FEDERAL MARITIME

COMMISSION

40th

ANNUAL REPORT

for

Fiscal Year

2001

[Seal]
TABLE OF CONTENTS

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

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

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

I.

II.

III.

IV.

V.

VI.

THE COMMISSION

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

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

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

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

A. Trade Developments ................................ 7

B. Restrictive Trade Practices ........................ 11

C. Trade Oversight ................................... 1 3

D. Alternative Dispute Resolution ..................... 14

E. Enforcement ..................................... 1 6

OSRA IMPACT STUDY ................................ 19

MONITORING AND ENFORCEMENT

A. Monitoring ...................................... 23

B. Enforcement .................................... 24

DEVELOPMENTS IN MAJOR U.S. FOREIGN TRADES

A. Transatlantic ..................................... 27

B. Mediterranean ................................... 30

C. MiddleEast ...................................... 3 1

D. Africa .......................................... 32

E. Latin America and the Caribbean ..................... 3 4

F. Transpacific ..................................... 37

G. Worldwide ....................................... 40

THE FOREIGN SHIPPING PRACTICES ACT OF 1988

A. General ......................................... 43

B. Top Twenty U.S. Liner Cargo

Trading Partners ............................... 44

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VII. SIGNIFICANT OPERATING ACTIVITIES BY

ORGANIZATIONAL UNIT

A. Office of the Secretary ............................. 49

B. Office of Administrative Law Judges ................ 51

C. Office of the General Counsel ....................... 55

D. Office of Equal Employment Opportunity ............ 73

E. Office of Inspector General ......................... 77

F. Office of the Executive Director .................... 8 1

G. Bureau of Consumer Complaints and Licensing ......... 93

H. Bureau of Enforcement .......................... 101

I. Bureau of Trade Analysis ......................... 105

APPENDIXES

A.

B.

C.

D.

E.

F.

G.

Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1

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

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

Form FMC-1 Tariff Location Addresses -

Electronic Service Contract Filings

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

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

Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Statement of Appropriations, Obligations

and Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

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FEDERAL MARITIME COMMISSION

WASHINGTON, D.C 20573-0001

March 31,2002

To the United States Senate and House of Representatives:

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

of 1961, and section 208 of the Merchant Marine Act,

1936, as amended, I am pleased to submit the 40th Annual

Report of the activities of the Federal Maritime

Commission for fiscal year 200 1.

Sincerely,

Harold J. Creel, Jr.

Chairman

MEMBERS OF COMMISSION

Harold J. Creel, Jr.

Chairman

Appointed 1994

Term Expires 2004

Delmond J. H. Won

Commissioner

Appointed 1994

Term Expires 2002

Joseph E. Brennan

Commissioner

Appointed 1999

Term Expires 2003

John A. Moran

Commissioner

Appointed 7998

Term Expired 2000

Antony M. Merck

Commissioner

Appointed 2000

Term Expires 2001

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SENIOR COMMISSION OFFICIALS

Counsel to the Chairman . . . . . . . . Thomas Panebianco

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

Chief Administrative Law Judge . . . . . Norman D. Kline

Acting General Counsel . . . . . . . . . . . . . . David I?. Miles

Director, Office of

Equal Employment Opportunity . . Alice M. BIackmon

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

Executive Director. . . . . . . . . . . . Bruce A. Dombrowski

Deputy Executive Director . . . . . . . . . . Florence A. Carr

Director, Bureau of Consumer

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

Director, Bureau of Enforcement . . . . . . . . Vern W. Hi//

Director, Bureau of

Trade Analysis . . . . . . . . . . . . . . . . . Austin L. Schmitt

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I

THE COMMISSION

A. HISTORY

The Federal Maritime Commission (“Commission” or “FMC”)

was established as an independent regulatory agency by

Reorganization Plan No. 7, effective August 12, 1961. Prior to that

time, the Federal Maritime Board was responsible for both the

regulation of ocean commerce and the promotion of the United States

Merchant Marine. Under the reorganization plan, the shipping laws

of the U.S. were separated into two categories -- regulatory and

promotional. The responsibilities associated with the promotion of

an adequate and efficient U.S. Merchant Marine were assigned to the

Maritime Administration, now located within the Department of

Transportation (“DOT”). The newly-created FMC was charged with

the administration of the regulatory provisions of the shipping laws.

The Commission is now responsible for the regulation of

oceanborne transportation in the foreign commerce of the U.S. The

passage of the Shipping Act of 1984 (“Shipping Act” or “1984 Act”)

brought about a major change in the regulatory regime facing

shipping companies operating in the U.S. foreign commerce. The

subsequent passage of the Ocean Shipping Reform Act of 1998

(“OSRA”), with its deregulatory amendments and modifications to

the 1984 Act, further signaled a significant paradigm shift in shipping

regulation.

B. FUNCTIONS

The principal statutes or statutory provisions administered by the

Commission are the 1984 Act, the Foreign Shipping Practices Act of

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1988 (“FSPA”), section 19 of the Merchant Marine Act, 1920 (“1920

Act”), and Pub. L. No. 89-777. All of these statutes were amended

and modified by OSRA, which took effect on May 1, 1999.

The Commission’s regulatory responsibilities include:

Protecting shippers and carriers engaged in the

foreign commerce of the U.S. from restrictive or

unfair foreign laws, regulations, or business practices

that harm U.S. shipping interests or ocean trade.

Reviewing operational and pricing agreements among

ocean common carriers and marine terminals, to

ensure that they do not have excessively

anticompetitive effects.

Reviewing and maintaining a database of service

contracts between ocean common carriers and

shippers, and using this database to guard against

anticompetitive practices and other unfair prohibited

acts.

Ensuring that common carriers’ rates and charges are

accessible to the shipping public in private,

electronically accessible systems.

Regulating rates, charges, and rules of governmentowned or -controlled carriers to ensure that they are

just and reasonable and are not unfairly undercutting

private competitors.

Issuing passenger vessel certificates evidencing

financial responsibility of vessel owners or charterers

to pay judgments for personal injury or death or to

repay fares for the nonperformance of a voyage or

cruise.

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n Licensing ocean transportation intermediaries

(“OTIS”) to protect the public from unqualified,

insolvent, or dishonest companies.

n Ensuring that OTIS maintain bonds that protect the

shipping public from financial loss.

n Investigating discriminatory rates, charges,

classifications, and practices of common carriers,

terminal operators, and OTIS operating in the foreign

commerce of the U.S.

The Commission is authorized by the FSPA, section 19 of the

1920 Act, and section 13(b)(6) of the 1984 Act, to take action to

ensure that the foreign commerce of the U.S. is not burdened by nonmarket barriers to ocean shipping. The Commission may take

countervailing action to correct unfavorable shipping conditions in

U.S. foreign commerce and may impose penalties to address actions

by carriers or foreign governments that adversely affect shipping in

the U.S. foreign oceanborne trades or that impair access of U.S.-flag

vessels to ocean trade between foreign ports.

The 1984 Act is applicable to the operations of common carriers

and other persons engaged in U.S. foreign commerce. It exempts

agreements that have become effective under the 1984 Act from the

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

The Commission reviews and evaluates agreements to ensure that

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

agreements do not otherwise violate the 1984 Act or result in an

unreasonable increase in transportation cost or unreasonable

reduction in service.

In addition to monitoring relationships among carriers, the

Commission is also responsible for ensuring that individual carriers,

as well as those permitted by agreement to act in concert, fairly treat

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shippers and other members of the shipping public. The 1984 Act

prohibits carriers from unduly discriminating among shippers and

other members of the shipping public. The 1984 Act also requires

carriers to make their rates, charges and practices available in tariffs

that must be open to public inspection. Carriers may only assess the

published rates and charges. The Commission does not have the

authority to approve or disapprove general rate increases (“GRIs”) or

individual commodity rate levels in the U.S. foreign commerce,

except with regard to certain foreign government-owned or

-controlled carriers. Ocean common carriers also are required to file

with the Commission all service contracts negotiated with shippers.

The Commission has developed an Internet-based system for the

electronic receipt of such contracts. Pursuant to the 1984 Act, all

such contracts are provided confidential treatment by the

Commission.

Pub. L. No. 89-777 requires the operators of passenger vessels

with 50 or more berths, who embark passengers at U.S. ports, to

establish financial coverage to indemnify passengers in cases of

death, injury, or nonperformance oftransportation. The Commission

certifies such operators upon the submission of satisfactory evidence

of financial responsibility. The Commission ensures that all OTIS

operating in the foreign commerce of the U.S. are appropriately

bonded to protect shippers from financial loss. Additionally, the

Commission licenses all U.S. intermediaries.

The Commission carries out its regulatory responsibilities by

conducting informal and formal investigations. It holds hearings,

considers evidence and renders decisions, and issues appropriate

orders and implementing regulations. The Commission also

adjudicates disputes involving the regulated community, the general

shipping public, and other affected individuals or interest groups.

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C. ORGANIZATION

The Commission is composed of five Commissioners appointed

for five-year terms by the President with the advice and consent of the

Senate. Not more than three members of the Commission may

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

Commissioners to serve as Chairman. The Chairman is the chief

executive and administrative officer of the agency.

The Commission’s organizational units consist of: Office of the

Secretary; Office of the General Counsel; Office of the Inspector

General; Office of Administrative Law Judges; Office of Equal

Employment Opportunity; Office of the Executive Director; Bureau

of Consumer Complaints and Licensing; Bureau of Enforcement; and

Bureau of Trade Analysis. The Executive Director assists the

Chairman in providing executive and administrative direction to the

Commission’s bureaus. These offices and bureaus are responsible for

the Commission’s regulatory programs or provide administrative

support.

In fiscal year 2001, the Commission was authorized a total of 180

full-time equivalent positions and had a total appropriation of

$15,465,900. That appropriation supported the actual employment of

128 full-time equivalent positions during the fiscal year. The

majority of the Commission’s personnel are located in Washington,

D.C., with area representatives in New York, New Orleans, Los

Angeles, Miami and Seattle.

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II

THE YEAR IN REVIEW

The Commission’s fiscal year was influenced significantly by the

corresponding slowdown in the U.S. economy and fluctuations in the

world economy following September 11, 2001. The Commission

closely monitored the effect of reduced consumer spending on carrier

efforts to cope with excess vessel capacity and decreasing freight

rates.

In addition, the Commission completed and released a study

analyzing the impact of the Ocean Shipping Reform Act of 1998

(“OSRA”) on the ocean transportation industry. The study found

that, overall OSRA has achieved its policy objectives. In this fiscal

year, the Commission also enhanced its alternative dispute resolution

program with much success, offering parties an economical and

efficient means to settle disputes and controversies on ocean shipping

matters.

This Annual Report is structured on an office-by-office basis and

contains a synopsis of each unit’s activities and accomplishments

during the past fiscal year. Special sections are devoted to areas of

particular interest. This section summarizes some of the

Commission’s major accomplishments this year.

A. TRADE DEVELOPMENTS

International ocean shipping remains a vital link between the U.S.

economy and the rest of the world. The Commission continually

monitors trade and economic conditions in its oversight of our

Nation’s oceanborne commerce.

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Overall, a slowdown of the U.S. economy in fiscal year 2001

reduced consumer spending on foreign imports. Consequently, the

volume of import cargo moving inbound to the U.S. sharply dropped

from the high levels of growth that prevailed in past fiscal years,

particularly in such trades as the transatlantic and transpacific. As

demand declined, carriers endeavored to cope with an excess supply

ofvessel capacity in many trades. Conditions worsened as previously

scheduled vessel upgrades and new services added further excess

capacity to the trades. Attempts by agreement carriers to coordinate

rate increases generally proved ineffective against falling freight rates.

With conditions already weak in many trades, the economic

instability stemming from the terrorist attacks in the U.S. and the

subsequent war in Afghanistan created additional problems for

carriers. As the U.S. economy slipped into a recession, a further

contraction in consumer demand reduced cargo growth and pushed

freight rates downward by an even greater degree than was previously

anticipated. Within the industry, concern over the financial stability

of carriers has spread. In addition to the recession, carriers faced cost

hikes from increased vessel insurance premiums and heightened

security measures. Some carriers reacted by scaling back their

services and cutting vessel capacity, particularly in the transpacific.

Industry analysts foresee further carrier consolidation resulting from

another round of mergers, acquisitions, and possible bankruptcies.

Major carriers continued to move forward in the area of

information technology by offering shippers more services over the

Internet. Shippers now have on-line access to such information and

services as vessel schedules, cargo booking and tracking, payment

and invoicing, and remote printing of bills of lading.

In the transatlantic trade between the U.S. and North Europe, the

volume of import and export cargo was down from the preceding

fiscal year. The imbalance between liner imports and exports

continued, with import cargo exceeding export cargo by 5 1 percent

by volume. To address the cost of repositioning containers, members

of the Tram-Atlantic Conference Agreement (“TACA”) initiated an

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equipment repositioning charge on inbound cargo. Freight rates fell

in both trade directions due to overcapacity and sluggish demand.

TACA endeavored to raise rate levels by implementing several small

to moderate tariff GRIs in both trade lanes. Since OSRA, however,

TACA’s ability to influence rates through tariff GRIs has diminished

because the majority of its cargo now moves under individual service

contracts. TACA’s market share continued to erode as competing

independent carriers successfully gained market share. Under its

coordinated capacity and space charter program, TACA temporarily

withdrew from service one vessel per week during a five-week period

of low demand between December 2000 and February 200 1. TACA

amended its agreement to reimplement the same program for the

period between December 2001 and February 2002.

Despite the U.S. economic slowdown, the volume of import cargo

from the Mediterranean continued to grow at a moderate pace, largely

sustained by the U.S. demand for home furnishings from the region.

In the outbound direction, export cargo to the Mediterranean

significantly fell due to a sharp drop in the demand for major U.S.

exports such as logs, lumber, and wood pulp. The slump in U.S.

export cargo volume drove outbound rate levels downward, while rate

levels in the stronger inbound direction rose modestly. Members of

the United States South Europe Conference implemented two small

to moderate tariff GRIs along with several new surcharges on

inbound cargo. Vessel capacity in the trade increased by 25 percent

relative to the preceding fiscal year. Carriers serving the

Mediterranean found it difficult to manage capacity since the region

also serves as a transit route between other east/west trade lanes.

In the Middle East, conditions were improving until the events

surrounding the terrorist attacks in the U.S. threw the region into

greater turmoil. Overall, import cargo from the Middle East grew by

7.6 percent as U.S. consumers continued to purchase furniture,

apparel, and other such goods from the region. Gains from higher oil

prices during the first half of the fiscal year stimulated efforts to

increase productivity within Middle East nations. U.S. export cargo

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to the region rose by 2.5 percent, with U.S. machinery and other

industrial production materials in high demand. Any political and

economic stability in the Middle East, however, was cut short after

September 11. Fighting between Israeli and Palestinian factions

intensified, placing an additional strain on relations between Middle

East nations. In addition to the disruptive trade conditions, carriers

serving the Middle East incurred higher costs from premiums

imposed by insurance companies. To defray those costs, many

carriers implemented war risk surcharges for vessel calls at Middle

East ports.

In Africa, low rates of economic growth and severe poverty

continued to affect much of the continent. Despite these conditions,

over the past several years, the volume of import and export cargo has

modestly grown. Efforts to improve international commerce are

expected to generate additional cargo growth. Some carriers

expanded their operations in the trade with new services, additional

port calls, and vessel upgrades. Port congestion and delays resulted

in higher costs to carriers, but efforts to modernize port facilities have

increased efficiency. Over the fiscal year, freight rates fell so sharply

from intense competition that conference carriers found it infeasible

to proceed with planned GRIs in the trade.

Import cargo from Central America to the U.S. was down by close

to 3 percent, largely due to extensive crop damage of fresh produce.

The region was hit hard by natural disasters and a drought that ruined

major portions of annual crops and hurt local economies. The poor

economic conditions throughout Central America also affected the

region’s demand for U.S. goods. U.S. export cargo fell by over 5

percent during the fiscal year. Carrier members of agreements within

Central America and the Caribbean endeavored to raise freight rates

by implementing GRIs; however, the weak demand caused rate levels

to remain low. Similarly, trade between the U.S. and South America

also declined in the fiscal year. The slowdown in U.S. consumption

affected such South American imports as lumber, wood products,

paperboard, coffee, and auto parts. Recessionary conditions in South

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America and the severe financial crisis in Argentina stunted the

region’s demand for U.S. goods and caused an overall decrease in

U.S. export cargo. Carriers endeavored to improve their capacity

utilization levels through a combination of operational agreements

and capacity cutbacks. Reductions in excess capacity relieved some

of the downward market pressure on freight rates; however, the slump

in demand has hindered recent efforts to increase rate levels in the

trade. Rate cohesion among members of the South America

discussion agreements has become more difficult.

In the transpacific, the growth of import cargo from Asia to the

U.S. was disappointingly small in comparison to the high rates of

consecutive import growth in past fiscal years. Carriers struggled

with overcapacity, as additional vessel space became operational in

the trade. Major carriers and operational agreements began removing

excess vessel space and cutting capacity toward the end of the fiscal

year. Members of the Transpaczjic Stabilization Agreement failed to

meet their GRI objectives and peak-season surcharge on inbound

cargo for 2001, with freight rates falling by upwards of 25 percent.

In the outbound trade direction, the degree of recovery realized in the

preceding fiscal year vanished as U.S. export cargo fell. Instability

in the outbound direction prevented members of the Westbound

Transpaczjk Stabilization Agreement from achieving any cohesion on

freight rates. Conditions in the transpacific are projected to worsen

as the recession takes hold of the U.S. economy. In addition, political

unrest in Pakistan and Sri Lanka caused carriers to impose war risk

surcharges to help defray the cost of higher insurance premiums in

those countries. Despite the faltering trade conditions, a new

controlled carrier based in China, Shanghai Hai Hua Shipping Co.,

Ltd., entered the transpacific trade.

B. RESTRICTIVE TRADE PRACTICES

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

address protectionist practices of other countries that unreasonably

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favor their domestic companies or discriminate against U.S. trade

interests in ocean shipping. In this regard, the Commission may issue

rules in response to foreign practices that create conditions

unfavorable to U.S. shipping in general. It also may institute

countermeasures in response to foreign laws or policies that adversely

affect U.S. carriers. It also can initiate appropriate action in instances

where a U.S.-flag vessel faces unfair barriers in entering a foreign-toforeign trade.

In fiscal year 2001, the Commission continued its active approach

in this area. In particular, the Commission continued to address

situations in the People’s Republic of China (“PRC”) and Japan.

In 2000, the staff was directed to, and did prepare draft proposals

for action in response to unfair shipping practices arising from the

laws, regulations and practices of the PRC. The Commission

continues to assess whether the release of these proposed responses

is appropriate to address the circumstances, and to weigh carefully

how the situation may evolve due to the accession of the PRC to the

World Trade Organization. Should the Commission determine that

formal proposals for remedial action are warranted, these proposals

will be noticed for public comment prior to their effectiveness.

The Commission also continues to monitor regulations and port

practices of the Government of Japan. In fiscal year 2001, the

Commission revised its semiannual reporting requirement for U.S.

and Japanese carriers. The Commission also ordered other carriers

serving the U.S./Japan trade to report on the effects of Japanese port

practices and changes to Japanese law and regulations which had

gone into effect in November 2000.

Finally, a permanent International Task Force, established in 2000

and chaired by the General Counsel and made up of key personnel in

that office, the Bureaus of Enforcement, Trade Analysis, and

Consumer Complaints and Licensing, was convened regularly in

200 1. The Task Force identifies, evaluates and attempts to anticipate

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foreign practices which might have adverse impacts on U.S. shipping

interests.

C. TRADE OVERSIGHT

During the fiscal year, the Commission completed and released

an impact study on the revised U.S. shipping legislation,

entitled: The Impact ofthe Ocean Shipping Reform Act of 1998. This

latest study expands on the Commission’s previous interim report and

gives a comprehensive assessment of the ocean shipping industry’s

operations two years after OSRA’s implementation. In preparing the

study, the Commission used various sources, including the public

comments from its Notice of Inquiry on OSRA’s impact. A broad

range of comments were received from carriers and agreement

representatives, shippers, shippers’ associations, and OTIS. The

Commission further conducted an extensive audit of service contracts

based on random samples taken from the FMC’s electronic tiling

system and database (“SERVCON”). The study provides a general

regulatory and economic overview and examines such key issues

as: service contract developments, agreement and trade activities,

voluntary service contract guidelines, tariff publication, and OTI

licensing and bonding. The study found that, thus far OSRA has

achieved its primary policy objective of providing a more marketdriven environment for industry participants. Closing observations

in the study identify issues that merit further attention and offer

suggestions for possible legislative consideration.

