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FEDERAL MARITIME COMMISSION

46 C F R PART 536

GENERAL ORDER 13 AMENDMENT 12 DOCKET NO 80 54

TIME VOLUME RATE CONTRACTS TARIFF FILING

REGULATIONS APPLICABLE TO CARRIERS AND

CONFERENCES

IN THE FOREIGN COMMERCE OF THE UNITED STATES

July 2 1982

Final Rule

This prescribes uniform rules and regulations govern

ing the filing of time volume rates It will eliminate

the present confusion and imprecision surrounding

existing time volume rates and their related tariff

provisions It will also enable the Commission to

monitor the use of time volume rates to ensure that

they comply with the terms of their related contracts

and the Shipping Act 1916

DATE Effective August 9 1982

SUPPLEMENTARY INFORMATION

On November 2 1981 the Commission issued a notice of proposed

rulemaking 46 F R 54390 requesting comments on a rule which

would govern the filing of time volume rates Forty four comments

have been received by or on behalf ofshippers carriers conferences of

carriers ocean freight forwarders and other interested parties See

Attachment A In light of these comments a number of changes have

been made to the rule as proposed However before discussing these

changes certain threshold issues must be addressed

Some commentators challenge the Commission s previous finding

that this rulemaking is exempt from the Regulatory Flexibility Act

RFA 5 U S C 601 et seq They believe that this finding is incor

rect and that the Commission is required to conduct an initial regula

tory flexibility analysis before continuing this rulemaking The Commis

sion has considered these arguments but continues of the view that the

requirements of the RFA do not apply This proceeding clearly relates

to the particular applicability of rates and practices exempt under sec

tion 601 2 ofthe Act 5 U S C 601 2

Several commentators question whether a non vessel operating

common carrier by water NVOCC is entitled to use time volume

rates They contend that an NVOCC is not a true shipper in that it has

ACTION

SUMMARY

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2 FEDERAL MARITIME COMMISSION

neither title nor beneficial interest in the shipments it handles They

further submit that conferring shipper status on NVOCCs and permit

ting them to gain the benefits of the underlying carriers time volume

rates will disrupt the United States oceanborne foreign commerce

They fear that the use of time volume rates by NVOCCs will enable

them to consolidate small shipments which would otherwise not qualify

for a volume rate and thereby erode the underlying carriers revenues

Commentators are also concerned that an NVOCC will be able to

secure for its customers an undue advantage over other shippers who

prefer to deal directly with a carrier Some commenting parties believe

that because ofthe NVOCCs ability to consolidate small shipments and

qualify for lower volume rates they will eventually use their increased

market power to obtain unlawful rebates unjustly discriminatory ar

rangements and other illegal favors

The Commission has historically considered an NVOCC as a shipper

in relation to the underlying vessel operating carrier Nothing presented

herein convinces the Commission otherwise Moreover the time

volume tariff rules contain sufficient safeguards to prevent the alleged

potential abuses as does the Shipping Act itself It should also be noted

that freight consolidators have been using time volume rates for many

years without adverse consequences Therefore there appears to be no

valid regulatory reason to deny to the NVOCC class of shippers the

benefits which may accrue from time volume rates

Finally there is the qu stion of whether conferences and dual rate

conferences in particular should be authorized to participate in time

volume ratemaking Certain commentators argue that time volume

rates are not conventional or routine ratemaking and that contracts for

such rates contravene section 14b of the Act 46 U S C 813a The

Commission disagrees Time volume rates are a routine form of rate

making interstitial to agreements approved pursuant to the Shipping

Act 1916 Contracts providing for such rates are not exclusive patron

age contracts subject to section 14b but rather are contracts based on

the volume offreight offered

The Commission will now address individual sections of the pro

posed rule and the comments addressed thereto

Section 536 2 as proposed included separate definitions for time

volume rate and time volume contract One commentator suggested

that two separate definitions are unnecessary The Commission agrees

These two interrelated definitions can be combined to form a more

concise and exact definition and the final rule has been amended ac

cordingly

Several commentators opposed proposed section 536 a

which requires the publication of time volume rates and contracts 30

days prior to their taking effect and their being made available to all

shippers during that period They noted that if a contract rate accom

2S F M C
TIME VOLUME RATES 3

plishes a reduction it should be permitted to take effect upon filing

consistent with existing requirements for rate reductions

The Commission understands the need to accommodate those in

stances when market conditions necessitate fast transactions while pre

serving the need to make all contracts available to all shippers More

over the Commission does not wish to preclude the use of renewable

contracts Therefore the final rule has been amended to permit new

time volume rates to become effective upon filing They must howev

er be made available to all shippers or consignees under the same terms

and conditions for a period of at least thirty 30 days subsequent to the

commencement of a new or renewal contract period

At the suggestion of some commentators proposed section

536 b 1 is being amended to make clear that time volume

contracts may cover more than one commodity This change will

permit a single time volume rate and or contract to apply to several

commodities thereby eliminating the additional time and expense of

maintaining several different contracts

Several commentators suggested that the recordkeeping requirements

of proposed sections 536 b 5 b 8 and f

be combined or

eliminated Other commentators more particularly objected to section

536 b 8 which required that a shipper consignee furnish writ

ten notice to the designated record keeper of any shipment under a

contract The contention is that the carrier s bill oflading is a sufficient

written record of time volume shipments because both carrier and

shipper receive copies for each shipment and no useful purpose would

be served by requiring additional written notification The Commission

concurs Proposed section 536 b 8 has been deleted from the

final rule However it is the Commission s opinion that section

536 fmore closely relates to section 536 g and there

fore they have been combined in section 536 7 e of the final rule

Also with respect to written notifications several shippers have

expressed a desire that our regulations provide that carriers be required

to inform shippers as to the number of tons shipped under a particular

time volume contract at various times during the contract period

While there are advantages to such a procedure the Commission views

this as a commercial problem the details of which should be worked

out between the parties Therefore it is unnecessary to address this

matter in the final rule

Some reservations were expressed concerning proposed section

536 b 6 because of its use of the words precise and dis

abling circumstances Commentators contend it would be difficult if

not impossible to precisely describe some disabling circumstances

and that moreover the term disabling circumstances is not specific

enough to prevent its use as an easy escape from the contract This

point is well taken This section has therefore been amended to clarify

25 F M C
4 FEDERAL MARITIME COMMISSION

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its terms and to prevent conunercial contingencies eg changing

markets poor management decisions business declines etc from being

labeled disabling circumstances to contravene otherwise binding

time volume contracts

This mal rule has also been revised to address the concern ofmany

commentators that the Commission was precluding all but one time

volume rate scheme Accordingly proposed sections 536 b 9

and c have been revised and combined torefiect the fact that con

tracting parties are free to develop their own time volume schemes

Within the strictures ofthe rule

Proposed section 536 d which prohibits the filing of time

volume rates in terms of a percentage fraction decimal or multiple of

any other rate was challenged by one commentator It Will nonetheless

remain uncbanged Numerous problems could arise if a cbange in a

non time volume rate automatically triggers a like percentage fraction

decimal or multiple change in a time volunIe rate For instance if a

time volume rate were stated as a percentage of a

non time volume

rate and the non time volume rate bad numerous cbanges tbe time

volume rate would never be clearly and explicitly stated since it could

require numerous comparisons and calculations involving several tariff

pages

Finally some commentators urge tbat tbe record retention period be

limited to two years rather than tbe proposed five year requirement

The five year requirement was establisbed to conform with the statute

of limitations applicable to rebating violations and it will be retained

Tbe Commission requested estimates of tbe mancial and man bour

burdens anticipated complying witb the proposed time volume rule

Only two commentators replied expressing fmancial and man hour

burdens of 1 000 40 hours and 30000 600 bours respectively Tbe

Commission believes that even these two estimates are nolonger rele

vant in light of the elimination of the reporting requirement for eacb

shipment as originally proposed The remaining record keeping re

quirement is to simply maintain copies of bills of lading and related

documents accessible within the United States to substantiate tbe

proper application of time volume rates as required by seetion 18b of

tbe Shipping Act 1916 Additionally there is tbe potential that some

reports will be prepared pursuant to section 5367 d concerning dis

abling circumstances However the Commission believes that they will

be ofade minimis nature

Information collection requirements contained in this regulation sec

tions 536 7 a b d and e bave been approved by tbeOffice of

Management and Budget under tbe provisions of the Paperwork Re

duction Act of 1980 44 V S C 3504 and have been assigned OMB

control number 3072 0042

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2 F M C
TIME VOLUME RATES 5

As a result of the above changes the Commission has renumbered

and rearranged certain sections ofthe rule

List ofsubjects in 46 C F R Rates Maritime Carriers

THEREFORE IT IS ORDERED That pursuant to 5 U S c 553

and sections 18 b and 43 of the Shipping Act 1916 46 U S C

817 b and 841 a Part 536 of 46 C FR is amended as follows

I Section 536 2 is amended by the addition of the following

p

Time Volume Rate A rate conditioned upon the shipment of a

specific or minimum quantity of cargo over a set period of time

implementation of which is accomplished pursuant to the terms of

a time volume contract set forth in the appropriate tariff and

complying with the terms and conditions of section 536 7

II A new section is added to 46 CFR Part 536 as follows

536 7 TimelYolume Rates

Time volume rates may be offered by common carriers

by water in the United States foreign commerce or con

ferences of such carriers subject to the following terms

and conditions

a Time volume rates and related contracts shall be pub

lished in tariffs on file with the Commission and made

available to all shippers or consignees under the same

terms and conditions upon filing and for a period of at

least thirty 30 days subsequent to the commencement of

a new or renewal contract period

b A time volume contract shall clearly state

1 The commodity or commodities to which it applies

2 the minimum quantity of cargo necessary to obtain the

time volume rate

3 the effective time period ofthe contract

4 the origin and destination ports points involved

5 the manner in which shipment records supporting the

time volume rate are to be maintained

6 a clear description of any disabling circumstances not

commercial contingencies e g changing markets poor

management decisions business declines etc which will

permit i

a reduction in the quantity of cargo required for

the contract period ii an extension of the contract

period without any change in the contract rate iii a

discontinuance of the contract or iv other options not

contemplated above

7 whether reductions in quantity will be permitted for

Saturdays Sundays or legal holidays occurring during a

disability period

25 F MC
6 FEDERAL MARITIME COMMISSION

8 in situations other than those described in

536 7b 6 where the volume requirement will not be

met during the contract period and due to carriers rate

structure undercharges result therefrom whether a ship

per consignee will be permitted to pay the deficit be

tween the actual quantity shipped and the minimum

volume requirement or whether the entire amount shipped

during the contract period will be rerated at the applica

ble non time volume rates in effect for the commodity on

the date that each particular shipment sailed

9 whether or not any surcharges shall apply to the time

volume contract rate

c No time volume rate may be stated in terms of a

percentage fraction decimal or multiple of any other

rate

d If a

specific reduction in the quantity required for the

contract period is stated in the contract for situations

when a shipment cannot be made due to specified dis

abling occurrences the party encountering disability days

shall within five days of the date of disability provide

written notice to the person designated to maintain

records of the nature of disability and ofits termination

when that event occurs

e Every carrier and conference shall designate a resident

representative in the United States for the maintenance of

time volume shipment records Shipment records con

cerning each time volume contract shall be maintained by

the designated recordkeeper for a period of five years

from the completion ofeach contract

IT IS FURTHER ORDERED That any existing contracts which

would otherwise fall under the provisions ofthis Order shall be permit

ted to remain in effect but may not be extended or renewed without

compliance with this Order or upon Commission approval In no case

shall any existing contract remain in effect more than 12 months from

the effective date ofthis Order

By the Commission

S FRANCIS C HURNEY

Secretary

25 F M C
TIME VOLUME RATES 7

Attachment A

Shippers

1 Boise Cascade Corporation

2 E duPont de Nemours and Company

3 FMC Corporation

4 Kero Sun Inc

Carriers and Conferences

1 American West African Freight Conference

2 Atlantic Gu1f West Coast of South America Conference

3 Continental North Atlantic Westbound Freight Conference

4 Continental U S GulfFreight Association

5 East Coast Colombia Conference

6 GreecelU S Atlantic Agreement

7 GulfEuropean Freight Association

8 Gulf Mediterranean Conference

9 Gulf United Kingdom Conference

10 Hapag Lloyd America Inc

11 IberianlU S North Atlantic Westbound Freight Conference

12 Japan Korea Atlantic Gulf Freight Conference

13 Japan Puerto Rico Virgin Islands Freight Conference

14 Marseilles North Atlantic U S A

Freight Conference

15 Med Gu1f Conference

16 Mediterranean North Pacific Coast Freight Conference

17 North Atlantic Baltic Freight Conference

18 North Atlantic Continental Freight Conference

19 North Atlantic French Atlantic Freight Conference

20 North Atlantic Mediterranean Freight Conference

21 North Atlantic United Kingdom Freight Conference

22 North Atlantic Westbound Freight Association

23 Open Bulk Carriers Ltd

24 Pacific Coast European Conference

25 Scandinavia Baltic U S North Atlantic Westbound Freight Con

ference

26 Sea Land Service Inc

27 The West Coast of Italy Sicilian and Adriatic Ports North Atlan

tic Range Conference

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8 FEDERAL MARITIME COMMISSION

28 Trans Freight Lines Inc

29 Trans Pacific Freight Conference ofJapanIKorea

30 United Kingdom U S A GulfWestbound Rate Agreement

31 United States Atlantic GulfVenezuela Conference

32 U S North Atlantic Spain Rate Agreement

33 U S South Atlantic Spanish Portuguese Moroccan and Mediter

ranean Rate Agreement

34 Westwood Shipping Lines

35 8900 Lines

36 Inter American Freight Conference

Other

1 Holland Knight

2 Military Sealift Command

3 National Customs Brokers Forwarders Association of America

Inc

4 New York Foreign Freight Forwarders and Brokers Ass n Inc

5 United States Department ofAgriculture

2 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 81 65

ROHDE LIESENFELD INC INDEPENDENT

OCEAN FREIGHT FORWARDER NO 1832

NOTICE

July 12 1982

Notice is given that no exceptions have oeen filed to the June 2 1982

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

mission could determine to review that decision has expired No such

determination has been made and accordingly that decision has become

administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 9
FEDERAL MARITIME COMMISSION

DOCKET NO 81 65

ROHDE LIESENFELD INC INDEPENDENT

OCEAN FREIGHT FORWARDER LICENSE NO 1832

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An investigation was begun to determine whether respondent Rohde Liesenfeld Inc

a licensed ocean freight forwarder had violated section 16 Initial Paragraph Ship

ping Act 1916 and section SI0 23 d of the Commission s General Order 4 then in

effect by misstating the port of discharge as Kiel West Germany instead of the true

ports of Hamburg or Bremen on 48 shipments of mixed commodities and by under

stating cargo measurements on 11 shipments of fiberglass boats to Hamb l1g

and S

shipments of machinery to Paraguay between 1976 and 1978 all for the purpose of

reducing freight charges The investigation also included the question of respondent s

fitness to retain its license and the question of assessing penalties for the alleged

violations After several months of prehearing inspection and discovery the parties

formulated a settlement agreement under which respondent would pay 20 000 and

institute certain controls to prevent recurrence of the conduct in question On the

basis of the substantial record developed and applicable principles of law it is found

that

1 The settlement agreement is fair and reasonable and comports with Commission

case law and standards governing the approvability of such settlements since it

considers the risks and costs of litigation and various mitigating factors and will have

a deterrent effect

2 Although the record developed thus far does show that respondent was involved in

the shipments in question as alleged it also shows that respondent may nothave been

aware of the true destination of the 48 shipments that it may nothave authorized or

approved of the misstatements on the 11 shipments which misstatements may have

been made by an employee no longer with respondent at the suggestion of the ocean

carrier involved and that respondent may have attempted to fashion more accurate

measurement figures for the five shipments in lieu of the obviously inaccurate figures

supplied by the exporter Moreover respondent terminated these practices voluntari

ly fully cooperated with the Commission s staff and Hearing Counsel has an other

wise unblemished record of service and the record does not suggest that respondent

harmed any shipper or significantly benefited financially from the above transactions

3 The record supports a

rmding that respondent is fit to retain its license on the basis

of the mitigating factors mentioned above and evidence showing that it can be

trusted to comply with law in the future

I

Gerald H Ullman for respondent Rohde Liesenfeld Inc

John Robert Ewers Joseph B Slunt and Deana E Rose for the Bureau of Hearings

and Field Operations Office of Hearing Counsel

10 2SF MC
ROHDE LIESENFELD INC

INITIAL DECISION I OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Finalized July 12 1982

This is an investigation begun by the Commission s Order of Investi

gation and Hearing served October 8 1981 According to the Order

the Commission began the proceeding because it had information which

revealed that respondent Rohde Liesenfeld Inc R L an inde

pendent ocean freight forwarder licensed by the Commission may have

violated certain provisions of the Shipping Act 1916 and the Commis

sion s implementing regulation General Order 4 in connection with

three groups ofshipments More specifically the information seemed to

show that R L had prepared or had otherwise become involved with

48 shipments of mixed commodities moving between December 15

1976 and November 8 1978 in which the bills oflading had incorrect

ly shown the ultimate port of discharge as Kiel West Germany rather

than the true port of discharge which was Bremen or Hamburg in

order to obtain lower freight charges applicable to shipments destined

for Baltic seaports supposedly saving 43 654 in freight charges In

addition R L may have declared false cubic measurements as a

means of obtaining or attempting to obtain ocean transportation for less

than applicable charges in connection with 11 shipments of fiberglass

boats carried from Baltimore Maryland to Hamburg Germany be

tween December 31 1976 and June 27 1977 saving 14 661 in freight

charges and may have done the same thing in connection with 5

shipments of cotton gin machinery carried to Paraguay between Janu

ary 24 1977 and September 8 1977 saving 24 350 in freight charges

If any of these events occurred and could be proven they could

constitute violations of section 16 Initial Paragraph 46 U S C 815

which prohibits any forwarder from knowingly and wilfully directly

or indirectly by means of false billing false classification false weigh

ing false report of weight or by any other unjust or unfair device or

means obtain ing or attempt ing to obtain transportation by water for

property at less than the rates or charges which would otherwise be

applicable Moreover they could violate section 51O 23 d ofthe Com

mission s General Order 4 46 C P R 51O 23 d in effect at the time of

the shipments 2 which prohibited any forwarder from knowingly

impart ing to a principal or oceangoing common carrier false informa

tion relative to any forwarding transaction

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

Commission Rule 227 Rules of Practice and Procedure 46 GFR 502 227

2

The provisions of section 51O 23 d forbidding forwarders from knowingly imparting false informa

tion to carriers orother persons were transferred to section 51O 32 f

of General Order 4 which was

revised effective May I 1981 46 F R 24568

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Because of the above alleged misconduct the Commission also ques

tioned whether civil penalties should be invoked against R L pursu

ant to section 32 e of the Act and if so the amount of any penalty

taking into consideration factors in possible mitigation and whether

R Vs forwarding license should be suspended or revoked pursuant to

section 44d of the Act for willful violations of the Act or such

conduct as the Commission finds to render R L unfit to carryon the

business of forwarding in accordance with sections 510 9b and

510 9 e ofGeneral Order 4

Following commencement ofthe formal proceedjng the case moved

into its prehearing inspection and discovery phase in which the parties

respondent and the Commission s Office of Hearing Counsel exchanged

discovery requests and participated in numerous meetings and discus

sions seeking either to proceed to trial or settle After a series of such

meetings and discussions interspersed with periodic reports to me con

cerning the progress being made and the ongoing development of a

record the parties participated in an informal prehearing conference on

February 19 1982 which I convened which resulted in the formula

tion of settlement proposals which were to be transmitted to the parties

respective principals Thereafter these proposals were accepted by the

principals and after certain difficulties relating to the furnishing of

documentary materials from overseas were overcome the parties were

able to submit the text of their settlement together with a well devel

oped supporting record and legal memoranda all of which materials

were submitted on or before May 14 1982 3 On the basis ofthis record

prepared by the parties and their persuasive arguments favoring settle

ment Ifind that their settlement is just and reasonable and should be

approved under applicable standards oflaw and that respondent is fit to

retain its license

3

The record consists of ajoint stipulation of the parties setting forth the facts concerning R Ls

involvement in the 48 II and S shipments and establishing that R L did prepare bills of lading

which incorrectly stated that the 48 shipments of mixed commodities were destined for Kiet West

Germany and did understate measurement of cargo on II shipments of fiberglass boats to Hamburg

and S shipments of cotton gin machinery to Paraguay resultina in considerable freight reductions The

record also shows the ocean carriers involved namely Polish Ocean Lines and Baltic Shipping Com

pany forthe 48 shipments Baltic for the IIshipments and Moore McCormack Lines and a

company

known as Nautilus Chartering Inc S A for the S shipments toParaguay The supporting materials for

this stipulation consist of 78 exhibits comprising numerous basic shipping documents bills of lading

and related documents tariffs calculations of freight savings caused by the misstatements etc Italso

includes asworn statement and two affidavits of Erich H Trendel President of R L Exhibit 75

Klaus Stankowitz VicePresident of R L Exhibit 76 and Dieter Liesenfeld ChiefExecutive Offi

cer and sole stockholder of R L Exhibit 77 These affidavits especially that of Mr Stankowitz

provide greater details concerning the three groups of shipments and show R L s potential defenses

and factors in mitigation which are discussed later in the body of this decision Because this case is

being settled the three officials have not of course been cross examined 80 that the merits of these

defenses and the validity of the factual details have not been fully tested However as with any settle

ment the defenses and proffered evidence are evaluated in terms of probability of success and risks of

litigation and such testing is not required

2S FMC
ROHDE LIESENFELD INC

DESCRIPTION OF THE TERMS OF THE SETTLEMENT

The proposed settlement consists of a

payment by R L ofthe sum

of 20 000 and certain curative undertakings by R L which are

designed to prevent recurrence of the type of conduct described

above 4

Essentially R L states that it has terminated all such prac

tices as those described and agrees to inform all owners officers and

employees of itself and of its owners subsidiaries and affiliates that

such practices are not company policy and must not be repeated A

notice to this effect will be submitted to such owners officers and

employees within 30 days of final approval of the settlement and will

be furnished to future owners officers and employees for three years

following approval ofthe settlement Furthermore within 30 days after

approval of the settlement all owners officers and employees of R

L will execute a statement under oath that they have read and under

stood the terms of the settlement agreement and will abide by them

and these statements will be furnished to the Commission Similar

statements of future owners officers or employees will be furnished to

the Commission for a period of three years after the settlement is

approved R L also agrees to institute all reasonable measures de

signed to prevent conduct that may be violative of section 16 Initial

Paragraph of the Act and of section 51O 23 d of the Commission s

General Order 4

5

APPROVABILITY OF THE PROPOSED SETTLEMENT

Both respondent and Hearing Counsel in their respective memoranda

of law strongly urge approval of their proposed settlement Respond

ent cites previous decisions of the Commission which continually reiter

ate the principle that both the law and Commission policy encourage

settlements and engage in every presumption which favors a finding

that they are fair correct and valid Respondent s memorandum p

3

citing among other cases Behring International Inc Independent

Ocean Freight Forwarder License No 910 23 F MC 974 983 JD

adopted by the Commission 23 F MC 973 1981 Respondent argues

that the settlement not only comports with the general policy of the

law mentioned but also with specific regulations of the Commission

4

The brief description of the settlement agreement is only an outline and is not all inclusive How

ever the compJete text of the settlement agreement and of the documents mentioned in the agreement

are set forth in the appendix to this decision

6As mentioned above section 51O 23 d is now section 51O 31 fTherefore the approval of the

settlement is conditioned on the understanding that the settlement will be amended to include the

present correct designation where such amendment is necessary in the context of the agreement It

appears that such amendment will be necessary in only one place in the agreement namely paragraph

no 4 on page 3 where R L agrees to maintain all reasonable measures designed to discourage

prevent and eliminate the conduct that may be violative of section 51O 23 d of the Commission s

General Order 4 References to the earlier section number elsewhere in the agreement are proper in

the context

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governing the settlement of civil penalties set forth in 46 C F R Part

505 and the specific instruction of the Commission in its Order of

Investigation and Hearing about taking into consideration factors in

possible mitigation of such penalty Order p

4 Respondent cites

factors which the Commission s

reg ations establish as relevant in

determining the reasonableness ofpayments in settlement of cases such

as doubts and litigative probabilities and the deterrent effect of settle

ments standards adopted by the Comptroller General and Attorney

General which are published in 4 C F R 103 3 and 4 C F R 103 5

respectively and incorporated by reference by the Commission in 46

C F R 505 1 In this regard re pondent contends that there are valid

doubts concerning the ability ofHearing Counsel to prove the elements

of violations of section 16 Initial Paragraph of the Act and presum

ably the corresponding portion ofGeneral Order 4 with regard to the

requirement that Hearing Counsel show that the alleged misstatements

on the 48 bills of lading which incorrectly showed Kiel as port of

discharge and the alleged false statements of cubic measurement on the

II shipments of boats to Hamburg and 5 shipments of cotton gin

machinery to Paraguay weremade knowingly and wilfully Respond

ent cites affidavits ofits officials showing that respondent may not have

been aware of the true destination of the 48 shipments that it did not

condone the actions of a lower level employee no longer with R L

who apparently understated the measurement of the II shipments to

Hamburg at the suggestion of the ocean carrier involved and was not

aware of his action and that R L acted to protect its principal by

preparing a more reasonable estimate of the measurement of the 5

shipments of machinery when the shipper admittedly did not submit a

correct figure Finally respondent contends that it has cooperated f

ly

with the Commission s

investigators even to the extent of providing

German consular documents which would not normally be available to

the Commission has had an unblemished record since it was licensed in

1976 and has firmly committed itself to take action to ensure compli

ance with all U S legal requirements in the future

Hearing Counsel similarly cite some of the multitude of cases which

emphasize that settlements are encouraged especially in the functioning

ofthe administrative process Hearing Counsel also cite General Order

30 the Commission s

regulation governing the compromise and settle

ment of cases involving civil penalties and state that there has been full

consideration ofmitigating and other factors set forth in that regulation

Hearing Counsel cite respondent s full cooperation with the Commis

sion s staff its prior unblemished record and its diligent remedial action

as well as the absence ofany indication that respondent has been guilty

offraudulent or deceitful conduct or that it has misappropriated funds

or violated any position of trust or responsibility Although Hearing

Counsel do not state that they could not prove that R L violated

25 F MC
ROHDE LlESENFELD INC

section 16 Initial Paragraph of the Act and section 51O 23 d of Gener

al Order 4 by knowingly and wilfully misstating destination and

cubic measurement on the various bills of lading Hearing Counsel do

appear to recognize the difficulties of proving such elements at a trial

type hearing in view of the evidence so far developed and in consider

ation of various mitigating factors Thus Hearing Counsel acknowledge

that affidavits of an official of R L and of its sole owner indicate that

the incorrect designation of Kiel as port of discharge on the 48 ship

ments to Hamburg and Bremerhaven 6was done without knowledge of

R L of the true destination and was done at the behest of R L s

parent company R L GMBH a German freight forwarder located in

Hamburg which was not acting in violation of German law and did

not believe that R L which was not a direct party to these arrange

ments made overseas between R L GMBH and steamship lines

would be considered to have violated U S law under the circum

stances Furthermore as to the II shipments of fiberglass boats to

Hamburg 7

the affidavits indicate that a lower level employee no

longer with R L undertook to understate the cubic measurement at

the behest of the ocean carrier involved without the knowledge or

permission of the company which when the facts became known

stopped the practice immediately Finally as to the five shipments of

cotton gin machinery to Paraguay affidavits of two R L officials

indicate that R L was attempting to ascertain a more realistic meas

urement figure than the one which the exporter had supplied which

was obviously inaccurate and that in the interest of the party who paid

the freight the overseas consignee R L made what it considered to

be a more realistic estimate of the proper cubic measurement than the

figure originally provided by the exporter who had little or no interest

in providing an exact figure since the exporter did not pay the freight

and later appeared to acknowledge that its figure might not have been

correct In Ithe above groups oftransactions R L does not appear to

have derived direct financial benefit of any great significance although

reductions in freight charges had resulted from the various misstate

ments on the bills of lading Moreover as noted R L has taken steps

to prevent recurrence of similar conduct and in case exporters furnish

uncertain or inaccurate measurement figures such as apparently oc

curred with respect to the five shipments of cotton gin machinery R

L has agreed to seek correct figures diligently prior to dispatch ofthe

shipment and if this cannot be done then R L will decline to handle

6

Although the Commission s Order mentions Bremen as one of the true ports of discharge for the

48 shipments the record indicates thecorrect port was Bremerhaven

7

The record indicates that the port of discharge was Antwerp on 10 of the shipments and Bremen

on one shipment rather than Hamburg as the Commission s Order states

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the shipment See Exhibit A to the settlement agreement paragraph

3

In conclusion Hearing Counsel mention that R L ceased the

practice of marking consolidated export shipments to Kiel on the bills

of lading nearly three years before this investigation formally com

menced and halted the aforementioned practices of underdeclaring

cubic measurements to carriers over four years before the formal inves

tigation began repeat the fact that R L cooperated fully with the

Commission s staff including Hearing Counsel to the extent ofproduc

ing critical documents locllted in Germany and that R L did not

realize the full benefit of the freight savings expressly acknowledge

that the requisite intent i e knowledge and wilfulness may not have

been present as regards the 48 shipments mistakenly showing Kiel as

port of discharge and recommend a settlement payment of 20 000 as

sufficient to act as a deterrent in view ofthe various factors in mitiga

tion discussed above

I find the settlement agreement to be fair and reasonable and to

comport with previously enunciated policies and standards governing

the settlement of cases before this Commission There are now so many

cases and decisions of the Commission encouraging settlements instead

of expensive litigation with doubtful results that the matter is now

axiomatic and no extended discussion of the reasons underlying this

policy should be necessary A discussion of these principles as applied

by the Commission in virtually every type of case involving alleged

violations under the Shipping Act is contained in such cases as Behring

International Inc Independent Ocean Freight Forwarder License No

910 cited above 23 F MC at 983 985 Kuehne Nagel Inc Inde

pendent Ocean Freight Forwarder License No 1162 24 F MC 315 325

328 10 administratively final October 13 1981 and in Old Ben Coal

Company v Sea Land Service Inc 21 F MC 506 511 515 10 admin

istratively final November 29 1978 They demonstrate that the presid

ing judge and Commission although approving of the idea of settle

ments in general do not become rubber stamps when settlements are

proffered See Universal Transcontinental Corporation 24 F MC 911

916 1982 Instead settlements are scrutinized to ensure that they do

not themselves violate any law or public policy and that they represent

reasonable judgments by the parties of the economic worth ofthe case

and probabilities of success compared to the cost of continued litiga

tion In cases in which assessment ofpenalties is made an issue further

more the Commission will pay attention to such factors as deterrent

effects and cost of recovery as well as the risks of litigation and

mitigating factors

The instant case and settlement provides an excellent example ofhow

a combination of factors supports the proffered settlement As both

Hearing Counsel and respondent indicate although the record thus far

25 FMC
ROHDE LIESENFELD INC

devoloped indicates that R L did participate in the above transactions

directly or indirectly and that its participation did ultimately result in

reductions of freight costs for the 48 shipments to Bremerhaven and

Hamburg the II shipments of fiberglass boats to Hamburg or Ant

werp and the 5 shipments of cotton gin machinery to Paraguay the

record also strongly suggests that R L was either not the prime

instigator of these transactions was unaware of most of them or was

itself victimized by the acts of a lower level employee no longer with

the company who acted at the behest of the ocean carrier involved

Thus it appears quite possible that on the 48 shipments which were

incorrectly shown to be destined for Kiel for the purpose of obtaining

lower freight charges published in the ocean carriers tariffs applicable

to Baltic Sea ports the idea was conceived by the ocean carrier and R

Ls parent company a German forwarder known as R L GMBH

which apparently acted properly under German law and believed that

R L which was not a direct party and was possibly unaware of the

true ports ofdischarge could not be held accountable under U S law

As to the 11 shipments of fiberglass boats to Hamburg or Antwerp it

appears that the ocean carrier involved suggested to an R L employ

ee that he understate measurement so that the carrier need not file a

reduced rate in its tariff and that the employee without the knowledge

or consent ofR L

proceeded to do so According to the affidavit of

Dieter Liesenfeld Chief Executive Officer of R L GMBH and sole

owner of R L R L was trying to obtain a competitive rate from

the ocean carrier but was not instructed to do so in an unlawful manner

because this might jeopardize R Ls valued forwarding license As to

the five shipments of cotton gin machinery it is quite possible that R

L acted reasonably in its effort to ascertain from the exporter a more

accurate measurement figure than the suspicious looking figures which

the exporter which may have had little or no interest in accuracy had

furnished and that R Ls estimate of measurement was itself reasona

ble All of the above facts do not mean that were the case to proceed

to trial type hearings complete with cross examination and fully re

searched post hearing briefs R L would not be held accountable for

the misstatements of destination and measurement on the bills of lading

notwithstanding these various defenses Ignorance of the law is not a

traditional defense nor is it clear that the improper acts of an employee

are not imputed to the employer or a parent to a subsidiary nor that the

well meaning construction of a measurement figure in lieu of reliable

supporting evidence is acceptable conduct However as both parties

acknowledge a critical element of violation of section 16 Initial Para

graph is knowledge and wilfulness and for violation of 46 C F R

51O 23 d knowledge and there are valid doubts as to whether Hear

ing Counsel could prove these elements for all the shipments under the

circumstances so far shown by the affidavits submitted by respondent

25 FM C

17
j

1

18 FEDERAL MARITIME COMMISSION

Furthermore there are a number ofmitigating factors which may affect

both the ability to prove the offenses as well as support the idea of a

settlement for example the fact that the events have long since termi

nated with no indication of recurrence that R L did not derive

direct significant financial benefit from freight reductions that the

lower level employee has been discharged that R L apparently

made its own estimate of the measurement of the machinery moving to

Paraguay in an effort to be accurate not to cheat the carrier that R

L has fully cooperated with the Commission s staff and Hearing Coun

sel even to the extent of furnishing critical documents from Germany

that R L has taken and will take remedial action to prevent recur

rence and that there is no indication offraudulent conductor harm to

shippers The Commission has often considered such mitigating factors

as those present in this case when deciding the proper amounts of

penalties to assess or whether to revoke or suspend licenses in full

recognition ofthe fact that the freight forwarder law is remedial not

punitive For example in Paulssen Guice Ltd Independent Ocean

Freight Forwarder License No 166 24 F MC 583 1982 the Commis

sion among other things granted a license to an applicant although

finding that the applicant had committed 922 violations of law by

forwarding that many shipments without a license and assessed a penal

ty of 5 000 the statutory maximum for one violation Section 32 a of

the Shipping Act 1916 as amended 46 U S C 831 However the

Commission found many mitigating factors such as the fact that appli

cant believed that it had been authorized to forward under a previous

ly approved branch office operation that it curtailed the unlawful ac

tivities promptly after learning that they were unlawful that it had not

violated any law prior to this time that it was not guilty of fraud and

had not acted out ofmoral turpitude that no shipper had suffered that

it had not received any improper financial gain that it was technically

well qualified and its president had operated as a qualifying officer of

the previously authorized branch office since 1976 that he was commit

ted to adhering to the requirements of law in the future and that

applicant had retained counsel familiar with the legal requirements of

freight forwarding to prevent the recurrence ofregulatory problems 24

F MC at 591 Such factors have often been considered by the Com

mission as mitigating See e g Continental Forwarding Inc Independ

ent Ocean Forwarder Application and Possible Statutory Violations 23

F MC 634 ID partially adopted by the Commission 23 F MC 623

1981 prior good behavior cooperation with the Commission s staff

diligent remedial action H K International Forwarding Inc Independ

ent Ocean Freight Forwarder License Application 22 F MC 622 1980

cooperation with the Commission s staff termination of allegedly vio

lative activity absence of fraud deceit financial misappropriation or

breach offiduciary duty Eastern Forwarding International Inc Inde

2S F MC
ROHDE LIESENFELD INC

pendent Ocean Freight Forwarder Application 23 F M C 206 1980

prompt termination of allegedly unlawful conduct absence of fraud

deceit or other conduct involving moral turpitude cooperation with the

Commission s staff The Commission has also recognized that if a

forwarder s conduct occurred at a time when the state of the law on

the subject was unclear the lack of clear and definitive administrative

or judicial precedent will also be considered as a factor in mitigation

See Behring International Inc Independent Ocean Freight Forwarder

License No 910 cited above 23 FMC at 991 992 This last factor has

some relevance to this case with respect to the fact that apparently it

was R Ls parent company R L GMBH not R L which made

arrangements for the 48 shipments to be designated as bound for Kiel

knowing that the true destinations were Bremerhaven or Hamburg

more costly ports of destination under the carriers tariffs and presum

ably R L was not made aware ofthe true destinations If so it is not

clear that R L would be held accountable for the conduct of its

parent which believed it was operating in accordance with German law

and was not implicating its subsidiary company in the United States

Moreover when considering whether the amount of payment upon

which the parties have settled 20 000 is within a zone of reasonable

ness considering the need to deter future violations as well as the risks

oflitigation and the various mitigating factors mentioned it would also

be well to recall that R L apparently received only a

portion of

benefits in the form of credits from its parent R L GMBH and to

consider that although there may have been 48 11 and 5 shipments in

which misstatements and misdeclarations occurred the Commission has

in at least one occasion considered far more violations 922 as essen

tially one for which apenalty of 5 000 was assessed because all ofthe

violations occurred under the same mitigating circumstance namely

the belief by the forwarder that it was authorized to perform the

services See Paulssen Guice Ltd Independent Ocean Freight For

warder License No 166 cited above 24 F M C at 591 In short then

the proffered settlement appears to reflect fully the various factors

enunciated by the Commission in previous cases of this type and the

factors in mitigation which are almost identical to those present in such

cases as Paulssen Guice Continental Forwarding H K International

and Eastern Forwarding cited above Finally it bears noting the par

ticular provisions of the settlement agreement requiring notification to

owners officers and employees of R L of the company s strict

policy against violations of U S law and the execution of statements

under oath by such persons binding them to this policy and to the

settlement agreement as well as the termination of the questionable

practices and remedial measures taken to prevent recurrence These

measures as well as the payment of 20 000 should work together to

provide the necessary deterrent effect

25 F M C

19
20 FEDERAL MARITIME COMMISSION

THE QUESTION OF FITNESS

The question of R Vs fitness to continue to operate under its

license without suspension or revocation now remains for determina

tion This issue has been included in this investigation by specific order

of the Commission which questioned whether R Vs license should

be suspended or revoked for wilful violations of the Shipping Act

1916 or such conduct as the Commission finds renders R L

unfit to carryon the business of forwarding Order of Investiga

tion and Hearing issue no 8 page 4 Under previous decisions ofthe

Commission it has been held that the question of fitness cannot be

settled by the parties See Kuehne Nagel Inc Independent Ocean

Freight Forwarder License No 1162 cited above 24 F MC at 335

Independent Freight Forwarder s License E L Mobley Inc Order 18

SRR 451 1978 See also Universal Transcontinental Corporation cited

above 24 F MC at 916 1982 Commission finds forwarder to be fit

on the basis ofthe record as a whole notwithstanding presiding officer s

termination of that issue upon approval of a settlement agreement

Both respondent and Hearing Counsel argue persuasively that revo

cation or suspension of R Vs ljcense would be a drastic sanction

without justification on the record Respondent which has not conced

ed that its conduct violated law among other reasons because of the

doubtful presence of knowledge and wil ulness cites the numerous

mitigating factors discussed above for example respondent s complete

cooperation with the Commission s staff and with Hearing Counsel its

furnishing of critical German consular documents not ordinarily avail

able to the Commission as well as its files in New York its unblemished

record since 1976 when it obtained its license its able service to the

American shipping public since that time its firm commitment to abide

by U S law and the innocence of its 30 odd employees virtually all of

whom were not even aware of the alleged violations Respondent s

Memorandum p10 Respondent cites previous decisions ofthe Com

mission such as E Allen Brown 22 F MC 583 ID adopted in rele

vant part March 24 1980 Delmar Shipping Corporation 8 F MC 493

497 1965 and E L Mobley Inc cited above 21 F MC 845 1979

in which the Commission showed great sensitivity to saving jobs of

forwarders that had been in business for a number of years and in

fashioning reasonable remedies short of revocation or suspension of

licenses Hearing Counsel cite similar factors in mitigation such as R

Vs cooperation and voluntary termination of the allegedly unlawful

conduct cite similar case law showing that the Commission considers

the freight forwarder law to be remedial not punitive and accordingly

seeks to fashion reasonable not draconian sanctions when such are not

necessary to achieve regulatory purposes and Hearing Counsel assert

that there is strong evidence to demonstrate that R L intends to

comply with the shipping laws and regulations and seeks to prevent the

25 F MC
ROHDE LIESENFELD INC

recurrence ofpast activities in question Hearing Counsel s Memoran

dum p 17 I

agree with both parties that revocation or suspension is

totally unnecessary and completely unsupported by this record and

furthermore on the basis of the record and R Ls firm commitments

to prevent future violations of law I

find R L to be fit to retain its

license as the Commission found the forwarder in Universal Transconti

nental Corporation cited above 24 F MC 911

It is true as both parties contend that the Commission seeks to

fashion reasonable remedies and does not merely issue draconian de

crees ofrevocation or suspension when such are unnecessary to achieve

regulatory purposes Moreover the Commission has avoided such dras

tic sanctions even when the record shows as it does not here that

there have clearly been wilful violations oflaw The Commission seems

more concerned that it has evidence that a forwarder can be trusted in

its future business behavior to adhere to all requirements oflaw and the

Commission s

regulations These principles and supporting case cita

tions are discussed in Kuehne Nagel Inc cited above 24 F MC at

355 340 see also Behring International Inc cited above 23 F MC at

990 E Allen Brown cited above 22 F M C at 596 E L Mobley cited

above 21 F MC at 847 Harry Kaufman D B A International Shippers

Co of N Y etc 16 F MC 256 271 1973 Independent Ocean Freight

Forwarder License Application Guy G Sorrentino 15 F MC 127 134

136 1972 The present record as the parties indicate contains virtual

ly all of the evidence necessary to find R L fit in cases of this type

for example R L s termination of the questionable practices long

before this case began its cooperation with the Commission s staff its

unblemished record and its firm commitment to abide by U S law with

specific remedial action and controls To such evidence of good faith

intentions to comply with law coupled with specific remedial action

the Commission has previously responded with restraint and has re

frained from invoking the extreme sanction of revocation or suspension

See e g

Kuehne Nagel Inc cited above 24 F MC at 340 341

Universal Transcontinental Corporation cited above 24 F MC at 915

916 In the last cited case furthermore the Commission found the

forwarder to be fit after considering a record which showed no clear

cut violations no harm to shippers voluntary termination of the ques

tionable practices some time before the proceeding began and the

forwarder s commitment to prevent recurrence of such practices In

these regards the Commission stated

Finally there is no evidence in the record of this proceeding

which would call into question Respondent s continued fitness

to be licensed as an ocean freight forwarder The compensa

tion practices at issue have not in this case been held to

constitute a violation of the Shipping Act 1916 or any Com

mission rule Moreover there is no indication that UTC other

25 FMC

21
22 FEDERAL MARITIME COMMISSION

wise violated the Act by passing on any compensation re

ceived to its shipper clients or by entering into any unap

proved section 15 agreements with the involved carriers Nor

does the record indicate that Respondent engaged in any con

duct inconsistent with its fiduciary responsibility to its shipper

clients On the other hand Respondent did terminate the prac

tices prior to the institution of this proceeding and agreed to

implement certain internal controls to preclude their recur

rence Accordingly the Commission finds that UTC remains

fit to be licensed as an independent ocean freight forwarder

Similarly Ifind on this record that R L is fit to retain its license

ULTIMATE CONCLUSIONS

Ifind that the proposed settlement agreement which respondent and

Hearing Counsel have negotiated is fair and reasonable comports with

previously enunciated standards of law and should be approved The

record does show that during th period 1976 1978 R L was in

volved in forwarding 48 shipments of mixed commodities to Hamburg

and Bremerhaven Germany which were mistakenly shown as bound

for Kiel on the bills of lading and in understating measurements of

cargo for 11 shipments of fiberglass boats to Hamburg or Antwerp

and for 5 shipments of cotton gin machinery to Paraguay and that as a

result of these misstatements and misdeclarations considerable reduc

tions in freight wererealized However the record also shows that R

L may not have been aware ofthe true routing in Europe i e that the

48 shipments were actually to be discharged at Bremerhaven and Ham

burg without transshipment to Kiel since its parent R L GMBH

located in Germany had arranged for the discharge in cooperation

with the ocean carrier involved as permitted by German law Further

more the understatements on the 11 shipments of boats appear to have

been made by a lower level employee no longer with R L at the

behest ofthe ocean carrier involved without the knowledge or permis

sion of R Ls management Finally R L appears to have changed

the measurement figures furnished by the exporter for the 5 shipments

ofmachinery in an effort to correct obviously inaccurate figures rather

than to cheat the ocean carriers involved Although R L might still

have been found to have violated section 16 Initial Paragraph of the

Shipping Act 1916 and 46 C F R 510 23 d notwithstanding the above

facts and defenses it is not clear that it would be so found after a full

trial type hearing nor that all these defenses are invalid under the

present state of the law Rather than consume time and money in

litigation with significant risks and doubts the parties have formulated

a settlement agreement which would deter recurrence ofthe question

able practices and which fully considers not only the risks oflitigation

but various mitigating factors

2S FMC
ROHDE LIESENFELD INC 23

This record will not support the drastic sanction of revocation or

suspension of R Ls license The record rather supports the finding

that R L is fit to retain its license since it shows such facts as R

Ls termination of the questionable practices long before this proceed

ing began full cooperation with the Commission s staff and Hearing

Counsel firm commitments to prevent recurrence of such practices

and shows an otherwise unblemished record of service since 1976 when

R L obtained its license Furthermore there is no evidence of harm

to shippers of direct and substantial financial benefit to R L as a

result ofthe questionable conduct or offraudulent conduct or behavior

stemming from moral turpitude on the part of R L In similar cases

with similar records the Commission has fOl 1nd that such factors war

rant a

finding of fitness

8 NORMAN D KLINE

Administrative Law Judge

25 F M C
24 FEDERAL MARITIME COMMISSION

APPENDIX

BEFORE THE FEDERAL MARITIME COMMISSION

1

ROHDE LIESENFELD INC

INDEPENDENT OCEAN FREIGHT

FORWARDER NO 1832

DOCKET NO 81 65

i

PROPOSED SEITLEMENT OF CIVIL PENALTIES

The Proposed Settlement has been entered into between the Bureau

of Hearings and Field Operations Hearing Counsel and Respondent

Rohde Liesenfeld Inc Rohde Liesenfeld It is submitted to the

presiding Administrative Law Judge for approval pursuant to Rule 162

of the Commission s Rules of Practice and Procedure 46 C F R

502 162 and section 505 3 of the Commission s General Order 30 46

C F R 505 3

WHEREAS by Order of Investigation and Hearing served October

8 1981 the Commission instituted the present Investigation to deter

mine whether Rohde Liesenfeld has violated section 16 Initial Para

graph of the Shipping Act 1916 46 U S C 815 and section

5l0 23 d ofthe Commission s General Order 4 46 C F R 51O 23 d

during the period December 5 1976 to November 8 1978 and whereas

that Order includes the issue of whether civil penalties should be

assessed for any violations of section 16 Initial Paragraph of the Ship

ping Act 1916 and section 5l0 23 d of the Commission s General

Order 4so found

WHEREAS the Order of Investigation and Hearing alleges that

Rohde Liesenfeld may have violated section 16 Initial Paragraph of

the Shipping Act 1916 and section 51O 23 d of the Commission s

General Order 4

WHEREAS Rohde Liesenfeld has admitted that it has engaged in

specified conduct which may be violative of section 16 of the Shipping

Act 1916 and section 5l0 23 d of the Commission s General Order 4

WHEREAS Rohde Liesenfeld has terminated the allegedly viola

tive conduct and has indicated its willingness and commitment to coop

erate with the Commission and maintain measures designed to elimi

nate discourage and prevent such conduct in the future

WHEREAS the parties in order to avoid the delays and expense

that would be occasioned by further litigation ofthe issues specified in

2S FMC
ROHDE LIESENFELD INC

the Order of Investigation and Hearing are desirous of settling expedi

tiously the issues of alleged violations and civil penalties in accordance

with the terms and conditions of thisAgreement and

WHEREAS section 32 e of the Shipping Act 1916 46 V S C

831 e authorizes the Commission to assess or compromise all civil

penalty claims under the Shipping Act 1916

NOW THEREFORE in consideration of the premises set forth

herein and in compromise of all civil penalty claims arising from

violations of the Act and General Order 4 as set forth in the factual

record submitted in the present proceeding and as set forth and de

scribed in the October 8 1982 Order ofInvestigation and Hearing that

the Commission believes may have been committed during the period

December 5 1976 through November 8 1978 Rohde Liesenfeld

agrees as a condition of this Agreement to comply with all require

ments set forth hereinafter subject to the stipulations conditions and

terms of settlement contained herein

1 Rohde Liesenfeld hereby agrees as a condition of this Agree

ment to pay to the Federal Maritime Commission the monetary

amount of Twenty Thousand Dollars 20 000 within thirty 30 days

following approval by the Commission of this Proposed Settlement of

Civil Penalties

2 Rohde Liesenfeld has terminated all practices such as those

described in the Commission s October 8 1981 Order of Investigation

and Hearing and has informed all of its owners officers and employees

and the owners officers and employees of all ofits parents subsidiaries

and affiliates in writing that such practices and all practices not in

accordance with the provisions of the Shipping Act 1916 and the

Commission s Rules and Regulations now in force or that may be

adopted are contrary to Rohde Liesenfeld s company policy must

be terminated immediately and must not be engaged in at any time

3 Respondent will within thirty 30 days following final approval

of this Proposed Settlement furnish acopy of Exhibit A attached

thereto to all its owners officers and employees and to all the owners

officers and employees of its parents subsidiaries and affiliates Re

spondent will furnish a

copy hereof to all future such owners officers

and employees for a period of three years following final Commission

approval ofthis Settlement

4 Rohde Liesenfeld will institute and has indicated its willingness

to maintain all reasonable measures designed to discourage prevent

and eliminate the conduct that may be violative of section 16 Initial

Paragraph of the Shipping Act 1916 and section 51O 23 d of the

Commission s General Order 4

5 Within thirty 30 days following final approval of this Proposed

Settlement each ofRohde Liesenfeld s owners officers and qualify

ing officer will execute a statement under oath that he she has read and

25 F M C

25
26 FEDERAL MARITIME COMMISSION

understood this Agreement and that helshe will abide by all of its

terms and conditions with respect to the termination ofthe practices set

forth and described in the factual record submitted in the present

proceeding For a period ofthree years following Commission approval

of this Settlement all future such officers owners and qualifying offi

cers will execute such statement under oath These statements will be

submitted promptly to the Secretary Federal Maritime Commission

The form ofthis statement is attached hereto as Exhibit B

6 Rohde Liesenfeld hereby agrees as a condition of this Agree

ment that if it breaches this Agreement it will not interpose the

Statute of Limitations as a bar or a defense in any action or proceeding

instituted prior to August 1 1985 by or on behalf ofthe Commission to

recover civil penalties for violations of section 16 Initial Paragraph of

the Shipping Act 1916 and of violations of the Commission s General

Order 4 arising out of the conduct set forth in the factual record

submitted in the instant proceeding In the event of such a breach by

Rohde Liesenfeld if such noncompliance shall not have been cured

or explained to the Commission s satisfaction within thirty 30 days

after written notice to Rohde Liesenfeld by the Commission the

Commission shall have the option to seek enforcement of all terms and

conditions of this Agreement or to declare this Agreement null and

void provided however that Rohde Liesenfeld s waiver of the

Statute of Limitations under this paragraph shall remain in full force

and effect In the event the Commission declares this Agreement null

and void and such determination is not reversed by a court of compe

tent jurisdiction any monies paid to the Commission shall remain the

property of the United States and Rohde Liesenfeld will not inter

pose any defense based on the Statute of Limitations in any action

which the Commission may institute to recover civil penalties arising

out of the conduct set forth in the factual record submitted in the

present proceeding

7 It is expressly understood and agreed that this Agreement and final

approval hereof is not to be construed as an admission by Rohde

Liesenfeld or its owners officers directors employees or affiliates of

the violations alleged in the Order of Investigation and Hearing by

which this proceeding was instituted

8 Rohde Liesenfeld acknowledges that it has voluntarily signed

this Agreement and states that no promises or representations have

been made to it other than the agreements and consideration herein

expressed

9 Insofar as this Proposed Settlement may be inconsistent with

Commission procedures for compromise and settlement of violations as

set out at 46 C F R 50S the parties hereby waive application of such

procedures

25 F MC
ROHDE LIESENFELD INC 27

10 The undersigned represents that he she is properly authorized

and empowered to execute this Agreement on behalf of Rohde

Liesenfeld and to fully bind Rohde Liesenfeld to all ofthe terms and

conditions set forth herein

Rohde Liesenfeld Inc

By S Klaus Stankowitz

Title Vice President

S JOHN ROBERT EWERS

Director

Bureau of Hearings and Field

Operations

S JOSEPH B SLUNT

Chief

Office ofHearing Counsel

S DEANA E ROSE

Hearing Counsel

April 23 1982

25 F M C
28 FEDERAL MARITIME COMMISSION

EXHIBIT Ato Proposed Settlement Agreement in Docket No 81 65

ROHDE LIESENFELD INC

NOTICE

This is to notify you that it is the policy of this company to strictly

adhere to the duties and obligations of a licensed freight forwarder as

prescribed by the U S Federal Maritime Commission

This means that this company its owners officers and employees

will familiarize themselves with applicable provisions of the U S Ship

ping Act 1916 46 U S C 801 et seq and any subsequent amend

ments thereto and Federal Maritime Commission General Order 4 46

C F R Title 510 and will abide completely by these provisions Your

attention is directed to the following particular provisions to which

strict adherence is required

1 Give correct information to ocean carriers regarding the

weight measurement and destination of shipments in connec

tion with forwarding transactions

2 Do not obtain transportation at other than applicable rates

3 Seek diligently to ascertain from the supplier before exporta

tion accurate information as to the actual measurement of

each shipment where a question has arisen as to the actual

measurement and decline from handling such shipment if

Rohde Liesenfeld is unable to confirm the correct measure

ment prior to the ocean transportation

4 Do not seek a freight rate which is not provided in the

carrier s tariff

The foregoing list of freight forwarder duties and obligations is for

example only and you are directed to adhere to all other obligations of

the Shipping Act 1916 and General Order 4

Please sign the attached copy of this notice in the space provided

and return it within two days to Rohde Liesenfeld Inc One World

Trade Center New York New York

25 F MC
ROHDE LIESENFELD INC 29

I hereby acknowledge that Ihave read the

foregoing notice and agree to adhere to it completely

8

Signature

Title

Office

Date

25 F M C
30 FEDERAL MARITIME COMMISSION

i

EXHIBIT B to Proposed Settlement Agreement in Docket No 81

65

AFFIDAVIT

I

1 Iam the

Inc with offices at

2 Ihave read and understood the settlement agreement entered into

between Rohde Liesenfeld Inc and Federal Maritime Commission

Bureau of Hearings and Field Operations in Commission Docket No

81 65

3 Iwill not engage in and will instruct those under my supervision

to not engage in any practices which would violate the U S Shipping

Act 1916 46 U S C 801 et seq and Federal Maritime Commission

General Order 4 46 C F R Title 510 both of which Ihave read and

with which Ihave become familiar

4 Iwill strictly abide by all provisions of the Shipping Act 1916

and General Order 4 and will instruct those under my supervision to

do the same

5 Iunderstand that I am signing this affidavit under oath and that

any false statement herein could subject me to possible criminal penal

ties

hereby depose and state as follows

ofRohde Liesenfeld

S

Sworn to before me a Notary Public

this day of 19

S

Notary Public

My Commission Expires

Seal

2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 11

JOHNSON JOHNSON INTERNATIONAL

v

ECUADORIAN LINE INC

NOTICE

July 19 1982

Notice is given that no exceptions have been filed to the June 7 1982

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

Commission could determine to review has expired No such determi

nation has been made and accordingly that decision has become admin

istratively final

25 F M C 31

8 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 82 11

JOHNSON JOHNSON INTERNATIONAL

v

ECUADORIAN LINE INC

Five shipments of polyethylene film improperly classified as Cargo N D S Reparation

awarded

AxelO Velden and Harold Clevell for complainant

Paul G Kirchner for respondent

INITIALDECISION 1 OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Finalized July 19 1982

Johnson Johnson International accuses Ecuadorian Line ofimprop

erly classifying five shipments of polyethylene film as Cargo N O S

and seeks 20 822 64 in reparation for the overcharges resulting from

the alleged misclassification

Johnson Johnson asked that the case be handled under the short

ened procedure of Subpart K of the Commission s Rules of Practice

and Procedure and attached to its complaint a brief and supporting

documents The use ofthe shortened procedure is conditioned upon the

consent of the respondent However Ecuadorian Line in its answer to

the complaint stated that Ecuadorian Line does not at this time

consent to the shortened procedure In response to an order calling

upon respondent to either consent to the shortened procedure or state

its unqualified refusal to do so respondent agreed to the shortened

procedure and filed its answering memorandum pursuant to the sched

ule established by my order of March 12 1982 On April 27 1982

Johnson Johnson filed a Reply of Johnson Johnson International

to the Motion of Ecuadorian Line dated April 9 1982 The document

to which Johnson Johnson s Reply was addressed was actually the

respondent s Answering Memorandum of Fact and Argument which

ended with a more or less pro forma motion to dismiss Ecuadorian

Line has now filed a motion to strike the reply and dismiss the proceed

ing Under the schedule mentioned above Johnson Johnson s

reply

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

Commission Rule 227 Rules of Practice and Procedure 46 CF R 02 227

32 2S FMC
JOHNSON JOHNSON INT L V ECUADORIAN LINE INC 33

should have been filed on April 19 1982 but was not served until April

26 1982 Respondent while recognizing that reparation proceedings

should not be overburdened with legal technicalities or procedural

niceties urges that the gross failure of Johnson Johnson to

comply with my order cannot reasonably be considered to involve a

mere legal technicality According to Ecuadorian Line The integrity

of the Commission s decision making process would be significantly

impaired if such orders could be disregarded at the whim ofthe parties

involved in these proceedings Johnson Johnson by telex expresses

its regret at filing its reply seven days late and asks that the motion to

dismiss be denied and the matter settled on its merits

While the delay in filing the reply may not be a mere legal technical

ity whatever that may mean I do not find that excusing it will

significantly impair the Commission s decision making processes The

motion to dismiss is denied

The facts giving rise to Johnson Johnson s claim for reparation are

few and undisputed The bills of lading covering the five shipments

described the commodity shipped as polyethylene film Ecuadorian

Line rated the shipments as Cargo N O S because the tariff 2

contained

no rate for polyethylene film

Subsequently Ocean Freight Consultants on behalf of the complain

ant filed claims for overcharges with respondent on the basis that the

shipments should have been classified as Film viz Cellulose Cello

phane or Resinous Film Products viz in sheets sheeting or rolls not

adhesive or gummed The claims were rejected on the ground that the

N O S classification was the correct one and ultimately this complaint

was filed

The single issue presented 3is whether polyethylene film is included

within the description Film viz Cellulose Cellophane or Resinous

Film Products Complainant asserts that polyethylene and resin

ous film are synonymous while respondent says that they are separate

and distinct articles Both rely on dictionary definitions to support their

disparate conclusions

In its opening memorandum complainant s argument consisted of

reliance upon a dictionary definition on page 759 which stated Pol

yethylene is a semi transparent film and the white leathery resinous

form are sic by far the most common

4

To complainant this makes

polyethylene film and resinous film synonymous and dictates the appli

cation of the Film classification to the five shipments

2

Freight Tariff FMC No 2 Atlantic Gulf West Coast of South America Conference

S

The issue of whetherJohnson Johnson had actually paid the freight and thus had standing was

rendered moot by the submission of cancelled checks showing payment of the freight

4

The dictionary was unidentified in the opening memorandum it was identified in complainant s

reply as the Condensed Chemical Dictionary Eighth Edition

25 F M C
34 FEDERAL MARITIME COMMISSION

The respondent however relies upon the New Webster s Encyclopedic

Dictionary of the English Language which at page 716 defines resin as

a flammable substance of sundry varieties found in most plants and

often obtained by spontaneous exudation From this and other defini

tions respondent feels that it is clear that resin in its usual and

ordinary meaning refers to a substance derived from plants Respond

ent then offers a string ofdefinitions which it says shows the difference

between resinous film products and polyethylene film Polyethylene is

defined as a polymer ofethylene New Webster s Encyclopedic Diction

ary page 643 and polymerization is defined by the Condensed Chem

ical Dictionary at page 710 as a chemical reaction usually carried out

with a catalyst heat or light in which two or more relatively simple

molecules monomers combine to form a chainlike macromolecule or

polymer Finally ethylene is defined as a colorless highly flammable

gas found in coal gas Condensed Chemical Dictionary page 301 note

4 From all of this respondent concludes that far from being synony

mous polyethylene and resinous film are distinct and cannot be cov

ered by the same classification ie polyethylene is not derived from

plant exudation and therefore it cannot be described as a resinous

product Complainant finds respondent s reliance on resin s origin from

plant exudation as misplaced because resin is also synthetically pro

duced 6

The arguments would end here were it not for respondent s conten

tion that this battle of the dictionaries is both unnecessary and of

questionable relevance because tariff terms and commodity de

scriptions are to be construed in the sense in which they are generally

understood and commercially available Having said this however

respondent s entire support for its idea of the generally understood

meaning ofpolyethylene is found in the following

In this case even complainant must admit that polyethylene

is commonly known identified and described simply as poly

ethylene It is extremely doubtful that anyone even remotely

familiar with polyethylene would ever describe it as a resinous

film Indeed complainant refused to identify it as resinous film

on the bills of lading subsequent to being put on notice that

Ecuadorian would not accept the assertion of OFC Ocean

Freight Consultants that polyethylene should be interpreted

6

Respondent also cites the following If

Any of various solid or semisolid amorphous fusible flam

mable natural organic substances that are usually transparent or translucent and yellowish to brown

are formed especially in plant secretions It Webster s New Collegiate Dictionary 8th Edition 1980

at 977 Any of various solid orsemisolid viscous usually clearortranslucent yellowish orbrownish

organic substances exuded from various plants and trees Webster s New World Dict onary of the

American Language 2nd Edilion 1970 011210

8

Complainant also alludes to the fact that other carriers have classified polyethylene as resinous

film This however neither proves nor disproves the validity of those classifications and certainly

does not resolve the dispute here

2S F MC
JOHNSON JOHNSON INT L V ECUADORIAN LINE INC 35

and considered a resinous film product so as to receive the

lower freight rate for that classification 7

Complainant must

have been uncomfortable with the idea of describing a com

modity that is universally recognized as polyethylene as some

thing else in order to get a lower rate

Unfortunately this falls considerably short of establishing that the rele

vant segment of the commercial population calls polyethylene simply

polyethylene and nothing else Complainant seems to feel that respond

ent may be biased and not really conversant with the many and varied

facets of polyethylene because it is clear to complainant that not only

those remotely familiar with polyethylene and with an objective mind

can see that polyethylene and resinous film are the same but this is

widely recognized by other steamship conferences Complainant uses

several commodity classifications from other tariffs to show that other

conferences share its views on polyethylene

One example offered by complainant is that of Inter American

Freight Conference the tariff of which contains the classification

Film Transparent Cellulose or Resinous Another is found in the

Atlantic Gulf West Coast ofSouth America Conference tariff which

lists Film viz Cellulose Cellophane or Resinous Film Products

viz Moving Picture Photographic or X Ray Complainant also

offers the tariff of the North Atlantic Baltic Freight Conference which

has a commodity description Sheets or Film Plastic or Resin

ous

From these examples complainant argues that It can be seen

that film cellulose resinous plastic and polyethylene are treated so far

as tariff classification and construction are concerned on the same rate

level Hence it goes without saying that they must be synonymous

Complainant s hence is ill used here for it simply does not follow

from the stated facts that resinous film and polyethylene film are

synonymous ie that they have the same or nearly the same meaning

The reasoning is circular at best None of the cited examples contains

polyethylene so complainant must necessarily begin with the very

proposition it wants to establish that polyethylene and resinous are

synonymous More importantly complainant simply states that polyeth

ylene cellulose and resinous film are treated the same for classification

or rate purposes It offers not a single instance of an actual shipment

which was treated this way A

degree of emphasis is placed on the

North Atlantic Baltic Freight Conference Tariff which includes plas

tic film in its classification About this complainant says that

7

There is some dispute as to the sequence of events and in view of this respondent s refusal to

change its description of the commodity on the bill of lading is irrelevant to the issue of the proper

classification

25 FMC
36 FEDERAL MARITIME COMMISSION

Polyethylene is a kind of plastic is plainly defined in the

condensed chemical dictionary page 690 1

1 Plastic in general including all forms are sensitive to

high temperatures among the more resistant being fluorcarben

resins nylon phenolics polyamides and silicones though

even these soften or melt above 500 F Other types are com

bustible which sic exlosed to flame for a short time polyeth

ylene acrylic Emphasis complainant s

Unfortunately for complainant the ground for the inclusion ofpoly

ethylene in this description is found in the presence of the word

plastic a word notable in respondent s tariff only for its absence

Complainant has shown only that other conferences have commodity

classifications the same as or similar to respondent s It has not shown

that these conferences routinely include polyethylene film within those

commodity descriptions Complainant has simply failed to establish that

those remotely familiar with polyethylene can see that polyethylene

film and resinous film are synonymous that this is theoway polyethyl

ene is commonly known in the commercial world From all this it

seems that resort to the battle ofthe dictionaries is indeed necessary

In the final analysis complainant s case rests upon the seemingly

slender thread of Condensed Chemical Dictionary s discussion of the

characteristics of polyethylene and here complainant does not do itself

justice in presenting its case Its entire argument on this head consists of

two statements

As per dictionary definition on page 759 copy attached Pol

yethylene is a semi transparent film and the white leathery

resinous form are sic by far the most common The definition

goes on to say that polyethylene is the high molecular weight

materials sic are tough white leathery resinous materials

The term polyethylene usually refers to the latter Emphasis

complainant s Opening memorandum Brief

As stated in our complaint the dictionary clearly defines

polyethylene as a semi transparent film and the white leath

ery resinous form are sic by far the most common The

definition goes on to say that polyethylene is the high molecu

lar weight materials sic are tough white leathery resinous

materials The term polyethylene usually refers to the latter

Emphasis complainant s Reply page 1

Aside from playing fast and loose with quotation marks complainant

has the disconcerting habit ofcombining or reordering various portions

ofthe definition without any real indication that it is doing so

The opening definition of polyethylene as found on page 759 of the

Condensed Chemical Dictionary is

25 F M C
JOHNSON JOHNSON INT LV ECUADORIAN LINE INC 37

Polymerized ethylene available in various forms but the semi

transparent films and the white leathery resinous form are by

far the most common

The definition then deals with the three weights of polyethylene low

medium and high and as to the latter it states The high molecular

weight materials molecular weight greater than 600 are tough white

leathery resinous materials The term polyethylene usually refers to the

latter ie the high weight molecular materials as distinguished from

the low weight polymers which are high grade lubricating oils and the

medium weight polymers which are waxy materials miscible with

paraffin

The immediate difficulty with the precise definition in Condensed

Chemical Dictionary is the distinction it seems to make between the two

most common forms of polyethylene the semi transparent film and

the white leathery resinous form The inference to be drawn from

this would seem to be that whatever the semi transparent film may

be it is not resinous However having made this distinction the

definition later seems to abolish it when under the heading Proper

ties the author ofthe definition uses the term these resins to refer to

all of the low and medium weight polymers and the high weight

molecular materials From this it would appear that all polyethylene

contain resins albeit synthetic and therefore polyethylene can be

deemed resinous

The respondent would as already noted restrict Resinous Film

Products to substances derived from plants and would exclude

polyethylene from various resinous products in that it inter alia is not

derived from plant secretions Respondent however conveniently ex

cludes a portion ofthe standard definition of resin

Resin l a

any of various hard brittle solid to soft semi solid

amorphous fusible flammable substances as amber copals

dammars mastic guaiacum that are usu transparent or trans

lucent and yellowish to brown in color with a characteristic

luster that are formed esp in plant secretions 2 a any of

a

large class of synthetic products as alkyd resins orphenolic

resins usu of high molecular weight that have some of the

physical properties of natural resins but typically are very

different chemically that may be thermoplastic or thermoset

ting that are made by polymerization or condensation and

that are used chiefly as plastics Webster s Third Interna

tional Dictionary

Thus resin can be prepared synthetically 8

and its meaning is not

confined to plant secretions Moreover in its attempt to exclude poly

8

The World Book Dictionary defines resin as including any of alarge group of resinlike substances

that are made artificially and are used especially in making plastics

25 F M C
38 FEDERAL MARITIME COMMISSION

ethylene respondent states that New Webster s Encyclopedic Dictionary

of the English Language defines polyethylene as a polymer of ethyl

ene and then launches into a description of polymerization to show

that polyethylene is the result of a chemical process not plant exuda

tion all of which is true as far as it goes Polyethylene however is

further defined as a polymer of ethylene one of a group of partially

crystalline light weight thermoplastics Emphasis mine

From the foregoing it is my conclusion that the five shipments

should have been classified as Film Cellulose Cellophane or Resinous

Film Products etc Resin must be read as including resins produced

synthetically Synthetic resins include thermoplastics and polyethyl

ene is a thermoplastic Resinous means having the nature or charac

teristic ofor like resin and should be read to cover the synthetic resin

polyethylene The application of the classification Cargo N D S to the

five shipments ofpolyethylene film was improper under section 18b 3

ofthe Shipping Act 1916 46 U S C 817 b 3 Complainant is award

ed reparation in the amount of 20 822 64 with interest to be computed

under Rule 253 of the Commission s Rules of Practice and Procedure

46 C F R 502 253

S JOHN E COGRAVE

Administrative Law Judge

2S FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 42

RAMON ARGUELLES AND RAMON E ARGUELLES D B A

MIAMI CARGO

SERVICES FMC INDEPENDENT OCEAN FREIGHT

FORWARDER

LICENSE NO 1464

NOTICE

July 29 1982

Notice is given that no exceptions have been filed to the June 21

1982 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

25 F M C 39

8 FRANCIS C HURNEY

Secretary
FEDERAL MARITIME COMMISSION

DOCKET NO 81 42

RAMON ARGUELLES AND RAMON E ARGUELLES

D B A MIAMI CARGO SERVICES FMC INDEPENDENT

OCEAN FREIGHT FORWARDER LICENSE NO 1464

I

I

i

Held

1 Where the respondent improperly acted as an ocean freight forwarder whileits license

was revoked for failing to file a

required security bond and where the respondent

issued invoices to its customers billing them for cartage and local insurance without

performing any services or placing any insurance and where the respondent issued

invoices which co mingled various components of insurance and accessorial charges

and invoiced clients for more than the actual cost of the insurance and added other

expenses to the insurance charges and where the respondent entered into a scheme

with a carrier whereby it overcharged the shipper and then paid the overcharge to

selected individuals in the form of kickbacks after the carrier made an over

charge correction in a like amount a settlement of 53S 000 00 is just and proper

Such a

penalty recognizes the seriousness of the possible violations of the Shipping

Act and the Commission s Rules and Regulations and gives due consideration to

mitigating circumstances It is within that reasonable area of settlement and compro

mise which lends itself to the deterrence of future similar conduct by the respondent

and others so inclined and which will secure compliance with the law and the

Commission s rules and policies

2 Where the respondent freight forwarder engaged in various practices not knowing or

believing they were serious violations and where he now recognizes their serious

ness and where the respondent has demonstrated he is able and willing to carryon

the business in accordance with the pertinent law and regulations and has sworn to

do so in the future it is held he is tit to carryon such a business and his license

need not now be suspended or revoked

Irving Schulman for respondent

Alan Jacobson as Hearing Counsel

i

I

INITIAL DECISION 1 OF JOSEPH N INGOLIA

ADMINISTRATIVE LAW JUDGE

Finalized July 29 1982

PRELIMINARY MATTERS

By Order of Investigation dated July 1 1981 the Commission or

dered that pursuant to sections 22 32 and 44 of the Shipping Act 1916

a proceeding be instituted to determine

1

This decision will become the decision of the Commi88ion in the absence of review thereof by the

Commission Rule 227 Rules of Prsctice and Procedure 46 CF R 02 227

40 2S F MC
RAMON ARGUELLES ETAL 41

1 Whether Ramon Arguelles and Ramon E Arguelles

db a Miami Cargo Services violated section 44 a of the

Shipping Act 1916 and section 510 3 of the Commission s

General Order 4 46 CF R 510 3 by carrying on the business

of forwarding without a license

2 Whether Ramon Arguelles and Ramon E Arguelles

db a Miami Cargo Services violated sections 51O 23 d

51O 23 e and 510 230 of General Order 4 by incorrectly

invoicing shippers for the cost of cargo insurance and accesso

rial services during the months of October and November

1978 and April 1979

3 Whether Ramon Arguelles and Ramon E Arguelles

dba Miami Cargo Services violated section 51O 23 fofGen

eral Order 4 by failing to account to its principals for overpay

ments reductions in rates insurance refunds and other sums in

April and May 1979

4 Whether civil penalties should be assessed against Ramon

Arguelles and Ramon E Arguelles dba Miami Cargo Serv

ices pursuant to section 32 e of the Shipping Act 1916 for

violations of section 44 of the Shipping Act 1916 or sections

51O 23 d 51O 23 e 51O 23 fand 51O 23jof the Commis

sion s General Order 4 and if so the amount of such penalty

and

5 Whether the independent ocean freight forwarder license

of Ramon Arguelles and Ramon E Arguelles db a Miami

Cargo Services should be suspended or revoked pursuant to

section 44 d ofthe Shipping Act 1916 for

a willful violations of section 44 of the Shipping Act 1916

or willful violations of the Commission s General Order 4 as

listed in subparagraph 4 above or

b such conduct as the Commission shall find renders

Ramon Arguelles and Ramon E Arguelles db a Miami

Cargo Services unfit to carryon the business for forwarding

in accordance with section 51O 9 e of General Order 4

As a result of the above Order the parties submitted a joint stipula

tion of facts and a proposed settlement of civil penalties In addition

testimony was taken regarding the imposition of civil penalties as well

as to whether or not the respondent was fit to continue as a licensed

ocean freight forwarder

STIPULATION OF FACTS

1 Miami Cargo Services hereinafter referred to as MCS is located

at 3050 Biscayne Boulevard Suite 306 Miami Florida and is an inde

pendent ocean freight forwarder operating under FMC License No

1464 R which was transferred to it on May 3 1976 Stip para 1

2 Prior to May 3 1976 Ramon Arguelles dba Miami Cargo Serv

ices as a sole proprietor operated as an independent ocean freight

25 FMC
42 FEDERAL MARITIME COMMISSION

forwarder under FMC License No 1464 issued on March 26 1973

Stip para 2

3 MCS is a partnership composed of Ramon and Ramon E Ar

guelles both of whom are certified as qualifying officers Ramon has

not been active in MCS for several years and Ramon E as senior

partner has been running the firm Stip para 3

4 In the latter part of 1978 the FMC increased the surety bond

needed by a licensed independent ocean freight forwarder from

10 000 00 to 30 000 00 MCS failed to file the necessary surety bond

and on December 2 1978 its license was revoked Stip para 4

5 MCS obtained the required surety bond on January 24 1979 so

notified the Commission and was reissued License No 1464 R effec

tive April 12 1979 Stip para 5

6 From December 2 1978 through April 11 1979 MCS dispatched

584 shipments on behalf of others by oceangoing common carriers in

the foreign commerce ofthe United States During this period MCS s

senior partner believed that all shipments were covered by the surety

bond issued on January 24 1979 and that the license had been reinstat

ed Stip para 6 Tr pp 18 19

7 Prior to October 1979 MCS issued invoices to customers which

did not state separately the insured value insurance rate and premium

cost the charge for each accessorial service including terminal charges

and the fee for arranging for insurance and or accessorial services The

senior officer ofMCS was not then aware that such separate statements

wererequired Stip para 7 Tr 23 25

8 On at least 55 shipments made during the months of October and

November 1978 and April 1979 MCS invoiced its clients for insur

ance and placement charges in an amount totalling 3 912 77 more

than the actual cost of the marine insurance MCS through its senior

officer was unaware that such a collective charge even though dis

closed was improper because it did not distinguish between insurance

policy premiums and handling charges Stip para 8

9 On 144 shipments made during the months of October and No

vember 1978 and April 1979 MCS invoiced its clients for insurance

charges which were never reported or paid to the insurance carrier In

one instance when a claim occurred for goods valued at 13 00000

MCS reimbursed the shipper in full even though it did not receive an

insurance reimbursement itself When the irregularities in reporting

proper insurance premiums were called to the attention of MCS they

were immediately corrected Stip para 10 Tr 22 27

10 On 108 shipments dispatched during the months of October and

November 1978 and April 1979 MCS invoiced its clients for cartage

and local insurance totalling at least 3 397 50 The money was used

by MCS to pay fees to various persons referring business to MCS and

not to pay cartage and insurance costs Stip para 11

2S F MC
RAMON ARGUELLES ETAL

II On April 12 1979 MCS remitted the sum of 4 000 00 to Jose

Mora a partner of V E Inter American Sales V E The money

was actually a freight overcharge correction given MCS by the carrier

Maritimas Del Caribe Maritimas which was due MCS s principal

V E It was paid to Mr Mora instead of V E because he wanted

some cash in Miami that would not show up in his Venezuelan compa

ny Stip para 12 Tr 15 16

12 On May 31 1979 MCS received a credit from Marine Agency

Inc agents for Maritimas in the amount of 2 128 60 representing a

reduction in monies owed on a shipment made by MCS on behalf of

V E MCS applied this money as an insurance discount paid it to an

unidentified third party and failed to notify V E Stip para 13 Tr

16 17 29 30 31

13 On a shipment of 16 vehicles dispatched by MCS for Orlando

Auto Square moved by Maritimas in 1979 MCS collected the full

charges of 12 334 90 from the shipper In paying Maritimas through

its agent Marine Agency MCS paid the full charges less 1 600 00 On

May II 1979 MCS paid the 1 600 to Jose Carillo who was an officer

of the consignee ofthe shipment Stip para 14

14 On April 11 1979 MCS collected a total of 10 379 55 from J

M Hallet New Car Brokers for a shipment made on a Maritimas vessel

Included in the bills of lading charges was the sum of 859 60 for

special handling In paying the charges to Marine Agency acting as

agent for Maritimas MCS deducted the 859 60 and paid this amount

to one L Yanez Stip para 15

15 In 1979 MCS collected a total of 1 57180 from Maronne Ford

Inc for a shipment made on a Maritimas vessel Included in the bill of

lading charges was the sum of 200 00 for special handling In paying

the charges to Marine Agency MCS deducted the 200 00 and paid it

to Manuel Blanco Stip para 16

16 With respect to the transactions described in paragraphs 11

through 15 above the carrier Maritimas agreed to add an unwarranted

handling charge to the normal bill of lading so that it could later

issue a correction for that charge which would then enable MCS to

pay the monies to selected individuals Tr 16 17 29 30 31 32

17 In September 1979 FMC District Investigator Donald Butler

conducted a field review of MCS operations He advised Ramon E

Arguelles that MCS may have violated section 44 of the Shipping Act

as well as various provisions of General Order 4 Mr Arguelles stated

he would bring MCS into full compliance with Commission regulations

Mr Butler again reviewed MCS s operation in September of 1981

MCS no longer invoices clients for cartage and local insurance with

out performing such services Also it does not invoice clients for

insurance placement charges without placing the insurance Stip

paras 17 22

25 F MC

43
44 FEDERAL MARITIME COMMISSION

ULTIMATE FINDINGS OF FACT

18 The record in this proceeding justifies a settlement whereby the

respondent pays 35 000 00 to the Federal Maritime Commission Such

a settlement recognizes the seriousness of the alleged violations in

volved and takes into consideration relevant mitigating circumstances

and is within the parameters of that reasonable area of settlement and

compromise which lends itself to the deterrence of future similar con

duct by the respondent and others so inclined and which will secure

compliance with the law and the Commission s rules and practices

19 The respondents Ramon Arguelles and Ramon B Arguelles

dba MCS are fit to continue as licensed ocean freight forwarders

DISCUSSION AND CONCLUSIONS

1 Settlement ofCivil Penalties

It is well settled that the law generally as well as the Federal

Maritime Commission encourages settlements and that there is a pre

sumption that settlements are fair correct and valid Section 5b 1 of

the Administrative Procedure Act 5 VS C 554 c I provides

The agency shall give all interested parties opportunity for

1 The submission and consideration of facts arguments

offers of settlement or proposals of adjustments when time

the nature of the proceedings and the public interest permit

In Pennsylvania Gas Water Co v Federal Power Commission 463 F 2d

1242 1247 D C Cir 1972 the Court noting its legislative history 2

referred to the above provision as being ofthe greatest importance to

the functioning ofthe administrative process and stated

The whole purpose of the informal settlement provision is to

eliminate the need for often costly and lengthy formal hearings

in those cases where the parties are able to reach a result of

their own which the appropriate agency finds compatible with

the public interest

a

Senate Judiciary Comm Administrative Procedure Act Legislative History S Doc No 248

