments to find other means of payment Because

sufficient time has elapsed between the date ofthe Commission s

order for BMI to terminate the practice of financing shipments

and the requested time frame any discussion in this area is moot

Suffice to say however that to acquiesce to such requests would

not only defeat the whole purpose to finding BMI in violation of

the Act in the first instance but also undermine the foundation of

the Commission s regulatory authority Thus we need only ad

dress BMl s re invoicing practice

In our Supplemental Report pages 9 10 we rejected BMI s

arguments advanced in support of its so called re invoicing

procedure and set forth the Administrative Law Judge s remarks

to conclude that BMI seemingly is assisting its principals in the

filing of false documents and perhaps in the violating of the

currency exchange laws ofother countries BMI presently argues

IOn March 8 1973 the Commissionissued its Report on Reconsideration approving and adopting

verbatim its Report and Order of June 9 1972

17 F M C
330 FEDERAL MARITIME COMMISSION

that the language relied on by the Commission has no relationship

to re invoicing but is solely concerned with BMls failure to use

invoices which state separately the actual amount of ocean

freight insurance and merchandise value as required by section

510 23jof the Commission s rules BMI insists that the subject o

re invoicing was never before the Judge but arose for the firs

time in BMl sAffidavit ofCompliance ofJune 4 1973 in order to

prevent any problems in the future 2

BMI submits that there is a clear distinction between the

practice of re invoicing and BMls past activities of inflating

ocean freight rates insurance and merchandise value since with

the former which is alleged to be an accepted practice there is no

intent to deceive third persons but only a means by which BMl

principal can make a profit on the resale of the goods To illustrate

its point BMI cites as an example aPeruvian principal who buys

an American radio from the American supplier through BMI fo

100 and subsequently resells it in Peru to his customer for 150

pursuant to BMI s invoice of the same amount 150 Thus BM

states

The ultimate purchaser from ourPeruvian principal would open up a letter o

credit providing for payment at 160 00 per radio which is the actual purchase

price he has agreed to pay He is not deceived The letter of credit provides for a

price of 160 00 per radio and in processing the BMI invoice for this amount the

bank is not deceived Similarly the customs officials in Peru have not been

deceived The shipment is declared for customs purposes at the price being paid

by the ultimate purchaser 160 00 per radio and the appropriate duty in the

South Armerican country is being paid on this price Finally there is no

wrongdoing with respect to currency control regulations since the ultimate

purchaser will obtain an exchange for the price he is paying for the radios

BMI s conclusions are misleading General Order 4 is for the

protection of third persons as well as consignees While the Judge

may not have had re invoicing per se in mind when making his

observations they apply equally as well to the practice of re

invoicing that is BMI is assisting its principal via deception on

third persons in a possible violation of its country s laws Just as

BMI supplies the false information so that the principal s bank

will be paying out more toBMI than what Was actually expended

with part of the difference being returned toBMls principal re

invoicing allows BMI and its principal as a team to induce the

ultimate purchaser to unwittingly aid BMls principal to circum

vent its country s currency exchange regulations

2A

description of BMls lire invoicing procedure as well as the contested lanllUBKe used by the

Comminion can be found in our Supplemental Report aerved November 8 1978 pp 8 10

a

Section 23 ofthe Act read in pertinent part Orderof the Board relatingto any violation ofthisAc

shall he made only after afull hearing and upon asworn complaint orin proceedinp instituted of ita