Other specific monitoring and research projects undertaken for

fiscal year 2001 included: a confidential report on voluntary service

contract guidelines; development of an economic market definition

for an enforcement case involving exclusive tug franchises on the

Lower Mississippi River; analysis of the activities of certain

controlled carriers; economic analyses of industry trade data in

response to Congressional inquiries; and responses to informal

complaints and requests from shippers on rate and service matters.

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D. ALTERNATIVE DISPUTE RESOLUTION

During fiscal year 2001 the Commission implemented a

significantly enhanced, comprehensive Alternative Dispute

Resolution (“ADR”) program in order to find ways to settle disputes

without having them processed via costly and time-consuming formal

adjudications. To this end, the Commission issued a revised ADR

policy statement and issued rules that provided guidelines and

procedures for arbitration, as well as making mediation and other

ADR services available for conflicts or disputes on ocean shipping

matters. While its new ADR policy was under development, staff

underwent training in various forms of ADR and began providing

mediation services to parties engaged in litigation in formal

Commission adjudicatory proceedings. Immediate benefits were

obtained, as mediation simultaneously resulted in resolution of a

Commission proceeding between two private parties and its

companion state court case. Had this matter continued to a hearing,

the Commission and the parties would have incurred considerable

costs and expenses. Also, the Commission’s ADR services were able

to facilitate the resolution of a significant dispute by parties at a major

port, thereby avoiding litigation that almost certainly would have

involved substantial expenses to the parties and to the Commission.

Efforts are continuing to engage parties in utilizing ADR to resolve

matters at an earlier, less costly stage of litigation.

As part of its ADR services, the Commission provides ombuds

services to the shipping public by assisting consumers and other

complaining parties in resolving a number of problems. During fiscal

year 2001, the Commission received a high volume of such

complaints, continuing what may become a trend first experienced

during the previous fiscal year. Requests for assistance in the

aftermaths of multiple cruise line failures continued to account for

much of the complaint volume, as affected individuals sought

assistance in their efforts to recover cruise fares and deposits. Many

of these requests involved cruise lines participating in the

Commission’s Public Law 89-777 program, including the major

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operators Premier Cruise Operations Ltd. and Commodore/Crown

Cruise Lines. Other inquiries from the public concerned defunct

cruise operators exempt from our regulations, such as Renaissance

Cruises Inc., and a smaller line, Great Lakes Cruises, Inc. The vessels

that these carriers operated did not embark passengers at U.S. ports

and thus did not have Public Law 89-777 nonperformance coverage.

Moreover, the events of September 11,2001, generated a number of

complaints about handling of special situations by a number of cruise

lines. The Commission provided assistance whenever possible.

The Commission’s continuing efforts to make its complaint

resolution procedures available to a wider public led to increasing

complaints in the area of household goods and personal effects. Many

of these inquiries resulted from increased information through the

Commission’s Internet site, while state and local consumer agencies

directed many other complainants to the Commission. Complaints in

this area encompassed numerous types of problems, such as rate

disputes, lost or damaged goods, and unreasonable delays. While in

many cases the Commission’s efforts enabled affected parties to

satisfactorily resolve their problems, in other cases individual

shippers were not able to obtain effective recourse. Still, in the latter

situations, dissemination of information often made it possible to alert

similarly situated individuals about dangers that might affect their

own shipments.

An increasing number of shipping companies sought our

assistance in collecting unpaid sums from various customers.

Complaints of this nature involved unpaid freight charges,

uncollected freight forwarder compensation, and settlement amounts

arising from various claims. In some cases, the slow payments

reflected serious cash flow problems, and may well have been related

to difficulties in the general economy. Even though problems of this

nature ordinarily fall outside of the Commission’s area of

responsibility, our informal assistance frequently helped to resolve

situations and forestall formal collection actions.

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Also, we continued to receive complaints of the types that have

recurred frequently over the years. Shippers often contended that

carriers have “rolled over” their cargoes from one vessel to the next,

probably in favor of some more lucrative competing cargo, while

other shippers approached the staff with grievances concerning

unreasonable and untimely routings on the parts of non-vesseloperating common carriers (“NVOCCs”). In these situations, the

Commission was able to utilize effectively various ADR techniques

to resolve difficulties. With respect to passenger vessel

transportation, commonly recurring complaints included such issues

as port cancellations, excessive noise, missed flight/cruise

connections, inadequate or subpar entertainment, and rude or

unfriendly shipboard personnel. While our ability to provide

assistance in such matters is limited, often our intervention resulted

in amicable resolution of a complaint.

E. ENFORCEMENT

The Commission maintains a presence in Los Angeles, Miami,

New Orleans, New York and Seattle through Area Representatives.

These representatives serve as a liaison between the Commission and

various maritime interests in their respective areas and also

investigate activity that may violate the Shipping Act of 1984 (“1984

Act”).

During fiscal year 2001, the Bureau of Enforcement (“BOE”)

investigated and prosecuted malpractices, particularly fraudulent

cargo descriptions and measurements in the transpacific trades and

secret rebates in the South American trades. Other trades were also

the subject of malpractice investigations, including the North

Atlantic, Central American and Caribbean trades. These malpractices

included market-distorting activities such as various forms of secret

rebates and absorptions, misdescription of commodities and

misdeclaration of measurements, illegal equipment substitution,

unlawful use of service contracts, as well as carriage of cargo by and

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for untariffed and unbonded NVOCCs. Most of these malpractice

investigations resulted in compromise settlements of civil penalties.

However, some investigations required the institution of formal

adjudicatory proceedings in order to pursue remedies under the 1984

Act.

In addition to rate malpractice enforcement activity, several

matters arose with respect to activities pursuant to filed and untiled

agreements between and among ocean common carriers. Further,

upon submission of reports by BOE to the Commission, Fact Finding

Investigation No. 24, a nonadjudicatory investigation into maritime

terminal activities of Florida ports related to the provision of

exclusive tug services, was instituted, and a formal proceeding was

initiated to determine the lawfulness of exclusive tug arrangements

at marine terminal facilities on the Lower Mississippi. Also, a Show

Cause proceeding for failure to abide by new OTI requirements of

OSRA resulted in the cancellation of the licenses of 55 OTI entities.

The Commission collected $1,145,000 in civil penalties this past

fiscal year. These collections represent a wide range of violations in

all of our major trade lanes. Although the Commission continues to

undertake enforcement activity, as required by its statutory mandate,

its primary objective is to encourage voluntary compliance by the

regulated ocean transportation industry.

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III

OSRA IMPACT STUDY

The Commission released a comprehensive study on the

regulatory and economic impact of the Ocean Shipping Reform Act

of 1998 (“OSRA”). The study assessed the U.S. ocean liner

industry’s operations during the first two years since the

implementation of OSRA. In preparing the study, the Commission

relied upon a broad range of sources, including a cross section of

industry views provided in response to the Commission’s Notice of

Inquiry on OSRA’s impact.

The study provides a general regulatory and economic overview

of ocean liner shipping, and examines several key issues

including: service contract developments, agreement and voluntary

service contract guideline activities, OTI licensing and bonding, and

tariff publication. Other issues covered include: controlled carriers,

restrictive shipping practices by foreign governments, port trucking,

and e-commerce. The study’s closing observations identify issues

warranting continuing attention by the Commission and offer several

suggestions for possible legislative consideration.

Based on the research and information obtained, the study

concludes that OSRA appears to be achieving its primary policy

objective of producing a more market-driven ocean liner shipping

environment, thereby increasing competition and the efficiency of

industry participants. While there continue to be issues for debate

and varying views on the overall effect of OSRA among different

industry groups, generally responses to the Commission’s Notice of

Inquiry indicated that OSRA is working as intended.

The study found that the procompetitive reforms aimed at service

contracting appear to have contributed to a 200 percent increase in the

-19-
number of service contracts and amendments filed with the

Commission since May 1999, as well as an increase in the volume of

cargo moved under those contracts. In several trades where the

percentage of cargo volume moving under service contracts had been

50 to 60 percent, some carriers reported a jump to 80 percent or more

under OSRA. It appears the primary impetus for these increases is

the flexibility and confidentiality of individual service contracting

introduced under OSRA. This enables shippers and carriers to design

contracts to meet their specific business requirements in a

confidential environment.

In the area of agreements, the report notes that there have been a

number of significant changes. The deregulatory nature of OSRA, the

emergence of global markets, and the improved service of

traditionally non-conference carriers, have contributed to the

restructuring of the U.S. liner shipping industry. Broad-based rate

discussion agreements with non-binding ratemaking authority have

essentially replaced traditional rate-fixing conferences as the primary

forum for collective carrier pricing activity in most U.S. liner trades.

Discussion agreements are less bureaucratic and autocratic than the

traditional conference and provide members with the opportunity to

exchange commercial information and agree voluntarily on pricing

policy. Unlike conferences, which saw a marked decline in their

numbers (almost one-third either disbanded or were suspended about

the time OSRA became effective in May 1999), the number of rate

discussion agreements has remained somewhat stable during the first

two years of OSRA. Further, the number of efficiency-enhancing

operational agreements on file with the Commission continues to rise,

as carriers seek to maintain a competitive market position by

expanding their individual service networks through cooperative

arrangements.

The study also found that since OSRA’s implementation, the

number of individual NVOCCs and ocean freight forwarders has

declined slightly, whereas the number of OTIS that are both NVOCCs

and freight forwarders more than doubled. This may be a function of

-2o-
the consolidation taking place throughout the U.S. shipping industry

in an effort to provide better services.

Finally, the study noted the concerns expressed by OTIS in

response to the Commission’s Notice of Inquiry, as well as in other

forums. These concerns include what NVOCCs perceive to be a

closer Commission scrutiny of their activities vis-a-vis those of

vessel-operating common carriers (“VOCCs”), and an unfair

advantage by NVOCCs who do not establish or adhere to published

tariffs. In addition, NVOCCs want to be allowed to enter into service

contracts with their shipper-customers in order to put the NVOCCs

on what they believe to be an equal competitive footing with VOCCs.

The full text of the Commission study can be viewed by visiting

the Commission’s website at www.fmc.nov.

Separate from the two-year OSRA impact study, the Commission

prepared a confidential report on the impact of ocean common carrier

agreements’ voluntary service contract guidelines for participating

members. The purpose of the report was to discern the degree to

which agreement members followed these guidelines when

negotiating service contracts. In fiscal year 2001, there were 19

agreements that filed confidential service contract guidelines with the

Commission. The Commission audited 600 service contracts of

carriers who are members of agreements that recommend service

contract guidelines in the transatlantic, transpacific, Australia-New

Zealand and Latin America trades.

The confidential report found that the success of these agreements

in gaining compliance with service contract guidelines depended on

underlying market conditions. During times when the demand for

ocean liner transportation was high, carriers generally followed the

guidelines. However, during times when the demand for ocean liner

transportation was low, carriers generally did not abide by the

guidelines. The percentage of service contracts adhering to

surcharges and/or accessorials was mixed, ranging from 34 to 100

-21-
percent, depending on the trade. Adherence to GFUs and specific

commodity rates was less successful, ranging from none to 60 percent

of the service contracts examined.

-22-
IV

MONITORING AND

ENFORCEMENT

A. MONITORING

The systematic monitoring of carrier activities and commercial

conditions in the U.S. liner trades is an integral part of the

Commission’s responsibilities under the 1984 Act, as amended by

OSRA. Such monitoring helps ensure that carriers operating in the

U.S. trades comply with the statutory standards of the 1984 Act and

the requirements of relevant Commission regulations. To that end, the

Commission administers a variety of monitoring programs and other

research activities designed to keep it informed of current trade

conditions, emerging commercial trends, and carrier pricing and

service activities.

The importance the Commission attaches to its ongoing

monitoring activities is a direct consequence of the removal, under

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

disapprove agreements. The 1984 Act provides that, unless rejected

under relevant statutory authority, agreements filed with the

Commission shall become effective on the 45” day after filing or the

30” day after notice in the Federal Register, whichever is later.

Agreements can be rejected for technical reasons or for failure to

include statutory provisions in the agreement language. Also, the

Commission may extend the original 45-day period when additional

information from filing parties is deemed necessary and is requested.

Finally, if the Commission determines that an agreement, by virtue of

a reduction in competition, is likely to unreasonably increase

transportation costs or decrease transportation service, it may seek

-23-
injunctive relief in the U.S. District Court for the District of

Columbia.

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

agreements from taking effect, the need for adequate and timely

evaluation of post-implementation agreement activity has increased

considerably. The Commission’s monitoring program provides such

an evaluation through its examination of carrier competition,

including market share, concentration, entry conditions, general rate

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

service contracting activity, and shipper complaints.

In fiscal year 200 1, the Bureau of Trade Analysis prepared a

variety of economic analyses and reports on the activities and

practices of carriers operating in the U.S. international trades. Projects

included: (1) the preparation of several sections of the Commission’s

two-year OSRA Impact Study, including a confidential report on the

impact of service contract guidelines; (2) the preparation of the

Commission’s Notice of Inquiry on the impact of OSRA and review

and analysis of industry responses; (3) economic analyses of newly

tiled major carrier agreements and amendments under the competition

standards of section 6(g) of the 1984 Act; (4) review of quarterly

monitoring report data submitted in accordance with the regulations

on agreement reporting requirements; and (5) an economic analysis

of the activities of certain controlled carriers.

B. ENFORCEMENT

The 1984 Act establishes an integrated system for the regulation

of the shipping and related industries in furtherance of the statutory

declaration of policy to ensure a nondiscriminatory, efficient, and

economic ocean transportation system for the benefit of international

trade of the U.S. The enforcement program represents a major area

of Commission activity. A principal goal of the program is to achieve

compliance with the provisions of the 1984 Act. Compliance, in turn,

provides the pathway to the statutory objectives of the 1984 Act.

-24-
Enforcement is a traditional means to achieve compliance through

deterrence.

The Commission maintains a presence in Los Angeles, Miami,

New Orleans, New York and Seattle, through Area Representatives

based in each of those cities. These representatives also serve the

other major port cities and transportation centers within their

respective areas. Local presence in major port areas greatly enhances

the Commission’s ability to perform its various functions and

improves communications with the regulated industry and its

customers.

Interaction between the Commission’s Area Representatives and

the U.S. Customs Service (“Customs”), with respect to the exchange

of investigative information, continues to be beneficial. All Area

Representatives work closely with Customs in their respective port

districts and have established symbiotic working relationships which

contribute to the productivity and efficiency of both agencies.

During fiscal year 2001, BOE investigated and prosecuted

malpractices, particularly fraudulent cargo descriptions and

measurements in the transpacific trades and secret rebates in the

South American trades. Other trades were also the subject of

malpractice investigations, including the North Atlantic, Central

American and Caribbean trades. These malpractices included

market-distorting activities such as various forms of secret rebates

and absorptions, misdescription of commodities and misdeclaration

of measurements, illegal equipment substitution, unlawful use of

service contracts, as well as carriage of cargo by and for untariffed

and unbonded NVOCCs. Most of these malpractice investigations

resulted in compromise settlements of civil penalties. However, some

investigations required the institution of formal adjudicatory

proceedings in order to pursue remedies under the 1984 Act.

In addition to rate malpractice enforcement activity, several

matters arose with respect to activities pursuant to filed and unfiled

-25-
agreements between and among ocean common carriers. Further,

upon submission of reports by BOE to the Commission, Fact Finding

Investigation No. 24, a nonadjudicatory investigation into maritime

terminal activities of Florida ports related to the provision of

exclusive tug services, was instituted, and a formal proceeding was

initiated to determine the lawfulness of exclusive tug arrangements

at marine terminal facilities on the Lower Mississippi. Also, a Show

Cause proceeding for failure to abide by new OTI requirements of

OSRA resulted in the cancellation of the licenses of 55 OTI entities.

During fiscal year 200 1, the Commission collected $1,145,000 in

civil penalties. Settlements were reached with many different

segments of the industry (e.g., carriers, shippers, forwarders, and

NVOCCs) operating in the U.S. foreign trades (see Appendix E).

-26-
V

DEVELOPMENTS IN MAJOR

U.S. FOREIGN TRADES

A. TRANSATLANTIC

Over the course of fiscal year 2001, conditions in the trade

between the U.S. and North Europe progressively deteriorated as the

cargo volume of imports and exports fell from the preceding fiscal

year. The collapse in stock prices and the subsequent economic

slowdown curbed U.S. consumer spending on import goods. As U.S.

demand softened, import cargo from North Europe decreased by 1.3

percent in fiscal year 2001. The decline marked a clear downturn in

the inbound trade direction compared to the preceding fiscal year

when import cargo robustly grew by 13 percent. The decline in U.S.

demand affected such major import goods from North Europe as

paper, furniture, beer, synthetic rubber, and food products, while auto

parts from Germany was one of only a few imports remaining strong.

In the outbound direction to North Europe, U.S. exports faired even

worse as cargo volume dropped by 6.2 percent in fiscal year 2001,

compared to a 3 percent increase in the preceding fiscal year. The

weak euro against the U.S. dollar, along with sluggish economies in

North Europe, reduced the demand for such major U.S. export goods

as edible nuts, fruits, auto parts, furniture, wood pulp, and lawn

equipment. The September 11 terrorist attacks, and the ensuing war

in Afghanistan, created further instability for carriers operating in the

transatlantic. As the U.S. economy officially lapsed into a recession

during 200 1 and consumer demand stalled, greater declines in cargo

volume in both trade directions are now projected for the remainder

of calendar year 2001 and into 2002.

-27-
The trade imbalance continued to be a major concern for carriers

as the disparity between the directional cargo flows increased in the

transatlantic. In fiscal year 2001, U.S. import cargo exceeded U.S.

export cargo by 5 1 percent, or close to 500,000 TEUs. Carriers were

affected by uneven vessel-capacity utilization in the opposing trade

directions, which made it difficult to reposition empty containers. For

the trade as a whole, the latest industry reports for September 2001

placed vessel-capacity utilization in the stronger inbound direction at

74 percent, while the weaker demand in the outbound direction left

vessels about half full. No improvement in the trade imbalance is

foreseen in the near future. To address the cost of repositioning

empty containers, members of the Tram-Atlantic Conference

Agreement (“TACA”) (No. 202-011375) initiated an equipment

repositioning charge of $100 per container on inbound cargo. In the

preceding fiscal year, TACA included a repositioning charge in a

tariff GRI on inbound cargo. The effect of that GRI was limited,

however, because only a small amount of TACA’s cargo moves under

tariff rates.

The unfavorable trade conditions also affected freight rates in the

transatlantic. Industry reports estimated that the decline in import

cargo volume from North Europe caused inbound freight rates to fall

by 5 percent as of the 2nd quarter of 2001. In the outbound trade

direction, the continued effects of overcapacity and dwindling U.S.

export cargo volume to North Europe further eroded freight rates to

levels that some carriers viewed as record lows. As a conference,

TACA endeavored to reverse the downward trend in freight rates by

implementing several tariff GRIs. During the fiscal year, TACA

implemented two moderate tariff GRIs inbound, and three small to

moderate tariff GRIs outbound.

The ability of TACA to collectively influence freight rates

through tariff GRIs has diminished considerably. Since OSRA, the

vast majority of TACA’s cargo moves under individual service

contracts with rates independently negotiated outside of the

conference. Most recently, TACA reported that only about 10 percent

-28-
of the cargo carried by its members moved under conference rates.

In addition, the conference’s collective market share fell slightly from

a year ago. According to the latest trade data, TACA’s market share

in the inbound direction fell from 48 percent during the 2nd quarter

of 2000, to 45 percent during the 2nd quarter of 2001. In the

outbound direction, TACA’s market share remained relatively

constant from a year ago at 49 percent. TACA’s largest independent

competitors in the transatlantic included Evergreen Marine

Corporation, COSCO North America, Inc. (“COSCO”), Lykes Lines

Limited, LLC (“Lykes Lines”), and Hanjin Shipping Company, Ltd.

(“Hanjin”). The leading carrier serving the trade, however, is a

TACA member, A.P. Moller-Maersk Sealand (“Maersk Sealand”).

It held the highest single market share at approximately 14 percent in

both trade directions.

In the preceding fiscal year, carriers operating in the transatlantic

reconfigured their services through a series of vessel-sharing and

space-chartering agreements. The long-standing agreements between

Maersk Sealand, P&O Nedlloyd Limited (“P&O Nedlloyd”), and

Orient Overseas Container Line Limited (“OOCL”) were terminated

and replaced by new arrangements. As such, distinct carrier groups

have now evolved in the transatlantic, comprising significant portions

of the trade’s total vessel capacity. The largest carrier group shares

vessels through the Grand Alliance (No. 208-011602) and charters

space through an agreement with Americana Ships ( No. 232-

0 11705). Carriers in this group include Hapag-Lloyd Container Linie

GMBH (“Hapag-Lloyd”), Nippon Yusen Kaisha (“NYK Line”),

OOCL, P&O Nedlloyd, Lykes Lines, and TMM Lines Limited, LLC.