79th Cong 2d Sess 203 1945 In considering the settlement provision in S 7 79th Cong 1st Sess

1945 which ultimately became Section 554 c of the Administrative Procedure Act see note 5

supra the Senate Judiciary Committee stated

Subsection b now Section 554c of the Administrative Procedure Act provides that even

where formal hearing and decision procedures are available to parties the agencies and par

ties are authorized to undertake the informal selllement of cases in whole or in part before

undertaking the more formal hearing procedure Even courts through pretrial proceedings

dispose of much of their business in that fashion There is much more reason to do 80 in the

administrative process for informal procedures constitute the vast bulk of administrative ad

judication and are truly the life blood of the Administradve process The statutory rec

ognition of such informal methods should both strengthen the administrative arm and serve

to advise private parties that they may legitimately attempt to dispose of cases at least in part

through conferences agreements orstipulations It should be noted that the precise nature of

informal procedures is left to development by the agencies themselves

S Doc No 248 supra at 24

2S F MC
RAMON ARGUELLES ET AL

Further the Commission has by rule encouraged settlement 3

and has

often favorably looked upon them as a matter ofpolicy 4

As to the propriety of the settlement itself the parties propose that

MCS will pay the FMC 35 000 00 over a five year period In addition

MCS agrees to notify all of its owners directors and officers of the

terms of the agreement and most importantly has agreed to permit an

independent audit of its books and records over a four year period

with or without notice to MCS The audit will be furnished to the

FMC In determining whether or not the proposed settlement is fair

and reasonable and is in the public interest one must refer to the

settlement standards set forth in 4 C FR Parts 101 105 1980 which

are referred to in section 505 1 of the Commission s Rules and Regula

tions 46 C FR 505 1 1980 Those standards involve such criteria as

the cost ofcollecting the claim enforcement policy and litigative prob

abilities 4 C F R 103 1980 Embodied in these general standards are

more specific factors such as

I The nature and seriousness ofthe violations alleged

2 The amount of money generated through the allegedly viola

tive conduct

3 The distribution of monies generated through the violative

conduct

4 The cessation ofthe allegedly violative conduct and

5 The level ofcooperation provided

When one applies the above standards to the instant case there is

little question but that the alleged violations are serious First the

respondent engaged in business as an ocean freight forwarder without a

license Second it invoiced clients for insurance charges it never paid

and failed to separately state various charges on the invoices Third it

caused erroneous charges to be refunded from carriers so that the

monies could be used to pay kickbacks to various third parties All of

3

Rule 91 of the Commission s Rules of Practice and Procedure 46 cP R 502 91 provides in perti

nent part Where time the nature of the proceeding and the public interest permit an interested

parties shall have the opportunity for the submission and consideration of facts argument offers of

settlement orproposal of adjustment

See also Rule 505 46 CP R 505 where in General Order 30 the Commission provides for com

promise assessment settlement and collection of civil penalties under the Shipping Act 1916 and the

Intercoastal Shipping Act 1933 and the criterion contained in the government wide Standards for

the Compromise of Claims where in section 103 5 under the heading Enforcement Policy 4 CF R

103 5 it is stated that

Statutory penalties forfeitures or debts established as an aid to enforcement and to compel

compliance may be compromised pursuant to this part if the agency s enforcement policy in

terms of deterrence and securing compliance both present and future wi1l be adequately

served by acceptance of the sum to be agreed upon

4

See Perry Crane Service v Port of Houston Authority of Port of Houston Texas Approval of Settle

ment FMC Docket No 79 51 22 F M C 30 1979 Del Monte Corp v Matson Navigation Co Ap

proval ofSettlement FMC Docket No 79 11 22 F M C 364 1979 Merck Sharp Dohme v Atlantic

Lines 17 FMC 244 1973

25 FMC

45
46 FEDERAL MARITIME COMMISSION

I

f

these activities violate the Shipping Act and go beyond the point of

inadvertent error or indifference Rather they connote a purposefulness

that cannot be con 1oned or allowed to continue

On the other hand in mitigation it must be noted that even though

MCS operated without a license it did so at a time when the Commis

sion was changing its bonding requirements and actually had secured

the necessary bond for most of the period involved In addition while

the respondent engaged in prohibited activity in scores of transactions

the amounts of money involved were small Indeed if one counts the

insurance damage claim it paid to a customer and amounts paid to

third parties the evidence does not establish any material unjust enrich

ment Finally the record is clear that once contacted by the FMC

regarding possible violations the respondent cooperated fully It made

its records available and immediately undertopk to correct the violative

conduct It made no attempts to conceal and has taken steps to prevent

future wrongdoing

Considering all pertinent settlement criteria we believe the proposed

settlement is a fair and equitable one and is in the public interest The

35 000 00 payment is substantial but is neither excessive nor inad

equate 5

Itrepresents an amount which will further FMC s enforcement

policy in that it will discourage the respondent from repeating its

improper conduct and will deter others from doing the same

8

Further

it recognizes the likelihood that even if this matter were litigated it is

doubtful that a greater amount could be realized especially when one

considers the additional litigating costs As to the other aspects of the

settlement they are all positive The fact that there will be an audit of

the respondent s activities over a four year period assures a continuity

of responsibility and together with its cooperative attitude during the

investigation demonstrates an intent on the part of the respondent that

favors approval ofthe agreement 7

Without further belaboring the point the settlement of the civil

penalties proposed by the parties here is a fair and an equitable one in

the light of the facts and circumstances involved is in the public

interest and is approved A copy of the settlement agreement is at

tached

Behring I tern tl n I Initial Decision served March 17 1981 adopted by the FMC on June 30

1981 23 P M C 973 1981

United St tu v Atl ntlca SpA 478 P Supp 833 836 SDNY 1979 S relgn Intern tlpn 1 Corp

Etc FMC No 8066 served Pebruary 19 1982 24 P M C 880

See Conllnent 1 Forwardln Inc Etc FMC No 803 served Pebruary 2 1981 23 P M C 623

630 where theCommiasion indicated that cooperation with Investillaton and Immediately takinll re

medial action is avalid mitigating circumstance

2S FMC
RAMON ARGUELLES ET AL

Fitness

After settlement of the penalty provisions the only issue left for

decision is whether or not the respondents ocean freight forwarder s

license should be suspended or revoked pursuant to section 44 d ofthe

Shipping Act 1916 Issue No 4 of the Order of Investigation and

Hearing In Independent Freight Forwarder s License E L Mobley Inc

18 S R R 451 1979 Initial Decision served November 6 1978 where

the Commission issued an Order of Investigation regarding both civil

penalties and the question of fitness the Commission held that

Freight forwarder licensee will not be permitted to use the

settlement procedures in lieu of proceeding with a hearing

ordered by the Commission to investigate alleged violations of

the freight forwarders rules and the fitness of the forwarder to

continue as a licensee it would be an abrogation of the

agencies Shipping Act responsibilities to permit the licensee to

negotiate the issue offitness

So here it is necessary to make a determination on this issue

Section 44 of the Shipping Act 1916 provides in pertinent part

SEC 44 a No person shall engage in carrying on the business

offorwarding as defined in thisAct unless such person holds a

license issued by the Federal Maritime Commission to engage

in such business

b

A forwarder s license shall be issued to any qualified

applicant therefor if it is found by the Commission that the

applicant is or will be an independent ocean freight forward

er as defined in this Act and is fit willing and able properly

to carryon the business of forwarding and to conform to the

provisions of this Act and the requirements rules and regula

tions of the Commission issued thereunder and that the pro

posed forwarding business is or will be consistent with the

national maritime policies declared in the Merchant Marine

Act 1916 otherwise such application shall be denied

Part 510 of the Commission s rules 46 C F R 510 1 et seq deals with

the Licensing of Independent Ocean Freight Forwarders The case law

that has evolved from the application of the pertinent legislation and

regulations is understandably subjective in nature On the one hand it

has been held that where violations of the Shipping Act have occurred

and it is believed the licensee will continue in the violative conduct

that licensee cannot be deemed to be fit to be so licensed Independent

Ocean Freight Forwarder Application Alvarez Shipping Co Inc 16

F MC 78 1973 GR Minon Freight Forwarder License 12 F MC

75 1968 See also Harry Kaufman D B A International Shippers Co

of N Y Independent Ocean Freight Forwarder License No 35 and For

warding Activities ofIrving Betheil and Stephen M Betheil 16 FMC 256

1973 On the other hand it has been held in Mobley supra that

25 F M C

47
I

i

t

i

48 FEDERAL MARITIME COMMISSION

Administrative sanctionscshould not however 1re blindly or

automatic ly imposed and even in cases where thecviolation is

clear evidence ofmitigatiEln will be considered in tailocina the

sanctionstHhe facts of specific case footnote omitted

Section 44 and ita eiulations are based on an wderlying

remedialpu1Jlic interest purpose and he sanctionsimPQsed

must serve such a PurPose ond not be p1hitiv in charac r

footnotes o tted

and in E Allen Brown Ind pendent Ocean Freight Forwarder License

No 1246 FMCDocketNo 19 16 1mtial DecisiOlfServed O lier 19

1979 22 F MC 583 and partiallYad pMarch 24 1980 that

Thus the courts as weJlas theCommi8Jion havctrecog

nized thaUtvidence of tnitilationshould beconsidereti when

detem lining whether a license applicant should bee found to W

fit although implicated in violationsaf theAct in the past

citations omitted Furthennore in previous cas es the Gom

mi ion has eXRre ed its belief that thefireipt Forwarder

Law P L 87 2 4 Was enacted as remedial statute In order to

correct abuieS in the forwarding IJ1dustry Citations oinitted

Thll prlnelp1e that the Commission should not rush to eXtreme

sllliCtions Witlrout considerlng all factors of mitigation in an

effort to fashion a just and reasonable remedy is well 8UppOrt

ed by the courts Although agencies are not required to

impose sanctions in a ect1y even manner because of the

wide lan tudCthey areglvenc by the courts as the expert bodies

most skilled in deviting means to carr yout specific leslslative

purposes the agencies are nevertheless expected to consider

less drastio altemativeremecilles arid to base whatever remedy

they select cn facts andreas nable interpretations oflaw foot

note omitted

Applying the above law and prinCiples to thefmts involved in this

case we must determine whether or not therespondehts are fit to

continue to be licensed as ocean freightfonvarders The evidence

clearly establishes that the respond nts violated provisions of the Ship

ping Act and the COmmission s RUles and Regulations It also estab

lishes that MCS s prirtcipill officer is now aware of the seriOusness of

tfie offenses involved and his testimony convmces us ttiat they Will not

happen again We believe that givenc Ramon E Arguelles obvious

expertise in the area of frelghf forwarding his obvious shlcerlty in

testifying that he was determined to ope iit accordance ith the

COmmlssion rules in tbe future and thtffact that his business is a small

one wherein Mt Argtlel1es livelihoOd depends on fUttlFe compliance

with the law and regulations sUSpensionor revocation of the freight

forwarder licenses would be too harsh a result MCS and the Arguel

les s deserve another chance and we therefore hold that the respond

25 F MC
RAMON ARGUELLES ET AL

ents are fit to carryon the business of independent ocean freight

forwarders

This proceeding is hereby discontinued

8 JOSEPH N INGOLIA

Administrative Law Judge

25 F M C

49
so FEDERAL MARITIME COMMISSION

BEFORE THE FEDERAL MARITIME COMMISSION

RAMON ARGUELLES AND RAMON E

ARGUELLES

DB A MIAMI CARGO SERVICES

FMC INDEPENDENT OCEAN FREIGHT

FORWARDER LICENSE NO 1464

DOCKET NO 81 42

PROPOSED SETTLEMENT OF CIVIL PENALTIES

This Proposed Settlement has been entered into between the Bureau

of Hearings and Field Operations Hearing Counsel and Respondents

Ramon Arguelles and Ramon E Arguelles db a Miami Cargo Serv

ices It is submitted to the presiding Administrative Law Judge for

approval pursuant to Rule 162 of the Commission s Rules of Practice

and Procedure 46 C F R 502 162 and section 505 3 of the Commis

sions General Order 30 46 C P R 505 3 and is to be incorporated into

the Final Order in the instant proceeding if so approved

WHEREAS by Order of Investigation and Hearing served July 1

1981 the Commission instituted the present investigation to determine

whether Respondents had violated section 44a of the Shipping Act

1916 46 D S C 841 and sections SlO 23 d 510 23 e 510 23 f

510 23jof the Commission s General Order 4 46 C F R 51O 23 d

510 23 e 51O 23 f51O 23j and whereas that Order includes the

issue ofwhether civil penalties should be assessed for any violations of

the above sections of the Shipping Act 1916 or the Commission s

General Order 4 so found

WHEREAS the Order of Investigation and Hearing alleges that

Respondents may have violated the above sections ofthe Shipping Act

1916 and the Commission s General Order 4

WHEREAS Respondents have admitted that they have engaged in

specified conduct which may be violative of section 44a of the Ship

ping Act 1916 and sections 510 23 d 510 23 e 510 23 f

and

51O 23jofthe Commission lI General Order 4

WHEREAS Respondents have terminated the conduct that may be

violative of the Shipping Act 1916 and of the Commission s General

Order 4 and have instituted and have indicated their willingness and

commitment to maintain measures designed to eliminate discourage

and prevent such conduct in the future

2 P MC
RAMON ARGUELLES ET AL

WHEREAS the parties in order to avoid the delay and expense that

would be occasioned by further litigation of the issues specified in the

Order of Investigation and Hearing are desirous ofsettling expeditious

ly the issue of the appropriate amount to be paid by Respondents in

accordance with the terms and conditions of this Agreement and

WHEREAS section 32 e of the Shipping Act 1916 46 U S c

831 e authorizes the Commission to assess or compromise all civil

penalty claims under the Shipping Act 1916

NOW THEREFORE in consideration of the premises set forth

herein and in compromise of all civil penalty claims arising from the

conduct set forth in the factual record submitted in the present pro

ceeding Respondents agree as a condition of this Agreement to

comply with all requirements set forth hereinafter subject to the stipu

lations conditions and terms of settlement contained herein

1 Respondents hereby agree as a condition of this Agreement to

pay a monetary amount of Thirty Five Thousand Dollars 35 000 of

which Five Thousand Dollars 5 000 shall be payable thirty 30 days

following approval by the Commission ofthis Proposed Settlement and

Thirty Thousand Dollars 30 000 shall be payable according to the

terms ofthe Promissory Note attached hereto as Appendix I

2 Except as provided in paragraph six 6 below this Agreement

shall forever bar the commencement or institution by the Commission

of any civil action or other claim for recovery of civil penalties from

Respondents arising from the conduct set forth and described in the

factual record submitted in the present proceeding It is understood by

Respondents that this Agreement shall not serve as a bar or defense to

any criminal prosecution or civil litigation by the Commission or any

other department or agency of the United States Government based

upon the specific conduct engaged in by Respondents other than these

actions and claims for recovery referred to above

3 Respondents agree to take all reasonable steps to preserve and

maintain at a location agreeable to the Commission through January 1

1987 all records and documents now in their possession or under their

control that in any way or manner either indicate or verify the conduct

set forth in the factual record submitted in the present proceeding and

upon reasonable notice to allow Commission investigators or attorneys

unimpeded access to such records and documents and to allow the

removal of documents specifically requested by Commission investiga

tors or attorneys for the purpose ofduplication

4 Respondents agree to take all reasonable measures designed to

discourage prevent and eliminate the conduct that may be violative of

the Commission s General Order 4 These measures shall include but

need not be limited to the measures set forth in Appendix II attached

hereto

25 F MC

51
52 FEDERAL MARITIME COMMISSION

S Respondents agree that within thirty 30 days following the ap

proval of this Proposed Settlement they will either furnish copies of

this Agreement or will give affirmative notice of the terms and provi

sions thereof to all of their owners direotors officers and employees

6 Respondents hereby agree as a condition orthis Agreement that

if they breach this Agreement they will not interpose the Statute of

Limitations as a bar or a defense in any action or proceeding instituted

prior to January I 1987 by or on behalfofthe Commission to recover

civil penalties for violations of the Commission s General Otder 4

arising out of the conduct set forth in the faotual record submitted in

the instant proceeding In theevent ofsuchabreach by Respondents if

such noncompliance shall not have been cured or explained to the

Commission s satisfaction within thirty 30 days after written notice to

Respondents by the Commission the Commission shall have the option

to seek enforcement of all terms and conditions of this Agreement or

to declare this Agreement null and void provided however that

Respondent s waiver of the Statute of Limitations under this paragraph

shall remain in full force and effect In the event the Commission

declares this Agreement null and void and such determination is not

reversed by a court of competent jurisdiction any monies paid to the

Co sion shall remain the property cof the United States and Re

spondents will not interposeany defensebilled on the Statute ofLimita

tions in any action which the Commission may institute to recover civil

penalties arising out of the conduct set forth in the factual record

submitted in the pteSllnt proceeding

7 In the event of changes of law or other circumstances at any time

during the term of this Agreement that Respondents believe warrant

modification or mitigation of any of the requiements imposed on Re

spondents by this Agreement the Cemmission agrees as an iitherent

part of this Agreement to Respondents right to petition the Commis

sion to this end

8 Itis expressly understoodand agreedthat this Agreement is not to

be constrUed as an admission by Respondents of the violations Il1leged

in the Order of Investigation and Hearing by which this proceeding

was instituted

9 Respondents acknowledge that they have voluntarily signed this

Agreement and state that no promises or representations have been

made to them other than the agreements and consideration herein

expressed

10 The undersigned represents thathe she is properly authorized

and empowered to execute this Agreement on behalf of Respondents

and to fully bind Respondents to all of tlie terms and conditions set

forth herein

2 FMC
RAMON ARGUELLES ET AL

11 Insofar as this agreement may be inconsistent with Commission

procedures for compromise and settlement of violations as set out at 46

C F R 505 the parties hereby waive application of such procedures

RAMON ARGUELLES AND

RAMON E ARGUELLES D B A

MIAMI CARGO SERVICES

ALAN J JACOBSON

Hearing Counsel

BY JOSEPH B SLUNT Chief

Office ofHearing Counsel

JOHN ROBERT EWERS

Director

Bureau ofHearings

and Field Operations

TITLE

January 1982

25 F MC

53
I

I

i

54 FEDERAL MARITIME COMMlSSlON

PROMISSORY NOTE

Appendix Ito Proposed Settlement in FMC Docket No 81 42

For value received Ramon ArgueUesand Rainon E Alguellesdlb a

Miami Cargo Services MCS promise to pay to the Federal Maritime

Commission Commission the principal sum of IhirtyoFiveTheusand

Dollars 35 000 to be paid at the offices of the Commission in Wash

ington D C by bank aashier s or certified check in the following

installments

Five Thousand DolllUs 5 000 on or before thirty 30 days

following the approval by the Commission of the Proposed

Settlement in FMC Docket No 8142

Three Tho l8llIld Dollars 3 000 on or before six 6 months

following the approval by the Commission of the Proposed

Settlement in FMC Docket No 81 42

Three Thousand Dollars 3 000 on or before twelve 12

months following the approval by the Commission of the

Proposed Settlement in FMC Docket No 81 42

Three Thousand Dollars 3 000 on or before eighteen 18

months following the approval by the Commission of the

Proposed Settlement in FMC Docket No 8142

Three Thousand Dollars 3 000 on or before twenty four

24 months following the lpproval by the Commission of the

Proposed Settlement in FMC Docket No 81 42

Three Thousand Dollars 3 000 on or before thirty 30

months following the approval by the Commission of the

Proposed Settlement in FMC Docket No 8142

Three Thousand Dollars 3 000 on or before thirty six 36

months following the approval by the Commission of the

Proposed Settlement in FMC Docket No 8142

Three Thousand Dollars 3 000 on or before forty two 42

months following the approval by the Commission of the

Proposed Settlement in FMC Docket No 81 42

Three Thousand Dollars 3 000 on or before forty eight 48

months following the approval by the Commission of the

Proposed Settlement in FMC Docket No 81 42

Three Thousand Dollars 3 000 on or before 54 months

following the approval by the Commission of the Proposed

Settlement in FMC Docket No 81 42

2S F MC
RAMON ARGUELLES ET AL

Three Thousand Dollars 3 000 on or before 60 months

following the approval by the Commission of the Proposed

Settlement in Docket No 8142

In addition to the principal amount payable hereunder interest on the

unpaid balance thereof shall be paid with each installment Such interest

shall accrue from the date upon which the Commission approves the

Proposed Settlement in FMC Docket No 81 42 and be computed at

the rate of twelve percent 12 per annum on the unpaid balance

If any payment of principal or interest shall remain unpaid for a

period of thirty 30 days after becoming due and payable the entire

unpaid principal amount of the Promissory Note together with interest

thereon shall become immediately due and payable at the option of the

Commission without demand or notice said demand and notice being

hereby expressly waived

If a default shall occur in the payment of principal or interest under

the Promissory Note MCS does hereby authorize and empower any

uS attorney any ofhislher assistants or any attorney ofany court of

record Federal or State to appear for them and to enter and confess

judgment against MCS for the entire unpaid principal amount of this

Promissory Note together with interest in any court of record Feder

al or State to waive the issuance and service of process upon MCS in

any suit on this Promissory Note to waive any venue requirement in

such suit to release all errors which may intervene in entering up such

judgment or in issuing any execution thereon and to consent to imme

diate execution on said judgment MCS hereby ratifies and confirms all

that said attorney may do by virtue thereof

This Promissory Note may be prepaid in whole or in part by MCS

by bank cashier s or certified check at any time provided that accrued

interest on the principal amount prepaid shall be paid at the time of the

prepayment

RAMON ARGUELLES AND RAMON E ARGUELLES

D B A MIAMI CARGO SERVICES

BY

TITLE

DATE

25 F MC

55
S6 FEDERAL MAllITlME COMMISSION

Appendix IIto Proposed Settlement in FMC Docket No 81 42

For a period of four years following final Commission approVal of

the ProposedSettlolllent inFMC Docket No 81 42 Ramon Arguelles

and Ramon E Arguellesdlb a MiarnLCargoServiees MCS will

permit an independent audit of their books and records lIS described

below

l Theaudit will be conducted by a certified public accountant or

such other indepertdent audhor lIS IDBY benamedsubject to Com

missiolL approval whowill bavc complctecal1thorityto examine any

and all books and records of MCS and Miami Cargo Services

Overseas Corpor ation MSOC see At hlMnt Ahoreto IU1d

upcn theiQuange of a written statemCllthY the irdependeniaudi

tor that he she hllS been denied access or rQSOnable COQ1Jeration in

an aqdit of MCS s or CS9C s boOks IUl 1recordll he s11e fill so

certify to the Cornmi ion and said aetion by MCS or MCSOC

will tie Qonclusive1Y considered to be a breacb of the Settlement

Agreement

2 The independom auditor will b 8uthorized to audit MCS and

MCSOe soooks and recotds for the llarpose of detecting viola

tions of Federal Maritime Commissions

freight forwarder regula

tions and or seotion44of the Shipping Act 1916

3 The audits will take place once a

year with or without notice

to MCSor MCSOC

4 The independent auditor Wil1 furnish MCS and the Commission

with a report of each alidit identifyin f4n hislber report the mate

rials inspected ineluding in mchidentifiGation the reference

number of the shippitilJ files reviewed the method of review and

the findings ofthe audit

RAMON ARGUEuLES ANDRAMON E ARGUELLES

DB AMIAMI CARGO SERVICES

BY

TITLE

DATE

2S FMC
RAMON ARGUELLES ETAL

Attachment A to Appendix II to Proposed Settlement Agreement in

FMC Docket No 81 42

MIAMI CARGO SERVICES Letterhead

Re Audit of Miami Cargo Services and Miami Cargo Services Over

seas Corporation

Gentlemen

This is to set forth the terms of our agreement that you provide the

necessary services to audit the billing practices of Miami Cargo Serv

ices and Miami Cargo Services Overseas Corporation Collectively

MCS

Pursuant to the Settlement Agreement in Federal Maritime Commis

sion Docket No 81 42 MCS has undertaken to adopt measures to

eliminate and prevent practices by MCS which may violate the Federal

Maritime Commission s

freight forwarder regulations

To accomplish this MCS has authorized you to conduct an inde

pendent audit of the books and records of MCS This auditing is to

continue for a period of four years following final Federal Maritime

Commission approval of the Settlement Agreement The audits will

take place every twelve months

The complete terms of the audit procedures and of MCS s obligations

thereunder are contained in Appendix II to the Settlement Agreement

which is attached hereto

It is agreed that you will be compensated for your audit services at

It is also agreed that all information and documents that you obtain

by virtue of this audit will be maintained by you in strict confidence

except to the extent the Settlement Agreement requires you to make

reports to the Federal Maritime Commission

25 FM C

57
58 FEDERAL MARITIME COMMISSION

i

Ifthe feregoina comports with your underatandina of our agreement

please sign the enclosed copy ofthis letter and return it

MIAMI CARGO SERVICES

BY

TITLE

DATE

Attachment

BY

TITLE

DATE

cc Federal Maritime Gommission

2 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 45

LOUIS DREYFUS CORPORATION ET AL

v

PLAQUEMINES PORT HARBOR AND TERMINAL DISTRICT

ORDER ADOPTING INITIAL DECISION

July 30 1982

This proceeding was instituted by the filing of a complaint pursuant

to section 22 ofthe Shipping Act 1916 by various shippers and carriers

Complainants 1

against the Plaquemines Port Harbor Terminal

District Port 2

The complaint alleges that the Port has assessed Com

plainants fees for the use of terminal facilities which are unjust and

unreasonable and unduly prejudicial in violation of sections 15 16 and

17 of the Act 46 D S C 814 815 and 816 The Commission s Bureau

of Hearings and Field Operations Hearing Counsel intervened in the

proceeding Administrative Law Judge Charles E Morgan issued an

Initial Decision finding that the Port was an other person within the

meaning of section 1 and that its fees violated sections 16 and 17 of the

Shipping Act 1916 3Exceptions to that decision have been filed by the

1 Complainants are Louis Dreyfus Corp The Early Daniel Co Inc Dixie Carriers Inc Le

Beour Bros Towing Co Inc The Valley Line Company Federal Barge Lines Inc and Hollywood

Marine Inc

a

Prior to the filing of this complaint Louis Dreyfus Corp brought suit in the US District Court

for the Eastern District of Louisiana against the Port aUeging that thetariff is unconstitutional Several

local collection suits were removed to the federal court and consolidated with that proceeding The

courtaction has been stayed pending the outcome of the FMC proceeding

3

The pertinent provisions of the Shipping Act 1916 are

a Section 1 46 US C 801

The term other person subject to this act means any person not included in the term

common carrier by water carrying on the business of forwarding orfurnishing wharfage

dock warehouse orother terminal facilities in connection with a

common carrier by water

b Section 16 First 46 U S C 815

That it shall be unlawful for any common carrier by water orother person subject to this

Act either alone orin conjunction with any other person directly orindirectly

First To make orgive any undue or unreasonable preference oradvantage to any particu

lar person locality ordescription of traffic in any respect whatsoever orto subject any par

ticular person locality or description of traffic to any undue or unreasonable prejudice or

disadvantage in any respect whatsoever

c Section 17 46 US C 816

Every such carrier and every other person subject to this act shall establish observe and

enforce just and reasonable regulations and practices relating to orconnected with the receiv

ing handling storing ordelivering of property Whenever the board finds that any such reg

Continued

25 F MC 59
60 FEDERAL MARITIME COMMISSION

Port and Hearing CounseL Complain nts have filed a Reply to these

Exceptions

INITIAL DECISION

A Findings ofFact

The Port encompasses approximately the first 100 miles ofthe Missis

sippi River from its mouth in the Gulf of Mexico and is coextensive

with the Parish of Plaquemines in the State of Louisiana It operates

five public facilities none of which serves common carriers by water

There are several private facilities within the Port serving among

others common carriers by water

The Port has on file with the Commission a tariff which provides for

the assessment of a Harbor Fee and a Supplemental Harbor Fee The

Harbor Fee is collected from any vessel over 100 feet which docks or

anchors withinthe Port The fee is 100 for vessels 100 to 250 feet in

length and 150 for vessels over 250 feet The Tee applies unless a flat

rate permit is issued Permits are issued free of charge to vessels entered

on the Parish ad valorem tax rolls Vessels are held primarily liable for

the Harbor Fee but cargo and wharfinterests are made sireties

The Supplemental Harbor Fee is a charge of 10 per ton on all

cargo over 500 tons fust handl lwithin the Port at Mchorage or in

midstream Cargo owned by the wharf owner is exempt J1Qm this

charge The cargo is primarily liable for the SuppleDlental Harbor Pee

but vessel and wharfinterests are made sureties The tariff alse provides

that the Harbor Fee shall be credited against the Supplemental Harbor

Fee

The Port is the sole interpreter ofthe tariff and reserves the right to

denyacceas toprivate Port facilities as well as assess civil and criminal

penalties against those who fail to pay the charges stated in the tariff

The Port s origtn l

interpretation of the tariff was that vessels which

handled car O paying a Supplemental HarbQr Feli were not assessed a

Harbor Fee Subsequently this interpretation was changed Presently

all vessels handling cargo are assessed the Harbor Fee and this mount

is credited against the cargo s Supplemental Harbor Fee The Port s

cargo reporting system is unreliable and resulted in many vessels paying

a Harbor Fee which would not otherwise have been assess

The Port has exempted subsidiaries of wharf owners from the Sup

plemental Harbor Fee The50Q ton Supplemental HarbQr Fee exemp

tion was applied to loaded ships leaving the Port although the tariff

ulation or practico it ulliust or umeasonable it may determine preaoribe and order enforced

a

jUlt and reasonable reauIation otpractice

The alleptions of a eotion IS violation were dlsmi88Cd by tbe PresldinS Officer due to lack of

proof

25 F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 61

HARBOR TERMINAL DISTRICT

stated that the fee was assessed on cargo first handled in the Port

Until recently if the Supplemental Harbor Fee was less than the

Harbor Fee the Port assessed the Harbor Fee

In 1978 the first full year the tariff was in effect the Port collected

over 135 million in fees divided approximately equally between

Harbor Fees and Supplemental Harbor Fees Complainant Dreyfus paid

23 of all Supplemental Harbor Fees for 1978 and 11 of all fees

collected in 1978 Complainant Early was found to have paid 7 ofall

Supplemental Harbor Fees for 1978 and 3 of all fees collected in

1978

Total Port expenditures were approximately 159 million in 1978 of

which 135 million were general parish service costs allocated to the

Port The remainder were direct Port expenditures That portion of

each Parish operating department budget which in the opinion of its

department head reflects marine related expenses is allocated to the

Port

There are no written criteria for determining what is a marine

related expense They are reported on an honor system No attempt

is made to allocate expenses to those classes of entities which actually

pay tariff fees Rather a but for test is applied which results in

anything remotely related to the Port being allocated as marine relat

ed 4Those ultimately assessed the tariff fees obtained little or no

direct services from the Port

B Jurisdiction

The Port was found to be an other person subject to the Shipping

Act within the meaning of section 1 on the basis that through its

municipal authority it exerts critical control over both the access of

common carriers to the Port s private facilities and the rates and prac

tices of those facilities Under Louisiana law private marine facilities are

impressed with a public servitude The Port can control facilities in

which it has no direct ownership interest On this basis the Port has the

authority to assess charges and control a crucial link in the chain of

transportation In light of this control the Presiding Officer held that

the Port was furnishing terminal facilities within the meaning of

section 1

5

Allocated expenses have included those of the Sheriffs Department Councilmen and Staff Avia

tiOD Fire Protection Ferries Safety Engineer Ambulance Itinerant Labor Coroner Health Water

works Garbage Sewerage Purchasing Internal Auditor Data Processing Accounting and Payroll

Insurance Social Security Retirement and Boatways

The Presiding Officer cites Agreement Nos T 2455 T 2553 18 F M C liS 1974 and A P St

Philip Inc v Atlantic Land Improvement Co 13 F M C 166 1969 as caseswhich establish the con

trol basis of jurisdiction and Agreement No T 2719 16 F M C 318 1973 and New Or eons Steamship

Asso v Bunge 8 F M C 687 1965 as caseswhich reject ownership of facilities as the required basis

of jurisdiction

25 F MC
62 FEDBRAL MARITIM COMMISSION

ThePreaiding Offtcer also held that although the challenged charges

are called harbor fees by their explSs terms and in their application

they are in effect charges on the handlin of cargo in tho Port and

therefore subject to section 17 of the Act

C Sections 16 d 17 Violations

The PresidiJig 9fftcet COJ chrdedthat the Supplemental Harbor Fee

violated both sections 17 and 16 First The charge was determined not

to be reasonably telated to the serviCes provided thQse paying the fees

and the exempfrons in the taritT were found to create a nartow class of

persons subject to the charge who were unjustly and unduly prejudiced

by it The Yresiding Officer explained that the tariffexeirlptiops resulted

in identicalcstgo being treateddifferently Hefouhdthat most cargo

pays no fees and theburden of supporting port services is borne by

the shippers who ate not exempt The Presiding Officer rejected the

Port s

justific ation for the exemptions ie that wharf ownership and

the payment of ad valorem taxes is a financial assistance to the Port

finding that theSe substituted revenuesdid not approach the level of

otherwise assessable COllts on these ihtereatso MoreOver because the

Port was charsinsfortraditional government services the tariff provi

sions were found to result in the costs oflhese sendces being borne

by thosewho do not and ClU1I1ot uetheub

Other aspects of the Supplemental Harbor Fee were also found

unlawful under section 17 Making vessel and wharf interest sureties

under the tariff was determined to create liability for an oblijation of a

third party not in privity or duty baunsJ to the c aed party The

PresidiDgOfliQer aAAo dete ed tllat the assessment on 101Kied ships

l aving port mtead of those tering port was conJrary to the first

handled provision of the taPq O1lyone 500 ton fFe exemption was

allowed on an exiting ship when many such exemptions sllould have

been grantedon the enteringJiiland bargCs constitvting that loacl

The Presidini Officer concluded that the Harbor Fee also violated

sections 17 and 16 Fir41t The tBrlff exemptions were held tooe irration

al llIld prltiudicial particllIarly because the exemption of all vessels

under 100 feet inpludes most vessels calling in the Port and results in

the major users of the Yott not paying for the Pott s services He

explained that ad valorem tax revenues and flat rate permit fees do not

recoup the costs fairly assessable to the interests exempted llIld that no

recognition is given to those users paying state ad valorem taxes of

which the Port 1lbtains a pottion The Presiding Officer fouildthat the

existing system results in the expensC of the ort attributable to local

and freiuent users the majority of the users of the eort being passed

on to ether users The surety provisions whichapply to the Harbor Fee

were also found to be unr l1able for the same reasons as were the

Supplemental Karbar Fee surety provisions

2 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 63

HARBOR TERMINAL DISTRICT

Finally the Presiding Officer concluded that the enforcement provi

sions of the tariff were unreasonable under section 17 The Port s

naming itself the sole interpreter of the tariff was found unreasonable

as was the imposition ofcivil and criminal penalties for non payment of

the tariff charges The Presiding Officer viewed the tariff provisions as

quasi contractual in nature rendering these enforcement provisions un

lawful and an abuse ofmunicipal authority

POSITIONS OF THE PARTIES

A The Port

On exception the Port argues that it is not an other person subject

to the Shipping Act because it does not own or operate any facilities

serving common carriers It is alleged that no common carriers call at

the public facilities owned by the Port and that the percentage of

common carriers calling within the Port is so small that there is an

insufficient impact on the common carrier industry to warrant the

assertion ofjurisdiction over it as a matter ofpublic policy

Furthermore the Port submits that the charges at issue do not relate

to the handling of cargo but are rather a means of recouping the

expenses of operating the Port The Port insists that the charges are

reasonably related to the services rendered users of the Port The Port

submits that Complainants should not be permitted to argue that the

fees are too high because they refused to obtain flat rate special permits

which would have substantially reduced their fees

The Port also contends that the charges are not unduly preferential

or unjustly discriminatory In so doing they argue that the exemption

for small craft is based upon the administrative costs of accounting for

these numerous vessel calls Furthermore most small craft using the

Port are also on the ad valorem tax rolls The ad valorem tax payer

exemption is allegedly reasonable because it prevents a double assess

ment against interests located in the Parish Flat rate permits are alleg

edly lawful because they allow frequent users to put a ceiling on their

fees The wharf owners cargo exemption is allegedly justified because

these entities incur significant expenditures to protect cargo and thereby

supplement Parish services

Finally the Port argues that minor errors in the tariff and its applica

tion of the wharf owners exemption are not a valid basis upon which to

find the tariff unlawful The Port advises that the first handled

language of the tariff was intended to prevent assessments for rehandled

cargo and does not preclude reporting of assessments on the basis of

departing vessels when cargo ownership is determined Further it

maintains that assessing liability on third parties to a

cargo transaction

is lawful because all parties are users of the Port services Finally the

Port insists that the Parish has an inherent right to impose civil and

criminal penalties to enforce collection of assessments lawfully due it

25 F M C
64 FEDERAL MARITIME COMMISSION

B Hearing Counsel

Hearing Counsel agrees with the Port that the Commission does not

have jurisdiction over it Hearing Counsel submits that there must exist

both an ownership interest as well as substantial control over the rates

and practices of a terminal facility to confer jurisdiction Finally it is

alleged that the charge at issue here is for the recoupment of expenses

for general port services and is not related to receiving or handling

cargo within the meaning ofsection 17

C Complainants

Complainants argue that the Presiding Officer was correct in finding

that the Commission has jurisdiction over the Port Controlling access

to the private facilities and requiring the collection of fees for Port

rendered services allegedly constitute furnishing terminal facili

ties within the meaning ofthe Shipping Act The proprietary interest

requirement advanced by Hearing Counsel is alleged to be erroneous in

light ofthe fact that midstream transfers of cargo have been deemed to

be a terminal operation and regulated by the Commission

Complainants also maintain that the absence of common carriers

calling at Port owned facilities is irrelevant as there are sufficient carri

ers calling at Port controlled facilities to make the Port subject to

Commission jurisdiction

Complainants allege that the charges at issue are within the ambit of

section 17 because they are related to or connected with receiving

handling or storing of property but that in any event even if a fee

does not relate to the handling of property under section 17 this does

not affect section I

jurisdiction or the application of section 16 First

Complainants believe that the Presiding Officer was correct in his

determination that the charges violate section 17 because they are not

reasonably related to the services rendered the charged party The

costs allocated for the specific benefits rendered by port services alleg

edly are not reasonably related to the class of users assessed Complain

ants submit that only a

very limited class of port service users are

actually assessed fees which represent the costs attributable to all the

users this results in 49 of the Port s revenue being assessed on 25

of cargo

It is alleged that cargo interests receive no direct benefit from the

Port services and only an indirect benefit in the form ofrisk insurance

and that a generalized benefit is insufficient to sustain the charge under

section 17 There allegedly must be a reasonable relationship between

the costs assessed and the benefits derived based on actual use in order

for the charge to be valid

Complainants state that their refusal to obtain flat rate permits from

the Port is justified because they are under no obligation to voluntarily

comply with an illegal licensing scheme

25 F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 65

HARBOR TERMINAL DISTRICT

Complainants also believe that the Presiding Officer properly con

cluded that the charges as assessed result in undue and unjust prefer

ence and prejudice in violation of section 16 First There is allegedly no

need to establish a competitive or triangular relationship because the

charges do not relate to the type or nature of the cargo assessed

Complainants further argue that the Presiding Officer was correct in

finding errors in assessments by the Port violated section 17 These

errors were allegedly regularly and knowingly made and therefore

constitute an unreasonable practice under section 17 Similarly through

its allegedly unreasonable interpretation ofthe first handled provision

of the tariff the Port denied numerous 500 ton Supplemental Harbor

Fee exemptions to barges entering the Port and assessed Complainants

substantial overcharges The solidary liability provisions of the tariff

are challenged because they impose primary liability on those not in

privity with the assessed party Finally Complainants maintain that it is

unreasonable and unjust for a local government authority to enforce a

port tariff by means ofcriminal penalties

DISCUSSION

The Commission has determined that the Presiding Officer correctly

disposed ofall issues presented in this proceeding with the exception of

his treatment of the surety provisions of the Port s tariff The Port s

Exceptions are essentially a reargument of matters fully and adequately

considered by the Presiding Officer and will generally be denied

Accordingly the Initial Decision will be adopted with only minor

modifications

A Jurisdiction

The Commission finds for reasons stated below that the Port is an

other person subject to the Shipping Act 1916 i e one which

furnishes terminal facilities in connection with a common

carrier within the meaning of section 1 of that Act In construing the

scope of the Commission s jurisdiction under section 1 the Supreme

Court has focused upon the integrity of the legislative scheme of the

Shipping Act and has required a broad construction of its terms to

effect its purposes

6

The statutory scheme contemplates regulation of

any entity if it exercises sufficient control over terminal facilities to

have a discernible effect on the commercial relationship between ship

pers and carriers involved in that link in transportation

Local governmental authorities are not categorically exempt from the

requirements of the Shipping Act 7

nor is there any court or Commis

6 u s v American Union Transport 327 US 437 4SQ51 1946 California l United States 320

U S 577 585 1944 See also Agreement No 8905 Port of SealIe and Alaska S S Co 7 F M C 792

795 796 1964

7

California v United States supra

25 F MC
I

1

j

I

66 FEDERAL MARITIME COMMISSION

sion precedent requiring ownership of a facility in order to confer

jurisdiction under section 1 It was clearly the intent of Congress to

prevent any person including local government authorities from

discriminating among shippers or carriers in providing terminal facili

ties 8Thus the crucial issue in determining whether a given entity is

subject to Commission jurisdiction as an other person is the degree of

its involvement in the furnishing ofterminal services to common carri

ersby water

The control theory ofjurisdiction cited by the Presiding Officer

has in different contexts been relied upon by the Commission An

entity need not directly or physically provide terminal services to be

deemed an other person subject to the Act The holdings in several

terminal lease cases support the proposition that it is the control of

terminal rates and practices which constitutes furnishing terminal

facilities and confers Commission jurisdiction 9

Conditioning access to a

port s private facilities upon the payment of a charge for governmental

services reflects significant threshold control over terminal facilities

Jurisdiction over the Port here however is not premised solely on

the fact that it conditions access to private facilities upon the payment

of a charge Assessments by local authorities could in Ii variety of

situations constitute the exercise oflawful taxation authority The Ship

ping Act does not authorize the Commission to review local taxes for

government services that are incidentally imposed on carriers and ter

minals The Port s charges here however are not taxes but rather fees

for essential health safety and security services which are rendered to

vessel and cargo interests in commercial cargo handling transactions

The Commission has determined that under the facts of this case the

Port s practice of assessing on the basis of cargo transactions a fee for

providing vessels and cargo essential health safety and security services

constitutes the furnishing of other terminal facilities within the mean

ing of section I ofthe Act The term other terminal facilities contem

plates not only physical assets such as docks wharves and warehouses

but also encompasses services rendered in connection with the marine

terminal link in transportation modes 10 The Port is intimately in

volved in common carrier cargo transaotions It has imposed utilization

of its services and payment of its fees as an unavoidable appurtenance

of all private terminal facilities The combination of the Port s exclusive

ability to furnish such terminal services its assessment of selective

cargo transfer fees and its control of access to the private facilities

Colifornia v United States supra at S86 S3 Cong Roc 8216

9

Agreement Nos T 24SJ T 2SSj supra Agreement No T 4 Terminal Lease Agl Hment at Long

Beach Col 8 F M C S21 1964 Agreem ntNo g09S Port of Seattl and Alaska Steamship Cosupra

10 See Marine Terminal Practices ofthe Pori of Sea ll 21 F M C 391 1918 Status of Carload and

Unload 2 US M C 161 161 1946

2S FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 67

HARBOR TERMINAL DISTRICT

results in fundamental control over the rates and practices of terminal

facilities The Commission finds that such pervasive involvement in the

business of common carriers llmarine terminals and the commerce of

the United States confers on the Commission jurisdiction over the Port

under section I of the Shipping Act 1916 and subjects the Port s fees

to scrutiny under the substantive provisions of that Act

The Port s assessment of the fees in question also falls within the

ambit of sections 16 First and 17 of the Act 12 Complainants are clearly

persons and the assessed cargo a description of traffic within the

meaning of section 16 First

In order for the Commission to assert jurisdiction under section 17

the charges or practices in question must have an underlying purpose

related to terminal operations and must nave more than an incidental

relationship to the handling of cargo or the movement of vessels into a

harbor 13 The underlying purpose and justification for the Port s

charges enable the Commission to readily classify them as terminal

related Moreover because the Port s services are held to be other

terminal facilities within the meaning of section 1 the charges for

these same services are necessarily terminal related The Supplemen

tal Harbor Fee is levied directly on cargo for terminal services alleged

ly rendered the cargo interests The Harbor Fee directly affects the

amount of Supplemental Harbor Fee paid by cargo interests The Com

mission finds that both fees fall within the ambit of section 17

11 Sufficient common carriers call at the Port to serve as abasis for jurisdiction if the Port is other

wise found to be furnishing terminal facilities The Commission has found that even minimal

contacts with oceangoing common carriers can serve as abasis of jurisdiction if interstate common

carriers also call at aport and the port otherwise holds itself out as accessible to common carriers

Bethlehem Steel Corp v Indiana Port Comm Denial of Motion to Dismiss 12 S R R 1061 1972

adopted 13 S R R 22 1972

12 Section 16 46 D S C 815 provides in pertinent part

That it shall be unlawful for any common carrier by water or other person subject to this

Act either alone orin conjunction with any other person directly orindirectly

First To make orgive any undue or unreasonable preference oradvantage to any particular

person locality ordescription of traffic in any respect whatsoever or to subject any particu

lar person locality ordescription of traffic to any undue orunreasonable prejudice ordisad

vantage in any respect whatsoever

Section 17 46 US C 816 provides in pertinent part

Every such carrier and every other person subject to this act shall establish observe and

enforce just and reasonable regulations and practices relating to orconnected with the receiv

ing handling storing ordelivering of property Wheneverthe board finds that any such regM

ulation orpractice is unjust or unreasonable it may determine prescribe and order enforced a

just and reasonable regulation orpractice

13 See Bethlehem Steel Corp v Indiana Port Comm 21 FM C 629 1979 affdsub nom Bethlehem

Steel Corp v

FM c supra where the Commission held that section 17 applies to charges which are

terminal related and not those which are navigation related

25 F M C
68 FEDERAL MARITIME COMMISSION

B Sections 16 and 17 Violations

The Commission has determined that the Presiding Officer was gen

erally correct in his finding that the fees are unlawful under sections 16

First and 17 ofthe Shipping Act 1916

Because there is no differentiation as to the nature of the cargo or

other transportation factors involved in the assessment of fees a com

petitive or triangular relationship need not be proven to establish a

violation of section 16 First14 The Port has treated different classes of

persons and descriptions of traffic unequally in the imposition of its

fees Because the exemptions from the tariff fees create a situation

where a minority of port users pay substantial fees to defray general

port expenses while the majority of users pay little or nothing Com

plainants have made a prima facie showing of undue preference and

prejudice This shifts the burden to the Port to justify the exemptions 15

which burden the Port has failed to meet

A measure ofthe reasonableness ofthe exemptions would be whether

the other revenue considerations ofthe exempted classes are reasonably

related to the fees forgiven None of the exemptions appears to meet

this standard No revenue based justification is advanced in defense of

the Port s flat rate permit exemption There is no evidence ofrecord to

substantiate the claim that the administrative cost of assessing vessels

under 100 feet exceeds the revenues to be obtained Similarly there is

no showing that the cargo protection costs saved through the expendi

tures of private wharf owners equals or exceeds the foregone revenue

resulting from their exemption Finally there is no proof that the

revenues derived from ad valorem taxes paid by port users exempted

from the harbor fees are generally comparable to the fees that would

otherwise be assessed these users Indeed the low ad valorem tax

rates 16 and the admission by the Port that ad valorem revenues repre

sent a small portion of Port revenues undermine the validity of the

harbor fees exemption and support the Complainants allegation that the

fees are a device whereby non local interests subsidize the governmen

tal services rendered Parish residents

Complainants have also made a

prima facie showing under section 17

that the charges do not bear a reasonable relationship to the compara

tive benefit obtained from the Port services by the assessed parties 17

Vo kswagenwerk A G v FM C 390 U s 261 278 80 1968 Valley Evaporating Co v Grace

Line Inc 14 F M C 16 1970 Investigation of Free Time Practices Port of San Diego 9 F M C 525

1966

See e

g Freight Forworder Bids on Gov t Shipments 19 F M C 619 1977 The failure of Com

plainants to obtain flat rate permits and thereby reduce their e

penses does not relieve the Port of the

Obligation to rationally justify its assessment methods Complainants are not seeking reparations and

unless the Port canshow that the use of the permit system results in afair apportionment of revenue

contributions among all users of the Port this allegation is irrelevant

18 See Initial Decision at 14

11 VolJawagenwerk A G v FM C supra j Baton Rouge Marine Contractors Inc v FM C 65 F 2d

1210 D C Cir 1981

2S F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 69

HARBOR TERMINAL DISTRICT

The charged parties have not received benefits from the Port s services

proportionate to the costs allocated to them Moreover other users of

the services obtain equal or greater benefits and have not been shown

to have paid their allocable share of Port costs The charges are not

based upon the actual use of the Port services by the charged parties

Even if the generalized benefit concept advanced by the Port were

acceptable it appears that the exempted users obtain the same general

ized benefit as the charged parties Yet as mentioned above there is no

evidence that these exempted classes have made other contributions to

the operating costs of the Port that approach the level of fees that

would have been paid under the Port tariff if an exemption were not

granted Moreover the tariff is applicable only to users ofthe navigable

waterways of the Port although a large portion of marine related

Parish expenses allocated to the Port arises from Parish services provid

ed outside the navigable waterways While there need not be a precise

correlation between marine related costs allocated to the Port by the

Parish and the classes of Port users assessed fees they must be reason

ably related Here there is a broad basis for determining marine

related costs and a narrow class of Port users assessed those costs

The other tariff provisions and practices of the Port found to be in

violation of the Shipping Act by the Presiding Officer with one excep

tion have been correctly evaluated Although isolated errors in billing

procedures are not unlawful repeated misbilling particularly after the

Port is made aware ofthe errors constitutes a willful disregard oftariff

provisions and an unreasonable practice under section 17 18

The first handled provision of the tariff is at the very least an

ambiguous provision which obscures the rights and obligations of the

charged parties 19 Moreover this provision has historically been given

a strained construction against the shipper It therefore constitutes an

unreasonable practice 2 0

Finally the civil and criminal penalty provisions of the tariff are

unreasonable Without determining whether this practice is otherwise

unlawful the Commission finds that it is excessive and not reasonably

related fit and appropriate to the ends in view 2 1 While penalties in the

form of denial of credit or access to the Port would be legitimate

enforcement mechanisms fines and incarceration are not

18 See European Trade Specialists Inc v Prudential Grace Lines Inc 21 F M C 888 892 1979

affd memo sub nom European Trade Specialists Inc v FMC D C Cif No 79 1503 June 5 1980

19 See Investigation of Free Time Prac ices Port of SanDiego supra at 543

20 West Gulf Maritime Ass v Port of Houston Authority 22 F M C 420 1979 affd memo sub nom

West Gulf Maritime Assoc v FMC 652 F 2d 197 1981 Table The Port has not excepted to the

Presiding Officer sfinding that it was aviolation of section J7 forthe Port to include aprovision in its

tariffnaming itselfas sole interpreter of its provisions

21 West Gulf Maritime ASJo Po Port ofHous on Authority 21 F M C 244 248 1978 affd memo sub

nom

West Gulf Maritime Ass n FM C 610 F 2d 1001 D C Cir 1979 Table cert denied 449

US 822 1980

25 F M C
J

j

70 FEDERAL MARITIME COMMISSION

The Presiding Officer s holding that the surety provisions ofthe tariff

are unreasonable however will not be adopted A terminal operator

can hold liable for tariff fees all direct and indirect users of its serv

ices 22 All parties made sureties for the Pott s fees are either direct or

indirect users of the Port s services Furthermore the allegation that

vessel interests cargo interests and wharf interests are not in privity nor

owe any duty to each other in a

cargo handling transaction is not

explained or supported by evidence Finally there is no evidence that

the Port has abused these liability provisions or that a hardship or

injustice has resulted from their application

THEREFORE IT IS ORDERED That the Initial Decision of the

Presiding Officer is adopted as clarified or limited above and

IT IS FURTHER ORDERED That the Exceptions of the Port are

granted only to the limited extent indicated above and denied in all

other respects and

IT IS FURTHER ORDERED That the Port immediately cease and

desist assessing a Harbor Fee and Supplemental Harbor Fee in violation

of sections 16 First and 17 of the Shipping Act 1916 as described

herein

By the Commission

S FRANCIS C HURNEY

Secretary

1

d

Vice Chairman Maakley s

dissentina opinion is attached Commissioner Daschbach concurs in Vice

Chairman Moakley s dissenting opinion

25 F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 71

HARBOR TERMINAL DISTRICT

DOCKET NO 79 45

LOUIS DREYFUS CORPORATION ET AL

v

PLAQUEMINES PORT HARBOR AND TERMINAL DISTRICT

Vice Chairman Moakley dissenting

I cannot find on the basis of this record that respondent Plaquemines

Port Harbor and Terminal District is an other person subject to the

Act within the meaning of Section 1 ofthe Shipping Act 1916

The Commission is not a court of equity but an agency whose

powers arise solely out of the statutes entrusted to it by Congress The

Shipping Act does not provide a cure for every practice that takes

place in ocean transportation nor does it vest in the Commission the

right to determine that actions taken by a

litigant are so offensive that

we must assume jurisdiction

The pertinent statutory language is as follows

The term other person subject to this act means any person

not included in the term common carrier by water carrying

on the business of forwarding or furnishing wharfage dock

warehouse or other terminal facilities in connection with a

common carrier by water

Respondent clearly furnishes no physical assets such as docks

wharves or warehouses in connection with common carriers Recogniz

ing this the majority would interpret the word facilities to include

services rendered in connection with the marine terminal link in

transportation modes The authorities cited for this interpretation are

two earlier Commission cases

The first Marine Terminal Practices of the Port of Seattle 21 FMC

397 1978 is a case in which a port which was a terminal operator in

other respects was found to be an other person by virtue of provid

ing consolidation services for inbound OCP shipments The Commis

sion said that

the consolidation service is part of a broader marine terminal

process to the extent that the Port in providing it is furnish

ing terminal facilities in connection with common carriers by

water id at 399

The second Status of Carloaders and Unloaders 2 USMC 761 767

1946 stands for the proposition that a

person furnishing hand trucks

lift trucks flat top trucks and the labor required to operate such

25 F MC
72 FEDERAL MARITIME COMMISSION

equipment for loading and unloading rail cars on a marine terminal is

providing terminal facilities within the meaning of section 1

The services provided by respondent in this case are quite distin

guishable from those in the Seattle and Carloaders cases They are

essentially governmental services such as police health and fire protec

tion If in charging a fee for those services Plaquemines becomes an

other person subject to the Act then virtually every State and local

taxing authority in this nation which assesses any type of fee to recoup

the cost of such services is likewise subject to the Commission s

juris

diction Moreover the majority s rationale for exercising jurisdiction

here could apply equally to jurisdiction over other federal agencies

which charge fees for cargo related services such as the U S Customs

Service or the U S Department ofAgriculture

Ibelieve that this dramatic expansion of the Commission s jurisdic

tion is both impermissible and unwise Iwould dismiss this complaint

for lack ofjurisdiction over the respondent

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 45

LOUIS DREYFUS CORPORATION

THE EARLY DANIEL COMPANY INC

DIXIE CARRIERS INC

LE BEOUF BROS TOWING CO INC

THE VALLEY LINE COMPANY

FEDERAL BARGE LINES INC AND

HOLLYWOOD MARINE INC

v

PLAQUEMINES PORT HARBOR AND TERMINAL DISTRICT

1 Plaquemines Port found to exercise control as to whether or not certain terminal

facilities located in Plaquemines Port are furnished and Plaquemines Port found by

virtue of such control to be an other person subject to the Shipping Act 1916 by

furnishing wharfage dock or other terminal facilities in connection with common

carriers by water

2 Plaquemines Port s supplemental harbor fee found to be a wharfage charge based on

tonnages of cargo handled at facilities located in Plaquemines Port and the supple

mental harbor fee to be subject to section 17 of the Act covering regulations and

practices relating to or connected with the receiving handling storing ordelivering

of property

3 Plaquemines Port s HHarbor fee found to be adockage and anchorage charge on

vessels docking or anchoring at facilities orpoints in Plaquemines Port and insofar

as this fee applies to vessels which dock for the purposes of having their cargoes

handled at terminal facilities in Plaquemines Port such harbor fee found to be related

to the supplemental harbor fee inasmuch as the amount of the latter is reduced by the

amount of the harbor fee and because the harbor fee at least in part is related to the

handling of cargoes at terminal facilities said harbor fee found to be subject to

section 17 of the Act covering the regulations and practices recited therein

4 Plaquemines Port as an other person through the imposition of its supplemental

harbor fee found to have given undue and unreasonable preference or advantage to

certain descriptions of traffic such as to cargoes owned by facilities ownersand to

certain cargoes believed to be but not in fact so owned and to have subjected other

descriptions of traffic to undue and unreasonable prejudice or disadvantage in viola

tion of section 16 First of the Act Similarly Plaquemines Port found inviolation of

section 16 First insofar as certain vessels were subjected to the harbor fee and other

vessels were exempted from such fee

5 Plaquemines Port through the imposition of its supplemental harbor fee and harbor

fee found to have established observed and enforced unjust and unreasonable regu

lations and practices relating to or connected with the receiving handling storing or

delivering of property particularly insofar as it has not been shown that the said fees

are reasonably related to the services performedby Plaquemines Port

25 F M C 73
74 FEDERAL MARITIME COMMISSION

6 Plaquemines Port found in violation of section 17 of the Act insofsr as its tariff

provisions hold liable for the debts of shippers and consignees of csrgoes all parties

who may have contact with the debtors including vessel owners terminal operators

and other users of the vessel or facility

7 Plaquemines Port found in violation of section 17 of the Act insofsr as its tariff item

145 as amended is ambiguous because it covers csrgo when tirst handled in the

Port and then contradicts the meaning of tirst handled by providing that the report

ing of such cargoes should be made when the csrgo leaves the whsrf or facility

8 Plaquemines Port found in violation of section 17 of the Act insofar as its tariff under

item 10 purports to establish itself as sole interpreter of the provisions of its tariff

9 Plaquemines Port found in violation of section 17 of the Act insofsr as item 130 of its

tariff sets up civil and criminal sanctions for the refusal to pay fees assessed by the

tariff

10 The complaint insofar as it alleges violations of section 15 of the Act is dismissed for

lack of proof

William E ONeil and Terry A McCall for the complainants

Louis B Porterie and Robert E Fontanelle Jr for the respondent

Paul J Koller and Aaron w Reese as Hearing Counsel

INITIAL DECISION 1 OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

Adopted July 3D 1982

INTRODUCTION On February I 1978 the Plaquemines Parish

Sheriffs Department arrested an intoxicated toolpusher domiciled in

the parish for shooting his dog at a sand fill on Deadman s Lane in

Boothville 2Two days later an oyster fisherman from another parish

turned himself in at the Port Sulphur 2

Jail upon learning of a warrant

for his arrest for the unlawful removal ofoysters from a leased bedding

ground In mid April two fishermen from neighboring St Bernard

Parish were arrested for fishing with a gill net in the pond at Braith

waite Park 2 Not a month later two more fishermen were arrested at

their trailer home in Venice 2and charged with the illegal firing of

weapons each had got off two blasts from a twelve gauge shotgun 2

On the fifteenth of June a driver veered off the road and came to a

stop in the midst of a cane field 2

he thereupon climbed to the roof of

his car and began hollering Deputies quickly took him away On July

1 a fisherman from Moss Point Mississippi improperly backed his car

causing it to strike a 1978 Ford Torino belonging to the Plaquemines

Parish Commission Council that was parked at the Good Rockin

Club 2

The inept backer was carted off to jail Two weeks later a

1

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

Commission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

a

Towns and locations referred to are located in Plaquemines Parish Louisiana unless some other

Parish orState is specified

25 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 75

HARBOR TERMINAL DISTRICT

laborer in the employ of Brown Root a construction firm was seen

tossing a beer can from the passenger window of his vehicle which

was northbound at the time on Louisiana Highway 23 just north of

Burmaster Street 2 When a deputy pulled him over the suspect could

not produce a driver s license and was promptly removed to jail On

July 21 a roustabout was found at home bleeding from a selfinflicted

neck wound accomplished with a butcher s knife Deputies took him to

the Port Sulphur 2

Hospital where the cut was stitched and thence to

jail where a records check later revealed that the subject was on

parole from a bank robbery conviction August 11 1978 found an

agent of the Louisiana Department ofWildlife Fisheries turning over

to the Plaquemines sheriff a Vietnamese fisherman from Texas who had

been apprehended in Breton Sound 2

he was charged with double

rigging in inside waters in closed season Less than two weeks later a

roustabout from Port Sulphur 2turned himself in at the local jail upon

learning of a warrant for his arrest the offense aggravated battery

with a pool stick

In the same year the Plaquemines Parish Fire Department was called

upon to fight a variety of fires On New Year s Day an ominous

portent of things to come a Cadillac caught fire at the Shell Oil

Company dock in Venice 2

St Patrick s Day was the occasion of a

grass fire behind the office 2

of Freeport Sulphur Company In June

Trident Communications in Belle Chasse 2

was the scene of a fire

caused by the punctured fuel tank of a tractor trailer rig On July 2 a

Vietnamese fisherman s houseboat burned in the Kincaid Canal 2and a

scant five days later a grass and trash fire erupted on the Belle Chasse 2

levee not far from Tidewater Marine A shortout in the fusebox at the

day quarters

2

ofBuster Hughes night shift construction workers led to

a fire in late August and within two weeks in early September an

aluminum boat caught fire aboard a flatbed truck at Delta Well Tester2

A week before Halloween an underground natural gas pipeline 2

was

inadvertently ruptured by a backhoe digging a waterline

In the same year the Plaquemines Parish Health Unit donated its

supply of rat traps as yet unused to the parish Mosquito Control

Department The unit also investigated a fish kill caused by the over

flow of an oxidation pond at an industrial galvanizing plant 2

The

parish Ambulance Service transported the 16 month old child of an oil

company employee from her Buras home to the Port Sulphur 2

Hospi

tal And the coroner s office 2

issued death certificates on a variety of

aircraft pilots fishermen pleasure boaters and swimmers who drowned

or suffered death from such causes as coronary and carcinoma The

Buras 2 Waterworks projected that it would run a deficit for the year

2

See preceding pages forfootnote

25 FMC
76 FEDERAL MARITIME COMMISSION

of 29 280 And the five members of the Plaquemines Parish Commis

sion Council devoted 30 percent of their official time to the business of

the Plaquemines Port Harbor and Terminal District

The expenses above to local government occasioned by each and all

of these occurrences and thousands more were classified as costs

incurred by the Plaquemines Port Harbor and Terminal District Pla

quemines Port or the Port on the theory that these were marine

related events The cost of these marine related events was then

passed on to common carriers by water other vessels and shippers

utilizing private wharfage dock warehouse and other terminal facili

ties within the port of Plaquemines with said cost to be defrayed by

the collection ofharbor fees and supplemental harbor fees pursuant to a

tariff filed with the Federal Maritime Commission

The subject proceeding is a complaint filed by two shippers in the

foreign trade by three common carriers by water and by two private

carriers by water all using terminal facilities in Plaquemines Port

alleging that the said harbor fees and supplemental harbor fees are

unlawful in violation ofthe Shipping Act 1916 the Act

THE COMPLAINANTS The complainants Louis Dreyfus Corpora

tion Dreyfus and The Early Daniel Company Inc Early both

are grain exporters in the foreign trade The complainants Dixie Carri

ers Inc Dixie The Valley Line Company Valley and Federal

Barge Lines Inc Federal are three common carriers by water certifi

cated by the Interstate Commerce Commission with operating rights to

and from ports on the Great Lakes and to ports on all waterways

connecting to the Great Lakes including ports on the Mississippi River

to the Gulf of Mexico The complainants Le Beouf Bros Towing Co

Inc Le Beout and Hollywood Marine Inc Hollywood are private

carriers by water All five of these carriers by water call at among

other ports the port designated as the Plaquemines Port Harbor and

Terminal District The two grain exporter complainants ship grain from

a terminal located in Plaquemines Port

THE RESPONDENT The respondent is the Plaquemines Port

Harbor and Terminal District Plaquemines Port extends southward

from its boundary with the Port ofNew Orleans at or about mile 816

on the Mississippi River to mile 0 at Head of the Passes leading to

the Gulf of Mexico plus another 212 miles below Head of the Passes

via Southwest Pass for a total of about 102 8 miles The principal

waterway of Plaquemines Port is the Mississippi River including its

Passes to the Gulf of Mexico The Plaquemines Port is coextensive

geographically with the Parish of Plaquemines Louisiana In this state

a parish is the general equivalent of a county in another state This Port

and the Parish also include portions ofthe GulfIntracoastal Waterway

various canals and other navigable waters The Intracoastal Waterways

flow across the northern portion of Plaquemines Port The Doullut

2S F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 77

HARBOR TERMINAL DISTRICT

Canal flows from the Mississippi River at Empire La and connects

with a waterway which flows to the Gulf ofMexico

The Plaquemines Parish is governed by the Plaquemines Parish Com

mission Council which consists offive commissioners who also govern

the Plaquemines Port

Located in Plaquemines Port are various terminal facilities docks a

grain elevator and federal anchorages for ocean going vessels Also in

the Port are facilities which are located midstream in the Mississippi

River which are used for the transfer of coal and other commodities

from barge to ocean vessel

The locations ofthe major facilities on Plaquemines Port are

On the Mississippi River and its passes

On that portion of the Algiers Cut Off Canal Intracoastal Alter

nate Waterway lying between Orleans Plaquemines Parish

line at Donner Canal westward along the Intracoastal Water

way to the intersection with the Barataria of the Jefferson

Plaquemines Parish Line

On the Empire Doullut Canal from the Mississippi River to the

Gulf ofMexico

At Jump Basin Tiger Pass Grand Pass and Baptiste Collette

from the Mississippi River to the GulfofMexico

Plaquemines Port and Plaquemines Parish do not operate any vessels

which are common carriers by water in the foreign commerce or in

interstate commerce on the high seas or on the Great Lakes

The Plaquemines Parish Commission Council as governing body for

the Parish of Plaquemines and for the Plaquemines Port owns or

operates only five public facilities in the nature of terminal facilities

located on the Mississippi River or other Plaquemines Port waters

These five facilities include three marinas or boat harbors used by

small pleasure craft and by fishing craft The fourth facility is a ship

yard for vessels 65 feet or less in length needing repairs and the fifth

facility is an unused dock about 90 to 100 feet long on the Mississippi

River which dock has been converted to an intake structure for water

pumps supplying water from the river to the Plaquemines Parish Water

Works

The charges applicable at these three marinas and at the shipyard are

not listed in TariffNo I of the Plaquemines Port which is filed with

the Federal Maritime Commission but these charges are noticed under

separate ordinances of the Plaquemines Parish Commission Council

However items 155 and 160 of Tariff No I

respectively provide

Wharfage Rates at Public Wharves and Basis for Assessment of

Wharfage Charge The wharfage charge of Plaquemines Port on all

commodities at its Public Wharve is 050 per net ton or fraction

thereof unloaded by and with the equipment furnished by the owner of

cargo with a minimum wharfage charge per shipment of 5 00

25 F M C
78 FEDERAL MARITIME COMMISSION

It appears that at least in recent years Plaquemines Port has not

assessed charges under items 155 and 160 of its tariff Also it appears

that in recent years no cargoes or vessels have used the above listed

fifth facility the dock although it is conceivable that a new or different

water intake facility could be utilized by the Parish and the said dock

could be converted back to use as a public dock for cargoes

The existence of items 155 and 160 above do not show that Plaque

mines Port now is a person furnishing terminal facilities in connection

with common carriers by water

However there are many private facilities in Plaquemines Port and

in its answers to interrogatories propounded in certain stayed Federal

Court actions Plaquemines Port stated that it administers all private

ly owned docks wharves etc within its geographical jurisdiction

The respondent admits that There is a public interest of ownership

impressed upon the banks of the navigable streams and waterways of

the State of Louisiana The permission to use them is vested in local

governments especially when they have a Port District enabling stat

ute These local governments have a

right to make charges for the

use ofthese areas for wharves The local governments have a corre

sponding power to impose a fee on the cargoes that are stored on such

public banks even if there are no wharves or facilities The right to

make the charge is inherent because private ownership of such area is

impressed with the vested right of public use of the banks of such

rivers and waterways In addition the enabling legislation for the

Port District states that the prior permission for the building of any

wharves or facilities must be obtained

Plaquemines Port was deemed not eligible to join the Mid Gulf

Seaport Marine Terminal Conference FMC Agreement T 2002 ap

proved January 17 1967 by Mr Cyrus C Guidry Executive Secre

tary and Legal Advisor to the said Conference Mr Guidry s opinion

was based on certain information given to him by the attorney for

Plaquemines Port Mr Guidry was told that Plaquemines Port did not

own or operate or furnish any wharves for the use of which charges

were assessed common carrier vessels loading or unloading cargo Also

Mr Guidry was given other information including that the sole public

facilities of Plaquemines Port were marinas for pleasure and fishing

boats

Mr Guidry s opinion is only a legal opinion and is not evidence of

any basic facts relative to whether or not Plaquemines Port furnishes

any terminal facilities in connection with common carriers by water

Plaquemines Port filed its Tariff No 1 with the Federal Maritime

Commission for informational purposes only with the understanding

that the filing of the tariff in and ofitself does not confer jurisdiction

ofthe Federal Maritime Commission over Plaquemines Port

2S F M C
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 79

HARBOR TERMINAL DISTRICT

Of course the mere filing of a tariff is not proof of jurisdiction over

the filer of a tariff The filing of a tariff may be only one ofmany facts

relating to jurisdiction

In determining whether Plaquemines Port is an other person sub

ject to the Shipping Act one of the issues herein set out below it must

be determined whether Plaquemines Port is a person carrying on the

business of forwarding or furnishing wharfage dock warehouse or other

terminalfacilities in connection with a common carrierby water

As will be seen below many common carriers by water have used

certain so called private facilities in Plaquemines Port for the use of

which facilities these carriers by water have been subjected to the

Tariff No I charges of Plaquemines Port One principal factor in

determining the ultimate jurisdictional question herein appears to be

whether by conditioning the use of these private terminal facilities on

the payment ofits tariff charges Plaquemines Port thereby controls the

use of these terminal facilities and in effect is at least in part furnish

ing these facilities

THE COMPLAINT By complaint filed April 20 1979 served April

24 1979 the seven complainants allege that the respondent Plaque

mines Port is an other person subject to the Shipping Act Further

it is alleged that the respondent s tariff on file with the Federal Mari

time Commission the Commission contains in item 135 a Harbor

Fee which purports to be applicable to each vessel which docks

moors or anchors within the Plaquemines Port in item 136 D a provi

sion for issuance to vessels over 100 feet long of special permits de

scribed in item 137 and in item 137 a provision that these special

permits will be issued to certain vessels appraised for ad valorem

taxes in the Parish of Plaquemines upon payment of such taxes

It is alleged also that the combined effect ofthese tariff items results

in the giving of undue and unreasonable preference and advantage to

particular persons such as the corporations whose vessels are entered

on the tax rolls of the Parish and results in undue and unreasonable

prejudice and disadvantage to the five complainant carriers by water

who pay property taxes on their vessels in other Louisiana parishes or

in states other than Louisiana and who are required by the terms ofthe

tariff to incur charges from the Plaquemines Port of 150 each time one

of their vessels enters the Plaquemines Port in violation of section 16

First ofthe Act

Further the complainants allege that the tariff contains in item 145 a

Supplemental Harbor Fee which purports to be applicable to all cargo

handled by a privately owned wharf excepting cargo which is owned

by the private wharf owner The two complainant grain exporters

Dreyfus and Early allegedly are subjected to undue and unreasonable

prejudice while other persons moving cargo owned by them across

wharves or through terminals owned by them are given undue and

25 F M C
80 FEDERAL MARITIME COMMISSION

unreasonable preference and advantage by the terms of item 145 in

violation of section 16 First of theAct

Further it is alleged that the terms ofitem 145 result in the establish

ment observance and enforcement of unjust and unreasonable regula

tions and practices related to and connected with the receiving han

dling storing and delivering of property in violation of section 17 of

the Act

Finally it is alleged that the Supplemental Harbor Fee contained in

item 145 ofthe tariff operates to the detriment ofthe commerce of the

United States is contrary to the public interest and is otherwise unlaw

ful in violation of the Act and therefore is in violation of section 15 of

theAct

Also the complainants suggest that the Supplemental Harbor Fee

contained in item 145 conflicts with guidelines of the Commission

regarding the filings of tariffs by terminal operators 46 CFR 533 6

defining handling of cargo between point of rest and any place on

the terminal facility other than the end of ship s tackle insofar as item

145 refers to cargo when first handled in the Plaquemines Port in

midstream or at anchorage and insofar as item 145 further states that

all other cargo handled by a privately owned wharf shall be deemed

midstream unloading To complainants item 145 appears to be an

attempt to assess a fee that is tantamount to wharfage for the use of

public facilities when at the same time the private facilities used by the

complainants additionally charge their own fees for the use of their

facilities

COLLATERAL PROCEEDINGS Since September 1 1977 the date

on which the tariff of Plaquemines Port became effective the Port has

sought to charge the complainants its fees under items 135 and 145

On March 15 1978 Dreyfus brought suit in the United States Dis

trict Court for the Eastern District of Louisiana seeking to have the

tariff of Plaquemines Port declared unconstitutional and null and void

ab initio Trial was set for November 24 1978

On July 14 1978 Dreyfus filed a motion for summary judgment

which was denied by the United States District Court on December 6

1978

On November 14 1978 the Plaquemines Parish Commission Council

as governing body of Plaquemines Port filed several suits in the Judi

cial District Court for the Parish ofPlaquemines against 25 defendants

various vessel interests Shipping agents and terminal operators doing

business in Plaquemines Port to enforce collection ofamounts invoiced

pursuant to the tariff ofPlaquemines Port

These additional Plaquemines Judicial District Court items were reo

moved and consolidated with the Dreyfus action into the Federal Court

action

25 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 81

HARBOR TERMINAL DISTRICT

The parties defendant in the consolidated Federal Court action who

are not before the Federal Maritime Commission in the present pro

ceeding are National Marine Service Inc Midland Enterprises Inc

General Electric Credit and Leasing Corporation TTT Shipping Agen

cies Inc Biehl Company Inc Strachan Shipping Co Rogers

Terminal Shipping Corporation Oceans International Corporation

Hauser Tidemann Dalton Steamship Lines Inc Norton Lilly

Co Inc carriers or shipping agents representing carriers Mississippi

River Grain Elevator Inc Electro Coal Transfer Corporation termi

nals and Mannesmann Pipe Steel Corporation and Artfer Inc

shippers Three other defendants have compromised and have been

released and another is bankrupt

The amounts assessed the fifteen defendants who are not before the

Federal Maritime Commission through June 30 1980 and in a few

cases July 2 1980 totaled 774 745 90

This total above plus 843 316 20 claimed against the complainant as

of the same time made the total of tariff fees then in litigation of

1 618 062 10

In each of its suits the Plaquemines Parish Commission Council

sought preliminary injunctions against the defendants prohibiting their

use of the Plaquemines Port and any facilities therein public or private

In lieu of enjoining the defendants access to the Mississippi River

and Gulf Intracoastal Waterway and the facilities thereon located

within Plaquemines Port the Plaquemines Parish Council agreed to

accept surety bonds and deposits in the registry ofthe federal courts to

secure payment of the claimed fees

A motion to dismiss the complaint filed by respondent was denied by

the Administrative Law Judge on August 20 1979 as was respondent s

motion for leave to appeal to the Commission which was denied on

October 25 1979

Dreyfus filed a motion for stay in the United States District Court

based upon the doctrine that the Federal Maritime Commission has

primary jurisdiction This motion was granted on January 30 1980 and

the United States District Court Action and all consolidated actions

were stayed pending the outcome of the present proceeding before the

Federal Maritime Commission

INTER VENTION BY HEARING COUNSEL A petition for leave

to intervene was filed by Hearing Counsel stating their belief that the

impact of the tariff provisions at issue herein was far broader than the

tariff provisions effect upon the seven complainants and stating that

there was a significant effect on the shipping public and the ocean

transportation industry This petition was granted but thereafter Hear

ing Counsel did not participate in the hearing nor did they offer any

evidence into the record Hearing Counsel did file opening and reply

briefs taking the position that respondent is not an other person that

25 F M C
j

i

I

82 FEDERAL MARITIME COMMISSION

respondent is not required to file a tariff with the Commission and that

the tariff items 135 and 145 providing a Harbor Fee and a Supplemental

Harbor Fee are not regulations or practices related to or connected

with the receiving handling storing ordelivery ofproperty

Hearing Counsel do concede that is arguable that the Supplemental

Harbor Fee is a

regulation or practice related to or connected with the

receiving handling storing or delivering of property for the reason

that the fee is a charge against cargo and the assessed fees are based on

tonnage But Hearing Counsel argue that this fee is not related to or

based upon any terminal services or facilities supplied by respondent

Hearing Counsel on brief do not admit that control of the use of a

terminal facility plus the imposition of a fee for use of such a facility

might result in control of the furnishing of a terminal facility Nor do

Hearing Counsel on brief discuss other issues relating to the merits of

the complaint such as whether the amount of the Supplemental Harbor

Fee is reasonably related to the benefits received by those charged this

fee

THE UNIQUENESS OF PLAQUEMINES PARISH AND PORT

The Plaquemines Port and the Parish sit astride the delta ofthe Missis

sippi River on its southernmost portion Only 6 percent of the surface

of the Parish is habitable This habitable area consists of two relatively

narrow strips of land along each bank of the Mississippi River between

the riverfront levees and the back levees The latter protect the land

from waters other than the Mississippi Substantially all ofthe habitable

area is close to the waterways in Plaquemines Port The remaining area

is either water or marsh and wetland area

On the Bast Bank or left descending bank 1db of the Mississippi

River the strip ofhabitable land is accessible by only one highway 35

miles long and on the West Bank right descending bank rdb the

one highway is 70 miles long The Parish population is about 27 000

permanent residents plus as many or more itinerant laborers and pro

fessionals The largest industry group and the largest employer in

Plaquemines Parish is the oil industry Plaquemines Parish has it own

oil deposits and also serves as a base for offshore oil exploration and

production in the GulfofMexico

There are no bridges across the Mississippi River in Plaquemines

Port The first bridge north of the Gulf of Mexico is one at New

Orleans There are two ferryboat crossings of the Mississippi River in

Plaquemines Port one at Belle Chasse La in the northernmost part of

Plaquemines Port and the other at Pointe a Ia Hache La nearer to the

central point ofPlaquemines Port

Plaquemines Parish provides its two ferryboat services until about

11 30 pm daily The parish has three ferryboats one of which the

M V Louisiana has been equipped with water pumps and firefighting

apparatus

25 F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 83

HARBOR TERMINAL DISTRICT

Inthe Parish there is a

very considerable threat of extensive damages

to property and life caused by hurricanes and other storms which

periodically beset this Gulf coastal area ofLouisiana

Because of the tendency of the hurricanes to damage citizens resi

dences in the Parish one ostensible result is that property tax millage

rates in Plaquemines Parish are either very low or the lowest in the

State of Louisiana

According to the state constitution personal and real property is

assessed for tax purposes at 15 percent of fair market value Millages

applied to the assessed valuation are determined by local election The

total combined millage rate for Plaquemines Parish in 1979 was 2245

mills 3and the 1977 and 1978 rates were similar The component

millages included school tax parish tax water tax hospital tax library

tax pollution control tax road maintenance tax waste disposal tax

incineration tax and law enforcement tax

A property worth 100 000 assessed at 15 percent or 15 000 would

pay ad valorem taxes at the rate of 2245 mills of 336 75 One witness

who owns 248 acres of marshland pays about 100 a

year in ad valorem

taxes

Nevertheless in spite of the hurricanes etc there are some proper

ties in Plaquemines Parish of considerable value A marine engineer

who has specialized in the design and construction of marine terminals

made an inspection and appraisal of the fair market value of certain

marine facilities in Plaquemines Port evaluating only that portion of a

facility located from the center line of levee to the Mississippi River

including those structures in the river His appraisals were

Mississippi River Grain Corporation Alliance La

Barge Unloading Ship Loading Terminal

12 000000 00

Amax Nickel Refining Co Inc Braithwaite La

Dock Facilities

4 600 000 00

Cal Ky Pipeline Terminal Empire La

Dock

812 00000

3

The Orleans Parish s millage rate was about 86 to 87 mills

25 FM C
84 FEDERAL MARITIME COMMISSION

Getty Oil Company Venice La

Ship Dockand Barge Dock

4675 000 00

GulfOil Co U S Ostrica La

Liquid Products Handling Facilities

6 350 00000

GulfOil Company U S Alliance La

Coke Dock Liquid Plastics Dock

20 350 00000

Electro Coal Transfer Corporation Davant La

Marine Transfer Facilities

30 000 00000

Signal Oil Company Homeplace La

Loading Dock

690 000 00

As to the facilities above of the Mississippi River Grain Corporation

the fair market value estimate of 12 000 000 apparently included only

the barge unloading and ship loading terminal In fact the replacement

cost of the grain elevator and the dock facilities together would be

about 80 000 000 Also the other facilities listed above would show

further values if properties beyond the center line of the Mississippi

River levee were included

When various industrial facilities were located within Plaquemines

Port or Parish often arrangements were made under Louisiana law to

waive collection of certain taxes for a number of years as inducements

for the industries to locate in the parish For example when the Missis

sippi River Grain Elevator facility originally was constructed it was

granted a ten year industrial exemption from ad valorem taxes by the

State of Louisiana The exemption expired in 1978 on portions of the

facility and MRGE voluntarily has placed the remaining portions of

the facility on the ad valorem tax rolls ofPlaquemines Parish

Other concerns having ad valorem tax exemptions in Plaquemines

Parish include Chevron Chemical Company Empire Menhaden Com

pany Inc Louisiana Power Light Co SECO Industries Universal

Foods and Signal Petroleum

THE HISTORY OFPLAQUEMINES PORT AND ITS POWERS

The predecessor of Plaquemines Port originally was created in 1954

and was then entitled the Plaquemines Parish Port Authority It was

created by an Act of the Louisiana Legislature Amendments to the

statute by the state legislature account for Plaquemines Port s present

form From 1954 to 1977 Plaquemines Port and its predecessor existed

in law but in fact were dormant The Port was activated in 1977 as

25 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 85

HARBOR TERMINAL DISTRICT

testified by the President of the Plaquemines Parish Commission Coun

cil Mr Chalin O Perez and by the Plaquemines Port Director Mr

Albert Beshel who also is one of the five commissioners of the Plaque

mines Parish Commission Council

Mr Perez a lifelong citizen of the Parish of Plaquemines became

president of the Parish Council in 1967 Certain other Parish Commis

sioners and Parish employees also are lifelong citizens of the Parish

Under applicable Louisiana statutes which created the Plaquemines

Port Harbor and Terminal District Ex C l of record Plaquemines

Port may acquire by purchase donation expropriation appropriation

or otherwise any lands in the Plaquemines Port needed for railways

wharves sheds buildings canals channels and other facilities required

for the operation of the Port The Plaquemines Port may levy annually

an ad valorem tax not to exceed five mills on the dollar on property

subject to taxation situated in the Port

The Plaquemines Port shall have the power to regulate the com

merce and traffic within the Port in such manner as may in its judg

ment be best for the public interest

Riparian owners or those lessees ofproperty along the banks of any

navigable stream or other body of water may with the consent of

Plaquemines Port and in conformity with plans and specifications ap

proved by the governing authority of the Port erect and maintain on

the batture 4banks or bed of any navigable stream or other body of

water owned or leased by them such wharves buildings or improve

ments as may be required for public or private purposes but in all

cases such wharves buildings or improvements shall remain subject to the

administration and control of the Plaquemines Port with respect to their

maintenance and to thefees and charges to be exacted for their case by the

public Emphasis supplied

As seen above Plaquemines Port retains administrative authority and

control over the private wharves and other terminal facilities in the

Port including control over the fees and charges exacted by the

owners ofprivate facilities for their use by the public

The fees and charges of Plaquemines Port here in issue are in addi

tion to the fees and charges and contractual rates and arrangements of

the owner of a private facility such as the Mississippi River Grain

Elevator MRGE

MRGE has a through put agreement a private contract with

Dreyfus for example A through put agreement provides an all inclu

sive charge for certain services rendered by MROE including unload

ing grain from barges into MRGE s grain elevator the storing of the

grain in the elevator and the taking of the grain out ofthe elevator and

4

Batture is the land lying between thelow tide line of the River and the middle of the levee