own motion

17 F MC
BOLTON MITCHELL SUPPLEMENTAL REPORT 331

Relying on BMlsPeruvian example the essence ofthe transac

tion only involves 100 And thus viewing re invoicing from its

inception and carrying the possible fraud to its proper conclusion

we find that the ultimate purchaser draws a 150 letter of credit

on a Peruvian bank to BMlsprincipal who upon receipt thereof

transfers such letter of credit to BMThereupon BMI deposits

the sum total of the letter of credit in its own account using only

100 thereof to satisfy the American supplier returning 50 to

BMls principal Under the circumstances the bank and Customs

officials might have acted entirely different with the knowledge of

the true facts

We agree with the Administrative Law Judge that those pro

tected by General Order 4 include banks and customhouses whose

services are Indispensable to a foreign consignee By necessity

they become an integral part of the overall ocean transportation

process and as such of concern to the Commission

The Commission should be concerned with any and all activities

ofa licensed freight forwarder which may detract from its fitness

willingness and or ability to carry out the business offorwarding

as required by the Act Ifa freight forwarder were found to have

acted illegally in concert with his clients it may not be fit to

assume the responsibilities of a freight forwarder i e using

deceptive practices which violate the currency exchange regula

tions ofany country

While there is no direct and specific evidence of record to

conclude that BMl s re invoicing is in fact assisting BMls

principal in violating its country s currency exchange laws the

possibility that such is happening and the fact that persons are

being deceived in the process are sufficient for the Commission to

prohibit BMls re invoicing activities

More important BMI does not seem to realize that the Judge s

remarks were not the only basis for prohibiting BMls practice of

re invoicing Section 510 23 h ofthe Commission s rules regulat

ing ocean freight forwarders reads

No licensee shall file or assist in the filing of any claim affidavit letter of

indemnity orother paper or document with respect to a shipment handled or to

be handled by such licensee which he has reason to believe is false or fraudulent

The explicit purpose of section 510 23 h is to forbid a licensee

from filing a document with respect to a shipment handled

which is false Here no matter how one views such operations

there still exists the glaring fact that the mechanics of BMl s re

invoicing involve the filing offalse documents in direct contrav

ention to section 510 23 h Because such documents by them

17 F MC
332 FEDERAL MARITIME COMMISSION

selves are enough to constitute aviolation ofsection 51O 23 h t

intent behind the completion of these false documents is irre

vant

BMI alternatively submits that because the practice of 

invoicing is common to the industry and that aside from BM

own reference to re invoicing no arguments or briefs we

submitted by any party to this proceeding with reference to 

invoicing the Commission has promulgated astandard ofcond

to be observed by licensees without granting the industry t

right to be heard in effect to enforce the cease and desist ord

against BMI s re invoicing operations is an action contrary 

section 23 ofthe Act 3

We disagree The Commission has given a thorough and f

hearing to BMI s forwarding activities Just because it wasBM

in the first instance who introduced the subject of re invoicin

is ofno consequence tothe procedural due process ofthis proce

ing The Commission is fulfilling its obligation to protect t

general public from unfair designs of any forwarder so inclined 

prohibiting re invoicing within the factual context as describ

by BMI from being put into effect Hence the only precede

being set is that which concerns what is being done by 

Additionally to delineate each and every document falling with

section 510 23 h would require the Commission todevote unnec

sary time to clarifying that which Is already explicitly prescrib

on its face

Moreover the question ofa violation of510 23 h was specifica

included in the Commission s Orderof Investigation that initiat

this proceeding Nothing could be added that has not already be

presented It must be remembered that the Commission based 

cease and desist order on the accepted facts as related by B

Accordingly we affirm our cease and desist order which calls 

BMI todiscontinue its practice of re invoicing

Ifwithin 30 days of the issuance of this Report the responde

does not apprise the Commission of his compliance with o

requirement to cease and desist as heretofore set out responden

ocean freight forwarder license will be revoked

HELEN DELICH BENTLEY CHAIRMAN AND ASHTON C

BARRETT COMMISSIONER DISSENTING

We adhere tothe view expressed in our dissenting opinion in t

Commission s Report on Reconsideration ofMarch 8 1973 16 FM

284 that BMI s license should be revoked

SEAL 8 FRANCIS C HURNEY

Secretary

17 F M C
TABLE OF COi UIO111 1ES

GeneralUSJPuerto Rico Virgin Islands Trades

General US Pacific Coast Hawaii Trade

333

Pape

95

235

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