Together, these carriers operate five weekly services between the U.S.

and North Europe that account for 33 percent of the trade’s total

capacity. The second largest carrier group in the trade shares vessels

through the New World Alliance (No. 217-011723) and charters

space through agreements with Maersk Sealand (No. 232-011722)

and Compagnie Maritime d’Affretement-Compagnie Generale

Maritime ( No. 217-011726). Carrier members of the New World

Alliance include APL Co. Pte. Ltd. (“APL Ltd.“), Hyundai Merchant

-29-
Marine Co., Ltd. (“Hyundai”), and Mitsui O.S.K. Lines, Ltd.

(“Mitsui”). As a whole, these carriers provide three weekly services

with 24 percent of the trade’s total vessel capacity.

On agreement issues, TACA implemented a coordinated capacity

program to temporarily withdraw vessels from service and to charter

space between members during the period of historically low demand

between the months of December 2000 and February 2001. Under

the program, TACA withdrew one vessel per week over a five-week

period. The vessels were returned to service starting on the next

round-trip voyage rotation from North Europe. During the 2000/200 1

program period when vessels were withdrawn, the total amount of

vessel space supplied by TACA sufficiently exceeded demand for

TACA members’ available vessel space. TACA submitted an

amendment to reimplement the same capacity program between

December 2001 and February 2002. Under the amendment, TACA

proposes to withdraw one vessel per week during the period. The

members who withdraw vessels will be allowed to charter space from

other TACA members.

B. MEDITERRANEAN

Even though Italy’s gross domestic product (“GDP”) increased 1

percent over last fiscal year, it still remains one of the lowest in the

European Union. Economic growth and domestic spending in Spain

was sluggish due to a decline in the demand for Spanish goods, such

as wine, spirits, foodstuffs, and forest products. The Turkish economy

continued to suffer from the effect of a banking crisis and the

devaluation of its lira.

Despite the U.S. economic slowdown during the fiscal year, the

volume of import cargo from the Mediterranean continued to grow at

7 percent over fiscal year 2000 cargo volumes, largely sustained by

U.S. demand for home furnishings from the region. After expanding

by 14 percent in fiscal year 2000, U.S. export cargo volume to the

Mediterranean contracted by nearly 14 percent during fiscal year

-3o-
200 1. A weak euro and sluggish economies in the Mediterranean

region contributed to a sharp drop in the demand for major U.S.

exports such as logs, lumber, wood-pulp, and cotton. Each of these

top-ranked commodities suffered double-digit percentage losses

compared to fiscal year 2000.

As the Mediterranean trade is a logical collection point for intransit cargo which attracts a number of carriers outside the direct

U.S./Mediterranean trade, managing excess vessel capacity continues

to be a major issue for carriers serving the direct trade. The

expansion in vessel capacity that started in tiscal year 2000 showed

no signs of abating during the fiscal year. The latest industry reports

indicate that vessel capacity in the trade increased by 25 percent

relative to the preceding fiscal year. For example, Zim Israel

Navigation Co., Ltd., Hapag-Lloyd, P&O Nedlloyd, CP Ships (UK)

Limited, and Italia Di Navigazione SPA expanded their operations in

the trade with new services, additional port calls, and vessel upgrades.

Continued excess vessel capacity and the drastic drop in U.S.

export cargoes drove outbound rate levels downward, while rate

levels in the stronger inbound direction rose modestly. Members of

the United States South Europe Conference (No. 202-011587)

(“USSEC”) whose members held a market share of less than 50

percent, implemented two small to moderate tariff GRIs along with

several new surcharges on inbound cargo. However, given the

depressed trade conditions in the U.S. export trade, members of the

USSEC decided not to implement any GRIs in that trade lane during

the fiscal year.

C. MIDDLE EAST

During fiscal year 2001, conditions were improving in the

U.S./Middle East trade until the events surrounding the terrorist

attacks in the U.S. threw the region into greater turmoil. Gains from

higher oil prices during the first half of the fiscal year stimulated

efforts to increase productivity within Middle East nations. Overall,

-31-
import cargo from the Middle East grew by 7.6 percent, as U.S.

consumers continued to purchase such goods as apparel, plastics,

furniture and chemical compounds from the region. However, due to

a slowing U.S. housing market and reduced U.S. spending, shipments

of furniture from Israel, and rugs and floor coverings from Saudi

Arabia, did not do as well as a year earlier.

Higher oil prices in Saudi Arabia and Kuwait during the first half

of the fiscal year improved the fiscal positions of governments in the

oil-producing nations, thus increasing the amount ofmoney available

to spend on U.S. goods. In addition, foreign investment that started

a year ago in Israel has changed the types of U.S. exports shipped to

that region from lower-valued cargo to higher-valued products.

Overall U.S. export cargo volume to the Middle East increased by 2.5

percent, even though the top-moving commodity, paper and paper

board, dropped 12 percent during the fiscal year.

Any political and economic stability in the Middle East, however,

was cut short after September 11. Fighting between Israeli and

Palestinian factions intensified, placing an additional strain on

relations between Middle East nations. In addition to the disruptive

trade conditions, carriers serving the Middle East incurred higher

costs from premiums imposed by insurance companies. To defray

those costs, many carriers serving the trade implemented war risk

surcharges for vessel calls at Middle East ports. Many carriers also

tiled special permission applications with the Commission to advance

the effective date of these surcharges.

D. AFRICA

While many sub-Saharan countries achieved some degree of

economic growth during calendar year 200 1, the estimated overall

GDP growth rate for the region of approximately 4.3 percent will fall

short of what is required to reduce the number of people living in

poverty. The Poverty Reduction Strategy, an initiative undertaken by

30 sub-Saharan countries, with strong backing from the World Bank

-32-
and other international financial agencies, was largely unsuccessful.

North of the Sahara, 33 percent of Egypt’s population was classified

as poor and 7 percent as extremely poor. Some industry reports

calculate that Africa would need a GDP growth rate of 7 to 8 percent

to begin a reduction of poverty conditions.

During the fiscal year, the World Bank and its affiliate agencies

invested more than $1 billion to fund various projects such as

transportation infrastructure, education, and other programs to

improve government services and planning. In addition, African

institutions and the United Nations contributed resources focused on

improving both domestic and international commerce including:

establishing a new set of payment mechanisms under the West Africa

Economic and Monetary Union to facilitate commerce across the

eight countries of the Union; programs to facilitate global trade

expansion; and promoting economic development ventures through

loan and technical assistance programs.

Despite low rates of economic growth and severe poverty levels

over much of the continent during the past several years, the volume

of liner cargo transported between the U.S. and Africa has continued

to grow. During fiscal year 200 1, U.S. export cargo volume to Africa

grew by 3.3 percent, while U.S. imports from Africa grew by 6.7

percent over fiscal year 2000.

African ports continued to be considered sub-standard due to

inadequate equipment and infrastructure, which resulted in lower

efficiency, higher port costs and congestion. Efforts are being made

to address these problems. For example, South Africa developed a

comprehensive plan to improve infrastructure at its ports.

Freight rates, which had begun to stabilize and increase

moderately in 1999 and 2000, fell sharply during the fiscal year as

a result of intense competition from non-conference and nondiscussion agreement carriers serving the trade. Falling rates were

aggravated by what was described, in some cases, as extremely low

-33-
rates offered by some independent carriers serving the trade. Rates

fell so sharply that conference members of the U.S. South Afvica

Conference (No. 202-011259) found it unfeasible to proceed with

planned GRIs in the trade.

Some carriers expanded their operations in the trade with new

services, additional port calls, and vessel upgrades. South African

Safmarine Container Lines N.V. started a 2 1 -day express service to

West Africa from Houston; Atlantic Container Line A.B. added a

new service with fixed-day weekly calls between North America and

West Africa; and Lykes Lines introduced two new multi-purpose

vessels in its North America to Africa service. Amendments were

made to existing agreements, but no new agreements were filed in

the trade during the fiscal year.

E. LATIN AMERICA AND THE CARIBBEAN

Overall trade between the U.S. and South America declined

during fiscal year 2001, with U.S. imports and exports declining 7

and 5 percent, respectively. On a regional basis, a deep economic

recession, political unrest, and foot-and-mouth disease in Argentina,

along with power shortages in Brazil, the region’s main economy,

severely dampened trade between the U.S. and the East Coast of

South America during the fiscal year. Underlying Argentina’s

financial difficulties is the fact that its products are too expensive to

export, partly because the peso is pegged to the U.S. dollar and the

euro. Brazil’s real also depreciated 28 percent during calendar year

200 1, increasing the competitiveness of Brazilian exports.

Argentina reintroduced tariffs on Brazilian exports to counter

Brazil’s currency advantage, exasperating the already weak

economic situation. The Brazilian government continued to stand

by its prediction of 4.5 percent growth in GDP for calendar year

2001, despite the energy crisis.

While U.S. imports from the East Coast of South America

benefitted from the surge in U.S. construction activity during 2000,

-34-
the slowdown in U.S. consumption during 2001 translated into a

9 percent decline in cargo shipments to the U.S. during fiscal year

2001, compared to the same period last year. In particular, U.S.

imports of logs and lumber, veneers and plywood, along with

paperboard, engines and auto parts, plunged. Brazilian coffee

suffered from low production, also leading to lower US. import

cargo volumes. U.S. exports to the East Coast of South America

region fell by nearly 1 percent during fiscal year 200 1, relative to the

previous fiscal year. Industry reports noted that vessel-capacityutilization levels through the first three quarters of the fiscal year

were weak, at approximately 59 percent for U.S. imports and 58

percent for U.S. exports.

On the West Coast of South America, economic conditions

within certain countries showed signs of improvement over last

fiscal year. Chile will likely post a 4 percent growth in GDP, and

Peru 3 percent growth. Although the Columbian economy continues

to suffer from political unrest, Cartegena is fast becoming a major

cargo transhipment hub, and Puerto Cabello in Venezuela aspires to

do the same. Despite some economic setbacks, Columbia is

forecasting a 2 percent growth in GDP for calendar year 200 1, while

Venezuela is forecasting 3 percent growth for the same period.

The decline in consumer confidence, global financial volatility,

and a stagnating global economic environment took a heavy toll on

the trade between the U.S. and the West Coast of South America.

U.S. imports from the West Coast of South America declined by 4.2

percent during fiscal year 2001, while U.S. exports to the region

dropped by nearly 12 percent. Struggling agricultural and fishing

industries continued to weaken U.S. imports from several countries,

including coffee and bananas from Columbia. The contraction in

demand for U.S. goods covered a broad commodity mix. However,

U.S. goods with the largest decline in demand were paperboard,

certain resins, urea (fertilizer) and automobiles. The contraction in

the trade between the U.S. and the West Coast of South America

also was shown through weak vessel-capacity-utilization levels

-35-
during the fiscal year -- approximately 62 percent for U.S. imports

and 54 percent for U.S. exports.

Excessive vessel overcapacity and economic instability in the

region’s largest economies led to rate reductions in previous years.

Toward the end of fiscal year 2000, as trade conditions improved,

some carriers initiated rate recovery programs and elected to carry

them forward into 200 1. At the end of calendar year 2000 and early

2001, improving economic conditions in South American countries,

with the exception of Argentina, and a significant reduction in

excess vessel capacity by carriers through operational alliances and

capacity cutbacks, relieved some of the downward market pressure

on freight rates. However, the softening market conditions during

the second half of calendar year 200 1 have hindered recent efforts to

increase rate levels in the trade. Discussions on any further rate

recovery programs by the West Coast of South America Discussion

Agreement (No. 205-011426) and the East Coast ofSouth America

Discussion Agreement (No. 205-011421) temporarily were

suspended until late spring 2002, at the earliest.

The economies of Central America and the Caribbean continued

to be depressed during fiscal year 2001. Nicaragua, Honduras,

Guatemala and El Salvador experienced drought conditions, which

led to a decline in their exports. Hurricane Iris devastated Belize,

causing floods which completely destroyed the shrimp business and

severely damaged the banana industry. Costa Rica also was damaged

by Hurricane Iris, and lost more than 10 percent of its banana and

coffee crops. In Jamaica, the sugar crop declined relative to previous

years, due in part to drought conditions.

For the fiscal year, U.S. imports from Central America and the

Caribbean fell by 2 percent, largely due to extensive agricultural

crop damage. The poor economic conditions throughout Central

America and the Caribbean also harmed the region’s demand for

U.S. goods. U.S. exports to the region fell by 5.2 percent during the

fiscal year. Nonetheless, carrier members of agreements serving

-36-
Central America and the Caribbean trades endeavored to raise freight

rates by implementing GRIs. The decline in cargo volume and

excess vessel capacity, however, have caused rate levels to remain

low.

F. TRANSPACIFIC

During fiscal year 2001, the transpacific trade was plagued by

overcapacity and slumping U.S. and Asian economies. Trade

conditions were deteriorating prior to the events of September 11;

however, the terrorist attacks served to worsen the situation. In

particular, while both U.S. import and export cargo growth declined

during the fiscal year, carriers also faced rising costs associated with

increases in vessel insurance premiums and heightened security

measures as a result of the attacks.

The Transpaczjk Stabilization Agreement (“TSA”) (No. 205-

01 1223) covers the inbound trade from the Far East to the U.S. and

is a prime example of a discussion and policy-setting agreement with

voluntary pricing authority. The discussion agreement presides over

the largest and most lucrative U.S. liner trade, where Asian imports

surpassed 6 million TEUs for the third consecutive fiscal year. TSA

consists of 14 carrier members, with a collective market share

exceeding 80 percent. Members exchange information and discuss

proposed GRIs, standardized surcharges, and other pricing-related

issues in the U.S. inbound Far East trade.

In fiscal year 2001, the cohesiveness of TSA and its ability to

effectively implement surcharges and rate increases have been

restricted by weakening trade conditions. During the fiscal year, the

growth of import cargo from the Far East to the U.S. was

disappointingly small (3 percent) in comparison to the double-digit

growth rates achieved in preceding fiscal years.

Despite weak cargo volumes following declines in retailers’

orders from Asia and rising U.S. unemployment rates, many carriers

-37-
added capacity early in the fiscal year as a result of vessel upgrades

and expansionary plans previously scheduled in anticipation of

greater cargo growth. As the fiscal year progressed and the U.S.

economy continued to weaken along with demand for Asian imports,

carriers serving the trade, struggling with overcapacity and falling

rates, began removing excess vessel capacity.

While TSA members considered a coordinated capacity

management plan to address the overcapacity situation, those joint

discussions were abandoned in favor of capacity cutbacks

undertaken by individual carriers or through operational agreements.

Maersk Sealand undertook capacity reductions by removing a string

of vessels from the trade, as did the New World Alliance and the

Grand Alliance. The New World Alliance includes Mitsui, APL

Ltd., and Hyundai, while the Grand Alliance members consist of

OOCL, Malaysia International Shipping Corp. Bhd., P&O Nedlloyd,

Hapag-Lloyd, and NYK Line. Industry reports expect the combined

effect of the cutbacks to reduce total weekly capacity deployed in the

U.S./Far East trade by approximately 10 percent.

Under these depressed trade conditions, members of TSA failed

to meet their GRI objectives and peak-season surcharge on inbound

cargo for 2001. Freight rates reportedly fell by upwards of 25

percent.

The Westbound Transpacljk Stabilization Agreement (“WTSA”)

(No. 205-O 11325) is the outbound counterpart to TSA and, likewise,

provides a forum for the exchange of information (including pricing)

among its members. In the outbound trade to the Far East, the

degree of recovery realized in the preceding fiscal year vanished, as

U.S. export cargo volume fell by nearly 15,000 TEUs below fiscal

year 2000. Despite the growing post-O%4 prominence of

discussion agreements in the transpacific, the continued dramatic

trade imbalance, declining cargo growth, and excess vessel capacity

during the fiscal year prevented WTSA members from achieving

cohesion on proposed rate increases. WTSA members were

-38-
somewhat successful in implementing a chassis usage charge

designed to encourage more efficient use of equipment during the

first half of 2001. However, industry reports observed that overall

rate levels in the outbound transpacific trade had reached

unprofitable levels.

As fiscal year 2001 came to a close, a number of war risk

surcharges were introduced as a result of political unrest in war-torn

countries and terrorism. Prior to September 11, members of TSA

and WTSA adopted a Sri Lankan war risk surcharge. After the

September 11 attacks, many carriers serving the trade imposed a war

risk surcharge on cargo moving through ports in the Middle East,

including Pakistan. These war risk surcharges were a result of the

higher premium costs to insure vessels operating in the trade.

Despite the faltering trade conditions during the fiscal year, a

new controlled carrier based in the PRC, Shanghai Hai Hua Shipping

Co., Ltd., entered the transpacific trade through a vessel-sharing

agreement with Great Western Steamship Company.

Government-owned, controlled carriers are active primarily in

the U.S. transpacific trade. While there are currently 14 carriers on

the Commission’s list of controlled carriers, over the past several

years carriers based in the PRC have been the largest group of

controlled carriers. Currently there are six PRC-controlled carriers

operating in the U.S. liner trades. COSCO, the largest of the group,

has grown from a very modest beginning to become one of the

largest carriers in the world -- during 2000 it ranked as one of the top

five carriers serving the U.S. liner trades. COSCO’s fleet consists

of more than 500 ships which call at ports in approximately 180

countries. It also is a very diversified company, offering nonshipping services such as real estate, finance, and insurance. China

Shipping Container Lines Co., Ltd. (“CSCL”), one of the newest

controlled carriers, has grown considerably. During the fiscal year

it operated more than 100 ships worldwide, and embarked on a

building program to further expand its fleet. CSCL’s market share

-39-
in the trade between the U.S. and the rest of the world increased

from .02 percent (2,707 TEUs) in 1999 to 1.1 percent (205,616

TEUs) in 2000. During the same period, it increased its market

share in the trade between the U.S. and the PRC from .Ol percent

(1,328 TEUs) to 3.9 percent (139,947 TEUs).

G. WORLDWIDE

After two years of solid trade growth, firming freight rates, and

some improvement in carrier profitability, an economic slowdown

began in the U.S. Consequently, the volume of import cargo moving

inbound to the U.S. sharply dropped from the high levels of growth

that prevailed in past fiscal years, particularly in such trades as the

transpacific and the transatlantic. The impact was immediately felt,

for example, in the large transpacific trade, as U.S. consumers

reduced spending on imports from the Far East causing cargo

volume growth to plunge to 3 percent -- down from a high of 14

percent a year earlier. U.S. export cargo volume growth in the trade

also was down during the fiscal year, but to a lessor extent relative

to U.S. imports. The U.S. Commerce Department reported that the

U.S. trade gap narrowed by a record amount during the fiscal year.

While both U.S. imports and exports fell, the reduction in the U.S.

trade gap was primarily a result of the drastic decline in U.S.

imports.

As demand declined, carriers attempted to deal with the excess

vessel capacity in many U.S. liner trades. Conditions worsened as

a record number of new containerships were deployed under

previous plans for scheduled vessel upgrades, and new services

added further excess capacity in the trades. Attempts by agreement

carriers to coordinate rate increases generally proved ineffective

against falling freight rates and excess vessel capacity.

With conditions already weak in many trades, the economic

instability stemming from the September 11 terrorist attacks in the

U.S. and the ensuing war in Afghanistan created additional problems

-4o-
for carriers. The increased threat of terrorist attacks, and/or military

actions in response, increased shipping costs for war risk vessel

insurance coverage and heightened port security. As the U.S.

slipped into a recession, a further contraction in U.S. consumer

demand stands to reduce cargo growth and push freight rates

downward by an even greater degree than was previously projected.

Within the industry, concern over the financial stability of carriers

spread, with industry analysts foreseeing further carrier consolidation

resulting from another round of mergers, acquisitions, and possible

bankruptcies.

During the fiscal year, carriers continued to try to cope with the

overcapacity situation through vessel and service rationalization

arrangements in all U.S.-foreign trades. These operational

agreements comprised 5 8 percent of all effective agreements on file

with the Commission during the fiscal year. They range in scope

and complexity from simple space-sharing arrangements, to the

highly integrated multi-carrier, multi-trade lane, global strategic

alliance. COSCO, Kawasaki Kisen Kaisha, Ltd., Hanjin, and

Yangming Marine Transport Corporation, for example, recently

announced discussions that may lead to a new global strategic

alliance arrangement that would involve joint liner services between

the U.S., Far East, and Europe.