25 F MC
I

86 FEDERAL MARITIME COMMISSION

loading it onto an ocean vessel In other words the grain is put

through the elevator for a fee

Also MRGE has its own grain tariff which provides among other

things for dockage charges to vessels The same MRGE grain tariff

also provides charges for drying and cleaning the grain

Plaquemines Port contains many oil deposits and serves as a base for

offshore oil exploration and production operations in the Gulf of

Mexico

The oil and gas portion of the Plaquemines Parish tax rolls is the

largest in terms of value and produces the largest share ad valorem

taxes collected

Plaquemines Parish has a wide variety of industries related to oil

exploration and production such as oil field supply and service compa

nies Services include drilling pipe diving food metering and wireline

services Supplies include oil drilling ohemicals and mud Most of the

oil field activity takes place in shallow marshy waters outside of the

principal land areas ofthe Parish

A large number of vessels many hundreds if not thousands operate

in the Parish to service the oil industry About 95 percent of these are

on the ad valorem tax rolls of the Parish Most of the vessels are

crewboats and supply boats which are less than 100 feet long

Numerous pipelines for both oil and gas crisscross South Louisiana

and Plaquemines Parish These pipelines generally bring oil in from

offshore areas to refineries or production facilities Some pipelines are

used for the interstate transmission ofoil and gas

Plaquemines Parish has a fishing industry involving oysters shrimp

and menhaden Most fishing vessels are less than 100 feet long The

Parish has a large number of docks and facilities for the fishing indus

try including menhaden processing plants at Empire La and docking

and ice facilities at Venice La

Plaquemines Parish also supports recreational fishing and hunting

Various marinas and boat launches supply services to hunters and

pleasure fishermen Pleasure fishing extends to the Gulf of Mexico and

to the inland marsh areas of the Parish Duck hunting is a popular

pastime Plaquemines Parish operates a number ofmarinas

The activation of Plaquemines Port in 1977 coincided with a

period of declining fortunes for the Parish as its oil severance and

royalty collections and other revenues were not keeping pace with

increased Parish governmental expenditures

The Parish passed its first sales tax in about 1976 or 1977 It was only

one and one half percent Plaquemines Parish had a deficit for about

the last four or five years up to April 29 1980

Because ofdeclining oil and mineral revenues and for other reasons

such as the increased traffic on the Mississippi River and increased

industrial activities in the Parish the Plaquemines Parish Commission

25 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 87

HARBOR TERMINAL DISTRICT

Council decided on orabout early in 1977 to raise additional revenues

through the Harbor Fees and the Supplemental Harbor Fees here in

issue as published in the Plaquemines Port s tariff which first became

effective on September I 1977

It is the complainants view that at this time in 1977 it was the intent

ofthe Plaquemines Parish Commission Council to raise additional funds

for the general governmental functions of the Parish by levying the

tariff charges in issue on foreign business interests that is on those

businesses such as the complainants businesses not domiciled in Pla

quemines Parish

Plaquemines Port takes the contrary view that it merely sought or

seeks to recoup marine related expenses from the users of the facili

ties ofthe Port ofPlaquemines

Plaquemines Port takes a very broad view of its definition of

marine related in allocating portions of the general expenses of the

Parish government to the costs of operating Plaquemines Port While

practically every industry in Plaquemines Parish might be considered

directly or indirectly marine related nevertheless it is abundantly clear

from the evidence that the so called marine related expenses were

not passed on to the persons and industries which caused these ex

penses but these marine related expenses were sought to be recov

ered only from vessels and cargoes subjected to the Harbor Fees and

the Supplemental Harbor Fees

THE FOUR LOUISIANA PORTAUTHORITIES Plaquemines Port

is one of the four port authorities created by the State of Louisiana

along the Mississippi River from the Gulf ofMexico northward to and

including Baton Rouge La

Plaquemines Port includes only one Parish Plaquemines and extends

from the Gulf to Mile 816 on the River The Board of Commissioners

of the Port of New Orleans have jurisdiction over the area along the

river from Miles 816 to 115 including the Parishes of St Bernard

Orleans and Jefferson The South Louisiana Port Commission has juris

diction along the river from Miles 115 to 168 including the Parishes of

St Charles St John the Baptist and St James The Greater Baton

Rouge Port Commission has jurisdiction covering Miles 168 to 255

including the Parishes of Ascension Iberville East Baton Rouge and

West Baton Rouge

The three upriver port authorities each are concerned with areas of

three or more parishes and either own or control public wharves

The State of Louisiana authorized differing modes ofgovernment for

these four Louisiana Port Authorities

The Port of New Orleans has a seven member board with four

members from Orleans Parish two from Jefferson Parish and one from

St Bernard Parish The State Governor selects these members of the

board from among nominees put forth by civic and business organiza

25 F M C
88 FEDERAL MARITIME COMMISSION

tions including the Chamber of Commerce of New Orleans the New

Orleans Board ofTrade Ltd the New Orleans Steamship Association

the International Freight Forwarders and Customs Brokers Association

of New Orleans Inc and the International Trade Mart The Greater

Baton Rouge Port Commission has fifteen members appointed by the

State Governor from nominees supplied by such authorities as the

police jury of the Parish of West Baton Rouge the mayor and alder

man of the town of Port Allen La and the city council of Baton

Rouge

The South Louisiana Port Commission is composed of nine members

of whom two each are appointed by the authorities of the Parishes of

St Charles St John the Baptist and St James A seventh member is

appointed by the State Governor and the other two positions are

occupied ex officio by the directors of the Louisiana Department of

Public Works and the Louisiana Department of Commerce and Indus

try

The title to port facilities operated by the Greater Baton Rouge Port

Commission and by the South Louisiana Port Commission vests in the

State of Louisiana

As seen above Plaquemines Port has the same governing body as

does the Parish of Plaquemines namely the five member Plaquemines

Parish Commission Council This is in contrast with the three other

Louisiana Port Authorities whose governing bodies are independent of

and differ greatly from the governing bodies of the various parishes

This situation in Plaquemines leads to the charge by the complainants

that the Plaquemines Parish Commission Council has tended to conduct

the business of Plaquemines Port without distinguishing it from the

operations ofthe Parish government

THE TA IFF PROVISIONS OFPLAQUEMINES PORT WHICH

RESULTED IN THE CHARGES IN ISSUE The Complainants ex

hibit No 3 contains the entire tariff of Plaquemines Port as filed with

the Commission and as it was effective at the time of hearing includ

ing some original and some revised pages Originally the tariff was

adopted April 20 1977 but did not become effective The tariff as later

adopted on August 17 1977 became effective for the first time on

September I 1977 Subsequent to the hearing the Port s tariff was

amended effective July 4 1980 to reflect changes including changes in

Items 135 145 and 165 Pages 44 to 61 inclusive of respondent s

opening brief recite the tariff provisions and charges of the Port includ

ing the changes and additions effected on July 4 1980 Official notice is

taken of all of the tariff provisions of the Plaquemines Port s tariff

including those in the amendments effective July 4 1980

To fully understand the controversy herein it is necessary to consid

er the tariffs provisions as they were originally at the time of the

hearing and as they were amended after the hearing At the hearing

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HARBOR TERMINAL DISTRICT

with Hearing Counsel not present to represent the public the Adminis

trative Law Judge deemed it advisable to comment on the existing

tariff provisions with the view of assisting in their clarification so as to

make the tariff provisions definite and certain and more readily under

standable by the shipping public

Item 135 of the tariff at the time of the hearing was as follows

Item 135 Harbor Fee

Each vessel which docks moors or anchors within the Dis

trict including Lash and Seabee barges and movable oil rig

and platforms shall be assessed a Harbor Fee as provided

herein to assist in defraying the expense of the administration

and maintenance of the Plaquemines Port Harbor and Termi

nal District including the supervision of the shipping of the

district with the view of preventing collisions and fires polic

ing the river and river front rendering aid to vessels in dis

tress and to aid in extinguishing fires in vessels and equipment

and in their cargoes aboard such vessel or upon wharves and

other facilities in the District

Fee Per Vessel

Vessels over 100 and under 250 feet in length

Vessels 250 feet and over in length

100 00

150 00

This Harbor Fee is due for the first five days or any part

thereof that the vessel remains within the District

Effective July 4 1980 this item 135 was amended according to

respondent for two reasons one to clarify the amount of the Harbor

Fee for vessels remaining over five days in the Port and two to make

all parties liable for the Harbor Fee The amendment added the follow

ing

and for each day or any part thereof over five days that the

vessel remains within the District the Harbor Fee due shall be

one fifth ofthe above stated Fee Per Vessel

The payment ofthe Harbor Fee shall be the primary obligation

of the owner agent or user of the vessel but the owner of the

facility handling or storing the cargo and the cargo owner

whose cargo is loaded unto a vessel outbound from the Port

District from any wharf dock facility mooring facility or

anchorage within the Port District shall be liable in solido as

surety for the payment of the Harbor fee due by the owner

agent or user of the vessel unto which such cargo has been

loaded subject however to the right of full subrogation and

full recovery by those who have paid on behalf of the owner

agent or user ofthe vessel against the owner agent or user of

25 F M C
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90 FEDERAL MARITIME COMMISSION

the vessel who is primarily liable for all amounts paid by

those responsible in solido but not primarily obligated See

Item 145 Supplemental Harbor Fee and Item 165 Payment of

Bills hereof

Item 136 ofthe tariff provides

Vessels Exempted From Harbor Fee

A Vessels passing through the port which do not berth at

any wharf anchor within the District or in any way moor

themselves within the District limits Vessels stopped with the

District for the sole purpose of changing pilots or because

inclement weather remaining less than twelve hours within the

limits ofthe District

B Government vessels not engaged in carrying cargo troops

or supplies

C Private non commercial pleasure craft

D Special permits vessels over 100 ftin length as set forth

in Item 137

Item 137 ofthe tariff provides

Special Annual Or Temporary Port Permit Vessels

Annual special permits will be issued by Plaquemines Parish

Port Authority to every vessel over 100 ft in length that is

appraised for Ad Valorem taxes in the Parish of Plaquemines

upon payment of the Parish taxes resulting from such Parish

assessments Special Permits will be issued by Plaquemines

Parish Port Authority upon the payment ofthe following fees

I

Vessels over 100 ft to 200 ft in length

a For 30 days

b For 90 days

c For 180 days

d For 365 days

100 00

250 00

450 00

750 00

II

For non self propelled barges lighters or other watercraft

over 100 feet In length and not more than 200 feet in length

a For 30 days 50 00

b For 90 days 125 00

c For 180 days 225 00

d For 365 days 375 00

III

For non self propelled barges lighters or other watercraft

over 200 feet in length and not more than 300 feet in length

a For 30 days 200 00

b For 90 days 50000

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LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 91

HARBOR TERMINAL DISTRICT

c For 180 days 900 00

d For 365 days 1500 00

Such permits will exempt such vessels from payment of

Harbor and Lay Up Fees as set out in Items 135 136 and 140

hereof

As seen from the amended provision regarding who shall be liable in

solido as surety in item 135 the payment of this harbor fee relates to

those vessels on which cargo has been handled in the Port orstored in the

Port or loaded upon a vessel outbound from Plaquemines Port As item

135 existed before the July 4 1980 amendment the fee related to vessels

which dock moor oranchor in the Port As further seen in item 136 of

the tariff the exempted vessels which do not pay the harbor fee in item

135 are those vessels merely passing through the Port etc These

vessels in other words are those vessels not handling cargo in not

storing cargo in or not loading cargo outbound from the Port

Clearly items 135 and 136 connote the intention of Plaquemines Port

to assess only those vessels handling cargo in the Port in some fashion

But other vessels not assessed could be involved in collisions fires or

other emergencies Thus the harbor fee is in reality more of a fee

related to cargo than a fee regarding navigational problems in a harbor

Item 145 of the tariff at the time of the hearing 1st revised page 13

was as follows

Item 145 Supplemental Harbor Fee

All cargo when first handled within the district in midstream

or at anchorage shall be assessed in addition to Items 135 137

and 140 10 per net ton or fraction thereof over 500 tons of

the weight of cargo handled provided that no cargo shall be

assessed a

tonnage harbor fee more than one time The pay

ment of supplemental harbor fee shall be the primary obligation

of the owner of the cargo but the owners orother users ofthe

vessels and facilities handling or storing such cargo shall be

bound and responsible in solido as surety for the payment of

such cargoes subject however to the right of full subrogation

and full recovery by those who have paid on behalf of the

owner of the cargo against the owner of the cargo who is

primarily liable for all amounts paid by those responsible in

solido but not primarily obligated The cargo ofthe owner of

a privately owned wharf shall be handled by the owner of the

wharf without the payment of this fee to the District The

Harbor Fee Charge of Item 135 and on any vessels involved

in the handling of cargo subject to this supplemental harbor

fee shall be credited against this cargo All other cargo han

dled by a privately owned wharf shall be deemed midstream

unloading and shall be subject to the same fee as that imposed

above upon midstream unloading

25 F M C
92 FEDERAL MARITIME COMMISSION

Effective July 4 1980 item 145 was amended in several ways as

follows

The first sentence became the first paragraph The second sentence

became the second paragraph and was changed somewhat but not in

substance according to the respondent to read as follows

The payment of Supplemental Harbor Fee shall be the primary

obligation of the owner of the cargo but the owners the agents

or other users of the vessels and the owners of the facilities

handling or storing such cargo shall be bound and responsible

in solido as surety for the payment of such charges subject

however to the right of full subrogation and full recovery by

those who have paid on behalf of the owner of the cargo

against the owner of the cargo who is primarily liable for all

amounts paid by those responsible in solido but not primarily

obligated

The new second paragraph above mentions agents of vessels spe

cifically In other words the respondent intends that all parties in

volved with the handling of cargo in the Port to be liable for the fees

in item 145 As seen Item 145 of the tariff holds cargo interests

primarily liable for the payment of the Supplemental Harbor Fee But

in addition this item makes the owners orother users ofthe vessels and

facilities handling or storing such cargo bound and responsible in solido

as surety for the payment of the debt incurred by the cargo owner

subject to the right of full subrogation and full recovery against the

owner ofthe cargo

It should be emphasized that item 145 provides a fee on cargo

tonnage handled in a terminal facility It is a fee assessed against cargo

and not a fee on vessels using a harbor although its title Supplemen

tal Harbor Fee has that connotation In other words item 145 more

properly should be titled a Terminal Fee instead of Harbor Fee

This Plaquemines fee was modeled on the Supplemental Harbor Fee of

the Port ofNew Orleans

But by way of contrast the Supplemental Harbor Fee of the Port of

New Orleans is assessed against vessels handling or transferring cargo in

midstream or when the vessels are anchored at or moored to mooring

facilities including barge fleet mooring facilities

The third sentence of item 145 of Plaquemines Port s tariff has

become the third paragraph

The fourth sentence ofitem 145 was made the fourth paragraph and

now reads

The Harbor Fee of Item 135 on any vessels involved in the

handling of cargo subject to this Supplemental Harbor Fee

shall be credited against this Supplemental Harbor Fee

The above fourth paragraph corrected a clerical error the word and

after Item 135 in the prior version was deleted and clarified this

2S F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 93

HARBOR TERMINAL DISTRICT

charge at the end of the sentence to mean this Supplemental Harbor

Fee

This correction further has the effect ofemphasizing that the Harbor

Fee on vessels in item 135 is on any vessels involved in the handling of

cargo and as will be seen from item 136 such handling of cargo must

be in Plaquemines Port In other words both the Supplemental Harbor

Fee item 145 and the Harbor Fee item 135 relate to or are depend

ent on the handling of cargo in or on terminal facilities in Plaquemines

Port Item 145 is a fee on cargo based on tonnages of cargo handled

and item 135 is a fee on vessels but only on vessels which transport

cargo handled in the Port Vessels which merely pass through Plaque

mines Port which do not berth at any wharf anchor within the Port or

in any way moor themselves in Plaquemines Port are exempted from

the Harbor Fee That is vessels loaded with cargo but merely passing

through Plaquemines Port and going to or from other ports such as the

Ports of New Orleans Baton Rouge or South Louisiana are exempted

from the Harbor Fee

The fifth and last sentence of the prior item 145 has become the

seventh paragraph and reads

All cargo handled by a privately owned wharf shall be

deemed midstream unloading and shall be subject to the Sup

plemental Harbor Fee imposed above which includes mid

stream unloading

A new fifth paragraph of item 145 reads as follows

The cargo is assessed the Supplemental Harbor Fee when it is

first handled within the District but because ofthe exemption

granted for cargo owned by the handling wharf owner the

reporting of cargoes should be made when the cargo leaves

the wharf or facility and the assessment calculation shall then

be made since the joint ownership ofthe cargo and the wharf

cannot be finally determined until the cargo leaves the wharf

or facility The Harbor Fee credit is given for the outbound

vessels onto which the cargo is loaded from the wharf and

the reporting to the Port District as to cargoes vessels and

ownership thereof is to be made at the instant before the cargo

leaves the wharf or facility

A new sixth paragraph ofitem 145 reads as follows

A Supplemental Harbor Fee shall be assessed for cargo not

owned by the owner of the wharf or facility irrespective of

the manner in which the cargo leaves the wharf or facility If

the cargo leaves the wharf or facility other than by vessel for

example by pipeline rail truck etc and therefore no Harbor

Fee is assessed with such outbound cargo there is no Harbor

Fee to be credited against the Supplemental Harbor Fee

The first proposed tariff of Plaquemines Port which did not become

effective filed with the Federal Maritime Commission on May 23

25 EM C
94 FEDERAL MARITIME COMMISSION

1977 provided a Supplemental Harbor Fee of 20 a net ton with

assessment against the vessel rather than against the cargo

The amended tariff No 1 of the Plaquemines Port which became

effective September 1 1977 filed with the Federal Maritime Commis

sion on August 25 1977 provided a Supplemental Harbor Fee of 1O a

net ton with assessment against the vessel

However the first revised item 145 received by the Commission on

December 27 1977 effective January 1 1978 provided the same 1O a

net ton Supplemental Harbor Fee but with assessment against the cargo

This assessment against the cargo remained at the time of and subse

quent to the hearing

The new fifth paragraph ofitem 145 remains somewhat contradictory

in and ofitself First it provides that cargo is assessed the Supplemen

tal Harbor Fee when it is first handled in the District However the

new fifth paragraph goes on to state that the reporting of cargoes

should be made when the cargo leaves the wharf or facility

Obviously when cargo is first put into a facility such as the Missis

sippi River Grain Elevator it has been first handled Just as obvious

ly when that same cargo leaves the facility it has been second third

or fourth handled but surely not first handled

The key words in the new fifth paragraph of item 145 are that the

reporting of cargoes for purposes ofcollecting the charges under item

145 should be made when the cargo leaves the facility since the joint

ownership of the cargo and the wharf cannot be finally determined

until the cargo leaves the wharf or facility in the event that there is

such a joint ownership

The respondent s intention is and generally has been to assess the

Supplemental Harbor Fee where there is no joint ownership against the

owner of the cargo with such ownership to be determined when the

cargo leaves the wharf or facility apparently because such cargo

owner such as Dreyfus for example does business regularly in Plaque

mines Port has employees stationed there and is reachable easily for

purposes ofcollecting the Supplemental Harbor Fee This is in contrast

to an ocean vessel which may make only one or a few calls in Plaque

mines Port and may be difficult later to reach As seen item 145 in its

second paragraph places the primary obligation of the charges on the

owner of the cargo but makes all other parties responsible as surety

The privately owned wharves in the Port of Plaquemines are public

ly oriented in that these wharves may handle cargoes owned by the

general public as well as any cargoes owned by the wharf owners In

contrast at the Port of New Orleans privately owned wharves are

restricted by law to the handling of cargoes of their owners The Port

ofNew Orleans has public wharves owned or operated by the Board

ofCommissioners ofthe Port ofNew Orleans

25 F M C
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 95

HARBOR TERMINAL DISTRICT

OTHER PERTINENT TARIFF PROVISIONS OF PLAQUE

MINES PORT Item 10 of the tariff provides in part that The

Plaquemines Port Harbor and Terminal District shall be the sole judge

as to the interpretation of this tariff Item 10 also provides that the

rates rules and regulations in the tariff apply to all users ofthe water

ways and facilities

Item 50 General Anchorage of the tariff lists the General Anchor

age for Plaquemines Port as follows

1 Fairway Anchorages

A South Pass Mississippi River Anchorage

B Southwest Pass Mississippi River Anchorage

2 Pilottown Anchorage

15 6 7 R D B

3 Boothville Anchorage

12 2 18 5 R D B

4 Ostrica Anchorage

23 5 244 R D B

5 Port Sulphur Anchorage

37 5 39 7 LD B

6 Deer Range Anchorage

53 5 54 5 LD B

7 Alliance Anchorage

63 6 65 8 RD B

8 Cedar Grove Anchorage

70 6 712 R D B

9 Augusta Anchorage

714720 R D B

10 Belle Chasse General Anchorage

73 6 75 2 R D B

11 12 Mile Point Anchorage

79 0 80 8 R D B

The rules and regulations concerning the General Anchorages

are prescribed by the U S Army Corps of Engineers and

their enforcement is a responsibility of the U S Coast Guard

Vessels anchored in the River except as below noted shall be

anchored in the above listed General Anchorages

Item 55 Special Permission To Anchor ofthe tariff provides

Vessels may be granted special permission by the Director of

Plaquemines Port to anchor in other parts of the District

25 F M C
96 FEDERAL MARITIME COMMISSION

Item 125 Loss or Damage Responsibility of the tariff provides

The Plaquemines Port being a political subdivision of the

State ofLouisiana is not liable and cannot assume responsibil

ity for any loss or damage to cargo or other property while on

the wharves docks landings or other facilities both public and

private under the administration of this District which have

been assigned or used for the shipment reception or storage of

such cargo or other property

Each shipper or receiver of cargo or those acting for them

must protect such cargo from loss or damage from any causes

whatsoever

Item 130 Penalties for Violation ofthe tariff provides

a It shall be unlawful for any person firm or corporation to

utilize or make use of the Plaquemines Port Harbor and

Terminal District or any ofits facilities without paying to the

District the proper toll charge or fee therefore as fixed and

specified in this tariff or by designation otherwise and every

person firm or corporation violating any provision of this

order respecting the payment ofany toll charge or fee shall

be deemed guilty of a misdemeanor and upon conviction

thereof shall be punishable by a fine of not more than Five

Hundred 500 00 Dollars or by imprisonment in the Parish

Jail for a period ofnot more than thirty days or by both such

fine and imprisonment The Court in its discretion may consid

er each day on which the violation occurs as a separate of

fense

b It shall be unlawful for any person firm or corporation to

fail refuse or neglect to comply with any of the provisions of

the rules and regulations prescribed by this tariff or supple

ment thereto or by designation otherwise and any person

firm or corporation violating any of the provisions of these

rules and regulations shall be guilty of a misdemeanor and

upon conviction thereof shall be punishable by a fine of not

more than Five Hundred 500 00 Dollars or by imprison

ment in the Parish Jail for a period of not more than thirty

days or by both such fine and imprisonment The Court in its

discretion may consider each day on which the violation

occurs as a separate offense

Item 155 Wharfage Rates at Public Wharfs of the tariff provides

The rate of wharfage on all commodities shall be 50 per net

ton or fraction thereof unloaded by and with the equipment

furnished by the owner of the cargo The minimum wharfage

for any shipment shall be 5 00

Item 160 Basis for Assessment of Wharfage Charge of the tariff

provides

All cargo or freight shall be subject to the wharfage charge as

follows

25 F MC
2S F M C

LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 97

HARBOR TERMINAL DISTRICT

1 When cargo or freight is placed onto public wharves docks

landings mooring facilities or other structures for handling to

or from vessels or

2 When cargo is placed on the public wharves for outbound

movement and is not subsequently loaded aboard a vessel but

is removed from the wharves or

3 When such cargo or freight is transferred over or under such

wharves docks landings mooring facilities or other struc

tures to or from vessels or

4 When such cargo or freight is delivered to or received from

vessels by other watercraft or when transferred over the side

of vessels directly to or from the water

a When said vessels are occupying berths at wharves

docks landings mooring facilities or other struct lres

b When said vessels are moored outside ofother watercraft

occupying berths at wharves docks landings mooring

facilities orother structures

Item 165 Payments ofBills of the tariff provides

All bills are due upon presentation by the District and failure

to pay when presented shall place the name of the vessel its

owners and agents or other user of the facilities upon a

Delinquent List conditions of which are hereinafter defined

The payment of supplemental harbor fee shall be the primary

obligation of the owner of the cargo but the owners or other

users of the vessels and facilities handling or storing such

cargo shall be bound and responsible in solido as surety for the

payment of such charges subject however to the right offull

subrogation and full recovery by those who have paid on

behalf of the owner of the cargo against the owner of the

cargo who is primarily liable for all amounts paid by those

responsible in solido but not primarily obligated All other

charges applicable to this Tariff shall be assessed to owners of

the vessels their agents or facilities in solido

All common carriers vessels their owners and or agents

and or owners assessors or leasors sic of wharves or other

users of the facilities landing goods on or in the facilities or

receiving goods from and or over the facilities or delivering

or receiving goods from barges or other craft while said vessel

is berthed at a wharf or at anchorage in the harbor thereby

contract to pay and are responsible for the dockarge sic

storage or other charge on such goods at the rates provided

herein to be collected either from the common carrier vessel

there sic owners and or agents or other users of the facili

ties

The Plaquemines Port Harbor and Terminal District reserves

the right to estimate and collect in advance all charges which
98 FEDERAL MARITIME COMMISSION

may accrue against common carrier vessels their owners and

or agents or against cargo loaded or discharged by such

vessels or other users ofthe facilities ofthe Plaquemines Port

Harbor and Terminal District whose credit has not been

properly established with the District or who are habitually on

the delinquent list Use of the facilities may be denied until

such advance payment or deposits are made

The District reserves the right to apply any payment received

against the oldest bills rendered against common carriers ves

sels their owners and or agent or other users of facilities

All common carriers vessels their owners and or agents

and or owners assessors or leasors sic of wharves or other

users of the port or facilities ofthe Plaquemines Port Harbor

and Terminal District placed on the delinquent list for reasons

hereto stated shall be denied further use of the port or facili

ties by the District until all such reports have been filed and

all charges thereon together with any other charges due shall

have been paid

As seen the provisions of item 165 of the tariff impose civil sanc

tions including the placing of vessels owners agents and users of

Plaquemines Port facilities on a delinquent list with consequent denial

of further use of the Port or its facilities These civil sanctions are in

addition to the criminal sanctions provided in item 130 of the tariff

Item 175 Reports Required From Towing Companies Bar Pilots

Assn and Others ofthe tariff provides

The owner agent operator or pilot of any watercraft engaged

in the towing or transportation of any commodities within or

passing through the waters under the jurisdiction of the Dis

trict must render periodically when called upon by the Dis

trict complete reports covering all tonnage handled including

description wei ht and approximate valuation Failure to

render reports Will subject the person or persons concerned to

the penalty prescribed m Item 130

SOME OF THE EFFECTS OF THE TARIFF PROVISIONS Item

135 imposes a harbor fee on vessels over 100 feet long which dock

moor or anchor in Plaquemines Port Exempted are vessels passing

through without berthing at a wharf anchoring or mooring vessels

stopped only to change pilots or ride out inclement weather and for

such purposes remaining less than twelve hours Also exempted are

government vessels not carrying cargo troops or supplies Also ex

empted are private non commercial pleasure craft And also exempted

are vessels carrying special permits as defined in item 137 of the

tariff

Item 137 ofthe tariff makes two classes of vessels eligible for special

permits every vessel over 100 feet in length which is appraised for ad

valorem taxes in Plaquemines Parish and for which the assessment has

25 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 99

HARBOR TERMINAL DISTRICT

been paid and vessels between 100 feet and 300 feet in length for

which the special permit may be purchased for periods of 30 90 180

or 365 days Special permits are not available to selfpropelled vessels

above 200 feet in length or to non self propelled vessels above 300 feet

in length

Unlike other GulfPorts which have harbor fees Plaquemines Ports

fee falls on inland watercraft as well as on those engaged in foreign

coastwise or intercoastal commerce

Item 145 of the tariff the Supplemental Harbor Fee is in fact a

harbor tonnage fee or a

cargo tonnage fee to be assessed against all

cargo when first handled in Plaquemines Port in midstream or at

anchorage This provision was modeled after ararely used provision of

the tariff of the Port of New Orleans but the New Orleans fee is

assessed not against cargoes but against vessels which handle cargoes in

midstream or at anchorage The New Orleans fee does not apply to

operations at private wharves and does not apply to inland watercraft

The Plaquemines Port fee of item 145 is assessed against cargoes

moved across docks wharves and through terminals as well as to

cargoes handled at midstream or at anchorage

Plaquemines Port has extended the fee in item 145 from acharge on

cargo handled in midstream to a charge on cargo handled at docks As

seen a part of item 145 provides that cargo handled by a

privately

owned wharf shall be deemed midstream unloading subject to the fee

for the same

Item 145 creates two classes of exemption namely for the first 500

tons of cargo handled and for the entire tonnage ofany cargo which is

owned by the owner ofthe facility at which the cargo is handled The

said owner includes parent company of the owner and any 100

percent owned subsidiary ofthe owner or parent company

The rationale of the respondent regarding item 145 s exemptions is

that 500 tons at 10 cents a ton is 50 which would be uneconomical to

bill and collect and that the owner of a facility by virtue of his

investment in the facility is entitled to special consideration

Also contained in item 145 is a provision allowing a credit between

the Supplemental Harbor Fee and the Harbor Fee of item 135 The

Harbor Fee charge of item 135 on any vessels involved in the handling

of cargo subject to the Supplemental Harbor Fee shall be credited

against this charge

From May of 1978 until after May of 1980 Plaquemines Port inter

preted this credit provision of item 145 so that if a Supplemental

Harbor Fee was paid by the cargo owner a credit in the amount ofthe

Harbor Fee was given the vessels In other words in such case no

Harbor Fee was assessed against the vessel

In 1978 434 oceangoing vessels docked in Plaquemines Port Of

these 291 vessels were assessed the Harbor Fee docking charge but for

25 F M C
100 FEDERAL MARITIME COMMISSION

the remaining 143 ocean vessels no Harbor Fee was assessed because a

Supplemental Harbor Fee was charged

Subsequent to May 1980 after the hearing Plaquemines Port

changed its interpretation of the exact same wording in the credit

provision ofitem 145 so that the vessel was charged the Harbor Fee in

each instance and the amount of the Harbor Fee was subtracted from

credited against the amount assessed as a Supplemental Harbor Fee

An example ofthe above follows Prior to the hearing vessels calling

at the Mississippi River Grain Elevator to be loaded with Dreyfus grain

were not assessed the 150 docking fee Harbor Fee as the Supple

mental Harbor Fee was assessed without any credit of the Harbor Fee

The Supplemental Harbor Fee charge to Dreyfus averaged about

3 000 on the cargo loaded on an ocean vessel and occasionally ex

ceeded 7 000

During the same period of time ocean vessels calling at MRGE to

receive grain from Artfer Inc were assessed the Harbor Fee of 150

but no Supplemental Harbor Fee was assessed under the mistaken belief

that Artfer Inc and MRGE were under the same ownership This

mistaken belief rested upon the fact that a Mr Ferruzi had an interest

in both Artfer and MRGE

Subsequent to the hearing Plaquemines Port s new policy is to assess

the vessel a 150 docking fee Harbor Fee and to assess the cargo

owner the Supplemental Harbor Fee less the amount ofthe docking fee

of 150

For the calendar year 1978 about one fourth of the total tonnage of

cargo moved and handled through facilities in Plaquemines Port was

assessed the Supplemental Harbor Fee that is 6 875 412 09 tons out of

26 236 525 28 tons

Appendices VI and X of Exhibit C 15 show that 6 857 412 09 tons 6

total were assessed the Supplemental Harbor Fee in 1978 This included

1 714 956 40 tons of soybean meal 1 769 430 65 tons of coal 776 291 50

tons of phosphate 1 813 916 25 tons of com and 782 817 tons of

other commodities such as alfalfa pellets urea coke ammonium

sulfate distilled corn corn pellets sunflower seeds oats pellets

meal wheat chicken feed linseed meal soybean meal pellets and rock

salt

In 1978 the monthly tonnage totals assessed the Supplemental Harbor

Fee ranged from 320 490 13 tons in July to 1 040 88123 tons in March

and averaged 571 451 tons per month

Appendix X of Exhibit C 15 shows the tonnages transferred over

docks and facilities in Plaquemines Port as reported where the cargoes

Appendix VI of Exhibit C 15 how the incorrecttotaJ of 6708 584 15 ton which error results

from an error in the total shown for August 1958 This appendix shows the incorrect total tons for

August of 397 306 80 whereas the correcttotaJ for August i 546 134 14 ton

25 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 101

HARBOR TERMINAL DISTRICT

were classified as owned by the facility owner and thus these cargoes

were exempted from the Supplemental Harbor Fee The reported car

goes listed as exempt are coal sulfuric acid fuel oil nickel products

nickel cobalt products nickel matte raw ore and sulphur Some of

the figures are in tons and some are in barrels The separate tonnage

total is 6 471 657 21 Separately listed are 43 854 212 57 barrels which

when converted to tonnage amounts to 6 078 009 67 tons The conver

sion factor apparently was 0 1385958 Also a note explains that the

barrels reported above are incomplete and the estimated apparently

unreported barrels for 1978 are 94 204 033 or 13 056 283 22 tons

Appendix IX to Exhibit C 15 shows dry tons for 1978 in the amount

of 13 180 24196 and 94 204 033 liquid barrels or 13 056 283 32 unre

ported tons or total dry and liquid tons of 26 236 525 28 This figure

differs from the total calculated from Appendix IX of 12 549 666 88

tons plus 13 056 283 32 tons or a total of 25 605 950 20 tons The

13 056 283 tons represents oil and petroleum products which were han

dled through terminal facilities in Plaquemines Port in 1978 but which

cargoes were not assessed the Supplemental Harbor Fee

With 6 857 412 tons subjected to the Supplemental Harbor Fee and

whether the total tonnage in 1978 was either 25 6 million or 26 2

million these figures show that 26 78054 percent or 26 13689 percent of

the total cargoes was subjected to the Supplemental Harbor Fee

Among other reasons because some 74 or 73 percent of the cargoes

were not subjected to the Supplemental Harbor Fee in 1978 the com

plainants naturally conclude that the implementation ofthe Supplemen

tal Harbor Fee resulted in undue preference and undue prejudice

During the period from September 1977 until June 1980 Plaquemines

Port exempted from the charges of item 145 of its tariff that is the

Supplemental Harbor Fee the cargoes of the oil companies and grain

cargoes ofArtfer Inc among others exempted

ADDITIONAL FACTS OF RECORD The monies generated by the

Harbor Fee and Supplemental Harbor Fee Items 135 and 145 of the

tariff are turned over by Plaquemines Port to the Plaquemines Parish

Commission Council which places them in the Parish s general fund

Tariff funds are commingled with revenues which the Parish obtains

from such sources as ad valorem taxes license fees mineral royalties

and sales taxes The identity of Plaquemines Port has been submerged

within the identity of the Plaquemines Parish Commission Council It

was not until a meeting conducted in November 1977 that any system

atic effort was made by the Plaquemines Parish or by Plaquemines Port

to determine the cost ofParish services properly chargeable as expendi

tures of Plaquemines Port This was done some months after the Pla

quemines Port s tariff had been prepared and charges already imposed

At the meeting in November 1977 attended by various heads of the

branches of the Parish government such as the comptroller the safety

25 F MC
102 FEDERAL MARITIME COMMISSION

director and the Commission Council members the parties attending

the meeting were advised to estimate the percentage of the budget of

each department which could be charged to Plaquemines Port

Inother words it had been determined already that vessels would be

charged a specific fee for docking and anchoring and cargoes a specific

fee for wharfage without any evidence of the actual costs of the

services to be defrayed or recompensed by the Harbor Fees and Sup

plemental Harbor Fees

At the meeting in November 1977 it was determined to advise each

department head to select from his documentary records any document

tending to show that the department s activity or service was water

connected or marine related Secondly a determination was directed to

be made of the percentage of such activity or service as related to the

department s total activity or service performed Thirdly it was direct

ed that the total annual budget of a department be multiplied by the

said percentage to get a dollar amount to be reimbursed from anticipat

ed tariff revenues of Plaquemines Port The sum of these calculations

from the budgets of all departments of the Parish government coupled

with the actual projected expenditures of Plaquemines Port constitute

the Plaquemines Port s annual budget These department percentages

calculated at the end of each year as charged to Plaquemines Port plus

actual direct disbursements by Plaquemines Port determine how much

ofits budget that Plaquemines Port has spent in a

year

In 1978 50 percent of the cost of fire protection in Plaquemines

Parish was allocated to Plaquemiles Port In 1979 the same percentage

was used although the budget of the fire department increased from

127 800 in 1978 to 200 300 in 1979 There was no administrative

review of the 50 percent figure to determine for 1979 whether the

percentage should be raised lowered or maintained Only slightly over

four 4 percent ofthe 1978 fires bore any connection at all to the port

users who had been subjected to the fees collected pursuant to the

Port s tariff That is when complainants requested production by the

fire marshall of documents of fires in those vessels or cargoes made

subject to the payment ofthe harbor fees and supplemental harbor fees

the fire marshall produced fire reports regarding slightly over 4 percent

ofthe fires

The marine related test or port related test was applied individ

ually by the head of each department ofthe Parish or by employees of

each department without any general review

Oceangoing vessels enter the Mississippi River through two passes at

the river s delta Southwest Pass and South Pass From Southwest Pass

the primary pass vessels travel 218 miles to the Head ofPasses where

the main as well as lesser passes not suitable for deep draft vessels

converge Pilotage is compulsory on the river The Bar Pilots board at

the seabuoy and take vessels to Pilottown at the Head of Passes There

2 F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 103

HARBOR TERMINAL DISTRICT

a Crescent River pilot boards There is another change ofpilots about

mile 90 above the Head of Passes near New Orleans A New Orleans

Baton Rouge pilot goes from there as far as Mile 255 near Baton

Rouge

During 1978 the first full year of the activation of Plaquemines Port

a total of about 26 million tons of cargo passed through terminal

facilities in the Port 434 oceangoing vessels docked at some 26 private

facilities on the Mississippi River in the Port and 3 286 tows or barge

flotillas called at private docks in the Port

The complainants Dreyfus and Early have been assessed supplemen

tal harbor fees by Plaquemines Port and Dixie Le Beouf Valley

Federal and Hollywood have been assessed harbor fees by the Port

when their barges were docked at private facilities in the Port

Through the middle of 1979 some 202 corporate entities were assessed

charges under the Plaquemines Port s tariff

A representative sample of those assessed charges under the Port s

tariff include Atlantic Richfield Barber Lines Steamship Co Biehl

Co Inc Canal Freight Line Central Gulf Lines Inc Delta Steam

ship Lines Inc Exxon Company U S A Gulf Coast Shipping Hansen

Tidemann Inc Ionian Transportation Kerr Steamship Company

Lykes Bros Steamship Co Inc Maersk Line Agency Mitsubishi

International Corp Nopal Lines Steamship Agency Norton Lilly

Co Pundsack International Shipping Agency Seatrain TTT Ship

Agencies Texaco Inc and Waterman Steamship Corp

Lykes Bros has received cargoes in Plaquemines Port aboard Lykes

Seabee barges which were then carried to foreign destinations aboard

oceangoing Seabee vessels Likewise Combi Line another common

carrier with tariff on file with the Commission has received cargo in

Plaquemines Port aboard its LASH barges which were then transport

ed to foreign destinations aboard its oceangoing LASH vessels Lykes

and Combi wereassessed docking charges harbor fees by Plaquemines

Port in regard to these movements Lykes was assessed for six such

movements from March to July 1979 and Combi was assessed 58 times

for its movements from January 1978 to August 1979 through its agent

Biehl Company From November 1977 to June 1978 Lykes was

assessed on ten occasions for docking charges Also Lykes vessels

have been assessed anchoring charges by Plaquemines Port when these

vessels were anchored in federally designated anchorages such as

Twelve Mile Point Anchorage Belle Chasse Anchorage and Booth

ville Anchorage

For the years 1978 and 1979 the complainants combined were as

sessed nearly 750 000 by Plaquemines Port

From January 1 1978 through January I 1980 Dreyfus was as

sessed 310 943 90 of supplemental harbor fees at the rate of 10 cents

per net ton of cargo over 500 tons per shipment pursuant to item 145 of

25 FMC
104 FEDERAL MARITIME COMMISSION

the tariff in 98 instances where oceangoing vessels were loaded at

MRGE

Subsequent to the hearing Plaquemines Port altered its interpretation

of the credit provision of item 145 and reinvoiced Dreyfus for

287 442 40 for the same 98 instances Each of the 98 original invoices

was reduced by the amount of the harbor fee usually 150 The old

average invoice charge was 3 172 90 and the new altered invoice

average charge was 2 933 10

Early put grain through MRGE only from September IS 1977 to

December 31 1978 Early also has been reinvoiced subsequent to the

hearing For 17 instances Early originally was assessed 56 08109 in

supplemental harbor fees and it has been reassessed a total of

46 599 60 The average charge of 3 298 89 has been revised to an

average of 2 741 15

MRGE is the southernmost grain elevator on the Mississippi River

and is exclusively involved in the export shipment ofgrain Itis one of

ten such export elevators located on the Mississippi River below Baton

Rouge MRGE is not engaged in grain merchandising or trading and

does not own any grain passing through its elevator Although MRGE

was organized by the late Mr Arturo Ferruzzi who had an interest in

the grain trading company Artfer Inc Artfer has no ownership inter

est in MRGE

The silos ofthe grain elevator are more than 900 feet from the doek

area of the MRGE facility which was constructed in several stages

The dock was originally built in 1967 and it was improved in 1979 to

enable it to handle a vessel in excess of 30 000 tOns Half of the silo

structures were constructed in 1967 and the other half in 1973 To

replace the entire facility of MRGE would cost about 80 000000

MRGE has facilities for receiving grain by barge and by railcar

Grain is barged from the heartland of the United States to the lower

Mississippi River Then the large river barge flotillas are broken up and

individual barges are placed in numerous fleeting areas usually between

New Orleans and Baton Rouge Smaller towboats take barges from the

fleeting areas to their ultimate destinations on the lower Mississippi

River

The grain of Dreyfus and others using MRGE is brought to the

elevator from three upriver fleeting areas At the elevator each barge is

discharged at the elevator s single barge unloader Then the grain is

moved through the elevator to a ship dock and to an awaiting ocean

vessel

There is never sufficient storage space at MRGE to allow the load

ing of an export ocean vessel only from the elevator Instead grain in

barges must be brought constantly to the unloader unloaded into the

elevator inspected graded and blended or aerated as necessary in the

elevator and then loaded aboard the oceangoing vessel The most

25 F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 105

HARBOR TERMINAL DISTRICT

economical method ofoperation at MRGE is to keep a continuous flow

of incoming barges when an ocean ship is loaded at the elevator The

coordination of ship and barge movements is an important cost factor

in grain operations

About 24 barge loads of grain are required to load one 30 OOO ton

ship

About 7

percent of all grain shipped to MRGE arrives in railcars In

1978 there were 1 109 rail carloads of Dreyfus grain received at

MRGE In 1978 the MRGE elevator handled about 4 million tons of

grain for export During 1978 Early moved about 24 million bushels of

grain and Dreyfus moved about 55 million bushels ofgrain through the

MRGE elevator

By the terms of its throughput agreement Dreyfus pays MRGE

certain contract fees which include the costs ofthe movement ofbarges

from the MRGE fleet to a discharge berth at the elevator and return of

the barges to the MRGE fleet the movement of rail cars in and out of

the Myrtle Grove switching district barge dockage unloading of the

grain from the barges and railcars inbound elevation ofthe grain in the

silos storage of the grain insurance of the grain at full market value

routine blending and handling ofthe grain and the loading of the grain

into ocean vessels

In addition to the above throughput fees Dreyfus pays MRGE s

private facility tariff rates for wharfage and dockage MRGE provides

office space and related facilities so that Dreyfus can station its six or

seven employees at MRGE to observe the loading and unloading

storage blending and handling of grain and attend to the interests of

Dreyfus

Dreyfus is the owner of all grain arriving at MRGE for the account

ofDreyfus It retains title to the grain while it is at MRGE Title to the

grain passes to the export buyer when the grain crosses the ship s rail

and is loaded aboard the ocean vessels

It is the practice of Plaquemines Port to apply the supplemental

harbor fee to the total tonnage loaded aboard the outbound vessels less

the 5OD ton exemption provided for in the tariff

As seen since the hearing Plaquemines Port has changed its policy

so as to credit or subtract the harbor fee from the supplemental harbor

fee resulting in lower supplemental harbor fees since the hearing

Both respondent and the complainants have submitted tables showing

for the year 1978 the supplemental harbor fees assessed against Dreyfus

and against Early complainants corrected page 35 of its initial brief

and respondent s supplemental reply brief dated September 2 1980

They agree on a Dreyfus assessment figure of 153 856 20 subject to

complainants addition of 2 760 for Dreyfus invoice 5415 for the ship

Astoria Delta Steamship Lines Inc Agent which departed MRGE

25 EM C
106 FEDERAL MARITIME COMMISSION

on December 26 1978 but was invoiced on January 17 1979 The

complainants total thus becomes 156 616 20 for Dreyfus

Likewise these two parties agree on an Early assessment figure of

44 294 40 subject to complainants addition of 2 857 for Early invoice

5482 for the ship Sea Corridor Strachan Shipping Co Inc Agent

which departed MRGE on December 29 1978 but was invoiced on

January 19 1979 The complainants total thus becomes 47 15140 for

Early

The complainants and the respondent s tonnage figures differ in that

the complainants apparently include and the respondent excludes the

500 tons per shipment exempted or subtracted from the supplemental

harbor fee assessment In some cases the 500 tons would be prorated

among two or more cargo owners in the event that their cargoes

moved out on the same ocean vessel Thus the Dreyfus or Early

exemption would be less than 500 tons

Both the complainants and the respondent use the figure of

670 732 20 as the total for 1978 for all assessments of the Supplemental

Harbor Fee by Plaquemines Port

Using 153 856 20 this is 22 93854 percent of 670 732 20 Using

156 616 20 this is 23 35003 percent of 670 732 20 In other words

about 23 percent of the total supplemental harbor fees for the year 1978

were assessed against Dreyfus

In no way has the respondent shown that Dreyfus reeeived 23

percent ofthe benefits for any services performed by Plaquemines Port

for which Dreyfus wasassessed these supplemental harbor fees

Early s assessment for supplemental harbor fees for 1978 was

44 294 40 to which figure the complainants add 2 857 for invoice

5482 or a total of 47 15140 as detailed above

Using 44 294 40 this is 6 60388 percent of 670 732 20 Using

47 15140 this is 7 02983 percent of 670 732 20 In other words about

7 percent of the total supplemental harbor fees for the year 1978 were

assessed against Early

The total ofDreyfus and Early for 1978 was about 30 percent of the

total for all supplemental harbor fees assessed by Plaquemines Port

Thus it is clearly understandable why Dreyfus and Early are two of

the complainants in this proceeding

Appendix VII to Exhibit C 15 for the year 1978 under headings of

Docking and Anchorage shows the Harbor Fees docking fees

paid by 3 286 tpws of 434 780 by 43 tugs of 4 350 and by 291 ships

ocean going vessels of 49 730 or a total of 488 860 for dockage For

anchorage 978 ships paid a total of 200 000 The grand total of

Harbor Fees was 688 860 In 1978 143 ships were not billed for the

Harbor Fee inasmuch as the practice ofthe Port at the time was credit

the Harbor Fee against itself where the cargo was assessed an equal or

2S FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 107

HARBOR TERMINAL DISTRICT

larger Supplemental Harbor Fee A proper description of tugs in this

connection would include offshore supply vessels

Adding the Harbor Fee total of 688 860 above to the total for

Supplemental Harbor Fees of 670 732 20 brings the total of Harbor

Fees and Supplemental Harbor Fees to 1 359 592 20 for the year 1978

Using complainants 156 616 20 of assessments against Dreyfus this

is 115 I935 percent of the total of Plaquemines Port s assessments for

1978 Using respondent s figure of I53 856 20 this is 113I634 percent

ofthe same 1 359 592 20

Similar calculations for Early using complainants 47 15140 of as

sessments and respondent s 44 294 40 result respectively in percents of

346805 and 3 25791

In other words Dreyfus was assessed 115 or 113 percent of Plaque

mines Port s total assessments for Harbor Fees and Supplemental

Harbor Fees in 1978 and likewise Early was assessed 3 5 or 3 3 percent

ofthe same

The five water carrier complainants all have been assessed the

Harbor Fee for the docking of their barges in order to discharge or

load cargo at numerous privately owned terminal facilities in Plaque

mines Port In 1978 and 1979 the following assessments were made

against these complainants

Dixie

Federal

Le Beouf

Valley

Hollywood

158 000

5 150

135 850

3 900

16 950

Dixie has carried steel pipe products to Anchor Wate a facility on

the Intracoastal Waterway in Belle Chasse La in Plaquemines Port

Federal has transported nickel products to or from the Amax Nickel

Refining Company dock in Plaquemines Port and has carried steel pipe

products to Anchor Wate

Valley has carried steel to the A and Z Terminal at Venice La in

Plaquemines Port

The five complainant carriers have called at the major private

wharves in Plaquemines Port to load or unload cargo including at

Gulf Alliance Gulf Ostrica Gulf Venice Chevron Chemical Amax

Nickel Anchor Wate Getty Venice Cal Ky Empire Texas Pipeline

Pilottown and Texas Pipeline Davant

Unlike the other Gulf ports which have charges denominated as

Harbor Fees the Plaquemines Port s Harbor Fee falls on inland

watercraft such as barges as well as on ocean vessels engaged in the

foreign trade and vessels engaged in the coastwise and intercoastal

25 F M C
108 FEDERAL MARITIME COMMISSION

trades Other ports such as New Orleans Baton Rouge and Houston

exempt inland watercraft from Harbor Fee provisions

In order to implement its tariff charges Plaquemines Port requires

terminal facility owners or operators to report the loading and unload

ing of vessels at their facilities A variety of methods of reporting has

been permitted by Plaquemines Port Form PPA No I contained no

place to identify the owner of the cargo or the number of tons trans

ferred Form PPA No I Revised 4 1 78 was later provided although

the original form was still in use by some facility owners in late 1979

Some facilities such as Getty Oil GulfAlliance GulfVenice Bass Cox

Bay Shell Southwest Pass and Texas Pipeline were allowed to tele

phone their reports on cargo transfers although the Plaquemines Port s

telephone log forms do not contain blanks to record the owner of the

cargo Some facilities such as Gulf Alliance and Gulf Venice were

allowed to submit written summaries identifying the vessels calling at

their docks to receive cargo but not specifying the owner ofthe cargo

With incomplete information as to the owner of the cargo Plaque

mines Port could not determine that the Supplemental Harbor Fee

should be charged Harbor Fees to vessels were prepared and as

sessed on vessels calling at facilities not supplying cargo information

whereas at the time vessels calling at other facilities which did report

cargo ownership and cargo tonnage enjoyed an exemption from the

Harbor Fee under the Plaquemines Port s practice prior to the hearing

of giving the vessel a credit if the Supplemental Harbor Fee was

assessed

To further complicate matters where the appropriate cargo informa

tion was available Plaquemines Port at times ignored the information

and failed to assess the Supplemental Harbor Fee on numerous occa

sions Plaquemines Port either failed to act on the cargo information in

these instances or it charged whichever fee was the highest thereby

allowing the Harbor Fee to fall on the vessel interest rather than

allowing the Supplemental Harbor Fee to fall on the cargo interest if

the Supplemental Harbor Fee was less than the Harbor Fee of

100 or 150 per vessel Such an optional procedure of assessment was

not sanctioned by any tariff provision

An example is invoice No 6779 dated April 24 1979 A carrier

operating under the name ofOilfield Barges was charged a Harbor Fee

of 150 for docking at Anchor Wate at 6 00 a m on April 17 1979

and departing the dock at 5 00

p

m the same day The tow loaded 655

tons of pipe for the account of Tennessee Gas Company The reporting

form showed that the cargo owner and wharf owner were distinct and

separate entities and therefore the Supplemental Harbor Fee should

have been assessed Plaquemines Port failed to assess the cargo interests

and assessed the carrier Since item 145 creates an exemption ofthe first

500 tons of cargo the Supplemental Harbor Fee should have been

25 F M C
LOUIS DREYFUS CORP ETAL V PLAQUEMINES PORT 109

HARBOR TERMINAL DISTRICT

assessed against 655 500 155 tons of cargo at 10 cents a ton or

15 50 Instead respondent invoiced the carrier and collected 150

rather than assessing the cargo and collecting 15 50

On June 6 1980 Plaquemines Port invoiced Artfer Inc an owner of

cargoes mainly of grain and grain meal which were loaded on ocean

vessels at MRGE between September 1977 and March 31 1979 assess

ing the Supplemental Harbor Fee on numerous shipments A cover

letter dated June 10 1980 from Plaquemines Port explained that it had

mistaken the cargoes handled for Artfer by MRGE to be cargoes

belonging to the elevator and as such exempt from the Supplemental

Harbor Fees The same letter notes that Artfer is to be given credit

for the Harbor Fees invoiced originally to the water carriers in

volved in these movements These new invoices assess Artfer a total of

244 029 40 for cargoes handled by MRGE in 59 instances

Plaquemines Port failed to invoice Artfer for Supplemental Harbor

Fees from November 1978 through June 1980 even though respond

ent had knowledge from the deposition of the Manager of MRGE in

November 1978 that MRGE did not have an ownership interest in the

cargo at its facility

In a usual operation at MRGE the oceangoing ship will take about 2

million bushels of grain MRGE s main function is to move the grain

between the barge or rail car and the oceangoing vessel MRGE also

may dry fumigate aerate orclean the grain

Between the farmer in Iowa or the Dakotas for example there is the

country elevator in the interior of the land then there is the river

elevator up north on the Mississippi Illinois Ohio or otherriver Then

there is the terminal elevator such as MRGE Although MRGE is not

geared to receive grain from farmers because no farmer would produce

two million bushels of grain on his own farm in one rare instance a

farmer delivered direct to the MRGE elevator In that case Mr Perez

sold his grain to Artfer Inc which in turn shipped out the grain The

deposition of Mr Robert L Beukenkamp Executive Vice President

and General Manager of MRGE does not reveal which Mr Perez he

refers to Official notice is taken that members ofthe Perez family have

for many years played prominent roles in Plaquemines Parish and Lake

Judge Perez is named in honor of the father of Chalin Perez the

President ofthe Plaquemines Parish Commission Council

Plaquemines Port received run tickets from the Cal Ky pipeline

facility in Empire La These run tickets were used in lieu of the

reporting form and they showed that certain oil loaded or unloaded at

the facility was for the account of others than Cal Ky Nevertheless no

Supplemental Harbor Fees were assessed at the time However follow

ing the hearing Plaquemines Port issued 138 additional invoices to

cargo owners for the oil moved at Cal Ky In the majority of these

instances the additionally invoiced Supplemental Harbor Fees involved

25 F M C
110 FEDERAL MARITIME COMMISSION

movements for which one of the carrier complainants was invoiced a

Harbor Fee and under Plaquemines Port s policy prior to the hearing

the complainant carriers would not have been assessed the Harbor Fee

ifPlaquemines Port had assessed the Supplemental Harbor Fee

Plaquemines Port s definition ofowner in its tariff includes the parent

company of the owner and any 100 percent owned subsidiary of the

owner or parent company This definition allows the cargoes ofsubsidi

aries and related companies to be moved across the dock of acompany

without payment ofthe Supplemental Harbor Fee

Thus Texaco Inc is not charged when its product is moved across

the wharf ofanother corporate entity Texas Pipeline Company Trans

actions between Amax Inc and Amax Nickel Refining Company have

not been subject to the Supplemental Harbor Fee The Getty dock at

Venice could handle products belonging to Getty Oil Company Getty

Refining and Marketing Co and Getty Pipeline Company The Gulf

Alliance Refinery could handle products ofGulf Oil Corporation or

Gulf Refining Co Chevron Oil could handle products of Chevron

USA Inc Chevron International Oil Co Chevron Industries Chev

ron Chemical and Chevron Pipeline Company

As seen in the year 1978 only 6 875412 tons of cargo out of

26 236 524 tons handled in Plaquemines Port were assessed a Supple

mental Harbor Fee and during the same year 13 056 283 tons of oil

and petroleum products were handled in the Port with nothing assessed

against these oil and petroleum cargoes

Plaquemines Port justifies its wharf owner exemption for several

reasons One is that the owner has a capital investment on which he

pays ad valorem taxes for which his cargo should receive a credit

However other facilities owners in Plaquemines Port have large cap

ital investments on which they pay ad valorem taxes but do not own

cargoes passing handled by their facilities and these cargoes are as

sessed the Supplemental Harbor Fee Such facilities include MRGE

Electrocoal and Cal Ky

On the other hand the docks of Signal Oil Getty Oil and Gulf

Ostrica have not handled cargoes assessed the Supplemental Harbor

Fee

MRGE s elevation fees throughput contract fees and its tariff fees

together are designed to recover the costs to MRGE of providing

wharf dock and other facilities to Dreyfus and Early One of the cost

factors considered by MRGE in determining that rate which it charges

is the ad valorem taxes assessed against MRGE

The additional rationales of Plaquemines Port for the exemption of

the wharf owner s cargo from the Supplemental Harbor Fee are that

the private wharf owner is better equipped to take care of his cargo

and that although a facility may be privately owned or operated its

operations remain private when it handles its own cargo but are public

25 F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 111

HARBOR TERMINAL DISTRICT

when it handles the cargo of others But the ability to protect cargo

does not vary as between owned cargo and non owned cargo handled

at anyone facility

Plaquemines Port s practice up to the completion of the hearing was

to not charge a Harbor Fee to a vessel if a Supplemental Harbor Fee

was charged to the cargo Subsequent to the hearing Plaquemines Port

reinvoiced some Supplemental Harbor Fee charges less the amount of

the Harbor Fee

As a result the overall charges of Plaquemines Port will not be

reduced but the Supplemental Harbor Fee will be reduced by the

amount of the Harbor Fee for 143 vessels and the Harbor Fee

Docking Ships will be increased by the fee on 143 additional vessels

which amounts to a shift of about 150 times 143 vessels or 21 450

The expenditures of Plaquemines Port are of two types first those

items purchased directly for the Port and second expenditures from

other accounts which are allocations of percentages of the expendi

tures ofthe various Plaquemines Parish departments

For the Aviation Department 50 percent is allocated to the Port for

the Coroner 20 percent for the primary salaries of Commission Coun

cil and staff 30 percent for Accounting and Payroll 5 percent for

Internal Auditor 10 percent for Purchasing 10 percent for Data

processing 7 percent for Fire protection 50 percent for Ambulance

service 50 percent for the two Ferries Belle Chasse aniPointe a Ia

Hache 10 percent each for Sewerage 5 percent for Garbage 10

percent and for the Waterworks 10 percent The Sheriffs Office does

not have a percentage allocation but a lump sum is estimated by the

Sheriff and is charged as an expenditure ofPlaquemines Port Insurance

is prorated in a percentage manner but is listed as a lump sum expendi

ture ofPlaquemines Port

The percentage allocations figures for the various Parish departments

are based upon the marine related or port related activities of each

department with the department heads outlining what they consider to

be marine related activities of their departments The Plaquemines

Parish Commission Council adopted the percentage figures suggested

by the department heads

The definition of marine related originated with the Council ac

cording to Commissioner Albert Beshel but there was no formal vote

adopting a definition of marine related Commissioner Beshel s defini

tion of marine related is

Any waterborne accident seaman leaving ships causing prob

lems in our small communities automobile accidents by drunk

en seamen drunken crew members deaths by drowning inju

ries on the water any type ofinjury on watercraft

However the department heads have other interpretations of the

origin of the definition of marine related incidents The Sheriff de

25 F M C
112 FEDERAL MARITIME COMMISSION

fined marine related for himself based on his understandings of the

discussion in November 1977 The administrator of the Parish Health

Unit created her own definition The Coroner s Office and the Aviation

Department got their definitions or understandings from the November

discussion But no written guidelines were given to any of the partici

pants in the 1977 meeting The Port Manager Mr Hugh Benvenutti

who attended the November meeting remembers that a definition of

marine related was discussed but that no concrete examples were

elicited Mr Benvenutti is responsible for auditing the backup materials

of various departments to determine that the percentages given by these

departments were accurate according to Commissioner Beshel but Mr

Benvenutti was not directed to audit the percentage figures 1IIldtlid not

do so

The comptroller ofthe Parish described a process ofannually accept

ing the Sheriffs estimate ofhis office s marine related activities as the

honor system

Those department heads who prepared the backup material did not

and do not understand the classes of vessels or cargoes which are

charged the Harbor Fees and the Supplemental Harbor Fees under the

terms ofthe tariff of Plaquemines Port Those department heads did not

limit their definition of marine related activities to those activities

only involving those persons charged by the tariff

Plaquemines Port s rationale for classifying certain incidents as

marine related is based upon the but for test But for the users of

the Port the Parish would not incur extra expenses according to the

respondent The Sheriff provides an example of the but for test But

for the presence ofBrown Root Company an offshore construction

company having a shipyard in Belle Chasse the Sheriff would not have

had to make arrests of either Brown Root employees engaged in

criminal activities or ofother persons committing criminal acts against

the property ofBrown Root

The Sheriffs office in Plaquemines Parish is an independent agency

established by Louisiana statute This office maintains its own account

ing practices is audited by state auditors receives its own ad valorem

millage and is not under the direction supervision or control ofeither

the Plaquemines Port or of the government of Plaquemines Parish

Although the Plaquemines Sheriff by Louisiana statute may call a

special election for the purposes of increasing general millage of the

Law Enforcement District the Sheriff has not done so to raise addi

tional revenues since this law was passed in 1976 Rather the Sheriff

has received assistance in the form of grants from the Plaquemines

Parish Commission Council to supplement funding of the Sheriffs

Office This assistance has been in the form of direct cash grants and

the purchase by the Council of equipment for the use of the Sheriffs

Office

25 F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 113

HARBOR TERMINAL DISTRICT

In making cash grants the Parish has not required that the Sheriffs

Office dedicate them to any specific purpose The Sheriff may apply

these funds as he sees fit in order to carry out his law enforcement

duties The Parish Sheriff has undertaken no duties other than those

already required ofhis office by Louisiana state laws

In the fiscal year ending June 30 1978 of the Sheriffs Office this

office also received a variety of revenues from the federal and state

governments Louisiana sheriffs receive 15 percent of the federal reve

nue sharing funds allocated to the State of Louisiana and its parishes

The Sheriff s office similarly receives a sum under a state revenue

sharing program as well as state funds to supplement the salaries and

supplemental pay ofdeputies In the above fiscal year 32 percent ofthe

Plaquemines Sheriffs general fund revenue was derived from the

above mentioned federal and state sources as follows 136 526 from

federal revenue sharing 25 225 from state appropriations for salaries of

deputies 136 617 from state appropriations for supplemental pay of

deputies and 130 677 from state revenue sharing which makes a total

of 429 045 and which was over 32 percent of the Plaquemines Sher

iffs total revenues of 1 333 789 In that fiscal year other revenues of

the Plaquemines Sheriffs office included 588 021 from ad valorem

taxes and a 125 000 appropriation from the Plaquemines Parish Com

mission Council among other revenue items

In fiscal 1978 the Plaquemines Sheriff had an excess ofrevenue over

expenditures of 111 157 which brought his year end general fund

balance to 463 347 The fiscal year 1978 was the last year for which an

official state legislative audit of the Plaquemines Sheriffs office was

available for the record herein

The Plaquemines Sheriff regarded as marine related any incident

connected with the waterways of the Parish involving a business con

nected with water in some manner Under the Sheriffs definition an oil

field supply company which employs Parish residents has no dock and

has none of its employees working over water but which sells equip

ment which may be used offshore is considered marine related and the

burglary of such a

company is deemed a marine related incident by the

Sheriff Incidents involving pleasure craft are considered marine relat

ed

Of a total of 1 076 arrests made between January and August 1978

487 were classed as marine related or port related Only 51 arrests

involved employees or persons or companies assessed under the tariff of

Plaquamines Port These 51 arrests represent 10 97 percent of the so

called marine related and 4 7 percent oftotal arrests Of the 487 marine

related arrests 60 74 percent were Parish residents and 80 percent

worked for Parish employers Twenty one of the 51 subjects whose

employers were assessed under the tariff were themselves residents of

the Parish Employees of Brown Root and J Ray McDermott two

25 F M C
114 FEDERAL MARITIME COMMISSION

oil field service companies with extensive property holdings in the

Parish accounted for 31 ofthe 51 arrests or 68 63 percent ofall arrests

of subjects working for individuals or concerns subjected to tariff fees

Of the remaining 16 arrested subjects 10 were employed by terminal

facilities two by shipping agents secondarily liable in the event shippers

or carriers fail to pay the tariff charges and four were employed by

water carriers including two by complainant Federal Barge Lines and

two by oceangoing vessels

The four arrests of employees of carriers amounted to less than one

percent of marine related incidents The ten terminal employed per

sonnel accounted for 2 05 percent ofmarine related arrests and the two

employees of shipping agents accounted for 04percent of marine

related arrests

Traffic violations accounted for 29 ofthe 51 arrests above and other

charges were possession ofmarijuana disturbing the peace aggravated

battery with a crutch forcible rape littering and criminal damage to

property

Among the 487 marine related arrests were traffic violations unlaw

ful removal of oysters shooting a dog attempted murder kidnapping

fugitives from other jurisdictions assault with a rifle forgery attempt

ed grand theft trespassing at a picket line criminal neglect of family

receiving stolen goods shoplifting and various others not directly relat

ed to transportation by water or to the business offurnishing wharfage

dock warehouse or other terminal facilities in connection with

common carriers by water

Areview ofthe sample months ofAugust and September 1978 shows

that only one of the 148 calls to the Sheriff classified as marine related

involved a corporation or employer subject to the tariff fees

Thirty percent of the expenditures for the Plaquemines Parish Ambu

lance Department are charged is an expenditure of Plaquemines Port

In 1978 the Parish ambulance responded to 1 463 calls of which 394

were classified as port related Of these 394 there were 31 involving

foreign seamen Only 26 of the patients moved in these 394 instances

were employed by these companies which had been assessed fees under

the tariff Two patients were employed by Parish or local government

units and two by the federal government None of the remaining 333

patients wereemployed by those assessed fees under the tariff

Of the 26 patients employed by those assessed fees under the tariff

seven patients were residents of the Parish None of the complainants

except Dixie Carriers have ever used the Parish ambulance service

Dixie was invoiced for its one ambulance call and promptly paid the

invoice

In every case of the use of an ambulance a bill is prepared by the

Parish and sent to the user but Parish collections of such billings

generally have been limited During the first eight months of 1979 the

25 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 115

HARBOR TERMINAL DISTRICT

Parish had total receivables of 51 022 for ambulance service For all of

1979 the Parish collected ambulance receipts of 33 787

The criteria of the Director of Ambulance Service to determine

marine related expense generally was where ambulances had to re

spond to incidents on water or to a

company which handles vessels on

water anywhere in the Parish If the victims worked for an oil compa

ny or an oil service company it was deemed marine related No

consideration was given to whether the incident involved a local resi

dent whether the employer was assessed tariff changes or was subject

to ad valorem taxes or whether the incident was of a type for which

the employer might respond or be responsible

Marine related was deemed to include among others a 16 month old

child whose father was employed by Oil Well Services an 81 year old

lady with no occupation listed whose husband was retired and for

which incident a 16 to 18 foot boat was required to remove the lady

from Lake Judge Perez a 17 year old unemployed male whose father

worked for Freeport Sulphur a Plaquemines Parish Council employee

who had to be removed from his trailer park after he swallowed half of

a thermometer which mishap occurred after he as a Ferry Boat em

ployee became sick on the ferry a pregnant woman in labor an

employee of Southeastern Construction Company an employee of the

Belle Chasse Boat Launch a

facility using crewboats exempt from the

Harbor Fee tariff provision because the boats were less than 100 feet

long an auto accident victim employed by Continental Oil Company

and a four year old girl whose father worked for A Z Terminal

Company which provides drilling pipe and service pipe to oil field

service personnel

Thirty three percent of the expenditures ofthe Parish Safety Depart

ment are charged to Plaquemines Port The duties of the Safety Engi

neer include traffic control investigating industrial accidents evaluating

the safety habits and equipment of Parish departments and holding

safety meetings About 5 percent of the Safety Engineer s time is

estimated to involve marine incidents His assistant may devote as much

as 10 percent ofhis time to marine activities

The Safety Engineer does not make routine inspections of vessels or

wharves or facilities in the Port In the event of a

shipboard fatality he

may have occasion to investigate aboard the vessel and he will investi

gate in connection with explosions fatalities of an accidental nature or

drownings When such investigations have proved extensive the Parish

has directly billed the companies involved

The U S Coast Guard investigates marine casualties and accidents

In 1978 the Plaquemines Parish Council commissioned a study by

outside consultant engineers of the Myrtle Grove La facility of the

MRGE Although the Parish has several large oil refineries chemical

plants and manufacturing complexes as well as smaller oil storage

25 F M C
116 FEDERAL MARITIME COMMISSION

facilities MRGE is the enly facility in the Parish which has been

inspected by eutside censultants fer explesien and fire hazards

The repert prepared by the consulting engineers was sent to MRGE

but the Parish neither fellewed up to determine whether the censult

ant s recemmendatiens were implemented by MRGE ner did the

Parish take actiens with regard to the recemmendatien made to it The

censultant s inspectien repert feund that the high risk area at MRGE is

in the silo area net at the leading and unleading areas the decks

MRGE is under the extensive regulation and inspectien af variaus

agencies which include the State Enviranmental Pretectian Agency

the Federal Grain Inspectian Service and the U S Department af

Agriculture

MRGE has implemented extensive design changes since 1977 includ

ing a negative pressure dust remaval system The prabability af a fire

ar dust explasian has been reduced to an extremely law level and the

facility is capable af handling its awn fire fighting requirements Dust

missians have been virtually eliminated

Ten percent efthe budgets af each af the five Parish waterwarks is

allacated to Plaquemines Part Funding far these waterworks is derived

fram rates paid by water users and an ad valarem water tax The Part

makes no direct sales afwater to either vessels ar the ewners afcarge

The 10 percent allacatien abave is related to the sales ef water to

dack related cempanies having water lines an their dacks Dack

related campanies include marinas gracery stares seafaed fishing and

fish pracessing dacks handling vessels less than 100 feet lang U S

gavernment installatians such as the Carps af Engineers and the Coast

Guard small baat launches ship repair facilities ail and chemical

plants ail field and ail field service campanies grain handling campa

nies campanies invalved in mineral pracessing ar mining ether than ail

and dacks af private individuals Water delivered to dack related

campanies becames the praperty af the campany ance it passes the

water meter ef a campany Such water is paid far at the prevailing

water rate and thraugh ad valarem taxes paid by such campanies

Only seven sites in Plaquemines Parish were appraved by the U S

Department ef Health Educatian and Welfare as acceptable vessel

watering sites Vessels aperating in interstate cammerce and thase in

internatianal cammerce may use these sites

Nane af the water carriers have taken an water in Plaquemines

Parish Nar daes MRGE supply water to vessels calling at that facility

In the neighbaring Part af New Orleans aceangaing vessels requir

ing water cantact the New Orleans Sewerage and Water Baard which

installs a meter line and hase far use af the vessels Vessels are then

charged directly fer water Elsewhere aleng the Mississippi River

ether than in Plaquemines Parish water is furnished to acean geing

vessels by barge frem New Orleans er by the meering facility en a

2S F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 117

HARBOR TERMINAL DISTRICT

gallonage or flat rate basis Generally oceangoing vessels in Plaque

mines Port obtain water through their agents in New Orleans with

delivery to Plaquemines by barge

Meter rates and the ad valorem millage charged by Plaquemines

Parish are calculated to cover the operation and maintenance of the

waterworks system and this level of rates oftaxes is not set to generate

funds for capital improvements such as extension of water lines to

outlying areas

Five percent of Plaquemines Parish s expenditures for sewerage are

allocated to Plaquemines Port The Port conducted a

survey of compa

nies with docks and only eight of 42 companies which responded were

connected to the Parish sewerage system Many industries use septic

tanks Of the eight companies connected to the Plaquemines sewerage

system no cargoes handled at these docks were assessed the Supple

mental Harbor Fee

None ofthe complainants in this proceeding use the sewerage system

of the Parish MRGE has a septic tank The vessels calling at MRGE

do not use this tank Vessels operating in United States waters includ

ing vessels operated by the complainants are required to comply with

federal standards established by the Environmental Protection Agency

and enforced by the Coast Guard requiring marine sanitation devices

for the onboard handling and treatment of sewerage The Plaquemines

Port does not charge for the actual use ofthe Parish sewerage systems

The amount of sewerage generated by vessel or cargo is not known to

Plaquemines Port

Ten percent of the Parish budget for garbage is allocated to Plaque

mines Port There is no service charge for garbage collection in Plaque

mines Parish

In order to remove garbage vessels engaged in foreign commerce

must receive the permission of the United States Customs Before

garbage can be landed the United States Department of Agriculture

must approve of the disposal techniques and upon such approval the

garbage is removed and destroyed by incineration under the supervision

ofU S Customs and the Department ofAgriculture

During 1979 Plaquemines Parish responded to requests of United

States Customs Service for the use of Parish incineration allowing the

burning of vessel garbage on eight or nine occasions Customs Service

representatives were informed by Plaquemines that the Parish would

not continue to accommodate or make a

regular practice ofresponding

to such Customs Service requests The Parish has not accepted garbage

for disposal on a continuing basis The Parish made no charge for

incineration in these limited instances

In 1979 a Parish study of solid waste disposal concluded that 17

percent of Parish expenditures on solid waste management were attrib

utable to Plaquemines Port users The study was designed to disclose

25 F M C
118 FEDERAL MARITIME COMMISSION

the level ofeffluents coming from oil field related stuff and also from

docks but all ofthe supporting material refers to offshore and oil field

related wastes Nothing in this study segregates waste generated aboard

vessels or by cargo interests subject to the tariff from wastes generated

by the offshore oil industry on fixed platforms or by oil field related

companies on land None of the complainants in this proceeding dis

charge garbage at any facilities in Plaquemines Parish MRGE accepts

no garbage from vessels mooring at the elevator and does not use the

Parish s garbage pickup service

Plaquemines Parish operates two ferries one each at two crossings

Belle Chasse and Pointe a la Hache Ferry service to passengers and

autos is provided 18 hours a day from 6 00 a m to midnight Ten

percent of the Parish expenditures for these ferries is allocated as an

expenditure of Plaquemines Port This percentage does not include any

of the Port s special expenditures to outfit one of the ferries for fire

fighting In 1979 the 10 percent allocation paid for various repairs to

ferry landings mooring dolphins and log boom one of the ferry boats

pilings and the purchase of a new diesel engine for another ferry boat

all of these expenditures being in addition to the regular operations

costs ofthe ferries

Thirty percent ofthe costs ofthe Plaquemines Parish Health Unit are

allocated to Plaquemines Port This unit charges no fees for its services

The Louisiana statute requires that each parish of the state provide and

fund a parish health unit The administrator of the Plaquemines Parish

Health Unit used her own criteria to determine marine related mat

ters which she defined as anything that would have something to do

with Plaquemines waterways If a construction company provided ma

terial or equipment that is used in a way associated with marine use

that would be marine related to the Health Unit Other examples of

marine related would be inspection of an oyster shucking plant inspec

tion of the Venice Boothville and Empire marinas being facilities

which handle vessels less than 100 feet long inspection of septic tanks

of businesses not located on the Mississippi River or other waterways

but which are oil field supply operations x raying persons employed on

the Parish ferry and public health medicine in the form of TB and VD

programs for oil company rig workers and vessel operators

The Health Unit on one occasion sent a public health nurse to a dock

at the request of a private physician to stamp the immunization records

of a seaman inoculated by the doctor The nurse did not board the

vessel On only one occasion could the Health Unit Administrator

remember any of its personnel going aboard vessels The agents of

oceangoing vessels generally use medical clinics in New Orleans for

inoculations and health examinations of crew members

Private sewage facilities may be operated only if they comply with

the Sanitary Code of the State of Louisiana Construction of a septic

25 F M C
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 119

HARBOR TERMINAL DISTRICT

tank may not be undertaken without a permit issued by the State

Health Office

In the three years from 1977 to 1980 the Health Unit has investigat

ed less than ten fish kills which included incidents such as the dis

charge of effiuent from the oxidizing pool of a galvanizing plant

discharge of fish heads and shrimps from trawlers less than 100 feet

long and a fish kill caused either by discharges from a menhaden

processing plant or by boats operating in a canal churning up water and

depriving fish ofoxygen

In 1977 the Administrator of the Health Unit advised a Commission

Council member that one of the services available to vessels operating

within the Parish was a control program for murine typhus a disease

often transmitted by rodents who host the fleas which carry the typhus

The only actions taken by the Health Unit in this regard consisted of

the purchase of several rat traps later turned over to the Mosquito

Control Unit and never used and the showing of a film on murine

typhus

All vessels entering the United States from foreign countries are

subject to the quarantine regulations ofthe U S Public Health Service

Vessels may be granted radio free pratique by the Public Health Service

without a full quarantine inspection if the vessel properly responds to

questions posed to the master of the vessel by radio An office of the

U S Public Health Service in New Orleans grants suchpratiques

Vessels also are subject to a sanitary inspection by the Public Health

Service at any time Vessels entering the United States are required to

have a valid de rat certificate issued for six month periods The Food

Drug Administration approves all interstate vessel watering points and

inspects them every six months with arepresentative of the Louisiana

State Health Department also present A member of the Parish Health

Unit accompanies the inspection team Approval is based on federal

standards The Parish has a water sampling program but this sampling

is required by the Environmental Protection Agency and is a necessary

duty even if no vessels were in the local jurisdiction The U S Public

Health Service maintains a hospital in New Orleans which provides full

medicinal care for United States seamen

Fifty percent of the expenditures of the Parish Aviation Department

are allocated as expenditures of Plaquemines Port At its inception in

1964 the Aviation Department had a helicopter and a spray plane for

mosquito control At present this department operates one helicopter

and two fixed wing aircraft one of which is a

seaplane These aircraft

are available to all departments ofthe Parish government as well as to

other local officials such as the Sheriff District Attorney Clerk of

Court and Tax Assessor

The Port contends that 50 percent of flight time is devoted to port

harbor and marine matters Flight time for the Port is deemed proper if

25 F MC
120 FEDERAL MARITIME COMMISSION

the flight is associated with water either inland outland river or any

type ofwater Ifit is a water oriented type ofactivity the Plaquemines

Port is charged for a portion of the flight Port related activities are

deemed to include mosquito control protection of levees flights over

water to an extent and flights for the Sheriff such as those involving

surveillance to intercept contraband Other activities considered port

related include search and rescue and surveillance of anchorages

Search and rescue operations primarily are for commercial fishermen

who operate boats 24 to 26 feet long and secondarily for hunters and

pleasure craft Plaquemines Parish did this kind of rescue operation

before the enactment ofthe tariff here in issue

The Coast Guard maintains an air station in Plaquemines Parish from

which it conducts all types of search and rescue activities in the Parish

Coast Guard aircraft are better equipped than those of the Parish The

Coast Guard in conjunction with the Public Health Service carries out

standard procedures for the evacuation ofpersonnel from vessels at sea

Vessel agents rely on the Coast Guard when the evacuation ofperson

nel from oceangoing vessels is required

At the lower end of the Parish a large number of private aircraft

seaplanes and helicopters utilized in oil operations in the Gulf and

surrounding areas is available to the oil industry for search and rescue

of its personnel The New Orleans area supports an organization known

as MEDI VAC a helicopter ambulance unit stationed at the West

Jefferson Hospital Plaquemines Parish s ambulance director calls for

this MEDI VAC unit when his auto ambulance has no lanCl access to a

patient and he does not call the Parish helicopter which is not

equipped for medical evacuation

Anchorages in the Mississippi River have been created by the U S

Coast Guard pursuant to federal law and regulation The Coast Guard

enforces such regulations and requires vessels which are out ofanchor

age to return to designated anchorages During daily flights from its air

station in Plaquemines Parish the Coast Guard conducts surveillance

operations to control pollution and for general purposes On the other

hand the head ofthe Plaquemines Aviation Department does not carry

with him a chart identifying the locations of the federal anchorages

when he flies

The Aviation Department has been listing every ship anchored in the

Mississippi River in Plaquemines Port since January 1980 but the same

information is available by telephone from two official sources 1 the

Pilot s Association an organization of state licensed compulsory pilots

whose members have the sole discretion to decide where to anchor a

particular vessel and 2 the U S Coast Guard Vessel Traffic Service

The Sheriffs Office does not have its own aircraft but utilizes the

Parish helicopter to aid in enforcement activities When such activities

are over terrain subject to tidal action they are logged as Port matters

25 F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 121

HARBOR TERMINAL DISTRICT

Beginning in 1979 50 percent of the expenditures of the Itinerant

Labor Department of Plaquemines Parish were charged as expenditures

ofPlaquemines Port

This Department operates a program whereby itinerants people

coming in and out ofthe Parish are fingerprinted and photographed to

determine if there is a rap sheet on them or if they are undesirables

Those persons employed in the Parish for more than six weeks are

issued permits by this department and a processing fee is imposed In

June 1980 subsequent to the hearing Plaquemines Port changed its

policy so as to give a credit to the Port for the revenue from the

processing fees Vessel personnel crews of oceangoing vessels or of

barges or tugs are not required to obtain itinerant labor permits unless

they remain in Plaquemines Parish for alonger period than six weeks to

two months

Some 50 to 60 percent of all businesses taken care of through the

Itinerant Labor Department was oil field related None of the com

plainants in the subject proceeding have employees to whom have been

issued itinerant labor work permits None of the barge line complain

ants have any employees permanently stationed in Plaquemines Parish

Beginning in 1979 20 percent of the cost of the Coroner s Office of

Plaquemines Parish was allocated to Plaquemines Port The Coroner

under state law is an independent elected officer but each Parish is

required by statute to compensate the Coroner for the performance of

autopsies and other services In addition the Coroner receives compen

sation from the state

Regardless of whether the complainants or others pay tariff charges

to Plaquemines Port the Coroner is obligated to investigate deaths in

accordance with Louisiana statutes and he must investigate deaths

whether the decedent is or is not a resident of Plaquemines and

whether or not the decedent or his employer pays ad valorem taxes to

Plaquemines Parish In classifying deaths as port related this was done

where the deaths were directly connected with navigable waterways of

the Port

In 1979 33 of 110 parish wide total deaths were classified as directly

related to the Port Such port related deaths included the recovery of

six unknown persons from the Mississippi River two bodies that drifted

into Plaquemines Parish from upriver parishes the deaths of three

aircraft pilots two over water and one on land from a heart attack on

takeoff the death of a man falling overboard from a work barge in the

Gulf of Mexico four deaths from a pipeline explosion three deaths

from drownings of persons swimming in the Mississippi River the

death of a manwho wandered away from his cottage and fell into the

Mississippi River the deaths of two fishermen aboard vessels less than

100 feet long engaged in servicing fish processing plants and the death

of a retired carpenter preparing to go trawl fishing The Coroner

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122 FEDERAL MARITIME COMMISSION