Fiscal year 200 1 also saw the further development of confidential

contracting in the “post-conference” OSRA environment. The

ability to deal with individual carriers, the elimination of the “metoo” requirements for similarly situated shippers, and the

confidentiality of certain commercially sensitive service contract

terms, have fostered a shift to contract carriage. In several trades

where the percentage of cargo volume moving under service

contracts had been 50 to 60 percent, some carriers reported through

the Commission’s Notice of Inquiry on the economic impact of

OSRA that the percentage jumped to 80 percent or more under

OSRA. The number of service contracts and amendments filed with

the Commission since May 1999 has increased approximately 200

-41-
percent. This increase, along with increased cargo moving under

service contracts, is due in part to the flexibility and confidentiality

of individual service contracts.

Major carriers continue to make large capital investments in

information technology. As such, cargo-based, e-commerce portals

are gaining in importance and popularity and are receiving support

from major liner carriers. These Internet portals provide a

centralized location for “one-stop shopping” for various participating

carrier services and obviate the need for shippers to refer to

numerous individual carriers’ websites. INTTRA, GT Nexus and

Cargo-Smart, the three ocean carrier-backed Internet portals, are

focusing on track-and-trace systems as a core capability. Extensive

carrier collaboration is expected to continue in this area. In addition,

one carrier member of INTTRA, P&O Nedlloyd, recently unveiled

six products that it will provide shippers along with a track-and-trace

feature. These products include: vessel schedule information, online booking capability, on-line shipping instructions, ability to print

remote bills of lading, automated shipment tracking, and a complete

on-line invoicing and payments system.

-42-
VI

THE FOREIGN SHIPPING

PRACTICES ACT OF 1988

A. GENERAL

The Foreign Shipping Practices Act of 1988 (“FSPA”) became

effective on August 23, 1988.

The FSPA directs the Commission to investigate and address

adverse conditions affecting U.S. carriers in U.S. oceanborne trades,

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

under U.S. law or as a result of acts of U.S. carriers or others

providing maritime or maritime-related services in the U.S.

In fiscal year 2001, the Commission monitored potentially

unfavorable or discriminatory shipping practices by a number of

foreign governments. However, no FSPA action was taken in 2001.

In fiscal year 2001, the Commission’s Task Force on Restrictive

Foreign Practices continued to meet. The Task Force, chaired by the

General Counsel, is a network of representatives from a number of

Commission bureaus and offices, and meets to exchange information

regarding new or continuing areas of concern relating to restrictive

foreign shipping practices possibly necessitating action under one of

the Commission’s statutory authorities in this area. The regular

meetings of the Task Force also aid the Commission in developing

efficient methods to address conditions as they arise.

-43-
B. TOP TWENTY U.S. LINER CARGO

TRADING PARTNERS

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

Act of 1988 requires the FMC to include in its annual report to

Congress “a list of the twenty foreign countries that generated the

largest volume of oceanborne liner cargo for the most recent calendar

year in bilateral trade with the United States.”

The Journal of Commerce’s Port Import Export Reporting Service

(“PIERS”) database was used to derive the Commission’s list of top

twenty trading partners. PIERS obtains data on U.S. import and

export shipments from tapes of bill-of-lading manifests filed

electronically with Customs via the Automated Manifest System

(“AM,“). PIERS also stations personnel at individual ports to

manually collect shipment data that is incomplete or not tiled through

AMS. PIERS edits the raw shipment data and distinguishes liner

shipments from non-liner shipments. The individual shipment data

is also compiled into a more general and useful format for

convenience. PIERS uses standardized spellings of company names,

coding of ship lines, port names, and country code assignments. The

Journal of Commerce also employs proprietary artificial intelligence

software to increase the accuracy of its data.

The most recent complete calendar year for which data were

available is 2000. The table on the next page gives the twenty foreign

countries that generated the largest volume of oceanborne liner cargo

in bilateral trade with the U.S. in 2000. The figures in the table

represent each country’s total U.S. liner imports and exports in

thousands of TEUs.

-44-
Top Twenty U.S. Liner Cargo

Trading Partners (2000)

Rank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c!lmm!

(ooos)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

China (PRC) ............................ 3,587

Japan .................................. 1,809

Hong Kong’ ............................. 1,374

Taiwan ................................. ..96 1

South Korea ............................. .899

Germany ............................... ..62 8

Italy ................................... ..55 8

United Kingdom (Incl. N. Ireland) ............. 505

Thailand ................................ .485

Brazil .................................. ..42 7

Indonesia ............................... ..410

The Netherlands .......................... .401

Belgium & Luxembourg .................... .392

Malaysia ................................ .310

France ................................. ..29 6

Philippines .............................. .267

India .................................. ..25 7

Dominican Republic ....................... .24 1

Spain .................................. ..22 9

Australia ................................. .222

I On July 1, 1997, Hong Kong reverted to Chinese control as a special

administrative region. However, PIERS continues to report data separately for

Hong Kong because of its status as a major transshipment center.

Source: All data are aggregatedfrom the PIERS (Port Import Export Reporting

Service) database maintained by the Journal of Commerce.

-45-
The only change to the Top Twenty list for 2000, in comparison

with the list for 1999, is the addition of Australia, which replaced

Costa Rica, now in 21”’ place.

In terms of ranking order, China (PRC) continued its lead, with

an increase in volume of almost 37 percent over 1999’s volume,

which represented an 18 percent increase over 1998’s. Hong Kong

and Taiwan registered a slight decrease of 3.45 and 1.35 percent,

respectively, over the 1999 levels. Japan’s volume grew 3.40 percent

over its 1999 share. Countries with an increase of over 10 percent

above 1999 levels were: South Korea, 10.60 percent; Germany, 12.15

percent; Italy, 13.65 percent; Thailand, 18.60 percent; Indonesia,

16.50 percent; Malaysia, 13.55 percent; Philippines, 10.80 percent;

and India, 15.80 percent. Only minor changes occurred among the

rankings of the other top twenty countries.

-46-
VII

SIGNIFICANT

OPERATING

ACTIVITIES

BY

ORGANIZATIONAL UNIT

A. OFFICE OF THE SECRETARY

1. General

The Office of the Secretary serves as the focal point for all

matters submitted to and emanating from the members of the

Commission. Accordingly, the Office is responsible for preparing

and submitting regular and notation agenda of matters for

consideration by the Commission and preparing and maintaining the

minutes of actions taken by the Commission on these items; receiving

and processing formal and informal complaints involving violations

of the shipping statutes and other applicable laws; receiving and

processing special docket applications and applications to correct

clerical or administrative errors in service contracts; issuing orders

and notices of actions of the Commission; maintaining official files

and records of all formal proceedings; receiving all communications,

petitions, notices, pleadings, briefs, or other legal instruments in

regulatory and quasi-judicial proceedings and subpenas served on the

Commission or members and employees thereof; administering the

Freedom of Information, Government in the Sunshine, and Privacy

Acts; responding to information requests from the Commission staff,

maritime industry, and the public; issuing publications and

authenticating instruments and documents of the Commission;

compiling and publishing bound volumes of Commission decisions;

and maintaining and promulgating official copies of the

Commission’s regulations.

The Secretary’s Office also participates in the development of

rules designed to reduce the length and complexity of formal

proceedings, and participates in the implementation of legislative

changes to the shipping statutes. During fiscal year 2001:

n The Commission issued decisions concluding eight

formal proceedings. Three initial decisions of

administrative law judges became administratively

-49-
final without Commission review. Nine proceedings

were dismissed or discontinued, including two

rulemaking proceedings. The Commission also

concluded thirteen special docket applications, and

three informal dockets which involved claims sought

against carriers for up to $10,000. During the same

period, the Commission issued final rules in three

rulemaking proceedings.

Six rulemaking proceedings and three formal petitions were

pending before the Commission at the end of the year. Final

decisions in these matters are anticipated in fiscal year 2002.

Finally, the Office of the Secretary serves as a public

information/press office for the Commission. It manages the

Commission’s website content; coordinates the issuance of

Commission News Releases; directs public inquiries to the

appropriate Commission bureau/office for response; and monitors the

trade press for matters of agency interest for referral to the Chairman,

Commissioners and Commission staff.

2. Library

The FMC Library serves the Commission’s research and

information needs. Its holdings consist of specialized material

primarily covering the various segments of the shipping industry, as

well as historical and current regulatory materials covering all phases

of shipping in the U.S. foreign trades. It also contains material on

several related fields such as engineering, economics, political

science and an extensive collection of legal publications. The library

includes such sources of information as law encyclopedias,

engineering textbooks, legal treatises, Comptroller General Decisions,

and editions of the various National Reporter systems. The Library’s

holdings consist of approximately 4,000 volumes and numerous

microfiches, CD-ROMs and on-line services.

-5o-
B. OFFICE OF

ADMINISTRATIVE LAW JUDGES

1. General

Administrative Law Judges (’ ‘ALJs”) manage the development of

an evidentiary record through rulings and conferences with counsel

for the litigating parties, rule upon dispositive motions, and preside

at hearings held after the receipt of a complaint or institution of a

proceeding on the Commission’s own motion.

ALJs have the authority to administer oaths and affirmations;

issue subpenas; rule upon offers of proof and receive relevant

evidence; take or cause depositions to be taken whenever the ends of

justice would be served thereby; regulate the course of the hearing;

hold conferences for the settlement or simplification of the issues by

consent of the parties; dispose of procedural requests or similar

matters; make decisions or recommend decisions; and take any other

action authorized by agency rule consistent with the Administrative

Procedure Act.

At the beginning of fiscal year 200 1,18 formal proceedings were

pending before the ALJs. During the year, eight cases were added.

The ALJs formally settled three formal proceedings, dismissed or

discontinued three formal proceedings, issued one award of attorney’s

fees, and issued five initial decisions in formal proceedings.

2. Commission Action

The Commission adopted one formal initial decision, four orders

of approval of settlement, two dismissals of complaints, and one

award of attorney’s fees of the ALJs. Four initial decisions and one

award of attorney’s fees of the ALJs were pending consideration by

the Commission at the end of the fiscal year.

-51-
3. Decisions of Administrative Law Judges (in

proceedings not yet decided by the Commission)

Stallion Cargo, Inc. -- Possible Violations of Sections

IO(a)(l) and 1 O(b)(l) of the Shipping Act of 1984

[Docket No. 99-181.

In this proceeding respondent Stallion Cargo, Inc., an NVOCC

serving the Florida-Aruba trade, was found to have violated sections

1 O(a)(l), 1 O(b)( 1) and 10(b)(2)(A) of the 1984 Act, as amended, at

various times in 1998, 1999, and 2000, by misdescribing cargoes

tendered to vessel-operating carriers on 15 occasions and by failing

to charge its applicable tariff rates on 152 occasions. After the

proceeding had begun, respondent amended and corrected its tariff

and attempted to correct its unlawful practices. However, respondent

had carried on its unlawful activities knowingly and willfully, even

to some extent after being warned by the Commission’s staff. In view

ofrespondent’s weak financial condition and other mitigating factors,

civil penalties in the amount of $50,000 were assessed, respondent

was ordered to cease and desist from committing its unlawful

activities, and its license was not revoked or suspended.

World Line Shipping, Inc. and Saeid B. Maralan (AU

Sam Bustani) Order to Show Cause [Docket No. 00-OS].

In this proceeding the Commission remanded a case to the Office

of ALJs to determine the amount of civil penalties to be assessed

against respondent, who had been operating as an NVOCC without

having a public tariff, license or proof of financial responsibility, in

violation of sections 8, 19(a), 19(b), and 23(a) of the 1984 Act.

Respondent had also violated a cease and desist order previously

issued by the Commission. The presiding judge found that maximum

civil penalties allowed by the 1984 Act should be assessed, that is,

$27,500 per each violation, and that because of 25 proven violations,

-52-
the total amount of such penalties would be $687,500. However, the

judge did not tack on separate penalties for acts which had violated

different sections of the 1984 Act under the rationale that to do so

would circumvent the maximum amount allowed by law per

violation.

Universal Logistic Forwarding Co., Ltd. -- Possible

Violations of Sections 1 O(a)(l) and IO(b)(l) of the

Shipping Act of 1984 [Docket No. 00-lo].

In this proceeding an NVOCC located in Taiwan was found to

have violated sections lO(a)( 1) and lO(b)( 1) of the 1984 Act by

improperly using another carrier’s service contract and by failing to

charge its tiled tariff rates. Respondent was also found to have

committed 45 separate violations of these laws and to have done so

knowingly and willfully. Respondent disregarded the proceeding and

failed to present any defense for its behavior. The presiding judge

assessed respondent the maximum penalty permitted by law, namely,

$1,237,500, as had been done in previous cases of this kind.

New Orleans Stevedoring Company v. Board of

Commissioners of the Port of New Orleans [Docket

No. 00-111.

In this proceeding complainant, an MT0 seeking to obtain a

lease from respondent Port of New Orleans, was denied such lease

and alleged that respondent had violated sections 10(d)(3) and

1 O(d)(4) of the 1984 Act by refusing to deal with complainant and by

giving a competitor a preference or advantage at the Port. The

presiding judge found that the Port did not provide an unreasonable

preference or advantage to complainant’s competitor nor

unreasonably refuse to deal with complainant, who had voluntarily

terminated its status as a lessee of facilities along the Mississippi

River in order to avoid the costs associated with such status while the

Port was undergoing new construction of facilities.

-53-
4. Pending Proceedings

At the close of fiscal year 2001, there were fourteen pending

proceedings before the ALJs, of which four were investigations

initiated by the Commission. The remaining proceedings were

instituted by the filing of complaints by common carriers by water,

shippers, conferences, port authorities or districts, terminal operators,

trade associations, and stevedores.

-54-
C. OFFICE OF

THE GENERAL COUNSEL

The General Counsel provides legal counsel to the Commission.

This includes reviewing staff recommendations for Commission

action for legal sufficiency, drafting proposed rules to implement

Commission policies, and preparing final decisions, orders, and

regulations for Commission ratification. In addition, the Office of the

General Counsel provides written or oral legal opinions to the

Commission, its staff, and the general public in appropriate cases. As

described in more detail below, the General Counsel also represents

the Commission before the courts and Congress and administers the

Commission’s international affairs program.

1. Rulemakings and Decisions

The following are rulemakings and adjudications representative

of matters prepared by the General Counsel’s Office:

(a) Rulemakings

Agency Reorganization and Delegations of Authority

[Docket No. 00-131, (December 19,200O).

The Commission issued a Final Rule revising 46 C.F.R. Parts 501

and 502, to reflect the reorganization of the agency which took effect

on February 27, 2000. The Rule updated the descriptions of the

Commission’s organizational components, as well as the descriptions

of delegations of authority within the agency. The Rule also removed

the few remaining references to the Shipping Act, 19 16, which was

abrogated by the Interstate Commerce Commission Termination Act

of 1995.

-55-
The Content of Ocean Common Carrier and Marine

Terminal Operator Agreements Subject to the Shipping

Act of I984 [Docket No. 99-131, (August 3,1999).

The Commission issued a Notice of Inquiry to seek comments

from interested parties regarding possible changes to the

Commission’s rules governing the content of ocean common carrier

and MT0 agreements which are filed with the Commission in

accordance with the 1984 Act. The proceeding was initiated in

response to comments received in the rulemaking proceeding in

Docket No. 98-26, Ocean Common Carrier and Marine Terminal

Operator Agreements Subject to the Shipping Act of 1984, which

amended the Commission’s agreement regulations to implement

changes made by OSFL4. Those comments requested that the

Commission’s rules on content standards for agreement filing be

updated and refined. Interested parties were given 60 days to

comment in response to the Notice of Inquiry, which was published

in the Federal Register on August 3,1999. Comments were received

from carriers, shippers, and other interested parties and are currently

under review to determine what further action may be warranted.

00 Decisions

Revocation of Licenses, Provisional Licenses and Order

to Discontinue Operations in U.S.-Foreign Trades for

Failure to Comply with the New Licensing Requirements

of the Ocean Shipping Reform Act of 1998 [Docket No.

00-121, _ S.R.R. _ (April 12,200l).

The Commission initiated this proceeding by issuing an Order

to Show Cause directing 81 companies to show cause why it should

not revoke their existing licenses or provisional licenses, and issue a

cease and desist order barring them from operating as OTIS for failure

to comply with the requirements of sections 8 and/or 19 of the 1984

-56-
Act, 46 U.S.C. app. 99 1701 and 1718, and 46 C.F.R. Parts 515 and

502 (1999). Following the issuance of the Order to Show Cause, 23

OTIS contacted the Commission and complied with the requirements,

while 3 OTIS canceled their bonds. No responses were filed by the

remaining 55 entities (“respondents”), and they continued to remain

in non-compliance.

The Commission, therefore, proceeded to revoke respondents’

licenses and provisional licenses, and issued a cease and desist order

barring them from providing OTI services in the U.S.

World Line Shipping, Inc. and Saeid B. Maralan (AKA

Sam Bustani) -- Order to Show Cause [Docket No.

oo-OS]) -S.R.R. -(January 8,200l).

In this Commission-initiated investigation, the FMC ruled that

World Line Shipping and Saeid B. Maralan (AKA Sam Bustani) had

violated sections 8, 19(a), and 19(b) of the 1984 Act, and cease and

desist orders from a previous proceeding, by serving as an NVOCC

without a public tariff, license, or proof of financial responsibility.

The Commission had earlier sought and obtained a preliminary

injunction in the U.S. District Court for the Central District of

California, Federal Maritime Commission v. World Line Shipping

et al., 28 S.R.R. 1464, to prevent World Line Shipping and Sam

Bustani from operating during the pendency of this investigation.

The Commission found a total of 32 violations, and referred the case

to an ALJ for an assessment of civil penalties.

Inlet Fish Producers, Inc. v. Sea-Land Service, Inc.

[Docket No. 00-031, - S.R.R. - (September 19,

2001).

The complaint in this proceeding alleged that Sea-Land

Service had engaged in unlawful discrimination by permitting Inlet

Fish’s competitors, but not Inlet Fish, to subtract packing weight from

-57-
cargo in the calculation of freight rates. Sea-Land filed a motion to

dismiss Inlet Fish’s complaint as untimely under the three-year statute

of limitations. The presiding ALJ denied the motion, and Sea-Land

appealed the ALJ’s decision to the Commission. The Commission

affirmed the ALJ, ruling that a cause of action can in some

circumstances accrue not when an injury occurred, but when a party

learns that it was injured, or should have learned, by exercising

reasonable diligence, that it was injured. In this instance, the

Commission found that Inlet Fish had filed its complaint within three

years of learning that it may have been injured. This case was

referred to the ALJ for further action.

Cargo One, Inc. v. COSCO Container Lines Company,

Ltd. [Docket No. 99-241, 28 S.R.R. 1635 (October 31,

2000).

This proceeding was initiated by a complaint filed by Cargo

One, Inc., an NVOCC, against COSCO Container Lines Company,

Ltd., an ocean common carrier. Cargo One alleged that COSCO

violated several provisions of the Shipping Act by denying container

space in deference to larger shippers contrary to the agreement in

their service contract, demanding payment of tariff rates in lieu of

service contract rates, and failing to rectify Cargo One’s complaints.

COSCO filed a motion to dismiss on the grounds that section 8(c) of

the Shipping Act provides that “[tlhe exclusive remedy for a breach

of contract entered into under this subsection shall be an action in an

appropriate court, unless the parties otherwise agree.” The ALJ

denied the motion to dismiss, and subsequently granted COSCO’s

motion to appeal the issue to the Commission.

The Commission vacated the ALJ’s order and remanded the

proceeding to the ALJ. The Commission held that allegations of

violations of sections 1 O(b)( 1) and 1 O(b)(3) (pre- 1998 amendments)

will normally be dismissed pursuant to section 8(c), unless the

complainant rebuts the presumption that those claims are merely

-5a-
coexistent with claims for breach of contract; and that allegations of

violations of sections 1 O(b)(6)(e), 1 O(b)( 1 l), 1 O(b)( 12) and 1 O(d)( 1)

(pre-1998 amendments) will be presumed actionable before the

Commission, as those sections invoke considerations peculiar to

Shipping Act concerns beyond the confines of breach of contract

actions.

Stallion Cargo, Inc. - Possible Violations of Sections

1 O(a)(l) and 1 O(b)(l) of the Shipping Act of 1984 [Docket

No. 99-181, _ S.R.R. _ (October l&2001).