classified these thirty three deaths as four heart disease one homicide

ten accidental drownings twelve industrial drownings one industrial

death two industrial plane crashes and three unclassified

Of the above thirty three deaths twelve were Parish residents or

persons who worked for firms on the Parish ad valorem tax rolls six

unidentified persons removed from the Mississippi River three nonresi

dents ofthe Parish who werenot at work at their place ofemployment

at the time of their deaths one Orleans Parish resident whose body

drifted downriver and three non residents of the Parish whose deaths

occurred in areas open to the Gulf ofMexico outside the area in which

the respondent assesses its tariff charges The remaining eight persons

included one foreign seaman an Orleans Parish resident employed by

the telephone company who died while not at work aboard a small

boat 15 to 25 feet long and an Arkansas resident and deckhand em

ployed by a water taxi service who suffered a heart attack aboard a

vessel about 65 feet long

None of the decedents classified as directly related to the Port were

employed by any of the complainants or by anyone assessed the Sup

plemental Harbor Fee None of these decedents can be identified as

being employed by those charged the Harbor Fee

The Port of New Orleans immediately upriver does not impose

charges in its Federal Maritime Commission tariff for services provided

by the Coroner of Orleans St Bernard or 1efferson Parishes Nor are

such services claimed to be provided for or paid for through the tariff

charges ofother Gulf ports

Fifty percent of the expenditures of the four volunteer fire depart

ments operated by Plaquemines Parish is allocated to Plaquemines Port

The four departments are located at Belle Chasse Port Sulphur Buras

and Venice La all on the west bank ofthe Mississippi River or right

descending bank The Parish is in the process ofestablishing a fifth fire

department 01 the east bank ofthe river to replace the contract service

ofSt Bernard Parish

In both 1978 and 1980 the Fire Marshal of the Plaquemines Parish

estimated that 5 to 8 percent of the fires reported in the Parish are

aboard vessels In 1978 there were 14 vessel fires including one aboard

a dredge out of a total of 321 fires in the parish representing 4 36

percent of the fires that year

These vessel fires included fires aboard a Vietnamese fishing boat in

Mrs Kincaid s canal at Empire an unidentified boat fire a fife in an

aluminum hull boat belonging to the Delta Well Testing Service while

the boat was on a flatbed trailer a fire aboard a crew boat belonging to

residents of Plaquemines Parish a fire aboard an unidentified skiff a

fire aboard an oyster boat owned by an Orleans Parish resident a fife

involving an old boat hull with owner unknown a fife aboard a boat of

the 10hnette Boat Rental Company a fife aboard the M V Captain Kyle

2S FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 123

HARBOR TERMINAL DISTRICT

owned by a Plaquemines resident a fire aboard a boat at the Bayside

Marina a fire aboard a crew barge belonging to the Circle Bar Drilling

Company which is on the ad valorem tax rolls of the Parish a fire

aboard a tugboat alongside the said barge and belonging to the same

company and a fire aboard a suction dredge in Tiger Pass These fires

can be classified alternatively as six involving private fishing or pleas

ure craft three crewboats crew barges or tugs one boat on a flatbed

trailer one oyster boat one dredge and one unidentified boat Eight of

the vessels in these fires belonged to persons residing in or paying ad

valorem taxes to the Parish in three cases the fire records do not reveal

the identity or residence of the owner and in two cases the owner

resided in other Louisiana parishes In one case the owner but not his

residence was identified

In 1978 there were three dock fires which included a dock under

construction at Mile 57 on the River a dock fire involving Dravo a

contractor for a new coal plant and a fire spreading to the Lee Service

Dock from a crewboat belonging to a parish resident

The Plaquemines Port classified 61 of the total of 321 fires as marine

related These marine related fires include the three dock and fourteen

vessel fires above plus two automobile fires six truck fires six fires in

buildings seven trash fires two grass fires two waste oil fires two

sulphur fires six cases of gas leaks or gas clouds three tank fires one

crane fire one fire alert five false alarms and one shiploader fire

GENERAL DISCUSSION The complainants generally contend that

the services charged for by Plaquemines Port in its tariff filed with the

Commission are services purportedly provided by the Port but in truth

are the customary day to day services rendered by the Parish of Pla

quemines to the people citizens or not within its boundaries The

complainants contend that the Parish services are comparable to those

provided by any similar governmental unit and that for Plaquemines

Port to charge for these services is unlawful in violation of the Ship

ping Act

On the other hand the respondent points out that Plaquemines Parish

is not a

typical Louisiana Parish in that for example a central Louisi

ana Parish where there is no Mississippi River would not have ship

collisions and the drownings associated with the Mississippi River

Respondent also points out that in the stretch of the River between

Venice and Pilottown at times there are as many as 100 to 200 vessels

and because Plaquemines Parish is stretched out over 100 miles from

end to end a Port or Harbor police force separate from the Parish

police force would be impractical

The record shows in general that the responsibility for ships anchor

age in the Mississippi River is that of the U S Army Corps of Engi

neers and the U S Coast Guard For fires and collisions and other

harbor matters including communications the U S Coast Guard pri

25 F M C
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124 FEDERAL MARITIME COMMISSION

marily responds whereas the Parish of Plaquemines and the Port of

Plaquemines acting as good neighbors have voluntarily sought to help

in emergency situations

The ordinary services ofpolice fire ambulance etc were provided

as a matter of course by the Plaquemines Parish government or by the

Sheriff prior to September I 1977 without thought of relating such

services to Plaquemines Port Since that date these services have not

been shown to be directly related to the so called supplemental harbor

fees and harbor fees ofPlaquemines Port

The fee embodied in Item 145 of the tariff is denominated as a

Supplemental Harbor Fee but in fact it is a fee assessed solely

against cargo It is in the nature of a wharfage fee The fee is to be

charged against all cargo handled within Plaquemines Port exempting

the first 500 tons in a cargo handling operation and with the exception

that no oharge is made for the handling of cargo whenever the cargo

owner utilizes his own wharf dock warehouse or other terminal

facility in connection with the movement of cargo to or from a vessel

But in other instances where the owner of the cargo is not the owner

ofthe facility which handles the cargo the wharfage fee Supplemental

Harbor Fee is assessed by Plaquemines Port eventhough the facility is

not owned by Plaquemines Port

Plaquemines Port conditions the public s use of the Mississippi River

and ofprivate terminal facilities located in the Port The Supplemental

Harbor Fee operates as a wharlage fee for the use ofprivate facilities

which in addition themselves charge wharfage or fees which are in lieu

of wharfage The Plaquemines Port administers and controls all private

facilities within the Port and is empowered to condition the shipping

public s use of such facilities upon the payment of its wharfage charges

Supplemental Harbor Fee

Every person subject to the Act must establish observe and enforce

just and reasonable regulations and practices related to or connected

with the receiving handling storing or delivering of property The

charging of wharfage by Plaquemines Port for the use of private

facilities when the private facilities also charge wharfage is an unrea

sonable and unlawful practice contrary to section 17 of the Act This

practice is assuredly unlawful inasmuch as the charges assessed clearly

are not reasonably related to the services provided For example Drey

fus was assessed about 23 percent ofthe total supplemental harbor fees

assessed by Plaquemines Port in 1978 whereas there is little or no

proof that Dreyfus received any of the services of the police fire

ambulance coroner sewage water and other departments whose costs

wereallocated in substantial parts to the Port ofPlaquemines

The Supplemental Harbor Fee discriminates 0

against the cargoes of

persons other than facility owners subjecting these persons cargoes to

undue and unreasonable prejudice and disadvantage under section 16

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LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 125

HARBOR TERMINAL DISTRICT

First of the Act while giving the cargoes of the facility owners undue

and unreasonable preference and advantage

Plaquemines Port contends in effect that its assessment of the Supple

mental Harbor Fee as an equivalent of wharfage is justified on the

ground that all private facilities located within the Port are impressed

with a servitude of public use and that all private facilities are public

facilities when they receive cargoes owned by persons other than the

facility owner If as Plaquemines Port says these private facilities

become public facilities and Plaquemines Port charges a supplemental

harbor fee for use cargo handled through such facilities then Plaque

mines is not only administering these public facilities but also is con

trolling them through the imposition ofits fees

Regardless ofwho owns the terminal facilities in Plaquemines Port if

Plaquemines Port were justified in assessing supplemental harbor fees

against any cargo owner whose cargo is handled through a terminal

facility located in Plaquemines Port then all such cargo owners whose

cargoes are so handled should be assessed equally and if Plaquemines

Port were to give credit to cargo owners who also owned facilities this

conceivably might be accomplished by crediting assessed supplemental

harbor fees paid by a facility owner against ad valorem taxes paid or to

be paid by the same cargo and facility owner thus preserving equality

of assessments ofthe supplemental harbor fees

Instead at present certain facility owners are exempted from supple

mental harbor fee assessments merely because they own their facilities

and pay ad valorem taxes

In docket Nos 73 17 and 74 40 Sea Land Service Inc and Gulf

Puerto Rico Lines Inc Proposed Rules on Containers 21 F M C 1

1978 Order on Reconsideration served June 14 1978 20 FMC 788

the Commission held unlawful a

requirement in the tariff which would

have required importers and consignees utilizing facilities other than

their own to pay normal warehouse storage fees for a minimum of

thirty days even though such storage service was not desired while at

the same time exempting other importers and consignees who owned or

operated their own warehouse facilities instead of using public ware

houses This proceeding in Nos 73 17 and 74 40 is under appeal in the

Court ofAppeals for the D C Circuit but is not being appealed on the

above tariff principle

The complainants herein properly contend that it is unlawful to

differentiate between shippers in the assessment of terminal charges

supplemental harbor fees based on differences in ownership or oper

ations ofterminal facilities

The complainants also point out that the ad valorem taxes paid by

the facilities owners in the present proceeding No 79 45 are not paid

to Plaquemines Port but are paid to Plaquemines Parish This fact

bolsters the above finding of unlawfulness as between the treatment of

25 F M C
126 FEDERAL MARITIME COMMISSION

cargo owners not owning facilities and cargo owners also owning

facilities

At least up until the time of the close of the hearing the respondent

exempted the cargoes of Artfer Inc and the cargoes of all of the oil

companies notwithstanding that all ofArtfer s cargoes and many ofthe

oil cargoes under the tariffs terms failed to qualify for exemption under

item 145 In the calendar year 1978 about 26 percent of the total

tonnage of cargo moved throJlgh Plaquemines Port was assessed the

supplemental harbor fee Assuming that respondent properly calculated

the 10 cents a ton fee on estimated tonnage it follows that respondent s

failure to assess some significant tonnages of cargo would result in a

higher than reasonable basis of charges to those cargoes actually as

sessed the supplemental harbor fee and that perhaps the supplemental

harbor fee should have been 2 12 cents a ton

A giving of a noncompensatory rate to some shippers or cargo

owners can cause a disproportionate share or burden of costs to fall on

other cargo owners A competitive relationship between such shippers

or cargo owners is not necessarily a prerequisite to a finding of unlaw

fulness In Investigation of Free Time Practices Port of San Diego 9

F MC 525 1966 it was held at page 547 that whatever the justifica

tion for requiring a competitive relationship when determining the

existence of preference or prejudice in ocean freight rates such a

requirement cannot be justified when determining whether prejudice or

preference results from free time or free storage practices for free time

bears no relationship to the character of the cargo In the present

proceeding we have a charge for wharfage to one cargo owner and no

charge to another cargo owner for wharfage The same finding as in

the Port of San Diego case should follow in the present cases to wit

that the wharfage charge supplemental harbor charge herein is unlaw

ful

The police fire ambulance etc services allegedly provided by Pla

quemines Port which services are said to justify the supplemental

harbor fee are essentially the general services oflocal government and

they are not dependent upon such factors as differences in transporta

tion circumstances or differences in commodities

The actual costs incurred by Plaquemines Port through the receiv

ing handling storing and delivering of property at private facilities do

not reflect the cost to Plaquemines of the services provided to those

assessed under the tariff of Plaquemines Port Aotually the tariff rates

require that those sessed pay for services which they do not and in

many instances cannot use

Each ton of cargo is uniformly charged for police fire ambulance

coroner aviation water sewerage and other general Parish services

But a shipment of grain owned by Dreyfus is never attended by the

25 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 127

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coroner conveyed to a hospital in a Parish ambulance etc and it is

assessed 10 cents a net ton for services it has not received

Item 145 provides that the owners or other users ofthe vessels and

facilities handling or storing the assessed cargo herein shall be bound

and responsible in solido as surety for the payment ofthe supplemental

harbor fee or wharfage charge This provision creates a liability in a

given person for the obligations of a third party with whom the given

person is not in privity and to whom the given person owes no duty

This tariffprovision is therefore unlawful for this reason alone

Item 145 defines the handling of certain cargoes by a privately

owned wharf as midstream unloading and subject to the same fees as

imposed for midstream unloading Section I Definitions of the tariff

defines midstream unloading as cargo loaded from a vessel and reload

ed on a vessel without being removed from a public or private wharf

Thus the tariff defines midstream unloading as a

cargo operation

accomplished without the use of wharfage dock warehouse or other

terminal facilities but elsewhere in item 145 the tariff classifies mid

stream unloading as cargo operations when conducted at such terminal

facilities

It is evident that a more precise heading for item 145 in lieu of

supplemental harbor fee would be midstream unloading fee and

wharfage fee at privately owned wharves

Item 145 of the tariff was in part changed by amendment effective

July 4 1980 But the first paragraph ofthis item still provides as it did

before the amendment that all cargo when first handled emphasis

supplied within the District in midstream or at anchorage shall be

assessed 10 per net ton or fraction thereof over 500 tons of the

weight ofthe cargo handled provided that no cargo shall be assessed a

tonnage harbor fee more than one time

Another part of item 145 was amended on July 4 1980 to provide in

the fifth paragraph an added paragraph or added provision that the

cargo is assessed the Supplemental Harbor Fee when it is first handled

within the District but because of the exemption granted for cargo

owned by the handling wharf owner the reporting of cargoes should be

made when the cargo leaves the wharf orfacility emphasis supplied and

the assessment calculation shall then be made since the joint ownership

ofthe cargo and the wharf cannot be finally determined until the cargo

leaves the wharf or facility The Harbor Fee credit is given for the

outbound vessels onto which the cargo is loaded from the wharf and

the reporting to the Port District as to cargoes vessels and ownership

thereof is to be made at the instant before the cargo leaves the wharf or

facility

The inconsistency in the tariff of the meaning of first handled is of

materiality to the complainants because ofthe exemption afforded the

first 500 tons ofany cargo handled within the District

25 F M C
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I

i

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128 FEDERAL MARITIME COMMISSION

Were this exemption literally applied to the cargo when first handled

it would result in the first 500 tons offloaded from each and every

barge calling at the MRGB elevator for example being exempted

under terms of tariff item 145 But by assessing the cargo not upon fl1St

handling but rather as it leaves the elevator and is onloaded into

oceangoing vessels Plaquemines Port avoids granting a multiplicity of

5oo ton exemptions and instead grants only a single exemption per

ocean going vessel

IfPlaquemines Port had adhered to the terms of its tariff item 145 as

it originally provided clearly before July 4 1980 it would have result

ed in the assessment of the supplemental harbor fee of 10 per net ton

against only 50 tons from each of the barges based upon a barge load

of 550 tons for a total assessment of 5 per barge times 30 barges or a

total of 150 But ignoring the first handled requirement and assess

ing the supplemental harbor fee against the ocean vessel the shipper is

required to pay for all but 500 tons ofthe same 16 500 tons 30 barges

times 550 tons per barge of soybeans and the shipper s supplemental

harbor fee or wharfage fee is 1 600 16 500 tons minus 500 tons times

10 cents a ton

Dreyfus from September 1 1977 through June 3 1980 was assessed

414000 in cargo fees under item 145 but on the basis that the 500 ton

exemption should have been applied per barge rather than per ocean

vessel Dreyfus estimated overcharge in this period is about 372 000

Cargo such as Dreyfus grain is always in the care of either a vessel

or of a facility such as MRGB These vessels are assessed a harbor

fee for docking or anchoring within Plaquemines Port when they are

handling cargo such as Dreyfus grain The MRGB elevator facility or

other facilities located in Plaquemines Port pay ad valorem taxes pur

portedly for any services rendered to them by Plaquemines Port With

out the cargo such as Dreyfus grain there would be no need for the

vessels or facilities above Thus the attempt by Plaquemines Port to

separately charge the cargo above regardless of charges or taxes paid

by the vessels and facilities above is illogical

Only one other Gulf ofMexico port ofthe United States the Port of

New Orleans imposes a supplemental harbor fee New Orleans assesses

this fee only against midstream activity whereas Plaquemines moves

shoreward to impose the fee against cargo operations conducted at

private wharfage dock warehouse and other terminal facilities

Plaquemines supplemental harbor fee discriminates against interstate

and foreign commerce it imposes charges for services not rendered

and is unreasonably high The tariff provision itself is ambiguous It

holds unrelated third parties liable for payment and it conditions the

public s access to and use of navigable waters ofthe United States and

of privately owned facilities situated on such waters

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LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 129

HARBOR TERMINAL DISTRICT

Item 135 of the tariff is titled as a Harbor Fee and is in reality a fee

for anchoring and docking In fact the bills rendered by Plaquemines

Port to the various vessels paying such a fee uniformly refer to anchor

ing or docking or both The harbor fee does not apply to vessels

under 100 feet long It is difficult to see that hundreds of 90 foot oil

industry crewboats and supply boats daily trafficking between Plaque

mines Ports docks and numerous offshore platforms place no burden

on the Port if at the same time vessels over 100 feet long and under

250 feet are charged 100 per entry into the port and vessels 250 feet

and longer are charged 150 per entry plus 20 or 30 respectively for

each day over five days Nearly all vessels trafficking in the oil and

mineral business in Plaquemines Port are under 100 feet in length and

thus exempted from the Harbor Fee

Item 135 thus burdens vessels in interstate and foreign commerce

and gives an undue and unreasonable preference and advantage to

vessels under 100 feet essentially local vessels or boats in the oil

industry

Item 136 D of the tariff provides for special permits for vessels over

100 feet in length as set forth in item 137 This item provides exemp

tions to all vessels which have been appraised for ad valorem taxes in

the Parish of Plaquemines This exemption accords an undue and unrea

sonable preference and advantage to local maritime interests and sub

jects interstate shipping to undue prejudice and disadvantage Certain

vessels such as the barge lines not paying ad valorem taxes in Plaque

mines Parish are required by the State of Louisiana and by other

states to pay a percentage ofad valorem tax which is equivalent to the

percentage of the carrier s barge line s total transportation mileage

attributable to its movement through the waters of the state Thus

while paying state assessed ad valorem taxes common carriers by water

in interstate commerce cannot qualify for Plaquemines Port s tariff

exemption based on appraisal for ad valorem taxes because their tax

situs is elsewhere than in Plaquemines Parish

Item 137 further provides for the sale of special permits to vessels

which because of their tax situs cannot qualify for the free permit

granted to locally taxed vessels This permit scheme operates to reduce

the compensation required of vessels holding permits to a fraction of

the amounts which would be realized if the permits were not offered

Consequently those vessels granted special permits on the basis of

their ad valorem tax status and those vessels purchasing special permits

in anticipation of avoiding the higher cost of a multiplicity of harbor

fees have been unduly and unreasonably preferred in violation of sec

tion 16 First ofthe Act

The tariff in item 135 specifies that the harbor fee is to assist in

defraying the expense of the administration and maintenance of the

Port including the supervision of the shipping in the Port with the

25 F M C
130 FEDERAL MARITIME COMMISSION

view of preventing collisions and fires policing the river and river

front rendering aid to vessels in distress and to aid in extinguishing

fires in vessels and equipment and in their cargoes aboard such vessels

or upon wharves and other facilities in the Port

To exempt local traffic from the harbor fee while assessing interstate

and foreign water carriers amounts to an unreasonable practice in

violation of section 17 of the Act inasmuch as the expenses ostensibly

incurred by Plaquemines Port in respect to local water carriers neces

sarily must be passed on to non local water carriers Because local

traffic is of greater frequency than interstate or foreign traffic a greater

part ofthe burden purportedly placed on Plaquemines Port is shifted by

the terms of the tariff to a class of water carriers responsible for the

lesser part ofthat burden The permit scheme from top to bottom shifts

the major share ofport costs to the minority ofport users

The permit scheme furthermore operates to license the use of the

first 102 miles of the Mississippi River and the Plaquemines mileage of

the Gulf Intracoastal Waterways

The complainants point out that the exemption of shippers and con

signees from the supplemental harbor fee wharfage fee when they

own the terminal facilities handling their cargo is violative of section 16

First of the Act This violation is compounded when the water carrier

handling the shipper s or consignee s cargo must pay the harbor fee

whereas in the past before May 1980 the vessel did not have to pay

such a harbor fee when the supplementaLharboLfee was assessed By

the conditioning in the past of the payment of a harbor fee upon the

applicability to cargo of the wharfage fee this was in itself a violation

of section 16 First of the Act In other words in the past while it was

in the economic best interests of the cargo to escape the wharfage fee

it was to the vessel s best interest to carry only cargo destined to pay

the wharfage fee

A tariff provision which sets up such a conflict between the water

carrier and the shipper is at odds with the principle that all shippers

should be treated substantially equally

Item 165 of the tariff establishes rules and regulations for the pay

ment of the harbor fees and the supplemental harbor fees Paragraph

four of item 165 provides that Plaquemines Port may require common

carriers or other users of the facilities of the Port to make advance

payment of estimated assessments for harbor fees dockage whose

credit has not been established with the Port Use of the facilities may

be denied according to this paragraph of item 165 until advance

payments ordeposits are made

Paragraph six of item 165 provides that common carriers vessels

their owners or agents and owners of wharves and other users of the

Port or its facilities upon being placed on a delinquent list shall be

2S FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 131

HARBOR TERMINAL DISTRICT

denied further use of the Port or facilities until all charges have been

paid

These provisions of item 165 of Plaquemines Port s tariff condition

the use of the Port itself and of all private and public facilities therein

upon the payment of fees for anchoring docking and utilizing such

facilities for the handling of cargo

Consequently no use can be made ofany facility within Plaquemines

Port without the entering into and the performing of certain contrac

tual obligations to Plaquemines Port Respondent thus by controlling

the use ofterminal facilities in the Port such as the MRGE facility and

by subjecting the public which used such facilities to the harbor fees

and supplemental harbor fees in effect in substantial part furnishes all

wharfage dock warehouse and other terminal facilities in Plaquemines

Port

Item 165 ofthe tariff is not a sanction without teeth Items 130 a and

130 b of the tariff respectively provide that failure to pay Plaque

mines Port the proper toll charge or fee for use of any facilities and

failure to comply with any provisions of the rules and regulations

prescribed by the tariff both will result in findings deeming the person

firm or corporation guilty of a misdemeanor punishable upon convic

tion by a fine of up to 500 or by imprisonment in the Parish Jail for 30

days or both and that the Court in its discretion may consider each

day on which a violation occurs as a separate offense The complain

ants suggest that respondent is without power to impose the sanctions

in items 130 a and 130 b for violations of its tariff provisions

Item 10 of the tariff states in part that Plaquemines Port is the sole

judge as to the interpretation of its tariff However the law requires

that tariffs be clear and definite Iftariffs are ambiguous they must be

construed against the tariff issuer A tariff provision purporting to allow

a port to interpret provisions ofthe ports tariff is in violation of section

17 ofthe Act Docket No 74 15 West GulfMaritime Association v Port

of Houston order adopting initial decision served January 28 1980 22

F MC 423

Plaquemines Port s expenditures for 1978 totalled 1 590 879 87 Of

this amount 1 345 856 59 represented the charges allocated to the Port

from the various departments of the Parish government This transfer

ofParish expenses to the Port was improper in view ofthe fact that the

Parish expenses so transferred were not compensable by the common

carriers other vessel interests and shippers who use the Port

Many of the Parish expenses transferred to the Port are expenses

which can be and have been recouped by municipalities by fees as

sessed against those using the services

Parties using the Parish ambulance service are individually invoiced

but the Parish failed to pursue its accounts receivable permitting or

suffering the ambulance service to operate at a loss To recover this

25 F M C
132 FEDERAL MARITIME COMMISSION

deficit the Parish required the Port to bear 30 percent of the deficit

The Port in turn passed on or attempted to pass on its costs to the

shipping public

Ten percent of the cost of the two ferries conveying vehicles and

passengers across the Mississippi River in the Parish was passed on to

the shipping public but no tolls are charged for the use of the ferries

Ten percent ofthe Parish budget for garbage collection and disposal

five percent of the cost of sewerage and ten percent of the annual

deficit ofthe various Parish waterworks werepassed on to the shipping

public notwithstanding that fees for these services are assessed the

facilities in the Parish

Tariff assessments against vessels and cargoes have been used for the

operation of five waterworks in the Parish and for the stock water

plants and water delivery truck whereas the record shows that no

vessel and no cargo utilizing Plaquemines Port has freely obtained any

water from the Parish All water is metered out and any water used by

a vessel or cargo has been charged to the shoreside facility through

whose meter it has flowed

Part ofthe cost offire protection is the purchase of foam for fighting

fires The Parish charges a fee to any vessel receiving the benefit of

such foam The ferries perform no services to vessels

To allocate 10 percent of the annual water deficit to the Port or

more than 100 000 is to charge twice for the same service

Forty nine percent of all assessments by Plaquemines Port for the

year 1978 were based on the supplemental harbor fee the fee for

wharfage of cargo Yet the majority of Parish departmental services

the expenses of which were allocated to the Port to be defrayed less

the supplemental harbor fee and harbor fee assessments are of no avail

to cargo

The ferries the ambulances the coroner the health unit the Parish

helicopter water sewerage and garbage are services which cannot be

rendered to cargo

General administrative expenses of Plaquemines Port have been in

flated because they were based in part on the time of the Parish

I Council in administering certain services which services in turn could

not be in many instances and were not rendered to vessel and cargo

interests Since the basic services cannot be allocated properly to the

Port s users the costs ofadministering the basic services also cannot be

so allocated properly Hence 30 percent of the Council s official time

costing the Port 80 580 for 1978 and varying percentages of the

expenses for data processing internal auditing insurance hospitaliza

tion social security contributions etc were improperly and uureason

ably allocated to the Port

In 1978 part of the Plaquemines Sheriff costs were allocated to the

Port in the amount of more than 290 000 assertedly for services

25 FMC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 133

HARBOR TERMINAL DISTRICT

performed in connection with Parish waterways coastal waters and

offshore industries The record shows that the great majority ofthese

services were in no way connected with the shipping public

A principle of criminal law is that one person is not chargeable for

the criminal offense of another merely because of a conjugal blood or

employer relationship In spite of the above principle the respondent

seems to take the position that an employer whether water carrier

shipper or terminal operator is answerable for the criminal acts ofhis

employee Plaquemines Port seemingly contends that the employer is

obligated to pay for the Sheriffs expense in arresting an offending

employee booking and housing him in the Parish jail and otherwise

exercising control and custody ofhim

An oil field service company will pay neither the harbor fee nor the

supplemental harbor fee but the cost to the Port ostensibly created by

the employee s violation ofthe law will be shifted to those who do pay

the harbor fees and the supplemental harbor fees such as Dreyfus

Early Lykes Bros Steamship Co Combi Line and the complainant

barge lines

Respondent erred in ascribing to the shipping public the costs in

curred by the Sheriff in policing Plaquemines Parish for two reasons

first for holding the employer liable for the criminal acts of an employ

ee when such Acts were committed beyond the scope of the employ

ment and second by charging costs occasioned by criminal acts to

employers otherthan those whose employees committed the acts

The allocation to the shipping public of 1 345 000 of Parish govern

mental expenses for 1978 which expenses were substantially local in

nature resulted in assessments against the shipping public without any

substantial proof of any related services being performed for the ship

ping public A terminal charge for services not rendered is violative of

section 17 of theAct

THE RESPONDENT PLAQUEMINES PORT IS AN OTHER

PERSON SUBJECT TO THE SHIPPING ACT Plaquemines Port is

one of four port authorities authorized by the State of Louisiana to

promote and facilitate marine commerce on that portion of the Missis

sippi River which serves ocean commerce Respondent exercises its

jurisdiction over 102 miles of the Mississippi River from the Gulf of

Mexico to the Port of New Orleans and over a part of the Gulf

Intracoastal Waterway Through its tariff on file with the Federal

Maritime Commission Plaquemines Port controls the shipping and

cargo handling activities of at least 110 wharves docks and terminals

and of at least 202 water carriers including common carriers by water

as defined by section 1 of the Act

Plaquemines Port derives its authority from Louisiana statute laws

Its authority includes the right to make reasonable charges and collect

the same for the use of all structures works and facilities administered

25 F M C
134 FEDERAL MARITIME COMMISSION

by the Port and it may regulate the fees and charges made by privately

owned wharves docks warehouses elevators and other facilities locat

ed within Plaquemines Port when the same are offered for public use

Respondent Plaquemines Port in its annual report of 1978 and in its

answers to interrogatories in certain civil actions in the United States

District Court Eastern District ofLouisiana Exhibits C 15 and C 21 of

the present record admits that it administers all privately owned docks

and wharves within the Port as well as all cargoes and vessels during

their presence in the Port

In addition respondent owns three marinas or boat harbors a small

shipyard for boat repair and a used dock 90 to 100 feet long Its tariff

in items 155 160 and 165 provides wharfage rates at public wharves

conditions under which wharfage will be assessed and for the responsi

bility of common carriers vessels owners agents etc for payment for

dockage storage or other charges among other provisions of these

items Thus Plaquemines Port offers its facilities to the public through

a published tariff but inasmuch as there is no record of the use of such

facilities by common carriers and no record of payment of wharfage

charges under item 155 the finding below that respondent is an other

person does not rely on these tariff items Rather the finding relies on

the fact that respondent Plaquemines Port controls the use of certain

private terminal facilities and subjects their use to the imposition of its

harbor fee and supplemental harbor fee

In the year 1978 some 26 million tons of cargo were handled

through private terminal facilities in Plaquemines Port and the Port

imposed its harbor fees and supplemental harbor fees on a substantial

portion of this cargo Many common carriers by water have called at

these private terminal facilities and many cargoes transported by these

common carriers have been subjected to the supplemental harbor fees

herein and many of the vessels transporting these cargoes have been

subjected to the harbor fees herein

Plaquemines Port superimposes its tariff fees upon the charges con

tract and tariff of the private terminal facilities located in the Port

Furthermore and most important to the other person finding herein

Plaquemines Port conditions the use of these private terminal facilities

upon the payment to Plaquemines Port of its harbor fee and supplemen

tal harbor fee Ifthese fees are not paid Plaquemines Port will bar or

attempt to bar the use ofthese private facilities to the shipping public

viz common carriers by water and cargo owners shippers and consign

ees

Inso conditioning the use of these private facilities Plaquemines Port

controls their use and control is the key factor Control outweighs the

factor of private ownership of these facilities But even then Plaque

mines Port asserts that ownership ofbattures and banks ofrivers under

Louisiana law are impressed with a public interest and a private wharf

25 FMC
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HARBOR TERMINAL DISTRICT

can only be built with the consent of a deep water port commission

This public interest in private facilities forms part of the basis for

Plaquemines Port s right to charge its harbor fees and supplemental

harbor fees in the view ofthe Port

Control of the use of these private facilities in Plaquemines Port in

the circumstances herein outweighs the factor of who operates these

facilities because these facilities cannot be operated unless the harbor

fees and supplemental harbor fees are paid to Plaquemines Port on

cargoes not owned by the facilities owners

In the case ofMRGE which is solely a service company all cargoes

passing through this facility are not owned by MRGE Thus MRGE is

a privately owned facility which serves the public So Plaquemines

Port in controlling the use of the facilities of MRGE is at least in

substantial part carrying on the business of furnishing wharfage dock

warehouse or other terminal facilities in connection with common carri

ers by water

The assessment of the supplemental harbor fee on the cargo by

Plaquemines Port has the same effect on the cargo owner as if the

private facility had imposed this charge In the same manner as other

terminal charges affect water commerce so do the supplemental harbor

fees wharfage charges herein These charges are one of the crucial

links in the transportation chain which the Shipping Act was intended

to regulate

One who conditions the use of a terminal facility is himself an other

person because such a person influences whether and on what terms a

terminal facility will be furnished to common carriers or to the shipping

public A lessor ofterminal facilities whose lease conditions the use of

the facilities is an other person because the lessee s use of the terminal

facilities is influenced by the lease provisions Here Plaquemines Port is

analogous to a lessor whose lease is conditional because Plaquemines

Port says to MRGE for example you can only operate your grain

elevator if you collect 10 cents a net ton on grain handled through your

terminal facility and remit this 10 cents a ton to Plaquemines Port

Public entities owning or operating wharves are subject to the Ship

ping Act so that they are subject to the same Shipping Act Laws

preventing discrimination between carriers and between shippers as are

private owners of wharves It follows that public entities controlling

the use ofwharves are likewise subject to the Shipping Actthe same as

are owners and lessees of wharves when the latter control the use of

these terminal facilities In fact obviously the more fundamental factor

is not ownership but it is control of the use ofthe facility An owner of

a terminal facility who has given up all control ofthat facility by long

term lease for example may be in no wise carrying on the business of

furnishing terminal facilities and in such case the lessee would be the

other person But if the owner by the lease terms or otherwise retains

25 FM C
136 FEDERAL MARITIME COMMISSION

some control of the furnishing of the terminal facility that owner of

course remains an other person To properly regulate terminal activi

ties one must not go only to the nominal person furnishing the terminal

facility but to the actual person or persons who controls the business of

furnishing terminal facilities

The interpretation of the term other person as made herein and

the finding that Plaquemines Port is an other person appear absolutely

necessary to the general intent of the Shipping Act insofar as it is

designed to prevent unlawful discrimination among shippers and

common carriers by water

Plaquemines Port not only superimposes its charges upon those of

private facilities such as MRGE but in addition Plaquemines Port has

the right under Louisiana law in connection with such wharves build

ings or improvements in Plaquemines Port to administer and control

with respect to their maintenance and to do the same with respect to

thefees and charges to be exacted for their use by thepublic

While Plaquemines Port has not yet so far as the record shows

dictated or controlled the fees and charges of any facility such as

MRGE Plaquemines Port d9Cs have the right to control such fees and

charges Thus in toto Plaquemines Port controls the harbor fees and

supplemental harbor fees which it charges and also may control those

fees and charges of the private facilities it administers In effect Plaque

mines Port may exercise total control over such fees and charges as are

imposed in connection with the use of private terminal facilities in

Plaquemines Port

Midstream activity takes place in Plaquemines Parish Dockside Inc

operates a floating elevator in midstream 5 or 6 miles below the Belle

Chasse La ferry landing in the Mississippi River Other midstream

activity involves the loading and unloading of LASH and Seabee

barges This is a type of terminal activity such as the lOading ofbarges

onto mother vessels which no doubt was not contemplated more than

sixty years ago when the Shipping Act was enacted but the terms of

the Act can be read now to include this type of terminal midstream

operation within the term other terminal facilities in connection with a

common carrier by water Herein Plaquemines Port furnishes the

point of interchange in midstream at which the terminal activity takes

place by conditioning the very existence of midstream loading and

unloading in the Mississippi River upon the payment of Plaquemines

Port s supplemental harbor fees

The essence of a terminal operation is that of a point of interchange

or a link between one mode oftransportation in anotJer

When Plaquemines Port conditions and controls midstream activity

upon the payment of its supplemental harbor fees Plaquemines Port

again controls the furnishing of terminal facilities in connection with

25 FMC
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HARBOR TERMINAL DISTRICT

common carriers by water Plaquemines Port is an other person under

the Shipping Act

SOME CASE LAW CITATIONS In Bethlehem Steel Corp v Indi

ana Port Commission docket No 71 76 served January 8 1979 21

F M C 629 it was determined that a harbor service charge was not

necessarily a regulation or practice related to or connected with the

receiving handling storing or delivery of property inasmuch as the

harbor charge was intended to recoup the port s investment in con

struction of the harbor and that purpose was unrelated to cargo han

dling The charge was levied on vessels entering the harbor and was

assessed per gross registered ton of the vessel This was a manmade

port not a natural one It was constructed in part with State of Indiana

or Port funds Bethelem Steel Corp and the Midwest Steel Division of

National Steel Corporation constructed large portions of the harbor

The facts and circumstances in the present proceeding differ greatly

from those in the Bethlehem Steel case above There it was decided that

not all of the Indiana Port s activities were subject to section 17 of the

Act simply because the Port was a terminal operator and an other

person subject to the Act The Indiana harbor charge was related to

the construction of the harbor rather than to the construction of pier

facilities warehousing or wharfage facilities The charge in question

was based on the navigational aspect of the harbor and it was unrelat

ed to cargo handling

In the present proceeding we do not have fees or charges related to

the construction of a harbor Plaquemines Port s harbor is in essence

the Mississippi River and is not a manmade harbor Plaquemines Ports

fees mostly are related to cargo handling not to navigational aspects of

the River The supplemental harbor fee only applies to cargoes handled

through terminal facilities midstream or shoreside The harbor fee only

applies on vessels docking mooring or anchoring and when they

have their cargoes handled at terminals in Plaquemines Port whereas

vessels passing through the Port ofPlaquemines are exempted

Patently the Bethlehem Steel case does not support the contention

that Plaquemines Ports supplemental harbor fee and harbor fee are not

regulations or practices related to or connected with the receiving

handling storing or delivering of property under section 17 of the Act

Most assuredly the Plaquemines supplemental harbor fee relates to the

receiving handling storing or delivering of property such as grain at

MRGE

The Plaquemines harbor fee falls on vessels which are docked so that

they may have their cargoes of grain for example delivered to MRGE

or handled by MRGE If the vessels are merely passing through Pla

quemines Port and their cargoes are not being handled in terminals

there is no harbor fee assessed by Plaquemines Port such vessels being

exempted by the tariffs terms

25 F M C
138 FEDERAL MARITIME COMMISSION

In New Orleans Steamship Association v Bunge 8 F MC 687 1965

and in Agreement No T2719 16 F MC 318 1973 the Commission

held that an operator of a terminal grain facility who had filed a tariff

indicating that common carriers would not be served is not an other

person subject to the Act

In the present proceeding Plaquemines Port argues that it does not

furnish terminal facilities to common carriers by water but this argu

ment relates only to the aspect offurnishing terminal facilities rather

than to the fact that common carriers are welcomed and served at the

various private terminal facilitie in Plaquemines Port Accordingly the

two cases cited next above are not determinative ofthe basic issue in

the present proceeding which issue is whether Plaquemines Port by

controlling the use of private terminal facilities is thereby furnishing

such facilities

In Clyde Mallory Lines v State of Alabama 296 U S 261 1935 at

page 266 the Supreme Court stated that the policing of a harbor so as

to insure the safety and facility of movement of vessels using it differs

from wharfage or other services which benefit only the particular

vessels using them

In the present proceeding Plaquemines Port s

supplemental harbor

charge is a wharfage charge applied on tonnages of cargoes and it is

not a harbor policing charge In like manner the Plaquemines Port s

harbor charge has been applied in part to vessels whose cargoes are

handled at terminals in Plaquemines Port and other vessels passing

through the harbor are not charged the harbor fee Thus this fee is not

a navigational fee or a fee related to policing of the harbor but is a fee

related to cargo handling Additionally these fees are set off one

against the other Since both the supplemental harbor fee and the

harbor fee herein therefore are wharfage dockage and cargo related

fees the principles of the Clyde Mallory case are not pertinent to the

present Plaquemines proceeding

In Department of Revenue of the State of Washington v Association of

Washington Stevedoring Companies 435 U S 735 1978 cited by the

respondent in issue was the State of Washington s application of its

business and occupation tax to stevedoring Obviously the present

Plaquemines proceeding differs because it is not concerned with state

taxes but with Port fees

In Volkswagenwerk Aktiengesellschaft v Federal Maritime Commission

390 U S 261 1968 an assessment levied upon terminal operators and

ship lines who were members of the Pacific Maritime Association to

fund a modernization and mechanization fund was found unlawful

because of the measure of the assessment on automobiles It was found

that the question under section 17 of the Shipping Act is not whether

petitioner had received some substantial benefit as a result ofthe assess

ment but whether the correlation of that benefit to the charges im

2S F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 139

HARBOR TERMINAL DISTRICT

posed is reasonable Both the respondent and the complainants rely on

the principle of this Volkswagenwerk case The respondent argues that

there is a reasonable approximation between the benefits which Plaque

mines Port provides and the charges which it assesses in consideration

of these benefits whereas the complainants argue that these benefits

and charges are not reasonably related The complainants in this pro

ceeding have shown that the fees imposed by respondent have been

anything but fair and that these fees have not been imposed in a

reasonable and evenhanded manner

An initial basic issue herein is whether respondent is an other

person The critical fact is that Plaquemines Port absolutely controls

whether or not any terminal facility located in Plaquemines Port

whether such facility is private or public may carryon the business of

furnishing wharfage dock warehouse or other terminal facilities in

connection with common carriers by water Unless Plaquemines Port s

fees the supplemental harbor fee and harbor fee are paid to it the

shippers of cargoes and the river barges and ocean vessels will be

barred by Plaquemines Port from using any terminal facilities located in

the Port

Thus control of the furnishing of terminal facilities in connection

with common carriers by water amounts to the furnishing of terminal

facilities in connection with common carriers by water Plaquemines

Port by virtue of such control is an other person subject to the

Shipping Act

Plaquemines Port superimposes its charges on fees on the charges or

fees contractual or tariff of existing private facilities conditioning the

use ofthose private terminal facilities upon the payment of Plaquemines

Port s supplemental harbor fee and harbor fee

In Investigation of Storage Practices 6 F MB 871 1961 the Board

reasoned that one of the respondents therein Trans Oceanic Agencies

TOA was an other person because it placed itself between the Port

ofStockton and its consignee customers for the purposes ofordering or

obtaining the port s services for them and that if Stockton furnished

warehouse or terminal facilities in connection with a common carrier

by water so did TOA In the present proceeding Plaquemines Port has

placed itself between or astride the private terminal operators and their

consignee customers for the purpose of collecting Plaquemines Ports

fees

In the matter of Agreement Nos T 2455 T 2553 18 F MC 115

1974 the Commission determined that the Philadelphia Port Corpora

tion PPC was an other person because a clause in a lease agreement

gave PPC some oversight control ofthe use of terminal facilities In

the present proceeding Plaquemines Port has greater control than mere

oversight because Plaquemines Port levies direct charges fees for the

use ofterminal facilities and because under its tariff provisions Plaque

25 F M C
140 FEDERAL MARITIME COMMISSION

mines Port may exclude cargo owners and vessels from using terminal

facilities located in Plaquemines Port Plaquemines has done more than

PPC Plaquemines has exercised control whereas PPC had not done

so

In A P St Philip Inc v Atlantic Land Improvement Co 13 F M C

166 1969 the Commission found that the lessor of a terminal facility

effectively controlled the persons and traffic who and which were

permitted to use the facility by requiring in its lease agreement that all

vessels berthing at the facility make use of a specific tug service

Respondent Atlantic therein was found to have subjected itself by its

control of the terminal facility to the juriSdiction ofthe Shipping Act

The status of a lessor is not determinative of whether a person is

furnishing terminal facilities The conditioning and controlling of their

use is the key The lessor who does not so control or condition is not

an other person The lessor who does is

The status of other person does not attach to lessors as a class but

rather attaches to those persons who condition or control the furnishing

of facilities Plaquemines Port by Louisiana statute and by its tariff is

vested with and retains control over private terminal facilities in Pla

quemines Port As an administrator of such facilities Plaquemines Port

has the power to control and to condition the use of private terminal

facilities in the Port It is concluded and found that Plaquemines Port is

an other person subject to the Act

The regulatory authority in its definition in section 1 of an other

person concerns persons who furnish facilities rather than furnish

services because it is the facility which is the link between shippers

carriers terminals and modes oftransportation

Plaquemines Port as an other person has cast a wide net and snared

numerous common carriers and shippers of cargo Total assessments for

one year 1978 were about 671 000 for the supplemental harbor fee

and about 689 000 forthe harbor fee

Cargo tonnages assessed the supplemental harbor fee in 1978 totalled

about 6 857 413 tons About 3 620 vessels were assessed docking fees

totalling 488 860 in 1978 and about 978 ships were assessed anchoring

fees in 1978 of 200 000 by Plaquemines Port None ofthe complainant

barge lines were assessed the harbor fees herein for anchoring but

these five complainants were assessed the harbor fees for docking at

privately owned terminal facilities in the Port

In 1978 and 1979 combined the following harbor fees for docking of

barges in order to discharge or load cargo at numerous privately

owned facilities in Plaquemines Port were assessed against Dixie

158 000 against Federal 5 150 against Le Beouf 135 850 against

Valley 3 900 and against Hollywood 16 950 As seen supplemental

harbor charges assessed in 1978 against Dreyfus were 156 619 20 and

against Early were 47 15140

2S F MC
LOUIS DREYFUS CORP ET AL V PLAQUEMINES PORT 141

HARBOR TERMINAL DISTRICT

RULING ON LATE FILED MOTIONS Since the close of the

hearing the respondent has filed motions to file late exhibits and to file

a supplemental brief which motions are opposed by the complainants

The last such motion was dated October 6 1981

Except to the extent that such motions and exhibits refer to tariff

items or to amendments to tariff items and to Louisiana statute laws

the said motions hereby are denied Ordinarily tariffs may be noticed

officially and the recognition of the Louisiana laws referred to in the

last motion and exhibits does not alter the existing record in any

substantial way nor does it affect the findings and conclusions in this

decision

ULTIMATE CONCLUSIONS AND FINDINGS It is ultimately

concluded and found I that Plaquemines Port has exercised and

exercises control as to whether or not certain terminal facilities located

in Plaquemines Port are furnished and that Plaquemines Port is by

virtue of such exercise of control an other person subject to the

Shipping Act 1916 because it furnishes wharfage dock or other

terminal facilities in connection with common carriers by water 2

that Plaquemines Port s supplemental harbor fee is a wharfage charge

which is based on tonnages of cargo handled at terminal facilities

located in Plaquemines Port and that this supplemental harbor fee is

subject to section 17 of the Act covering regulations and practices

related to or connected with the receiving handling storing ordeliver

ing ofproperty 3 that Plaquemines Port s harbor fee is a

dockage and

anchoring charge on vessels docking oranchoring at facilities orpoints

in Plaquemines Port and because this fee applies to vessels which dock

for the purposes ofhaving their cargoes handled at terminal facilities in

Plaquemines Port such harbor fee is related to the supplemental harbor

fee inasmuch as the amount of the latter is reduced by the amount of

the harbor fee and because the harbor fee at least in part is related to

the handling of cargoes at terminal facilities said harbor fee is subject

to section 17 of the Act covering the regulations and practices recited

therein 4 that Plaquemines Port as an other person through the

imposition of its supplemental harbor fee has given undue and unrea

sonable preference or advantage to certain descriptions of traffic such

as to cargoes owned by facilities owners and to certain cargoes be

lieved to be but not in fact so owned and that Plaquemines Port has

subjected other descriptions oftraffic to undue and unreasonable preju

dice and disadvantage in violation of section 16 First of the Act that

Plaquemines Port is in violation of section 16 First of the Act because

certain vessels were subjected to the harbor fee and other vessels such

as those under 100 feet long and those issued certain permits were

exempted from such fee 5 that Plaquemines Port through the imposi

tion of its supplemental harbor fee and its harbor fee has established

observed and enforced unjust and unreasonable regulations and prac

25 F M C
142 FEDERAL MARITIME COMMISSION

tices relating to or connected with the receiving handling storing or

delivery of property particularly because it has not been shown that

the said fees are reasonably related to the services performed by Pla

quemines Port and because it has been shown that the complainants

have been subjected to charges which are not reasonably related to any

services performed in their behalf by Plaquemines Port 6 that Plaque

mines Port is in violation of section 17 of the Act because its tariff

provisions hold liable for the debts of shippers and consignees of car

goes all parties who may have had contact with the debtors including

vessel owners terminal operators and other users of the vessel or

facility 7 that Plaquemines Port is in violation of section 17 of the

Act because its tariff item 145 as amended is ambiguous because it

covers cargo when first handled in the Port and then contradicts the

meaning of first handled by providing that the reporting of such

cargoes should be made when the cargo leaves the wharf or facility 8

that Plaquemines Port is in violation ofsection 17 ofthe Act because its

tariff item 10 purports to establish itself as sole interpreter of the

provisions of its tariff 9 that Plaquemines Port is in violation of

section 17 of the Act because its item 130 of its tariff sets up civil and

criminal sanctions for the refusal to pay fees assessed by the tariff and

10 that the complaint insofar as it alleges violations of section 15 of

the Act is dismissed for lack ofproof

An appropriate order should be entered barring the assessments

against the complainants which herein have been found to be unlawful

under the Shipping Act

S CHARLES E MORGAN

Administrative Law

2S FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 77

U S SOUTH ATLANTIC GULF PANAMA COSTA RICA

RATE AGREEMENT NO 10045 6

U S SOUTH ATLANTIC GULF GUATEMALA HONDURAS EL

SALVADOR RATE AGREEMENT 10105 4

NOTICE

July 30 1982

Notice is given that no exceptions have been filed to the June 25

1982 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 143
FEDERAL MARITIME COMMISSION

DOCKET NO 81 77

U S SOUTH ATLANTIC GULF PANAMA

COSTA RICA RATE AGREEMENT

AGREEMENT NO 1004 5 6

U S SOUTH ATLANTIC GULF GUATEMALA

HONDURAS EL SALVADOR RATE AGREEMENT

AGREEMENT NO 10105 4

The Commission inetituted thie proceeding to determine whether two 48 hour rate agree

ments coneieting of three carrien operating in two Central American trades which

agreements as expanded the Commission approved effective November 1980 should

continue to enjoy approval under section 15 of the Shipping Act 1916 This determi

nation was to consider updated evidence showing the effects of the expanded agree

ments on the trades served how intermodal authQrity was being used and the

effects if any of an overlapping conference Ifind the agreements deserve continued

approval for a three year term for the following reasone

I Findings which the Commission made when approving the agreements in 1980

regarding the potential for rate instability in the trade and the potential stabilizing

effect of the agreements are still valid

2 There are benefits which have occurred since the approval of the expanded

agreements namely the development of joint tariffs publishing uniform ratee and

uniform descriptions of service the implementation of uniform intermodal service

and the employment of a full self policing system Although all the hoped for

stabilizing effects have not been realized so far and numerous outside competiton

continue to operate in the trade there is some sign of improving rate stability and no

signs of harm to shippers or outside carrien Moreover there is no overlapping

effect between the agreement covering Panama and the separate Panama Conference

agreement

3 Firm conclusions regarding effects of the agreements on cargo shares and trade

carryings cannot be made because pertinent Census data are not available beyond

June 1981 shortly after the agreements joint tariffs were filed and such data are

unadjusted However the data show no harmful trends developing as to outside

carriers but rather a decline for agreement members in 1981

4 The agreements should be approved for a term of three years following fmal

Commission decision rather than enjoy unlimited approval This follows Commission

precedent by which parties to agreements are permitted opportunities to demonstrate

that their agreements are beneficial on the basis of actual operating evidence when

their operating experience has been limited and when evidence of such experience

has not been available

Donald J Brunner for proponents

John Robert Ewers Joseph B Slunt and WItam D Welswasser for the Commission s

Bureau of Hearings and Field Operations Office of Hearing Counsel

144 25 FMC
RATE AGREEMENTS NOS 10045 6 10105 4 145

INITIAL DECISION 1 OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Finalized July 30 1982

This proceeding was begun by the Commission to determine whether

two rate fixing agreements in the trade between U S South Atlantic

and Gulf ports and five Central American countries should continue to

enjoy Commission approval under section 15 ofthe Shipping Act 1916

or whether they should be disapproved canceled or modified on the

basis of an updated record which would be developed in the formal

investigation The two agreements consist of so called 48 hour rate

agreements under which the member carriers may fix rates jointly but

are free to determine their own individual rates provided they give

other members of the agreements 48 hours notice One of the agree

ments No 1045 presently consists of three member lines Coordinat

ed Caribbean Transport Inc CCT Linea Naviera Pan Atlantica S A

dba Pan Atlantic Lines LINAPA and Sea Land Service Inc and

covers the trades between ports in the U S South Atlantic and Gulf

ranges and Caribbean ports and points in Costa Rica and Panama The

other agreement No 10105 also presently consists of three member

lines CCT Pan American Mail Lines dba Pan Atlantic Lines

PAML 2and Sea Land and covers the trades between U S South

Atlantic and Gulfports and Caribbean ports and points in Guatemala

EI Salvador and Honduras Sea Land which is a member of both

agreements is also a party to another agreement Agreement No 3868

The Atlantic Gulf Panama Canal Zone Colon and Panama City

Conference but as mentioned below it does not participate in Agree

ment No 10045 with respect to any ports in Central America within

the scope of the aforementioned Panama Conference in other words

Sea Land does not participate in the Panama section ofAgreement No

10045

Agreement No 10045 Panama Costa Rica was first approved by

the Commission on July 5 1973 Agreement No 10105 Guatemala EI

Salvador and Honduras was first approved on May 23 1974 Original

ly the scope of these agreements was limited to Florida ports on the

U S side and consisted ofonly two carriers CCT and Pan Atlantic In

1978 however Sea Land sought to join the agreements and the parties

sought other changes as well namely an extension of the geographic

scope ofthe agreements to add U S Atlantic and Gulf ports to include

inland points in the Central American republics to establish new self

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

Commission Rule 227 Rules of Practice and Procedure 46 CFR 502 221

2 Under a

separate agreement approved by the Commission No 10421 the two companies

LINAPA and PAML are permitted to utilize the same trade name Pan Atlantic Lines

25 F M C
146 FEDERAL MARITIME COMMISSION

policing provisions as required by the Commission s General Order 7

46 CFR 528 to authorize joint tariffs and to make certain other

changes relating to authority to agree on demurrage charges and to

alteration of certain voting procedures See Conditional Approval oj

Agreement No 10045 3 20 SRR 437 1980 Proponents sought these

changes to their agreements on several grounds contending that the

subject trades were highly competitive and unstable that tariff and rate

structures were confusing and chaotic that rates had recently under

i gone wide fluctuations that these conditions prompted certain carriers

to leave the trades that the uniform tariff would benefit shippers that

an expanded scope ofthe agreements would make it possible for addi

tional carriers to join the agreements and that the agreements as

expanded would lead to greater rate stability and thereby encourage

carriers to make major investment decisions which would result in

improved quality of service Id 20 SRR at 437 438

On September IS 1980 the Commission issued two orders of condi

tional approval which with two dissenting opinions approved the

amended agreements on certain conditions effective November 10

1980 for a one year term The Commission found that the proponents

had demonstrated the existence of past rate instability and a clear

potential for future instability and that the authority to discuss and

agree upon rates in an expanded trade area should have a stabilizing

effect Id20 SRR at 439 The Commission further found that

prevention or correction ofrate instability is a legitimate Shipping Act

objective and the Commission considers the instant agreement to be a

manifestation of such a measure Id The Commission acknowledged

that the existence of non comparable tariffs and rate structures made it

difficult for shippers to make accurate rate comparisons but was not

convinced that the agreements would solve this problem because there

were only three carriers out of 13 or so in the trades who were

members ofthe agreements and even the three retained the right to file

separate rates on 48 hours notice The Commission concluded that

important public benefits would be derived and valid regulatory pur

poses would be served by expansion of the subject agreements and that

the additional authority to establish intermodal through rates to add

from inland points in Central America was warranted in view of inad

equate port facilities the needs ofshippers for fast flowing inland serv

ice the natural movement of cargo to and from inland points in Central

America the consistency of such intermodal service with proponents

ro ro and containership serviCes and the offering of such services by

competitors

Having found benefits and valid regulatory purposes the Commission

approved the agreements but on several conditions Thus it restricted

the agreements to U S South Atlantic and Gulfports on the U S side

finding no nexus ofcompetition among proponent carriers outside of

25 F MC
RATE AGREEMENTS NOS 10045 6 10105 4 147

the Southeastern and Gulf regions of the United States fd at 439

The Commission also limited the term of approval to one year so that

the Commission may have a further opportunity to assess the impact

the expanded rate agreement has had on the trade Id at 439 Order

of Investigation and Hearing p

2 The Commission imposed further

conditions on approval namely requiring the agreements to specify the

use of a joint tariff rather than individual tariffs as required by 46 CFR

536 3j

restricting Sea Land s participation in Agreement No 10045

Panama Costa Rica to Costa Rican matters so long as Sea Land

remained a member of the separate Panamanian conference agreement

No 3868 clarifying that the foreign ports served would be Caribbean

ports and conforming the new selfpolicing provisions of the agree

ments to the detailed requirements of General Order 7 46 CFR 528

Conditional Approval ofAgreement No 10045 3 cited above 20 SRR at

441 442

After these conditions were met and the Commission s approval

became effective on November 10 1980 for a one year term as men

tioned nearly three months were consumed by the parties who were

required by the Commission s orders to formulate new joint tariffs to

reflect the agreements expanded scope Because time had to be utilized

for developing these tariffs and because the agreements had to be

refiled with the Commission some time in advance of their expiration

date which was in November 1981 3

proponents were able to furnish

the Commission with trade and carriage data which covered only six

months of the one year approval period In the Order of Investigation

and Hearing which began this proceeding the Commission stated that

although proponents had demonstrated the existence of past rate insta

bility and the potential for future rate instability the data submitted by

proponents together with their refiling did not demonstrate that their

rate agreements had ameliorated this instability However the Commis

sion acknowledged that proponents only had a relatively short time to

show the actual effects of the agreements on the trades and that the

Commission would therefore permit the parties to develop further evi

dence which the Commission requires to realistically assess the agree

ments impact Order p

3 Moreover the Commission stated that

based upon their review of the limited data furnished the Commission

believed that the stabilizing effect which proponents had contended

would result from the expanded scope of the agreements has not yet

occurred Id p 3 Rather than granting the indefinite extension of

approval as sought by proponents the Commission granted approval

3

The Commission s regulations General Order 17 46 CPR 521 require parties to agreements who

wish to have their agreements period of approval extended to file the requisite application not less

than one hundred twenty 120 days prior to the date on which the approved agreement would other

wise terminate 46 CPR 5212 a Proponents requested extension on July 17 198L

25 F M C
148 FEDERAL MARITIME COMMISSION

pendente lite and launched this investigation 4However the Commis

sion did not limit its concern to the question of whether the agreements

were ameliorating unstable conditions in the trade and should be ap

proved or disapproved only on that basis Rather the Commission

stated that it wished to examine the entire question of continued ap

proval ofthe subject agreements under the standards enunciated by the

Supreme Court in FMC v Aktiebolaget Svenska Amerika Linien 390

U S 238 243 1966 Svenska and that it would consider four factors

among others when deciding whether the agreements continued to

meet the Svenska standards These four factors are

I the impact ofthe agreements on the rates and cargo shares of

the parties in the subject trades

2 the impact of the agreements on overall rate stability and

service in the trades

3 the utilization ofintermodal authority and

4 the effect if any of overlapping conferences Order p 3

The Record Developing Phase of the Proceeding

As noted above the Commission initiated this formal investigation to

permit the parties to develop a more recent record to enable the

Commission to evaluate the various contentions made by proponents

that the subject agreements were producing benefits and serving valid

purposes and also to determine the impact of the agreements on the

basis of actual experience with particular concern for specific evidence

of rates and cargo shares overall rate stability and service utilization of

intermodal authority and the effect of overlapping conferences in the

Panama trade area In response to the Commission s wishes the parties

cooperated in an effort to develop an adequate record despite certain

handicaps relating to the limited period of time in which the agree

ments have been operating under joint tariffs and the difficulty of

assembling reliable trade data from unadjusted Census Bureau figures

and actual carrier data Notwithstanding these difficulties the parties

did accumulate additional evidence in accordance with procedures es

tablished at several informal prehearing conferences and in response to

my own requests The evidence of record furnished in this manner

consists ofthe following items I written sworn testimony of Messrs

Robert E Tapia of CCT and Kenneth J Coleman of Pan Atlantic

Lines and related answers ofMr Tapia to Hearing Counsels interroga

tories under cover letter dated March I 1982 from Mr Donald J

Brunner to Hearing Counsel 2 written sworn testimony ofMr Fran

By previous order of the Commission of November 6 1981 approval of the subject agreements

had been extended from November 10 1981 to December 31 1981 The Commission s Order of Inves

tigation and Hearing and Pendente LiteApproval which was served on December 23 1981 extended

approval pendente Jile to prevent the lapse in approval which would otherwise haveoccurred

25 FMC
RATE AGREEMENTS NOS 10045 6 10105 4 149

cis J O Donnell of Sea Land together with copies of the amended

agreements justification statements and data for the amended agree

ments submitted in 1978 a petition of October 1981 seeking expedited

consideration of the agreements a

copy of the Commission s order of

conditional approval of Agreement No 10045 3 and statistical data for

the first and second quarters of 1981 all under cover letter from Mr

Brunner to myself dated March 9 1982 3 written testimony given

under penalty of perjury by Robert G Adam senior economist of the

Commission s Office of Regulatory Policy and Planning consisting of

51 pages with attached tables These various materials which have

been treated as evidence of record by the parties in accordance with

my tacit approval are hereby admitted formally into evidence Since

neither party saw any need to cross examine these witnesses no trial

type hearing was conducted and the parties submitted simultaneous

opening and reply briefs on May 21 and June 4 1982 respectively

Summary of the Evidence

The following section provides a

summary of the evidence which as

mentioned consists mainly ofthe written testimony of three officials of

each proponent carrier the rather detailed economic testimony of Mr

Adam the Commission s economist and numerous statistical data and

tables relating to cargo carryings in the subject trades

A Proponents Services and Investments in the Trades

1 CCT provides the following service as listed below by vessel name

and TED capacity All vessels are RO RO type vessels

Vessel TEU

Capacity

240

112

weekly Miami to Guatemala and Honduras

every 10 days Miami to Costa Rica

Panama

weekly New Orleans to Guatemala Hon

duras

every 10 days New Orleans to Costa Rica

Panama

Scheduling

Lionheart

Mar Caribe

Coral Gables 120

Sea Drake 110

2 LINAPA provides a 9 day sailing between Miami Florida and

Panama Costa Rica utilizing the MV Costa Rica which is a 148 TED

RO RO vessel

3 PAML offers a weekly service between Miami and Guatemala

HonduraslEl Salvador utilizing the MV Central America a RO RO

vessel with a 14B TED capacity PAML offers a service on a 9 day

25 F MC
150 FEDERAL MARITIME COMMISSION

turn from New Orleans to Guatemala Honduras El Salvador employ

ing the MV Pan Caribe a RO RO vessel with a 60 TEU capacity

4 Sea Land serves the Gulf ports on a weekly basis utilizing four

vessels with TEU capacities varying between 569 and 630 TEU s con

necting with feeder vessels at Kingston Jamaica Sea Land serves the

South Atlantic range with the vessel Seattle which has a 620 TEU

capacity This cargo is relayed at San Juan to Kingston thence by

feeder to the ultimate destination Sea Land has two feeder ships the

ASD Hektor a 300 TEU vessel which serves Porto Cortes and Santo

Tomas on a 7 day turn The MAR Tierra a 126 TEU vessel serves

Porto Limon on a 7 day turn All Sea Land vessels are lift onlift off

5 The line haul vessels which have been listed for Sea Land in the

preceding interrogatory also serve the Puerto Rico trade Caribbean

Islands trade and Panama in addition to serving North Atlantic ports

6 CCT and Pan Atlantic have been established carriers in the

MiamiCentral America trade for over twenty years Both have recent

ly inaugurated their services from New Orleans to Central America to

Guatemala Honduras EI Salvador in November 1980 and to Costa

Rical Panama in May 1981

7 Sea Land has a worldwide transportation system and has been in

the subject trade for the last five years Sea Land announced that its

America s service has become a separate division the other two divi

sions within Sea Land are the Atlantic and Pacitic 6

8 All proponents have increased their investment in the trade in the

last three years CCTs total new investment during this period includ

ing vessels terminal improvements trailers etc totals 61 427 000 Pan

Atlantic s new investment during that period was approximately

40 000 000 including two new ships new refrigerated equipment and

expanded terminal facilities at Miami and New Orleans Sea Land s

specific investment to the trade is difficult to identify because Sea Land

serves the foreign countries from the North Atlantic not within the

scope of Agreements Nos 10045 and 10105 the West Coast mini

bridge as well as foreign origins However Sea Land has increased its

equipment pool and terminal facilities in the foreign countries encom

passed within the agreements Also Sea Land has recently expanded its

service to include Port Everglades Miami

B Competition

9 The record contains various estimates of the large number of

carriers competing in the subject trades ranging from 14 to 20 Thus

IS This announcement was made after the record closed Hence as proponents SU teSt it is outside

the record However Commission Rule 226 46 CPR 02 226 permits me to take official notice of

such matlers of widespread knowledge which require no formal proof Since Hearing Counsel have

not disputed this proposed fact and it appears not necesaary to provide formal proof of the public

announcement I will invoke Rule 226

2S F MC
RATE AGREEMENTS NOS 10045 6 10105 4 151

according to Mr Adam the Commission s staff had at one time found

14 carriers serving the trades in 1981 Adam p

5 Pan Atlantic s

witness Coleman identified 16 carriers competing in recent years with

the members of the subject agreements Coleman Interrogatory No 25

including such carriers as Cass Line Mayan Chilean Line Johnson

Line Nexos Line and Bernuth Marine in addition to better known

national flag lines According to Mr Coleman furthermore Pan Atlan

tic has faced competition from as many as ten lines which have refused

invitations to join the subject agreements Flomerca the national flag

line of Guatemala had once been a member of Agreement No 10105

Guatemala Honduras EI Salvador but withdrew for reasons relating

to its desire to maintain a 15 percent rate differential below the existing

structure of the agreement members Flomerca also enjoys a certain

advantage over other lines serving Guatemala because Flomerca is

exempt from a 6 percent Guatemalan Merchant Marine Tax 10 In the

agreement area covering Guatemala HonduraslEI Salvador the pri

mary nonagreement competition is presented by Flomerca Line which

as noted is the national flag carrier of Guatemala In addition govern

ment supported lines namely NAMUCAR NANICA Nicaragua na

tional lines and TRANS NAVE Ecuadorian national line compete

for cargo between U S Atlantic Gulf and all foreign ports encom

passed within the agreements Moreover at Panama there is direct

competition with members of FMC Agreement No 3868 as amended

which includes Sea Land U S Lines Delta Lykes and others

II Competition in the trade can best be characterized as carriers

who serve the trade on inducement or who are in and out of the trade

in a

relatively short period of time Armasal and Uiterwyk Lines were

at one time members of the agreements However the former went

bankrupt and the latter discontinued its services to both trade areas

presumably because of lack of profitability Recently Jeco Lines en

tered the trade cut rates and existed within three months

12 The agreement lines offer the only consistent regular container

ized service in the trades and carry or have carried a majority of the

liner cargo Based upon Import Bulletin data the agreement lines are

consistently among the top four liner carriers in each country except

Panama The fourth carrier is the aforementioned Flomerca which

offers a breakbulk service limited to Gulf ports

C Unfavorable Economic and Political Conditions in Central America

13 Mr Adam has prepared a detailed study of the economic condi

tions ofthe five Central American republics served by the parties to the

two agreements He paints a rather gloomy picture of the prevailing

conditions Generally all ofLatin America registered its lowest rate of

economic growth in 1981 for the past 35 years its gross domestic

product GDP rising by a mere 12

percent in 1981 During 1981 a

25 F MC
152 FEDERAL MARITIME COMMISSION

decline in the rate of real economic growth was experienced in all of

the Central American countries where most of them suffered either a

continuation or an aggravation of political tensions and social conflicts

with resulting acceleration of economic uncertainty Deterioration was

most severe in EI Salvador where GDP declined by 9 percent for the

second straight year Economic activity also declined in Costa Rica by

15 percent and reached a virtual standstUl in Guatemala and Honduras

As a result per capita GDP was down in all four nations in 1981 Per

capita GDP also declined in Panama to 2 1 percent in 1981 although

the growth rate in Panama had reached 45 percent in 1981 above the

regional average for Latin America Inflation continued to be a prob

lem in Central America as well although the average rate of increase

of consumer prices in Central American and Caribbean nations declined

slightly to 15 5 percent in 1981 from 17 percent in the prior year

Among the five nations covered by the subject agreements in 1981

inflation increased dramatically in Costa Rica 60 percent while in

creasing to 10 2 percent in Guatemala 10 percent in Honduras 13 3

percent in El Salvador and under 6 percent in Panama

14 The economies of most of the countries of the Caribbean basin

have been adversely affected by depressed prices of the goods they

export and a rise in costs of goods they import This has resulted in

severe shortages of foreign exchange Moreover Latin America is

facing one of its most critical periods since the war The most optimis

tic forecasts expect the current recession to last for the major part of

1983 with moderate recovery only beginning by the end of 1982 The

down turn in Central America is furthermore exacerbated by political

tension and organized terrorism throughout much of the region Be

cause of shortages of foreign exchange the governments of Costa Rica

Guatemala Honduras Nicaragua and El Salvador have imposed

import controls and many exporters to these nations now require con

firmed letters ofcredit before shipping Panama with political stability

and no exchange conh ols is an exception The outlook in that country

is for continued growth in 1982

15 Mr Adam s detailed study of the economies of the five Central

American nations covered by the subject agreements is similarly

gloomy Thus Costa Rica which has traditionally been the most pros

perous nation is now undergoing a severe financial crisis High prices

for oil imports reduced coffee prices years of large deficits in the

public sector and external borrowing have combined to bring the

economy of Costa Rica to a standstill Foreign exchange reserves have

declined foreign debt is significant and inflation is steep Exports and

imports from and to Costa Rica have generally been in decline as a

result ofthese negative factors Panama unlike the other four countries

studied is apparently the only bright spot Its economy grew by 45

percent in terms ofreal GDP in 1981 and prospects for continued real

2S FMC
25 F MC

RATE AGREEMENTS NOS 10045 6 10105 4 153

growth are good Unlike other economies in the region Panama is

primarily a service oriented economy and the Canal banking tourism

and the Colon Free Zone account for 60 percent ofGDP Construction

projects also are important aids to the economy Based on 1981 data

U S exports to Panama are rising by only 21 percent while imports

from Panama are declining by about 10 percent Guatemala s economy

is on the brink of stagnation Economic growth declined to only I

percent in terms of real GDP in 1981 because of sharp drops in

commodity prices deterioration of the regional Central American

Common Market and internal violence Inflation began to rise in 1981

and agricultural exports fell largely due to lower world coffee prices

and pesticide contaminated beef U S exports to Guatemala were up by

only 1 percent in 1981 over the prior year while imports from that

nation were declining at a rate of 20 percent in 1981 Honduras has

been relatively stable politically but it also suffers from capital flight

and balance of payment deficits falling prices of exports high cost of

oil investor fears of regional instability and a dismal real GDP growth

rate of 0 5 percent in 1981 Honduras remains the poorest and least

sophisticated country in the region and is not as weU equipped as most

of its neighbors to sustain an economic crisis Based on 1981 data U S

exports to Honduras were offby 7 9 percent while imports were rising

by 3 3 percent The near term prospects for Honduras are not bright

with export growth stagnant and shortages of capital for investment

combined with political uncertainties The economy of EI Salvador has

been deteriorating with unemployment up to 25 percent or more de

cline in GDP and a need for foreign assistance to repair damaged

highways bridges and power equipment caused by the current upheav

al in EI Salvador Output dropped by almost 10 percent in 1981 while

per capita GDP was also down by 12 percent in 1981 The economy of

EI Salvador may faU by an additional 5 to 7 percent in 1982 without

the infusion of massive foreign assistance Capital outflows have been a

continuing problem Exports feU in 1981 while imports declined in

volume but not in value because of increased cost of oil leaving the

country with a trade deficit of 110 million in 1981 Based on 1981

data U S exports to El Salvador rose by nearly 13 percent over 1980

while imports plunged nearly 40 percent

16 The countries of Central America are small and except for Costa

Rica relatively underdeveloped The region as a whole has been pro

jected to grow rapidly in the future in terms of trade and income with

variances among individual countries However this optimistic forecast

may now be completely obsolete because of the current political tur

moil in the region The trade of most of the countries in Central

America is forecast to increase more rapidly than their growth rates

However the total volume of trade in the region is not large total

regional exports and imports exclusive of Mexico expected to reach
154 FEDERAL MARITIME COMMISSION

only 14 million and 33 million tons by 1980 According to Mr Adam

Table 2 to his testimony the total volume oftrade for the five subject

countries for the year 1981 as annualized on the basis of the first six

months results amounts to only something in the neighborhood of 1

million short tons

17 The transportation problems of these countries are as diverse as

their economies Many of the Central American countries have poor

inland transportation and port systems with varied requirements and

government responses to these conditions Puerto Barrios in Guatema

la has very limited breakbulk handling equipment and inadequate

inland transportation Port congestion is expected to become even

worse However plans to construct a modem port adjacent to Barrios

have been announced Port congestion at Puntarenas Limon and possi

bly Golfito in Costa Rica has led to a rerouting of cargoes destined for

that country via the port of Balboa in Panama There is an indication

that two projects are underway to cope with this problem but their

status is uncertain given the current negative outlook for the Costa

Rican economy According to a MarAd report a new container termi

nal is planned for Acajutla in EI Salvador Plans there are to improve

the current inadequate rail system to the port prior to the completion of

the container terminal Honduras has been expanding Puerto Castilla to

cope with increased agricultural and lumber exports and Panama may

invest up to 200 million in container port development at both ends of

the Canal Zone The latter project is designed to spur private economic

activity in the Canal Zone when it is incorporatedinto Panama

D Proponents Carryings in the Trade and Overall Trade Developments

As mentioned a main purpose of this investigation was to give the

parties an opportunity to develop more recent evidence to show propo

nents actual experience under the agreements as amended by the Com

mission s orders of approval effective November 10 1980 Since the

parties to the agreements were required by the Commission s order to

formulate new joint tariffs in place of their individual tariffs as one of

the conditions of approval and since this task required several months

to complete resulting in the tiling of the joint tariffs in February 1981

and since the proponents were required to retile for approval in July of

1981 under the Commission s

regulations proponents experience under

the approved agreements as amended was rather limited at the time

the Commission considered whether to extend its approval beyond the

November 1981 expiration date established by the Commission in its

original orders of approval Since this proceeding commenced on De

cember 23 1981 the parties have been diligently assembling updated

data in order to bring the proceeding to a

reasonably prompt conclu

sion However the record developed still does not cover a full year s

actual results under the new tariffs one reason being that Census data

2S F MC
RATE AGREEMENTS NOS 10045 6 10105 4

which Mr Adam used to prepare his trade analyses were not available

for the full year 19B1 Instead as he explained Census provided data

covering only the first six months of 1981 and when necessary to show

yearly comparisons Mr Adam was forced to double i e annualize

these data See Adam s testimony p 25 footnotes 13 and 14 There

fore to some extent it is still somewhat premature to make trade

analyses which will reflect actual experience under the amended agree

ments as they have been operating under the conditions required by the

Commission and under the new joint tariffs Id p 25 n 14 More

over as Mr Adam indicates and as proponents have noted Census data

for the first six months of 19B1 the latest data available at the time Mr

Adam prepared his testimony are unadjusted whereas previous year s

Census data have been adjusted by the Commission s Office of Data

Systems 6

Notwithstanding the limited period of time for which data

were available and the need to utilize Census data which are not

precisely correlated to common carrier operations as they are under

stood by the Commission or possibly to the exact trade area covered

within the port and point scope of the agreements it appears that such

data are the best available and in the absence of any superior source

one must work with them Furthermore although perhaps not as pre

cise as one would ideally wish they can be used to seek trends in the

subject trades and to make approximations of the experience of the

proponents in these trades In other cases the Commission has recog

nized that mathematical precision is not possible or that indirect evi

dence is all that is available This occurs frequently in so called rate

cases but even in section 15 cases See e g United States v FMc 655

F 2d 247 253 254 D C Cir 19BO Agreement No 57 96 19 FM C

291 303 1976 Swnska cited above 390 U S at 249 In some in

stances furthermore data are derived from carrier proponents own

records and when used to determine trends merely from these data the

problems associated with Census data would obviously not apply

18 Quarterly reports covering the first half of 1981 submitted by

proponents in response to the request of one of the Commissioners who

voted to approve the agreements Teige show that cargo movements

in tonnage terms under Agreement No 10105 Guatemala Honduras

EI Salvador exceed those under Agreement No 10045 Panama Costa

6

Although there has been no oral examination of Mr Adam which would explain the meaning of

the adjustments it is weU known that Census data are not precisely correlated to common carrier

cargo within the meaning of the Shipping Act Some filtering out of irrelevant cargo might therefore

be necessary In this case moreover Census data reflect cargo moving by countries of origin and

destination Adams Table No 2 footnote 1 Since this case involves agreements covering only Carib

bean ports some cargo moving via Pacific ports to and from the five subject countries will be picked

up in the Census data and accordingly the data wiJI be gross figures However since the carrier

members of the agreements have inland intermodal authority in the Central American countries the