This proceeding was initiated by the Commission on

October 5, 1999, as an investigation into the activities of Stallion

Cargo, Inc. (“Stallion”), an NVOCC. The investigation sought to

determine whether Stallion violated sections lO(a)( 1) and lO(b)( 1) of

the Shipping Act, 46 U.S.C. app. $0 1709(a)(l) and (b)(l), by

willfully and knowingly obtaining transportation at less than the rates

and charges otherwise applicable by misdescribing the commodities

actually shipped; and by charging, demanding, collecting or receiving

less or different compensation for the transportation of property than

the rates and charges shown in its NVOCC tariff. The Order also

directed the presiding officer, in the event violations were found, to

determine: whether civil penalties should be assessed against

respondent and in what amount, whether respondent’s tariff should

be suspended, whether respondent’s OTI license should be revoked,

and whether a cease and desist order should be issued. The presiding

ALJ issued a decision in which he found that Stallion knowingly and

willfully violated sections 1 O(a)( 1) and 1 O(b)( 1) at various times in

1998,1999, and 2000, by misdescribing cargoes tendered to VOCCs

on 15 occasions and by failing to charge its applicable tariff rates on

152 occasions. The ALJ determined that a civil penalty in the amount

of $50,000 should be assessed and a cease and desist order should

issue.

-59-
On Exceptions, the Commission affirmed those portions of

the ALJ’s decision finding that Stallion knowingly and willfully

violated section lO(a)( 1) on 15 occasions and lO(b)( 1) on 152

occasions. The Commission, however, vacated the ALJ’s findings

that: Stallion’s interpretation of its tariff could be construed as

reasonable; Stallion’s violations ceased after June 2000, and thus this

constituted a mitigating factor in assessing penalties; 33 ofthe section

lO(b)( 1) violations were technical in nature and did not warrant a

civil penalty; 10 footwear violations did not cause harm to shippers,

thus no civil penalties should be assessed for them; and assessing

civil penalties for shell tariffs would run “counter to the

Commission’s efforts to eliminate ‘shell’ tariffs.” The Commission

also vacated the ALJ’s assessment of a $50,000 penalty and imposed

instead a civil penalty in the amount of $1,340,000. Finally, the

Commission revoked Stallion’s license to operate as an OTI and

issued a cease and desist order barring it from operating in the U.S.

as an OTI.

Compania Sud Americana de Vapores S.A. v. InterAmerican Freight Conference, et al. [Docket No. 96-141,

28 S.R.R. 12 (March 19,1998).

This proceeding was initiated by a complaint tiled by

Compania Sud Americana de Vapores S.A. (“CSAV”) against

respondents Inter-American Freight Conference (“IAFC”), and

Section C of the IAFC. CSAV alleged that the respondents violated

sections 10(a)(2) and 10(a)(3) of the 1984 Act, 46 U.S.C. app.

4 1709(a)(2) and (3), by charging CSAV for expenses allegedly not

authorized by the IAFC Agreement. CSAV claimed to have been

damaged by the IAFC’s action in drawing on a CSAV-supplied letter

of credit to pay for a portion of the winding-up expenses of a juridical

entity known as the Sociedade Brasileira de Administracao de

Conferencias de Frete. In response to the complaint, respondents

submitted a Motion to Dismiss and/or for Summary Judgment.

CSAV then tiled a Cross-Motion for Partial Summary Judgment. The

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presiding ALJ issued a decision in which he granted the respondents’

Motion for Summary Judgment and dismissed the complaint. The

ALJ found that, as a matter of law, the respondents had provided

sufficient language in their filed FMC Agreement to satisfy the

agency’s filing requirements. The CSAV appealed the ALJ’s

decision to the Commission. Disagreeing with the ALJ’s conclusion,

the Commission issued an order in which it determined that the

respondents had not tiled the agreement to dissolve the corporation,

and that this failure to file produced a violation of section 1 O(a)(2) of

the 1984 Act. After the Commission issued its Order, the

respondents tiled a Petition for Reconsideration, and several outside

parties filed an amicus curiae brief in support of the Petition for

Reconsideration. That Petition was being reviewed by the

Commission at fiscal year end.

Rose International, Inc. v. Overseas Moving Network

International, Ltd. [Docket No. 95-061, S.R.R.

(June 1,200l).

This proceeding was initiated by a complaint filed by Rose

International, Inc., an NVOCC, against Overseas Moving Network

International, Ltd. (“OMNI, Ltd.“), a corporation of moving and

storage companies, OMNI Shipping Services, Inc. (“OSSI”), an

alleged NVOCC, and various members of both OMNI Ltd. and OSSI.

Complainant alleged that respondents violated section lO(a)( 1) of the

1984 Act (pre-OSRA), 46 U.S.C. app. $ 1709(a)(l), by knowingly

and willfully creating OMNI Shippers’ Association (“O&A”) as an

unfair device or means to circumvent the tariff and bonding

requirements and to allow unbonded and non-tariffed members of

OMNI, Ltd. to access service contracts, thereby obtaining

transportation by water at less than the rates or charges that would

otherwise be applicable. Complainant also alleges that respondents

violated section lO(a)( 1) by knowingly and willfully creating OSSI,

an allegedly sham corporation, as an unfair device or means to

circumvent the tariff and bonding requirements of the Shipping Act

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and to allow unbonded and non-tariffed members of OMNI, Ltd. to

access service contracts, thereby obtaining transportation by water at

less than the rates or charges that would otherwise be applicable.

Rose further alleged that respondent Federal Forwarding, a freight

forwarder, received unlawful carrier compensation in violation of

section 19(d)(4) of the 1984 Act, 46 U.S.C. app. $17 18(d)(4), and 46

C.F.R. $8 5 10.23(g) and (h). Complainant claimed that as a result of

these violations, respondents caused it to lose business and sought

reparations for lost profits, lost growth opportunity, and for

reimbursement of a liquidated damages penalty imposed by a

conference. The presiding ALJ issued a decision in which he

dismissed all of complainant’s claims.

On Exceptions, the Commission decided to review the case de

novo to develop the facts more fully. The Commission agreed in part

with the ALJ, finding that complainant had failed to prove that OSA

was an improper shippers’ association and that respondent Federal

Forwarding had violated section 19(d)(4) and 46 C.F.R. 5 510.23(h)

in receiving unlawful carrier compensation. The Commission

overturned the ALJ, however, to find that OSSI was indeed a sham

NVOCC corporation run by OMNI, Ltd., and that it was created to

allow certain OMNI, Ltd. members to operate as NVOCCs without

the requisite bonds and tariffs, thereby allowing them to access

service contracts and obtain rates for less than would have otherwise

been applicable. The Commission further found that respondent

Federal Forwarding received unlawful carrier compensation in

violation of 46 C.F.R. 9 510.23(g). The Commission did not grant

reparations for these violations, however, as it found that

complainant’s evidence as to lost profits and lost growth opportunity

were flawed and did not prove these claims with reasonable certainty.

Moreover, the Commission found that complainant was not entitled

to reimbursement for the liquidated damages penalty imposed by the

conference for complainant’s failure to meet its cargo commitments

because it failed to mitigate its damages.

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2. Litigation

The General Counsel represents the Commission in litigation

before courts and other administrative agencies. Although the

litigation work largely consists ofrepresenting the Commission upon

petitions for review of its orders filed with the U.S. Courts of

Appeals, the General Counsel also participates in actions for

injunctions, enforcement of Commission orders, actions to collect

civil penalties, and other cases where the Commission’s interest may

be affected by litigation.

The following are representative of matters litigated by the

Office:

Federal Maritime Commission v. South Carolina State

Ports Authority, et al., Sup. Ct. No. 01-46.

The Commission filed a petition for a writ of certiorari on

July 10,2001, seeking Supreme Court review of the opinion of the

U.S. Court of Appeals for the Fourth Circuit in South Carolina State

Ports Authority v. Federal Maritime Commission et al., 243 F.3d 165

(March 12, 2001). In that decision, the court of appeals had

overturned the Commission’s conclusion that the Eleventh

Amendment to the U.S. Constitution does not bar privately-initiated

complaint proceedings before the agency. The South Carolina State

Ports Authority and the U.S. Solicitor General each filed briefs in

opposition to the Commission’s petition on September 10,200l. On

that same day, the National Association of Waterfront Employers, the

Carriers Container Council, and the United States Maritime Alliance

filed amici curiae briefs in support of the Commission’s petition.

The Commission filed a reply brief addressed to the arguments of the

Solicitor General and the Ports Authority on September 20, 2001.

The Supreme Court granted the Commission’s petition on

October 15, 2001, and ordered the Commission to tile its opening

brief by November 29,200 1.

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South Carolina State Ports Authority v. Federal Maritime

Commission et al., 4’h Cir. No. 00-1481.

This case was initiated in the U.S. Court of Appeals for the

Fourth Circuit by the South Carolina State Ports Authority, as a

Petition for Review of the Commission’s decision in South Carolina

Maritime Services, Inc. v. South Carolina State Ports Authority,

Docket No. 99-2 1. That decision held that the Eleventh Amendment

and state sovereign immunity do not extend to administrative

proceedings like those conducted by the Commission, but instead

only apply to judicial proceedings before courts. The practical result

of the FMC’s determination was that the South Carolina State Ports

Authority was found not to be immune from private complaint

proceedings before the Commission. The Ports Authority appealed

this decision. The case was docketed on April 24,200O. The Ports

Authority’s brief was filed on July 20,200O. Twenty-one states filed

an amicus curiae brief on July 3 1, 2000, in support of the Ports

Authority. The National Association of Waterfront Employers filed

an amicus curiae brief in support of the FMC’s decision on

September 11,200O. The FMC filed its brief on September 20,2000,

and the U.S. tiled a separate brief, supporting the FMC’s decision, on

the same day. Oral argument was heard on January 22,200l. The

Court issued its opinion on March 12,200 1, reversing the FMC and

ordering the complaint dismissed, 243 F.3d 165 (4” Cir. 2001). The

Commission filed a petition for writ of certiorari with the Supreme

Court seeking reversal of the Fourth Circuit’s decision. The Solicitor

General filed a request on August 1 to extend from August 9 to

September 10 the period for filing a response to the petition. The

Court granted the request on August 1 and extended to September 10

the period for tiling a response to the petition, and ordered the

extension applicable to all parties. The Commission filed a petition

for a writ of certiorari with the Supreme Court seeking reversal of the

Fourth Circuit’s decision. On October 15,200 1, the Supreme Court

granted the Commission’s petition and agreed to review the Fourth

Circuit’s opinion.

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Federal Maritime Commission v. World Line Shipping,

Inc. and Saeid B. Maralan (tia Sam Bustani), C.D.

Ca., No. 00-CV-423.

The Commission filed a Complaint for Injunctive Relief

against World Line Shipping, Inc. and Saeid B. Maralan in the U.S.

District Court for the Central District of California, seeking to enjoin

the Defendants from violating the Shipping Act during the pendency

of FMC Docket No. 00-05, World Line Shipping, Inc. and Saeid B.

Maralan (a/k/a Sam Bustani) - Order to Show Cause. Docket No.

00-05 will determine whether World Line Shipping Inc. and Saeid B.

Maralan have violated and continue to violate sections 8(a), 19(a),

and 19(b) of the Shipping Act by acting as an NVOCC without a

public tariff, license, or bond. The Complaint for Injunctive Relief

sought to enjoin such conduct through the decision in Docket No.

00-05. The Court granted the preliminary injunction on June 12,

2000. The Commission subsequently requested that the Court

dissolve the injunction. On January 18,2001, the Court granted the

request to dissolve the injunction.

Maryland Port Administration v. Federal Maritime

Commission, qfh Cir. No. 97-2418.

This proceeding sought review of the Commission’s decision

in Docket No. 94-O 1, Ceres Marine Terminals, Inc. v. Maryland Port

Administration (“MPA”). Ceres, an MT0 alleging violations of

sections lO(b)(l l),lO (b)(12), 10(d)(l) and 10(d)(3) ofthe 1984Act,

and sections 16 and 17 of the Shipping Act, 19 16, claimed that MPA

engaged in unjust preference and prejudice and unreasonable

discrimination by failing to grant it equivalent lease terms and

terminal facilities that it provided to an ocean common carrier in its

lease with the Port. MPA argued that ocean common carriers and

MTOs are not similarly situated and thus, any disparate treatment was

not unjust or unreasonable.

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On October 10,1997, the Commission found that the ALJ had

failed to consider or address the evidence or to reflect the applicable

standards for his decision. Therefore, the Commission vacated the

Initial Decision and decided the case de novo. The Commission

found that MPA had violated sections lO(b)( 11) and 1 O(b)( 12) of the

1984 Act by relying on a vessel call guarantee to justify granting more

favorable lease terms to an ocean common carrier and refusing those

same, or substantially similar, terms to an MT0 solely because of its

status, where the vessel call guarantee did not provide to the port any

more security or assurances than the MT0 could have provided, and

further violated section lO(d)( 1) by imposing on the MT0 rates and

charges that were excessive in relation to the benefit received,

particularly where the degree of disparity in the rates so greatly

disfavored the party committed to moving substantially more cargo.

The Commission also found that respondent violated sections

lO(b)( 11) and lO(b)( 12) by refusing to grant the MT0 rates for its

barge service that were comparable to those offered to another barge

operator unless the MT0 dropped its existing state court lawsuit and

paid amounts allegedly due, and further violated section lO(d)( 1) by

imposing on the MT0 rates for its barge service that were excessive

in comparison to the rates provided to the operator of another barge

service for the same service and that was not reasonably related to any

legitimate goal of the port.

Respondent appealed the Commission’s decision to the U.S.

Court of Appeals for the Fourth Circuit in Richmond, Virginia, and

Ceres intervened in the proceeding. Briefing was completed on

February 19, 1998, and argument was heard on April 8, 1998. On

October 13,1998, the Court issued an unpublished decision in which

it affirmed in part, reversed in part, and remanded the case to the

Commission. The Court affirmed the Commission’s decision that

Ceres’ barge traffic counts towards the container guarantee in its lease

with MPA. However, the Court further found that the Commission

failed to consider fully MPA’s claim that Ceres was estopped from

challenging the terms of its lease from MPA. The Commission’s

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decision rejected MPA’s claim but did not elucidate that rejection to

the Court’s satisfaction; therefore, the Court remanded the issue to the

Commission for its consideration. The Court also noted that should

the Commission determine that MPA’s estoppel challenge is without

merit, the Commission is encouraged to revisit its determination with

respect to the measure of damages due Ceres.

On October 23, 1998, MPA filed with the Commission a

“Petition to Establish a ‘Chinese Wall,’ or in the alternative, to permit

discovery regarding communications between Ceres and the Federal

Maritime Commission staff,” to which Ceres replied on

November 10, 1998. On April 16, 1999, the Commission issued a

Report and Order denying MPA’s petition, finding that the

participation of agency staff in a remanded proceeding presented no

conflicts with the Administrative Procedure Act or due process

considerations. On May 26, 1999, the Commission issued an Order

establishing a procedural schedule for disposition of the remanded

issues. Opening briefs were tiled on June 25, 1999, and reply briefs

on July 20, 1999. In its reply, MPA contended that in view of recent

Supreme Court decisions, it is immune from Ceres’ damages claim

under the Eleventh Amendment to the Constitution. On August 16,

1999, MPA filed a response in which it did not object to Ceres’

motion, but also filed a motion for leave to amend its answer and a

request for a briefing schedule on the sovereign immunity issues. On

September 10, 1999, the parties tiled a joint Motion to Approve

Stipulation, in which they sought to preserve the sovereign immunity

issues for resolution in a future Federal court proceeding. The

Commission granted the Motion on September 17, 1999.

The Commission issued an Order on August 15, 2001,

addressing the issues remanded by the Court. Initially, the

Commission held that the common law doctrines to waiver and

estoppel may not be invoked to prohibit a party to an agreement

subject to the Commission’s jurisdiction from challenging that

agreement in a complaint filed with the Commission alleging that one

of the parties to the agreement violated a duty imposed on it by the

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1984 Act. In addition, the Commission reiterated its view that the

proper measure of damages, in a case where a duty imposed by the

1984 Act is absolute and a competitive relationship is not necessary

to prove undue or unreasonable preference or prejudice, is the

difference between the rate charged and the rate that would have been

charged but for the violation of the 1984 Act. The parties also were

directed to file supplemental briefs addressing the merits of MPA’s

sovereign immunity defense, which issue had not previously been

presented to the Commission.

On October 1,2001, Ceres filed its opening brief and MPA

filed a motion to dismiss on sovereign immunity grounds. On

October 18, 2001, the Commission issued an order holding this

proceeding in abeyance, pending the decision by the U.S. Supreme

Court in FederalMaritime Commission v. South Carolina State Ports

Authority.

3. Legislative Activities

The General Counsel represents the Commission’s interests in

all matters before Congress. This includes commenting on proposed

legislation, proposing legislation, preparing testimony for

Commission officials, responding to Congressional requests for

assistance, and preparing agency responses to requests from the

Office of Management and Budget (“OMB”) on proposed bills and

testimony.

During fiscal year 2001,93 bills, proposals and Congressional

inquiries were referred to the Office of the General Counsel for

comment. The Office also worked closely with Congressional staffs

on proposed legislation that affected the Commission. The Office

also collaborated with the Office of General Counsel, DOT, to

prepare a codification of title 46 of the U.S. Code as it relates to

shipping.

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The new sections of the proposed codification pertaining to

the Commission include the Shipping Act of 1984, 46 U.S.C. app.

9 170 1, as amended by the Ocean Shipping Reform Act of 1998, Pub.

L. No. 105-258; section 19 of the Merchant Marine Act, 1920, 46

U.S.C. app. 9 876; the Foreign Shipping Practices Act of 1988,46

U.S.C. app. 5 1710a; and Evidence of Financial Responsibility -

Passenger Transportation, 46 U.S.C. app. $0 817d and 817e. The

Commission is awaiting further action by DOT.

4. Foreign Shipping Restrictions and International

Affairs

The General Counsel is responsible for the administration of

the Commission’s international affairs program. The General Counsel

monitors potentially restrictive foreign shipping laws and practices,

and makes recommendations to the Commission for investigating and

addressing such practices. The Commission has the authority to

address restrictive foreign shipping practices under section 19 of the

1920 Act and the FSPA. Section 19 empowers the Commission to

make rules and regulations governing shipping in the foreign trade to

adjust or meet conditions unfavorable to shipping. The FSPA directs

the Commission to address adverse conditions affecting U.S. carriers

in foreign trade, which conditions do not exist for foreign carriers in

the U.S.

In fiscal year 2001, the Commission met to discuss and

monitor potentially restrictive shipping practices of the government

of the PRC. The Commission also met to revise the semiannual

reporting it receives on restrictive port practices in Japan.

The Commission has continued to follow with interest

developments relating to the issues of restrictive practices in Japanese

ports, including amendments to the Port Transportation Business Law

which became effective in November 2000. The Commission issued

an order in its ongoing proceeding in Docket No. 96-20, Port

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Restrictions and Requirements in the United States/Japan Trade, on

August 9,200 1, amending and rescheduling the reports required to be

tiled by Japanese and US. carriers. The Commission’s order was

“necessary to gather further information and to update the record in

this proceeding” in light of recent legislative and ministerial

enactments of the Government of Japan. In a related development,

the Commission at the same time required various other carriers

whose operations at Japanese ports may be affected to report on

recent developments and current conditions, pursuant to Commission

authority to require special or periodic reports on carrier operations

in section 15 of the 1984 Act, 46 U.S.C. app. $1714. Responses to

those orders are due on November 7,200l.

The Commission’s Task Force on Restrictive Foreign

Practices, chaired by the General Counsel, is a network of

representatives from a number of Commission bureaus and offices.

The Task Force met to exchange information regarding new or

continuing areas of concern relating to restrictive foreign shipping

practices possibly necessitating action under one of the Commission’s

statutory authorities in this area. The meetings of the Task Force also

aid the Commission in developing efficient methods to address

conditions as they arise.

On August 12, 1998, the Commission initiated Docket No.

98-14, Shipping Restrictions, Requirements and Practices of the

People’s Republic of China, with the issuance of Information

Demand Orders to vessel-operating carriers of the U.S. and the PRC

for information on Chinese policies and practices regarding port

access, the licensing of multimodal transport operations, and the

establishment of representative and branch offices there.

The Commission met in January and June 1999 to review

information collected in this docket. In a press release dated June 24,

1999, the Commission stated that the responses to the FMC inquiries

indicated that Chinese laws and regulations discriminate against and

disadvantage U.S. carriers and other non-Chinese shipping lines with

-7o-
regard to a variety of maritime-related services. For example, U.S.

carriers are barred from opening wholly-owned companies or branch

offices in the PRC in locations where carriers’ vessels do not make

monthly calls; thus, U.S. carriers must rely on Chinese agents

(affiliates of the state-owned Chinese shipping lines) to solicit

business, book space, accept goods, and perform other functions in

many port cities and inland locales. U.S. carriers also are subject to

high-minimum capital requirements, and are barred by Chinese law

from performing a number of integral vessel agency services for

themselves, such as arranging for entry departure, customs clearance,

consignment, transshipment and multimodal transport. The

Commission also expressed concerns about: Chinese restrictions on

U.S. carriers’ freight forwarding operations; existing requirements

that ocean carriers obtain governmental permission before beginning

or changing international vessel services; and proposed rules that

could require the disclosure of confidential service contract rates or

terms, and further restrict non-Chinese carriers’ ability to offer

multimodal transport services in China. To address these restrictions,

the Commission directed its staff to prepare a formal proposal for

action under section 19 of the 1920 Act. The Commission may take

actions including limitations on sailings, suspension of tariffs,

suspension of regulated agreements, fees not to exceed $ 1 ,lOO,OOO

per voyage, or any other measure necessary and appropriate to

address the unfavorable conditions. Such proposed measures would,

upon Commission approval, be noticed to the public for comment by

interested parties prior to becoming effective.