Census data will reflect the total pool of cargo for which the agreement members can compete See

Proponents Opening Brief p

8

25 F M C

155
156 FEDERAL MARITIME COMMISSION

Rica by a ratio of 2 6 to 1 201 616 tons vs 77 548 tons The fact that

Sea Land does not serve Panama under Agreement No 10045 accounts

for some of this differential Moreover the unbalanced nature of the

trades is apparent with the combined southbound cargo ofAgreements

10045 and 10105 exceeding the northbound cargo by a ratio of 3 3 to 1

214 211 tons vs 64 953 tons Miami being the principal port in the

southbound trades under both agreements As noted above overall the

trade between the U S South Atlantic and Gulf and the countries

involved is fairly small

19 Data furnished by proponents covering the full year 1981 as well

as 1980 and 1979 indicate a slight growth from 1979 to 1980 with a

rather substantial drop in 1981 except for El Salvador which experi

enced a slight recovery in 1981 which may be attributable to the

political situation there in that year The following table reflects propo

nents predominant southbound carriage for the past three years Sea

Land is stated in TED s Pan Atlantic and CCT are stated in tons

1981

Guatemala El Honduras Costa Rica Panamo Salvador

CCT Tons 38 267 14 853 25 570 26 521 49 307

Pan Atlantic Tons 20 000 18 404 10 606 20296 22 178

Sea Land TEU 1 806 515 1 230 1 888

1980

CCT Tons 39 733 13 491 34 369 39 912 53 735

Pan Atlantic Tons 24 440 10 060 14 805 27 816 27 644

Sea Land TEU 3 315 280 1 554 2 214

1979

CCT Tons 43 356 22 750 36 488 36 065 45 310

Pan Atlantic Tons 18 084 18 900 12 295 21 909 31466

Sea Land TEU 1 608 350 1 677 2 349

Overview ofthe Trade 1979 1981

The following section represents Mr Adam s trade analyses for the

years 1979 through 1981 derived from Census data and therefore sub

ject to the qualifications discussed above concerning unadjusted data

for 1981 annualization of 1981 data where appropriate and use oftrade

and liner definitions which are not identical to those terms as used by

the Commission Nevertheless Mr Adam s studies do show trends

which are sometimes corroborated by proponents own data and since

they all derive from the same common cource they are internally

2S F MC
RATE AGREEMENTS NOS 10045 6 10105 4 157

comparable Therefore they do provide an approximation of the trade

situation of some help to the Commission in evaluating any impact of

the agreements albeit tentative

20 In the subject trades total U S liner exports in tonnage terms

were up slightly from 13 million tons in 1979 to 14 million tons in

1980 before dropping off sharply to less than 10 million tons in 1981

During this period the percentage share held by the rate agreement

member carriers of the total export tonnage to the five countries as a

group also rose significantly from 37 percent in 1979 to 49 percent in

1980 before dropping off again to 39 percent last year The percentage

shares of the member carriers of total exports broken down by Agree

ments 10045 and 10105 respectively tend to follow the same pattern

indicated for the overall export trade rising from 48 and 32 percent

shares of the tonnage in 1979 to 56 and 46 percent in 1980 and down

again to 34 and 42 percent shares by 1981 It is interesting to note that

the share ofthe member carriers ofU S tonnage exports to Panama in

1981 amounts to only 24 percent well below their shares of the other

countries trades that year The member carriers share of U S exports

to EI Salvador did not follow the general trend ofdropping off in 1981

The member carriers share of U S exports to that nation rose steadily

from 49 percent in 1979 to 55 percent in 1980 and an impressive 61

percent in 1981

21 U S liner exports in terms of value rose from 14 billion in 1979

to 18 billion in 1980 before fa11ing off sharply to 926 million last

year The percentage share of the member carriers oftotal U S exports

to the group of countries by value appears to have followed the same

path indicated for total tonnage movements except that the shares for

the three years are very much larger 68 percent in 1979 75 percent in

1980 and slightly off to a 70 percent share in 1981 The percentage

shares of the member carriers of total exports by value broken down

by the respective Agreements 10045 and 10105 rise from 73 and 65

percent in 1979 to 76 and 74 percent shares in 1980 By 1981 the

member carriers share of 10045 had declined to 61 percent but contin

ued to rise to a 77 percent share for Agreement 10105 The member

carrier percentage shares of U S exports to the individual countries

presents somewhat differing trends Their shares of dollar exports to

Panama and Costa Rica rise from 68 and 79 percent in 1979 to 71 and

82 percent in 1980 before dropping off again in 1981 to levels of 54

percent and 74 percent respectively This follows the general up and

down trend for the overall export trade However the member carri

ers percentage shares of the dollar export trade to Guatemala Hondu

ras and EI Salvador rise steadily from a 60 71 percent range in 1979 to

71 77 percent in 1980 and to a very impressive range of 74 83 percent

in 1981

25 F MC
158 FEDERAL MARITIME COMMISSION

22 The inbound side of the trade presents a

very different picture

Total U S liner imports in tonnage terms are much smll1ler than total

U S liner exports to the group of five countries Furthermore total

imports decline sharply from a level of 559 568 000 tons in 1979 80 to

only 275 000 tons in 1981 During this same period the rate agreement

member carriers share of total import tonnage declined from 68 per

cent in 1979 to 66 percent in 1980 and only 52 percent in 1981 The

member carriers share of tonnage imports under Agreement 10045

follows the general trend in the export trade Here their shares rise

from 69 percent in 1979 to 79 percent in 1980 before dropping off to 65

percent last year These same carriers share of U S imports under

Agreement 10105 in terms of tonnage follows the general downward

trend for their share of aU U S imports dropping from 68 percent in

1979 to 61 percent in 1980 and only 49 percent by 1981 The similar

trends indicated for the member carriers shares of total U S tonnage

imports and those under Agreement 10105 may be explained by the

fact that the cargo movements under this agreement tend to be two to

four times as large as those under Agreement 10045 The inbound trade

from Panama exhibits a different pattern from the up and down trend

for the member carriers share under Agreement 10045 Their share of

total tonnage imports from Panama rises sharply upward from 27 per

cent in 1979 to 44 percent in 1980 and to 66 percent in 1981 However

the tonnage involved in the Panama trade is quite small compared with

that moving inbound from Costa Rica the other country under Agree

ment 10045 In the instance of Agreement 10105 the member carriers

percentage shares of the inbound tonnage from all three countries

Guatemala Honduras and El Salvador appear to be dropping off

sharply in 1981 from high levels in the preceding two years Their

share ofthe EI Salvador tonnage trade inbound actuaUy falls to only 27

percent in 1981 from a level of 65 percent in 1979

23 Total U S liner imports in value terms are much smaller than

U S dollar liner exports to the group of countries Moreover total

imports by value drop off dramaticaUy from a level ofabout 1 billion

in 1979 80 to only 414 million in 1981 The percentage shares ofthe

member carriers of total imports in value terms actuaUy remained

fairly stable in a 65 68 percentage range for all three years 1979 81

This of course is a

very different trend from that experienced in the

tonnage trade inbound where the member carriers share dropped

from 68 52 percent between 1979 and 1981 The share of the member

carriers ofdollar imports under Agreement 10045 rises from 79 percent

in 1979 to 84 percent in 1980 and remains stable at 85 percent in 1981

These carriers share ofdoIlar imports under Agreement 10105 does not

follow the same downward trend as their share of tonnage imports

under this agreement but remains at a

very stable level of 6062

percent in 1979 81 Again the similar trends for member carrier shares

25 F MC
RATE AGREEMENTS NOS 10045 6 10105 4 159

of total U S dollar imports and those under Agreement 10105 may be

explained by the fact that cargo movements in value terms under this

agreement are also two to four times as large as those under Agreement

10045 The inbound trade by value from the individual countries does

not present a very different trend from that for the member carrier

shares of each ofthe agreements The carriers shares ofdollar imports

from Panama and Costa Rica basically follow the stable trend indicated

for Agreement 10045 remaining at very high levels 89 and 83 per

cent in 1981 The percentage share of the member carriers of dollar

imports from Guatemala under 10105 remains at a stable level of65 68

percent for the entire period 1979 81 Their share of imports from

Honduras in value terms rose from 58 percent in 1979 to 66 percent in

1980 before dropping off to 63 percent last year In the case of El

Salvador the members share of dollar imports declined sharply from

64 to 37 percent between 1979 to 1981

Major Commodities in the Liner Trade 7

24 In the inbound side of the trade it is apparent that the major

commodities as a group moving under Agreements 10045 and 10105

are declining in both value and volume terms The totals for 1981 are

off by 59 64 percent from the preceding year During these two years

the shares of the major import commodities held by the member carri

ers under these respective agreements are also declining in tonnage

terms down from 78 to 60 percent for 10045 in 1981 and from 56 to 42

percent for 10105 last year On the other hand the members shares of

this import cargo in value terms rose sharply from 66 percent in 1980

to 85 percent in 1981 under 10045 but appear to have stabilized in the

past two years at levels of 57 59 percent for 10105

25 The principal liner commodites ranked in tonnage terms moving

inbound under both agreements during 1979 81 consist of beef bananas

and coffee The member carriers shares of coffee imports are rising

rapidly under Agreement 10045 in value and volume terms Their

shares of beef imports under 10045 appear to have stabilized at high

levels while their shares oftotal banana imports have dropped dramati

cally from levels of 69 and 78 percent to 20 and 22 percent in value

and volume terms between 1980 and 1981 The members shares of

total beef imports under 10045 in value and volume terms stabilized at

very significant 84 percent level in 1981 the same levels for 1979

Their shares of total coffee imports under 10045 have risen from 67 69

percent to an impressive 94 percent between 1979 and 1981 in both

value and volume terms The shares ofthe member carriers ofbeef and

coffee imports under Agreement IOIOS are either rising or have stabi

7

For purposes of comparison with prior years 1979 80 the totals for the major commodities

moving under each agreement were doubled to obtain approximate annual trends

25 F M C
160 FEDERAL MARITIME COMMISSION

lized at reasonably high levels while their percentage shares of total

banana imports are down from 100 percent of the value and volume in

1979 to 13 and 23 respectively in 1981 These carriers shares ofbeef

imports under 10105 by value and volume appear to have stabilized in

a range of86 94 percent for the entire period 1979 81 whiletheir share

of total coffee imports under this agreement are rising at a steady pace

from around 47 percent in 1979 to 55 percent last year in both value

and volume terms

26 The combined totals for the major import commodities moving

under each of the agreements indicate the aforementioned declines in

value as well as volume terms of approximately 60 percent in 1981

compared with the preceding year The share of the member carriers

for the combined agreements has also declined from 70 to 47 percent of

the tonnage during 1979 81 However based on value it has stabilized

at a level ofabout 64 percent oftotal imports ofthe major commodities

for the same years

27 It is obvious that the combined totals for the major export

commodities moving under both agreements were declining in 1981

by 13 percent ofthe tonnage and 36 percent of the value in compari

son with the prior year The composite share ofthe member carriers of

these commodities moving under 10045 and 10105 was also down to

19 percent by volume in 1981 from 22 percent the preceding year In

value terms however their share of the major commodities for the

combined agreements was actually rising steadily from 23 percent in

1979 to 39 percent in 1980 and 45 percent last year The member

carriers share of the export commodities moving under the agreements

was down slightly from the 1980 levels in volume terms to 14 percent

for 10045 and 22 percent for 10105 in 1981 This is somewhat in

contrast to the trend on the inbound side where the much larger

member shares of the import tonnage under these agreements were

down very sharply in 1981 However in value terms the shares ofthe

members ofthe principal commodity exports moving under the individ

ual agreements were rising at a steady pace between 1979 and 1981

Their shares rose from 27 to 35 percent under 10045 and from 22 to a

very impressive 52 percent of the value of major commodity exports

under 10105 between those years

28 The principal outbound liner commodities in both agreement

trades include thermoplastic resins lubricating oils and greases animal

feed Kraft paper and paperboard inorganic compounds wheat and

meslin and iron and steel products The latter two commodities while

important in these trades reflect only minor shares held by the member

carriers Resins was an important commodity to the members in both

agreement trades in 1979 81 The members shares of total movements

of resins under 10045 in value and volume terms were up from 467

percent to 60 64 percent between 1979 81 Their shares of value and

25 FMC
RATE AGREEMENTS NOS 10045 6 10105 4 161

volume movements of this commodity under 10105 were up to a re

markable 95 percent in 1981 from 44 percent of the volume and 49

percent ofthe value of shipments in 1979 The members share of total

movements of lubricating oils and greases under these agreements also

were rising significantly from about 15 percent ofthe value and volume

under 10045 in 1979 to about 36 percent by 1981 Their shares of this

important commodity were even more impressive under 10105 rising

from 19 to 62 percent in volume terms between 1979 and 1981 and

from 21 to 71 percent of the value during this same period The shares

of the members of movements of inorganic compounds under 10045

were also impressive rising from 18 to 38 percent ofthe tonnage and 29

to 41 percent of the value from 1979 to 1981 Under 10105 the mem

bers share of movements of inorganic compounds also increased from

25 to 30 percent of the volume during 1979 81 and the tonnage in

volved was much larger than that under 10045 Their share ofthe value

movements of these chemicals under 10105 increased from 26 to 49

percent between these two years Another major commodity where the

member registered rising shares was Kraft paper and paperboard

Under 10045 the members shares of this commodity rose from less

than one percent in volume terms and 4 percent by value in 1979 to 5

and II percent shares of a

rapidly declining trade for this item by 1981

The situation was much the same under 10105 where the members

shares increased moderately from 6

percent of the tonnage and value

trades for Kraft paper and paperboard in 1979 to 12 percent by volume

and 20 percent of the value ofthese shipments in 1981 However total

shipments of paper and paperboard under 10105 were down by more

than 80 percent in 1981 compared with the prior year Finally move

ments of animal feed under 10045 offered another instance where the

members value and volume shares were rising dramatically from 4

percent in 1979 to 39 percent of the tonnage and 52 percent of the

dollar value in 1981 at a time when total exports of this commodity

were declining by almost 90 percent Total movements of animal feed

under 10105 also declined in 1981 compared to shipments that moved in

1979 leaving members shares of 14 percent of the volume and 20

percent of the value last year just about where their shares stood in

1979

Rate History Under the Agreements

29 There is some indication according to Sea Land that overall rate

levels in the subject trades were depressed prior to the time that the

agreements were expanded in November 1980 Moreover on a few

major commodities namely waste paper paperboard lubricating oils

and products and resins Sea Land still believes rates to be depressed

Adam p50 Sea Land has also expressed the opinion that operations

to and from Guatemala Honduras and EI Salvador are not profitable

25 F M C
162 FEDERAL MARITIME COMMISSION

and that the Costa Rican trade is only marginally profitable However

there is no evidence of complaints from shippers about rate levels rate

instability or service Proponents Pan Atlantic and CCT while gener

ally agreeing with Sea Land do not maintain that overall rate levels are

depressed although acknowledging that a few rates are depressed on

relief cargo synthetic resins and paper products because of competi

tion in the trades Moreover according to the Commission s staff rates

on major moving commodities remained rum through the second quar

ter of 1981 Since approval of the expanded agreements there have

been two general rate increases under Agreement No 10045 Panama

Costa Rica and three under Agreement No 10105 counting a recent

general rate increase of 8 percent in February 1982 The second of

these increases under the agreements however consisted of the incor

poration of a bunker surcharge in the base rates There is no evidence

that these rate increases have caused the member lines to lose cargo

Moreover according to Pan Atlantic if cargo would be lost because of

any rate increase the carrier would restudy the matter and re evaluate

the rate Answer to Interrogatory No 22 attached to the Coleman

Tapia testimony

Utilization oflntermodal Authority and the Effect ofOverlapping

Conferences

30 Because of peculiar problems relating to inadequate port facilities

in Central America and the need for rapid inland movement the natu

ral flow of cargo is one of through inland movement and the joint

tariffs reflect this situation For example EI Salvador has no Caribbean

port and all rates to that country are by necessity intermodal The same

is true also for rates to Guatemala City which is inland There is no

intermodal authority within the United States There is no evidence in

this record which undermines or contradicts the findings on which the

Commission relied when granting iotermodal authority in its orders of

September 15 1980 in which the Commission acknowledged the inad

equacy of port facilities shipper demand for an intermodal service the

establishment of inland customs facilities to expedite inland movement

the recognition of actual cargo flows the enabling of proponents to

compete with outside carriers offering through services and the con

sistency of such intermodal service with proponents ro ro and contain

ership services See Conditional Approval of Agreement No 10045 3

cited above 20 SRR at 440

31 There is no evidence in this record that Sea Land is participating

in two different agreements namely No 10045 Panama Costa Rica

and No 3868 Atlantic and Gulf Panama Conference As a condition

for approval of expanded Agreement No 10045 proponents were in

structed to amend their agreement to provide specifically that Sea

Land Service Inc shall not participate in this Agreement with respect

2S FMC
RATE AGREEMENTS NOS 10045 6 10105 4 163

to any ports in Central America within the scope of the Atlantic and

Gulf Panama Canal Zone Colon and Panama City Conference Agree

ment No 3868 as long as it is a member of that Conference Condi

tionalApproval cited above 20 SRR at 442 The parties have complied

with all ofthe Commission s conditions of approval and the evidence is

that Sea Land does not participate in the Panama section of Agreement

No 10045 Tapia Coleman testimony p

9 There is also no evidence

that Sea Land is participating in the Panama Conference in any way

which affects its activities in Agreement No 10045

The Uniform Tariffs

32 As mentioned earlier by order of the Commission when it ap

proved the expanded agreements the parties were supposed to filejoint

tariffs to replace what would otherwise be three individual tariffs Such

tariffs were prepared over nearly three months time and were filed in

February 1981 The tariffs have brought uniformity in the method of

rate quotations They publish rates on a weight or measurement basis

from all South Atlantic and Gulf ports except Miami Before rates

were quoted in a wide variety of ways e

g by long or short tons

measurement tons cubic feet hundredweight lumpsum and various

per trailer rates Moreover all port accessorial charges are identical

except for local wharfage charges in the Gulf at U S and foreign

ports For example the terminal service charge at Santo Tomas is the

same regardless of whetherthe cargo originates in Jacksonville Miami

or New Orleans This was not the case before the expanded agreements

were approved nor did shippers know that quoted rates were for the

identical services The benefits of a uniform tariff and the problems

stemming from previous individual carrier tariffs were acknowledged

by the Commission when it approved the expanded agreements Condi

tional Approval cited above 20 SRR at 439

DISCUSSION AND CONCLUSIONS

As mentioned earlier the Commission instituted this proceeding in

order to determine whether the two subject agreements which the

Commission had conditionally approved on September 15 1980 contin

ue to merit approval under the standards enunciated by the Supreme

Court in FMC v Aktiebolaget Svenska America Linien 390 U S 238

243 1968 Svenska The Commission furthermore stated that in

making its determination as to continued approvability it intended to

consider among other things four specific factors namely the impact

of the agreements on rates and cargo shares of the parties the impact

of the agreements on overall rate stability and service in the trades the

utilization ofintermodal authority and the effect if any ofoverlapping

conferences Under the Svenska test the Commission weighs and bal

ances the evidence to determine whether an agreement is required by a

serious transportation need is necessary to secure important public

25 F M C
164 FEDERAL MARITIME COMMISSION

benefits or will serve a valid regulatory purpose to offset the presump

tion that agreements which run counter to our national philosophy

favoring free and open competition are contrary to the public interest

This test was enunciated by the Commission in two previous decisions 8

and met the approval of the Supreme Court and has been followed by

the Commission with court approval ever since in this type of case

See e gFMC et aL v Pacific Maritime Association et al 435 U S 40

53 54 1978

In applying the Svenska test other decisions of the Commission and

courts have established a number of corollary principles Thus it has

been held that although proponents must bring forth evidence in sup

port of justification under the Svenska test the scope and depth of

proof required for approval varies from case to case depending upon

the degree of invasion of the antitrust laws Agreement No 87605

Modification ofthe West Coast United States Canada India Pakistan

Burma Ceylon Rate Agreement 17 F MC 61 62 1973 Agreement

No 57 96 Pacific Westbound Conference Extension of Authority for

Intermodal Services 19 F MC 289 300 1975 The Commission has

also held that an agreement representing an extension of existing au

thority rather than a totally new agreement would be held to a less

stringent standard of proof Agreement No 57 96 cited above 17

F MC at 300 In determining how anticompetitive are the effects of

any particular agreement moreover the court has recognized that the

effects on competition may be more severe under an agreement that is

not per se unreasonable under the antitrust laws i e that anticompeti

tive effects are measured by actual impact on transportation not by

theoretical concepts ofper se unreasonableness under antitrust laws See

United States Lines Inc v Federal Maritime Commission 584 F 2d 519

D C Cir 1978 Finally in a number of cases the Commission has

granted approval ofagreements but has limited the term of approval to

anything from one year to three or five years for various reasons e g

to ensure that a conference will utilize the new intermodal authority or

to assess the impact of an agreement when data are not conclusive or

there has been insufficient operating experience See e g

the condition

al orders of approval in this case Conditional Approval ofAgreement No

10045 3 cited above 20 SRR 437 one year term ofapproval to assess

operating results Dart Containerline Ltd 21 SRR 605 609 1982

three year approval of a joint service to give parties an opportunity to

conduct operations and demonstrate need beyond that period Agree

ment No 57 96 cited above 19 F MC at 295 l8 month approval of

intermodal authority to ensure that conference would utilize it Agree

ment No 101408Extension of U S Gulf United Kingdom Rate Agree

See Med remnean Pools Invest rlion 9P M C 264 J966 Investlgal on ofPassanger TravelAgents

10 F M C 71966

2S FMC
RATE AGREEMENTS NOS 10045 6 10105 4 165

ment 18 SRR 1563 1979 reversed and remanded in United States v

FMc 15 SRR 851 D C Cir 1980 48 hour rate agreement with

intermodal carriers approved for an additional 18 months to facilitate

monitoring of proponents performance and reduce likelihood of

abuses Atlantic Gulf East Coast of South America Conference 13

FM C 121 1969 conference agreement to file intermodal tariffs ap

proved for 18 months to ensure no blockage of intermodalism by

conference Agreement No 10116 1 Extension of Pooling Agreement in

US Pacific Coast Japan Trades 21 F MC 775 782 1979 pooling

agreement approved for one year term and then extended pendente lite

to allow proponents to furnish evidence of need benefit or purpose

American Flag Common Carrier Charter Agreement 21 SRR 189 190

1981 cross chartering cooperative arrangement approved for five

years to better evaluate their competitive effects in light of actual

operating results and current trade conditions Agreement Nos DC 38

and DC 31 1 Association Puerto Rico Trades 1968 I7 F M C 251 260

261 1974 agreement to establish uniform terminal and accessorial

charges and selfpolicing approved for two year period and then ex

tended for one year to permit parties to accomplish its purposes

Agreement No 10286 21 F M C 676 1979 pooling agreement ap

proved for three years to develop information showing whether it is

effective

Contentions of the Parties

Both Hearing Counsel and proponents agree that the subject agree

ments deserve continued approval The only issue between these parties

concerns the recommended term of approval proponents urging indefi

nite approval while Hearing Counsel urge a three year period

Proponents contend that the agreements provide a safety net of

stability in the trades which proponents require in view of outside

competition from controlled and numerous other carriers who tem

porarily serve the trade They argue that the agreements are the only

stabilizing element in a politically and economically unstable trade area

They contend that they offer the only regular commercial services

which have consistently served the trade over a number of years and

that they face not only numerous competing lines but lines which are

government owned or controlled and which can compete on the

basis of marginal pricing Proponents point out that they have made

substantial investments in the trade amounting to 100 million overall

especially in regard to refrigerated equipment and storage facilities

which are essential to the businesses of the shippers in this trade They

point out that there have been two general rate increases for one

agreement and three for the other since the agreements were expanded

to cover rising costs demonstrating rate stability that intermodal au

thority within Central American countries has been implemented and

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1

166 FEDERAL MARITIME COMMISSION

that there is no effect fromSea Land s membership in both Agreement

No 10045 and in No 3868 the Panama Conference Because of the

fact that trade data from the Census Bureau are not available beyond

the first six months of 1981 proponents argue that one cannot deter

mine the impact of the agreements on the cargo shares of the parties at

this time They cite various facts to show that the proponents continue

to meet the Svenska test namely by maintaining continued service with

substantial investments by publishing uniform rates and rate quotations

in a joint tariff by carrying out the only selfpolicing system under

Commission General Order 7 in the trade area and by enabling Central

American exporters to use their services to export major perishable

commodities requiring refrigeration so as to earn hard currency which

in turn generates American exports to the countries involved

As to the term of approval proponents take strong exception to

Hearing Counsels recommended term ofthree years Proponents argue

that they have demonstrated that their agreements meet the Svenska test

and that they should not be modified by limiting their term of approval

except upon substantial evidence or a substantial likelihood that some

provision of their agreements will violate the Act They point out that

the Commission maintains continuing surveillance over all section 15

agreements and can easily institute an investigation seeking to disap

prove the agreements under section 15 if they fail to meet the continu

ing standards of approvability citing Agreement No 9025 Dockage

Agreement 8 F M C 381 386 1965 Proponents contend that there is

no evidence of violation or likelihood of violation of the Act if the

agreements are approved indefinitely and that the Commission should

therefore not modify the agreements by limiting their term ofapproval

Hearing Counsel agree that the agreements have shown that they

furnish benefits and serve valid regulatory purposes under the Svenska

standards They cite the Commission s own findings in Conditional

Approval ofAgreement No 10045 3 cited above 20 SRR 437 in which

the Commission itself found that the agreements provided benefits and

served valid purposes in bringing uniformity to the proponents tariffs

and in enabling the parties to combat trade instability which had been

demonstrated in the past and which existed potentially in the future

Hearing Counsel expressly acknowledge that there still exist today the

very conditions which prompted the Commission to conclude that the

potential for future rate instability existed in the subject trades and

that indeed subsequent political and economic turmoil may have exac

erbated them Opening Brief of Hearing Counsel pp 3 4 Hearing

Counsels only major dispute with proponent as Ihave noted con

cerns the propriety of granting indefinite approval Hearing Counsel

rely upon their expert staff witness s opinion that pertinent analysis of

market share data for the period 1979 1981 may be both inappropriate

and premat re at this time given the fact that the agreements have been

2S FMC
RATE AGREEMENTS NOS 10045 6 10105 4 167

in operation such a very short time d page 4 Therefore Hearing

Counsel believe that the record as to the effects of the subject agree

ments is not fully informative and that only tentative conclusions can be

drawn from the necessarily incomplete data available The unavailabil

ity of more recent trade data plus the extraordinary political upheaval

presently existing in Central America in Hearing Counsels opinion

also make it unusually difficult to forecast future conditions In view of

the necessarily limited scope of the record regarding operational data

showing the parties experience since their agreements were expanded

in November 1980 and their joint tariffs filed in February 1981 Hearing

Counsel believe that the agreements which are otherwise shown to be

beneficial should continue to enjoy approval but only for a three year

period Hearing Counsel state that after expiration of that term reas

sessment in light of then prevailing conditions may be appropriate

Id p

5 In response to proponents contention that the Commission

has no basis in fact or in law to limit approval of the agreements

Hearing Counsel cite previous Commission decisions favoring limited

terms of approval if supporting evidence itself was limited or if parties

to agreements had not had sufficient operational experience under their

agreements to show that they werehaving beneficial effects 9

Hearing Counsel explain in greater detail in their reply brief why

they believe that a limited three year term of approval is warranted

Thus although they fully acknowledge the political and economic

instability in the trade region the probability that certain rates on

important commodities are depressed that tariff uniformity may be

beneficial and that proponents may make their investment decisions on

the basis of continued approval of their agreements they argue strenu

ously that the present necessarily limited record and limited period of

experience under the expanded agreements simply do not justify grant

ing unlimited approval to an essentially rate fixing agreement After

sufficient time has elapsed which Hearing Counsel believe to be three

years the Commission will have available a record showing detailed

operational experience under the expanded agreements so that a realis

tic evaluation of the beneficial effects of the agreements may be made

Moreover at that time the Commission can see if the present chaotic

conditions have continued to disturb the trade Hearing Counsel refer

to the Commission decision in Mediterranean Pool Investigation cited

above 9 FMC at 290 in which the Commission paid particular

attention to the question of the existence of adverse trade conditions

which would justify approval of an agreement designed to alleviate

such conditions and the need for the Commission to have available

9

In support of this argument to limit the term of approval under such circumstances Hearing

Counsel cite Canadian American Working Arrangement et al 16 SRR 733 737 738 1976 and Agree

ment Nos De38 and DC JB Association Puerto Rico Trades 1968 cited above 17 F M C251

25 F M C
I

168 FEDERAL MARITIME COMMISSION

adequate information or data upon which to base an intelligent judg

ment as to probable future impact ofthe particular agreement

What the Term of Approval Should Be

There is no question that the subject agreements deserve continued

approval There is nothing in the record developed in this proceeding

which detracts from the findings of the Commission in Conditional

Approval ofAgreement No 10045 3 cited above 20 SRR 437 when the

Commission approved both expanded agreements with conditions for

a one year term effective Novertlber 10 1980 Thus there still is a

history of past rate instability which although it may have subsided is

still quite able to revive in view of the very substantial competition

offered by 16 or so carriers who are not parties to the agreements The

Commission s conclusions in approving the expanded agreements that

they should have a

stabilizing effect and that the agreements repre

sent a manifestation of a measure designed to prevent or correct rate

instability a legitimate Shipping Act objective 20 SRR at 439 are still

valid today although the limited record cannot conclusively show that

such beneficial effects have resulted in view of the limited operating

experience since approval of the expanded agreements The Commis

sion had also concluded that uniform tariffs would be beneficial but was

not convinced that the three party agreements would solve the problem

of multiple rate quotations and metJtods trade wide because of the

presence of so many outside carriers 20 SRR at 439 This statement is

still true but since the joint tariffs have only been filed in February

1981 and operational data from Census runs to only June 1981 it may

be premature to conclude that the agreements will never succeed in

attracting additional members or in encOuraging outside carriers to

publish their own uniform methods of quoting rates and services This

record shows further that the additional benefits and purposes which

the Commission found would be produced and served as a result of the

expanded agreements namely the utilization of needed intermodal

inland service within Central America to alleviate the congested port

problems there and to meet the needs of Central American shippers for

fast flowing containerized services 20 SRR at 440 are still present a

little over one year after approval of the expanded agreements Because

the agreements were expanded from two to three parties with the

addition of Sea Land in November 1980 furthermore they subscribed

to the fully developed selfpolicing system mandated by the Commis

sion s General Order 7 46 CFR 528 and have employed a neutral body

known as The Adherence Group T AG to ensure that the parties

adhere to clean practices This is the only such system in the trades

and in Sea Land s opinion has caused a decline in the number of

25 FMC
RATE AGREEMENTS NOS 10045 6 10105 4

allegations of malpractices 0 Thus in addition to the previous benefits

found by the Commission the addition of a full selfpolicing system

must be counted as an important public benefit even if the system

applies only to the three carriers who are members of the two agree

ments This benefit can be added to the benefits flowing from the new

joint tariff and the implementation of inland intermodal authority in the

Central American republics which occurred after the expanded agree

ments were approved

Having noted that the previous benefits found by the Commission are

still present and that several new benefits have followed approval of

the expanded agreements I now address the question of whether there

is any evidence in the present record relating to the four specific

factors set forth in the Commission s Order of Investigation p

3

which would detract from the previous findings that the agreements as

expanded are producing benefits and serving valid regulatory purposes

As mentioned above the Commission wished to consider these four

factors together with other evidence when determining whether to

grant the agreements continued approval I

find nothing in the present

record which would warrant a finding that these benefits and purposes

are being offset by harmful consequences

The four factors deal with the effects of the agreements following

approval in November 1980 specifically on rates and cargo shares

overall rate stability and service utilization ofintermodal authority and

on the existence of an apparently overlapping conference in the Panama

trade of which Sea Land is a member The latter two factors do not

appear on this record to cause any concern whatsoever Following

approval of the expanded agreements joint tariffs were filed in Febru

ary 1981 which implement inland intermodal authority within the Cen

tral American republics Thus there are rates to or from Guatemala

City and EI Salvador among other points which are either inland or

have no Caribbean ports thus requiring inland transportation Approval

of the agreements has therefore in no way stifled the development of

the inland services which shippers need and which the Commission

found to be warranted 20 SRR at 440 As to the last factor i e the

effect of Sea land s membership in both Agreement No 10045

Panama Costa Rica and in Agreement No 3868 Panama Confer

10 There is no direct evidence that malpractices among the three parties have been rampant only

evidence that allegations have been made and references sent to T AG for appropriate action How

ever in view of the substantial volume of outside competition and the declining cargo base and bad

year in 1981 the basic elements conducive tomalpractices are present The court and the Commission

have recognized that direct evidence of malpractices may not always be available but evidence of alle

gations combined with underlying trade problems conducive to malpractices may be substantial evi

dence justifying findings of malpractices which agreements may be approved to correct See United

States FMC IS SRR 927 934 935 D C Cir 1980 affirming Agreement No 10286 Italy US A

North Atlantic Pool Agreement 21 F M C 676 679 1979 pooling agreement approved for three years

to combat malpractices shown by hearsay evidence and evidence of underlying overtonnaging

25 FM C

169
I 170 FEDERAL MARITIME COMMISSION

ence this record shows no overlap whatsoever because Sea Land does

not participate in the Panama section of Agreement No 10045 a

previous condition of approval which Sea Land has met Nor is there

any evidence that Sea Land s participation in the Panama Conference

has any effect on Agreement No 10045 This leaves the question ofthe

post approval effects of the expanded agreements on rates cargo

shares overall rate stability and service Although the record could not

be developed with recent data so as to furnish conclusive answers the

data limited as they are and other evidence ofrecord do provide some

insights and provide no basis for disapproval ofthe agreements

As noted previously though some rates on certain commodities are

considered depressed because ofsubstantial outside competition there is

no evidence of present rate instability or complaints from shippers

about rates or services Rates remained firm at least through the first

half of 1981 Furthermore in the face of all of this outside competition

the parties have been able to institute two general rate increases under

Agreement No 10045 and three under No 10105 to cover rising costs

the second ofthese increases however merely incorporating a previous

fuel surcharge into the base rate structure There is no evidence of

specific losses of cargo to outside competitors because ofthese general

increases but there is evidence that in the event any loss might occur

the particular rate will be re evaluated As to effects on service ap

proval of the expanded agreements has not resulted in curtailment of

service On the contrary ifanything it has led to uniform intermodal

services among the three parties as published in their joint tariffs and

has done nothing to encourage the parties to discontinue their invest

ments in the subject trades which disapproval may do It is true that

the agreements comprise only three carriers out of 20 or so that come

and go in these trades Therefore one cannot expect that the expanded

agreements will promptly cure any diaparate rate structures that may

exist in the trades Cf Commissioner Teige s concurring opinion in

Conditional Approval ofAgreement No 10045 3 cited above 20 SRR at

442 and Commissioner Day s dissent 20 SRR at 444 However as

expanded and modified by the Commission the agreements have led to

uniformity in method of rate quotation among the three carriers enjoy

ing significant shares ofthe carryings in the trade and may by example

have beneficial effects on outside carriers possibly even to the extent of

persuading them to join the agreements In any event the failure ofthe

expanded agreements to attract new member carriers or to completely

eradicate all differing rate structures published by 16 or so outside

carriers does not detract from the other benefits these agreements have

produced since approval in November 1980 e g the uniform tariff

selfpolicing system and uniform intermodal services Moreover as

more fully discussed below the experience of the parties under the

expanded agreements and under their February 1981 joint tariffs has

i

25 FMC
RATE AGREEMENTS NOS 10045 6 10105 4

not been sufficient in light of the limited trade data available to come

to firm conclusions even if there are at present no signs in this record

that outside carriers will be joining the agreements in the near future 11

The most difficult question to answer on this record is what has been

the effect ofthe agreements on cargo shares ofthe parties in the subject

trades There are two reasons for this difficulty First the agreements

as modified by the Commission were approved in November 1980 and

the joint tariffs under which the parties were required to operate as one

of the conditions of approval were not filed until February 1981

Second although the agreements have operated under the new tariffs

only for over a year now data showing cargo carryings in the trade

were not available from the Census Bureau beyond June 1981 and this

data as noted before are unadjusted to correlate with Shipping Act

common carrier terms Hence the record contains only about four

months actual historical data covering the life of the new joint tariffs

and a little over one half of the previous one year term of approval

granted by the Commission to the expanded agreements effective No

vember 10 1980 It is for this reason that Hearing Counsel argue that a

firm conclusive answer to the question as to how the expanded agree

ments have affected cargo shares cannot be given at this time and as

noted above why Mr Adam the Commission s economist believes

that any pertinent analysis ofmarket share data for the period 1979 81

may be both inappropriate and premature at this time Adam s

testimony p

25 n 14 However although it is extremely difficult to

discern trends after the approval ofthe expanded agreements there are

some tentative observations that can be made Thus it appears that

1981 was a bad year showing a decline in overall trade levels for liner

cargo both northbound and southbound and that proponents percent

age shares of the liner trade also declined in 1981 in terms of tonnage

These negative results for 1981 offset the increases that the trade and

proponents had enjoyed in 1980 over 1979 A detailed narrative of the

various trade analyses performed by Mr Adam showing cargo carry

ings overall proponents shares in terms of tonnages and cargo value

etc is provided in my numbered findings offacts above paragraphs 20

through 28 It is not necessary to repeat the many detailed analyses

shown by Mr Adam and discussed in those paragraphs However

11 It should be noted however that despite the presence of the two expanded agreements two pre

vious member lines have left the trades Armasal and Uiterwyk Lines Annasal went bankrupt and

Uiterwyk departed presumably for more lucrative trades It cannot be established on this record

therefore that the agreements will preserve shaky carriers Nor for that matter can it be conclusively

ll1gued that the three member carriers have made theirsubtantial investments in the trade only because

of the presence of the two agreements orthat they would not have provided independent intermodal

services absent approval of the agreements What the carriers would do to their investments and serv

ices if the agreements were to be disapproved is a matter open to conjecture although they strongly

suggest that approval of the agreements has been amotivating factor in their continued presence in the

trade

25 F M C

171
172 FEDERAL MARITIME COMMISSION

among the many observations are the following that in the predomi

nant over two to one southbound trade total tonnages fell to less than

one million tons after rising from 13million in 1979 and 14 million in

1980 that proponents share of this tonnage dropped off to 39 percent

in 1981 after 37 percent in 1979 and 49 percent in 1980 that in terms of

value similarly total exports southbound dropped to 926 million in

1981 after rising to 14 billion in 1979 and 18billion in 1980 that

proponents shares of these exports also declined to 70 percent in 1981

after rising from 68 percent in 1979 to 75 percent in 1980 that propo

nents shares in terms of value to Panama and Costa Rica also declined

in 1981 to 54 percent and 74 percent respectively but rose to Guatema

la Honduras and EI SalvadQr to a very impressive range of 74 83

percent in 1981 that on the northbound trade imports total overall

tonnages declined sharply to only 275 000 tons in 1981 from 559

568 000 tons in 1979 1980 that proponents shares of import cargo in

tons dropped to only 52 percent in 1981 from 68 percent in 1979 and 66

percent in 1980 that proponents shares of imports from Panama rose

to 66 percent in 1981 but fell sharply from Guatemala Honduras and

EI Salvador dropping to only 27 percent in 1981 for EI Salvador that

by value total imports dropped to only 414 million in 1981 from a

level ofabout 1 billion in 1979 1980 that unlike tonnages proponents

percentages shares by value ofimports remained fairly stable in a 65 68

percentage range for the three years 1979 81 that proponents shares of

imports in value from Panama and Costa Rica remained at very high

levels 89 and 83 percent in 1981 respectively that their shares also

remained stable from Guatemala 65 68 percent for 1979 81 that their

shares however dropped from Honduras and El Salvador in 1981 63

percent and 37 percent respectively that major commodities imported

declined in both value and tonnages dropping by 59 64 percent in 1981

from the preceding year that proponents shares ofthese commodities

also dropped in tonnage terms to 60 percent for Agreement No 10045

and to 42 percent for Agreement No 10105 in 1981 that proponents

shares of this cargo in value terms rose to 85 percent for No 10045 in

1981 and stabilized at levels of 57 59 percent under No 10105 in the

past two years that combined totals for the major import commodities

moving under each of the agreements declined approximately 60 per

cent in value as well as in tonnages in 1981 that proponents shares for

these commodities declined to 47 percent of tonnages in 1981 but

remained stable at about 64 percent in value terms that combined totals

of major exports southbound declined in 1981 by 13 percent in ton

nages and by 36 percent in value compared to 1980 that proponents

shares of major exported commodities dropped to 19 percent by

volume in 1981 from 22 percent the preceding year but that in value

terms their share rose to 45 percent of these commodities in 1981

2S FMC
RATE AGREEMENTS NOS 10045 6 10105 4 173

It is difficult to discern patterns and trends from all of the above data

especially since one analysis from time to time seeks to contradict

another Moreover as mentioned the limited period of time covered by

the data and their unadjusted nature coupled with the unstable political

climate in 1981 render predictions rather shaky and tentative Neverthe

less Mr Adam concludes that while there has been little signicant

change in proponents overall market share of the subject trades during

1979 81 a

drop off in their shares of the southbound and northbound

trades is apparent between 1980 and 1981 in both value and tonnage

terms This drop off moreover reflects a corresponding decline in total

trade levels leaving the proponents with declining shares of a smaller

trade pie Adam p

36 He also concludes that there are some

exceptions to the general decline in total trade and proponents shares

for example an increase in proponents shares in exports in 1981 in

terms of value of shipments under Agreement No 10105 and a more

impressive share of exports in terms of value than in tons As for

imports he notes the same decline in 1981 for the total trade and for

proponents shares although based on value of imports proponents

shares seem more stable for the period 1979 81 As for major imported

commodities Mr Adam notes the usual decline in 1981 but also a

stable or rising percentage share for proponents during 1980 81 in terms

of value He sees a

possible trend for proponents to concentrate on

high value imports such as beef and coffee rather than lower value

items such as bananas Exported major commodities show usual de

clines in 1981 as do the proponents shares However in terms of value

proponents shares increased significantly from 1979 to 1981

Hearing Counsel although recognizing the difficulty ofdrawing firm

conclusions from limited data note a decline in overall trade by ton

nages southbound in 1981 after rising in 1980 over 1979 and a corre

sponding decline in proponents shares although by value Hearing

Counsel note a rise slightly under Agreement No 10105 in exports

southbound Thus there is a rise and fall pattern which overall trade

and proponents percentage shares seem to follow in tonnages and

sometime by value As to imports northbound Hearing Counsel note

a steady decline overall by value during 1979 81 and by proponents

percentage shares Generally then Hearing Counsel reason that if

proponents shares rise when trade rises and fall when trade falls it

may be reasonable to expect the Agreements hoped for stabilizing

effect on the trade to increase when trade levels rise but if trade fell

so too would the agreements effect fall Opening Brief of Hearing

Counsel pp 6 7

I

agree with Hearing Counsel that only limited and tentative conclu

sions can be drawn from the necessarily limited and unadjusted Census

data presently available and agree with proponents that the Census data

are unadjusted and limited in time and must therefore be treated with

25 F M C
174 FEDERAL MARITIME MMISSION

caution However although it may be premature to make predictions

or draw firm conclusions from early tentative trends nothing in the

preliminary data offsets evidence that the agreements have benefits and

serve purposes apart from the effects they are having on the trades

concerning cargo carryings and shares namely by causing uniform

tariffs with simplified rate and service quotations by implementing

uniform intermodal services and by establishing a full selfpolicing

system under General Order 7 Although one may argue that the

individual member lines of the agreements could furnish intermodal

services and simplify their individual tariffs without the need for the

agreements only by virtue of approval of the expanded agreements

could there be a single uniform tariff a single uniform type of inter

modal rate quotation and a selfpolicing system complete with a neutral

body as enforcer As the Commission stated in its Order of Investiga

tion p 3 it would consider the merits of continued approvability of

the subject agreements not merely by reterence to factors such as cargo

shares and effects on the trade but by other matters as welI and as both

parties assert correctly in my opinion separate benefits do flow from

continuation of these expanded agreements Since this is so I see no

basis to disapprove either agreement certainly not on the tentative

inconclusive data and trends shown by unadjusted Census data which

cover only the first six months of 1981 ie only about four months

after the filing of proponents joint tariffs in February 1981 With

demonstrated benefits and with no firm probative evidence ofharmful

trends developing in the trades as welI as no firm evidence that the

agreements will affect or have affected the numerous outside competi

tors and no protests from outside carriers or complaints from shippers

there is no reason to deny proponents continued approval of their

agreements The only remaining question however is how long should

the term of approval run Although this question may seem difficult to

answer because proponents arguments favoring approval without time

limits have some appeal in the last analysis there is simply too much

Commission precedent in support oflimiting approval to three years so

as to allow more reliable data to accumulate consistent with the Com

mission s manifest desire to assess the impact the expanded agreement

has had on the trade Conditional Approval ofAgreement No 10045 3

cited above 20 SRR at 439

As noted earlier Hearing Counsel contend that the limited data

presently available do not support a grant of indefinite approval of the

subject agreements because trends and effects cannot be clearly dis

cerned at this time or relied upon with assurance Insuch cases Hearing

Counsel note that the Commission has granted only limited terms of

approval and Hearing Counsel therefore urge a three year term to

enable the Commission to develop further evidence which will support

an intelIigent evaluation ofthe agreements effects on the trades Propo

25 F MC
RATE AGREEMENTS NOS 10045 6 10105 4 175

nents note an absence of any evidence which would support a

finding

that the subject agreements violate any provision of the Shipping Act

and without such evidence argue that the Commission has no basis in

law or fact to modify the agreements by imposing time limits As I

have discussed earlier however the Commission has quite a long

history of modifying agreements by limiting them to specified terms

ranging from one to five years and very often does this when the

evidence is not yet available by which the beneficial effects of agree

ments can be determined with assurance or when parties to agreements

have not yet had an opportunity to demonstrate that their agreements

will actually produce the desired beneficial effects In some cases the

Commission has even gone so far as to state that it has a policy of

imposing time limitations on approval of certain types of agreements

e g

intermodal agreements or agreements in which evidence ofactual

operating results and current trade conditions is not yet available See

e

g Agreement No 57 96 cited above 19 F MC at 305 306 Hearing

Counsels proposal to limit term to 18 months is consistent with

Commission policy to avoid granting indefinite and unlimited approval

in the intermodal field and limited approval will enable the

Commission to pinpoint any problems which may develop with the

implementation of Agreement No 57 96 American Flag Common

Carrier Charter Agreement cited above 21 SRR at 190 The Commis

sion has a policy of requiring most cooperative working arrangements

to terminate on a specific date in order to better evaluate their competi

tive effects in light of actual operating results and current trade condi

tions Agreement No 10286 Italy US A North Atlantic Pool Agree

ment cited above 21 F MC at 680 A three year period will allow

the parties sufficient time to begin pool operations and to develop

information which may establish its predicted efficacy Agreement

Nos DC 38 and DC 38 1 Association Puerto Rico Trades cited above

17 F MC at 260 The additional one year period added to a previous

two year period of approval we believe is sufficient to allow PROSA

to take whatever steps are necessary to refine its demurrage collection

system and otherwise accomplish the objectives of the Agree

ment

The above cases have similarities to those in the present case Thus

like the pooling agreement in Agreement No 10286 neither proponents

nor the Commission s staff have been able to develop sufficient data to

establish the agreements predicted efficacy Like the chartering agree

ment in Common Carrier Charter Agreement there is a need for actual

operating results and updated evidence of trade conditions so that the

Commission can better evaluate their competitive effects Like the

agreement in Agreement No DC 38 there has not been sufficient time

to determine whether all ofthe predicted benefits ofthe agreement will

result Of course proponents contend that since there is no evidence of

25 F MC
1

I

j

176 FEDERAL MARITIME COMMISSION

harm or violations of law which have resulted from approval of the

expanded agreements there is no basis to limit the term of approvabil

ity which proponents believe to be tantamount to a modification of

their agreement requiring specific findings ofharm or violations oflaw

However appealing this argument seems to be unfortunately forpropo

nents the Commission has not agreed with it when the Commission

believes that parties to agreements have not yet been able to demon

strate that their predicted benefits will result or have not had sufficient

time to operate Thus in Agreement Nos DC 3B and DC 3B l etc cited

above the presiding judge had refused to impose any time limitation on

the subject agreement which had previously been approved for a two

year trial period on the same ground argued by proponents here

namely that the agreement had shown that it produced benefits and

served needs but that if circumstances changed the Commission could

at any time cancel or modify the agreement under the procedures

established by section IS of the Act 17 F MC at 261 As noted

above however the Commission added another year s approval to

permit the parties to accomplish the objectives of the agreement

among other reasons because the parties had not sufficientiy demon

strated that the agreement was operating properly or that conditions in

the trade warranted unconditional indefinite approval 17 F MC at

26026 notwithstanding the fact that the Commission found that the

agreement was required by a serious transportation need and is neces

sary to secure important public benefits 17 F MC at 260

In the present case proponents have shown and Hearing Counsel do

not dispute that there have been benefits flowing from the expanded

agreements namely the uniform tariff uniform rate quotations and

implementation of uniform intermodalauthority and the establishment

of a full selfpolicing system While other asserted benefits such as the

continued heavy investment in and commitment to the trade and benefi

cial effects on curbing rate instability are more conjectural or have not

yet been shown by operating results in the trades there is no denying

the former proven benefits and there is no offsetting evidence ofharm

or violation of law Therefore as did the Commission in Agreement

Nos DC 3B and DC 3B l cited above and in so many other cases also

cited above Iconclude that the agreements should be approved for a

term of three years from the date of service of the Commission s final

action in this proceeding if the Commission finalizes adopts or other

wise agrees with my conclusion 12 Assuming that such Commission

Altbough HeliringCounsel utge a threeyear term of approval they do not specify when this

term is to commence Ihave therefore followed theCommission s

example of extendina approval from

tbe date of the Commission s decision anowing forthe pameno comply with certain conditions as

was done witb respect to the present agreements See eo dltlo olApproval of Agreet No 10045 3

cited above 20 SRR 437

2 F MC
RATE AGREEMENTS NOS 10045 6 10105 4 177

action would occur some time in September 1982 this would extend

the lives of the agreements until September 1985 and would enable the

Commission s staff to obtain trade data from Census covering at least

the full four year period 1981 1984 despite the six months or more time

lag which seems to delay the availability of Census data Such a time

period when tacked onto the 1979 1980 period presently shown in this

record will provide a six year period in which the Commission s staff

can seek to discern trends for the Commission s use in determining the

merits of continued approvability beyond that time

ULTIMATE CONCLUSIONS

The two subject 48 hour rate agreements which had been expanded

and approved by the Commission prior to the institution of this pro

ceeding for a one year term and then further approved pendente lite

deserve continued approval for a term of three years following the

Commission s final decision in this case The proceeding was begun in

order to permit the parties to develop further evidence concerning the

effects of the agreements on the subject trades because sufficient time

had not yet elapsed under the agreements to discern such effects The

Commission also expressed interest in determining if intermodal author

ity had been utilized and whether the existence of an overlapping

conference in Panama had any effects However these factors were

only to be considered among others when determining the merits of

continuing approval of the agreements

The record developed by the parties indicates that benefits have

flowed from approval of the expanded agreements in November 1980

such as the publication of a uniform tariff containing uniform methods

of rate quotations the implementation of joint intermodal authority

under such tariffs and the establishment of a full selfpolicing system

under the Commission s General Order Furthermore there has been no

evidence developed showing harm to shippers or other carriers Al

though the record shows that the joint intermodal authority has been

utilized and that there is no adverse effect because of Sea Land s

membership in one ofthe agreements as well as in the separate Panama

Conference the record concerning impact of the agreements on rates

cargo shares and overall rate stability is less conclusive There appears

to be some additional rate stability as shown by several general rate

increases which the parties to the agreements have been able to institute

to cover rising costs However because of the limited period of time

since the expanded agreements have been operating under their joint

tariff and because of the unavailability of trade data published by the

Census Bureau more recent than the first six months of 1981 and

certain infirmities in the Census data it is too early to come to any firm

conclusions or to discern trends in the trade relevant to the issue of

continued approvability However the data appear to indicate that 1981

25 FM C
178 FEDERAL MARITIME COMMISSION

was a bad year in the trade overall and that the parties shares of the

trade in terms of tonnages declined in that year to only 39 percent in

the predominant export southbound trade and 52 percent in the import

northbound trade Their shares declined in value as well to 70 percent

of exports while remaining fairly stable for imports at 65 68 percent

although there are some exceptions to this general picture Itis there

fore still premature to attempt to assess the impact of the two agree

ments in terms of cargo shares or overall rate stability A more realistic

appraisal should await development of several years operating experi

ence especially since only three carriers out of the 20 or so operating in

the trade area involved are parties to the two agreements

It should be noted that the Commission s

findings made in September

1980 when the Commission first approved the expanded agreements

that there was a potential for rate instability caused by the presence of

so many outside carriers and that the subject agreements should have

a stabilizing effect are still true today and may possibly be even more

valid in view of current upheaval in the region In numerous previous

agreements furthermore the Commission has granted limited terms of

approval frequently three years to allow parties to show by actual

experience that their agreements will produce the desired beneficial

effects when experience under the agreements has not been sufficiently

lengthy In this case such a course of action is even more warranted

when one considers that the critical data necessary to assess trade wide

impacts come from the Census Bureau and through no fault of the

parties to the agreement are not available for more recent periods of

time and when one considers that limited though the data may be

they show no harmful trends developing in terms ofcompetitive effects

on outside carriers

S NORMAN D KLINE

Administrative Law Judge

2S FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 80 63

WEST COAST OF ITALY SICILIAN AND

ADRIATIC PORTS NORTH ATLANTIC RANGE

PORTS CONFERENCE TARIFF RULE NO 26

Conference tariff rule filed to replace a rule found violative of Shipping Act sections 17

and 18b lis cancelled for noncompliance with the Commission s earlier order in

this proceeding

The practice of withholding cargo delivery from a

consignee until a private penalty is

paid to the ocean carrier is an unreasonable practice within the meaning of Shipping

Act section 17 when liability for the penalty attaches upon the preparation and

submission of incorrect shipping documents by the shipper

Stanley O Sher and John R Attanasio for the West Coast of Italy Sicilian and

Adriatic Ports North Atlantic Range Ports Conference

John Robert Ewers Joseph B Slunt and Deana E Rose for the Bureau of Hearings

and Field Operations

SECOND REPORT AND ORDER

August 3 1982

BY THE COMMISSION ALAN GREEN JR Chairman THOMAS F

MOAKLEY Vice Chairman JAMES JOSEPH CAREY RICHARD J

DASCHBACH AND JAMES V DAY Commissioners

This is a Commission instituted proceeding directed at tariff provi

sions employed by the member lines of the West Coast ofItaly Sicilian

and Adriatic Ports North Atlantic Range Ports Conference WINAC

or Respondents which assess a penalty charge for incorrect freight

descriptions in the amount of twice the difference in freight due These

provisions were originally contained in WINAC TariffRule 26 which

was cancelled by the Commission s August 21 1981 Order Revised

provisions were republished by WINAC as Tariff Rule 27 and filed

with the Commission on September 30 1981 A further show cause

order was issued against Rule 27 on December 30 1981

Tariff Rule 27 states that the cargo interests are liable for penalty

charges but creates a possessory cargo lien to collect these charges

1WINAC Tariff Rule 26 24 FM C 121 1981 appeal pending D C Cir No 81 2066 The Com

mission found former Rule 26 deficient for its indefiniteness and for permitting penalties to be collect

ed from persons other than those actually responsible for the cargo misdescription ie the party at

faultWINACs enforcement of acargo lien by means of aprivate sale was also found unreasonable

Rule 27 now provides for apublic sale of withheld cargo and this matter is no longer in controversy

25 FMC 179
180 FEDERAL MARITIME COMMISSION

only from the consignee Use of the lien is limited however to situa

tions where the carrier has first attempted to collect the penalty from

the shipper and has reasonable ground to believe the consignee is at

fault The point presently at issue is whether Rule 27 permits the

ocean carrier to withhold cargo delivery from a consignee which has

not prepared or submitted incorrect shipping documents unless the

consignee assumes responsibility for penalty charges and if so whether

this practice is consistent with the August 21 1981 Order and section

17 of the Shipping Act 1916 46 U S C 816 2

Positions of the Parties

A Respondents

The member lines of the WINAC Conference contend that Rule 27

fully protects innocent U S consignees because 1 the carrier must

attempt to collect from the shipper before charging the consignee 3

2

the carrier must possess reasonable grounds to believe the consignee

is at fault 4and 3 the consignee may secure release of the cargo by

posting a bond if the consignee believes itselfto be innocent5

Respondents also claim that Rule 26 27 has caused no unfairness or

injustice in actual practice because cargo sales under the lien provisions

and reparations claims seeking the return ofincorrectly assessed penal

ties have been infrequent

Respondents argue that the collection of penalty charges is a matter

ofprivate contract which unlike the collection of government imposed

civil penalties is not subject to due process standards concerning the

determination of guilt Alternatively Respondents claim that 1

Rule 27 is basically fair in the due process of law sense 2 the

imposition of an absolute duty ofaccuracy would be unreasonable and

I The second paragraph of section 17 provides that

Every ocean carrier and every other penon subject to the Shipping Act shall establi h

observe and enforce just and reasonable regulations and practices relating to or connected

with the receiving handling storing or delivering of property Whenever the board finds

that any such regulation orpractice is unjust orunreasonable it may determine prescribe and

order enforced a

just and reasonable regulation orpractice

Respondenls stale that the con ignee wUlbe charged if the shipper refuse to pay February 18

1982 Memorandum a112

4

Respondents state that they have assessed penalties against a consignee only when there was

some evidence of collusion between the consignor and consignee February 18 1982 Memorandum

at 13 The type of evidence involved is not described but Conference Secretary Giovanni Ravera

states that he knows of no case in which a forwarder refused to pay a penalty charge except where

the forwarder claimed to have had instructions from the receiver Affidavit of February 15 1982 at

4 Affidavit of November 14 1980 at 13 Thus it appears that the evidence of collusion customarily

relied upon haa been the forwarder or hipper talemenllhallhe US consignee insisted upon Ihe

use of an incorrect cargo description

Allhough Ihe procedures which allegedly prolect consign were nol stated in WINACs tariff

Rule 27 took effect on S ptember 30 1981 the Respondents maintain that these procedures were

nonethele available underRule 26 aa well February 18 1982 Memorandum aI12 15

25 F MC
WINAC TARIFF RULE 26

3 injured consignees may obtain reparations in an FMC complaint

proceeding 6

Respondents further contend that 1 the Commission found their

penalty charges to be lawful in principle 2 commercial law recog

nizes the use of a possessory cargo lien to collect any lawful charges

due an ocean carrier 7and 3 a consignee may be assessed certain

charges without regard to whether the consignee is guilty of miscon

duct 8It would allegedly be unfair to deny the Respondents a

cargo

lien covering penalty charges because a lien is the only effective means

of collecting such charges and a direct collection procedure would

jeopardize Respondents ongoing relationship with European shippers

Respondents therefore assert that the option ofposting a bond to secure

cargo delivery provides a reasonable balance between carrier and con

signee interests especially because Respondents believe aconsignee is

involved in all instances where freight collect shipments are misde

scribed 9

B Hearing Counsel

The Bureau of Hearings and Field Operations Hearing Counsel

believes Rule 27 complies with the August 21 1981 Order in all

respects and states that Rule 27

provides a reasonable basis for determining the party

responsible for misdescriptions and for protecting the interests

ofthe innocent consignee

Hearing Counsel also argues that Respondents collection of private

penalty charges from consignees for misdescriptions performed by ship

pers in circumstances where the carrier reasonably believes the

consignee was attempting to obtain transportation at less than tariff

rates simply reflects the carrier s statutory duty to make diligent ef

forts to apply its tariff correctly and is a reasonable method of over

coming certain obstacles imposed by Italian customs laws to inspecting

cargo at the port ofloading 1 0

6

Respondents also state that the need for absolute accuracy in determining when aconsignee is at

fault described in the Commission s HFurther Order to Show Cause is not specifically required by

theAugust 21 1981 Order

7

Eg

The Eddy 72 U S 481 1961 The courts have upheld the use of a

cargo lien to coHeet

misdescription penalties North German Lloyd v Elling 96 F 2d 48 2d Cir 1938

8

Respondents refer to Louisville Nashville R R Co v Central IronCo 265 US 60 1924 acase

involving aconsignee s Jiability for freight undercharges on freight prepaid shipments

9

February IS 1982 Affidavit at 34 Respondents state that 80 of their cargo moves freight col

lect but offer no evidence supporting their claim of consignee involvement in the 149 misdescriptions

discovered in 1979 beyond the general observation that the consignee benefits from any reduction in

freight charges on freight collect shipments

10 This proposition is accompanied by citations to United States v Sea Land Service Inc 424

F Supp 1008 1011 DN J 1977 appeal dismissed 577 F 2d 730 3d Cir 1978 cert den 439 US

1072 1979 Prince Line v American Paper Exports 55 F 2d 1053 2d eif 1932 Rates from us to

Philippines 2 US M C 535 542 1941 Ford Co v M CR R

Co

191 CC 507 511 1910

25 F MC

181
182 FEDERAL MARITIME COMMISSION

Discussion and Conclusion

A major source of confusion in this proceeding to date has been the

Respondents ambiguous use of the phrase party at fault At one

point Respondents agreed with Hearing Counsel to amend former Rule

26 so that penalties would be assessed only against

the party responsible for the misdescription or error

Party at Fault 11

The Commission s August 21 1981 Order erroneously stated that the

above proposed language was included in the February 12 1981 version

of Rule 26 12

Respondents do not claim that Rule 27 limits the collection of penal

ties from consignees which are at fault but merely argue that the

new rule reasonably balances the competing interests involved Accord

ingly the Commission concludes that Rule 27 is inconsistent with the

August 21 1981 Order and with sections 17 and l8b I of the

Shipping Act 1916 by making the cargo interests rather than the

party at fault liable for penalties by permitting the carrier to withhold

cargo delivery unless the consignee pays penalties for misdescriptions

over which it may not have any control and for not revealing that

penalties are only assessed when cargo misdescriptions are discovered

after the vessel sails

Respondents largely reargue points addressed in the August 21 1981

Order and have still failed to demonstrate that cargo misdescription

conspiracies between U S consignees and European shippers are com

monplace on freight collect shipments The record contains no specific

evidence demonstrating that even one U S consignee has conspired

with aEuropean shipper to misdescribe cargo

Respondents claim that all freight collect consignees are guilty of

conspiracy in misdescription cases has already been rejected by the

Commission See 24 FM C at 124125 Although the consignee may

benefit financially from any undetected undercharges resulting from

cargo misdescriptions performed by the shipper this benefit alone

cannot support the conclusion that a conspiracy exists Consignees may

benefit from inadvertent clerical errors as well as intentional misde

scriptions of shippers 1s In addition to a showing of benefit to the

11 See December 31 1980 Memorandum of Heerlng Counsel at 34 Respondents isnored this repre

sentation in drafting Rule 27 bowever wbicb refers more broadly to circumatanCOl wbere the con

signee is at fault ft

The AuguU 21 1981 Order beld tbat carrierimposed penalties may be rted only against tbe

parties at fault either ultimately orin the fltSt instance through tbe use of a cargo lien device tt

24 F M C at 129

Even if one accepted Respondents mon that all mladeacrlptions in freigbt collect situations

are the result of a conspiracy there would be no justilication for Rule27 s

imposition of a

cargo lien

against the consignee on freight prepaid sbipments

2S FMC
WINACTARIFF RULE 26

consignee it is necessary at minimum to show that the misdescription

was willful and that the consignee had knowledge of the misdescrip

tion and condoned it Absent prima facie evidence ofthese elements it

is unreasonable for the conference to shift the burden to the consignee

to obtain a bond or pursue a

reparation action or both in order to

prove its innocence

The reasonable belief requirement added by Rule 27 is in light of

indications the Respondents will consider the consignee to be at fault

whenever the shipper refuses to cooperate an inadequate source of

protection for the consignee

In any case where a conspiracy did exist both the shipper and the

consignee would clearly violate section 16 Initial Paragraph of the

Shipping Act 1916 46 D S C 815 a statute which imposes civil

penalties for knowingly obtaining or attempting to obtain transportation

at less than tariff rates Intentional misdescriptions ofthis nature would

be more effectively deterred if the carrier furnished reliable evidence of

collusion between shipper and consignee to the Commission for pros

ecution than by randomly collecting private penalties from some con

signees and not others 14 Reliance on the enforcement scheme estab

lished by the Shipping Act adequately protects Respondents interests

because each misdescribed container they discover produces additional

freight revenues and the verification charge provided by Rule 27 15

Respondents claim that they actually administer their penalty system

in a more flexible presumably fairer fashion than is revealed by the

language of Rule 27 merely illustrates noncompliance with section

18 b I The Conference Secretary s affidavits indicate that when a

carrier discovers a misdeclaration in Europe the error is simply cor

rected after consultation with the shipper and penalties are assessed

only when the discrepancy is detected after the vessel sails 16 This

14 The record does not support a

finding that the Respondents penalty system effectively curtails

malpractices in the Italian trade SeeNovember 14 1980 Affidavit at 23 See also United States v Fed

eral Maritime Commission 655 F 2d 247 D C Cir 1980 regarding the evidence used to justify

Agreement No 10286 Because the Commission Jacks personal jurisdiction overEuropean shippers

and forwarders without a

physical presence in the United States civil penalty enforcement in conspir

acy caseswould be concentrated against U S consignees against whom there is hard evidence of in

tentional misconduct This type of enforcement should minimize the strain on Respondents ongoing

commercial dealings with European entities the fear of which now leads them to forego the collection

of penalties formisdescriptions discovered prior to vessel saiJing Commission enforcement should also

be moreeffective in resolving any problem of consignee recidivism which may exist It may not deter

shipper recidivism but neither does the essentially voluntary penalty coUection method Rule 27 em

ploys in the case of shippers If Rule 27 and its predecessors have actually deterred shipper miscon

duct such deterrence has only been an indirect result of the pressure placed upon consignees by the

cargo lien device Direct enforcement efforts eg legal action are apparently not taken against ship

pers

16 The verification charge is intended to recover the cost of inspecting a

typical container and is set

at 100 per container plus 25 perton if it is necessary to unpack thecontainer

16 See November 14 1980 Affidavit at 9

concerning the Respondents practice of not imposing pen

alties against the shipper if the error is discovered prior to sailing

25 EM C

183
184 FEDERAL MARITIME COMMISSION

important fact is not revealed by Rule 27 at all and further indicates

that Respondents use of a cargo lien to collect penalties places the

economic burden of misdescription enforcement on U S consignees A

tariff provision may not impose liability for misdescription penalties

while leaving the type of misdescription and the persons against whom

the penalty will be collected to the discretion ofthe ocean carrier Such

details must be clearly stated in the tariff

THEREFORE IT IS ORDERED That for the reasons stated

above and in the Commission s previous orders in this proceeding Rule

27 of the West Coast of Italy Sicilian and Adriatic Ports North

Atlantic Range Ports Conference Tariff FMC No 3 is cancelled such

cancellation to take place 30 days from the service date ofthis Order

IT IS FURTHER ORDERED That effective 30 days from the

service date of this Order the member lines of said Conference shall

cease and desist from publishing tariff matter purporting to authorize or

otherwise engaging in activities which

1 impose private carrier imposed penalties against consignees on

the basis of a presumption that consignees which benefit from

a misdescription are parties to a conspiracy to misdescribe

cargo

2 fail to notify shippers exactly when or where cargo tendered

for shipment must be verified to result in the assessment of

private carder imposed penalties or

3 impose a

cargo lien to collect private carrier imposed penal

ties against consignees

and

IT IS FURTHER ORDERED That this proceeding is discontinued

S FRANCIJ C HURNEY

Secretary

25 FMC
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

GENERAL ORDERS 13 AND 38 DOCKET NO 81 51

PARTS 531 AND 536 TIME LIMIT FOR FILING OF

OVERCHARGE CLAIMS

ACTION

SUMMARY

August 5 1982

Final Rule

This amends the Commission s tariff filing require

ments to prohibit carriers from imposing certain time

limits on shippers overcharge claims filed with the

carriers The final rule proscribes limits on claims to

a period of less than two years after accrual of the

cause of action The two year period is intended to

coincide with the period prescribed in section 22 of

the Shipping Act 1916 for reparations awarded for

injuries from violations of the Act The final rule also

prohibits tariff provisions requiring that overcharge

claims based on alleged errors in weight measure

ment or description of cargo be filed with the carrier

before the cargo leaves the carrier s custody The

effect of the amendment will be to prevent unneces

sar administrative proceedings where there is no dis

pute among the parties to avoid the unfair and unrea

sonable burdens imposed on shippers as a result of

such rules and to ensure that violations of section

18 b 3 of the Shipping Act 1916 do not go unre

dressed because oflimitations in carriers tariffs

DATE Effective November 8 1982

SUPPLEMENTARY INFORMATION

This proceeding was instituted by Notice of Proposed Rulemaking

published in the Federal Register on August 28 1981 46 F R 43472 to

amend the Commission s tariff filing regulations to prohibit carriers

from barring shippers filing of overcharge claims with the carriers less

than two years after accrual of the cause of action The amendment

was intended to obviate unnecessary administrative proceedings before

this agency and to further various objectives ofthe Shipping Act 1916

ie the section 14 Fourth 46 U S C 812 proscription of unfair

treatment of shippers in the adjustment and settlement of claims the

25 F MC 185
186 FEDERAL MARITIME COMMISSION

section 15 46 U S C 814 requirement that conferences adopt and

maintain reasonable procedures for promptly and fairly hearing and

considering shippers requests and complaints and the prevention of

uncorrected violations by carriers of section l8b 3 s 46 U S C 817

prohibition against freight overcharges

Thirty five comments to the proposed rule have been received 1 Of

the 23 responses from shippers shipper organizations and an attorney

all but one expressed full and unqualified support for the proposed rule

Of the twelve responses from carriers and conferences nine were in

opposition to the proposed rule and three were partially supportive

Positions of the Parties

The shippers and parties representing shipper interests generally sub

mitted brief comments of full support for the proposed rule citing the

reasons set forth in the Notice avoidance of unnecessary administrative

proceedings preventing would be claimants from becoming discour

aged and letting violations go uncorrected conformity with the two

year statute of limitations in the Shipping Act 1916 and correction of

unfair or unreasonable limitations which conflict with provisions in the

Shipping Act

1 Parties tiling comments were ocean Freight Consultants Inc Emerson Electric Co Transporta

tion Committee of the Rubber Manufacturers All8OCiation The Nstionallndustrial Traffic Lesgue

Australis Eastern U S A Shipping Conference The 8900 Lines Agreement Greece US Atlantic

Agreement lberianlUS North Atlantic Westbound Freight Conference Italy South France South

Spain Portugal U

S Gulf and the Island of Puerto Rico MedGult Conference Marseilles North

Atlantic U S A Freight Conference Mediterranean North Pacitic Coast Freight Conference North

Atlantic Mediterranean Freight Conference U S Atlantic Gulf Australia New Zealand Conference

U S North Atlantic Spsin Rate Agreement U S South Atlantic Spanish Portugu Moroccan and

Mediterranean RateAgreement and the West Coast of Italy Sicilian and Adriatic PortslNorth Atlan

tic Range Conference WINAC Pacitic Westbound Conference PaciticStraits Conference Pacific

Indonesian Conference and Malaysla Pacillc Rate Agreement United States Atlantic Gulf Haiti

Conference United States Atlantic Gulf Jamaica Conference and Southeastern Caribbean Confer

ence of the Associated Latin American Freight Conferences Atlantic Gulf West Coast of South

America Conference and East Coast Colombia Conference of the Associated Latin American Freight

Conferences JapanlKorea Atlantic and Gulf Freight Conference Japan Puerto Rico Virgin Islands

Freight Conference New Yark Freight Bureau Philippines North America Conference Thailand Pa

citic Freight Conference Thailand US Atlantic Gulf Conference TransPacitic Freight Confer

ence of JapanKorea TransPacitic Freight Conference Hong Kong and Agreement Nos 10107 and

10108 the Far East Conference and Inter American Freight Conference the Motor Vehicle Manufac

turers A88OCiation the Latin America Pacillc Coast Steamship Conference and Pacillc Coast River

Plate Brazil Conference E I du Pont de Nemours Company The Society of the Plastics Industry

Inc Gulf United Kingdom Conference Gulf European Freight A880Ciatlon Continenta1lU S Gulf

Freight Association U KUS A Gulf Westbound Rate Agreement the Gulf Europe Carrier Asso

ciationstl j United States Lines Inc Sea Land Service Inc American West African Freight Confer

ence FMC Corporation Merck Chemical Manufacturing Division Uniroyal Inc j Hooker Interna

tional Division Pacific Coast European Conference North Europe US Pacific Freight Conferencet

and PacificlAuatralia New Zealand Conferencc Monsanto CompanYi Traffic Service Bureaut Inc

CPC International Inc Caterpillar Tractor Co William Levenstein Esq Joy Manufaoturing Co

Singer Products Co Inc Johnson Johnson International Grain Processing Corporation Exxon

Chemical Supply Company Ino Union Carbide Corporation and The Shippers National Freight

Claim Council Inc

2S FMC
TIME LIMIT FOR FILING OVERCHARGE CLAIMS 187

Additional comments included that abolition of the six month rule

was necessary because audits both those performed internally and

those contracted out to professional auditors are time consuming un

dertakings which often cannot be completed within the six month

period provided in tariffs One commentator CPC International Inc

alleged that the six month rule rewards carriers who purposely drag

their feet in providing information which may give rise to overcharge

claims Another shipper commentator Emerson ElectricCo requested

that the Commission go further in its rules by requiring that the carrier

acknowledge receipt of overcharge claims within ten days and dispose

ofthe claims within an additional 120 days

Emerson also emphasized its opposition to tariff rules requiring that

errors in weight or measurement be brought to the carrier s attention

before the cargo leaves the carrier s custody Emerson argues that these

types of claims are easily settled between shippers and carriers because

they generally consist of computation errors and are easily supported

by export packing lists or other data and that as apractical matter

inland shippers in particular cannot comply with this tariff rule

Caterpillar Tractor Co although supporting a proscription of the

six month rule favors the weightmeasurement tariff restrictions argu

ing that they deter rebating and encourage shippers to provide accurate

weight measurement data

Carriers and conferences opposing the proposed rule generally take

note of the Commission s previous endeavors in this area none of

which resulted in the complete proscription ofthe six month rule They

argue that there is no reason for the Commission to be trying again

that the tariff rules are reasonable fair and nondiscriminatory and that

they do not violate any provisions of the Shipping Act A few carrier

commentators argue that the Commission is without authority or juris

diction to promulgate the proposed rule in the absence of evidentiary

findings of Shipping Act violations Other points made by some carrier

interests include that the six month rule prevents rebating because it

avoids informal unsupervised settlement of claims that abolition of the

six month rule will impose administrative recordkeeping burdens on

carriers that the Commission s policy of awarding high interest on

grants of reparation already works a significant hardship on carriers

and encourages delay on the part of shippers with overcharge claims

that abolition of the six month rule will invite excessive audits and

that section 18 b 4 of the Shipping Act authorizes the Commission to

reject tariffs only if they fall short of statutory technical or ministerial

requirements Several carrier commentators express particular opposi

tion to the explanation in the Notice that the amended rule is intended

to prohibit tariff rules allowing claims of weight measurement errors

only when the cargo is in the carrier s custody These carriers argue

that errors ofthis kind are impossible to verify once the cargo has left

25 FMC
188 FEDERAL MARITIME COMMISSION

the carrier s custody and that carriers would be left at the mercy 01

potentially unscrupulous shippers and shippers auditors

Some carriers suggest amendments to the proposed rule as an alter

native to outright adoption These include specifying when the cause 01

action begins to accrue some suggest the date ofsailing as opposed to

date of payment offreight charges allowing a time limit for filing of

overcharge claims of something less than two years exempting claims

alleging weight measurement or description errors from any rule reo

stricting carrier imposed time limits on claims including any intended

restriction on carrier custody requirements or administration fees in the

final rule itself modifying and streamlining the Commission s

regula

tions concerning overcharge claims eliminating awards of interest on

reparation when an overcharge claim is resolved within the statutory

period and establishing certain required standards by which a claimant

must adduce its case One group of conferences which supports the

proposed rule2 specifically inquires as to whether the rule will be

effective prospectively or whether potential claimants who may already

be time barred by a six month rule will now be able to file their

complaint with the carrier if the two year period has not yet passed

The Gulf Europe Carrier Associations which support the proposed

rule in part request oral argument

Discussion

The Commission is not unmindful of previous proceedings which

addressed the subject ofthe six month rule The Commission s determi

nation in those proceedings not to promulgate rules similar to that

proposed in the instant rulemaking does not preclude it from doing so

at this time In those decisions 3 the Commission determined that the

proposed rules were not supported by either the facts or law At any

rate the Commission in rulemaking is not confined to the redress of

demonstrated evils as distinct from the prevention of potential ones

4

Thus it is not necessary for the Commission to make specific findings

of Shipping Act violations prior to adopting substantive rules provid

ing that the rules are in furtherance ofgeneral Shipping Act objectives

New York Freight Forwarders and Brokers Assn v Federal Maritime

Commission 385 F 2d 981 D C Cir 1967 Pacific Coast European

Conference v Federal Maritime Commission 350 F 2d 197 203 204 9th

Cir 1965 Au tasia Container Express Possible Violations of Section

United States Atlantic Oulf Haiti Conference United State Atlantic Oulf Jamaica Confer

ence and Southeastern Caribbean Conference

S ProfJOd Rule Covering Time Limit on the Filing of Overcharge Claims 12 P M C 298 1969 10

F M C 1 1966 CarrierlmfJOd Time Limits an Presentatlan of Claims for Freight Adjustments 4

F M B 29 1952

Pacific Coast European Conference Y F deral Martime Commission 376 F ld785 790 DC Cir

1967

2S FMC
TIME LIMIT FOR FILING OVERCHARGE CLAIMS 189

18 b 1 and General Order 13 19 EM C 512 521 1977 revd on other

grounds Austasia Container Express v Federal Maritime Commission 580

F 2d 642 D C Cir 1978 The comments received pursuant to the

Notice of Proposed Rulemaking have convinced the Commission that

proscription ofcarrier imposed time limits is necessary to meet several

Shipping Act objectives At the same time the arguments against the

proposed rule have not been persuasive

It is not the case as argued by United States Lines Inc that section

18 b 4 of the Act would prohibit the Commission s proposed exercise

of rulemaking power That statutory provision and the court opinion

cited 5state that only technical defects constitute proper grounds for

rejecting a tariff The Commission s proposed action does not involve

administrative rejection ofnewly filed tariffs it would proscribe certain

tariff provisions as contrary to Shipping Act objectives The Commis

sion s statutory mandate to implement rules and regulations to carry out

the provisions of the Act is not obstructed by section 18b

4 See 46

U S C 841a

The Commission disagrees with the argument that evidentiary hear

ings would be required prior to adoption of the proposed rule All

interested parties have been given sufficient opportunity to provide

facts and arguments by commenting on the proposed rule Moreover

the parties advocating evidentiary hearings have not indicated that

there were indeed any factual matters which they have offered to

adduce in opposition to the proposed rule The parties have not raised

any issues in their comments which would require or even be served by

evidentiary hearings Under these circumstances hearings would only

delay the process of proscribing tariff rules found to be inconsistent

with Shipping Act objectives This proceeding has been conducted in a

procedurally correct manner

Several carrier commentators indicate that because adoption of the

rule will result in more claims being decided by the carriers themselves

as opposed to the Commission there will be a greater likelihood ofill

will discrimination conflict prejudice and rebating The Commission

does not believe that reliance on carriers and shippers to resolve dis

putes will necessarily result in unlawful activity either in the form of

false shipper claims or unwarranted reparations by carriers It rejects

the proposition that both carriers and shippers need as much supervi

sion as possible because they will act in bad faith at every opportunity

or at least will be tempted to yield to pressure to do so The Commis

sion expects parties subject to the Shipping Act to comply with it and

will vigorously make use of the statutory remedies for violations of the

Act

6

Pennsylvonia v Federal Maritime Commission 392 F Supp 795 D D C 1975

25 F MC
i

190 FEDERAL MARITIME COMMISSION

Moreover the argument for continued Commission resolution of

claims after six months appears to be inconsistent with the accusation of

a few of the same commentators that the proposed rule constitutes

unnecessary government regulation The proposed rule reflects an

awareness that the business community is capable of handling its own

affairs within the confines ofthe law and without unnecessary govern

ment supervision The alleged recordkeeping and administrative burden

that would be imposed on carriers if the proposed rule is adopted is not

readily discernible The documents which a carrier would need to

respond to an overcharge claim tIed with the carrier do not appear

likely to differ from those the carrier would rely upon in defending the

claim before the Commission Nor would the administrative burden of

responding to direct claims belikely to exceed that of being a

respond

ent in an informal docket proceeding before the Commission The real

administrative burden is imposed on the Commission as a result of the

time limit rules for they impede the orderly operation of Commission

business by unnecessarily diverting Commission resources from other

regulatory functions of the agency

The excessive audits alleged to result from abolition of the six

month rule would cause no hardship to carriers Shipper audits would

have a significant effect on carriers only to the extent they result in

successful overcharge claims in which event they must be viewed as an

appropriate means by which section 18b 3 violations are corrected

The Commission s policy of granting interest on awards of repara

tions is beyond the scope ofthis proceeding It should be pointed out

however that award of interest is intended to make whole the shipper

for the carrier s use of the shipper s money it is neither intended to be

nor does it actually constitute a hardship or penalty on the carrier

There is therefore no merit to one commentator s suggestion that

carriers be exempted from the interest requirement if a claim is resolved

within the statutory period Nor is award of interest an incentive to

shippers to delay filing their overcharge claims Interest rates are com

puted on the basis of six month U S Treasury bill monthly rates for the

period in question 6

and interest is therefore no boon to shippers

A few commentators claim that the proposed rule would more easily

enable a carrier to stonewall a claim until the two year statute of

limitations has expired because claims transmitted just prior to the

expiration of the two year period would be subject to potentially time

consuming consideration by the carrier instead of automatic rejection

on the basis of a time limit rule Emerson Electric Co requests that the

Commission establish requirements that carriers acknowledge receipt of

claims within 10 days and dispose of claims within 120 days Again the

46 CP R f02 253

2S FMC
TIME LIMIT FOR FILING OVERCHARGE CLAIMS 191

Commission is not persuaded that the perceived threat of unscrupulous

carriers justifies the rejection of the proposed rule nor are additional

safeguards against such abuses necessary Since 1979 Commission regu

lations have required carriers to acknowledge written overcharge

claims within 20 days of receipt and inform claimants of their rights

under the Shipping Act including section 22 s two year statute of

limitations See 46 cFR 531b 8 xvi and 536 5 d 20

Some commentators request the Commission to specify a date certain

at which the cause of action will accrue under the proposed rule Sea

Land notes that for purposes of overcharge claims the Commission has

found section 22 s statute oflimitations to begin to run from the date of

delivery of cargo to the carrier the date of shipment or the date of

payment of freight charges whichever is later A few commentators

request that in the interest of uniformity and clarity a date certain be

established such as the date the ship sails These commentators appear

particularly concerned that use ofdate ofpayment of freight charges as

a criterion encourages late payment and discriminates in favor of late

payors by providing them an expanded period in which to file claims

with the Commission

Although the Commission does not wish to encourage late payment

of freight charges the basis for payment as a factor in determining

when a cause ofaction accrues is a rational one a shipper is not injured

until it has paid the unlawful charges See Fiat Allis France Materiels de

Travaux Publics SA v Atlantic Container Line 22 FM C 544 at 552

1980 Although the formulas for determining when a cause of action

accrues under section 22 have included date ofdelivery of the cargo to

the carrier 7

date oftime ofshipment 8

and even the date ofbilling 9all

have included the date of payment of freight charges The Commission

will not however issue a definition on the matter in this particular

rulemaking The bases for determining accrual of a cause of action

under section 22 have derived from Commission decisions not only in

the context of section 18 b 3 proceedings but in other matters arising

out of the statutes the Commission administers The Commission will

continue to let this matter develop through the adjudicatory processes

A related question raised by one commentator is whether potential

claimants who may already be time barred by a six month rule will be

able to file claims directly with a carrier Once this final rule takes

effect shippers with overcharge claims which have already been reject

7

See Sun Company Inc v

Lykes Bros Steamship Co Inc 20 F M C 68 at 69 n 7 1917 see also

46 cP R 502 302 in the Commission s Rules of Practice and Procedure for the informal adjudica

tion of small claims

8

See Fiat Allis France Materiels de Travaux Publics supra at 552

See United States v Hellenic Lines Lid 14 F M C 254 260 1971

25 F M C
192 FEDERAL MARITIME COMMISSION

ed on the basis of a six month rule but which are not yet barred by the

two year statutory limit can still be submitted directly to the carrier 10

Several carrier commentators oppose the abolition of carrier custody

rules and emphasize the difficulty in verifying the weight measurement

or description of cargo after it has left their custody A few suggest

that if the Commission proscribes carrier custody rules it should at

least establish minimum standards of documentary proof necessary for

shippers to meet their burden in asserting this type of claim

The variations on claims of this nature and the different means by

which weight measurement and description can be proven render

prohibitive the establishment of specific enumerated standards of proof

Any such list of documents would on the one hand be likely to omit

means of proof which in certain circumstances would suffice to make a

shipper s case while on the other hand include standards which in

certain circumstances would be insufficient Because of the carrier s

difficulty in satisfying itself of the validity ofclaims of this nature it is

incumbent on shippers to document their claims with original or certi

fied documents such as bills of lading packing lists and weight or

measurement certificates Proscription of carrier custody rules is not

tantamount to a carte blanche to shippers to submit and expect payment

on all and any weight measurement description claims a claim unsup

ported by convincing documentation should be denied Claims are not

to be honored on the basis of trust or good will Documentation must

be of sufficient credibility to avoid rebates or inaccurate claims Ship

pers can expect carriers to require them to meet the same heavy

standard ofproof which the Commission would apply ll

A survey of the 189 informal docketed proceedings which were

noticed for filing or assignment during calendar year 1981 also reveals

the impact of the operation of the six month rule In 94 of those

proceedings or 49 7 of the time the records reflect that the shipper

claimants were denied their initial claim rued directly with the carrier

on the basis of a six month rule 12 Of those 94 proceedings 56 or

59 6 were cases in which the respondent carriers ffered no defense

on the merits in most cases the carrier concurred that there was an

erroneous assessment of freight charges Additionally in another 20

proceedings 10 6 of the 189 the shipper s initial claim with the

10 As heretofore discussed however shippers should be aware that aclaim filed directly with the

carrier does not toll the statute of limitations and claims should be flied with the Commission if the

earrier s

processing of the claim is likely to extend to the termination of the two year period

11 The proposed rule referred to carrier custody rules only in the Supplementary Information sec

tion In the interest of clarity the nnaI rule adopted herein spocitlcaIly proscribea carrier custody

rules The tlna rule also incorporates a suggestion of the Oulf Europe Carrier Asaociations by adding

the words fifer private settlement to distinguish between claims filed with the carrier and those filed

with theCommission

111 Or a carrier custody rule or adminiJtrative fee requirement

25 F MC
TIME LIMIT FOR FILING OVERCHARGE CLAIMS 193

carrier was apparently but not expressly denied on the basis of a time

limit rule either by a

general denial of the claim or the claim being

ignored and an informal docketed proceeding was then initiated in

which again the carrier did not dispute the merits of the claim 13

The percentage of undisputed informal docketed proceedings before

the Commission as a result of six month or carrier custody rules is

therefore at least 39 7

14 This requires a considerable expenditure of

Commission resources at a time when budgetary restrictions have

caused a reduction in Commission staffing and the Commission s other

regulatory demands remain pressing Avoidance of the waste of these

resources is hardly an abdication ofthe agency s

regulatory responsibil

ities as suggested by some carriers Rather it constitutes a

recognition

that carriers should meet their responsibility where possible to correct

freight overcharges without requiring initiation of federal proceedings

on the matter especially where there is no dispute between the parties

on the merits of the overcharge claim Time limit rules effectively and

prematurely transform what is essentially a commercial activity i

e

resolution of overcharge claims into a governmental function It is

significant that in addition to shipper support for the proposed rule

there were also favorable comments received from some carriers and

conferences 15

Conclusion

The Commission is satisfied that the operation of carrier imposed

time limitations on overcharge claims discourages and deters the exer

cise by shippers of their right to seek reparation pursuant to section

l8b 3 of the Act Comments from carriers explaining that six month

rnles do not alter shippers right to seek reparations prompt the Com

mission to express its cognizance that while not per se contrary to

section 22 s two year time limit the rules have the de facto effect of

restricting shippers rights under section 22 Despite some commenta

13 The remainder of the proceedings were those in which the initial claim filed with the carrier was

denied because there was some dispute on the merits of the claim those in which the initial claim was

filed too late in the 2 year period for the carrier to respond to or resolve the claim orelse the claim

was ignored and those in which the record does not reflect whether an initial claim was everfiled

with thecarrier

14 This figure is aconservative one because it probably underrepresents the number of undisputed

casesattributable to the rule Many of the proceedings regarded for the purposes of this study as dis

puted were those in which the carrier offered only a

pro forma argument to the settlement officer

usually extoll1ng the wisdom of its time limit tariff provisions and complaining about shippers not ful

filling their responsibility to ensure that cargo is described accurately without everaddressing the

evidence presented by the claimant in support of its claim Also excluded from the tally of undisputed

claims attributable to thesix month rule were adozen proceedings in which thecarrier did not contest

the merits of the claim but in which the record did not indicate with certainty whether aclaim was

initially filed with thecarrier

15 Several commentators have suggested changes in overcharge claim regulations which afe outside

the scope of this rulemaking The Commission has referred these matters to its staff for consideration

in connection with possible futurerulemakings

25 F MC
194 FEDERAL MARITIME COMMISSION

tors claims that time limit rules are intended to encourage potential

claimants to file their claims more promptly the rules are unlikely to

have this effect Shipper commentators have noted that weightmeas

urement description errors are rarely detected before the cargo has left

the carrier s custody and audits are time consuming exercises perhaps

hindered at times by slow carrier response to inquiries and cannot

often be completed in time for a claim filing in conformity with a six

month rule As noted in one comment and confirmed by a review of

the 1981 proceedings most claims iUe filed with the Commission well

toward the latter end of the two year statu e of limitations Thus the

sole object ofthese rules would appear to be for the convenience ofthe

carriers themselves not the operation of the claim system as a whole

Moreover the alleged benefit to the carriers is not readily apparent

Whatever difficulties carriers might have in evaluating the merits of

non prompt overcharge claims are not abated when shippers are forced

to pursue those claims before the Commission and do not justify

rejecting those substantial number of claims in which there is agreement

on the merits It is difficult to comprehend why a carrier would

construct grounds for rejecting a claim when the same claim will

require a carrier defense in another forum unless the carriers are

relying on shippers not to pursue the matter to that other forum When

this occurs the overpayment of any freight charges goes uncorrected

and the time limit rules thereby provide the opportunity for violations

of section 18b 3 to continue unredressed Adoption of the proposed

rule is therefore necessary to meet the objectives of section i 8b 3

Six month and carrier custody rules are also found to conflict with

the objectives of section 14 Fourth of the Act which states that a

carrier shall not unfairly treat any shipper in the matter of

the adjustment and settlement of claims As heretofore noted the

time limit rules impose unnecessary burdens on shippers to file their

claims with the Commission Concomitant with this burden are the

expenditures such filings entail The rules preclude without justification

the commercial or private resolution of some claims and result in the

initiation of more costly governmental proceedings instead The Com

mission concludes that these unjustified impositions constitute unfair

treatment to shippers in the adjustment and settlement of claims con

trary to section 14 Fourth ofthe Act

Section 15 of the Act 46 US C 814 requires that conferences

adopt and maintain reasonable procedures for promptly and fairly

hearing and considering shippers requests and complaints The carri

ers commenting on the proposed rule have offered no reasonable justifi

cation for theit time limit tariff provisions The burden of filing over

charge claims with the Commission when the carrier does not contest

the substance ofthe shipper s complaint is particularly unfair and unrea

sonable And it is uncontrovertible that the rules have the effect if not

25 FMC
TIME LIMIT FOR FILING OVERCHARGE CLAIMS 195

also the design of precluding the prompt consideration of complaints

by carriers in many instances Thus the rules contravene the objectives

of section 15 as well

The proposed rule indicated the Commission s intention to prohibit

the assessment of an administrative charge for the processing of

overcharge claims At least one uncontested claim was brought before

the Commission last year because of the invocation of this modified

six month rule Although a less severe sanction than an outright bar

on acceptance of claims the assessment of a claim fee constitutes a

penalty upon seeking correction of a statutory violation An administra

tive fee was defended by virtually none of the commentators to the

proposed ruleThe Commission concludes that such fees like the other

time limit tariff provisions and for the same reasons are contrary to

sections 14 Fourth 15 and 18b

3 In the interest of clarity adminis

trative fees have been specifically proscribed in the rule adopted

herein 16

Finally the Commission finds that this rulemaking is exempt from the

requirements of the Regulatory Flexibility Act 5 D S C 601 Section

601 2 of that Act excepts from its coverage any rule of particular

applicability relating to rates or practices relating to such rates

As the proposed rule clearly relates to rates and rate practices

the Regulatory Flexibility Act requirements are determined to be inap

plicable

List of subjects in 46 CF R Maritime Carriers Tariffs

THEREFORE IT IS ORDERED That pursuant to section 4 ofthe

Administrative Procedure Act 5 D S C 553 and sections 14 Fourth

15 18 b 3 and 43 of the Shipping Act 1916 46 US C 812 814

817 and 841a Parts 531 and 536 of46 C F R are amended as follows

1 In Section 5315 b 8 xvi add the following new language imme

diately after the subdivision heading

5315 Contents ofTariffs

b

8

xvi Overcharge Claims No tariff in the domestic offshore commerce

shall limit the filing of overcharge claims with a carrier for private

settlement to a period of less than two years after accrual of the cause

of action nor shall the acceptance of any overcharge claim be condi

tioned upon the payment of a fee or charge No tariff in the domestic

offshore commerce shall require that overcharge claims based on al

leged error in weight measurement or description of cargo be filed

before the cargo has left the custody ofthe carrier

16 The Gulf Europe Carrier Associations request for oral argument is denied

25 F MC
196 FEDERAL MARITIME COMMISSION

2 In section 536 5 d 20 add the following new language immediate

ly after the subparagraph heading

536 5 Contents ofTariffs

d

20 Overcharge Claims No tariff in the foreign commerce shall limit

the filing ofovercharge cl rims with a carrier for private settlement to a

period of less than two years after accrual of the cause of action nor

shall the acceptance of any overcharge claim be conditioned upon the

payment of a fee or charge No tariff in the foreign commerce shall

require that overcharge claims based on aUeged error in weight meas

urement or description of cargo be filed before the cargo has left the

custody ofthe carrier

By the Commission

8 FRANCIS C HURNEY

Secretary

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 80 12

DART CONTAINERLINE COMPANY LTD POSSIBLE

VIOLATIONS OF SECTION 16 SECOND PARAGRAPH AND

18 B 3 SHIPPING ACT 1916

NOTICE

August 9 1982

Notice is given that no appeal has been taken to the June 30 1982

dismissal ofthe investigation in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has become

administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 197
i

I

i

i

FEDERAL MARITIME COMMISSION

DOCKET NO 80 12

DART CONTAINERLINE COMPANY LTD

POSSIBLE VIOLATIONS OF SECTIONS 16 SECOND

PARAGRAPH AND 18 B 3 SHIPPING ACT 1916

DISMISSAL OF PROCEEDING

Finalized August 9 1982

On February 28 1980 the Commission instituted this proceeding

based on allegations that the respondent Dart Containerline Company

Ltd had paid rebates to at least one shipper in the westbound trade

from the Iberian Peninsula to the United States

After the institution of the proceeding Hearing Counsel evaluated

the availability ofwitnesses and other evidence to support the Commis

sion s claim 1

This evaluation led Hearing Counsel to submit a pro

posed settlement on J e 23 1980 2

I

rejected this settlement proposal

and gave Hearing Counsel the option of going to trial or submitting a

new proposal for settlement which would contain sufficient information

to insure that the Commission s criteria for the settlement of civil

penalty cases had been met See Rejection of Settlement served Sep

tember 18 1980 After the proposed settlement was rejected Hearing

Counsel advised me that they did not intend to submit a new proposal

for settlement but would serve formal discovery requests on respond

ent s On October 29 1980 I set a schedule for discovery and required

Hearing Counsel to submit a schedule for the final disposition of the

case In a status report submitted pursuant to my order Hearing Coun

sel advised that its discovery efforts against Dart had been unproduc

tive and after evaluation of the availability of witnesses and other

documentary evidence and the resources available to secure such evi

dence Hearing Counsel said it had nothing to contribute to the pro

ceeding Hearing Counsel did not say what disposition was to be made

ofthe case

On March 24 1981 Dart moved to dismiss the case on the ground

that the record contained no proof that Dart had committed any viola

1

Tho aII sations were based on copiof bill of lading debit notes and bank drafts which

showed that for frelsht charS a shipper waa billed S8 286 9O rather than IOO 24S 78 which hould

have been billed under tho applicable tariff

Orderly proceduro and amore omclont use of rooourcea would dictate thatthi ovaluation be

made before the in titution of the Proceedin Indeed uoh an evaluation would seem to be prerequi

site to any determination to recommend the in titutionof any proceeding

S

I had auoponded discovery pendinsthe settlemont lfotiatiOns

198 25 FMC
DART CONTAINERLINE CO LTD POSSIBLE VIOLATIONS 199

OF SHIPPING ACT 1916

tions of the Shipping Act Hearing Counsel filed a reply to Dart s

motion stating that it had no objection to granting it and I dismissed

this proceeding by order served April 14 1981 However on August

14 1981 the Commission rejected my dismissal and remanded the case

for further development of the record

The additional efforts of Hearing Counsel to obtain evidence to

support the allegations against Dart are chronicled in their Memoran

dum in Support of Motion to Dismiss the end result being that they

were unable to obtain any additional evidence Because of this Hearing

Counsel now moves to dismiss the proceeding

In their memorandum supporting the motion Hearing Counsel argue

that to require that they continue this proceeding would not only be

an exercise in futility but would be contrary to established law and

practice Their argument is based upon their role as prosecutors in

proceedings brought to assess civil penalties 4 With citations to author

ity Hearing Counsel urge that I as prosecutor Hearing Counsel is the

absolute judge of whether a

prosecution should be initiated and the

first and presumptively last judge of whether a

pending prosecution

should be terminated 2 a prosecutor s recommendation to terminate

or dismiss a case on the basis that there is insufficient evidence to

sustain the charges should be accepted unless it appears that the exer

cise ofthe prosecutor s discretion is not in the public interest and 3 a

recommendation to dismiss is against the public interest if the given

reason for dismissal is not grounded in fact or is not made in good faith

or is designed to harass the defendant by the commencement ofanother

prosecution at a different and more favorable time and place Hearing

Counsel says none of the latter factors are present here so the case

should be dismissed

4

Senate Report 96147 96th Cong 1st Sess April 9 1979 at pp 18 and 19 House Report 232 96th

Cong st Sess June 4 1979 at pp 16 and 17 also reprinted in US Code Congressional and Administra

tive News at pp 1407 and 1498 1979

25 F M C
200 FEDERAL MARITIME COMMISSION

There is no need to ground dismissal of this proceeding on Hearing

Counsel s role as prosecutor and the law attendant to that role The

more immediate ground is that Hearing Counsel has satisfied the Com

mission s directives on remand They have pursued all available avenues

for obtaining evidence and have come up empty handed and there is no

reason to doubt their position that there is insufficient evidence avail

able to establish or prove the specific allegations ofrebating

The proceeding is dismissed

8 JOHN B COORAVE

Administrative Law Judge

Ii This case is a

prime example of the consequences which result from delay in instituting aproceed

ins The violatiolUl areallesed to have occurred in November and December of 1973 but this proceed

ins was not ilUltituted until February of 1980 It is readily understandable that witnesses cannot be

found ortheir memories have faded and the records have boen destroyed in the ordinary course of

business

2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 18

UNITED STATES ATLANTIC GULF SOUTHEASTERN

CARIBBEAN CONFERENCE

v

TROPICAL SHIPPING CONSTRUCTION CO LTD

NOTICE

August 9 1982

Notice is given that no appeal has been taken to the July 6 1982

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

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has become

administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 201
FEDERAL MARITIME COMMISSION

DOCKET NO 82 18

UNITED STATES ATLANTIC GULF SOUTHEASTERN

CARIBBEAN CONFERENCE

v

TROPICAL SHIPPING CONSTRUCTION CO LTD

NOTICE OF DISMISSAL

Finalized August 9 1982

This order confirms the ruling made at the prehearing conference

held June 22 1982 At the prehearing complainant withdrew its com

plaint and the proceeding was then dismissed

S JOHN E CoORAVE

Administrative Law Judge

O 25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 79 9

PRUDENTIAL LINES INC

v

CONTINENTAL GRAIN COMPANY

ORDER ADOPTING INITIAL DECISION

August 20 1982

The proceeding is before the Commission on Exceptions to the Initial

Decision ofAdministrative Law Judge Norman D Kline

Briefly stated the controversy arose as a result of a sale of grain by

Continental Grain Company Continental to the Government of Egypt

under the P L 480 Program 1 When the Peralta Shipping Company

agent for the Government of Egypt nominated Prudential Lines Inc

Prudential LASH vessels to carry a portion of the grain Continental

refused the nomination on the ground that the contract of sale ap

proved by the United States Department of Agriculture USDA pre

cluded LASH barges from loading the grain sold to Egypt The grain

was ultimately loaded at the Norfolk Western Elevator in Norfolk

Virginia N W Elevator on two U S flag deck ships of the Farrell

Lines and on three foreign flag vessels

The complaint filed by Prudential alleged that 1 Continental s

refusal to permit the loading ofPrudential s LASH barges constituted a

violation of sections 16 First and 17 of the Shipping Act 1916 2

2

Continentals failure to include in its terminal tariff all its rates charges

rules and regulations violated General Order 15 of the Commission s

Rules and Regulations 46 C F R 533 and 3 Continentals participa

tion with other grain terminal operators subject to the Shipping Act in

an arrangement restricting access to the terminal to certain types of

vessels without having first obtained Commission approval violated

1

Agricultural Trade Development Assis nce Act oC 1954 68 Stat 455 Pursuant to P L480 the

United States Government provides financial aid to assist eligible foreign nations in the purchase and

transportation of agric Jltural commodities The P L480 Program is administered by the United States

Department of Agriculture

2

Section 16 First prohibits any person subject to the Act to subject any particular person locality

or description of traffic to any undue or unreasonable prejudice or disadvantage 46 U S c 815

First

Section 17 provides that every

common carrier by water in foreign commerce and every other

person subject to the act shall establish observe and enforce just and reasonable regulations and prac

tices relating to orconnected with the receiving handling storing ordelivering of property

n

46

US C f816

25 FMC 203
204 FEDERAL MARITIME COMMISSION

section 15 of the Act and General Order 15 ofthe Commission s Rules

and Regulations By reason ofthese alleged violations Prudential seeks

reparation in the amount of 1 032 135

The Initial Decision found that although Continental as operator of

the N W Elevator was an other person subject to the Shipping

Act 1916 46 U S C 801 et seq in refusing to permit the loading of

LASH barges at the N W Elevator it was acting in its capacity as a

merchandiser of grain 3

and as such was engaging in an activity not

subject to regulation under that Act Exceptions to the Initial Decision

and Replies to Exceptions have been filed by Prudential Continental

and the Commission s Bureau of Hearings and Field Operations Hear

ing Counsel The Commission heard oral argument

DISCUSSION

The Exceptions of the parties are essentially a restatement of the

arguments and contentions already advanced before the Presiding Offi

cer and properly disposed of by him For the reasons set forth below

the Commission adopts the Initial Decision of the Presiding Officer 4

A Jurisdiction In Personam

Continental excepts to the Presiding Officer s

finding that as operator

of the N W Elevator Continental furnished terminal facilities in

connection with four common carriers by water 5 While Continental

does not challenge the common carrier status of those carriers with

respect to the carriage of general cargo it contends that none was a

common carrier ofbulk grain from the N W Elevator that is none

advertised calls at the Elevator as part of its regularly scheduled serv

ice and none held itself out to carry grain in bulk at published rates

available to all

Evidence of record supports the finding that the four named carri

ers

6 whose vessels loaded grain at the N W Elevator held them

selves out by a course of conduct to perform common carrier service

and accept goods for carriage on their vessels from whomever offered

to the extent of their ability to carry

7

The Commission therefore

rejects Continentals argument to the contrary

3 Consideration of Prudential s

request for reparation was deferred until after the determination of

thejurisdictional issue

4

Arguments and contentions not specifically discussed have nevertheless been carefully considered

and found to be without merit

S Section I of the Shipping Act 1916 subjects to regulation under that Act

any person carrying on the business of furnishing terminal facilities in connec

tion with acommon carrier by water 46 US C 801

8

These are Icelandic Steamship Co Prudential Central Gulf Lines and Farren Lines hereinafter

referred to as lithe Carriers The Carriersoperated under tariffs on tile withthe Commission

1

The Carriers maintained on file with the Commission tariffs of freight rates and charses by which

they held themselves out to carry a wide range of commodities for the general public The tariffs

Continued

25 F M C
PRUDENTIAL LINES INC V CONTINENTL GRAIN 205

COMPANY

The Commission is also not impressed with Continental s contention

that the vessels which called at the N W Terminal loaded grain

under individually negotiated contracts and were therefore engaged in

contract as opposed to common carriage 8

As stated in the Initial

Decision the Shipping Act regulates carriers not types of carriage In

Grace Line Inc v Federal Maritime Board the court rejected the

carrier s argument that because it had always transported a specific

commodity on a contract basis it was as to that commodity a

contract carrier not subject to the Shipping Act 9

In an attempt to limit the holding in Grace Line Continental asserts

that the Initial Decision fails to recognize that because a mixture of

common and contract cargo is not unlawful per se the Commission

may exercise jurisdiction over contract carriage only when necessary

to prevent evasion of a carriers duties with respect to common car

riage Neither the Shipping Act nor decisions interpreting that Act

recognize such a limitation Indeed the court in Grace Line supra

when confronted with the very issue being raised here declined to so

narrow the definition of common carrier in section I ofthe Shipping

Act 280 F 2d supra at 792 10

Moreover the absence of published rates for the carriage of Conti

nental s grain did not alter the common carrier status of the Carriers

who loaded grain at the N W Elevator Because of the exemption

Jisted specific ports of loading and discharge on the United States Atlantic Coast and in foreign countries

sailing schedules advertised in trade publications listed thedates on which vessels would call at specific

ports including thePort of Norfolk Virginia Moreover Continental in its loading Jist characterizes two

vessels of the Icelandic Steamship Co which most frequently loaded grain at the Elevator as liner

There is evidence that the vessels wereonly partially loaded with grain so that space was available for

other types of cargo

8

The Commission s jurisdiction over grain elevator terminals which handle grain exclusively and

where grain is loaded into vessels operated by common carriers by water was upheld in Agreement

Nos 8225 and 8225 1 Between Greater Batan Rouge Port Commission and Corgill Inc 5 F M B 648

1959 affirmed sub nom Greater Baton Rouge Port Commission Y US 287 F 2d 86 5th err 1961

cert denied 364 US 985 1962 see also Rates of Pacific Northwest Elevators Association II F MC

369 1968 Investigation of Wharfage Charges on Bulk Groin at Pacific Coast Ports 8 F M C 653 1965

Grace Line Ine Y FederalMaritime Board 280 F 2d 790 793 2d Cir 1960 cerl denied 364 US

933 1961 affmning Banana Distributors Inc Y Groce Line Inc 5 F M B 615 622 1959 where the

Commission in applyirtg Shipping Act standards to the socalled contract carrier portion of the

voyage stated

the Act confers jurisdiction overcarriers specifically over common carriers U

as distin

guished from thetype of carriage ie common orcontract

Upon review the courtruled that acommon carrier by water Udoes not cease to be such because it

makes an exception as to a

part of the goods it accepts To the same effect is Flota Mercante Granccr

lombiana Y FMC 302 F 2d 887 D C Cir 1962

10 Continental o

longer relies on the decision in Fall RiyeLine Pier Inc Y International Trading

Corp of Virginia 399 F 2d 413 Ist Cir 1968 in support of its argument that even if the Carriers were

identified as common carriers the low incidence of such carriage would not be of sufficient conse

quence to warrant assertion of jurisdiction overthe N W Elevator The Presiding Officer however

properly distinguished facts of that case from those inthe instant proceeding

Moreovet section 1 of the Shipping Act makes subject to the Act aperson furnishing termi

nal facilities in connection with a

common carrier by water emphasis added It would appear

therefore that jurisdiction attaches as soon as the terminal services one common carrier

25 F MC
1

206 FEDERAL MARITIME COMMISSION

from tariff filing requirements contained in section l8b 1 of the Ship

ping Act the four carriers were under no obligation to publish rates for

the carriage of bulk grain Nor did such carriage transform them into

contract carriers 11 As mentioned in the Initial Decision the legisla

tive history of section 18b 1

12 clearly indicates that the exemption

was enacted to enable common carriers to compete with tramp

operators Limited as it is to the carriage of cargo in bulk it leaves

unchanged the obligation ofthe carrier with respect to the carriage of

non exempt cargo

13

The evidence of record thus supportuhe finding in the Initial Deci

sion that Continental as operator of the N W Elevator furnished

terminal facilities in connection with common carriers by water and is

therefore an other person subject to the Shipping Act 1916

B Subject Matter Jurisdiction

Prudential eJcepts to the Presiding Officer s conclusion that the

LASH barge exclusion originated in a grain seIJing and trading context

and was not therefore subject to Shipping Act jurisdictjon Prudential

believes that this exclusion was based solely on terminal considerations

that is Continental s perception that LASH barges are slower in load

ing and clearing berth than other vessels which when considered with

the fact that Continental both imposed the restriction and operated the

terminal at which the grain was loaded is sufficient to establish Com

mission jurisdiction

Vessel terms are linked to the range of options available to a grain

trader in the execution ofits obligations under the contract of sale and

may thus affect the price at which grain is traded 14 In a regular

commercial setting if a purchaser of grain nominates a vessel other

than a breakbulk vessel to load the grain such nomination may be

acceptable if an adequate premium can be negotiated In the context of

the P L 480 program a change of vessel terms would have required in

11 Continental s reliance on Unllad SIOles V SI ph n B Lines 384 P 2d 118 th Cir 1967 and

InVlsligollo of TariffFiling ProcllcBS of Co lol rshlps 7 P M C 30 1962 is misplaced The Carriers

here held themaelves out by published tariffs and advertiainll to serve indiscriminately all shippers on

their advorlised routes

P L87 346 Stat 76

The Carriers maintained sailing schedules adverlised in JoadinlllrSdo publiootions whioh indicated

thot the v ls sorved regular routand listed tho dates at whioh tho v ls would cal1 at speoilled

ports including tho port of Norfolk Such adverlisins not limited to speoifio terminals was sufficient

notice to the operators of al1 wharv piers and termlllals in the Port of Norfolk as wel1 as to all

shippen inoluding Continental of the carrier s

roadinto accept oargo wherever tendered within

the Port of Norfolk complex Notwithstanding Ita obllllation to operate the N W Elevator as a

publ10 terminal Continental is thesole shipper from thot faciJlty

As fully explained in the Initial Deolslon In the norntal oouraoofmarketinll grain trsders fre

quently exeoute theircontraots of sale by transferring theiroontractual obllllations to other lIfaln trad

inl companies commercials which in tum may pass them on to other commercials in a tring of

transactions Tofacilitate such transfers grain merchandiJers whetheror not they operate grain termi

nals utilizestandard commodity sales contracts which often contain vessel terms

2S F MC
PRUDENTIAL LINES INC V CONTINENTL GRAIN 207

COMPANY

this instance a

renegotiation of the contract with the Government of

Egypt and further approval by USDA Thus even though it affected

the operation of the N W Elevator Continentals refusal to permit

the loading of LASH barges was based primarily on grain trading

factors 15 The vessel restriction placed in the contract of sale was but

one of the conditions upon which Continental sold grain to the Gov

ernment ofEgypt at the price agreed upon

Hearing Counsel recognizes that the inclusion of the restrictive pro

vision in the commodity sales contract does not fall within the gambit

ofthe Commission s authority but believes that Continental s refusal to

accept the nomination of Prudentials vessels in performance of that

contract was in furtherance of its interests as operator of the N W

Elevator 16 Hearing Counsel in reliance on a line of cases involving

the Commission s authority to regulate the implementation ofcollective

bargaining agreements by persons subject to its regulatory authority

maintains that Continental as operator of the N W Elevator is not

necessarily insulated from its Shipping Act obligations because the

contract of sale is not subject to scrutiny under that Act

The Presiding Officer correctly distinguished the facts upon which

the decisions involving collective bargaining agreements rest and prop

erly found them inapplicable to the instant case We therefore affirm his

findings and conclusions on this issue

Moreover it should be noted that the effect of carrier implementa

tion ofrules originating in collective bargaining agreements designed to

require the refusal of containers to certain shippers and the unloading

and reloading of certain already loaded containers 50 mile rules was

to directly impose on shippers terms and conditions affecting basic

common carrier obligations to furnish services to all on a reasonable

and nondiscriminatory basis See eg Council of North Atl Shipping

Ass ns v FMC 672 F 2d 171 188 D C Cir 1982 petition for cert

filed U S May 29 1982 No 81 2196 17 Other cases in which the

Commission has asserted jurisdiction over labor related matters have

likewise involved the imposition by carriers and other regulated persons

lIS The contract of sale did not specify the N W Elevator as the port of loading but rather speci

fied ports within acertain range Nor is it known whether when it entered into the contract of sale

Continental intended to load the grain at the N W Elevator Moreover the 150 000 estimate pre

pared by Continental when attempting to reach an agreement with Prudential on removing the LASH

barge restriction did not reflect terminal costs butrather costs related to grain trading

16 In rebuttal to the Presiding Officer s

finding that in the absence of a

proper booking Continental

had no obligation to grant access to the terminal to Prudential s LASH vessels Prudential and Hear

ing Counsel maintain that the reason Prudential did not have a proper booking is that Continental

refused the nomination of Prudential s LASH vessels from the party authorized to make that booking

Continental however refused the nomination in accordance with the terms of the contract of sale

which was approved by USDA

17 See aso Soufh Atlantic and Caribbean Line Inc Order to Show Cause 12 F M C 237 1960

affirmed 424 F 2d 941 D C Cir 1970 United States v Sea Land Service Inc 424 F Supp 1008

DNJ 1977 appeal dismissed 577 F2d 730 3rd Cir 1978 cert denied 439 U S 1072 1979

25 F M C
208 FEDERAL MARITIME COMMISSION

of certain rates and practices directly and with material effect 18 Here

Continentals refusal to permit the loading of Prudential LASH vessels

at the N W Elevator was in compliance with its obligations under

what was essentially a grain trading transaction and the effect of the

grain contract vessel terms on the regulated operations of Continental

is therefore incidental and nonmaterial 19 Cf United Stevedoring Corp

v Boston Shipping Assoc 16 F M C 7 12 15 1972

Furthermore the common carriers who entered into agreements with

labor unions were subject to the Commission s jurisdiction when they

negotiated and entered into the agreements whereas Continental sold

grain to the Government of Egypt in its capacity as merchandiser of

grain an activity outside the scope ofShipping Act regulation

In conclusion the Presiding Officer s findings that Continental as

operator of the N W Elevator is an other person subject to the

Shipping Act 1916 and that Continental s refusal to permit the loading

of Prudential s LASH barges at the N W Elevator does not fall

within the ambit of the Commission sjurisdiction are proper and well

founded

THEREFORE IT IS ORDERED That the Initial Decision issued

in this proceeding is hereby adopted by the Commission and made a

part hereof

IT IS FURTHER ORDERED That the Exceptions of Prudential

Hearing Counsel and Continental to the Initial Decision are denied

IT IS FURTHER ORDERED That the proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

ISSee Vol awagenwerk v FMC 390 US 261 1968 New York Shipping Assn v FMC 495 F 2d

1215 2nd elr cert den 419 U S 964 1974 Federal Maritime Commission v PacifIC Maritime Asso

ciation 435 U S 40 1978 Transamertcan Trailer Tran port Inc v FMC 492 F 2d 617 1974 New

York Shipping Ass n v FMC 571 F U 1231 1978 New York Shipping Ass n v FMC 628 F 2d 253

1980

19 See note IS supra

2S FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 9

PRUDENTIAL LINES INC

v

CONTINENTAL GRAIN COMPANY

Complainant Prudential Lines Inc a common carrierby water operating LASH vessels

alleges that respondent Continental Grain Company a grain seller and trader which

operates a marine terminal facility at Norfolk Virginia known as the N W

Elevator is subject to the jurisdiction of the Shipping Act 1916 by virtue of its

terminal operations allegedly conducted in connection with common carriers by

water Prudential further alleges that Continental refused to permit Prudential LASH

barges to load a shipment of grain at the N W Elevator on a particular shipment

of wheat in July of 1978 and demanded a penalty from Prudential as a condition to

permitting LASH barges to load the shipment actions which are allegedly in viola

tion of sections 16 First and 17 of the Act On the basis of the evidence developed

and applicable principles of law it is found that

I Continental s operations at the N W Elevator are those of an other person subject

to the Act because the record shows that Continental has served common carriers at

the Elevator that Continental publishes a terminal tariff filed with the Commission

which does not specifically exclude common carriers and even defines liners and

that its lease requires it to operate a public terminal Continentals claim that the

vessels calling were not in common carriage or that even if so they called infre

quently has no legal significance

2 Continental s practice of preferring non LASH vessels which resulted in the exclu

sion of such vessels in this case is a practice which is apparently common in the

grain industry among major grain traders and sellers The practice having originated

in that industry while not totally removed from consideration of marine terminal

efficiencies is based upon numerous factors which grain sellers and traders consider

when formulating their contracts of sale and is thus outside the scope of theShipping

Act or this Commission s expertise Allegations that major grain companies have

concertedly agreed to discriminate against LASH vessels lie within the jurisdiction

of the antitrust laws not the shipping laws

3 In the last analysis Prudential is asking the Commission to hold Continental liable

for monetary damages because Continental adhered to its rights under its contract of

sale of grain and Prudential was seeking to obtain a booking because the buyer s

shipping agent had without authority induced Prudential to bid on the shipment

While Prudential may have been adversely affected it cannot obtain relief against a

seller of grain merely because the seller also operates a marine terminal and cannot

use that fact to project the Commission into the midst of a grain selling practice

John F McHugh and Robert F Ambross for complainant Prudential Lines Inc

David G Freidman Robert H Huey Lewis E Leibowitz and Joseph D Sander for

respondent Continental Grain Company

John Robert Ewers Aaron W Reese and Charles C Hunter for Office of Hearing

Counsel

25 FM C 209
i

i

210 FEDERAL MARITIME COMMISSION

INITIAL DECISION 1 OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Adopted August 20 982

This proceeding began with the filing of a complaint by Prudential

Lines Inc served on February 26 1979 in which complainant alleges

that respondent Continental Grain Company a grain merchandiser and

trader operating a marine terminal and grain elevator at Norfolk Vir

ginia had excluded Prudential s LASH barges from carrying a ship

ment of grain which Continental had contracted to sell and deliver

during July 1978 refUSing t9 allow Prudential s LASH barges to load

the grain at its Norfolk terminal More particularly the complaint

alleges that on or about June 14 1978 pursuant to a purchase authori

zation issued by the Department of Agriculture under the Agriculture

and Development Act of 1954 public Law 480 an agency of the

Egyptian Government issued an invitation to wheat suppliers for 50 000

tons of wheat Some time thereafter in late June of 1978 Continental

bid on the offer and was accepted but in accepting specified that

LASH barges would not be permitted at the Norfolk Elevator Never

theless on June 26 1978 the Egyptian Government agency through its

ship broker Peralta Shipping Agency invited bids to carry the pur

chased grain without restricting carriage to any particular type of

vessel The complaint continues alleging that on June 27 1978 Pruden

tial submitted a bid in response to Peralta s invitation to carry a large

portion of the wheat which Prudential believed to be the lowest bid

However on June 28 1978 Peralta advised Prudential that Continen

tal as the successful bidder had excluded in its bid the use of LASH

service at its grain elevator in Norfolk However Peralta agreed to

keep open its negotiations with Prudentill1 to enable Prudential to reach

some type of agreement with Continental In subsequent meetings be

tween representatives of Prudential and Continental which took place

between June 28 and July 5 1978 Continental allegedly informed

Prudential that it would refuse to load LASH barges at the Norfolk

Elevator because the slower loading rate for LASH barges compared

to bulk vessels adversely affected the productivity and profitability of

the Norfolk Elevator Thereafter Prudential offered to pay a penalty to

Continental if its LASH barges were not loaded at a rate equal to that

ofbulk vessels up to approximately 50 000 but Continental allegedly

advised Prudential that Prudential would have to pay 150 000 outright

for the right to have its barges loaded Meanwhile on June 3D 1978

Peralta agreed to book on Prudential s LASH barges subject to Conti

nental s removing its restrictions on LASH service by July 5 1978

1

This deci ion wlll become tho deci ion of the Conuni ion In the ablOnce of review therecf by the

Commi ion Rule 227 Rule of Practice and Procedure 46 CPR 02 221

25 F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 211

COMPANY

However since Continental had not removed the restrictions on that

date Peralta again issued an invitation for ocean transportation and

Prudential again bid to carry subject to Continentals

removing the

LASH restriction this time by July 7 1978 However Continental

again refused to lift the restriction Thereafter on July 10 1978 Per

alta for the third time requested bids for ocean transportation of the

wheat but this time Peralta excluded LASH service from the invitation

Notwithstanding such exclusion Prudential again bid to carry and

included in its bid an offer to pay a penalty of up to approximately

51 000 if it failed to match the bulk carrier productivity rate Howev

er in the face of Continental s refusal to permit LASH vessels to

handle the shipment Peralta did not accept Prudential s bid to carry

Consequently the wheat was ultimately shipped on a foreign flag bulk

vessel which loaded at the Norfolk Elevator without restriction or

penalty

Prudential alleges further that Continental is a marine terminal opera

tor which publishes a tariffsetting forth the various rates charges rules

and regulations concerning the use of vessel berths at its Norfolk

Elevator as well as an Elevator Tariff which governs receiving of

commodities at the Norfolk Elevator and delivery to barges and ves

sels Neither tariff however placed any restrictions on the loading of

LASH barges In view of these alleged facts Prudential asserts that

Continental had no right to demand penalties for loading LASH barges

which were not published in Continentals tariffs Prudential claims that

this exclusion by Continental subjected Prudential to undue or unrea

sonable prejudice or disadvantage and gave an undue and unreasonable

preference and advantage to Prudential sforeign flag competitors all in

violation of section 16 First of the Shipping Act 1916 Moreover

according to Prudential Continental srepeated refusals to load LASH

barges at its Norfolk Elevator in accordance with its marine terminal

tariff and its proposal to load barges only if Prudential would pay

Continental a charge not specified in such tariff constituted a failure to

file with the Commission a tariff showing all its rates charges rules

and regulations applicable to the Norfolk Elevator and furthermore

constituted a wilful failure by Continental to establish and observe fair

and reasonable rules and regulations with respect to its Norfolk Eleva

tor all in violation of section 17 of the Shipping Act 1916 which

requires terminal operators subject to the Commission s

jurisdiction to

establish observe and enforce just and reasonable regulations and

practices relating to or connected with the receiving handling storing

or delivering of property Prudential alleges furthermore that in

seeking a penalty from Prudential before allowing it to load the wheat

Continental was not protecting any interest it had as a seller and

shipper of grain but rather was acting solely to enhance its position as

an elevator operator in a manner contrary to its terminal tariff Finally

25 FMC
212 FEDERAL MARITIME COMMISSION

Prudential alleges that by reason ofthe foregoing conduct of Continen

tal Prudential lost revenue and paid lay up expenses for one of its

LASH vessels the LASH PACIFICO in an amount totalling some

1 032 135 for which injury Prudential seeks reparation together with

such additional amounts that the Commission may determine to be

proper together with an appropriate cease and desist order

By answer dated March 19 1979 Continental denies many of the

material factual allegations made by Prudential and denies that Conti

nental subjected Prudential to any undue or unreasonable disadvantage

or had otherwise violated law Continental admits that it imposed

restrictions on the loading of LASH barges in its terminal tariff and in

its contract of sale but it asserts that the Commission lacks jurisdiction

over the subject matter ofthe complaint

On April 4 1979 the Office ofHearing Counsel Bureau of Hearings

and Field Operations then known as the Bureau of Investigation and

Enforcement petitioned for leave to intervene asserting important and

novel jurisdictional questions concerning the practices of Continental at

its elevator and their belief that Continental subjected Prudential to

undue and unreasonable prejudice Hearing Counsels petition was

granted On January 28 1980 the Council of American Flag Ship

Operators excluding its member Prudential Delta Steamship Lines

Inc and Waterman Steamship Corporation also petitioned for leave to

intervene The Council which consists of six American carriers operat

ing U S flag vessels some of which are LASH or SEABEE barge

carrying types wished to intervene because of their belief that the

jurisdictional issues were of great importance and its belief that Conti

nental s restrictive activities fell within the Commission s jurisdiction

and may have been violative of sections 16 and 17 of the Act Howev

er the Council wished to limit its participation to argument on the

jurisdictional issues On that basis its petition was granted See Inter

vention Granted March 19 1980 However several months after the

trial type hearing was conducted in this proceeding the Council and

the named lines requested permission to withdraw as intervenors advis

ing that they no longer wished to participate Their request was grant

ed on December 22 1980 See Request for Order Dismissing Interve

nors Granted that date

Some time after the answer was filed the parties began prehearing

inspection and discovery which became rather extensive and consumed

many months Several rounds of interrogatories and requests for pro

duction ofdocuments were served and depositions were taken of vari

ous knowledgeable persons The parties exhibited diligence in compil

ing materials through the discovery process for the purpose of narrow

ing issues and curtailing the scope of trial type hearings In addition

during the discovery process Continental sought to have the complaint

dismissed on jurisdictional grounds a request which had to be denied

2S FMC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 213

COMPANY

because of an incomplete factual record on which to decide complicat

ed and novel jurisdictional issues After several conferences with the

parties were held at which they reported on their progress toward

drafting as much of a stipulated record as possible discovery was

virtually completed some time in early 1980 and trial type hearings

scheduled first in March and then in May of 1980 See notices issued

February I February 26 March 19 and April 23 1980 However

prior to commencement ofthe hearings the parties requested an oppor

tunity to begin intensive discussions which they hoped would lead to a

comprehensive settlement which would resolve the past controversy

and establish new rules for the future in other words establish a

complete commercial resolution On their representation that such dis

cussions would require much time and would involve complex prob

lems and because oftheir demonstrated diligence and good faith efforts

to cooperate Igranted them permission to conduct their negotiations

but required periodic status reports and imposed a cutoff date for either

settlement or commencement of hearings See Notice of Final Post

ponement of Hearing and Order to Report Periodically Regarding

Status ofSettlement Negotiations May 7 1980 Despite long and hard

efforts to fashion a commercial settlement which occupied the parties

from late April through some time in August they were unable to

reach settlement and were therefore forced to proceed into trial type

hearings which began on September 3 1980 and with brief interrup

tions ran until September 18 1980 in New York City The evidentiary

record which was developed at that hearing ultimately amounted to

1454 pages of hearing transcript and 99 exhibits Thereafter at the

request of the parties who demonstrated a need for more than the

normal time for preparation of post hearing briefs in a case of this size

and complexity especially complainant which had only limited legal

resources a three stage briefing schedule was established which con

cluded on April 6 1981 See Admission of Late Filed Exhibits Closing

of Record and Establishment of Briefing Schedule October 3 1980

and Briefing Procedure Adjusted December 22 1980

FACTUAL BACKGROUND

The following findings offact are drawn from the proposed findings

of fact in the parties posthearing briefs and statements Record refer

ences contained therein are omitted The findings are quite detailed and

provide a detailed factual background However particularly critical

findings and additional findings are also discussed in the next section

entitled Discussion and Conclusions to the extent that they are

necessary to any particular discussion and conclusion Therefore the

present section is designed to provide an in depth background which

will place the subsequent discussion in a more meaningful context

25 F M C
214 FEDERAL MARITIME COMMISSION

The proposed findings of the parties are rather lengthy and often

divergent In some instances they dwell on areas of tangential relevance

or are essentially related to situations which seem relevant to laws

other than the Shipping Act for example Prudentials lengthy pro

posed findings regarding an understanding among major grain compa

nies to prefer non LASH vessels in their contracts of sale I have

considered all of these fmdings and for the sake of confming the case

to material issues under the Shipping Act have referred to extraneous

proposed findings in the following discussion entitled Discussion and

Conclusions In thus fashioning the numbered findings I have fol

lowed ample case authority which holds that Ineed not refer to every

proposed finding of fact and need only make material fmdings suffi

ciently clear to enable one to understand my reasoning and conclusions

See Adel International Development Inc v PRMSA 23 F MC 477 480

1980 Colorado Interstate Gas Co v Federal Power Commission 324

U S 581 1945 Minneapolis St Louis Ry Co v United States 361

U S 173 1959 Gilbertville Trucking Co v United States 196 F Supp

351 359 D Mass 1961 modified on other grounds 371 U S 115

CONTINENTAL GRAIN COMPANY

1 Continental Grain Company Continental is a large international

merchandiser of grain In its capacity as such it purchases and markets

grain throughout the world

2 Continental s World Grain Division is responsible for marketing on

an international level grain that is originated throughout the world

Continental s North American Grain Division is responsible for market

ing on an international level grain that is originated in the United States

and Canada These divisions constitute the exporting arm of the corpo

ration They are headquartered in New York N Y and will hereinafter

be referred to as Continental New York

3 Within Continental s North American Grain Division are six re

gional offices headquartered in Chicago Illinois St Louis Missouri

Minneapolis Minnesota Portland Oregon Kansas City Missouri and

Winnipeg Manitoba These regional offices are responsible for market

ing grain that is originated in their respective regions Each regional

office is a profit center within the corporation

4 Continental s

regional offices do not market grain on an interna

tionallevel Ifthe grain originated by these regional offices is to be sold

for export to a foreign government or corporation by Continental the

regional offices must flfst transfer title to the grain to Continental New

York

5 In addition to selling grain to Continental New York the region

al offices trade with one another and with entities outside the corpora

tion

2S F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 215

COMPANY

6 In order to facilitate its grain merchandising activities Continental

operates grain elevators throughout the United States Included among

these grain elevators are export elevators at which Continental loads

grain for export throughout the world

7 Included among the export elevators currently operated by Conti

nental on the Atlantic and Gulf coasts of the United States are facilities

located in Norfolk Virginia Savannah Georgia Westwego and Re

serve Louisiana and Beaumont Texas The export elevators located in

Reserve Louisiana and Beaumont Texas do not handle soft red

winter wheat In July 1978 the Savannah Georgia facility was not

operating as an export elevator and the Westwego Louisiana facility

due to a dust explosion in December 1977 that crippled the elevator

was only partially operational

8 The export elevator operated by Continental in Norfolk Virginia

is the Norfolk and Western Grain Elevator N W Elevator The

N W Elevator reports to the Continental regional office headquartered

in Chicago Illinois

CONTINENTAL S GRAIN TRADING ACTIVITIES

9 In order to facilitate its international grain merchandising activities

Continental New York maintains an export book which references

all of the pending commodity purchase and international sales contracts

entered into by the corporation The export book reflects on average

approximately 1 500 000 to 1 750 000 tons of grain purchased and

2 000 000 tons ofgrain sold

10 The commodity sales contracts which Continental New York

references in its export book generally require delivery during a speci

fied future range ofdates In the normal course ofbusiness a commodi

ty sales contract may be entered into upwards to a year in advance of

the range ofdates designated for the execution ofthat contract

IIExport contracts provide for a delivery period a range of dates

during which the grain can be delivered of anywhere from 15 to 60

days A typical delivery period is 30 days

12 By entering into a commodity sales contract Continental New

York is not marketing an identifiable lot of grain which has been set

aside for the express purpose of executing the contract of sale The

merchandising of grain is an extremely fluid process in which the

matching of physical grain to a commodity sales contract does not

occur until a

relatively short period of time before the dates designated

for the execution ofthat contract

13 Because grain is fungible its price is determined by supply and

demand at any given place and time Export and other sales contracts

are for future delivery Because so many factors influence supply and

demand and because those factors change quickly prices change quick

ly and grain trading is an extremely risky business

25 FM C
216 FEDERAL MARITIME COMMISSION

14 In order to reduce this risk grain traders hedge by using the

futures market Futures contracts are standard contracts for delivery of

grain in the future at designated warehouses These contracts rarely

result in actual delivery of grain rather they are traded on an ex

change and are liquidated when the delivery period comesby making

payments representing the difference between the contract price and

the actual market price at that time Trading in contracts for future

delivery ofthe commodity itself is called cash trading

15 Cash sales are usually hedged with a corresponding purchase

of futures for the same delivery period This hedging limits the maxi

mum possible loss or profit on that one transaction as the case may be

Similarly cash purchases are offset with acorresponding sale of

futures Profit or loss on the thousands of transactions made by Conti

nental is thus determined by four factors the price of the purchase

contract ultimately used to cover the sale the price ofthe correspond

ing futures sale the price of the cash sale and the price of the corre

sponding futures purchase

16 Grain is traded on the basis of these premiums that is the

difference between the cash and futures price for a given delivery

month These premiums reflect the varying perceptions of traders about

supply and demand conditions

17 The standard commodity sales contract entered into by Continen

tal New York designates a port at or a coastal range in which the

grain sold must be loaded The terms of delivery specified therein are

generally F O B Free on Board a designated port or a port within a

specified coastal range Title to the grail sold pursuant to such terms of

delivery passes at the end ofthe loading spout ofthe export elevator at

which the grain is loaded

18 As a rule the decision by Continental New York as to the port

at which the grain will be delivered is not made until after the purchas

er of the grain advises Continental New York of the identity and

readiness to load of the vessel that the purchaser has selected to carry

the grain Such notice is normally provided at least ten days prior to

the vessels estimated time of arrival Continental is generally not obli

gated to designate the loading port until the vessel is within 72 hours

off the coast of the United States The designation of the specific

loading facility at which the grain will be delivered may be and has

been made even after the vessel is in port

19 The majority of the commodity purchase contracts referenced in

the export book maintained by Continental New York have been

acquired from competing grain merchandisers hereinafter referred to as

other commercials The remainder have been acquired in house

i e from Continentals regional offices The percentage of purchase

contracts involving soft red winter whellt that have been acquired from

2S F M C
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COMPANY

other commercials is higher than the percentage of purchase contracts

involving other grains that have been acquired from other commercials

20 Continental New York at its option may execute a

commodity

sales contract by transferring its contractual obligations to another

commercial Such a transfer may be effectuated by applying a commod

ity purchase contract acquired previously by Continental New York

from another commercial to the contract of sale for export A transfer

ofcontractual obligations may also be accomplished by acquiring a new

commodity purchase contract from another commercial through the

broker network and applying that contract to the commodity sales

contract

21 IfContinental New York elects to transfer its contractual obli

gations to another commercial by either applying a commodity pur

chase contract referenced in its export book to the commodity sales

contract or by repurchasing the necessary grain from that commercial

the grain sold for export by Continental New York would be loaded

at an export elevator operated by that other commercial unless that

commercial elected to transfer its contractual obligations to yet another

commercial

22 Continental New York also has the option of executing a com

modity sales contract by purchasing the necessary grain in house This

option would entail applying a commodity purchase contract previous

ly acquired from one ofContinental s

regional offices to the commodity

sales contract or obtaining a new commodity purchase contract for

application to the contract of sale from one of these offices The

regional offices in turn would originate or would have already secured

the necessary grain from the interior or would purchase or would have

already obtained that grain from another commercial

23 IfContinental New York elects to execute a commodity sales

contract by purchasing the necessary grain in house the grain sold for

export would be loaded at an export elevator operated by one of

Continentals regional offices if the Continental regional office from

which Continental New York purchased the grain had originated the

grain from the interior as opposed to having applied a commodity

purchase contract acquired from another commercial

24 The market conditions that prevail at a given moment determine

whetherit would be more advantageous for Continental New York to

execute a commodity sales contract by transferring its contractual obli

gations to another commercial or by purchasing the necessary grain in

house

25 In the normal course of marketing grain commercials including

Continental New York frequently execute commodity sales contracts

by transferring their contractual obligations to other commercials This

exchange of commodity purchase and sales contracts creates strings

25 F M C
218 FEDERAL MARITIME COMMISSION

of contracts through which contractual obligations pass from the initial

seller to the ultimate buyer Such strings may involve numerous parties

26 The ability of Continental New York to execute commodity

sales contracts by transferring its contractual obligations to other com

mercials is an important aspect of its grain merchandising activities

The degree of flexibility so allowed is essential to the effective manage

ment ofContinental New York s substantial export book

27 In order to allow for the direct flow of contractual obligations

from the initial seller through the string to the ultimate buyer the terms

ofthe contracts ofpurchase and sale which comprise the string must be

in conformity with one another

28 The standard commodity sales contract limits the class of con

tractually acceptable types of vessels to self trimming break bulk vessels

bulk carriers It is a custom of trade in the grain merchandising

industry that unless a contract specifies otherwise a bulk carrier is

assumed to be the only type of vessel which may be loaded Tankers

deck ships and LASH barges are perceived by the industry to be to a

greater or lesser degree nonconventional types of vessels

29 The rationale for the custom of trade referred to above is the

grain merchandising industry s perception that the efficiencies of load

ing a bulk carrier are far superior to those of loading other types of

vessels

30 If a commodity sales contract authorizes the loading of a noncon

ventional vessel a contract of purchase which does not allow for such

a loading could not generally be applied to execute that contract of sale

absent renegotiation of the terms of the contract of purchase and the

assessment of some form ofpremium

31 Execution of a commodity sales contract which sanctions the

loading of nonconventional vessels by means of a transferral of the

contractual obligations to another commercial would generally be ren

dered more difficult and in some instances virtually impossible by the

inclusion ofthat authorization

32 In order to execute a commodity sales contract which authorizes

the loading of a nonconventional vessel by repurchasing the necessary

grain from another commercial Continental New York would gener

ally have to pay a substantially higher prioe for the grain so purchased

33 An offer of grain on terms authorizing presentation of a LASH

vessel would be made at a higher prioe than an offer authorizing other

vessels

34 In recent years U S grain exports have inoreased dramatically as

people throughout the world have looked to U S grain suppliers as a

source of food From 1962 to 1978 annual exports of wheat com

sorghum barley oats and rye increased by 162 peroent from 35 5

million metric tons to 92 7 million metric tons Annual exports ofwheat

alone increased during the eight year period from 1970 to 1978 by 61

25 F M C
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COMPANY

percent from 20 2 million metric tons in 1970 to 32 5 million metric

tons in 1978 This growth in exports has created heavy utilization of

export facilities

THE P L 480 PROGRAM

35 A major foreign aid program run by the U S government is a

program authorized by the Agricultural Trade Development and As

sistance Act of 1954 68 Stat 455 as amended commonly known as the

P L 480 program under which the U S government finances sales

of agricultural commodities to eligible foreign governments

36 The P L 480 program is administered by the U S Department of

Agriculture USDA USDA issues a purchase authorization to the

government of the purchasing country indicating the amount which

may be spent for commodity purchases and containing additional terms

relating to those purchases USDA approval is required for commodity

sales contracts entered into by foreign governments pursuant to the

program

37 In a P L 480 sale the foreign buyer issues a tender or an

invitation for bids to sell the commodity and to charter vessels for the

ocean transportation of the commodity All bids are opened in public

on the due date The foreign buyer then decides what bids to accept

and submits those bids to USDA for approval

38 Pursuant to Section 901 b of the Merchant Marine Act of 1936

46 U S C 1241 b I at least fifty percent of the commodities pur

chased by each country under the P L480 program must be transport

ed on U S flag vessels

39 An amendment to the P L 480 regulations in 1977 changed the

prior procedure to require that all purchases under the program be

made through public invitations for bids that the bids be made public

and that the lowest responsive bid be accepted Because ofthis require

ment P L 480 sales represent a

departure from normal commercial

practice in which individual exporters and buyers are free to negotiate

and re negotiate the terms ofexport sales contracts

40 Leo Wallace the USDA official responsible for approving com

modity bids under the P L 480 program since 1975 stated As we

started getting some experience with this new procedure it

became clear that many exporters were basing their prices on bulk

carriers excluding certain types of vessels Because of this develop

ment it became difficult for USDA to insure that the fifty percent

cargo preference requirement was met given the U S flag fleet con

sisting ofmostly other than bulk carriers which are better suited to the

carriage ofbulk grain

41 Later in 1977 USDA began including in its purchase authoriza

tion forms a provision forbidding commodity sellers to make offers

precluding specific types of vessels from lifting the cargo Wallace

2S F M C
220 FEDERAL MARITIME COMMISSION

stated that this effort to avoid exclusions was not working

because

T he primary result was that the prices offered including all

types of vessels included a risk factor for loading to slower

moving vessels and it appeared that this would be on all

offers not just half of them T here was a risk factor that

would run anywhere from zero to four five dollars a ton for

the risk of loading slow moving ships so that we had to come

up with something else

42 In the spring of 1978 USDA began inserting in its purchase

authorization forms a provision allowing export offers to preclude cer

tain types of vessels from lifting the cargo if the exclusion was ap

proved by USDA

43 Sometime after June 1978 as a matter ofpolicy USDA began to

request that exporters make separate offers for each type of vessel that

could be presented to lift the grain although exclusions of particular

vessel types were still permitted if approved by USDA As a result

many offers now contain separate commodity prices for carriage by

bulk carriers tankers deck ships and LASH and Seabee barges Com

modity offers permitting carriage by LASH and Seabee barges are

consistently made at a price higher than offers for any other type of

vessel

44 In a normal commercial contract in the absence of any provision

regarding vessels it would be implied that LASH barges could not be

nominated to lift the grain In a PL 480 contract an explicit contractual

provision to this effect is desirable because the commodity price cannot

be re negotiated once the sale is approved by USDA and hence no

premium charged by another commercial for accepting LASH barges

can be passed on to the foreign purchaser

CONTINENTAL S CONTRACT OF SALE OF WHEAT TO EGYPT

45 On June 14 1978 the General Authority of Supply Commodities

of the Arab Republic of Egypt Egypt issued through the Egyptian

Commercial Office an Invitation for Bids for the supply of up to

50 000 metric tons US Wheat The Invitation for Bids was published

in accordance with Purchase Authorization No EG 7004A issued by

the United States Department of Agriculture USDA pursuant to

Public Law 480

46 In addition to listing the description and quantity of the wheat

Egypt sought to purchase the Invitation for Bids specified that the

wheat purchased would have to be loaded during the period July 1

through July 31 1978 and directed that all offers should designate a

port at or a range of ports in which that wheat would have to be

loaded It was further specified therein that vessel nominations made by

Egypt were not to be irrevocable and that substitutions of vessels for

2S F MC
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those initially nominated were not to be subject to the seller s approval

The Invitation for Bids did not contain any provisions restricting the

types or classes of vessels into which the wheat purchased could be

loaded

47 On June 21 1978 Continental New York submitted an offer for

the supply of wheat in response to Egypt s Invitation for Bids Conti

nental New York s offer contained six separate bids each of which

specified aquantity and grade of wheat a loading range or port and a

price Two ofthe bids designated the Gulf coast of the United States as

the loading range one specified the Atlantic coast of the United States

north of Cape Hatteras USNH including Savannah Georgia but

excluding Albany New York one designated an elevator operated by

Continental in St Louis Missouri another specified the Great Lakes

and the final bid designated Duluth Superior All of the bids specified

the terms of delivery as FO B Free on Board unstowed un

trimmed With the exception ofthe bid that designated Duluth Superi

or as the loading area all of the bids offered to supply soft red winter

wheat

48 Also included in the offer submitted by Continental New York

was a provision specifying that unless a bid noted otherwise the wheat

offered for sale could not be loaded aboard LASH barges The bid that

designated the elevator operated by Continental in St Louis Missouri

as the loading facility was the only bid that authorized the loading of

LASH barges This restrictive provision was Item 7 C

49 Item 7 C was incorporated into the offer submitted by Continen

tal New York by R

Jeffrey Smith then a Junior Merchandiser with

Continentals North American Grain Division after a brief consultation

with Richard Carter then the Vice President in charge ofContinental s

North American Grain Division s wheat operations

50 The bids that designated loading ranges on the Gulfand Atlantic

coasts of the United States authorized the loading of tankers Tankers

could be loaded on the Gulf coast at a specified premium per metric

ton of wheat purchased and on the Atlantic coast at no additional cost

These bids also allowed for loading deck ships at a premium of sorts It

was specified therein that load rate guarantees i

e a commitment to

load the wheat purchased at the rate designated by the purchaser

would apply only to vessels capable ofaccepting 20 000 or more metric

tons of wheat The normal deck ship is not capable of transporting such

a quantity ofwheat

S Continental New York believed that it was necessary to specifi

cally exclude LASH loadings in the offer it submitted to Egypt as

opposed to relying upon the custom of trade as to contractually accept

able vessels because ofrestrictions imposed by USDA on the merchan

dising ofgrain under the auspices ofthe P L 480 Program In a normal

commercial setting if a purchaser elected to nominate LASH barges as

25 FMC
222 FEDERAL MARITIME COMMISSION

opposed to a bulk carrier for the carriage of the grain it had pur

chased that nomination might be accepted if a premium could be

negotiated Such a price sensitive matter could not be negotiated

within the context of the P L 480 Program without securing the

approval of USDA Continental New York elected not to offer to

load LASH barges at a specified premium because at the time it

submitted its offer to Egypt it believed that the calculation of such a

premium was impossible

52 The prices specified in the various bids which comprised the offer

submitted by Continental New York reflected among other things

Continental New York s perception of the commodities market the

perceived efficiencies of loading contractually acceptable types of ves

sels and the anticipated ability of Continental New York to execute a

commodity sales contract that might be entered into with Egypt by

transferring its contractual obligations to another commercial

53 If Continental New York had included LASH barges in the

category of contractually acceptable vessels the prices specified in the

bids that had excluded LASH barges would have been considerably

higher to compensate Continental for the risk that no covering pur

chase from another commercial grain company could be made or that

such a purchase could be made only at an exorbitant premium

54 Item 7 C was included in the offer submitted by Continental

New York in order to facilitate the transfer to another commercial of

the contractual obligations that would flow from Egypt s acceptance of

one or more of Continental New York s bids

55 A number of other commercials operated export elevators on the

Atlantic coast ofthe United States in July 1978 Cargill Inc operated

facilities at the Ports of Albany New York Norfolk Virginia and

Charleston South Carolina Bunge Corporation maintained an export

elevator at the Port of Philadelphia Pennsylvania Tidewater Grain

Company owned a facility at the Port of Philadelphia Pennsylvania

Louis Dreyfus Corporation operated an export elevator at the Port of

Baltimore Maryland In addition to Continental a number of other

commercials operated export elevators on the Gulf coast ofthe United

States

56 It was anticipated by Continental New York at the time it

submitted its offer to Egypt that ports on the Atlantic and Gulf coasts

ofthe United States would be heavily congested and that export eleva

tors in these ranges would be fully utilized during the 1I1 0nth of July

1978 Continental New York therefore perceived that it would have

been extremely costly if not impossible to execute a contract of sale

for export which authorized the loading of LASH barges by transfer

ring Continental New York s contractual obligations to another com

mercial

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57 It was further anticipated by Continental New York that if it

authorized the loading ofthe wheat that it had offered to sell to Egypt

aboard LASH barges any wheat sold would have had to have been

loaded at an export elevator operated by one of Continental s

regional

offices This meant loading at the Westwego Louisiana facility on the

Gulf coast and at the export elevator located in Norfolk Virginia on

the Atlantic coast

58 By telex addressed to Continental New York and dated June 21

1978 the Egyptian Commercial Office confirmed subject to USDA

approval that it had agreed to purchase from Continental New York

25 000 metric tons of soft red winter wheat to be loaded in the range

USNH excluding Albany New York but including Savannah Geor

gia in July 1978 and 10 000 metric tons of soft red winter wheat to be

loaded on the Gulf coast in July 1978 Egypt s provisional acceptance

did not refer to the provision included in the offer submitted by Conti

nental New York prohibiting the loading into LASH barges of the

wheat offered in the bids that had been accepted

59 By telex dated June 22 1978 the Egyptian Commercial Office

advised Continental New York that USDA had approved Egypt s

purchase of 25 000 metric tons of soft red winter wheat to be loaded in

the range USNH excluding Albany New York but including Savan

nah Georgia during the month ofJuly 1978

60 On that same day Continental New York notified the Egyptian

Commercial Office of its confirmation of the sale that had been ap

proved by USDA In that telex Continental New York reiterated that

LASH barges could not be utilized to load the wheat that it had sold to

Egypt

61 By telex dated June 27 1978 the USDA advised Continental

New York that its sale of 25 000 metric tons of soft red winter wheat

to Egypt had been approved

62 A

commodity sales contract evidencing the sale and purchase of

25 000 metric tons of soft red winter wheat was thereafter entered into

by Continental and the General Authority for Supply Commodities

acting on behalf of the Government of the Arab Republic of Egypt

This contract specified that the wheat traded could not be loaded into

LASH barges

63 The commodity sales contract approved by USDA contained the

provision excluding LASH barges from carrying the wheat Egypt had

purchased from Continental New York

HOW PRUDENTIAL WAS UNABLE TO OBTAIN THE

BOOKING

64 On June 19 1978 Peralta Shipping Agency Inc Peralta acting

on behalf of the Egyptian Company for Maritime Transport Martrans

of the United Arab Republic ofEgypt issued a Freight Invitation for

25 F M C
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224 FEDERAL MARITIME COMMISSION

the carriage of up to 50 000 metric tons of wheat to be loaded during

the period July 1 through July 25 The s Freight Invitation was issued

pursuant to Purchase Authorization No EO 7004A Under the terms

of Purchase Authorization No EO 7004 A Egypt was to select the

vessels that were to transport the wheat it had purchased from Conti

nental New York

65 Following notification by telephone of the terms of Peralta s

Freight Invitation Prudential by telex dated June 20 1978 offered to

transport two parcels of7 500 metric tons of wheat to be loaded in the

range USNH not north N Y during the periods July 5 through July

15 1978 and July 15 through July 25 1978 Prudential specified that

the wheat would be loaded on one or more of the vessels LASH

ATLANTICO LASH ITALIA and LASH PACIFICO

66 In response to Prudentials offer Peralta submitted a counter

offer specifying a different quantity and freight rate and designating

Charleston South Carolina as the port of loading Following negotia

tions Prudential subsequently agreed to and ultimately did carry pur

suant to a booking note dated June 23 1978 9 357 metric tons of wheat

which were loaded by Cargill Inc at the port of Charleston South

Carolina in late July 1978 The wheat was loaded aboard and carried

on LASH barges

67 On June 26 1978 Peralta issued another Freight Invitation for

the carriage ofup to 25 000 metric tons of wheat to be loaded on the

Atlantic coast of the United States between July 1 and July 25 1978

The Freight Invitation was issued pursuant to Purchase Authorization

No EO 7004 A

68 The Freight Invitation issued by Peralta did not restrict the type

or class of vessels that could be offered to carry the specified quantity

ofwheat

69 Following notification by telephone of the terms of Peralta s

Freight Invitation Prudential by telex dated June 27 1978 offered to

transport 18 000 metric tons of wheat to be loaded in the range Savan

nahCharleston not north N Y during the period July 15 through

July 25 1978 Prudential advised that the wheat would be loaded on

one or more ofthree specified LASH vessels

70 In response to Prudential s offer Peralta submitted a counter

offer specifying a different quantity and freight rate on June 27 1978

The following morning prior to receiving Prudential response Peralta

notified Prudential by telephone that Continental New York the

supplier of the wheat purchased had in its commodity bid prohibited

the loading ofthat wheat aboard LASHbarges

71 By telephone Peralta requested that Continental New York

authorize the loading of the wheat purchased by Egypt into LASH

barges Upon being advised that the commodity sales contract prohibit

2 F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 225

COMPANY

ed such a

loading Peralta requested that Continental New York

discuss with Prudential the possibility ofwaiving that prohibition

72 Daniel J Cahalane then the General Traffic Manager Mediterra

nean Mid East Division of Prudential testified that he believed that

Peralta had advised Prudential on June 28 1978 that the loading ofthe

wheat purchased by Egypt was to be undertaken at the export elevator

operated by Continental in Norfolk Virginia Mr Cahalane further

testified that Peralta invariably notified Prudential of the port of load

ing prior to the fixture ofthe vessel that would transport the grain and

that Peralta had in the past always correctly identified the port of

loading Mr Cahalane did not indicate the initial source of the informa

tion that he had received from peralta

73 Mr Carter testified that he had not so advised Peralta that the

wheat Continental New York had sold to Egypt would be loaded at

the export elevator operated by Continental in Norfolk Virginia Mr

Carter further noted that it would have been contrary to the policy of

Continental New York to so advise Peralta until Continental New

York was contractually obligated to do so Mr Smith testified that

although he did not specifically recall he strongly doubted that he

would have so advised Peralta that Norfolk Virginia was the port at

which the wheat purchased by Egypt was to be loaded Mr Smith did

not believe that the port of loading would actually have been deter

mined prior to the time at which Continental New York was contrac

tually obligated to specify the facility at which the grain would be

loaded

74 Mr Carter further testified that due to difficulties Continental

New York had experienced in its prior dealings with Peralta Conti

nental New York would not have advised Peralta of the port of

loading until it was contractually obligated to do so Apparently Egypt

had on previous occasions nominated vessels that were not available to

transport grain it had purchased only to substitute and perhaps substi

tute again different vessels Mr Carter noted that due to past nomina

tions of such phantom vessels Continental New York would not

designate aport ofloading uptil it was assured that the vessels nominat

ed were physically present and would actually load the grain Egypt

had purchased

75 On June 28 1978 Mr Cahalane in a discussion with Mr Carter

raised the possibility of loading Prudentials LASH barges at the N

W Elevator Mr Cahalane emphasized Prudentials belief that LASH

barges could be loaded at rates comparable to those achieved by other

types of vessels

76 Mr Carter in turn advised Mr Cahalane that Continental s

regional office in Chicago Illinois had estimated that the rate at which

wheat could be loaded aboard LASH barges at the N W Elevator

would be substantially less than that which could be achieved by a bulk

25 F M C
226 FEDERAL MARITIME COMMISSION

carrier Mr Carter indicated further that by loading a vessel that could

receive wheat at a slower rate the productivity ofthe N W Elevator

would be negatively affected

77 Representatives of Prudential also discussed the possibility of

loading Prudential s LASH barges at the N W Elevator with Conti

nental personnel in Norfolk Virginia on June 29 1978

78 At Mr Carter s suggestion Continentals Chicago Illinois re

gional office attempted to arrange with Cargill Inc the loading of

Prudentials LASH barges at the export elevator operated by Cargill

Inc in Norfolk Virgini Cargill Inc declined to load the LASH

barges

79 On June 30 1978 Peralta accepted Prudential s offer to transport

17 500 metric tons ofthe wheat Egypt had purchased from Continental

New York Peralta s acceptance was made contingent upon Prudential

reaching an agreement with Continental New York by noon on July

5 1978 that would allow for the loading ofPrudential s LASH barges

80 On July 5 1978 Mr Cahalane contacted Mr Smith Mr Carter

was on vacation at this time Mr Cahalane proposed a productivity

schedule under which Prudential would pay Continental at a rate

between one cent and ten cents per bushel for the cargo depending on

the extent to which the loading rate of Prudential s LASH barges

actually fell below 1000 tons per hour The proposed schedule did not

include any definition of what was meant by loading hours and

according to Continental did not compensate Continental for lost ele

vation Under the proposed schedule Continental estimated that even

if the LASH barges loaded at only 400 tons per hour Prudential would

pay Continental only 38 850 while Continentals estimated loss

would total 97 125

81 After consulting with other Continental personnel Mr Smith

informed Mr Cahalane that the latter s proposed schedule was not

responsive to the problem of Continental s lost elevation When Mr

Cahalane continued to seek a solution Mr Smith consulted other

Continental personnel and advised Mr Cahalane that loading LASH at

the N W Elevator would force Continental to lose elevation

estimated at 120 000 incur demurrage liability estimated at 30 000

and possible elevator overtime costs of 5 000 to 10 000 In earlier

discussions on June 28 1978 between Mr Cahalane and Mr Carter

Mr Cahalane offered to have Prudential pay Continental in advance

for all stevedoring and extra labor charges expected to be incurred In

addition Mr Smith advised Mr Cahalane that confusion about USDA

weight and grade inspection procedures applicable to LASH barges

required some firm understanding with USDA in advance about the

number of weight and grade certificates that would be required Mr

Smith also told Mr Cahalane that any contractual change would re

quire USDA approval

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82 Grain is sold by Continental for export F O B end ofspout as

noted earlier One measure of the money earned on grain bought and

sold by Continental is known as elevation Elevation is a theoretical

measure ofthe difference between the market value of grain as received

by an elevator on the land side and the F O B export market price

Elevation is purely a measure of this difference in market prices it is

neither a charge nor a profit and bears no relation to terminal costs It

is simply one element of the earnings on an export sale The cost price

at which grain was purchased for the Elevator and the FO B price

when sold for export are determined by market conditions ie supply

and demand

83 Continental is concerned that its Elevator may become

plugged i

e that grain arrives on the land side ofthe Elevator faster

than it can be loaded into vessels Use of slower loading vessels in

creases the risk of plugging Plugging can result in Continentals

losing

sales if the grain cannot be loaded at the N W Elevator and is instead

purchased and re sold by another company Continental s records show

a build up at the N W Elevator in late June and early July 1978 but

this was at a time when supposedly fast loading bulk vessels were in

berth The record shows that LASH barges do not load as slowly as

Continental believes and that LASH barges load at about the same

rates as deck ships at least Also as Continental concedes the losses

which Continental feared would occur at the N W Elevator do not

pertain to the particular sale to Egypt but to other sales and as

Prudential notes probably for other types of grain such as corn which

were at the Elevator at the time in question Prudentials Reply State

ment p

37 n I

84 Mr Smith advised Mr Cahalane that Continental would consider

removing the LASH exclusion if Prudential would pay 150 000 up

front This figure derives from cost data for the Elevator that had

been provided by Continental s Chicago and Norfolk personnel and

purportedly related to conditions then obtaining at the N W Elevator

and deal with profit estimates based upon the volume of bushels of

grain moving through the Elevator in a specified period of time Mr

Cahalane rejected Mr Smith s proposal

85 On July 5 1978 Peralta issued another Freight Invitation for the

carriage of 22 500 metric tons of the wheat that Egypt had purchased

from Continental New York The wheat was to be loaded on the

Atlantic coast of the United States between July I and July 25 1978

Prudential by telex dated July 6 1978 offered to transport 17 500

metric tons of wheat on the terms that Peralta had agreed to previous

ly Peralta provisionally accepted Prudentials offer and nominated Pru

dentials LASH vessels to Continental New York on July 7 1978

Continental New York by telex dated July 7 1978 rejected Peralta s

vessel nominations as uncontractual

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j

228 FEDERAL MARITIME COMMISSION

86 On July 5 1978 Peralta nominated two deck ships to transport a

total of 9 000 metric tons of the wheat Egypt had purchased from

Continental New York The vessels so nominated were the EXPORT

BUILDER and the EXPORT COURIER operated by Farrell Lines

These vessels were characterized by Peralta as U S Flag Liners

Peralta confirmed its vessel nominations by telex dated July 6 1978

87 On July 5 1978 Continental New York accepted the vessels

nominated by Peralta and advised Peralta that the wheat to be carried

by these vessels would be loaded at Norfolk Virginia By telex dated

July 11 1978 Continental New York confirmed its acceptance of the

vessels that Peralta had nominated and formally declared Norfolk

Virginia as the port ofloading

88 On July 10 1978 Peralta issued another Freight Invitation for the

carriage of 17 000 metric tons of the wheat that Egypt had purchased

from Continental New York The wheat was to be loaded on the

Atlantic coast of the United StateS between July 11 and July 25 1980

Once again Prudential offered to transport 17 000 metric tons ofwheat

on the terms that Peralta bad previously agreed to Prudential incorpo

rated into its offer the penalty schedule that Mr Cahalane had previ

ously proposed to Mr Smith

89 Peralta did not accept Prudentials offer but wasunable to secure

transportation of the remaining wheat purchased by Egypt on a U S

Flag vessel On July 17 1978 Peralta issued yet another Freight Invita

tion This Freight Invitation excluded LASH barges and was limited to

non U S Flag vessels

90 On July 19 1978 Peralta nominated the SWEDISH WASA a

British Flag bulk carrier to transport 17 000 metric tons of the wheat

that Continental New York had sold to Egypt By telex dated July 19

1978 Peralta confirmed that nomination and substituted the EXPORT

CHAMPION for the previously nominated EXPORT COURIER

9 By telex dated July 19 1978 Continental New York requested

that Continentals Chicago Illinois regional office declare the port at

which the grade Continental New York had sold to Egypt would be

loaded

92 By telex dated July 19 1978 Continental New York accepted

Peralta s vessel nomination and formally declared Norfolk Virginia as

the port ofloading The wheat purchased by Egypt was transported on

the SWEDISH WASA the EXPORT CHAMPION and the EXPORT

BUILDER These vessels were loaded at the N W Elevator in July

and August 1978

93 On at least five separate occasions in 1978 prior to or contempo

raneous with the events here in issue Prudential had loaded bulk grain

on LASH barges at other grain export elevators on the East Coast of

the United States These inoluded loadings at the elevators of Cargill

Inc in Albany New York and Norfolk Bunge s terminal in Philadel

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phia the State elevator in Charleston South Carolina leased and oper