Later in 1999, there were a number of further developments.

A new Chinese controlled carrier, China Shipping Container Lines

(“CSCL”), announced plans to enter the U.S. trades, and bilateral

maritime talks resumed between the U.S. and China. Also, the U.S.-

flag carrier, Sea-Land Service, Inc., announced that it was to be

acquired by the parent of Maersk Line. In light of these

developments the Commission, in November 1999, determined to

further review these matters and supplement the record before taking

up the issue of whether to initiate a section 19 rulemaking proceeding

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targeting practices of Chinese carriers. Accordingly, the Commission

issued an information demand order to CSCL inquiring about the

scope of its operations in China and the US.; CSCL’s response was

received February 29, 2000. Also, after the closing of Maersk’s

acquisition of Sea-Land’s services, the Commission issued an order

demanding information about the extent of that company’s services

in China, and the effect of Chinese restrictions on its operations in

U.S. commerce. Maersk Sea-Land’s responses were received

March 24, 2000. The Commission met several times in fiscal year

2001 to consider these and other developments, and had the matter

under review at fiscal year end.

In fiscal year 200 1, the Office of the General Counsel met on

many occasions with carrier, OTI and shipper organizations to discuss

those entities’ concerns about foreign practices. These matters were

still under review by the General Counsel at fiscal year end. The

Office also participated in interagency groups and international

maritime discussions, and coordinated and participated in briefings

of foreign visitors.

Another responsibility of the Office is the identification and

verification of controlled carriers under section 9 of the 1984 Act.

Common carriers that are owned or controlled by foreign

governments are required to adhere to certain tariff-publication

requirements under the 1984 Act, and their rates are subject to

Commission review. The Office investigates and makes appropriate

recommendations to the Commission regarding the status of potential

controlled carriers. In fiscal year 2001, the Office reviewed

documents and information relating to the controlled carrier status of

a number of carriers.

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D. OFFICE OF

EQUAL EMPLOYMENT

OPPORTUNITY

The Office of Equal Employment Opportunity (“EEO”)

applies knowledge of Federal EEO and personnel management

concepts, procedures and regulations to develop and manage a

comprehensive program of equal employment opportunity. The

Office works independently under the direction of the Chairman to

provide advice to the Commission’s management in improving and

carrying out its policies and program of non-discrimination and

affirmative program planning.

The Office is responsible for affirmative program planning,

special emphasis programing, and complaints processing and

adjudication, with the assistance of collaterally-assigned EEO

counselors and a Special Emphasis Program Coordinator.

The Office works closely with the Commission’s Office of

Human Resources, managers and supervisors to:

n Improve recruitment and representation of

women, minorities and persons with handicapping

conditions in the workforce.

n Provide adequate career counseling.

n Facilitate early resolution of employment-related

problems.

n Develop program plans and progress reports.

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The Director, Office of EEO, arranges for counseling of

employees who raise allegations of discrimination; provides for the

investigation, hearing, fact-finding, adjustment, or early resolution of

such complaints of discrimination; accepts or rejects formal

complaints of discrimination; prepares and issues decisions for

resolution of formal complaints; and monitors and evaluates the

program’s impact and effectiveness.

Significant accomplishments in fiscal year 2001 include the

following:

1. Provided briefings to senior staff.

2. Provided workshops on equal employment opportunity.

3. Provided counseling assistance to managers, supervisors

and employees.

4. Reviewed and assessed management and personnel human

resource activity and actions.

5. Developed information and materials for training senior

executives, Area Representatives, and staff and EEO Counselors.

6. Planned and developed special emphasis programs for

FMC employee participation.

7. Continued to improve FMC’s image and identity among

Federal agencies and the community by developing cooperative

programs in the special emphasis areas.

8. Continued non-discrimination policy and programs in

response to Pub. L. No. 103-123.

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During fiscal year 2002, the Office will continue all existing

programs and initiate additional activities designed to increase an

understanding of EEO concepts and principles.

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E. OFFICE OF

INSPECTOR GENERAL

The Office of Inspector General (“OK?‘) at the Commission

was established pursuant to the Inspector General Act of 1978, which

was amended in 1988 to provide for additional statutory inspectors

general at designated Federal entities, including the Commission.

It is the duty and responsibility of the OIG to:

H Provide policy direction for and conduct,

supervise, and coordinate audits and investigations

relating to the Commission’s programs and

operations.

n Review existing and proposed legislation and

regulations relating to the Commission’s programs

and operations and to make recommendations

concerning the impact of such legislation or

regulations on the economy and efficiency in, and

the prevention and detection of fraud and abuse

in, the administration of the Commission’s

programs and operations.

n Recommend policies for, and conduct, supervise,

or coordinate other activities carried out or

financed by the Commission for the purpose of

promoting economy and efficiency in the

administration of, or preventing and detecting

fraud and abuse in, the Commission’s programs

and operations.

n Recommend policies for, and conduct, supervise,

or coordinate relationships between the

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Commission and other Federal agencies, state and

local governmental agencies, and nongovernmental

agencies with respect to all matters relating to: the

promotion of economy and efficiency in the

administration of, or the prevention and detection

of fraud and abuse in, programs and operations

administered or financed by the Commission; and

the identification and prosecution of participants

in any fraud or abuse.

n Keep the Chairman and the Congress fully and

currently informed by means of semiannual and

other reports concerning fraud and other serious

problems, abuses, and deficiencies relating to the

administration of programs and operations

administered or financed by the Commission,

recommend corrective action concerning such

problems, abuses, and deficiencies, and report on

the progress made in implementing such corrective

action.

During fiscal year 2001, the Office issued the following five

audits in final:

AOl-01 Review of the Commission’s Property

Management System

AOl-02 Evaluation of the Office of Transportation

Intermediaries Program

AOl-03 Evaluation of the Administrative Law

Judges ’ Workload 1990-l 999

AOl-04 Review of the Transit Benefit Program

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AOl-05 Government Information Security Reform

Act - Evaluation Report

The Office also responded to Congress with respect to two

requests for information in connection with recently enacted

legislation.

During the year, various Hotline complaints were received,

and investigations, both informal and formal, were opened and

pursued. At the end of the fiscal year, there were no formal

investigations pending.

In fiscal year 2002, we plan to conduct audits in the

information technology area, and will continue to perform evaluations

of agency programs and operations. Other audits also will be handled

as the Office carries out the OIG’s statutory mandate to combat waste,

fraud, and abuse in agency programs. These audits are tied to both

the agency and the OIG strategic plans. The Office also will initiate

investigations, both formal and informal, as warranted.

The IG, as an active member of the Executive Council on

Integrity and Efficiency, will continue working with that group on

joint projects which affect the IG community.

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F. OFFICE OF THE

EXECUTIVE DIRECTOR

The Executive Director, as senior staff official, is responsible

to the Chairman for the management and coordination of Commission

programs managed by the:

n Bureau of Consumer Complaints and Licensing,

n Bureau of Enforcement, and

n Bureau of Trade Analysis,

and thereby implements the regulatory policies of the Commission

and the administrative policies and directives of the Chairman.

Also, the Executive Director provides administrative guidance

to the:

n Office of the Secretary,

4 Office of the General Counsel, and

n Office of Administrative Law Judges,

and administrative assistance to the:

w Office of the Inspector General and

n Office of Equal Employment Opportunity.

The following offices report directly to the Office of the

Executive Director:

n Office of Budget and Financial Management,

n Office of Human Resources,

w Office of Information Resources Management, and

n Office of Management Services.

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This management structure has been established to ensure the

timely and proper achievement of Commission goals and objectives.

In addition, the Executive Director is the Audit Follow-up and

Management (Internal) Controls Official for the Commission, and the

Office manages those programs. The Executive Director is also the

agency’s Senior Procurement Executive, its Designated Chief

Information Officer, and the Commission’s Chief Operating Officer.

The Deputy Executive Director serves as the Commission’s

Competition Advocate, its Chief Financial Officer, and is its

representative, as Principal Management Official, to the Small

Agency Council. The Office also is responsible for directing and

administering the Commission’s Information Security Program.

A significant achievement of the Office during fiscal year

2001 was overseeing the progress, completion and issuance of a

comprehensive study on the impact of OSRA on the maritime

community, which presented the findings of a detailed two-year

analysis of OSRA’s legislative reforms and the first years of

operations under the revised regulatory regime. The study was a

follow-up to the Status Report issued in fiscal year 2000 on this

subject, which explained how the industry had been adapting to the

statutory and regulatory changes brought about by OSRA. The

Commission conducted interviews and discussions with industry

representatives to obtain their input on relevant OSRA issues, and

issued a Notice of Inquiry on OSRA’s impact to obtain additional

information for assessment in the study. The Study described the

manner in which OSRA shaped and affected developments in liner

shipping, and furnished details on service contracting, carrier use of

antitrust immunity, tariff publishing, and the activities of OTIS.

The Office also prepared an initial assessment of agency

operations under the February 2000 reorganization. The intent of this

review was to assess whether the agency is structured and operating

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so as to accomplish OSRA’s objectives effectively, and whether

resources are allocated appropriately. The results of the assessment

will be considered with the findings of the OSRA Study to determine

if specific organizational or operational changes will be implemented.

Further, the Office coordinated development and implementation of

the agency’s telework plan. The Office also oversaw both an

implementation plan to bring the Commission into compliance with

section 508 of the Rehabilitation Act Amendments of 1998, and the

revision of several internal Commission orders on procedures for

certain programs and activities. Additionally, the Office continued to

coordinate implementation of the agency’s five-year strategic plan

and Annual Performance Plan, as well as preparation of the Annual

Program Performance report, as required by the Government

Performance and Results Act of 1993 (“GPRA”), and oversaw the

semiannual review of the user fee schedule for Commission services.

The Office’s key objectives for fiscal year 2002 are guiding

Commission efforts regarding continued development or redesign of

programs to support the Commission’s statutory mandates; managing

the Commission’s conformance with the requirements of GPRA;

refining and finalizing the Commission’s teleworking program;

ensuring a smooth transition with a new cross-servicing provider for

accounting, payroll and other services; and bringing the Commission

into compliance with the Government Paperwork Elimination Act of

1998 (“GPEA”) and the Government Information Security Reform

Act (“GISRA”).

1. Office of Budget and Financial Management

(4 General Office Responsibilities

The Office of Budget and Financial Management (“OBFM”)

administers the Commission’s financial management program and is

responsible for providing guidance on the optimal utilization of the

Commission’s fiscal resources. OBFM is charged with interpreting

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government budgetary and financial policies and programs, and

developing annual budget justifications for submission to the

Congress and OMB. The Office also administers internal control

systems for agency funds, travel, and cash management.

@I Achievements

During fiscal year 2001, OBFM:

n Collected and deposited $3,857,092 from user fees,

fines and penalty collections, and ocean freight

forwarder and OTI application and passenger

vessel certification fees.

n Coordinated and prepared budget justifications

and estimates for the fiscal year 2002

Congressional budget and fiscal year 2003 budget

to OMB.

w Prepared a variety of external reports, including:

the Annual Leave Year Report and the Report on

Workyears and Personnel Cost for 2000 (Office of

Personnel Management - “OPM”); the Report on

International Travel for FY 2000 (OMB); and the

Report on First-Class Airline Accommodations for

fiscal year 2000 (General Services Administration -

“GSA”).

n Prepared monthly status reports on workyears,

funding, travel and receivables.

n Managed the Commission’s travel and cash

management programs.

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n

n

n

n

w

Participated on a task force to review and update

user fees collected by the FMC.

Conducted extensive research on standardizing

and modernizing the agency’s financial systems

environment.

Participated on a task force to identify a new

cross-service provider to contract for

payroll/personnel and accounting service support.

Assumed the responsibility for the Commission’s

Transit Benefit Program.

Future Plans

Financial management goals in fiscal year 2002 include

refinement of the agency’s accounts receivable system and

development of a fully integrated financial management system.

OBFM also will: (1) continue to implement electronic commerce to

automate the processing of purchase orders, obligations and

payments, in conjunction with the Office of Management Services

and the Office of Information Resources Management; (2) review

procedures and controls for cash management; and (3) continue to

pursue initiatives leading to economy and efficiency in budget and

financial operations.

2. Office of Human Resources

(a) General Office Responsibilities

The Office of Human Resources (“OHR”) plans and

administers a complete human resources management program

including: recruitment and placement, position classification and pay

administration, occupational safety and health, employee assistance,

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employee relations, workforce discipline, performance management

and incentive awards, employee benefits, career transition, retirement,

employee development and training, and personnel security.

@I Achievements

During fiscal year 2001, OHR:

n Assumed responsibility for the agency’s training

program, including the development of a training

needs assessment, strategic training plan,

implementation of LAN-based multimedia

training, and established e-learning opportunities

by developing on-line university training.

n Administered action on recent Presidential

initiatives such as teleworking and increasing

opportunities for employees with disabilities.

w Reestablished the partnership for acquisition of

assistive devices through the Department of

Defense Computer/Electronic Accommodations

Program.

n Conducted a comprehensive internal recruitment

and placement program to staff critical vacancies.

n Initiated an extensive external recruitment

program, using alternatives such as the

Presidential Management Intern Program.

n Coordinated with OPM on the completion of the

2000 Plum Book.

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w

n

n

n

n

n

w

Updated retirement eligibility lists and timely

processed all retirements.

Developed and established a program to promote

Preventive Health Services, including monthly

e-mails advising employees of information and

resources.

Managed and conducted numerous employee

benefit and charitable contributions’ programs,

and coordinated and publicized family-friendly

initiatives.

Conducted a cyclical position management

program review and a comprehensive personnel

security program.

Continued automation of human resources

programs and records, including developing and

testing mechanisms for posting of information on

FMC’s Intranet.

Implemented a smoking cessation program.

Future Plans

In fiscal year 2002, OHR plans to continue to: (1) advise

agency management and staff on all human resources matters and

ensure the maintenance of a sound and progressive human resources

program; (2) implement pertinent portions of the agency’s strategic,

training and related performance plans, particularly the performance

goal calling for a comprehensive recruitment effort; and (3) continue

to explore and implement simplification, flexibility, and

accountability of human resources management programs.

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3. Office of Information Resources Management

(a) General Office Responsibilities

The Office of Information Resources Management (“OIRM”)

plans, coordinates and directs the management of automated

information systems with respect to information resources

management (“IRM”). OIRM provides administrative support to the

program and administrative operations of the Commission. The

Director, OIRM, serves as the Commission’s Senior IRM Manager,

FMC Computer Security Officer, Forms Control Officer, and Records

Management Officer.

OIRM is responsible for ensuring that the Commission’s IRM

functions are administered in a manner consistent with applicable

rules, regulations and guidelines. These IRM functions

include: conducting IRM management studies and surveys; managing

data telecommunications; developing and managing databases and

applications; coordinating records management activities;

administering IRM contracts; and developing Paperwork Reduction

Act clearances for submission to OMB. The Office also is

responsible for managing the computer security and forms programs.

(b) Achievements

During fiscal year 2001, OIRM:

n Coordinated and monitored all technical,

logistical, procedural and security issues related to

database systems created, owned and maintained

by the Commission.

n Administered the agency’s information technology

(“IT”) technical support and technical assistance

contracts.

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n Compiled a GPEA Report to OMB identifying the

Commission’s Information Collections and

Information Dissemination Products. The report

includes an Action Plan to establish electronic

reporting options where practicable by

October 21, 2003, to ensure Commission

compliance with the Act.

n Initiated a GPEA Study Contract to acquire

contractor assistance in performing risk

assessments, and cost/benefit analyses for the

Commission’s information collections electronic

reporting options.

n Conducted an agencywide Information Systems

Security Review as required by GISRA, working

with the IG and contractor staff performing the

Independent Computer Security Evaluation. This

effort included compiling the Commission’s

inventory of information systems, assessing bureau

and office Systems Security Plans, and making

recommendations as appropriate.

n Initiated compliance activities pursuant to Section

508 of the Rehabilitation Act, as amended, to

include drafting policies, assessing technical and

administrative needs and requirements, and

employing contractual language and contractor

assistance as needed.

n Initiated a contract for an independent

vulnerability assessment of the Commission’s

Local Area Network (“LAN”). Reviewed the

contractor’s LAN Vulnerabilities Report and

performed recommended remediation.

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n Provided guidance, coordination and liaison

support to the Commission to obtain OMB

approval and clearance of forms and paperwork

reduction clearances.

n Conducted an agencywide records management

review to identify records eligible for disposition,

to update Record Disposition Schedules, and to

assess recordkeeping practices for paper and

electronic records.

n Conducted an annual inventory of IT equipment

to ensure management accountability and control

of the Commission’s IT investments, and to update

the Commission’s IT Architecture.

(cl Future Plans

In fiscal year 2002, OIRM will continue to emphasize ongoing

support for Commission and externally mandated programs. Major

initiatives include plans to: (1) establish the Commission’s

Enterprise Architecture (,‘,A”), ensuring that the Commission’s EA

subscribes to the Federal Enterprise Architecture Framework;

(2) ensure Commission compliance with major Governmentwide

initiatives such as GPEA, E-Sign, GISRA, and Section 508 of the

Rehabilitation Act; (3) coordinate the development of a Capital

Planning and Investment Control Strategy for the Commission;

(4) assist Commission staff on issues related to accessibility of

private automated tariff systems; (5) provide continued agencywide

advice and coordination on records management, OMB clearances,

and information management; and (6) continue the maintenance and

update of the Commission’s homepage to ensure that information is

provided to the public in an expedient manner.

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4. Office of Management Services

(a) General Office Responsibilities

The Office of Management Services (“OMS”) directs and

administers a variety of management services functions that

principally provide administrative support to the regulatory program

operations of the Commission. The Director of the Office serves as

the Commission’s Contracting Officer.

The Office’s support programs include telecommunications,

procurement of administrative goods and services, property

management, space management, printing and copying management,

mail and records services, facilities and equipment maintenance, and

transportation. The Office’s major functions are to secure and furnish

all supplies, equipment and services required in support of the

Commission’s mission, and to formulate regulations, policies,

procedures, and methods governing the use and provision of these

support services in compliance with the applicable Federal guidelines.

@I Achievements

During fiscal year 2001, OMS:

n Developed and distributed to bureau and office

heads a guide to assist them in preparing

Government estimates for their requirements.

n Revised the property management guide entitled,

Accountability and Control of Personal Property,

for reissuance to all bureau and office heads.

n Coordinated with GSA’s Potomac Services Team

concerning our Headquarters’ building lease

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n

n

n

n

(cl

expiration and GSA’s new building lease renewal

process.

Negotiated with GSA for a significant reduction in

the FMC’s Headquarters’ guard services cost and

the inclusion of all Government building tenants in

the sharing of this cost.

Executed a new enhancement contract for the

Commission’s Internet-based service contract

filing system project.

Coordinated with the Office of Thrift Supervision

on the final award contract for accounting services

and personnel and payroll support to the FMC.

Arranged for the printing and distribution of the

FMC’s 39th Annual Report.

Future Plans

In fiscal year 2002, the Office’s objectives include the

following: (1) award a new cross-servicing contract(s) for the

Commission’s personnel and payroll services and administrative

accounting services support; (2) renew the FMC’s Smart Card

purchase program and revise/update the manual; (3) resolve

outstanding lease renewal issues with GSA and execute a new longterm occupancy agreement for Headquarters space needs; (4) resolve

outstanding building security issues with GSA and other building

tenant agencies; and (5) continue to provide advice and assistance to

FMC units regarding innovative support service approaches.

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G. BUREAU OF CONSUMER

COMPLAINTS AND LICENSING

1. General

The Bureau of Consumer Complaints and Licensing has

responsibility for the Commission’s OTI licensing program,

passenger vessel certification program, alternative dispute resolution

(“AD,‘) program, and consumer assistance program. In

administering these programs, the Bureau:

n Licenses and regulates OTIS, including ocean

freight forwarders and NVOCCs.

n Issues certificates to owners and operators of

passenger vessels that have evidenced financial

responsibility to satisfy liability incurred for

nonperformance of voyages or for death or injury

to passengers and other persons.

n Manages programs assuring financial

responsibility of OTIS and passenger vessel

operators, by developing policies and guidelines,

and analyzing financial instruments and financial

statements.

n Responds to consumer inquiries and complaints,

acting as an intermediary to resolve difficulties

encountered by consumers with respect to cruises

and shipments of cargo.