ated by Cargill and the Davis terminal in Norfolk Prudential s LASH

barges have thus previously had access to grain elevators

THE N W ELEVATOR AND THE VESSELS AND CARRIERS

IT SERVED

94 The N W Elevator is a marine terminal facility at which bulk

grain is loaded for export aboard vessels operating in the foreign com

merce of the United States At the N W Elevator grain which is

delivered by truck barge or rail is weighed elevated processed

graded and loaded aboard oceangoing vessels berthed at the facility

95 Continental has leased and operated the N W Elevator since

May 1962 Continental leases the terminal from the Norfolk and West

ern Railroad Pursuant to its lease Continental is required to operate

the Terminal as a public terminal open to all parties

96 Continental utilized and maintained on file with the Federal

Maritime Commission during the period October I 1974 through Octo

ber I 1978 a marine terminal tariff entitled

CONTINENTAL GRAIN COMPANY OPERATORS

NORFOLK AND WESTERN GRAIN ELEVATOR NOR

FOLK VIRGINIA RULES REGULATING AND

RATES APPLYING TO LOADING OF SELF PRO

PELLED VESSELS

97 The following types and classes of vessels are referred to in the

terminal tariff self trimming bulk carriers vessels with no tween

deck liberty and other similar type vessels with one tween deck

vessels with more than one tween deck and tankers Notwith

standing the tariff title which refers to self propelled vessels non self

propelled vessels specifically LASH barges have been loaded and

charged tariff rates

98 The terminal tariff which governed the loading of grain aboard

vessels at the N W Elevator during the period October I 1974

through October I 1978 defined Liner Vessels as

a vessel sailing under an advertised schedule and operated by

a line maintaining regular sailings from any United States port

to named ports and on which the quantity of grain to be

loaded shall not exceed one half of the total dead weight

tonnage ofthe vessel

99 Although the tariff contains a provision that states that Liner

Vessels shall be given preference under certain conditions the evi

dence of record indicates that no such preference had actually been

granted Liners are generally defined in the shipping industry to

mean vessels that are on an advertised and regular schedule to specific

ports and that are held out to the general public for carrying general

cargo at regular rates

25 F M C
230 FEDERAL MARITIME COMMISSION

100 Effective October 1 1978 Continental amended its terminal

tariff so as to add the following provision regarding the loading of

LASH barges

Elevator Management reserves the right to reject LASH

Barges if in its opinion such vessels interfere with the normal

loading process

101 During the period of June and July of 1978 Continental also

maintained on file with the United States Department of Agriculture a

tariff for the Elevator as a licensed public grain warehouse containing

charges including a per bushel shipping charge for weighing out and

delivery of grain to cars trucks barges and vessels As a licensed

warehouseman Continental was required by a provision of the United

States Warehouse Act 7 U S C 254 to receive grain for storage

without discrimination

102 Continental s Port Coordinator Cowan indicated that the Ter

minal tariff was regarded as being a true tariff The record further

reveals that Continental operated its terminal in a fashion generally

consistent with its tariff as to charges for services Detailed billing

records show that vessels were charged in accordance with rates pub

lished in the tariff

103 The Monthly Report of Ship Loading maintained by Conti

nental in the regular course of business at Norfolk Virginia indicates

that grain was loaded aboard liners at the N W Elevator on

seventeen different occasions during the years 1977 and 1978

104 The liners so loaded at the N W Elevator during these

years were the SELFOSS and the BR UARFOSS operated by The

Icelandic Steamship Company Icelandic Subsequent to March 1

1978 Icelandic has maintained on file with the Federal Maritime Com

mission Freight Tariff No FMC 9 Icelandic Freight Tariff No FMC 9

specifies freight rates and conditions for the carriage of a wide range of

cargo shipped from U S North Atlantic Ports ofthe Portland Maine

Norfolk Virginia range to Ports in Iceland Freight TariffNo FMC 9

cancelled Norfolk VirginialIceland Freight TariffNo FMC 3

105 Icelandic advertised in The Journal of Commerce regular fre

quent sailings of the BR UARFOSS and the SELFOSS from Ports

mouth Virginia to Iceland direct In these advertisements dates were

listed on which these vessels would call at the specified ports ofloading

and discharge

106 During the years 1977 and 1978 neither the BRUARFOSS nor

the SELFOSS received a full shipload of grain at the N W Elevator

Furthermore between January 1977 and September 1979 the largest

grain shipments carried by the BR UARFOSS and the SELFOSS were

substantially below one half the deadweight tonnage of these vessels

Continentals

loading reports refer to these vessels as liners

2S F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 231

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107 The EXPORT BUILDER and the EXPORT CHAMPION the

vessels on which a portion of the grain purchased by Egypt from

Continental New York was loaded at the N W Elevator were

operated at the time of loading by Farrell Lines Inc Farrell Farrell

advertised in The Journal of Commerce that the EXPORT BUILDER

and the EXPORT CHAMPION made regularly scheduled calls at

U S Atlantic coast ports including the Port of Norfolk Virginia and

numerous specified foreign ports of call including the Port of Alexan

dria Egypt In its advertisements Farrell listed dates on which these

vessels would call at the specified ports of loading and discharge

108 Farrell is a member ofthe North Atlantic Mediterranean Freight

Conference NAMFC NAMFC has maintained on file with the Feder

al Maritime Commission Freight Tariff 13 FMC 8 which specifies

commodity rates and conditions governing the carriage of a wide range

of cargo from North Atlantic Ports of the United States in the Hamp

ton Roads Eastport Range to specified foreign ports ofcall

109 In September 1977 forty LASH barges that were ultimately

carried aboard Central Gulf Line s LASH vessel DELTA SUD were

loaded with grain at the N W Elevator The DELTA SUD loaded

grain at the N W Elevator while calling at the Port of Norfolk

Virginia in accordance with a schedule advertised in The Journal of

Commerce which specified various ports ofcall on the Atlantic coast of

the United States including Norfolk Virginia and on the Red Sea and

the Persian Gulf

110 Central Gulf Lines has maintained on file with the Federal

Maritime Commission Freight Tariff No 1 FMC No 28 which

specifies commodity rates and conditions governing the carriage of a

wide range of cargo between U S ports including the Port of Norfolk

Virginia and designated foreign ports of call

Ill LASH barges that were transported on Prudential s LASH

vessel LASH ITALIA were loaded at the N W Elevator in June

1977 The LASH ITALIA was calling at the Port of Norfolk Virginia

in accordance with a regular schedule advertised in leading industry

publications These advertised schedules designated specific ports of

loading and discharge in the United States including the Port of Nor

folk Virginia and abroad

112 Prudential has maintained on file with the Federal Maritime

Commission Freight Tariff 1 FMC No 47 which specifies commodi

ty rates and conditions governing the carriage of a wide range of cargo

between U S Atlantic Coast ports and designated foreign ports of call

on the Mediterranean Sea

113 The LASH ITALIA was only authorized to carry a maximum of

thirty three out of a total complement of seventy seven LASH barges

loaded with bulk wheat Prudential dedicated the remaining LASH

barges to the carriage of general cargo In the normal course of busi

25 F M C
I

1

232 FEDERAL MARITIME COMMISSION

ness Prudential carried parcels ofgrain to fill empty vessel space This

practice is done in order to shorten the ship when cargo is in short

supply

114 During the years 1977 and 1978 approximately 175 vessels were

loaded with grain at the N W Elevator Twenty one of these load

ings involving the SELFOSS the EXPORT CHAMPION the EXPORT

BUILDING the DELTA SUD or the LASH ITALIA Approximately

seventy five percent ofthe vessels so loaded werebulk carriers

115 The calls made by the vessels or barges sent by the four

common carriers discussed above were made pursuant to negotiated

rates which are not published in their common carrier tariffs and the

vessels evenif calling at the port ofNorfolk regularly do not advertise

regular calls at the Elevator In this case Prudential negotiated rates

with Peralta under a particular type of contract of affreightment or

booking note which in some respects resembles charter clauses for

handling bulk commodities Under this arrangement Prudential dedi

cates a certain number ofbarges for the grain leaving any other barges

that would be carried on the mother ship free to carry general cargo

Prudential solicited carriage of bulk grain through brokers and a for

warder who did not book general cargo Prudential would seek to

negotiate profitable rates for carriage of bulk grain but gave priority to

its general cargo business Continental s policy is to consider vessels

non liner unless they maintain a regularly scheduled service from the N

W Elevator notwithstanding the literal language of the terminal

tariff which mentions regular sailings from any United States port to

named ports

DIFFERENT ESTIMATES OF LOADING TIMES

FOR LASH AND OTHER SHIPS

116 The parties have made different calculations ofloading rates for

LASH barges and for other types of ships suoh as deck or bulk ships

Comparisons are difficult to make because different types of grain were

loaded some times and because some ofthe time spent by the barge or

ship on berth is consumed by maneuvering or bad weather which is not

reflected in tables showing actual loading times

117 Continental s own monthly vessel loading reports Exhibit 54

based upon actual loading time pouring time shows that for four

LASH barge loadings including an abnormal rainy loading on January

1974 the actual rate per hour based upon actual pouring time was

15 925 bushels per hour for the LASH barges at the Elevator compared

to 14 220 bushels per hour for eight deck ships Even if adjusted to

reflect total stevedoring time spent while the barges or deck ships were

at the Elevator rather than merely the actual time in pouring compari

sons between six LASH barges loading corn and wheat during 1972

through 1977 and six deck ships loading corn and soybeans show

2S F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 233

COMPANY

LASH to be nearly as productive as deck ships The average for the

LASH loadings was 10 6 thousand bushels of corn or wheat per hour

for LASH 118 thousand if the abnormal January 1974 loading is

omitted compared to 12 3 thousand bushels per hour for the deck

ships Converted to metric tons the comparison is a range of 408 3 to

2912 metric tons per hour omitting the abnormal January 1974 load

ing for LASH barges compared to 498 to 257 metric tons per hour for

the deck ships LASH also did better than the two liner ships BRUAR

FOSS and SELFOSS which averaged 7 5 thousand bushels per hour

actual pouring time for 12 loadings between January 1977 and June

1978 2

118 Comparisons of loading rates for bulk ships which are believed

to be the fastest loading ships for grain show that based on actual

pouring time bulk ships loaded at an average of 551 metric tons per

hour during January through June 1978 whereas four LASH barges

loaded at an average rate of approximately 425 metric tons per hour in

1974 and 1977 The range for the bulk vessels was 449 to 635 metric

tons per hour based on actual pouring time

119 Other data derived from Continentals records shows that the

Elevator did not load on an around the clock basis In fact the Eleva

tor poured grain on the average only about fifty percent of the time

each day On that basis of course average hourly rate of loading as

contrasted to rate of loading when grain is actually pouring is lower

Calculations drawn from Continental s records show an average load

ing rate on such a total time basis to be about 263 metric tons per hour

based upon total hours in a month These data call into question

Continental s estimate that the Elevator could load 1 000 tons per hour

but for LASH barges a

figure Continental utilized when negotiating

with Prudential for productivity payments to offset slower loading

LASH barges

2 Continental challenges the validity of these comparisons between LASH and deck ships and also

shows that there is aloss of productivity when loading LASH barges due to time spent in positioning

the barges above time spent in actual pouring Continental also asserts that the LASH and deck ship

comparisons are invalid because some barges loaded wheat orcom and the deck ships loaded cornor

soybeans Continental shows that comparing LASH barges loading cornwith deck ships loading corn

reveals that deck ships averaged 12 375 bushels per hour total time on berth while LASH barges

averaged only 9990 bushels per hour Continental posthearing Statement p 52 The record so

shows However if the abnormally slow LASH loading of January 1974 is omitted the comparison

becomes 12 375 bushels per hour for deck ships compared to 12 350 bushels per hour for LASH

barges Continental does show lost time in loading LASH barges when comparing actual pouring time

with total time on berth Continentals

proposed finding No 124 But there is also lost time forthe

deck ships as the various tables show There is no comparison of deck ships and LASH barges restrict

ed to wheat loadings as Continental asserts if total time on berth is used But Prudential shows that

for actual pouring time a

comparison of strictly wheat loadings on three LASH loadings with wheat

on four deck ships reveals that LASH did better 16436 bushels per hour compared to 15 180 for the

deck ships Prudential Reply Statement p

40

25 F M C
234 FEDERAL MARITIME COMMISSION

120 There is evidence that Continental had not employed the most

efficient stevedoring techniques in loading LASH barges in their early

experiences with LASH on November 1972 Prudential s personnel

believe based upon their experiences at the Albany Elevator that

Prudential had the personnel and tugboats available to load 17 500 tons

of wheat at the N W Elevator at a rate between 500 and 1 000 tons

per hour Prudential had loaded LASH barges at the Cargill elevator in

Norfolk in June 1978 at an average loading rate of 463 tons per hour

total time according to Prudential s Norfolk Terminal Manager who

was specifically requested to keep track of the loading rate at a time

when Prudential was negotiating with Continental about the shipment

in issue

121 Although the various calculations appear to be confusing it

appears that LASH barges do quite well compared to deck ships when

actually pouring or even when total time in berth is considered There

is also considerable lost time surrounding the actual pouring which

indicates loss of productivity at the Elevator generally regardless of

type of vessel Bulk ships appear to load faster as far as actual pouring

rate is concerned as well as for total time in berth The bulk ship

SWEDISH WASA which ultimately carried a portion of the shipment

in question after the LASH vessel nominations were vetoed by Conti

nental under the contract of sale did load at a rate much faster than

any LASH barge had experienced at the terminal 811 36 metric tons

per hour based on total time on berth not pouring time This rate

exceeded Continental s expectations as to what a bulk ship could load

by over 200 000 bushels Continental had expected that a bulk vessel

could load 400000 bushels of wheat in a 22 hour period the SWEDISH

WASA loaded 655 900 bushels in that period Nevertheless as Pruden

tial notes the total picture at the Elevator should be considered to

determine the effects on other loadings if LASH barges were loaded

and at the time in question relatively low loading generally at the

Elevator 240 000 bushels per day could lessen the impact on other

loadings if LASH had been selected

CUSTOMS IN THE GRAIN INDUSTRY REGARDING USE OF

ELEVATORS FOR EXPORTING GRAIN AND VESSEL

SELECTION

122 There appears to be a custom among the major grain traders to

consider bulk vessels to be conventional and all other types of vessels

tankers deck ship and LASH barges to be non conventional By a

general trade custom or practice grain companies exporting through

their East Coast elevators expect that a bulk vessel will be presented at

an elevator under their contract of sale and delivery If anon bulk

vessel were presented it would either be rejected or a negotiated

premium in the sales price would have to be paid based upon market

2S F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 235

COMPANY

differentials at the time The reason for this custom is the grain compa

nies belief that non bulk vessels load more slowly and would cause

delays at the various elevators Such delays would affect the elevators

profitability in addition to whatever effects it might have on other grain

sales and on grain companies ability to cover sales by purchasing from

other grain companies

123 Although there is evidence that grain companies may ignore the

standard restrictions in their contracts of sale when attempting to buy

grain from each other to cover sales the custom in the industry appears

to be that they prefer standardized contracts which exclude LASH and

other non conventional vessels to avoid possible renegotiations of prices

to account for non conventional vessels or to facilitate purchase from

another grain company to cover a sale In a sale approved under P L

480 such as the one in issue in this case an explicit contractual

exclusion ofLASH barges is made because the commodity price cannot

be renegotiated in the event that the original grain seller transfers the

contract to another grain company which would demand a premium

for accepting LASH barges Incidentally the responsible official of the

U S Department of Agriculture approved Continental s particular offer

to sell in this case with its exclusion of LASH vessels under the

erroneous impression that no LASH vessels would be available to

handle the shipment

124 Continental s traders believed that conditions at the various

elevators would be crowded during June 1978 and that it would be

necessary to cover a sale for delivery on the Atlantic or Gulf coasts

with a purchase from another grain company The record indicates

some build up at the N W Elevator during late June and early July

1978 while bulk vessels were on berth However other evidence indi

cates that the N W Elevator was not over loaded with grain at this

time

125 Notwithstanding Continental s exclusion of LASH vessels in its

offer to sell which was accepted by Egypt another grain company

Cargill had successfully bid on part ofthe invitation without excluding

LASH vessels Moreover even in Continentals contract of sale Conti

nental did not exclude presentation of other types of non convention

al vessels such as tankers or deck ships Indeed deck ships of Farrell

Lines did carry some of the grain and there is no evidence that the

sales price had to be renegotiated because ofthat fact However during

the early discussions between Prudential and Continental when Pru

dentials Mr Cahalane sought to have Continental waive its contractual

restrictions so as to permit LASH barges to load Continental sought to

cover the sale by purchasing grain from Cargill s Norfolk elevator at a

premium which would allow LASH barges to load there Cargill

however refused to sell wheat for loading into LASH barges at any

premium

25 F M C
236 FEDERAL MARITIME COMMISSION

126 The terminal tariffs filed by the various grain companies cover

ing elevators on the East Coast at the time in question contained no

special restrictions on LASH vessels except for Cargill s tariff in Nor

folk which published a special 5 cent charge per outbound bushel for

loading grain into LASH barges or between deckers

127 Another custom or practice of the grain exporting industry

concerns the fact that a person desiring to export grain from the East

Coast who does not own or operate an elevator has to purchase the

grain at the ocean side of the export elevator Even grain companies

operating elevators must purchase grain from each other F O B end of

spout In other words the grain stored in East Coast elevators operated

by grain companies and loaded into vessels belongs to the grain compa

nies operating the elevators notwithstanding the public warehousemen

nature of particular elevators such as the N W Elevator Before 1972

there were large government stocks of grain However there has been

a dramatic change in the grain industry to the point where the grain

companies apparently control movement of grain through their eleva

tors so that persons without elevators e g private farmers cannot

simply ship their grain to an export elevator on the East Coast for

subsequent export if that elevator is operated by a grain company

DISCUSSION AND CONCLUSIONS THE ISSUE OF

JURISDICTION OVER THE N W ELEVATOR AS A

TERMINAL OPERATOR

Because ofthe complexity of the issues concerning the Commission s

jurisdiction over Continental s terminal operations and over its practices

relating to the exclusion of Prudential s LASH barges from carriage of

the shipment of wheat in question the parties agreed that it would be

wise to defer litigating the question of reparation i e Prudential s

alleged monetary damages and to concentrate instead on determining

whether jurisdiction lies in the Commission and if so whether Conti

nental violated section 16 First and 17 of the Act as alleged by

Prudential Therefore the first issue to be determined is the question as

to whether Continental is subject to the Commission s

jurisdiction be

cause ofits operations at the N W Elevator

As to this issue Continental contends that it does not furnish terminal

facilities in connection with common carriers by water so that it cannot

fall under section 1 ofthe Shipping Act 1916 which defines an other

person subject to this A ct as a person who carries on the business

of furnishing wharfage dock warehouse or other terminal facili

ties in connection with a common carrier by water Act section 1 46

U S C 801 Continental argues that the vessels calling at the N W

Elevator have been operated as bulk ships in contract carriage pursuant

to specially negotiated arrangements with shippers and consignees

Thus even when ships operated by apparent common carriers such as

2S FMC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 237

COMPANY

Icelandic Steamship Co Prudential Central Gulf Lines and Farrell

Lines called at the N W Elevator according to Continental they did

so in contract carriage or else as in the case of 32 out of 36 loadings of

non bulk ships during 1976 through 1978 at the Elevator on the Icelan

dic ships BRUARFOSS and SELFOSS it was Icelandic s owners who

purchased the grain not a shipper None ofthese non bulk ships carried

under tariffs which published grain rates contends Continental and

even Prudential which admittedly is a common carrier otherwise tried

to book the wheat shipment under specially negotiated rates without

publishing such rates in its common carrier tariff Also the vessels

calling at the N W Elevator did so without advertisements showing

regular calls at the Elevator Finally even if some of the vessels calling

at the Elevator did act as common carriers when so doing Continental

argues that the common carriage involved was ofminimal consequence

compared to the many vessels in noncommon carriage calling at the

Elevator Hence Continental argues that the Elevator is essentially not

furnishing services in connection with common carriers or if so the

Elevator has minimal impact on common carriers thereby justifying a

finding that there is no jurisdiction under the Act as was held in Fall

River Line Pier Inc v International Trading Corp of Virginia 399 F 2d

413 1st Cir 1968 and under the reasoning of Bethlehem Steel Corp v

Indiana Port Commission 21 F MC 629 1979 Opinion on remand

affirmed per curiam 642 F 2d 1215 D C Cir 1980

Both Hearing Counsel and Prudential refute the above contentions

with citations to evidence ofrecord and to previous court and Commis

sion decisions They cite numerous cases holding that grain elevator

operators who make their facilities available to common carriers by

water are subject to Shipping Act jurisdiction They point to evidence

ofrecord showing that ships operated by common carriers have called

at the N W Elevator and that Continental s terminal tariff does not

exclude common carrier vessels that its lease from the Norfolk

Western Railroad specifies that the Elevator will be operated as a

public terminal open to all parties that it is not common carriage but

common carriers that the Shipping Act specifies when defining regulat

ed terminal operators that common carriers do not lose that status

because some oftheir ships orportions ofthe ships are operated in non

common carriage pursuant to contracts and without published tariff

rates on bulk commodities and that the doctrine by which status is

determined on the basis of a count of the number of common carrier

calls is not valid and is not followed by the Commission

I find that both the evidence and the legal precedent cited confirm

that Prudential and Hearing Counsel are correct in arguing that Conti

nental s N W Elevator must be found to be within Shipping Act

jurisdiction

25 F M C
238 FEDERAL MARITIME COMMISSION

The Commission has long regulated grain terminal elevators which

handle grain exclusively but load grain in vessels operated by common

carriers and many tariffs are filed by such elevators with the Commis

sion See e g Rates of Pacific Northwest Elevators Association 11

F MC 369 373 1968 California Stevedore and Ballast Co v Stockton

Port District 7 F M C 75 81 1962 D 1 Roach Inc v Albany Port

District et al 5 F M B 333 334 1957 Agreements No 8225 and 8225

1 Between Greater Baton Rouge Port Commission and Cargill Inc 5

F MB 648 649 653 654 1959 affirmed under the name of Greater

Baton Rouge Port Commission v US 287 F 2d 86 90 92 5th Cir

1961 cert denied 368 U S 985 1962 Investigation Wharfage Charges

on Bulk Grain at Pacific Coast Ports 8 F MC 653 656 1965 In the

present case Continental claims that it is not furnishing terminal serv

ices in connection with common carriers by water There are a number

of valid answers to this contention which Prudential and Hearing

Counsel have raised however

Much attention has been given to the type of vessel and carrier

which have been shown on the record to have called at the N W

Elevator This is because section 1 of the Act requires terminal opera

tors to furnish their facilities in connection with a common carrier by

water If this is critical to a determination of the Elevator s status

under the Act then the record supplies the answer On at least 21

occasions during the years 1977 and 1978 Continental furnished termi

nal facilities in connection with at least six vessels that were operated

by four different common carriers by water Central Gulf Icelandic

Prudential and Farrell Lines The carriers involved filed tariffs hold

ing themselves out to transport general commodities and advertised

calls at Norfolk Evidence of record further indicates that some or all

of these vessels were not fully loaded with grain and that common

carriers had the practice of carrying both grain and general cargo in

the same vessel to shorten the ship that is to fill empty space during

seasons ofthe year when other cargo was in scarce supply 3

Prudential

itself had loaded grain on its LASH vessels from the N W Elevator

on four prior occasions most recently in June of 1977 and had been

billed at the terminal tariff rates Moreover even Continental s own

terminal records identify two of the common carriers vessels which

had loaded at the Elevator as liners and its own terminal tariff during

Prudential had the practice of ftlllng baraea with grain to supplement aeneral cargo on the same

voyages which advertised calls at Norfolk See Prudential Openina Statement p

39 n I and record

citations therein Other common carriers may have done the samething The Icelandic ships BRUAR

FOSS and SELFOSS which called at the N W Elevator and which Continental arguea loaded

grain for their owners as the record shows Tr 1146 did Dot toad enouah grain to fill half their

deadweiaht tonnage Continentals own monthly reports of ship loadings characterize the Icelandic

ships as liners See Prudential posthearlng Statement pp 38 39 proposed findings 60 and 61 and

record citations therein

2S FMC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 239

COMPANY

the years 1977 and 1978 even defined Liner Vessels as vessels operat

ing under an advertised schedule by a line maintaining regular

sailings and on which the quantity of grain to be loaded shall not

exceed one half ofthe total dead weight tonnage ofthe vessel

Continental does not argue that it was not serving oceangoing vessels

nor does it dispute the fact that Central Gulf Farrell Prudential and

Icelandic may be common carriers with filed tariffs What it does

argue however is that regardless of the ordinary status of these carri

ers they operated as non common carriers when they sent their vessels

or barges to the N W Elevator to pick up grain Secondarily

Continental argues that even if common carriers called at the Elevator

the low incidence of such calls meant that the Elevator was essentially

not furnishing terminal facilities in connection with a common carrier

under the doctrine of the Fall River Line Pier case cited above These

defenses however do not withstand scrutiny and are outweighed by

critical evidence as to the Elevator s public holding out

The four carriers that called at the N W Elevator Central Gulf

Icelandic Farrell and Prudential cannot reasonably be found to be

other than common carriers They operated under advertised schedules

filed tariffs and held themselves out generally to carry commodities for

the general public These facts are sufficient to establish them as

common carriers under numerous decisions of the Commission and the

courts See e g

Activities Tariff Filing Practices and Carrier Status of

Containerships Inc 9 F MC 56 63 65 1965 Investigation of Tariff

Filing Practices 7 F MC 305 320 321 1962 McCallister Brothers Inc

v Norfolk Western Railway Company 20 FM C 52 65 66 1977

Possible Violations of Section 18 a of the Shipping Act 1916 19 F MC

43 50 51 1975 United States v Stephen Brothers Lines 384 F 2d 118

5th Cir 1967 However Continental argues that whenever the vessels

or barges of these carriers called at the N W Elevator they did so

under special contracts and were thus not operating in common car

riage There are several valid answers to this argument raised by

Prudential and Hearing Counsel First even if a part of the vessel or

barge sent by the common carrier was involved in contract carriage

rather than common carriage this does not mean that the common

carrier which operated the ship lost its status as a common carrier or

that the Elevator was not serving common carriers As Hearing Coun

sel note the Shipping Act is concerned with regulation over carriers

not with the type of carriage Thus the Commission noted in Banana

Distributors Inc v Grace Line Inc 5 FMB 615 622 1959 affirmed

under the name Grace Line Inc v Federal Maritime Board 280 F 2d

790 2nd Cir 1960 cert denied 364 U S 933 1961

the Act confers jurisdiction over carriers specifically over

common carriers as distinguished from types of carriage

ie common or contract

25 F M C
240 FEDERAL MARITIME COMMISSION

Furthermore when common carriers have in fact utilized portions of

their vessels in common carriage of general commodities but have

segmented other portions of their vessels in so called contract car

riage on the same voyages the Commission has not only continued to

find the carrier to be a common carrier but has even applied Shipping

Act standards to the so called contract carriers portion of the

voyage For example in the famous banana case cited above Grace

Line Inc v Federal Maritime Board 280 F 2d 790 Grace Line had

argued that its contract carriage ofbananas was exempt from regulation

notwithstanding its status as a common carrier for other commodities

on the same vessels The Court however refused to grant any partial

exemption or to redefine Grace s common carrier status holding on

the contrary that a common carrier by water does not cease to be such

because it chooses to make an exception as to a part of the goods it

accepts To this regard the Court stated

The Grace Line s argument presupposes not only that these

duties imposed by the Shipping Act are limited to common

carriers by water as of course they are but also that they are

limited to such carriers while they are carrying goods as to

which they have held themselves out as common carriers

We can see no reason to impute such a limitation upon the

definition of common carriers in g 801

As we have just said a common carrier by water does not

cease to be such because it chooses to make an exception as to

a part of the goods that it accepts 280 F 2d at 792 793

Similarly in Flota Mercante Grancolombiana v FMc 302 F 2d 887

D C Cir 1962 the court again refused to distinguish between a

common carrier S activities as carrier ofgeneral cargo from its activities

in so called contract carriage of bananas and affinned the Commis

sion s fmding of common carrier status for purposes of applying Ship

ping Act standards to the carrier s practices in handling contract ship

ments ofbananas

The cases just discussed show that a common carrier cannot divest

itself ofits status as such or avoid regulation under the Act by segment

ing its vessel operations so long as a part ofthe operations on its vessels

are those practiced by common carriers Therefore whatever were the

terms under which the four common carriers vessels or barges picked

up grain at the N W Elevator they were still sent and operated by

acknowledged common carriers Unless section 1 of the Act is to be

rewritten to specify that terminal operators subject to regulation under

the Act are those persons flIlrlshing terminal facilities only in connec

tion with cargo loaded in common carriage one is left with the

definition as written namely the furnishing of such facilities in connec

25 FMC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 241

COMPANY

tion with a common carrier by water and there is no way in which

the four common carriers named can be found on this record to be

other than common carriers Continental however emphasizes another

fact in reliance on its contract carriage argument That is its argument

that since Prudential and other common carriers customarily negotiate

special rates for the carriage of bulk grain which rates are not pub

lished in the carriers tariffs this fact again illustrates that Continental s

N W Elevator was not serving common carriers Even if the lack of

tariff filing of bulk commodity rates did signify that this portion of

Prudentials business was not common carriage I have just explained

that it makes no difference since Prudential would remain a common

carrier in the eyes of the law However the argument is not valid for

two other reasons First common carriers were specifically exempted

from the requirement that they file bulk commodity rates in their tariffs

so that they could better compete with unregulated tramp carriers

and could fill out their vessels with bulk cargo to supplement general

cargo Thus instead of proving that Prudential or any other common

carrier is not a common carrier merely because it does not file a

negotiated bulk commodity rate the argument corroborates the fact

that Prudential and possibly the other common carriers were only

trying to compete with tramp vessels and to fill out their vessels or

shorten the ship as Prudential calls this practice This point is made

very clear in the legislative history to P L 87 346 which added section

18b to the Shipping Act in 1961 the provision oflaw which governs

tariff filing in foreign commerce The testimony of then Chairman

Stakem of the Federal Maritime Board the Commission s predecessor

agency clearly describes the purpose of the bulk commodity tariff

exemption as relating to the need for common carriers to be free to

compete with tramp operators by quoting special rates without being

encumbered with tariff filing regulations See Hearings Before the Spe

cial Subcommittee on Steamship Conferences of the House Committee

on Merchant Marine and Fisheries on H R 4299 87th Congress First

Session March 20 1961 pp 26 36 4

4 Chairman Stakem testified in pertinent part as follows

We suggest that cargo loaded in bulk without mark orcount be excluded from the filing and

other requirements of section 3 of the bill Since such cargoes are normally carried by

tramps which are exempt from regulation under the 1916 Act common carriers subject to

the act should be free to change their rates in order to compete for these cargoes

As you know the bulk cargo is usuaHy an open rate item for most of the conferences and

the liner ships are in competition with the tramps to put this cargo in as finer cargo It seems

to us that it is the type of commodity that wecould not necessarily require an advance filing

of rates on

I

think it would be alittle bit impossible in the light of the fact that the tramps are free to do

as they please and quote as they please and it would put the liners in a very bad position in

connection with thebottom cargo that they constantly seek

25 EM C
242 FEDERAL MARITIME COMMISSION

Second the Commission has already rejected Continental s argument

that the ships or barges sent by Prudential or the other three common

carriers were operating under special contractual arrangements with

shippers and thus cannot be considered to be operating as common

carriers In TariffFiling Practices ofContainerships Inc 9 F MC 58 64

1965 the Commission rejected the argument as follows

In Investigation of TariffFiling Practices 7 F MC 320 1962 a

carrier contended that it was not offering common carrier

service since it did not advertise solicit or publish a sailing

schedule and carried cargo only after it had secured a negoti

ated written transportation agreement with the shipper The

Commission rejected all these contentions and stated with re

spect to the last

It cannot be successfully contended at this late date that a

carrier may avoid common carrier status by insisting on a

transportation agreement with each shipper All cargo car

ried for compensation moves on some form oftransportation

agreement express or implied 7 F MC at page 321

In General Practices in Rates 1961 7 F MC 260 280 1962

the Commission stated that a special arrangement to secure the

business of a shipper did not ofitself convert the arrangement

into one of contract carriage Citations omitted

The Commission has recognized that under some circum

stances a common carrier may execute contracts with particu

lar shippers for the carriage of large volumes of cargo This

system does not abrogate common carrier status The con

tracts are actually forward booking agreements Citations

omitted

The previous discussion shows that the evidence of record which

indicates that at least four common carriers sent vessels or barges to be

loaded with grain at the N W Elevator during 1977 and 1978 cannot

be discounted merely because the four carriers may have negotiated

special rates or may have carried bulk grain in a manner different from

that in which they carried general cargo even if it could be found that

the four carriers conducted contract carriage or non common car

riage with respect to their booking ofbulk grain Continental however

has another argument namely that even if on the occasions in which

the four common carriers called at the N W Elevator and loaded

grain they did so as common carriers and as common carriage the

relatively small number ofthese calls compared to all calls at the N

W Elevator removes the Elevator from Commission jurisdiction be

cause the effects on common carriers are so minimal Continental relies

upon the case of Fall River Pier Inc v International Trading Corpora

tion of Virginia Inc cited above 399 F 2d 413 and to a lesser extent

on Bethlehem Steel Corp v Indiana Port Commission cited above 21

2S FM C
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 243

COMPANY

F MC 629 1979 opinion on remand affirmed per curiam 642 F 2d

1215 D C Cir 1980 Continental argues that in the Fall River Line

Pier case the pier had unloaded common carriers on only four occa

sions out of the 33 unloadings which had occurred during the two

years prior to the case Continental s Posthearing Statement p 66

Continental argues that even assuming that all the vessels alleged to be

operating as common carriers which had called at the N W Elevator

during a three year period prior to this suit were in fact common

carrier vessels they only amounted to 36 loadings out of 271 occurring

during that time period Id Thus according to Continental the per

centage of common carrier loadings or unloadings compared to total

loadings or unloadings in both cases is almost identical 12 1 percent in

Fall River Line Pier compared to 13 3 percent in the present case

Moreover in the present case Continental argues as in the Fall River

Line Pier case there is little or no impact on common carriers because

Prudential s attempts to book the grain involved only contract carriage

Continental sums up its contention by stating that the lesson of that

case ie Fall River Line Pier is that a terminal at which common

carriers have called on only a few occasions is not subject to the

Commission s jurisdiction in its dealings with a contract carrier absent

a showing that the common carriage was affected Continental Posth

earing Statement p

69 Both Hearing Counsel and Prudential howev

er in my opinion have persuasively explained how the Fall RiverLine

Pier and Bethlehem Steel Corp cases cannot be used to support Conti

nental s contentions Fall River Line Pier is a peculiar case Complain

ant a contract importer of bagged cement at the Fall River Line Pier

which during the period in question primarily served only two cement

importers who used contract carriers filed its complaint with the Com

mission alleging discriminatory storage charges and practices and ulti

mately obtained an order of the Commission against respondent termi

nal operator calling for the payment of approximately 12 000 in repa

ration See International Trading Corp v Fall River Line Pier Inc 7

F MC 219 1962 and 8 F MC 145 1964 A District Court enforced

the Commission s order but on appeal the 1st Circuit reversed finding

that the Commission had no jurisdiction over the respondent terminal

operator The basis for the Court s decision was its finding that al

though on some occasions vessels carrying general cargo had called at

the piers the case involves vessels having no connection with the

merchant marine and only incidentally concerned with common car

riage as distinguished from the extensive common carriage operations

of the Grace Line see Banana Distributors Inc v Grace Line Inc 5

F MB 617 1959 399 F 2d at 416 The Court went on to say that

a t a minimum there should have been a finding or a factual basis

supporting a finding that the common carriage here was of sufficient

consequence to be affected by the contract carriage Id Hearing

25 F M C
244 FEDERAL MARITIME COMMISSION

Counsel point out several distinguishing factors between Fall River Line

Pier and the present case note that the Contmission has not followed

the case in subsequent decisions and question whether it was correctly

decided Prudential also questions whether the case was correctly de

cided noting that no one appeared before the Court on behalf of the

party asserting Commission jurisdiction but more importantly showing

that the present case is one in which a common carrier complainant

alleges substantial effects on its operations unlike Fall River Line Pier

where the effects on common carriage were supposedly minimal Pru

dential also cites the latter case of Bethlehem Steel Corp in which the

Commission rejected the Fall River Line Pier rationale in finding juris

diction over the respondent terminal operator

Fall River Line Pier stands out peculiarly and has not been followed

by the Contmission It involved a small pier dealing essentially with

two contract cement importers and with vessels that only rarely dis

charged general cargo The court s decision acknowledges that some

general cargo had been discharged by one barge and three vessels and

mentions a carrier known as Thorden Line which had discharged

cement and office furniture at Fall River but also miscellaneous general

cargo at New York Philadelphia and other ports 399 F 2d at 415

At best there were only about four general cargo vessel calls at Fall

River as opposed to the present case in which there were 21 or 36

loadings on vessels operated by common carriers at the N W Eleva

tor depending on whether one counts a two year or three year period

prior to the loading involved in the present case In the present case

moreover four known common carriers Central Gulf Farrell Pruden

tial and Icelandic sent vessels or barges to the N W Elevator The

main problem with Fall River Line Pier however is that it rests upon a

counting or consequences theory In other words the Court deemed

impressed that so few common carrier calls were made at the pier in

Fall River compared to the overwhelming number of calls of contract

carriers unloading bagged cement Since there were so few calls by

general cargo vessels the court could not fmd much impact on

common carriers In this case the impact on common carriers is clear

Prudential is an acknowledged common carrier as were the other three

mentioned above and even if one accepts Continental s argument that

the ships these common carriers sent to the Elevator were not acting

under common carriage the record shows that Prudential at least

customarily sought grain to shorten the ship i e to supplement

common carriage cargo by filling in with grain Itis difficult therefore

to argue that these four carriers vessels calling at the Elevator were

only incidentally concerned with common carriage Again note that

the Court seems to confuse common carriage with common carri

ers as if section 1 ofthe Shipping Act defmed other persons subject to

the Act as those persons furnishing terminal facilities in connection

25 F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 245

COMPANY

with common arriage rather than in connection with a common

carrier by water Whatever the merits of the Courts incidental or

insufficient consequences test however it has not been followed by

the Commission which it should be noted was not a party before the

Court 5 As shown by the Bethlehem Steel Corporation decision the

Commission does not engage in a counting exercise to determine the

number of common carriers that call at a particular pier before finding

jurisdiction over terminal operators InBethlehem Steel Corp v Indiana

Port Commission complainant had alleged that respondent s assessment

of a harbor service charge was unreasonable in violation of section 17

of the Act Early in the proceeding respondent Port Commission

moved for a dismissal contending that its services in connection with

common carriers by water have been insubstantial and of insufficient

consequence to establish a basis for the Commission s jurisdiction 12

SRR at 1080 Specifically the respondent Port Commission had

argued that it had served only one common carrier vessel the

URANUS on two occasions which vessel had been engaging in for

eign commerce Respondent had also argued that its service to

common carriers in interstate as opposed to foreign commerce should

not be counted The presiding officer rejected the counting theory

stating 12 SRR at 1061

The concept advocated by the Port which relates jurisdiction

to the number of times a common carrier is served is rejected

It would be anomalous with the Commission s duty to regulate

terminals serving common carriers by water to exempt a ter

minal from the duties and prohibitions imposed upon an other

person in even one incident

As he further stated 12 SRR at 1061

The finding that the Port served common carriers by water is

sufficient to support the Commission s

jurisdiction

On appeal the ruling of the presiding officer was adopted by the

Commission 13 SRR 22 1972 The Commission made the following

remarks

The record shows that Respondent has furnished services to

several common carriers by water in interstate commerce and

II The effect of a decision by a Court of Appeals on the Commission is unclear when as in Fall

River Line Pier the Commission was not a

party and the Court had heard no argument from the Com

mission There is some doubt as to the validity of aCourt s

reversing aCommission decision unless the

Court reviews that decision under the so called Hobbs Act 28 US 2341 et seq instead of by means

of reviewing aDistrict Court s order of enforcement of aCommission order See Marine Terminal v

Rederi Transatlantic 400 U S 62 1970 holding such action of the Court of Appeals again the 1st

Circuit to be improper See also Sanrio Company Ltd v Maersk Line 23 F M C 154 199 1 0 1980

adopted by the Commission 23 F M C 150 1980 in which the Commission noted adecision of the

Fifth Circuit Court of Appeals which contravened Commission decisions without the Commission s

participation before the Court which decision the Commission therefore declined to follow

25 F MC
246 FEDERAL MARITIME COMMISSION

on two occasions has served the Uranus a vessel engaged in

foreign commerce Respondent holds itself out to the public

that it is readily accessible to overseas vessels with limited

use oftugs 13 SRR at 23

The Commission therefore did several things in the cited case Fully

aware of the Fall River Line Pier decision four years earlier the Com

mission rejected the notion that its jurisdiction over terminal operators

depended upon the number of times that a common carriers vessels

called at a terminal showed no interest in determining whether a vessel

owned by a common carrier had actually operated in common carriage

when it called at the terminal and was not apparently concerned with

how large or how small the consequences or effects on common carri

ers happened to be but seemed more concerned with the holding out of

the terminal to all vessels I conclude on the basis of the Bethlehem

Steel Corp case that the Commission does not follow the rationale of

the Pall River Line Pier decision 6

In a fairly recent article concerning

the Commission s jurisdiction over terminal operators moreover the

author apparently agrees with this conclusion 7 He interprets the Beth

lehem Steelruling of the Commission to mean that e stablishing juris

diction did not depend upon a showing that some threshold proportion

of the Indiana Port Commission s terminal services were furnished to

common carriers 8 He also comments on the fact that the Commission

has not followed the Fall River Line Pier case stating 9

There have been no cases decided since Fall River in which

the Commission required a showing that a threshold propor

tion of a terminal s services were furnished to common carri

ers as a prerequisite to the FMC asserting jurisdiction The

Fall River standard has been abandoned in favor of an even

one common carrier standard

Continental question the validity of the Commi ion rulings on Jurisdiction in the Bethlehem

Steel case because of later developments in that case Hearing Counsel however as well 88 Prudential

have shown that these later developments do not aTect the Jurisdictional rulings See especially Hear

ing Co ls Reply Brief pp IS 16 n S Thesubsequent developments had nothing to do with the

status of respondent Port Commi88ion as an other person subject to this Alet n

They rather had to

do first with the lawfulness and later thejurisdictional status of the Port s Rarbor Service Charge

After the Commi ion had found the subject charge to be unlawful under section 17 of the Act 17

P M C 266 1974 the Court of Appeala set aside that finding and remanded with inatructiona to

determine reasonablen of theoharge on the basis of the oontribution of the parties to harbor devel

opment and of the benefits derived by the parties from use of the harbor See IndIDna Part Cammls

slon v FMC S21 P 2d at 28S In its opinion on remand 21 P M C at 633 the Commi ion af

firmed Its earlierjurisdiotionalruling but found the partioular oharge to be unrelated to terminal activi

ties and thus to be outside the Commission s

jurisdiction under section 17 of the Act This decision

was affirmed without opinion by the Court 642 P 2d 1213 DC Cir 1980

See Buohwald Federal Maritime Commisslan Jurisdiction Over Terminal Operalors 12 Journal of

Maritime Law and Commeroe 209 January 1981

s

Ibid p 228

Id

25 FMC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 247

COMPANY

For another ruling in which jurisdiction was found over one furnish

ing terminal facilities without requiring a showing of any particular

number of common carriers calling at the terminal see Louis Dreyfus

Corp v Plaquemines Port Harbor and Terminal District 19 SRR 749

750 Morgan J 1979

The prevailing view of the Commission therefore appears to be that

Shipping Act jurisdiction will not be renounced merely because the

number of common carriers calling at a terminal is minimal or the

particular vessels calling at the terminal are not themselves operating in

common carriage although they are owned by common carriers

Continental s Holding Out as a Public Terminal

The previous discussion deals with Continentals arguments that

would deny Commission jurisdiction over its N W Elevator by

considering the number of vessels sent to the Elevator by common

carriers the supposedly small impact on common carriers and the

argument that the vessels were acting as contract carriers not in

common carriage when they arrived at the Elevator Although superfi

cially appealing I cannot find these various arguments to be persuasive

either in fact or in law In fact four common carriers did send vessels

or barges to be loaded at the N W Elevator and Prudential at least

followed the practice of adding grain to its general cargo carryings

when cargo was short Moreover the Commission seems to have spe

cifically rejected the determination ofjurisdiction by counting numbers

of common carrier calls at terminals or by measuring impacts on

common carriers so long as it appears that one or more common

carriers have called However if the question is still considered close

and Continental s

arguments are found appealing one final category of

evidence which has not yet been considered tips the scales in favor of

finding Continental s N W Elevator to be a

regulated marine termi

nal This evidence has to do with Continentals public holding out as

shown by its tariff filed with the Commission and its lease with the

Norfolk Western Railroad As both Hearing Counsel and Prudential

note Continental has filed a terminal tariff with the Commission since

at least October 1974 which Continentals own witness testified was

regarded as a true tariff and which was utilized in billing carriers

loading at the Elevator Moreover the tariff while apparently limiting

service to selfpropelled vessels which LASH is not did not in fact

bar LASH barges which had been loaded at the Elevator in the past 1 0

10 There is evidence that Continental did not follow its tariff regarding its purported limitation to

selfpropelled vessels since it had loaded LASH barges in the past Moreover there is also some evi

dence that despite the publication of liner preference in the tariff no such preference was granted in

fact See Prudential s Posthearing Statement p 39 and proposed finding 62 with record citations In

Continued

25 F MC
248 FEDERAL MARITIME COMMISSION

More importantly perhaps the tariff did not exclude common carriers

vessels On the contrary it even specifically defined liner vessels as I

noted earlier as vessels on advertised schedules and regular sailings

which did not load more than one half of the deadweight tonnage of

the vessel with grain Furthermore the tariff also provided for liner

preference although there is testimony that such preference was not

actually granted in practice Finally Continental operates the N W

Elevator under a lease from the Norfolk Western Railroad which

lease provides that the purpose of the operation is to conduct its

business on the premises as a public terminal open to all parties No

matter how Continental tries to persuade one that its N W Elevator

was not a

regulated marine terminal because ships calling at the Eleva

tor were not really acting in common carriage although they may have

been sent by common carriers and such arguments are not really

persuasive although superficially appealing as Ihave shown how can

Continental dispute its public holding out when its own tariffs and the

very lease under which it operates demonstrate such a holding out

Such a holding out Ibelieve is significant

The Commission regards terminal operators under its jurisdiction in

the same light as public utilities or common carriers See Investigation of

Free Time Practices Portof San Diego 9 F MC 525 547 548 1966

American Export Isbrandtsen Lines Inc v Federal Maritime Commission

444 F 2d 824 828 D C Cir 1970 Chr Salvesen Co Ltd v West

Mich Dock Market Corp 12 F MC 135 141 1968 A P St Philip

Inc v Atlantic Land Improvement Co 13 F M C 166 174 1969

However the essence of a public utility or COmmon carrier is its public

holding out Thus although the filing of a tariff the regularity of

schedules the carriage ofgeneral cargo for several shippers and similar

factors all have a bearing on the ultimate determination ofthe status of

a common carrier as the Commission has noted TariffFiling Practices

of Containerships Inc 9 F MC 56 65 1965 the ultimate test is the

carrier s holding out ie whether it is public or private or limited

Thus as the Commission stated in Tariff Filing Practices of Container

ships Inc 9 F MC at 62

The Commission has examined the indicia of common carrier

at common law on numerous occasions The most frequently

mentioned characteristic is that a common carrier by a course

of conduct holds himself out to accept goods from whomever

offered to the extent ofhis ability to carry

case of conflict between what the tariff states and what the terminal operator actually does in any

particular instance the Commission has indicated tbat the actual practice will be contromng See In

the Matter of Agreement No T 2719 16 F M C 318 32 1973 This does not mean however that the

tariffis to be disregarded as evidence of apublic holding out

2S F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 249

COMPANY

See also American Export Isbrandtsen lines Inc v FMC cited

above 444 F 2d at 831 A preponderance of the evidence in this case

shows that Continental held out to load grain on all carriers vessels

and even though its tariff supposedly excluded non self propelled ves

sels such as LASH barges it loaded them as well Indeed after the

events that transpired in this case concerning the exclusion of Pruden

tials LASH barges from the N W Elevator Continental amended its

terminal tariff in October 1978 reserving the right to reject LASH

barges if in its opinion such vessels interfered with the normal loading

process This public holding out shown in the tariffand lease together

with the fact that at least four common carriers did send vessels and

barges to load at the Elevator which vessels did not necessarily load

exclusively with grain the literal language of section 1 of the Act the

legislative intent to establish a comprehensive regulatory scheme ex

tending beyond vessels into terminal operations incidental to common

carriers vessels and the recognition of the public utility Iike aspect of

marine terminal operations provide adequate support for me to con

clude that Continentals N W Elevator was operating as an other

person subject to this Alct To reinforce this conclusion I note that

other grain companies wishing to remove their elevators from Commis

sion regulation have done so simply by specifically excluding common

carriers in their tariffs See e g New Orleans Steamship Association v

Bunge Corp 8 F M C 687 694 1965 Agreement No T2719 16

F MC 318 321 1973 in which it was held that a terminal operator

may remove itself from Commission jurisdiction by explicitly announc

ing in its tariff that it no longer serves common carriers As the

Commission stated in the Bunge case 8 F MC at 694

We therefore find that since November 22 1961 the day

Bunge barred common carriers from calling at its Destrehan

facility we have had no jurisdiction over its operations there

In the present case therefore having chosen not to exclude common

carriers from its N W Elevator by tariff or otherwise Continental

has gained the benefits of serving common carriers as well as contract

carriers It cannot therefore renounce its status as a public terminal

operator unless and until it specifically discontinues service to common

carriers in its tariff and adheres to such publication 11

11 Continental cites one other case to support its contention that it was not operating aterminal in

connection with common carriers That case is McAllister Brothers Inc v Norfolk Western Railway

Company 20 F M C 62 1977 In that case the Commission affirmed afinding by the presiding judge

that respOndent N W Railway Company had not operated a

regulated terminal facility at particular

coal piers in Norfolk The decision distinguished between the coal piers which handledcoal exclusive

ly in connection with chartered coal vessels which had no resemblance to common carriers as com

pared to ageneral merchandise pier serving other vessels As Hearing Counsel correctly note Hearing

Counsel Reply Brief p

10 the vessels calling at the coal piers carried shiploads of coal not mixtures

Continued

25 F M C
250 FEDERAL MARITIME COMMISSION

THE ISSUE OF JURISDICTION OVER CONTINENTAL S

DECISION NOT TO LOAD LASH BARGES

The second general issue to be determined concerns the question of

whether the Commission s jurisdiction extends into the particular exclu

sion which Prudential experienced Prudential and Hearing Counsel

contend that Continentals refusal to load Prudentials LASH barges at

the N W Elevator constituted a violation of section 16 First and 17

of the Act because it subjected Prudential to undue and unreasonable

prejudice and disadvantage and constituted an unreasonable practice

related to the receipt handling storing and delivering of property

Both Prudential and Hearing Counsel believe that Continentals activi

ties as a seller of grain and its exclusion of LASH barges from the

particular contract of sale that was involved in this case do not exempt

it from Commission regulation when it decided not to load LASH

barges at its N W Elevator At that time more or less these parties

believe that Continental was merely furthering its interests as a terminal

operator rather than conducting a grain selling and merchandising busi

ness Therefore they argue its conduct falls within Shipping Act con

cern Prudential goes further by alleging that Continental and other

major grain companies have engaged in a concerted effort to discrimi

nate against LASH vessels in their contracts of sale in violation of

section 15 of the Act Finally Prudential believes that Continental

unlawfully attempted to extract a penalty from Prudential before agree

ing to permit Prudential to send its LASH barges to the N W

Elevator to load the grain in question

Hearing Counsel while generally agreeing with Prudential argue

that Commission jurisdiction attaches under sections 16 First and 17 of

the Act because the grain was ultimately loaded at Continental s N

W Elevator and the interests of Continental as a grain seller and as a

terminal operator became for all intents and purposes the same al

though Hearing Counsel deny that Commission jurisdiction extends into

the original contract of sale of the grain between Continental and

Egypt or into the provision in that contract excluding LASH vessels

Moreover Hearing Counsel believe that Commission jurisdiction is

shown because of the ultimate effect on the operations of the N W

Elevator stemming from exclusion ofLASH vessels

Continental believes that the particular practice complained of

namely exclusion of LASH vessels from the carriage of the wheat

shipment in question is part and parcel of Continentals grain selling

of common and contract carrier cargoes and luch vessels never published tariffs advertised sailing

schedules orheld themselves out as common carriers The case is unlike the present One in several

key respects since in this case common carriers have sent vessels to the N W Elevator and have not

exclusively loaded with grain In McAllister furthermore there was no evidence of any public holding

out by thecoal piers to common carriers

25 F M C
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 251

COMPANY

and merchandising business not its terminal operations Continental

argues that the exclusion of LASH was determined in its contract of

sale with Egypt which the Commission has no legal authority to

regulate under the Shipping Act and that the reasons for this exclusion

in that contract relate to the intricacies of the grain trading and selling

business Continental argues in effect that Prudential would have the

Commission rewrite its contract of sale to permit Prudential to obtain a

booking to which it was not entitled by contract Such modification

furthermore would have several serious adverse effects on Continen

tal s grain selling and trading business because it would interfere with

its options to fill sales and with its elevation ie the market differen

tial between the price ofgrain received at the N W Elevator and the

FOB export price The practice of excluding LASH vessels from this

contract of sale or from other sales contracts is thus according to

Continental a practice of the grain selling and trading business not the

terminal business To illustrate this contention Continental argues that

it could not publish a provision in its terminal tariff to offset these

problems caused by utilization of LASH barges instead of faster loading

bulk vessels because it cannot anticipate the many fluid factors in the

grain commodity market all of which are considered by Continental

when selecting the grain to fill a contractual commitment Continental

believes that Hearing Counsels

argument that Continental was not

subject to Commission regulation when entering into the contract of

sale but did become subject when it declined to modify the contract to

allow LASH to load the grain at its N W Elevator is absurd 12

The arguments of Prudential and Hearing Counsel have some appeal

I must admit It seems unfair that Prudential which submitted an

acceptable bid to Peralta the Egyptian buyer s shipping broker should

be excluded from carriage merely because it operates LASH vessels

and its barges are supposed to be slower loading than the grain indus

try s preferred bulk vessels This also seems unfair when the record

shows that LASH barges are not so slow in loading as Continental

believes load about as fast as deck ships and that with a little more

effort and diligence greater productivity in loading can probably be

12 Hearing Counsel admit to difficulties in their position namely the problem of identifying that

point in time when Continental the grain seller began to act like Continental the terminal operator

or in other words when did Continental begin to further its interests as a terminal operator rather

than as agrain seller Hearing Counsel admit that the exact point at which Continental New York

determined to load the wheat at the N W Elevator cannot be ascertained from the evidence of

record with any degree of certainty Hearing Counsel s Opening Brief p 61 Therefore Hearing

Counsel admit that it is difficult to determine in what capacity Continental New York was acting

and what interests it sought to further by so acting when it declined to accept Peralta s nomination of

Prudentials LASH vessels Ibid p 62 However since the wheat was ultimately loaded at the N

W Elevator Hearing Counsel argue that Continentals interests as grain seller and terminal operator

became indistinguishable when Continental declined to accept LASH vessels and furthermore

argue that its rejection of LASH had asignificant effect upon the operation of the N W Elevator

Ibid p

63

25 F M C
252 FEDERAL MARITIME COMMISSION

achieved at the N W Elevator based upon Prudential s experience It

also seems that since Continental publishes a terminal tariff and holds

out to any type of vessel either in its tariff or in practice that Pruden

tial ought not to have been barred from loading grain at the N W

Elevator on the particular sale to Egypt After all isn t a terminal

supposed to be akin to a public utility observing non discriminatory

practices to all who use its services Moreover isn tthe problem here

to some extent the fact that LASH barges supposedly load more

slowly than bulk vessels causing other vessels to back up and costing

the terminal in vessel demurrage charges or overtime as even Conti

nental acknowledges to be the case If so isn t this a terminal cost

problem not a grain selling problem and cannot Continental protect

itself by publishing an offsetting charge in its terminal tariff so that it

could still accept LASH barges without loss Moreover how fair is it

for the major grain companies to adopt a form contract and a custom

to prefer bulk vessels over LASH and then to defend any particular

Elevator s refusal to load LASH on the ground that the grain company

operating the Elevator could not transfer the sale to another grain

company s elevator because that company also followed the industry s

non LASH restrictive practice There are still other facts which Pru

dential points out in its Reply Statement pp 23 24 which sometimes

contradict Continental s factual assertions and indicate for example

that LASH barges can be loaded about as fast as deck ships which

ships Continental in fact loaded for part of the wheat shipment to

Egypt at the N W Elevator that the Department of Agriculture

approved the P L 480 purchase and exclusion of LASH in the errone

ous belief that all LASH vessels had been otherwise accounted for that

grain elevators on the East Coast were not as congested as Continental

would have one believe that Continental had made known that the N

W Elevator would be the point ofloading possibly as early as June

28 1978 when Prudential first tried to negotiate with Continental or

even June 27 when Peralta advised Prudential that in other loadings

Norfolk had been named much earlier than Continental claims to be the

practice that Continentals offer to sell the grain in question has permit

ted deck ships and tankers as well as bulk vessels without additional

increase in the sales price to Egypt that congestion problems at the N

W Elevator had to do with loading efficiencies and slow loading

rates ofbulk vessels that lost sales alleged by Continental as a result of

an attempt to substitute LASH barges for bulk vessels would affect not

the sale to Egypt but sales of corn which was also stored at the N W

Elevator during the relevant time period and that transference of the

sale to another grain company would not be impeded because of the

standard contract of sale which precluded LASH because that contract

had often been ignored in practice by grain companies

25 FMC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 253

COMPANY

All of these foregoing arguments and asserted facts would seem to

indicate that this case calls for relief which the Commission can some

how grant under sections 16 First and 17 of the Act However I

believe that the very size of the record and the complexity of the facts

serve to conceal the fact that the case primarily involves a contract of

sale of grain and only secondarily deals with the duties of a

regulated

terminal operator under the Shipping Act If anything the root cause

ofthe problem which Prudential and other LASH vessel operators face

is the fact that grain companies observe peculiar practices in their

multifarious and complex grain trading and selling businesses which

ultimately affect LASH operators but which have their source in grain

merchandising not terminal matters In other words the exclusion of

LASH from carriage of the shipment in question originated in a grain

selling and trading context not in a terminal context although ultimate

ly the grain company s elevator was affected because bulk or other

non LASH vessels loaded Therefore attempts to insert the Shipping

Act so as to affect the decision of Continental as seller of grain under

its contract with Egypt would mean regulation of grain merchandising

practices through the back door of the grain company s N W Eleva

tor It makes little sense in my opinion to argue that the Commission

has no jurisdiction over a contract of sale of grain which contains an

exclusionary clause but somehow the Commission gains jurisdiction

whenever the parties to that contract attempt to carry out that contrac

tual provision This in effect means that the Commission is regulating

the contract because the Commission would be rendering the particular

provision regarding selection of vessels void

Another problem I find with the argument that the Commission can

give Prudential relief from the terms of the contract of sale on the

ground that the seller also operates the terminal through which the

grain happened to pass is that such relief presupposes that Prudential

had a

right to the booking ofthe grain in the first place and that it was

deprived of the booking by unlawful interference of a

regulated termi

nal operator In point of fact however it was Peralta the booking

agent of the Egyptian buyer which violated its principals contract

with Continental the seller of grain by twice inducing Prudential to

bid on the carriage of the shipment This conduct by Peralta set in

motion the unfortunate chain of events by misleading Prudential into

believing that it could obtain a booking Moreover as Hearing Counsel

acknowledge it is somewhat inequitable for Peralta to seek to obtain

cheap LASH rates for transporting the wheat after Continental had

sold it at a price which was based upon use of different vessels and

then force Continental in the name of Prudential to modify its con

tract regardless of any particular financial harm that may result to

Continental Furthermore whatever the duties of a

regulated terminal

operator they certainly do not require such operator to provide load

25 F M C
j

I

j

254 FEDERAL MARITIME COMMISSION

ing or other services to any vessel which shows up at the terminal and

demands to be loaded even if such vessel has no booking In other

words a carrier cannot show up at a regulated terminal and demand

that the terminal operator load its ship when the cargo at the terminal

has already been booked on another ship by the shipper merely because

the terminal operator has a tariff on ftle with the Commission and holds

itself out to load vessels In short we have here a carrier Prudential

which had no booking but which had been misled by a booking agent

Peralta into thinking that it could obtain a booking contrary to the

terms of a private contract of a seller and buyer ofgrain attempting to

be permitted to send its LASH barges to the terminal at which the

grain was to be loaded even without a booking A brief analysis of

pertinent facts and case law will illustrate support for the foregoing

conclusions

It is true that terminal operators subject to Commission jurisdiction

are held to high duties similar to those of public utilities arid common

carriers so that they cannot unfairly discriminate among their custom

ers See e

g Chr Salvesen Co Ltd v West Mich Dock Market

Corp cited above 12 F MC at 141 Investigation of Free Time Prac

tices Port of San Diego cited above 9 F MC at 547 548 A P St

Phillip Inc v Atlantic Land Development Co cited above 13 F M C

at 174 But those and similar cases involve situations in which shippers

sought to have cargo loaded or unloaded or sought other services

pursuant to proper booking contracts or vessels called in response to a

terminal tariff that held out to service vessels desiring unloading serv

ices or were denied use of alternative tugboat service without justifica

tion In other words the customer of the terminal who sought a tariff

service had some proper reason to be at the terminal and sought a

service that fell squarely within the four comers of the holding out in

the tariff or the duty of the terminal operator In none of those cases

did a shipper appear at a terminal and demand that the terminal load its

cargo on a ship for which it had no booking or a vessel call and

demand to be loaded without having first acquired a booking More

over even in those cases in which shippers have a legitimate reason to

seek terminal services the terminal operator is not required to provide

services over and above those specified in its tariff For example

shippers cannot deposit their cargo on piers and expect free warehous

ing or storage services See e gFree Time and Demurrage Charges on

Export Cargo 13 F MC 207 215 245 246 247 1970 Free Time and

Demurrage Practices at N Y Harbor 11 F MC 238 253 259 1967 In

short terminal operators hold out to perform services under a tariff and

to perform the services specified in the tariff fairly and without unrea

sonable discrimination They do not hold themselves out to provide

services for persons having no previously acquired right to appear at

the terminal to seek its services Nor are the terminal operators required

25 FMC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 255

COMPANY

to furnish extra non terminal services by providing free warehousing or

free storage or by acting as a booking agent for carriers or shippers

Nor because they operate terminals does the Commission regulate

everything they do without regard to what and where the activity is

See e g Bethlehem Steel Corp v Indiana Port Commission cited above

21 F M C 629 Commission has no jurisdiction over a Harbor Service

Charge imposed by a terminal operator which is related to navigation

and not to the physical handling of cargo New Orleans Steamship

Association v Bunge Corp cited above 8 FMC 687 Commission has

no jurisdiction over a Louisiana terminal merely because the same

company operates a regulated terminal in Philadelphia Agreement Nos

T1685 and T1685 6 16 SRR 887 1976 adopted on this point 19

F M C 440 457 458 1977 no Commission jurisdiction over terms of a

lease of backup terminal facilities when terminal operator acted as

lessor of facilities only Levatino Sons v Prudential Grace Lines 18

FMC 82 84 85 108 112 1974 warehouse agreement between carrier

and other person subject to Act outside section 15 Investigation of

Whaifage Charges on Bulk Grain at Pacific Coast Ports 8 FMC 653

656 1965 no Commission jurisdiction over terminal operator s grain

storage activities United States v American Union Transport Inc cited

above 327 U S at 453 The original congressional purpose of section

1 of the Act clearly was to reach all who carryon the specified

activities whether in or out of affiliation with a carrier Emphasis

added

But argue Hearing Counsel and Prudential Continental does operate

a terminal the N W Elevator and therefore it cannot discriminate

among vessels merely because of a contract of sale which its grain

selling division entered into Moreover the Commission has held that a

regulated person cannot segment its operations so as to avoid regulation

when such segmentation results in unjust discrimination Hearing Coun

sel cite a long line of cases in which common carriers by water have

been required to treat their customers fairly notwithstanding contrary

pressures from underlying labor agreements 13 But analysis of these

cases shows that they directly involved the common carriage oper

ations and duties of carriers not to discriminate while serving shippers

a fundamental duty long established in transportation law and one

which this Commission quite properly and readily enforced A typical

13 These cases are collected on page 19 of Hearing Counsel s Reply Brief They are South Atlantic

and Caribbean Line Inc Order to Show Cause 12 F M C 237 1969 affirmed 424 F 2d 941 D C

Cir 1970 Seo Land Service Inc and Gulf Puerto Rico Lines Inc Proposed lLA Rules on Containers

21 F M C 1 1978 appeal docketed No 72 1776 D C Cir Pacific Maritime Association v F M C

543 F 2d 395 D C Cir 1976 reversed on other grounds 435 U S 40 1978 United States v Sea

Land Service Inc 424 F Supp 1008 D N J 1977 appeal dismissed 577 F 2d 730 3rd Cir 1976

denied 439 U S 1072 1979 and Consolidated Express Inc v Sea Land Service Inc Denial of Motion

to Dismiss 16 SRR 817 1976

25 EM C
256 FEDERAL MARITIME COMMISSION

case is South Atlantic and Caribbean Line Inc Order to Show Cause 12

F M C 237 1969 affirmed South Atlantic and Caribbean Line Inc v

Federal Maritime Commission 424 F 2d 941 D C Cir 1970 in which

the Commission refused to allow a carrier to embargo certain con

tainerized cargo within 50 miles of a particular port without complying

with applicable tariff law although the carrier claimed that the restric

tive practice was mandated by an underlying labor contract The Com

mission rejected the contention stating

We are not here concerned with the ultimate validity of clause

19 in the labor contraCt Such a determination is beyond our

jurisdiction and is within the province of the National Labor

Relations Board But whatever its validity we cannot permit

the mere execution of a collective bargaining agreement to

override the clear requirements of a statute we are charged to

administer Statutes controlling the activities of common carri

ers and the obligations of those carriers are not subordinate to

the requirements of labor contracts Citation omitted 12

F M C at 241

The South Atlantic and Caribbean Line case and the other labor

related cases cited by Hearing Counsel involved carriers operating as

common carriers in a manner directly contrary to their common carrier

duties under fundamental transportation law 14 But in the present case

Hearing Counsel and Prudential are asking the Commission to impose

common carrier or public utility type duties in areas beyond Continen

tal s terminal Specifically they want the Commission in effect to

extend itself into Continentals grain selling and merchandising prac

tices specifically the practice of utilizing contracts of sale in which

ships other than LASH are preferred for reasons relating to some

extent to exceedingly complex market factors affecting the constantly

changing price of grain the need to maintain options in filling orders

until the last feasible moment the need to strive for a favorable eleva

tion when the grain is actually loaded etc As the record shows the

world of grain trading and selling is a unique and complex world unto

itself one that an agency with expertise in regulating ocean shipping

and practices of carriers and marine terminals is ill equipped to deci

14 One of the labor related cases cited by Hearing Counsel is somewhat different however That is

Federal Maritime CDmmlssion v Paelfte Maritime Association et 01 435 US 40 1978 That caae had to

do with labor agreements between various steamship tines and marine terminal operators and others on

management side and alongshoremen s and warehousemen s labor union on the employees side The

Court held that the Commission had jurisdiction over the agreements under section ISof the Act not

withstanding the fact that the agreements werepart of collective bargaining and might otherwise have

involved antitrust law The Court agreed that the agreements had competitive effects aa regards other

ports outside the collective bargaining unit and that the Commission could determine these effects in

the shipping industry under section 1 of the Act Although found in labor contracts the carrier and

terminal operator members of PMA were apparently attempting to impose certain labor terms on non

member ports so as to remove competitive advantages which PMA members believed the non member

ports had enjoyed

2S FM C
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 257

COMPANY

pher To argue as do Hearing Counsel that the Commission isn treally

being asked to extend itself into the murky world of grain trading

because the Commission would not be nullifying the restrictive non

LASH provision in Continentals contract of sale with Egypt but

would only be acting when that provision is implemented by Continen

tal at the Elevator seems terribly unrealistic and illogical Ifthe provi

sion in the contract of sale can be blocked by this Commission at any

time after a

party to the contract strives to follow it and this Commis

sion so holds what good would it do for Continental or its foreign

buyer to insert such a provision into a contract of sale How could

anyone reasonably argue that the Commission would not be affecting

the contract of sale itself

But as mentioned above Hearing Counsel and Prudential argue that

the Commission would really only be regulating Continentals terminal

operations not its grain business and that this is necessary because one

cannot allow a

regulated person to segment his operations so as to

avoid regulation if by so doing the person causes unjust discrimination

This analysis however does not hold up under scrutiny First does

anyone really believe that a giant grain company like Continental is

deliberately segmenting its grain business so as to avoid regulation by

the Maritime Commission There is no evidence that Continental began

its business as a

regulated terminal operator at agrain elevator and later

expanded into the grain trading which it is now attempting to segregate

from its terminal operations in order to avoid regulation under the

Shipping Act a law which was never intended to apply to the grain

business in the first place In reality Continental is a

grain trader and

merchandiser and is quite a well known and mammoth one at that and

it happens to operate a number ofgrain elevators at various ports as do

other giant grain companies like Cargill and Bunge

Second to argue that the Commission would only be regulating the

terminal operations of Continental rather than the grain trading oper

ations is rather unrealistic Such a contention makes the terminal tail

wag the grain company dog In other words Hearing Counsel and

Prudential believe that the Commission would merely be enforcing non

discriminatory Shipping Act standards on Continental s terminal oper

ations notwithstanding restrictive practices under Continental s grain

selling contracts But the primary business of Continental is grain trad

ing and merchandising not elevator operating The practices com

plained of did not really originate at the N W Elevator although

their effects were felt there They originated back in the grain trading

offices when grain companies including Continental formulated stand

ardized contracts of sale and trade customs which often preferred non

LASH vessels It is one thing to order a common carrier by water to

stop discriminating against types of shippers in its common carriage

business and to disregard contrary rules in underlying labor contracts

25 F M C
258 FEDERAL MARITIME COMMISSION

and quite another thing to order a grain company to stop drafting

contracts of sale which discriminate against types of vessels merely

because the grain company operates a terminal which is subject to

Shipping Act regulation A common carrier cannot generally discrimi

nate among its shipper customers under its tariff Such conduct falls

directly within the parameters of the common carrier s ancient holding

out to carry fairly However there is no ancient law which requires a

grain trader to fashion its terms of sale so as to ensure that it will

purchase the services of every type of vessel willing to carry the grain

In the labor related common carrier cases the Commission had little

difficulty in ordering the common carriers involved to terminate an

embargo file a correct tariff provision or cease and desist from carry

ing out discriminatory practices among shippers Such orders were well

within the Commission s authority and expertise But what kind of

order is the Commission supposed to fashion in a case such as the

present one in which the discriminatory practice originated in the grain

selling business How is the Commission supposed to order Continental

to allow its buyers to select LASH vessels without restraint in its

contracts of sale and do so by means ofContinentals terminal tarim As

Continental noted Continental s Posthearing Statement p

92 n 13 its

N W Elevator tariff did not preclude loading ofLASH barges when

sales contraots had not excluded them from carriage Moreover there

would be no reason to impose charges other than normal tariff charges

for loading LASH barges if Continental s contractof sale had permitted

LASH barges to load and they loaded at one of its elevators This

illustrates the point that the exclusionary practice ofwhich Prudential

complains originated in a sales contract long before any ship presented

itself at a grain elevator and sought loading services In other words

the discriminatory practice did not fall within the holding out of the

terminal which merely loads any vessel having a proper booking on

equal terms under a tariff UAgain it illustrates how Prudential and

Hearing Counsel are asking the Commission to use the terminal tail to

wag the grain company dog The situation is similar to telling a

common carrier which is preparing to load shipper A s cargo for

export to a foreign buyer that theoarrier must instead load and carry

shipper B s cargo to the same buyer because shipper B complains that it

should have gotten the order from the foreign buyer and would have

but for shipper A which happens to be the carrier s parent corporation

Ineleed therecorel hOWl a1lthe srain which I tored inContinental N W Elevator anel i

loaeled into v l for export belons to Continental itaelf title not p lnS to the buyer until pourinS

into the v 1 is completee Contlnental marine terminal tarllT at tho Elovator ther fore really con

t1tUleB a holel1ns out to provlele loadins lIIeI relateel services to any v I which h quireda book

Ins to carry the rain anelto charse all vessel tho samo tariff raleB for those servlcesLln Be sense thon

Continontal sraIn bo lno predominates oven at tho Elovator anel It marine lotminal bu lnoe1oo

not ovon beSin until a v l call anelbesin to recelvo tho loacIlns anel rotateel orvices

2S F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 259

COMPANY

Moreover if the carrier refuses to load B s cargo to the exclusion ofA

B will sue the carrier claiming unjust discrimination and that the

carrier is realIy furthering the interests of the carrier and not the

interests of shipper A It might be different however if the common

carrier refused to load shipper B s cargo after shipper B had made the

sale to the foreign buyer in order to alIow shipper A to snatch the sale

away from Shipper B In such a scenario the common carrier is violat

ing its clear duty to serve any shipper tendering cargo without discrimi

nation In the present case it is not the N W Elevator which

conceived the idea of refusing to load LASH barges under the original

bid to Egypt it was rather the grain selling and trading offices of

Continental

No matter how earnestly Prudential and Hearing Counsel urge the

Commission to find that Continental furthered its terminal interests

rather than its grain selling and trading business when it insisted on its

rights under the contract of sale to exclude use of LASH barges I

find

that the situation realIy involves a grain trading practice and a contract

of sale that the restrictive practice originated not at the terminal but in

the grain selling offices ofContinental and that the attempt to eliminate

such practices by regulating Continentals N W Elevator tariff is an

unrealistic attempt to thrust the Commission outside the parameters of

the Elevator s holding out into the world of grain trading and merchan

dising an example of using the tail to wag the dog

FinalIy a look at another terminal case in which the Commission

held that no violation of sections 16 First 17 or 15 of the Act had

occurred is helpful This is the case ofD J Roach Inc v Albany Port

District et al 5 F MB 333 1957 In that case a stevedore complained

that respondent Port District and Cargill both subject to the Act had

entered into an agreement providing for exclusive stevedoring by one

stevedore at the Albany grain elevator which barred complainant from

competing The Commission found no violation of law in this arrange

ment despite the exclusion ofthe complaining stevedore because Cargill

held itself out to perform and through contracts with vessels agreed

to perform stevedoring services and merely subcontracted certain of

its stevedoring operations to other stevedoring contractors who in

turn performed the work for Cargill and not for the vessel or the

cargo 5 F MB at 335 Thus although the Commission had found

that Cargill was a regulated terminal operator under the Act 5 F MB

at 334 335 and although in the performance of Cargill s grain loading

duties it barred alI but one stevedore the Commission found that this

was merely a subcontracting arrangement between Cargill and the

preferred stevedore and therefore one beyond the scope of sections 16

First or 17 It would appear that if in the performance of vessel

loading services as a terminal operator the terminal operator is free to

prefer a stevedore although this precludes other stevedores from doing

25 F M C
260 FEDERAL MARITIME COMMISSION

business at the elevator that Continental in the present case which is

primarily a grain seller and trader is free to prefer vessels in a contract

of sale which does not originate at the terminal although ultimately a

vessel is precluded from calling and having grain loaded at the termi

nal

Prudentials Allegations Regarding Concerted Restrictive Practices in the

Grain Trading Industry

Prudential has striven to develop a record showing concerted restric

tive practices of grain companies harming not only LASH operators

but private grain exporters as well as showing Continental s mistaken

notions of low productivity of loading of LASH barges Prudential

believes that it has shown that Continental as well as other grain

companies operating elevators are also violating the various terminal

tariffs which they file with the Commission and that its actions in

demanding penalties or premiums at its N W Elevator for loading

Prudential s LASH barges show that it was really furthering its termi

nal business by carrying out these restrictive activities The heart of

Prudential s arguments are found in its proposed findings of fact Nos

41 52 Prudential Posthearing Statement pp 22 34 Although I see

some merit to Prudential s arguments showing that the grain companies

follow an indusry practice preferring bulk vessels exercise a peculiar

control over grain exports through their elevators and have a some

what shortsighted view of LASH productivity all of this evidence

seems more relevant to antitrust law ie to the prohibitions against

combinations or conspiracies in restraint of trade than to the Shipping

Act If moreover there is a peculiar restriction against use of grain

companies elevators by private farmers or grain exporters outside of

the grain company clique I am not sure why such restrictions do not

similarly fall under the proscriptions of antitrust law or perhaps under

Department of Agriculture jurisdiction over public grain warehousing

rather than under the Shipping Act if they are indeed unlawful Pru

dential has shown so much that it has perhaps shown grounds to pursue

the matter in greater depth under antitrust law or perhaps the U S

Warehouse Act However much these facts may gain sympathy for

Prudential and other LASH operators this does not mean that the

Commission was given jurisdiction to correct the various inequities if

such they be

Briefly Prudential argues on the basis of evidence of record which it

developed at the hearing that despite the public warehouse nature of

their elevators the various grain companies have developed an industry

understanding and practice that bulk vessels are to be preferred on sales

of grain overseas and that LASH vessels will be excluded from grain

elevators operated by these companies or if not refused will be loaded

only upon payment of a heavy premium in the sales price as a

25 FMC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 261

COMPANY

9ondition of lifting the refusal to accept LASH barges Prudential

Posthearing Statement pp 23 24 Furthermore the grain companies

control the use ofthe export elevators on the East Coast by excluding

private grain exporters or farmers from storing grain at an elevator

which they operate and from exporting therefrom Prudential asserts

that under a long established trade restriction in effect since 1978 and

earlier a

person desiring to sell grain for export from the U S East

Coast was required either to load it through his own export elevator or

to purchase the grain at the ocean side of an export elevator operated

by a grain company which was itself engaged in the grain export

business Prudential Posthearing Statement p23 In other words

Prudential is saying that the grain companies control the exportation of

grain through the U S East Coast because they operate all the grain

elevators there and do not permit anyone to ship grain through the

elevators but themselves Therefore if any person desires to export

grain through the U S East Coast if he does not have his own export

terminal facility he must buy the grain from a grain company operating

the elevator F O B end of spout on the vessel Thus Continental and

other grain companies by an unlawful conspiracy control grain exports

through the East Coast and do so with restrictive provisions excluding

LASH ships which restrictions are contrary to their terminal tariffs

and also to their status as licensed warehousemen However if Conti

nental or any member of this group of grain companies decides to

allow a LASH barge to load at one ofthe elevators on the East Coast

it may do so but will extract a penalty or premium from the LASH

opeator without tariff authority Moreover even if one grain company

were disposed to accept LASH barges for loading under a contract of

sale the existence of the industry practice to exclude LASH would

probably mean that the grain company would ultimately refuse LASH

because no other grain company would fill the contract under LASH

terms

Even if we accept all of Prudentials contentions as proven and

there is record support for them these allegations seem to relate to a

combination in restraint of trade under antitrust law far more than an

unfiled agreement in the shipping industry among carriers or terminal

operators under section 15 of the Act Again the root cause of the

problem of which Prudential complains is apractice which originated

in the grain industry not the terminal business A concerted refusal to

deal if that is what this is is a classic type of antitrust violation ie a

group boycott which is considered to be per se unlawfuJ 16 IfPruden

16 Ifa

group of competitors agree not to deal with aperson outside the group oragree to deal only

on certain terms this is a restrictive combination violating section 1 of the Sherman Act See Klors

Inc v Broadway Hale Storage Inc 359 U S 207 1959 Paramount Famous Lasky Corp v us 252