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n Develops and maintains an ADR program,

arranging for and providing mediation and other

dispute resolution services where appropriate.

n Develops and maintains information systems that

support the Bureau’s programs and those of other

Commission entities.

In carrying out these functions, the Bureau provides

information and referrals in response to a wide array of informal

inquiries, provides guidance with respect to licensing and bonding,

and where appropriate, advises about various means available to

resolve complaints, both informally and formally. The Bureau also

focuses on facilitating conflict resolution through informal and nonbinding approaches in an effort to minimize litigation expenses.

The Bureau is organized into three offices. The Office of

Consumer Complaints (“OCC”) has responsibility for responding to

consumer inquiries and complaints, and assists with the development

and implementation of an ADR program. The Office of

Transportation Intermediaries has responsibility for reviewing

applications for OTI licenses, and maintaining and updating records

about licensees. The Office of Passenger Vessels and Information

Processing has responsibility for reviewing applications for

certificates of financial responsibility with respect to passenger

vessels, managing all activities with respect to evidence of financial

responsibility for OTIS and passenger vessel owner/operators, and for

developing and maintaining all Bureau databases and records of OTI

applicants and licensees. All offices respond to a number of inquiries

and concerns about programs for which they are responsible. During

fiscal year 200 1, the Bureau responded to more than 6,650 inquiries.

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2. Alternative Dispute Resolution

The Bureau, through its Deputy Director, has responsibility

for developing and implementing the Commission’s ADR program.

Complaints against shipping entities are at an all-time high, and in the

long run, it is anticipated that an enhanced ADR program will result

in lower costs both to the agency and to the shipping public by

offering quicker and less expensive means for dispute resolution.

During fiscal year 2001, the Bureau continued work on

program development and program-specific training for its personnel.

Personnel received training to mediate a broad range of disputes --

from informal disputes to those involving already commenced

litigation. Also, the Bureau developed rules to implement the

Commission’s expanded ADR program; the final rules were issued

by the Commission in August 2001. The new rules set forth

guidelines and procedures for arbitration and provide for mediation

and other ADR services to be provided by the Commission.

The Bureau’s Deputy Director served as a mediator in two

Commission proceedings, and in one instance was instrumental in the

parties reaching an agreement that resolved not only the formal

proceeding pending at the Commission, but also pending suit before

a state court. In addition, in a significant dispute at a major East

Coast port on the verge of erupting into a major law suit, the

Commission’s ADR services enabled the parties to resolve their

differences without resorting to legal processes.

At the same time, the OCC provides ombuds services, and has

responsibility for the Commission’s informal complaint-handling

activities, serving as an intermediary between parties in an attempt to

resolve disputes, such as those involving delay or mishandling of

shipments. It receives, records, and tracks complaints received by

OCC and other Commission components, assuring timely replies.

Through these services, the Bureau helps secure the recovery of funds

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improperly collected by industry entities, facilitates the international

movement of household goods, and communicates to cruise vessel

operators the substance of consumer complaints arising from their

services. During fiscal year 2001, the OCC processed a total of 2,797

complaints and information requests. Of those, 821 complaints

required resolution of disputes and attempts to resolve difficulties

with shipments. Refunds to the general public of overcharges, refunds

and other savings attributable to complaint-handling activities

amounted to $208,600. Since 1991, the OCC and its predecessor

office have helped complainants recover more than $1,600,000.

The Bureau also adjudicates small claims of shippers seeking

reparations for violations of the shipping statutes. During fiscal year

200 1, the dollar limitation for claims which may use this small claims

procedure was increased from $10,000 to $50,000. By agreement of

the parties, these claims are adjudicated by Settlement Officers, rather

than ALJs, saving the expense and encumbrances of more formal

administrative proceedings. Although the vast majority of small

claims received a few years ago comprised freight overcharge actions

against ocean common carriers, the majority of cases now concern

claims by individuals against NVOCCs. Those complaints generally

involve alleged prohibited acts in connection with the international

transportation of household goods. Typical complaints include

situations where an NVOCC has received cargo from its customer

and taken payment for the transportation of the cargo, but failed to

deliver the cargo. Tracking down the whereabouts of a shipment can

be difficult, and often additional charges have accrued because of

delay or because the NVOCC has not made a necessary payment, thus

necessitating payment of additional funds to obtain release of the

shipment. During fiscal year 2001, three claims were filed, while two

pending cases were carried over from the previous year. There were

three pending cases at the close of the fiscal year.

The Bureau also has responsibility for the adjudication of

special docket applications. These are applications for permission to

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apply other than tariff rates and to waive or refund freight charges

arising from various errors in tariff publications, an inadvertent

failure to publish an intended rate, or a misquotation of a rate. During

fiscal year 200 1, twelve special docket applications were processed.

None were pending at the close of the fiscal year.

In fiscal year 2002, the Commission intends to more actively

implement its expanded ADR program, resulting in more ADR

involvement both prior to and after the onset of litigation. The

Bureau plans to continue to expand its consumer outreach programs,

and strengthen its growing ties to Federal, state, local and private

consumer assistance agencies. Also, the Bureau will continue to take

advantage of new outreach possibilities made possible by electronic

means of communication.

3. Licensing of Ocean Transportation

Intermediaries

OTIS are transportation middlemen. There are two different

types of such transportation middlemen, NVOCCs and ocean freight

forwarders. Both NVOCCs and ocean freight forwarders must be

licensed if located in the U.S. Foreign NVOCCs may choose to

become licensed, but do not require a license. Whether licensed or

not, foreign NVOCCs must establish financial responsibility. In

addition, all NVOCCs must publish electronic tariffs.

To be licensed, an OTI must establish that it is qualified in

terms of experience and character, as well as establish its financial

responsibility by means of a bond, insurance or other instruments.

Licensed ocean freight forwarders must establish financial

responsibility in the amount of $50,000, and licensed NVOCCs,

$75,000. An additional $10,000 coverage is required for each

unincorporated branch office of a licensee. In addition, unlicensed

foreign NVOCCs must maintain $150,000 in coverage. The financial

instrument must be available to pay any order of reparation assessed

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under the 1984 Act, claims against the OTI arising from its

transportation-related activities, and any judgments for damages

against an OTI arising from its transportation-related activities under

the 1984 Act.

During fiscal year 2001, the Commission received 277 new

OTI applications and 223 amended applications, issued more than

390 OTI licenses, and revoked 270 licenses. At the end of the fiscal

year, 1,33 1 freight forwarders, 1,25 1 U.S. NVOCCs, 844 joint

NVOCClocean freight forwarders, and 38 foreign NVOCCs held

active OTI licenses. An additional 599 foreign NVOCCs maintained

proof of financial responsibility on file with the Commission but

chose not to be licensed. License revocations included the licenses

of 55 OTIS that, by April 2001, still had not met the licensing,

financial responsibility and/or tariff publication requirements imposed

by OSRA and the Commission’s implementing regulations that were

effective May 1,1999, despite many efforts by Commission staff to

obtain their compliance.

During fiscal year 2001, BCCL made progress towards

publishing a list of licensed and bonded OTIS on the Commission’s

homepage, which would assist carriers in complying with their

statutory mandate to do business only with those licensed by the

Commission. In fiscal year 2002, the Bureau plans to publish that list

and develop an internal database of OTIS to facilitate compliance and

enforcement activities.

4. Passenger Vessel Certification

The Commission administers sections 2 and 3 of Pub. L. No.

89-777 (46 U.S.C. app. $9 8 17d and 817e), which require evidence

of financial responsibility for vessels which have berth or stateroom

accommodations for 50 or more passengers and embark passengers

at U.S. ports and territories. The program now encompasses 175

vessels and 45 operators, which have evidence of financial

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responsibility coverage in excess of $350 million for nonperformance

and over $1 billion for casualty. The certificates issued pursuant to

this program are necessary for Customs’ clearance of thousands of

passenger vessel sailings annually. During fiscal year 2001, the

Commission received applications for 145 certificates (casualty and

performance), while 74 casualty certificates and 82 performance

certificates were approved and issued.

The Bureau offers information and guidance to the cruising

public throughout the year on their rights and obligations regarding

monies paid to cruise lines who experience financial difficulties and

nonperformance problems. This is in addition to those disputes

between cruise lines and the cruising public that are resolved by OCC

as part of its ADR responsibilities.

The cruise industry has grown tremendously over the past

decade. New cruise lines have entered the business, and existing

cruise lines continue to build and/or purchase additional vessels to

serve an increasing demand. In addition, applicants continue to

develop more sophisticated means of establishing their required

financial responsibility. However, financially many cruise line

fundamentals began to show deterioration during fiscal year 2001.

Following on the heels of the bankruptcy of a major cruise line,

Premier Cruise Operations Ltd. (d/b/a Premier Cruises and Premier

Cruise Lines) in September 2000, three more cruise lines ceased

operations during fiscal year 2001. New Commodore Cruise Lines

Ltd. (d/b/a Commodore Cruise Lines and Crown Cruise Lines) and

Cape Canaveral Cruise Line, Inc., participated in the Commission’s

program at the time operations ceased. Renaissance Cruises Inc. did

not participate in the Commission’s program since it did not embark

passengers at U.S. ports, even though its cruises were marketed

primarily to passengers in the U.S. At the close of fiscal year 2001,

it was apparent that yet another major cruise operator likely would

file for bankruptcy early in fiscal year 2002.

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5. Automated Database Systems

A significant function of the Bureau is to support all

Commission programs by providing information about all regulated

entities and those doing business with the Commission. In addition,

a database is maintained that provides information about financial

coverage for all OTIS, as well as the status of license applications.

During fiscal year 200 1, the Bureau made progress toward

publishing a list of licensed and bonded OTIS on the Commission’s

homepage, thus assisting carriers in complying with their statutory

mandate to do business only with those licensed by the Commission.

This is especially helpful as carriers may incur liability for doing

business with an unlicensed OTI. An up-to-date list is a safeguard to

the shipping public, and also protects licensees from losing business

because of an inaccurate determination by a carrier that it may not be

licensed.

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H. BUREAU OF ENFORCEMENT

The Bureau of Enforcement is the primary investigatory and

prosecutorial arm of the Commission. Attorneys of the Bureau serve

as trial attorneys in formal proceedings instituted under section 11 of

the 1984 Act, and in investigations instituted under the FSPA.

Bureau attorneys serve as legal advisors to the Executive Director and

other bureaus, and also may be designated Investigative Officers in

nonadjudicatory fact tinding proceedings. The Bureau monitors all

other formal proceedings in order to identify major regulatory issues

and to advise the Executive Director and the other bureaus. The

Bureau also participates in the development of Commission rules and

regulations. On occasion, under the direction ofthe General Counsel,

attorneys from the Bureau may participate in matters of court or other

agency litigation to which the Commission is a party.

Through investigative personnel, the Bureau monitors and

conducts investigations into the activities of ocean common carriers,

OTIS, shippers, ports and terminals, and other persons to ensure

compliance with the statutes and regulations administered by the

Commission. Monitoring activities include: (1) service contract

reviews to determine compliance with applicable statutes and

regulations; (2) reviews of OTT operations, including compliance with

licensing, tariff, and bonding requirements; (3) audits of passenger

vessel operators to ensure the financial protection of cruise

passengers; and (4) various studies and analyses to support

Commission programs. Investigations are conducted into alleged

violations of the full range of statutes and regulations administered by

the Commission, including: illegal or unfiled agreements; abuses of

antitrust immunity; unlicensed freight forwarding; illegal rebating;

misdescriptions or misdeclarations of cargo; untariffed cargo carriage;

unbonded OTI and passenger vessel operations; and various types of

consumer abuses, such as failure of carriers or intermediaries to carry

out transportation obligations, resulting in cargo delays or financial

-lOl-
losses for shippers. The Bureau adheres to the agency’s objectives of

obtaining statutory compliance and ensuring equitable trading

conditions and focusing enforcement efforts on activities which have

market-distorting effects.

The Commission maintains a presence in Los Angeles,

Miami, New Orleans, New York and Seattle through Area

Representatives based in each of those cities. These representatives

serve other major port cities and transportation centers within their

respective areas. In addition to monitoring and investigative

functions, Area Representatives represent the Commission within

their jurisdictions, provide liaison between the Commission and the

maritime industry and the shipping public, collect and analyze

intelligence ofregulatory significance, and assess industry conditions.

Liaison activities involve cooperation and coordination with other

government agencies and departments, providing regulatory

information and relaying Commission policy to the shipping industry

and the public, and handling informal complaints.

The Bureau prepares and serves notices of violations of the

shipping statutes and Commission regulations and may compromise

and settle civil penalty demands arising out of those violations. I f

settlement is not reached, Bureau attorneys act as prosecutors in

formal Commission proceedings that may result in settlement or in

the assessment of civil penalties. The Bureau also participates, in

conjunction with other bureaus, in special enforcement initiatives,

fact finding investigations and in rulemaking efforts.

During fiscal year 2001, the Bureau investigated and

prosecuted malpractices, particularly fraudulent cargo descriptions

and measurements in the transpacific trades and secret rebates in the

South American trades. Other trades were also the subject of

malpractice investigations, including the North Atlantic, Central

American and Caribbean trades. These malpractices included

market-distorting activities such as various forms of secret rebates

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and absorptions, misdescription of commodities and misdeclaration

of measurements, illegal equipment substitution, unlawful use of

service contracts, as well as carriage of cargo by and for untariffed

and unbonded NVOCCs. Most of these malpractice investigations

resulted in compromise settlements of civil penalties. However, some

investigations required the institution of formal adjudicatory

proceedings in order to pursue remedies under the 1984 Act.

In addition to rate malpractice enforcement activity, several

matters arose with respect to activities pursuant to filed and unflled

agreements between and among ocean common carriers. Further,

upon submission of reports by the Bureau to the Commission, Fact

Finding Investigation No. 24, a nonadjudicatory investigation into

maritime terminal activities of Florida ports related to the provision

of exclusive tug services, was instituted, and a formal proceeding was

initiated to determine the lawfulness of exclusive tug arrangements

at marine terminal facilities on the Lower Mississippi. Also, a Show

Cause proceeding for failure to abide by new OTI requirements of

OSRA resulted in the cancellation of the licenses of 55 OTI entities.

Interaction between the Commission’s Area Representatives

and Customs with respect to the exchange of investigative

information continues to be beneficial to both parties. Cooperation

with Customs has expanded into several joint field operations to

investigate entities suspected of violating both agencies’ statutes or

regulations. Such cooperation also has included local police and the

U.S. Immigration and Naturalization Service, when necessary.

In fiscal year 2001, the Bureau continued its OTI audit

program. This program is conducted from Headquarters, primarily by

mail, and reviews the operations of licensed OTIS to assist them in

complying with the statutory requirements and the Commission’s

rules and regulations, particularly as modified by OSRA. The audit

program also includes review of entities holding themselves out as

VOCCs with no indication of vessel operations.

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At the beginning of fiscal year 2001, 36 enforcement cases

were pending final resolution by the Bureau, the Bureau was party to

9 formal proceedings, and there were 60 matters pending which the

Bureau was monitoring or for which it was providing legal advice.

During the fiscal year, 30 new enforcement actions were commenced;

40 were compromised and settled, administratively closed, or referred

for formal proceedings; and 26 enforcement cases were pending

resolution at fiscal year’s end. Also, the Bureau participated in 10

new formal proceedings, 10 proceedings were completed, and 9

formal proceedings were pending at the end of the fiscal year.

Additionally, 70 matters involving monitoring or legal advice were

received during the fiscal year, 70 such matters were completed, and

60 were pending in the Bureau on September 30,200l.

In fiscal year 2002, the Bureau will continue to pursue marketdistorting, fraudulent and anticompetitive practices and will continue

to monitor U.S. trades and the implementation of the changes and

regulations resulting from OSRA, to the extent that resources permit.

It will pursue initiatives aimed at entities not in compliance with the

Commission’s definition of VOCC, as well as instances of

noncompliance with statutory requirements for service contracting.

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I. BUREAU OF TRADE

ANALYSIS

1. General

The primary function of the Bureau is to plan, develop, and

administer programs related to the oversight of concerted activity of

common carriers by water under the standards of the 1984 Act as

amended by OSRA. Further, the Bureau is responsible for

administering the Commission’s agreements and service contract

programs, and monitoring the accessibility and accuracy of all tariffs

published by common carriers, conferences of such carriers, and

MTOs. The Bureau’s major program activities include:

n Administering comprehensive trade monitoring

programs to identify and track relevant

competitive, commercial, and economic activity in

each major U.S. trade, and to advise the

Commission and its staff on current trade

conditions, emerging trends, and regulatory needs

affecting waterborne liner transportation.

n Conducting systematic surveillance of carrier

activity in areas relevant to the Commission’s

administration of statutory standards.

n Developing economic studies and analyses in

support of the Commission’s regulatory

responsibilities.

n Providing expert economic testimony and support

in formal proceedings, particularly regarding

unfair foreign shipping practices.

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n Processing and analyzing ocean common carrier

and marine terminal agreements.

n Reviewing and processing service contracts and

service contract amendments filed by ocean

common carriers and conferences of such carriers,

including service contract statements of essential

terms published by such entities.

n Reviewing tariff publications in private automated

systems of carriers and conferences and ensuring

that tariffs under OSRA are accessible and

accurate.

2. Monitoring

The goal of the Bureau’s monitoring activities is to ensure that

carriers operating in U.S. ocean trades comply fully with applicable

statutory standards and Commission regulations. To that end, the

Bureau administers a variety of monitoring programs and other

research efforts designed to apprise the Commission of current trade

conditions, emerging commercial trends, and carrier pricing and

service activities.

For a description of the Bureau’s monitoring activities for

fiscal year 2001, see Section IV. A, Monitoring.

3. General Economic Analysis

In addition to research and economic analysis pertaining to its

monitoring programs, the Bureau provides economic expertise for a

variety of Commission initiatives, including rulemaking proceedings.

Bureau economists prepare testimony in fact finding investigations

and cases of unfair shipping practices under section 19 of the 1920

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Act and FSPA. They also contribute to speeches and provide

briefings for senior agency officials.

Key projects the Bureau completed in fiscal year 2001

included: (1) the preparation of several sections of the Commission’s

two-year OSRA Impact Study, including a confidential report on the

impact of service contract guidelines; (2) the preparation of the

Commission’s Notice of Inquiry on the impact of OSRA and the

review and analysis of industry responses; (3) economic analyses of

newly filed major agreements and amendments under the section 6(g)

standard; (4) an analysis and critique of a World Bank draft paper

calling for an end to carrier antitrust immunity in liner shipping;

(5) an economic analysis and development of a market definition in

Docket No. 01-06, Exclusive Tug Franchises - Marine Terminal

Operators Serving the Lower Mississippi River; (6) an economic

analysis of activities of certain controlled carriers; (7) participation in

inter-Bureau working groups to coordinate the preparation of three

separate, but related proposed rules covering agreement content,

minutes, and information forms and monitoring reports;

(8) responding to various informal complaints and requests from

shippers on matters including the imposition of rate increases and/or

surcharges by certain major agreements; (9) review of quarterly

monitoring report data submitted in accordance with the regulations

on agreement reporting requirements; (10) classification of

agreements to determine each agreement’s monitoring report

requirements for calendar year 2001; (11) analyzing requests by

agreements for amending their monitoring report requirements;

(12) responding to Congressional requests for trade analyses and data

on issues such as Japanese trade statistics; and (13) meeting with

industry representatives to discuss trends and anticipated commercial

developments.

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4. Agreement Analysis

Under sections 4 and 5 of the 1984 Act, all agreements by or

among ocean common carriers to fix rates or conditions of service,

pool cargo or revenue, allot ports or regulate sailings, limit or regulate

the volume or character of cargo or passengers to be carried, control

or prevent competition, or engage in exclusive or preferential

arrangements are required to be filed with the Commission. Except

for certain exempted categories, agreements among MTOs and among

one or more MTOs and one or more ocean common carriers also are

required to be filed with the Commission.

Generally, an agreement becomes effective 45 days after

filing, unless rejected by the Commission, made the subject of a

formal Commission request for additional information, or is enjoined

by a U.S. district court under section 6(h) of the 1984 Act when it can

be demonstrated that it will unreasonably increase transportation costs

or unreasonably decrease service. An agreement already in effect can

also be enjoined on a similar showing by the Commission. Under the

Commission’s regulations, certain routine or nonsubstantive

agreements are exempt from the 45-day waiting period and are

effective upon filing with the Commission. Further, the 1984 Act

empowers the Commission to investigate and order the disapproval,

cancellation, or modification of any effective agreement it finds to be

in violation of the Act. In an investigation, the Commission may seek

to enjoin, in U.S. district court, conduct that violates the Act.

There are two broad categories of agreements tiled with the

Commission. The first category is pricing agreements, where the

main focus is the discussion and fixing of rates. Types of pricing

agreements include conference and rate discussion agreements. The

other category is operational agreements that authorize operational

cooperation between the parties, such as sharing vessel space. The

following is a brief description of the various types of agreements:

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(a) Conference Agreements

Conference agreements provide for the collective discussion,

agreement, and establishment of ocean freight rates and practices by

groups of ocean common carriers. Although conference carriers are

allowed to act independently, the expectation is that they will adhere

to rates and terms and conditions of service adopted by the group.

These agreements publish a common rate tariff in which all the

parties participate.

Although the last new conference agreement was filed in

March 2000, the Bureau did receive 28 modifications to existing

conference agreements. These were mostly membership changes. In

fiscal year 200 1, the Bureau analyzed and processed 30 tilings. At

the end of the fiscal year, there were 21 conference agreements on

tile. Activities under two conferences in the inbound transpacific

trades remain suspended, however.

W Discussion Agreements

Discussion agreements fall under two types: rate and non-rate

agreements. Like conferences, rate discussion agreements focus on

the fixing of rates, but any consensus reached under these agreements

is non-binding on the parties. There is no common rate tariff; each

party publishes its own tariff.

Non-rate discussion agreements are not geared to rate matters

and generally provide a forum for discussing matters of mutual

interest; in some instances, they operate much like a trade association.

Examples of this latter description are the cruise association

agreements and the Box Club, a group of containership operators that

meet once or twice a year to discuss policy and legislative issues that

affect their industry.

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During the fiscal year, the Bureau received one new

discussion agreement and 69 modifications to currently effective

agreements, again mostly membership changes. At the end of the

fiscal year, there were 36 rate discussion agreements and 9 non-rate

discussion agreements on file.

03 Vessel-Sharing Agreements

Vessel-sharing agreements (“VSAs”) make up the largest

group of agreements on file with the Commission. There are several

different varieties of these agreements, ranging from agreements that

involve a high degree of operational cooperation with respect to space

and services, down to the simple swap of container slots. The high

end of these agreements are so-called alliances, while the low end are

routine space charters. Most VSAs authorize some level of service

rationalization. The objective of these agreements is to provide a

high-quality service, while reducing individual operating costs.

During fiscal year 2001, the Bureau received 43 new VSAs,

which represented over 90 percent of all new agreement filings during

the year, and 66 modifications to the VSAs. The Bureau processed

120 filings during the fiscal year, and 4 1 VSAs were terminated. At

the end of the fiscal year, there were 150 VSAs on file.

@I Joint Service Agreements

Parties to joint service agreements operate a joint venture

under a single name in a specified trading area. The joint venture

issues its own bills of lading, sets its own rates, and acts as an

individual ocean common carrier.

One new joint service agreement and four modifications to

existing agreements were filed during the fiscal year. The Bureau

processed all five filings during the year. Four joint services were

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terminated last year, leaving only 10 joint service agreements on file

at the conclusion of the fiscal year.

09 Cooperative Working & Other Agreements

Cooperative working agreements (“CWAs”) do not fit under

any of the foregoing agreement types. Generally, they deal with

policing matters, unique management arrangements between carriers,

joint service contracting, and sharing administrative services. Other

agreements include agency, transshipment, and equipment

interchange agreements.

An interesting new type of CWA was filed last year: Internet

portal agreements. These agreements (two were filed) authorize the

parties to establish a common Internet portal and platform through

which they, other transportation service providers, intermediaries,

and shippers interact through a common set of transactions pertaining

to the tracking of shipments, booking of cargo, generating shipping

documentation, and the like.

The Bureau received 13 filings under these categories of

agreements in fiscal year 2001. There were 17 CWAs and other

agreements on file at the end of fiscal year 200 1.

(0 Marine Terminal Agreements

Marine terminals, operated by both public and private entities,

provide facilities, services, and labor for the interchange of cargo and

passengers between land and ocean carriers, and for the receipt and

delivery of cargo from shippers and consignees. The Bureau is

responsible for reviewing and processing agreements related to the

marine terminal industry.

During fiscal year 2001, the Bureau received and analyzed 53

terminal agreements relating to port and marine terminal services and

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facilities. Certain terminal agreements become effective upon filing

under Commission rules that exempt certain classes of marine

terminal agreements from the waiting period requirements of the

1984 Act. Terminal agreements not entitled to an exemption are

processed under applicable statutory requirements. At the end of the

fiscal year, 421 terminal agreements were on file with the

Commission.

The number of marine terminal agreement filings has been

generally declining since 1992. That year, to lessen the regulatory

burden on the industry, the Commission exempted terminal lease

agreements from filing. Prior to that time, the Commission was

receiving approximately 340 terminal agreements a year. Although

there was an increase in the number of filings last year over the

previous year (53 versus 46), the number received was still almost

half of what was filed five years ago.

5. Overview of Agreement Filings

In tiscal year 200 1, the Bureau received 324 agreement filings,

a decrease of 10 percent from the previous year. The Bureau

processed 333 agreement filings during fiscal year 200 1. At the end

of fiscal year 2001, there were 243 carrier agreements and 42 1

terminal agreements on tile. Appendix C contains a breakdown of

receipts and processing categories for fiscal year 2001.

6. Tariffs

Since May 1, 1999, section 8 of the 1984 Act requires

common carriers and conferences to publish tariffs in private

automated systems. These tariffs set forth the rates, charges, rules,

and practices of common carriers operating in the U.S. foreign

commerce. The Bureau reviews and monitors the accessibility of the

private systems, as prescribed under the 1984 Act, and reviews

published tariff material for compliance with the Act’s requirements.

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The Bureau acts on applications for special permission to deviate

from tariff publishing rules and regulations and recommends

Commission action on tariff publishing activities and regulations.

The Bureau also collaborates with other components of the

Commission to verify OTUNVOCC financial responsibility as it

relates to tariff publication.

Two Circular Letters, No. 00- 1, Public Access to Tariffs and

Tariff Systems under the Ocean Shipping Reform Act of 1998, and

No. 00-2, Charges Assessedfor Access to Tariffs and Tariff Systems,

were issued by the Commission to address the carriers’ automated

tariff systems (“CATS”). The circulars were issued because the

Commission found that the public’s ability to access some tariff

systems appeared to be limited. In fiscal year 2001, the

Commission’s staff contacted representatives of tariff publishers and

carriers to encourage voluntary compliance through cooperative

efforts before any other type of remedial action is considered. The

staff has been in regular contact with the carriers, conferences and

tariff publishers to assist in the resolution of problems in certain

CATS. This matter will continue to be monitored to ensure

appropriate statutory compliance is achieved.

The Bureau is directly involved in processing the

Commission’s Form FMC-1. The data on that form identifies the

location of carrier tariffs or MT0 schedules, including carrier and

conference service contract essential terms publications. At the end

of fiscal year 2001, a total of 2,88 1 Form FMC-1 tariff location

addresses for VOCCs and OTI/NVOCCs were posted on the

Commission’s homepage.

During fiscal year 2001, the Bureau also received and

processed 41 foreign commerce special permission applications to

deviate from the statutory provisions of the 1984 Act and/or the

Commission’s tariff publishing regulations. The total number of

special permission applications received more than doubled over the

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previous fiscal year’s 19, because a number of VOCCs sought to

advance the effective dates of war risk surcharges applicable to

Colombo, Sri Lanka, as a result of events related to an armed conflict

in the region. Thirty-two additional special permission applications

regarding war risk surcharges in the Middle East and Pakistan were

also received in October 200 1, as a result of the September 11,200 1,

tragedies at the World Trade Center and the Pentagon.

7. Service Contracts

Service contracts offer an alternative to transportation under

tariff terms. Their flexibility enables contract parties to tailor

transportation services to accommodate specific commercial and

operational needs.

Since OSRA’s effective date of May 1,1999, all contracts are

required to be filed electronically. Initially, two systems were

available to file service contracts, one which was Internet-based, i.e.,

SERVCON, and another which used a dial-up, ATFI-based approach.

The dial-up system was discontinued September 1999, and since that

time all service contracts have been filed in SERVCON. The

Internet-based system is designed for flexibility. It does not require

contract terms to be filed in any prescribed order, and it allows

carriers to submit service contracts in such electronic formats as

WordStar, WordPerfect, Microsoft Word, ASCII, Excel and HTML.

Certain enhancements have been made to the original system, e.g.,

providing the contract filer with the ability to retrieve its individual

directory and service contracts at the Commission.

During fiscal year 200 1, the Commission received thousands

of service contract filings. There were 47,629 new service contracts

(compared to 35,190 in fiscal year 2000), and 182,403 amendments

(compared to 110,780 amendments in fiscal year 2000).

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8. Controlled Carriers

A controlled carrier is an ocean common carrier that is, or

whose operating assets are, directly or indirectly, owned or controlled

by a government. Section 9 of the 1984 Act provides that no

controlled carrier may maintain rates or charges in its tariffs or

service contracts that are below a level that is just and reasonable, nor

may any such carrier establish, maintain, or enforce unjust or

unreasonable classifications, rules or regulations in those tariffs or

service contracts. In addition, tariff rates, charges, classifications,

rules, or regulations of a controlled carrier may not, without special

permission of the Commission, become effective sooner than the 30th

day after the date of publication.

By Order on March 27, 1998, the Commission granted one

controlled carrier, COSCO, a limited exemption from the 30-day

notice period applicable to controlled carriers, to reduce rates to meet

or exceed the filed rates of competing ocean common carriers.

(Petition No. PI-98, Petition of China Ocean Shipping (Group)

Companyfor a Limited Exemption from Section 9(c) of the Shipping

Act of 2984.) Subsequently in March 1999, COSCO submitted a

separate petition under P3-99, seeking to publish rate decreases in the

U.S. foreign commerce that would be effective upon publication,

without regard to whether they are the same as or lower than rates

published by competing carriers. On April 17,2001, the Commission

streamlined and updated the procedures for COSCO to comply with

the Controlled Carrier Act limited exemption. In fiscal year 2001,

COSCO exercised the authority granted by the Commission’s Order

in 11 instances. In October 2000, China National Foreign Trade

Transportation (Group) Corp. (“Sinotrans”) petitioned (No. P2-00 at

the Commission) for an exemption similar to that granted COSCO

under Pl-98, so that it could lawfully reduce rates to meet or exceed

the published rates of competing ocean common carriers on one day’s

notice. The matters regarding COSCO under P3-99 and Sinotrans

under P2-00 were still pending at the end of fiscal year 200 1. The

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most recent list of controlled carriers issued by the Commission was

published in the FederaE Register on September 27,200O.

9. Non-Vessel-Operating Common Carriers

Ocean freight forwarders and NVOCCs in the U.S. have been

combined by OSRA into a new entity known as OTIS. The

Commission’s Bureau of Consumer Complaints & Licensing now

monitors and reviews compliance with OTI/NVOCC financial

responsibilities under OSFZA, while the Bureau of Trade Analysis

reviews the accessibility requirements of NVOCC tariff publications

in the carriers’ private automated systems. At the end of fiscal year

200 1, a total of 2,508 tariff location addresses for OTI/NVOCCs had

been posted on the Commission’s homepage.

10. Marine Terminal Activities

Pursuant to OSRA, an MT0 may make available to the

public, subject to section 10(d) of the 1984 Act, a schedule of rates,

regulations, and practices, including limitations of liability for cargo

loss or damage, pertaining to receiving, delivering, handling, or

storing property at its marine terminal. Any such schedule made

available to the public shall be enforceable by an appropriate court as

an implied contract without proof of actual knowledge of its

provisions. Pursuant to the Commission’s regulations governing

MT0 schedules, any terminal schedule that is made available to the

public must be available during normal business hours and in

electronic form. Each MT0 must notify the Bureau of the electronic

location of its terminal schedule by submitting Form FMC- 1 before

commencing operations. At the close of fiscal year 2001, a total of

152 operators’ electronic location addresses for MT0 terminal

schedules were posted on the Commission’s homepage. An

additional 34 MTOs opted not to make tariff publications publicly

available.

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11. Automated Database Systems

The Bureau currently maintains and uses the following

automated database systems: (1) Form FMC-1 System; (2) Tariff

Profile System; (3) SERVCON, the system for filing service

contracts, and related Form FMC-83 system for registration to file

service contracts; (4) Microfiche System; (5) historical ATFI tariff

database system; (6) the tariff and service contract portions of the

FMC Imaging System; and (7) the Agreement Profile System. During

fiscal year 200 1, the Form FMC- 1 System reflected the tariff location

addresses of 373 VOCCs, 2,508 OTUNVOCCs, 2 1 conferences, and

152 of the 186 MTOs. Information in the Tariff Profile System is

used to review and analyze carrier tariffs and service contract

essential terms publications to ensure compliance with Commission

rules and regulations under OSRA, particularly the accessibility of

carrier tariffs. The Service Contract System contains service contract

data, most of which is only available to the Commission’s staff due

to OSRA’s confidentiality requirements. Registration to file service

contracts into the system is authorized through the submission of

Form FMC-83. The historical ATFI database contains all tariff and

service contract essential term publication data filed electronically

with the Commission between February 22,1993, and April 30,1999.

The Microfiche System provides a means of locating canceled tariffs

and amendments which have been microfiched. The FMC Imaging

System, among other things, provides for document storage and

retrieval of canceled tariffs and service contracts. The Agreement

Profile System contains information about the status of carrier and

terminal agreements, as well as related monitoring reports. These

databases provide support for many of the Commission’s programs.

Certain information contained in the databases is also available to the

public.

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12. Future Plans and Proposed Activities

The Bureau’s overall monitoring program will: focus on

systematic oversight of carrier and trade activity with emphasis on

upgrading monitoring systems to incorporate data and information

that will be provided by carriers pursuant to Docket No. 94-3 1,

Information Form and Post-Effective Reporting Requirements for

Agreements Among Ocean Common Carriers Subject to the Shipping

Act of 1984; assess the impact of key issues facing the industry in

order to monitor developments in major trades and analyze

agreements in the foreign trades under the standards of the 1984 Act;

and continue to refine its section 6(g) monitoring methodology in

evaluating the degree of anticompetitiveness generated by agreements

within the context of their commercial environments. The Bureau

also will continue to review tariffs and service contracts to ensure that

they comply with the Shipping Act and the Commission’s

regulations, including the statutes and regulations related to

controlled carriers. Additionally, reports concerning carriers’

adherence to voluntary service contract guidelines of various

agreements will be prepared. Further, a system is being developed to

facilitate electronic signatures for various FMC information forms to

comply with requirements of GPEA by October 2003.

The Bureau also will continue to furnish support and prepare

economic testimony in formal Commission proceedings arising in the

areas of its expertise; provide analyses and recommendations on

petitions, information demand orders, and Commission-initiated

rulemakings; perform pre-effectiveness analyses of newly filed

agreements to determine whether they are likely to raise issues and

specific questions under sections 5,6(g) and 10 of the 1984 Act, or

raise general policy questions; prepare recommendations to the

Commission on the more complex agreements and those agreements

that raise policy issues; and process other agreement matters under

authority delegated by the Commission.

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APPENDIXES

APPENDIX A

FEDERAL MARITIME COMMISSION

ORGANIZATION CHART

Fiscal Year 2001

Commissioner Commissioner Chairman Commissioner Commissioner

Offlce of the

Secretary

Office of the

General

Counsel

Office of the

Inspector

General

Office of the

Executive

Director

Office of Office of Equal

Administrative Employment

Law Judges Opportunity

Bureau of Consumer

Complaints and Licensing Bureau of Enforcement Bureau of Trade Analysis

1Area Representatives

New York

Los Angeles

Miami

New Orleans

1Seattle

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APPENDIX B

COMMISSION PROCEEDINGS

Fiscal Year 2001

Formal Proceedings

Decisions .................................. 8

Discontinuances & Dismissals ................. 9

Initial Decisions Not Reviewed ................. 3

Rulemakings - Final Rules .................... 3

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Special Dockets ............................. 13

Informal Dockets ............................. 3

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APPENDIX C

AGREEMENT FILINGS AND STATUS

Fiscal Year 2001

Agreements Filed in FY 2001

(including modifications)

Carrier .............................

Terminal ...........................

. . . . .

. . . . . . .

........... 271

............ 53

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324

Agreements Processing Categories in FY 2001

Forty-Five Day Review ...............

Shortened Review ....................

Exempt-Effective Upon Filing ..........

Rejection of Filing ...................

Formal Extension of Review Period .....

Not Subject .........................

Withdrawals ........................

........

........

........

........

........

........

........

............ 90

............ 2 6

........... 208

............. 0

............. 4

............. 2

............. 3

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333

Carrier Reports Submitted for Commission Review

Minutes of Meetings and Ad Hoc Reports ,

Monitoring Reports . . . . . . . . . . . . . . . . . .

............ 510

............ 221

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731

Agreements on File as of September 30,200l

Conference ............................... ............. . . 21

Discussion ................................ ............. . . 4 5

Joint Service .............................. ............. 10

Vessel-Sharing ............................ ............. : ‘150

Cooperative Working & Other ............... ............. 17

Terminal ................................. ............. : ‘421

Total ...................................................... 664

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APPENDIX D

FORM FMC-1

TARIFF LOCATION ADDRESSES - ELECTRONIC

SERVICE CONTRACT FILINGS AND SPECIAL

PERMISSION APPLICATIONS

Fiscal Year 2001

Form FMC-1 Filings

vocc ............................ .373

OTI/NVO ........................ 2,508

MT0 ............................ ..I8 6

Conferences ........................ .21

Electronic Service Contract Documents

New Service Contracts ............ 4 7,629

Service Contract Amendments ...... 182,403

Special Permission Applications

Granted .......................... ..3 8

Denied .............................. 1

Withdrawn .......................... .2

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APPENDIX E

CIVIL PENALTIES COLLECTED

Fiscal Year 2001

Asia North America Eastbound Rate Agreement . . $110,000.00

Dedola International Inc. ........................ 40,OOO.OO

D. Kelly & West Indies Shipping. ................ 30,OOO.OO

Fortune Network Limited ......................... SO,OOO.OO

Interocean Lines, Inc. ........................... 30,000.00

Mark VII Transportation Company ................ 60,OOO.OO

Newport Cargo Consolidated, Inc. ................ 45,ooo.oo

OEC Freight Worldwide Co., Ltd. ................. 145,OOO.OO

Panalpina, Inc. ............................... 150,000.00

Robert Rullo/ABA Forwarding ................... 15,OOO.OO

Signet Shipping Company ....................... 20,OOO.OO

Tecmarine Lines, Inc. ............................ 80,OOO.OO

Transunion, SA ................................ 90,000.00

Trinity Shipping Line, SA ........................ 30,OOO.OO

Universal Freightways .......................... 45,ooo.oo

Wallenius Lines AB ............................ 1 lO,OOO.OO

Yatari Express Co., Ltd. ........................ 65.000.00

Total Civil Penalties Collected $1,145,000.00

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APPENDIX F

INVESTIGATIONS

Fiscal Year 2001

Investigations/Special Inquiries Opened:

Audits/Compliance Checks Opened:

Total Openings:

Investigations/Special Inquiries Completed:

Audits/Compliance Checks Completed:

Total Completions:

81

14

95

83

10

93

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APPENDIX G

STATEMENT OF APPROPRIATIONS,

OBLIGATIONS AND RECEIPTS FOR

THE FISCAL YEAR ENDED

SEPTEMBER 30,200l

APPROPRIATIONS:

Public Law 106-553: For necessary expenses ofthe Federal Maritime Commission

as authorized by section 20 1 (d) of the Merchant Marine Act of 1936, as amended

(46 App. U.S.C. 111 I), including services as authorized by 5 U.S.C. 3 109; hire of

passenger motor vehicles authorized by 31 U.S.C. 1343 (b); and uniforms or

allowances therefor, as authorized by 5 U.S.C. 5901-02; Provided, that not to

exceed $2,000 shall be available for official reception and representation expenses.

Public Law 106-554, 1 06’h Congress

Government-Wide Rescissions, 2001

Revised Appropriation

$15,500,000

34.100

$15,465,900

OBLIGATIONS AND UNOBLIGATED BALANCE:

Net obligations for salaries and expenses for the fiscal year

ended September 30,200l. $15,465,473

STATEMENT OF RECEIPTS: Deposited with the General

Fund of the Treasury for the Fiscal Year Ended September 30,200l:

Publications and reproductions,

Fees and Vessel Certification,

and Freight Forwarder Applications

Fines and penalties

Total general fund receipts

$471,835

$33385,257

$3,857,092

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