Continued

25 F MC
1

I

262 FEDERAL MARITIME COMMISSION

I

tial is correct in arguing that the grain companies have engaged in such

a boycott the obvious remedy is an antitrust not a Shipping Act suit

This again illustrates the point that Prudential s problems originated not

at the N W Elevator but in Continental s grain trading offices so that

this Commission cannot effectively grant relief To demonstrate this

point one need only consider that Continental and the other grain

companies having tariffs on me with this Commission can quite easily

remove themselves from all Commission regulation even at their termi

nals merely by specifying in their tariffs that they no longer hold out to

serve common carriers That is exactly what happened in New Orleans

Steamship Association v Bunge Corp cited above 8 F MC at 694 and

Agreement No T2719 16 F MC at 321 cited above Also as men

tioned above even if the grain companies do not cancel their holding

out there is no practical Shipping Act solution to Prudentials problem

since there is no realistic amendment to the terminal tariff which could

account for the continually changing market conditions in the grain

selling and trading industry 17

Another aspect ofPrudential s allegations concerns Continental s pur

ported refusal to handle any grain other than its own at its N W

Elevator According to testimony of the former manager of the N

W terminal Mr Winnie the nature ofthe grain exporting industry has

changed since 1972 when the Government had large surpluses of grain

Presently no person other than Continental apparently exports grain

through the N W Elevator See Prudential Posthearing Statement p

26 and record references therein quoted This non handling of a pri

vate person s grain at the N W Elevator Prudential suggests is also

contrary to Continential s duties as a licensed public grain warehouse

publishing a warehouse tariff and operating under section 254 of the

United States Warehouse Act 7 U S C 241 et seq If so however

such a matter is obviously the business of the agency that administers

that Act not the Federal Maritime Commission which has specifically

stated that it does not regulate grain storage practices under the juris

dictionof another agency Investigation of Wha1fage Charges on Bulk

Grain at Pacific Coast Ports cited above 8 F M C at 656 cf Agree

ments 8225 and 8225 1 cited above 5 F MB at 653 6S4 California

Stevedore Ballast Co v Stockton Port District cited above 7 F MC

us 30 1930 us v Flnt National Pictures Ine282 U S 44 1940 Such r trlctiv group agree

ment are doomed inh rently harmlUl and cannot be ju tified und ranlltruatlaw i th y

are per

violationa o thatlaw Paramo ntFamo Lasky Corp v us cited abov

On o th graln company Ei valor taritTs does pecify a

pecial charg or loading LASH

barges as w 1I as tweend cker hip cenlS p

r outbound bush lThi i Cargill Norfolk tariff

Appar ntly all oth r I valor tariff make no uch pociai proYi ion or LASH See Prud ntlal

Posthoaring Stalom nt pp 31 32 n 1 This act by i I how v r does not tabli h that th r

is a

practical tariff charg that can deal with uch matlor8 as J vallon curr nt commodity mark t con

dillon and lost ales which Continental claim 10 be involved when LASH in tead o bulk v 1a ar

allowed10 load at an I valorthat xpeclod bulk v l to call

25 FMC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 263

COMPANY

at 81 See also New Orleans Steamship Association v Bunge Corp

cited

above 8 FMC at 694 695

Finally Prudential argues that Continental is really furthering its

terminal intertest not its grain selling interests by excluding LASH

barges from its N W Elevator and furthermore excludes the barges

under a mistaken idea that LASH barges loading productivity is lower

than all other vessels To support this contention Prudential points to

evidence showing that when it negotiated with Continentials grain

selling executives in New York seeking to pay some sort of penalty or

premium in order to load the grain at the N W Elevator despite

the contract of sale excluding LASH Continentals suggested figures

were based upon terminal cost considerations and Continental s mistak

en estimates of slow productivity of LASH barges The record does

show that Continental took an unnecessarily dim view of LASH load

ing productivity since LASH could be loaded about as fast as deck

ships which Continentals contract of sale did not exclude and Conti

nental had not exercised all the diligence that it might have done in an

effort to increase the loading rate of LASH barges at the N W

Elevator As I have also discussed earlier the record is full ofevidence

showing various loading rates of LASH barges at the N W Elevator

and elsewhere as compared to loading rates for other types of ships

such as bulk and deck ships It is rather involved and complex but does

indicate that LASH barges did rather well in loading when compared

to deck ships and liner vessels and that there is considerable loss oftime

at the N W Elevator when no pouring occurs regardles of which

type of ship is on berth Bulk ships do appear to load faster than any

other type even if not exactly at the four to one ratio compared to

LASH that Continential believes but the considerable lost time when

the Elevator is not pouring resulting in slow productivity generally

should be considered when evaluating the impact of loading LASH

barges on other loadings A clear answer to the question whether

Continentials negotiations with Prudential leading to a

possible penal

ty payment relates to the terminal business or to the grain selling

business is not possible It appears that there are elements of both It

seems true enough that Continential was to some extent basing its end

of the negotiations with Prudential on assumed productivity rates of

LASH barges compared to bulk vessels This could translate into addi

tional costs at the terminal for example labor overtime or vessel

demurrage with Continential would have to pay to other vessels backed

up and waiting for LASH barges to complete loading These factors

seem to relate to the desire of Continential to increase productivity at

the terminal But as Continential argues there are other factors that

enter into the attempt to substitute LASH barges for bulk vessels which

are not compensated by a productivity penalty and relate to the grain

selling business Mainly these are lost elevation and loss of sales that

25 F M C
264 FEDERAL MARITIME COMMISSION

could have been made while barges were loading These factors it

would appear pertain to the state ofthe grain market

Perhaps Continential s fears that its N W Elevator would become

plugged if LASH barges had been allowed to substitute for bulk

vessels was mistaken and probably its views as to the rate of LASH

loadings were too pessimistic Therfore perhaps Continential should

reconsider the grain industry practice of excluding LASH from the

terms of its contract of sale with Egypt and risk problems if it had to

transfer the sale to another grain company which also followed the

restrictive practice However even if it seems unfair for Continental to

follow a discriminatory provision in contracts of sale against LASH

barges which do no load as slowly as Continental apparently thinks

one again must face the fact that the restrictive provision against

LASH originated in Continentals contract of sale and is apparently

often followed by other grain companies in their contracts of sale

Therefore to grant Prudential the relief it seeks the Commission would

have to hold Continental liable for refusing to depart from its contract

of sale which it made as a seller of grain Furthermore if the Commis

sion orders Continental to refrain from preferring bulk vessels in its

contracts of sale or from barring LASH vessels in those contracts when

Continental wishes to base its sales price in consideration of the use of

bulk vessels or in consideration of the need to maintain flexibility in

filling the order without fear of losing elevation because of slower

loading LASH barges the Commission is obviously interfering with

Continental s grain trading and selling business no matter how well

motivated the Commission may be in seeking to remove an unwarrant

ed stigma from LASH vessels Although there do appear to be aspects

ofthe terminal business which entered into Continental s

thinking when

it negotiated with Prudential regarding a possible penalty payment and

perhaps even some concern over terminal productivity generally even

when the contract of sale was formulated because of a belief that

LASH productivity was relatively slow this entire controversy seems

to boil down to the question of whether this matter is essentially one

involving the grain selling business and the rights of Continental under

its contract of sale or whether it involves a terminal matter and the

terminals duty to serve its customers without discrimination Ibelieve

that a preponderance of the evidence shows that the case primarily

involves grain trading and selling and related practices of that business

and that the relief which Prudential seeks namely a cease and desist

order and monetary damages because of Continentals refusal to waive

its rights under its contract of sale simply lies beyond the Shipping Act

and this Commission s jurisdiction If the restrictive practices against

LASH vessels of which Prudential complains did originate in 1978 or

earlier among various grain companies and those companies continue

concertedly to place such restrictions in their contracts of sale as

25 F M C
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 265

COMPANY

Prudential contends then it would appear that Prudential ought to seek

relief under that body of law which deals directly with concerted

refusals to do business and similar restraints of trade namely the

antitrust laws Ido not believe that this Commission is authorized by

law to change a practice in the grain industry which is intertwined with

complex market considerations by looking at grain elevator tariffs and

trying to extend obligations of common carriers into grain selling prac

tices or by holding Continentals terminal operating personnel responsi

ble for vessel booking practices of its grain traders and salesmen

Prudential s Allegations of a Section 15 Violation and of Continentals

Status as a Carrier

Since Prudential added two more allegations during the course of

this proceeding Ibelieve some mention of them should be made The

first concerns Prudentials allegation that Continental and other grain

companies have violated section 15 by entering into agreements which

discriminate against LASH vessls This allegation was not made in the

original complaint nor in Prudentials Rule 95 prehearing statement but

appeared in Prudential s Posthearing Statement pp 75 77 The second

concerns Prudentials allegation that Continental which itself some

times has acted as a carrier competing with Prudential ought not to be

allowed to use its terminals to exclude other carriers See Prudentials

Posthearing Statement p 71 I

find neither allegation sufficient to alter

my decision

As to the first allegation regarding an unfiled section 15 agreement I

find several deficiencies in both law and fact The first problem is

procedural because of lack of notice of such an issue in the original

complaint which was confined to allegations of violations of sections 16

and 17 of the Act It is procedurally improper and untimely to attempt

to litigate an issue which broadens the original complaint at such a

belated point in time A similar problem arose in Levatino Sons v

Prudential Grace Lines cited above 18 F MC 82 when the Initial

Decision in that case had found violations by respondent carrier be

cause of shutouts of cargo although the original complaint and the

hearing had given notice only of unjust discrimination Although the

finding of violation was made under the same sections of law sections

14 Fourth and 16 First as involved in the matter of discrimination the

Commission found the finding to be improper because of inadequate

notice ot respondent The Commission stated

As to shutouts at issue in this proceeding was only Levatino s

charge that Grace had violated sections 14 Fourth 16 First

and 17 of the Act by failing to provide Lavatino with space

accommodations for Levatino s cargoes which Grace had con

tracted to carry While we do not insist upon overnice limita

tion ofissues to those framed in the various pleadings we are

25 F M C
i

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266 FEDERAL MARITIME COMMISSION

i

of the opinion that the extension of this claim to a general

investigation of a course of conduct pursued by Grace with

respect to many other shippers was unwarranted 18 F M C

at 86

A second problem also concerns the question of notice This has to

do with the fact that Prudential in its PosthearingStatement ischarg

ing that Continental has entered into unfiled agreements with other

grain companies operating terminal elevators on the East Coast How

ever these other companies were never named as respondents in the

original complaint and are only referred to generally or occasionally in

Prudential s Posthearing Statement If the Commission is expected to

find that grain companies operating elevators on the East Coast have

entered into agreements which make them subject to the requirements

of section 15 much more notice would be necessary under basic princi

ples of administrative law The alleged companies would have to be

named as respondents in the complaint and given an opportunity to

answer and defend the oharges None of this was done Accordingly

this proceeding cannot make findings under section 15 See Administra

tive Procedure Act 5 U S C 554 b Imposition of SUJ Charge by the Far

East Conference 9 F M C 129 141 1965 see also Agl e

ment No

T2880 as Amended 14 SSR 1567 1568 1975 question ofjurisdiction

under section 15 requires fullhearing

The final problem with findings under section 15 concerns the fact

that parties to agreements subject to that law must be subject to the

Act in the fUst place and their agreements must fall under one of the

subject matter categories ofthe law Gram companies are not ordinarily

subject to the Act and as Ihave discussed above the subject matter of

the purported restrictive agree11entsoriginllted in the grain trading and

selling industry not at marine terminals As I have discussed earlier

not every activity or arrangement even of regulated persons is subject

to Commission jurisdiction See e g Agreement Nos T 1685 and T

1685 6 cited above 19 F MC at 457 458 Levatino Sons v Prudential

Grace Lines cited above 18 F MC at 84 85

Prudential s final agrument is that sinQe Continental sometimes char

ters ships itself which load grain at itsE1evator itlas operated as a

carrier itself at the Elevator If so Prudential asserts that Continental

should not be allowed to lse its public terminals to exclude competing

carriera from the trade PrudentialsPosthearing Statement p

71

This argument I fmd to be exceedingly weak If a terlDinaloperator

under Shipping Act jurisdiction has a duty to service all customers

having a

legitimate reason to call at the terminal to be loaded or

unloaded as indeed it does preferring one carrier s vessels over an

other would violate that duty See Chr Salv sen Company Ltd v

West Mich Dock Market Corp cited above 12 F M C 135 Howev

er there is no evidence that Continental gave special preferences to

25 F MC
PRUDENTIAL LINES INC V CONTINENTAL GRAIN 267

COMPANY

vessels which it had itself chartered over any other vessels Moreover

it is not even clear from the limited record on this point what kind of

carrier Continental is even if it can be found to be some type of carrier

A similar argument was made in New Orleans Steamship Association v

Bunge Corp cited above 8 F M C at 693 694 In that case complainant

argued that the Bunge Corp had provided ships to load and carry

grain for a variety ofbuyers and therefore was itself a common carrier

The Commission quickly rejected the argument finding that Bunge s

operations did not constitute the undertaking to carry for hire for

those seeking to employ the carrier 8 F MC at 693 and that a ll of

Bunge s shipments are in fulfillment of contracts for the sale of grain

Bunge does not undertake to carry for anyone it does not sell ocean

transportation it merely delivers grain in chartered vessels to its cus

tomers 8 FMC at 694 I therefore find no merit to the argument

ULTIMATE CONCLUSIONS

Continental Grain Company is first and foremost a grain selling and

trading organization It operates the N W Grain Elevator at Norfolk

and in so doing furnishes terminal facilities in connection with a

common carrier by water thereby bringing its N W Elevator under

the jurisdiction of the Shipping Act 1916 Its arguments that it does

not fall under such jurisdiction because it does not serve common

carriers or vessels in common carriage and even if it does it does so

infrequently do not withstand scrutiny The record shows that

common carriers have sent vessels or barges to the N W Elevator for

loading and that Continental publishes and files a terminal tariff which

does not exclude common carriers from the Elevator and even defines

liner vessels and operates under a lease which calls for Continental to

maintain a public terminal open to all parties The doctrine that

Continental should not be found subject to the Act because of relative

ly infrequent calls by common carriers or by vessels of common carri

ers was enunciated in a decision of the United States Court of Appeals

for the First Circuit in a case in which the Commission was not a party

and which has not been followed by the Commission

Although Continental does operate the N W Elevator as a person

subject to the Act not everything the grain company does is subject to

that Act Specifically Continental s practice which appears to be a

grain industry practice as well in specifically preferring non LASH

vessels in its contracts of sale ofgrain originated in the complex world

of grain selling and trading for reasons which while not totally re

moved from consideration of terminal efficiencies are based upon the

numerous factors which grain traders consider when formulating their

contracts of sale Therefore the practice while ultimately affecting

Prudential adversely is one which lies outside the scope of the Ship

ping Act and the expertise of the Commission Evidence which Pru

25 F M C
268 FEDERAL MARITIME COMMISSION

dential developed that this exclusionary practice is common in the

grain industry or that it violates Continentals status as a licensed

warehouseman regulated by the Department of Agriculture deals with

matters within the jurisdiction of the antitrust laws or the Department

ofAgriculture

The situation in which Prudential found itself commands considerable

sympathy since Prudential was precluded from carriage of a sizable

shipment ofwheat merely because it operates LASH vessels and barges

and the loading rate of those barges at grain elevators is not as slow as

Continental believes However Prudential was seeking to obtain a

booking which was not permitted in Continental s contract of sale and

was induced to do this by the actions of the Peralta shipping agency

which had no authority to go outside the provisions of the contract of

sale Therefore no matter how the case is analyzed it comes down to

the fact that Prudential was asking Continental to give up its contrac

tual rights as a grain seller and now wants the Commission to hold

Continental liable for monetary damages merely because Continental

also operates the N W Elevator through which this particular ship

ment moved but which it did not necessarily have to move The

argument that the Commission would not really be regulating a provi

sion in a contract of sale of grain but would really be confining its

regulation to Continentals terminal operations is not realistic This

argument would not only have the tail wag the dog but would ignore

the fact that the practice complained of originated not at the terminal

but in the grain selling and trading industry and that the Commission

would be attempting to extend its shipping expertise into a totally

different industry

NORMAN D KLINE

Administrative Law Judge

2S F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 81 59

GENERAL TRANSPAC SYSTEM POSSIBLE VIOLATIONS

OF SECTION 15 SHIPPING ACT 1916

NOTICE

August 23 1982

Notice is given that no exceptions have been filed to the July 16

1982 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 FRANCIS C HURNEY

Secretary

25 FMC 269
I

i

I

I

FEDERAL MARITIME COMMISSION

DOCKET NO 81 59

GENERAL TRANSPAC SYSTEM POSSIBLE

VIOLATIONS OF SECTION 15 SHIPPING ACT 1916

Respondent found to have violated section IS by entering into an unfiled cooperative

working arrangement with another non vessel operating common carrier

No penalty found to be warranted

George J Gme ch for General Transpac Systems

John Robert Ewen Joseph B S unt and Aaron W Reese for Office of Hearing

Counsel Bureau of Hearings and Field Operations

INITIAL DECISION 1 OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Finalized August 23 1982

The respondent General Transpac System is a Nevada corporation

which during the period relevant here operated as a non vessel operat

ing common carrier NVOCC Mr George J Gmelch was Chairman

ofthe Board and Chief Executive Officer ofGeneral Transpac and Mr

Herb Pierce was its Vice President Sometime prior to April 30 1976

Mr Pierce came to Mr Gmelch with a problem Under General Tran

spac s tariff Transpac Container Freight Guam Freight Tariff No S

FMC No 6 a shipper in order to determine the total cost of a

shipment had to add to the port to port rate charges for such things as

wharfage handling container stuffing and delivery at destination A

number of General Transpac s customers wanted a single all inclusive

door to door rate Gmelch suggest that they simply publish such a

rate in General Transpac s existing tariff However Pierce had been in

touch with someone at the Commission s San Francisco field office and

was told that General Transpac could not publish its all inclusive or

door to door rate in its tariff so long as it retained the port to port rate

in the same tariff 2

Gmelch had Pierce check again with the San

Francisco office and its position remained the same

At this time Gmelch was the sole owner of Transpacific Freighting

Corporation Transpacific s activities ranged from owning a vineyard in

Napa VaHey to operating a steamship agency in San Francisco Trans

1

This decision will become the decision ofthe Commission in the absence ofreview thereof by the

Commi88ion Rule 227 Rules of Practice and Procedure 46 CPR 02 227

The record is not clearon either the person contacted at theSAn Francisco office or theparticular

question put to that person The senera1 basis for the position of the San Francisco office eem to

have been that a llIriffcould not contain two dlfTerent rates forthe 88Me commodity and service

270 2S FMC
GENERAL TRANSPAC SYSTEM POSSIBLE VIOLATIONS OF 271

SECTION 15 SHIPPING ACT 1916

pacific was incorporated in California in 1955 to operate chartered

vessels primarily in the bulk trade from the West Coast It became

more or less dormant in 1957 or 58 and the vessels it was operating

were redelivered It was around this time that Gmelch acquired an

interest in Transpacific In 1971 Gmelch acquired the remaining shares

and became the sole owner In 1974 Transpacific sought steamship

agency activity and representation because Gmelch no longer em

ployed by Pacific Far East Line had friends or connections in the

shipping industry and felt that there was a need for a

steamship

agency representation on the West Coast Transpacific had no salaried

employees and while the corporation s official address was 956 Sacra

mento Street a residence Gmelch used General Transpac s office to

conduct operations It was Transpacific that Gmelch used to resolve

what he saw as the dilemma presented by the need for a door to door

rate and the position of the Commission s San Francisco office on the

inclusion of that rate in General Transpac s tariff On April 30 1976

Transpacific Freighting Corporation published A Non Vessel Operat

ing Common Carrier TariffNo 2

3

From the beginning Transpacific was a paper carrier Aside from

distributing a circular giving a

summary of the services it offered

Transpacific s advertising as an NVOCC was restricted to a tele

phone listing Transpacific s function was to serve as a kind of second

choice offered to shippers who when contacted by General Transpac

said they were only interested in an all inclusive or door to door rate

The arrangement between General Transpac and Transpacific is con

tained in two memoranda Under it General Transpac paid all expenses

and performed all services connected with Transpacific cargo Trans

pacific was then invoiced for their pro rata share of the expenses

and for 80 of the container profit to cover handling costs On

January I 1977 General Transpac and Transpacific entered into an

agency agreement under which General Transpac appointed Trans

pacific its agent in California and Guam General Transpac was to bear

the expenses of the agency and Transpacific was to pay 99 5 ofthe

ocean freight revenue generated under its Polypac Container Service

for services rendered under the agreement 4

Sometime after Transpacific s tariff became effective Mr Louis A

Hammond a General Investigator from the Commission s San Francis

co office visited the offices of General Transpac and Transpacific The

purpose ofthe visit was to determine whether TranspaGific had handled

3

Tariff No 1 was rejected by the Commission for reasoRs not stated in the record Transpacific was

known by the trade name Polypac Container Freight

4

The invoicing of Transpacific for 80 of the freight was an initial step only and Transpacific s

total compensation for its activities as an NVOCC and agent was one half of one percent of the reve

nue generated on its shipments

25 F MC
272 FEDERAL MARITIME COMMISSION

any shipments prior to April 30 1976 when its tariff went into effect

Mr Hammond found no violations and in the course of discussions

with Messrs Gmelch and Pierce restated the position that a carrier

could not have two different rates for the same commodity 6

In addi

tion Mr Hammond expressed his opinion that there was still some

question as to the validity of the two rates even though they were

published in separate tariffs It was his idea that two NVO s or

carriers working through a single agent could not have two tariffs

for the same commodities and the same service 6 Confronted with the

proposition that it might still be in violation of the law Transpacific

ultimately cancelled its tariff in August of 1977 and General Transpac

amended its tariff to include the door to door rate as it had wanted to

do from the beginning

His investigation completed Mr Hammond prepared a draft of his

report on the matter and it was at this time that his superiors raised the

question of a possible violation of section 15 based upon the existence

of two separate corporations and the apparent lack of any agreement

between them which had been filed with and approved by the Commis

sion as required by that section The possible violation of section 15

was included in the report but no mention of it wasmade to anyone at

General Transpac or Transpacific 7

On February 9 1981 Commission s Bureau of Hearings and Field

Operations asserted a claim of 20 000 against General Transpac for

carrying out an unfiled section 15 agreement with Transpacific during

the period April 30 1976 through August 15 1977 General Transpac

rejected the claim and this proceeding was instituted

DISCUSSION AND CONCLUSIONS

The issues to be resolved here are

1 Whether General Transpac System violated section 15 Ship

ping Act 1916 by carrying out an unfiled cooperative work

ing arrangement with Transpacific Freight Corporation sub

ject to section 15 ofthe Shipping Act 1916 and

2 Whether civil penalties should be assessed against General

Transpac System pursuant to 46 U S C 83l e for violations

of section 15 of the Shipping Act 1916 and if so the amount

of any such penalty which should be imposed taking into

consideration factors in possible mitigation of such a penalty

6

There werequalifications to this flat prohibition which are not relevant here

Other portions of Mr Hammond s deposition make it clear that he thought that Oeneral Transpac

and Transpacific were one entity and that the two corporations were a ufiction At this time

Omelch owned 43 of Oeneral Transpac and elTectively controlled it

When asked why no further contact was made with r pondent Mr Hammond explained that the

two tarilTs had been discontinued and a modified sinile tarilT substituted for them and that this elimi

nated the problem as faras he was concerned

25 F MC
GENERAL TRANSPAC SYSTEM POSSIBLE VIOLATIONS OF 273

SECTION 15 SHIPPING ACT 1916

That there was an agreement between General Transpac and Trans

pacific is admitted by respondent The dispute arises over whether the

agreement had to be approved by the Commission under section 15

which in relevant part provides

Every common carrier by water shall file immediately

with the Commission a true copy or if oral a true and

complete memorandum ofevery agreement with another car

rier or person subject to this Act or modification or cancella

tion thereof to which it may be a party or conform in whole

or in part providing for an exclusive preferential working

arrangement

Transpacific published and filed with the Commission a tariff under

which it held itself out to perform all the services of an NVOCC It

issued its own bills of lading and so far as the shipping public had any

reason to know Transpacific was an NVOCC While it is true that

Transpacific did not actually perform as an NVOCC leaving to Gener

al Transpac the performance of those functions it was not by its own

characterization of its activities a mere agent of General Transpac

The agreement between General Transpac and Transpacific was a

cooperative arrangement between two NVOCC s and should have been

filed with the Commission 8

York Forwarding Corp J B Wood Shipping

Co Inc and Edwards Fuge Corp 15 F MC 114 1972

Even if the arrangement here were a pure agency arrangement

respondents contention that the Commission s exemption of agency

agreements from the requirements of section 15 in 1981 demonstrates

that agency agreements were never intended to be filed under section

15 is without merit The Commission did not exempt agency agree

ments between common carriers 9

See 46 CFR 502 11 But respond

ent argues that in refusing to exempt agency agreements between carri

ers the Commission gave as its reason the potential for conflicts of

interests as well as possible market sharing in such agreements Since

the agreement between General Transpac and Transpacific involve

neither respondent says it is not within section 15 It hardly seems

necessary to point out that the Commission did not say that only those

agency agreements between common carriers which contained conflicts

of interests or included market sharing were within section 15 The

Commission made it quite clear that all agency agreements between

common carriers had to be filed with and approved by the Commission

under section 15 of the Act See Order adopting the exemption 24

F MC 301 1981

8

Respondent argues that even if there was aviolation it was a technical one This argument goes

only to the amount of any penalty which might be assessed because of the violation not to whethera

violation occurred

9 NVOCC s are common carriers See e

g Bernhard Ullmann v Puerto Rican Express Co 3

F M B 771 1952

25 F M C
274 FEDERAL MARITIME COMMISSION

Where two separate corporations each holding itself out to the public

as NVOCC s enter into an agreement whereby one assumes responsibil

ity for conducts the operations of and reaps profit from the other that

agreement is a cooperative working arrangement subject to section 15

of the Shipping Act 1916 Since respondent was a party to such an

agreeme 1t it was in violation of section 15 for the life of that agree

ment

The remaining issue is whether civil penalties should be assessed and

if so the amount of the penalty taking into consideration possible

factors in mitigation The Office of Hearing Counsel Bureau of Field

Operations the Bureau recommends that a penalty of 5 00000 be

assessed The basis for this amount is 1 The Agreement which violat

ed section 15 was in effect from April 30 1976 through August 15

1977 and 2 The penalty for violating section 15 is 1 000 per day for

each day the violation continues and the agreement generated revenues

of 57 600 From this the Bureau concludes that a penalty of 5 000

would be reasonable considering the nature of the violation and the

extent of the operations under the cooperative working arrangement

Respondent somewhat indignantly urges that even if it did violate

section 15 the imposition of any penalty would be unconscionable

because If there was ever a case where acompany did its best to

follow FMC advice and was clobbered by doing so this is it Stated

briefly respondent s position is that a person should not be punished if

by accepting and acting upon representations of an official of the

Commission that person commits a technical violation ofthe Shipping

Act The Bureau rejects this contention and argues that any discussions

between the Commission s

Investigator Mr Hammond and Messrs

Gmelchand Pierce are irrelevant to the issue to be resolved here

whether General Transpac violated section 15 10 This may well

be true but there are two issues in the case and the discussions

dismissed by the Bureau as irrelevant are directed to the second issue

whether a civil penalty should be assessed and if so how much should it

be The Commission s order calls for the consideration of factors in

mitigation in answering the question of whether a civil penalty should

be imposed and if so the amount of the penalty However the Bureau

10 The additional araument is made that Whatever the reason forTFC Transpaciftc becoming an

NVOCC even lSIuming but not concedlna that it waa the result of misleadlnlllnformation from

Commission personnel it cannot be conceived that Commission personnel directly or indirectly

misled OTS Oeneral Transpac into maklnll and carrying out a

cooperative working arrangement in

violation of section 15 Itis difficult to decide just what to make of this Ifwe lSIume that Trans

pacific became an NVOCC because of Umiateading information from Commission personnel then

Commission personnel directly or inclirectly misled Transpacific Ifthe proposition is that Commis

sion personnel did not deliberately mislead Oeneral Transpac nobody is arguing that they did Finally

if the position is that the misleading information need not have lead to aviolation of section IS this

may be true i e

respondent may have had other options open to it But this does not alter the fact

that the representations did create tbe circumstances which prompted respondent to do what it did

25 FMC
GENERAL TRANSPAC SYSTEM POSSIBLE VIOLATIONS OF 275

SECTION 15 SHIPPING ACT 1916

does not discuss a single one in arriving at its recommended figure of

5 000 and the respondent simply offers without citation or reference to

authority the proposition that because it was misled it should not be

punished

General Order 30 46 CFR Part 50S sets out in some detail the

procedures to be followed in the compromise assessment and settle

ment of civil penalties but when it deals with the standards or criteria

to be applied in determining the amounts of penalties when they are

compromised assessed or settled the Order simply says for the

purpose ofthis part the criteria for compromise settlement or assess

ment may include but need not be limited to those which are set forth

in 4 CFR Part 101 105 The regulations contained in Parts 101 105

were issued jointly by the Comptroller General and the Attorney

General under section 3 of the Federal Claims Collection Act of 1966

80 Stat 309 and their purpose was to prescribe standards for the

administrative collection compromise termination of agency collection

and the referral to the General Accounting Office and to the Depart

ment of Justice for litigation of civil claims by the Federal Government

for money or property The standards stop short of any prescriptions

for the assessment ofpenalties in formal proceedings such as this Civil

penalties as distinguished from debts are dealt with specifically in

only two instances 1 Agencies seeking the collection of statutory

penalties or forfeitures will give serious consideration to the sus

pension or revocation oflicenses for any inexcusable prolonged or

repeated failure of a debtor to pay a claim 46 CFR 102 7

11 and

2 Section 103 5 provides

Statutory penalties forfeitures or debts established as an aid to

enforcement and to compel compliance may be compromised

if the agency s enforcement policy in terms of deterrence

and securing compliance both present and future will be ade

quately served by acceptance of the sum to be agreed upon

Mere accidental or technical violations may be dealt with less

severely than willful and substantial violations 46 CFR 103 5

While section 102 7 is inapplicable here section 103 5 can with little

change and for such help as it gives be applied to the assessment as

well as the compromise or settlement of civil penalty claims But aside

from this there are no other published standards clearly applicable to

the assessment ofcivil penalties

The imposition of civil penalties is obviously designed to serve the

generic goal of promoting or furthering a statute s

regulatory objec

tives Penalties can do this in at least two ways The first and the most

widely accepted way is the motivation of future behavior or deter

11 There is no license to suspend or revoke here and the debtor would seem to be one against

whom acivil penalty has already been assessed but who refuses to pay

25 F MC
276 FEDERAL MARITIME COMMISSION

rence The prospect ofpunishment it is thought will foster the behav

ior the agency wants to encourage and discourage behavior the agency

wants to inhibit The second and one which is not really relevant here

is compensation Almost by definition a civil money penalty does not

serve the specific compensatory function of making whole an identifia

ble individual who has been injured by the wrongful act or violation

However it is sometimes argued that civil penalties can be viewed as

compensation to society at large for the harm it has suffered at the

hands ofthe violator 12

That the motivation of behavior or deterrence is the overriding if not

the only purpose of the civil penalties imposed by the Shipping Act

was most recently illustrated in the enactment ofP L 96 25 the statute

under which this proceeding was brought Among other things P L

96 25 amended the Shipping Act to increase the amount of penalties

that could be assessed against carriers for illegal rebating and gave the

Commission the authority to assess the increased penalties itself 13 In

explaining the need for the increased penalties the House said

The penalties for rebating under existing provisions of the

Shipping Act 1916 have not been sufficient to take the profit

out of rebating and the difficulty of enforcing those penalties

often makes rebating worth the risk House Rep 96 232

Shipping Act Amendments 1979 96th Congo 1st Sess 1979

page 8

In a similar vein the Senate said

The bill substantially increases the monetary penalties and

adds a new penalty oftariff suspension for rebating violations

The Committee shares the Commission s belief that these pen

alties will be far more effective asa deterrent than the rather

nominal penalties now in the Shipping Act 1916 Sen Rep

96 147 Shipping Act Amendments 1979 96th Cong 1st Sess

1979 page 9

Whatever may be the purposes of particular civil penalties the need

for standards in their imposition is widely recognized The Administra

tive Conference of the United States now a permanent agency ofthe

Government whose purpose it is to develop and recommerid improve

ments in the legal procedures by which Federal agencies administer

regulatory and benefit programs dealt wi h the assessment of civil

l

Translating compensation into aset of standards presents unique dimculties even in cases where it

has been specifically recognized as a

legitimate objective of money penalties Since money penalties

serve a

general rather than aspecific compensatory functioR the eney mUlt in theory measure the

nonspecific social harm caused by the illegal acllvity aditllcult enough task in environmental c

such as air or water pollution but virtUally an impossible one in c of Shipping Act violations How

is the social harm of an unflled aeolian IS allreement measured

P L 962S amendedsecllon 32 of the Act to authorize the Commission to its own penallles

Instead of referring the case to the Department of Justice for prosecution in the Federal District

Courts

2S FMC
GENERAL TRANSPAC SYSTEM POSSIBLE VIOLATIONS OF 277

SECTION 15 SHIPPING ACT 1916

penalties in Recommendation 79 2 1 CFR 305 79 2 The Conference

recommended that Agencies enforcing regulatory statutes violation of

which is punishable by a civil money penalty should establish standards

for determining appropriate penalty amounts in individual cases14

Admitting the need there remains the problem ofjust what standards

are appropriate to the assessment of penalties under the Shipping Act

Fortunately we have the benefit of the current views of two commit

tees ofCongress

Section 13 c of H R 4374 a bill which would make major revisions

ofthe Shipping Act 1916 provides

Assessment Procedure Every civil penalty provided for in

this Act may be assessed by the Commission after notice and

opportunity for hearing In determining the amount ofpenalty the Commission shall take into account the nature circum

stances extent and gravity of the violation committed and

with respect to the violator the degree of culpability history

of prior offenses ability to pay and such other matters as

justice may require

Identical language appears in section 15 c of S 1593 the Senate

version of H R 4374 15 In its Report the Senate Committee on Com

merce Science and Transportation made no mention of the civil penal

ty provision and the House Committee referring to section 13 merely

states This section also provides the manner in which a civil penalty

will be assessed and the things that must be considered in arriving at

the amount ofthe penalty to be assessed 16 While not yet the law the

criteria or standards which appear in S 1593 and H R 4374 are a clear

expression of Congressional attitude toward the assessment ofpenalties

by the Commission 1 7

The Commission is of course free to adopt

these standards whatever the fate of S 1593 and H R 4374 unless of

course one ofthe grounds for the defeat ofeither bill is the rejection of

the standards a highly unlikely event In any event I

find these stand

ards to be the best available guide for deciding what if any penalty is

appropriate here

The record demonstrates that had not a

representative of the Com

mission questioned General Transpac s plan to publish a second all

inclusive or door to door rate in its tariff the chain of events leading to

14 See also Diver The Assessment and Mitigation of Civil Money Penalties by Federal Administrative

Agencies 79 Column L Rev 1435 1457 1979

16 Senate Report No 97 414 97th Congress 2d Sess 1982

16 House Report No 97 611 Part I 97th Congress 2d Sess 1982

17 This Congressional attitude is not new nor is it restricted to the Commission Section 503 of the

Federal Communications Act requires the FCC when setting penalty amounts to take into account

the nature and circumstances extent and gravity of the prohibited acts committed and with respect to

the violator the degree of culpability any history of prior offenses ability to pay and such other mat

ters as justice may require 47 US C 503 b 2

25 F M C
278 FEDERAL MARITIME COMMISSION

this proceeding would not have occurred ls It was Mr Hammond s

position that General Transpac could not have the two rates in its tariff

that led Mr Gmelch to use Transpacific as an NVOCC to publish the

second rate This in turn led to the arrangement found here to be in

violation of section IS Thus the circumstances surrounding the viola

tion to some degree were created by the Commission itself through its

representative lS

The violation began on April 30 1976 and continued until August

IS 1977 This proceeding was instituted under sections IS 22 32 and

44 ofthe Shipping Act 1916 Section 32 authorizes the Commission to

assess civil penalties Provided however That in order to assess such

penalties a formal proceeding under section 22 of this Act shall be

commenced within five years from the date when the violation oc

curred This proceeding was begun on September 30 1981 so that

some 45 days of the violation were excluded from prosecution by

section 32 c The Bureau in apparent recognition of this problem

introduced as Exhibit 1 a document entitled Waiver of the Period

Within Which to Institute Civil Penalty Claim Action This document

states that the Commission has reason to believe that General Transpac

may have violated one or more sections ofthe Shipping Act 1916 and

that during the periOd that may be required to investigate such viola

tions and to negotiate a possible settlement thereof the Statute of

Limitations 28 U S C 2462 may operate to bar or prevent the recov

ery of civil penalties and that having had an opportunity to

confer with counsel General Transpac agrees that it will not interpose

the Statute of Limitation as a bar to any civil penalty claim undertaken

pursuant to Public Law 9241620 prior to September 30 1981 21 Mr

Gmelch signed this waiver on April 10 1981

18 At tho time that Transpacific canceled its tariIT Gen ral TrlUlllpac am nded its tariff to do what

it wanted to do in tho first place and this am ndment was accepted by tho Commission

19 I am in no way suagesting that the Commission is llestopped from imposing a penalty in this

case a1thoush th r are 80111 authoriti to that IT ct See Davis 1982 Suppl ment to Administrativ

Law Treatise pp 247 257 and authoriti cited th r

in I am su stinS that rol of tho Commisaion s

reprntativ is afactor to be consid r d in d t

rminins tho amount of tho p nalty if any is to b

ssod

a

In Exhibit I th ro is an ast risk after Public Law 92416 and th r is afootnote at tho bottom of

tho pase Public Law 92416 providea Any civil penalty provided herein may be compromised by

the Federal Maritime Commission ormay be recovered by theUnited States in acivil action It

a1 Th avowed purpose of the waiver is to aITord additional time to invtlsate sucb violations and

to nesotlate apoasibl s

tdement before tb statute of limitations ban tbe claim While admittedly

too much could be made or the situation one cannot help but wonder at the need for an investigation

at this late stase of tho civil penalty pt0c0J8 The claim I tter foracivil penalty of 20 000 was sent On

February 9 198If an inveatisation was atill ncc asary wbal was the basi for the amount claimed It

seems to m that all necosaary invtisatlons should precede the claim not follow it See my Dismiasal

of FrocoodinS in Docket No 8012 served June 30 1982 On the noral question of tbeforfeiture of

violator s riShts in excbanse for an olTer of mitisation see Nelson Administrative Blackmail The Remis

sion ofPena lm 4 W Pol LQ 610 19 1

2S F MC
GENERAL TRANSPAC SYSTEM POSSIBLE VIOLATIONS OF 279

SECTION 15 SHIPPING ACT 1916

By its terms the waiver is inapplicable to this proceeding since it is

an agreement by Mr Gmelch not to interpose the bar ofthe Statute of

Limitations section 2462 in either a compromise by the Commission or

in a civil action by the United States neither ofwhich is involved here

The statute applicable to this proceeding is not 28 U S C 2642 but

section 32 of the Shipping Act Thus for the purposes of this proceed

ing the violation took place between September 30 1976 and August

15 1977

During the life of the agreement the Bureau says that it generated

57 600 in revenue This amount is based upon the statement by re

spondent that Transpacific s one half of one percent under the agree

ment amounted to 288 The 57 600 does not represent profit to

General Transpac since freight charges had to be paid to the underly

ing carriers The record does not show what these charges were or

what other expenses wereattendant to the shipments in question

There is no evidence in the record that the agreement between

General Transpac and Transpacific affected third parties in any way

except perhaps to give those few shippers using the Transpacific tariff

the convenience of a single all inclusive rate The agreement so far as

the record here shows did not unjustly discriminate against carriers

shippers exporters importers or ports or between exporters from the

United States and their foreign competitors it did not operate to the

detriment of the commerce ofthe United States nor was it contrary to

the public interest Thus if a measure of the gravity of a section 15

violation is its effect on third parties persons not party to the agree

ment then this is the kind of accidental or technical violation which

is to be contrasted and dealt with less severely than willful and

substantial violations 46 CFR 103 5

Culpability is most often associated with criminal offenses e g

Blacks Law Dictionary Fifth Edition speaks only in terms of a person s

criminal culpability which requires a showing that he acted pur

posely knowingly recklessly or negligently as the law may require

with respect to each material element of the offense The Shipping

Act is not of course a penal statute and its offenses are civil not

criminal However by analogy civil culpability would require a

showing that the person acted knowingly recklessly or negligently as

the Shipping Act requires with respect to each element of the offense

alleged

Respondent here is charged with and found in violation of section 15

of the Act for its failure to file the cooperative working arrangement

with Transpacific The single element of the violation is the failure to

file and it remains only to determine whether section 15 requires

knowledge recklessness or negligence or some other state of mind to

establish culpability In contrast to section 16 First which requires that

the prohibited act be knowingly and willfuJly done section 15 places

25 F MC
280 FEDERAL MARITIME COMMISSION

the affirmative duty upon all parties to an agreement to file it with the

Commission The language ofthe section requires neither knowledge of

the requirement to file nor an intent to violate its terms Unapproved

Section 15 Agreements South African Trade 7 F MC 159 1962 In

Unapproved Section 15 Agreement Coal to Japan Korea 7 F M C 295

1962 the Commission said at page 304

It is not necessary under section 15 to impute an evil

motive For the purpose of this statute nonfeasance is as objec

tionable as malfeasance There is little if any excuse for failure

to file with the Commission or at least make inquiry ofit as to

whether an agreement comes within the scope of section IS

and therefore must be filed and approved

Thus section 15 would seem to impose an absolute liability to file an

agreement with the Commission and the question of culpability is not

relevant to the question ofwhether a violation has occurred However

the Commission was careful to distinguish between the question of

whether there has been a violation of section 15 and the question ofthe

penalty to be imposed In dealing with a finding by the Administrative

Law Judge the Hearing Examiner that the violation of section 15 was

purely technical the Commission in Coal to Japan Korea supra said

at page 303

We shall not pursue the point further because it is associated

in any event with an immaterial issue as to the respondents

motives We suppose there could be an occasion where the

parties motive or intent is useful to the proper disposition of

an investigation by this Commission of unlawful conduct But

where as here the objective is only to show a so called tech

nical violation it is irrelevant P roceedings by this Com

mission inquiring into allegedly unlawful activity are regula

tory in nature not penal

Here the Examiner after finding that the violations were

technical indulged in respondents fundamental misconcep

tion that the Commission could excuse them from any penalty

But the Commission as we have said lacks the power to

assess penalties Prosecution and the assessment or waiver

of penalties are matters that rest within the province of the

Attorney General and the Courts 7 F MC at page 303

With the passage of Public Law 9625 the assessment and waiver of

penalties are now matters that rest within the province ofthe Commis

sion and questions of motive and intent are relevant to the determina

tion of the amount if any of the penalty to be assessed a violator

On the record here the degree of culpability was slight indeed In

converting Transpacific into an NVOCC and creating the arrangement

between it and respondent Mr Gmelch was reacting to the representa

tions of an official of the Commission Moreover and wrongly as it

turned out Mr Gmelch viewed the arrangement between General

2S F MC
8 JOHN E COGRAVE

Administrative Law Judge

GENERAL TRANSPAC SYSTEM POSSIBLE VIOLATIONS OF 281

SECTION 15 SHIPPING ACT 1916

Transpac and Transpacific as an agency agreement which he mistaken

ly believed did not need to be filed under section 15 While none ofthis

excuses the violation it goes a long way in mitigation of the penalty

when considered together with the other circumstances of the viola

tion e gits lack ofimpact on third parties

The record here is devoid of any evidence of prior offenses by

General Transpac which could be taken into consideration in fixing the

amount of penalty to be assessed As for General Transpac s ability to

pay a civil penalty it says The Respondent is in deep financial trouble

and is struggling for its survival The Bureau on the other hand argues

that the only evidence in support ofthis assertion is General Transpac s

1980 Federal Income Tax Return and an unaudited consolidated bal

ance sheet dated June 1981 and that the tax return reveals that General

Transpac spent in excess of 41 000 for travel and entertainment and

A minor curtailment of these activities would offset the civil penalty

we recommend be assessed in this proceeding Whatever the wisdom

of this expenditure the money has already been spent and the ability to

pay is determined by the current posture of the company Here again

there is little help in the record and were ability to pay a crucial factor

in the decision here additional evidence would have to be obtained 22

After careful consideration of the circumstances surrounding the vio

lation the extent and gravity ofit and the degree ofculpability and the

lack of prior offenses on the part ofrespondent it is my conclusion that

a penalty is neither dictated by the respondent s past actions resulting in

the violation nor warranted as a deterrent to future unlawful activity by

the respondent 23

The proceeding is dismissed

i2 There is from this record no way of telling what benefit General Transpac derived from the

money spent for travel and entertainment and there is the question of whether absent fraud conceal

ment gross negligence orthe like consideration of aviolator s ability to pay legitimately includes an

inquiry into theefficiency of the past management orbusiness methods of theviolator

23 In the almost four years from the cessation of the violation found here and the claim for penalties

because of it the respondent so faras this record shows has engaged in no unlawful activity There is

no reason to believe that this will change in the future

25 F MC
FEDERAL MARITIME COMMISSION

TITLE 46 SHIPPING

CHAPTER IV FEDERAL MARITIME COMMISSION

GENERAL ORDER 29 DOCKET NO 82 16

PART 549 INDEFINITE SUSPENSION OF REGULATIONS

GOVERNING LEVEL OF MILITARY RATES

August 25 1982

Federal Maritime Commission

Final Rule

This rule suspends the regulations governing rates

quoted for the transportation ofU S Defel1se Depart

ment cargoes pursuant to Military Sealift Command

requests for proposals for an indefinite period This

action is taken in light ofthe determination that mili

tary rates are no longer so low as to be detrimental

to the commerce of the United States and with a

view towards lessening the regulatory burden on U S

flag operators

DATE Effective on October I 1982

SUPPLEMENTARY INFORMATION

Notice is hereby given thlt the Federal Maritime Commission is

extending the suspension of its regulations governing theo level of mili

tary rates established in Part 549 of Title 46 of the Code of Federal

Regulations Federal Maritime Commission General Order 29 for an

indermite period The suspension currently in effect will expire on

September 30 1982

The Commission s General Order 29 46 C F R S49 governing the

level of military rates was published in the Federal Register on Decem

ber 2 1972 47 FR 2S720 The Commission s proposal to temporarily

suspend General Order 29 and the reasons therefor were published in

the Federal Register on February 4 1981 46 FR 10767 The final rule

suspending General Order 29 during the period October I 1981

through September 30 1982 was published in the Federal Register on

April 3 1981 46 FR 20199 On March 23 1982 a proposed rule to

make the suspension permanent through the removal of 46 C F R Part

S49 was published 47 FR 12367

Four parties commented on the proposed rule The Military Sealift

Command MSC supported the rule assertingthat General Order 29

was unworkable and burdensome Sea Land Service Inc Sea Land

AGENCY

ACTION

SUMMARY

282 2S F MC
INDEFINITE SUSPENSION OF REGULATIONS GOVERNING 283

LEVEL OF MILITARY RATES

and EI Dupont de Nemours and Company Dupont concerned with

a reoccurrence ofthe abuses which led to the promulgation of General

Order 29 recommended that its suspended status be continued Such

action would provide regulatory relief while maintaining the Commis

sion s ability to react to events which may occur in the future The Del

Monte Corp stated that the regulations made a positive contribution to

the current reasonable level ofmilitary rates

The Commission has concluded that the contention of Sea Land and

Dupont that this action as opposed to outright elimination of the

regulations has considerable merit It will accomplish the goal of re

ducing the regulatory burden imposed on U S flag carriers while

providing the salutary effect of demonstrating a continued interest in

rates offered for the carriage of Defense Department cargoes Should

the Commission at some point terminate the suspension steps will be

taken to improve the effectiveness ofthe regulations

Pursuant to the Regulatory Flexibility Act 5 U S C 601 et seq the

Commission certifies that the proposed rule will not if adopted have a

significant economic impact on a substantial number of small entities

The primary impact of this proposed rule will be carriers publishing

military cargo rates and the Military Sealift Command none of which

are generally considered to be small entities within the meaning of the

Act

List ofsubjects in 46 CF R Rates Maritime Carriers

Therefore pursuant to section 18 b 5 and 43 of the Shipping Act

1916 46 U S C 817 and 841 a the Commission amends section 549 9

Part 549 ofTitle 46 C F R to read as follows

549 9 Suspension

The provisions of this Part are suspended for an indefinite period

By the Commission

S FRANCIS C HURNEY

Secretary

25 F MC
FEDERAL MARITIME COMMISSION

46 C P R PART 502

GENERAL ORDER 16 AMENDMENT NO 42 DOCKET NO

82 21

IMPROVEMENTS IN PREHEARING AND DISCOVERY

PROCEDURES

September 7 1982

Federal Maritime Commission

Final rules

The rules of procedure relating to discovery are re

vised to require more prompt commencement and

completion ofdiscovery require the establishment of

reasonable discovery plans secure prompt rulings in

case of disputes eliminate time consuming procedural

formalities provide for protective orders and supple

mentary responses and otherwise simplify procedures

and promote ease of usage of the rules This action

will simplify and e pedite the discovery phase of

Commission proceedings

Effective as to all adjUdicatory proceedings under

section 22 of the Shipping Act 1916 which com

mence after October 15 1982

SUPPLEMENTARY INFORMATION

On April 6 1982 the Commission published a Notice of Proposed

Rulemaking in the Federal Register 46 F R 14734 which proposed to

revise its rules of procedure relating to prehearing discovery promul

gated in Subpart L of Part 502 of Title 46 of the Code of Federal

Regulations The proposed revisions were substantial and would effec

tuate major changes in the existing discovery rules in order to simplify

discovery procedures and assist parties in formal Commission proceed

ings to complete discovery with minimal delay Thus under the pro

posed rules parties would be required to begin discovery with the

filing oftheir initial pleadings in complaint cases and would be required

to complete discovery within 120 days after service ofthe complaint or

after service of the Commission s order initiating a proceeding Parties

would also be required to meet early in the proceeding to plan for the

completion ofdiscovery within the required time period Provision was

made for conferences with the presiding officer who would issue such

rulings as might be necessary to resolve disputes and enable the discov

AGENCY

ACTION

SUMMARY

DATE

284 2S FMC
IMPROVEMENTS IN PREHEARING AND DISCOVERY 285

PROCEDURES

ery plan formulated by the parties to succeed in meeting the required

deadlines The entire discovery procedure would moreover be simpli

fied by providing an alternate to the present system whereby discovery

is conducted in a series of waves and parties must file formal motions

seeking compulsory orders whenever disputes occur Other reforms in

discovery procedures were proposed in accordance with the modern

federal rules ofdiscovery currently in effect in civil proceedings before

the courts such as the provision for telephonic depositions for issuance

of detailed protective orders and the requirement that parties furnish

supplementary responses under certain circumstances The Commission

also proposed to simplify the present rules dealing with discovery

requests directed to persons or documents located in foreign countries

by allowing initial rulings by the presiding officer subject to appeal to

or review by the Commission Finally the Commission proposed to

rearrange and otherwise simplify the form of the rules to promote ease

ofusage

Comments to the Notice of Proposed Rulemaking were submitted by

the Maritime Administrative Bar Association MABA the law firm of

Lillick McHose Charles and by Sea Land Service Inc a carrier by

water subject to the jurisdiction of the Shipping Act 1916 All of the

commentators support the proposed rules However MABA and the

Lillick firm propose several changes These proposed changes are ad

dressed below

I Commencement ofDiscovery

MABA suggests that the proposed rules are not clear regarding what

is meant by the commencement of discovery and suggests the addition

of a new section 502 201 b 3 which would provide that the prompt

commencement requirements of sections 502 201 b I and 2 would be

satisfied when a party undertakes discovery under sections 502 205

and or 502 206 MABA further suggests that the new section make

clear that the parties may provide for further discovery at the confer

ence of the parties required by section 502 201 d While the proposed

rules require the prompt commencement of discovery they do not

specify which type ofdiscovery a party must utilize or whether a

party

must utilize all types of discovery at the outset of the proceeding in

order to satisfy the rules concerning commencement Therefore the

Commission agrees that clarification is desirable However MABA s

proposed subsection 502 20l b 3 is too narrowly drawn because it is

restricted to interrogatories 502 205 and requests for production

502 206 The rules however cover not only interrogatories and

requests for production but depositions and requests for admissions

Furthermore depositions are a discovery device that may be employed

with respect to persons who are not parties to a proceeding Accord

ingly MABAs suggestions will be adopted but its proposed section

25 F M C
286 FEDERAL MARITIME COMMISSION

S02 201 b 3 will be expanded to include any discovery device includ

ing discovery that may commence with respect to persons who are not

parties to the proceeding

II Establishing a Fixed Datefor a Discovery Conference and Otherwise

ClarifYing the Purpose ofthat Conference

MABA suggests that proposed section 502 20 1 d which would re

quire parties to confer as soqn as possible after certain events in order

to provide for the completion of discovery within 120 days after serv

ice of the complaint or the Commission s order initiating the proceed

ing needs clarification and certain improvements MABA suggests that

the parties be required to meet on a defmite date i e within IS days

after service of the answer to a complaint or service of discovery

requests in a Commission instituted proceeding MABA also suggests

that the rule specify that the parties are under a duty to establish a

schedule for the completion of discovery within the prescribed time

limit and to resolve disputes to the fullest extent possible by the use of

admissions stipulations and other techniques Finally MABA suggests

that the proposed rule unnecessarily refers to attorneys as well as the

parties

The Commission agrees that the establishment of a date certain

would promote the basic purposes of the discovery rule revisions i e

simplification and expedition and that the specification of the duty of

the parties to establish a discovery schedule and to utilize available

devices to eliminate disputes also serves these purposes Furthermore

the Commission agrees that the reference to the parties attorneys is

unnecessary in the context ofthe particular rule Accordingly MABAs

suggested improvements and clarification will be adopted in the final

rule However to ensure that the changes that will now be incorporat

ed in the final rule do not contribute to delay the ColIll11ission will

specify in the mal rule that the establishment of a fIXed date should not

be construed to preclude the parties from holding an earlier meeting

Finally provision will be made for the submission of any discovery

schedule to the presiding officer so that t1epresiding officer can moni

tor the course of the discovery phase of the proceeding and issue

rulings when necessary to carry out the purposes ofthese rules

III Proposals to Alter the Discovery Schedule

MABA believes that proposed section S02 201 e which requires any

party unable to complete discovery within the 120day period to r

ro

pose an alternate schedule within 60 days after service of the complaint

or after the order instituting the proceeding does not provide sufficient

time and suggests a 9Q day period instead MABA states thllt the parties

may not know whether additional time to complete discovery is neces

sary in such a short period especially if there are clients located over

seas and for other reasons The Lillick firm also comments that the 60

25 F MC
IMPROVEMENTS IN PREHEARING AND DISCOVERY 287

PROCEDURES

day period is too short and that it fails to account for the possibility

that unforeseen events may require an extension ofthe normal l20 day

period for completion of discovery at any time during the l20 day

period The Lillick firm suggests that the presiding officer be author

ized to extend that period for good cause shown at any time during

that period

The Commission finds merit to the contention that in some cases

involving complicated discovery parties may not be able to determine

within 60 days whether problems will arise subsequently which will

prevent them from completing discovery within the prescribed 120 day

period and recognizes furthermore that unforeseen events may arise at

any time throughout this period The main purpose of section

502 201 e was to require the parties to notify the presiding officer

promptly if such problems arose which would prevent timely comple

tion of discovery and to propose appropriate alternative schedules for

the presiding officer s approval Rather than select anyone point in

time for such notification such as 60 days or 90 days however the

Commission believes that the purposes of the particular rule in question

would be served if the parties were required to submit periodic status

reports to the presiding officer on a monthly basis or at such other

times as the presiding officer may require or circumstances may war

rant and concluding on the final day of the discovery schedule Re

quests for changes in the schedule can be made by means of such

reports The first such report should be made to the presiding officer

not later than 30 days after the parties submit their discovery plan and

schedule pursuant to section 502 201 d unless the presiding officer

otherwise directs However by permitting parties to submit such re

ports and to propose alternative schedules when necessary the Com

mission does not mean to imply that parties may relax their diligence or

may propose alternative schedules for frivolous reasons and therefore

will make clear that proposals for changes in discovery schedules must

be approved by the presiding officer Accordingly the Commission is

revising proposed section 502 201 e to require such status reports to be

submitted in the manner described

IV Provision for Written Rulings after Completion of Informal Confer

ences

In order to resolve discovery disputes promptly and at minimal cost

the proposed rules authorize the presiding officer to conduct confer

ences which may be formal on the record or informal when no report

er is present See proposed sections 502 201 1 and gAs an example

of the latter type conference the presiding officer may conduct a

telephonic conference call thereby saving considerable time and ex

pense if the parties are located in widely scattered parts ofthe country

MABA believes that where possible discovery disputes should be re

25 F MC
288 FEDERAL MARITIME COMMISSION

solved informally by the presiding officer However to avoid subse

quent misunderstanding and confusion MABA believes that written

rulings are necessary and suggests that the parties should be responsible

for submitting within three work days after the conference a joint

memorandum upon which the written rulings of the presiding officer

can be based unless the presiding officer grants additional time

The Commission agrees that informal conferences with the presiding

officer by telephone or otherwise can save time and unnecessary ex

pense but that such conferences may be discouraged if no provision for

adequate recording ofthe rulings and for written confirmation is made

in the rules Therefore the Commission agrees with MABA s sugges

tion that the parties furnish a joint written memorandum ofthe rulings

made at informal conferences Of course if one or more of the parties

do not wish to undertake the responsibility of furnishing such a memo

randum or if the presiding officer finds that an informal conference

would not be suitable in any particular instance the presiding officer

may still summon a formal on the record conference or may require

written pleadings to resolve discovery disputes Accordingly MABAs

suggestions as incorporated in its proposed additions to section

502 201 1 will be adopted

V Permission to File Written Replies to Discovery Objections

As proposed the rules provide for written objections to interrogato

ries and to requests for production ofdocuments See proposed sections

502 205 a and 502 206 b MABA states that unless there is a provision

for the filing of written replies to such objections each side does not

have an equal opportunity to state its case and that the record on

which the presiding officer will rule would not be complete Also

MABA suggests that written expression of each party s position may

also facilitate settlements Therefore MABA suggests that proposed

sections 502 205 b and 502 206 b be amended by adding language

permitting the filing of written replies to objections but with the caveat

that such filings shall be permitted only to the extent that the discovery

schedule previously established under section 502 201 d is not delayed

Although the proposed rules strive for as much simplicity and infor

mality as possible as seen from the previous discussion in regard to the

holding of informal conferences it is conceivable that there may be

occasions when written expressions of positions on both sides of a

discovery dispute are necessary to offset any possible disadvantage to a

party who is restricted to oral presentation only Furthermore a more

adequate record may be necessary to assist the presiding officer in

reaching a just and reasonable decision in a complicated discovery

matter Ifthe discovery schedule is not disturbed by the filing of an

additional pleading then there are benefits to such a procedure with no

25 F MC
IMPROVEMENTS IN PREHEARING AND DISCOVERY 289

PROCEDURES

corresponding harm Accordingly the Commission agrees with

MABA s suggestions and they will be adopted

VI Specification ofSanctions for Violations ofProtective Orders

MABA suggests that the rules should outline specific sanctions for

violations ofprotective orders issued by presiding officers under section

502 20l i and recommends adoption of a new section 502 21O d which

would authorize sanctions ranging from private warnings to financial

penalties and institution of disciplinary proceedings against attorneys

and practitioners MABA concedes that the language of its proposed

new rule has not been noticed in the Federal Register but contends that

the Commission has discretion to adopt the suggested amendments

which MABA believes to have a reasonable nexus between the rules

originally proposed and those finally adopted

The Commission does not agree that this proceeding is the proper

place to consider MABAs proposals Not only are the suggested

amendments well beyond the scope of the notice provided in the

Federal Register but they impose several severe sanctions on attorneys

and other persons who have had no opportunity to comment and

additionally raise legal questions as to the extent of the Commission s

authority to issue such rules Accordingly while the Commission be

lieves that the integrity of its proceedings must be protected and that

violations of protective orders are serious matters which are to be

discouraged the Commission believes that the matter of sanctions must

be carefully considered under proper procedures and if further amend

ments to the rules are believed to be necessary will Institute an appro

priate rulemaking proceeding

Pursuant to the Regulatory Flexibility Act 5 V S C 601 et seq

the Commission certifies that adoption of the rules herein discussed will

not have a significant impact on a substantial number of small entities

List of subjects in 46 C F R Part 502 Administrative Practice and

Procedure

THEREFORE pursuant to the Administrative Procedure Act 5

V S C 553 sections 22 27 and 43 of the Shipping Act 1916 46

V S C 821 826 and 841a the Commission is revising Subpart L of

Part 502 ofTitle 46 C FR to read as follows

SUBPART L DEPOSITIONS WRITTEN INTERROGATORIES

AND DISCOVERY

502 201 General provisions governing discovery

502 202 Persons before whom depositions may be taken

502 203 Depositions upon oral examination

502 204 Depositions upon written interrogatories

502 205 Interrogatories to parties

502 206 Production of documents and things and entry upon land for

inspection and other purposes

25 F MC
290 FEDERAL MARITIME COMMISSION

502 207

502 208

502 209

502 210

Requests for admission

Use of discovery procedures directed to Commission staff

personnel

Use ofdepositions at hearings

Refusal to comply with orders to answer or produce docu

ments sanctions enforcement

SUBPART L DEPOSITIONS WRITTEN INTERROGATORIES

AND DISCOVERY

502 201 General provisions governing discovery

a Applicability The procedures described in this subpart are avail

able in all adjudicatory proceedings under section 22 of the Shipping

Act 1916 Unless otherwise ordered by the presiding officer the copy

requirements of 502 118 b 3 i shall be observed

b Schedule jbr use 1 Complaint proceedings Any party desiring to

use the procedures provided in this subpart shall commence doing so at

the time it fUes its initial pleading e g complaint answer or petition

for leave to intervene Discovery matters accompanying complaints

shall be fUed with the Secretary of the Commission for service pursuant

to 502 113 of this part

2 Commission instituted proceedings All parties desiring to use the

procedures provided in this subpart shall commence to do so within 30

days ofthe service ofthe Commission s order initiating the proceeding

3 Commencement of discovery The requirement to commence dis

covery under sections 502 201 b l

and 2 shall be deemed satisfied

when a party serves any discovery request under this Subpart upon a

party or person from whom a response is deemed necessary by the

party commencing discovery A schedule for further discovery pursu

ant to this Subpart shall be established at the conference ofthe parties

pursuant to section 502 201 d

c Completion of discovery Discovery shall be completed within 120

days of the service of the complaint or the Commission s order initiat

ing the proceeding

d Duty of the Parties In all proceedings in which the procedures of

this Subpart are used it shall be tbe duty of the parties to meet or

confer within 15 days 1 after service of the answer to a complaint or

2 after service of the discovery requests in a Commission instituted

proceeding to establish a schedule for the completion of discovery

within the 120 day period prescribed in section502 201 c to resolve to

the fullest extent possible disputes relating to discovery matters and to

expedite limit or eliminate discovery by use of admissions stipulations

and other techniques The schedule shall be submitted to the presiding

officer not later than five days after the conference Nothing in this rule

should be construed to preclude the parties from meeting or conferring

at an earlier date

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IMPROVEMENTS IN PREHEARING AND DISCOVERY 291

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e Submission of status reports and requests to alter schedule The

parties shall submit status reports concerning their progress under the

discovery schedule established pursuant to section 502 201 d not later

than 30 days after submission of such schedule to the presiding officer

and at 30 day intervals thereafter concluding on the final day of the

discovery schedule unless the presiding officer otherwise directs Re

quests to alter such schedule beyond the l20 day period shall set forth

clearly and in detail the reasons why the schedule cannot be met Such

requests may be submitted with the status reports unless an event

occurs which makes adherence to the schedule appear to be impossible

in which case the requests shall be submitted promptly after occurrence

of such event

f Conferences The presiding officer may at any time order the

parties or their attorneys to participate in a conference at which the

presiding officer may direct the proper use of the procedures of this

subpart or make such orders as may be necessary to resolve disputes

with respect to discovery and to prevent delay or undue inconvenience

When a reporter is not present and oral rulings are made at a confer

ence held pursuant to this section or section 502 201 g

the parties shall

submit to the presiding officer as soon as possible but within three work

days unless the presiding officer grants additional time a joint memo

randum setting forth their mutual understanding as to each ruling on

which they agree and as to each ruling on which their understandings

differ the individual understandings of each party Thereafter the

presiding officer shall issue a written order setting forth such rulings

g Resolution of disputes After making every reasonable effort to

resolve discovery disputes a party may request a conference or rulings

from the presiding officer in such disputes Such rulings shall be made

orally upon the record when feasible and or by subsequent ruling in

writing If necessary to prevent undue delay or otherwise facilitate

conclusion of the proceeding the presiding officer may order a hearing

to commence before the completion ofdiscovery

h Scope of examination Persons and parties may be examined re

garding any matter not privileged which is relevant to the subject

matter involved in the proceeding whether it relates to the claim or

defense of the examining party or to the claim or defense of any other

party including the existence description nature custody condition

and location of any books documents or other tangible things and the

identity and location of persons having knowledge of relevant facts It

is not ground for objection that the testimony will be inadmissible at

the hearing if the testimony sought appears reasonably calculated to

lead to the discovery of admissible evidence

i Protective Orders Upon motion by a party or by the person from

whom discovery is sought and for good cause shown the presiding

officer may make any order whichjustice requires to protect a party or

25 EM C
292 FEDERAL MARITIME COMMISSION

j

person from annoyance embarrassment oppression or undue burden or

expense including one or more of the foHowing 1 that the discovery

not be had 2 that the discovery may be had only on specified terms

and conditions including a designation ofthe time or place 3 that the

discovery may be had only by a method of discovery other than that

selected by the party seeking discovery 4 that certain matters not be

inquired into or that the scope of the discovery be limited to certain

matters 5 that discovery may be conducted with no one present

except persons designated by the presiding officer 6 that a deposition

after being sealed be opened only by order of the presiding officer 7

that a trade secret or other confidential research development or

commercial information not be disclosed or be disclosed only in a

designated way 8 that the parties simultaneously file specified docu

ments or information enclosed in sealed envelopes to be opened as

directed by the presiding officer Ifthe motion for a protective order is

denied in whole or in part the presiding officer may on such terms and

conditions as are just order that any party or person provide or permit

discovery Rulings under this paragraph shaH be issued by the presiding

officer at a discovery conference called under fi 502 201 1 or if circum

stances warrant under such other procedure as the presiding officer

may establish

U Supplementation of responses A party who has responded to a

request for discovery with a response that was complete when made is

under no duty to supplement the party s

responses to include informa

tion thereafter acquired except as foHows

1 A party is under a duty seasonably to supplement responses with

respect to any question directly addressed to A the identity and

location ofpersons having knowledge of discoverable matters and B

the identity ofeach person expected to be called as an expert witness at

a hearing the subject matter on which such person is expected to

testify and the substance ofthe testimony

2 A party is under a duty seasonably to amend a prior response if

the party obtains information upon the basis of which A the party

knows that the response was incorrect when made or B the party

knows that the response though correct when made is no longer true

and the circumstances are such that a failure to amend the response is

in substance a knowing concealment

3 A duty to supplement responses may be imposed by order ofthe

presiding officer or by agreement of the parties subject to the time

limitations set forth in 502 201 c or established under 502 201 e

Rule 201

502 202 Persons before whom depositions may be taken

a Within the United States Within the United States or within a

territory or insular possession subject to the jurisdiction of the United

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IMPROVEMENTS IN PREHEARING AND DISCOVERY 293

PROCEDURES

States depositions shall be taken before an officer authorized to admin

ister oaths under the laws of the United States or of the place where

the examination is held

b In foreign countries In a foreign country depositions may be

taken 1 on notice before a

person authorized to administer oaths in

the place in which the examination is held either under the law thereof

or under the law of the United States or 2 before a person commis

sioned by the Commission and a

person so commissioned shall have

the power by virtue of his commission to administer any necessary oath

and take testimony or 3 pursuant to a letter rogatory A commission

or a letter rogatory shall be issued on application and notice and on

terms that are just and appropriate It is not requisite to the issuance of

a commission or a letter rogatory that the taking of the deposition in

any other manner is impracticable or inconvenient and both a commis

sion and a letter rogatory may be issued in proper cases A notice or

commission may designate the person before whom the deposition is to

be taken either by name or descriptive title A letter rogatory may be

addressed To the Appropriate Authority in here name the country

Evidence obtained in response to a letter rogatory need not be ex

cluded merely for the reason that it is not a verbatim transcript or that

the testimony was not taken under oath or for any similar departure

from the requirements for depositions taken within the United States

under the rules in this subpart See 22 CFR 9249 92 66

c Disqualification for interest No deposition shall be taken before a

person who is a relative or employee or attorney or counsel of any of

the parties or is a relative or employee of such attorney or counsel or

is financially interested in the action

d Waiver of objection Objection to taking a deposition because of

disqualification of the officer before whom it is to be taken is waived

unless made before the deposition begins or as soon thereafter as the

disqualification becomes known or could be discovered with reasonable

diligence

e Stipulations Ifthe parties so stipulate in writing depositions may

be taken before any person at any time or place upon any notice and

in any manner and when so taken may be used like other depositions

Rule 202

502 203 Depositions upon oral examination

a Notice of examination A party desiring to take the deposition of

any person upon oral examination shall give reasonable notice in writ

ing to such person and to every other party to the action The notice

shall state the time and place for the taking of the deposition and the

name and address of each person to be examined if known or if the

name is not known a general description sufficient to identify the

person or the particular class or group to which the person belongs

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294 FEDERAL MARITIME COMMISSION

The notice shall also contain a statement of the matters concerning

which each witness will testify The attendance of witnesses may be

compelled by subpena as provided in Subpart I of this part If a

subpena duces tecum is to be served on the person to be examined the

designation ofthe materials to be produced as set forth in the subpena

shall be attached to or included in the notice All errors and irregular

ities in the notice or subpena for taking of a deposition are waived

unless written objection is promptly served upon the party giving the

notice Examination and cross examination of deponents may proceed

as permitted at the hearing under the provisions of 502 154

b Record of examination oath objections The officer before whom

the deposition is to be taken shall put the witness on oath and shall

personally or by someone acting under his direction and in his pres

ence record the testimony ofthe witness The testimony shall be taken

stenographically and transcribed unless the parties agree otherwise All

objections made at the time of the examination to the qualifications of

the officer taking the deposition or to the manner oftaking it or to the

evidence presented or to the conduct of any party and any other

objection to the proceedings shall be noted by the officer upon the

deposition Evidence objected to shall be taken subject to the objec

tions Objections shall be resolved at a discovery conference called

under 502 201 for if circumstances warrant by such other proce

dure as the presiding officer may establish In lieu of participating in

the oral examination parties served with notice of taking a deposition

may transmit written interrogatories to the officer who shall propound

them to the witness and record the answers verbatim The parties may

stipulate or the presiding officer may upon motion order that a deposi

tion be taken by telephone or other reliable device

c Motion to terminate or limit examination At any time during the

taking ofthe deposition on motion ofany party or ofthe deponent and

upon ashowing that the examination is being conducted in bad faith or

in such manner as unreasonably to annoy embarrass or oppress the

deponent or party the presiding officer IIlllY order the officer conduct

ing the examination to cease forthwith from taking the deposition or

may limit the scope and manner of the taking of the deposition as

provided in paragraph b of this section Ifthe order made terminates

the examination it shall be resumed thereafter only upon the order of

the presiding officer Upon demand ofthe objecting party or deponent

the taking ofthe deposition shall be suspended for the time necessary to

make a motion for an order Rulings under this paragraph shall be

issued by the presiding officer at a discovery conference called under

502 201 for if circumstances warrant by such other procedure as

the presiding officer may establish

d Submission to witness changes signing When the testimony is fully

transcribed the deposition shall be submitted to the witness for exami

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IMPROVEMENTS IN PREHEARING AND DISCOVERY 295

PROCEDURES

nation and shall be read to or by the witness unless such examination

and reading are waived by the witness and by the parties Any changes

in form or substance which the witness desires to make shall be entered

upon the deposition by the officer with a statement ofthe reasons given

by the witness for making them The deposition shall then be signed by

the witness unless the parties by stipulation waive the signing or the

witness is ill or cannot be found or refuses to sign If the deposition is

not signed by the witness the officer shall sign it and state on the

record the fact of the waiver or of the illness or absence ofthe witness

or the fact ofthe refusal to sign together with the reason if any given

therefor and the deposition may then be used as fully as though signed

unless upon objection the presiding officer holds that the reasons given

for the refusal to sign require rejection ofthe deposition in whole or in

part

e Certification and filing by officer copies notice offiling 1 The

officer taking the deposition shall certify on the deposition that the

witness was duly sworn by the officer and that the deposition is a true

record of the testimony given by the witness The officer shall then

securely seal the deposition in an envelope indorsed with the title of the

action and marked Deposition of here insert name of witness and

shall promptly file it with the Secretary of the Commission by hand or

registered or certified mail

2 Interested parties shall make their own arrangements with the

officer taking the deposition for copies ofthe testimony and the exhib

its

3 The party taking the deposition shall give prompt notice of its

filing to all other parties

f Effect of errors and irregularities Errors and irregularities in the

manner in which the testimony is transcribed or the deposition is

prepared signed certified sealed indorsed transmitted filed or other

wise dealt with by the officer under this 502 203 and 502 204 are

waived unless a motion to suppress the deposition or some part thereof

is made within ten 10 days offiling Rule 203

502 204 Depositions upon written interrogatories

a Serving interrogatories notice A

party desiring to take the deposi

tion of any person upon written interrogatories shall serve them upon

every other party with a notice stating the name and address of the

person who is to answer them and the name or descriptive title and

address ofthe officer before whom the deposition is to be taken Within

10 days thereafter a party so served may serve cross interrogatories

upon the party proposing to take the deposition All errors and irregu

larities in the notice are waived unless written objection is promptly

lerved upon the party giving the notice

25 F M C
296 FEDERAL MARITIME COMMISSION

b Officer to take responses and prepare record A copy of the notice

and copies ofail interrogatories served shall be delivered by the party

taking the deposition to the officer designated in the notice who shall

proceed promptly in the manner provided by 502 205 c e and t

to take the testimony of the witness in response to the interrogatories

and to prepare certify and file or mail the deposition attaching thereto

the copy ofthe notice and the interrogatories received by him

c Notice offiling When the deposition is filed the party taking it

shall promptly give notice thereof to all other parties Rule 204

502 205 Interrogatories to parties

a Any party may serve upon any other party written interrogatories

to be answered by the party served or if the party served is a public or

private corporation or a partnership or association by any officer or

agent who shall furnish such information as is available to the party

Any party desiring to serve interrogatories as provided by this section

must comply with the applicable provisions of 502 201 and make

service thereof on all parties to the proceeding Each interrogatory

shall be answered separately and fully in writing under oath unless it is

objected to in which event the reasons for objection shall be stated in

lieu of an answer The answers are to be signed by the person making

them and the objections signed by the attorney making them The

party upon whom the interrogatories have been served shall serve a

copy of the answers and objections if any on all parties to the pro

ceeding under the schedule established pursuant to 502 201 The pre

siding officer for good cause may limit service ofanswers

b Objections to interrogatories All objections to interrogatories shall

be resolved at the conference or meeting provided for under

502 201 tor if circumstances warrant by such other procedure as

the presiding officer may establish Written replies to objections to

interrogatories shall be permitted only to the extent that the discovery

schedule previously established under section 502 201 d is not delayed

c Scope time number and use Interrogatories may relate to any

matters which can be inquired into under 502 20l h and the answers

may be used to the same extent as provided in 502 209 for the use of

the deposition of a party Interrogatories may be sought after interroga

tories have been answered but the presiding officer on motion ofthe

deponent or the party interrogated may make such protective order as

justice may require The number of interrogatories or of sets of inter

rogatories to be served is not limited except as justice requires to

protect the party from annoyance expense embarrassment or oppres

sion An interrogatory otherwise proper is not necessarily objectionable

merely because an answer to the interrogatory involves an opinion or

contention that relates to fact or the application of law to fact but the

presiding officer may order that such an interrogatory need not be

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IMPROVEMENTS IN PREHEARING AND DISCOVERY 297

PROCEDURES

answered until after designated discovery has been completed oruntil a

prehearing conference or other later time

d Option to produce business records Where the answer to an inter

rogatory may be derived or ascertained from the business records of

the party upon whom the interrogatory has been served or from an

examination audit or inspection of such business records or from a

compilation abstract or summary based thereon and the burden of

deriving or ascertaining the answer is substantially the same for the

party serving the interrogatory as for the party served it is a sufficient

answer to such interrogatory to specify the records from which the

answer may be derived or ascertained and to afford to the party

serving the interrogatory reasonable opportunity to examine audit or

inspect such records and to make copies compilations abstracts or

summaries Rule 205

502 206 Production ofdocuments and things and entry upon land for

inspection and other purposes

a Scope Any party may serve on any other party a

request I to

produce and permit the party making the request or someone acting on

his behalf to inspect and copy any designated documents including

writings drawings graphs charts photographs sound or video record

ings and other data compilations from which information can be ob

tained translated if necessary by the respondent through detection

devices into reasonably usable form or to inspect and copy test or

sample any tangible things which constitute or contain matters within

the scope of 502 203 a and which are in the possession custody or

control of the party upon whom the request is served or 2 to permit

entry upon designated land or other property in the possession or

control of the party upon whom the request is served for the purpose

ofinspection and measuring surveying photographing testing or sam

pling the property of any designated object or operation thereon

within the scope of 502 203 a

b Procedure The request shall set forth the items to be inspected

either by individual item or by category and describe each item and

category with reasonable particularity The request shall specify a rea

sonable time place and manner of making the inspection and perform

ing the related acts Responses shall be served under the schedule

established pursuant to 502 201 The response shall state with respect

to each item or category that inspection and related activities will be

permitted as requested unless the request is objected to in which event

the reasons for objection shall be stated Objections to requests for

production of documents shall be resolved at the conference or meeting

required under 502 201 t

or if circumstances warrant by such other

procedure as the presiding officer may establish Written replies to

objections to requests for production of documents shall be permitted

25 F MC
298 FEDERAL MARITIME COMMISSION

only to the extent that the discovery schedule previously established

under section 502 201 d is not delayed Rule 206

502 207 Requests for Admission

a l A party may serve upon any other party a written request for

the admission for purposes of the pending action only of the truth of

any matters within the scope of 502 203 a

set forth in the request that

relate to statements or opinions of fact or of the application of law to

fact including the genuineness of any documents described in the

request Copies of documents shall be served with the request unless

they have been or are otherwise furnished or made available for inspec

tion and copying Any party desiring to serve a

request as provided by

this section must comply with the applicable provisions of 502 201

2 Each matter of which an admission is requested shall be separate

ly set forth The matter is admitted unless within 30 days after service

of the request or within such shorter or longer time as the presiding

officer may allow pursuant to 502 201 the party to whom the request

is directed serves upon the party requesting the admission a written

answer or objection addressed to the matter signed by the party or the

party s attorney If objection is made the reasons therefor shall be

stated The answer shall specifically deny the matter or set forth in

detail the reasons why the answering party cannot truthfully admit or

deny the matter Adenial shall fairly meet the substance of the request

ed admission and when good faith requires that a party qualify the

answer or deny only a part of the matter of which an admission is

requested the party shall specify so much of it as is true and qualify or

deny the remainder An answering party may not give lack of informa

tion or knowledge as a reason for failure to admit or deny unless the

party states that reasonable inquiry has been made and that the informa

tion known or readily obtainable is insufficient to enable the party to

admit or deny A party who considers that a matter of which an

admission has been requested presents a genuine issue for trial may not

on that ground alone object to the request a party may subject to the

provisions of 502 207 c deny the matter or set forth reasons why it

cannot be admitted or denied

3 The party who has requested the admissions may request rulings

on the sufficiency of the answers or objections Rulings on such re

quests shall be issued at a conference called under 502 201 f

or if

circumstances warrant by such other procedure as the presiding officer

may establish Unless the presiding officer determines that an objection

is justified the presiding officer shall order that an answer be served If

the presiding officer determines that an answer does not comply with

the requirements ofthis rule the presiding officer may order either that

the matter is admitted or that an amended answer be served The

presiding officer may in lieu of these orders determine that final

25 F MC
IMPROVEMENTS IN PREHEARING AND DISCOVERY 299

PROCEDURES

disposition of the request be made at a prehearing conference or at a

designated time prior to hearing

b Effect of admission Any matter admitted under this rule is conclu

sively established unless the presiding officer on motion permits with

drawal or amendment of the admission The presiding officer may

permit withdrawal or amendment when the presentation of the merits

ofthe action will be subserved thereby and the party who obtained the

admission fails to satisfy the presiding officer that withdrawal or

amendment will be prejudicial in maintaining the party s action or

defense on the merits Any admission made by a party under this rule is

for the purpose ofthe pending proceeding only and is not an admission

for any other purpose nor may it be used against the party in any other

proceeding

c Expenses on failure to admit If a party fails to admit the genuine

ness of any document or the truth of any matter as requested under

502 207 a and if the party requesting the admission thereafter proves

the genuineness of the document or the truth of the matter that party

may apply to the presiding officer for an order requiring the other

party to pay the reasonable expenses incurred in making that proof

including reasonable attorney s fees Such application must be made to

the presiding officer before issuance of the initial decision in the pro

ceeding The presiding officer shall make the order unless it is found

that I the request was held objectionable pursuant to 502 207 a or

2 the admission sought was of no substantial importance or 3 the

party failing to admit had reasonable ground to believe that it might

prevail on the matter or 4 there was othergood reason for the failure

to admit Rule 207

502 208 Use of discovery procedures directed to Commission staff

personnel

a Discovery procedures described in 502 202 502 203 502 204

502 205 502 206 and 502 207 directed to Commission staff personnel

shall be permitted and shall be governed by the procedures set forth in

those sections except as modified by paragraphs b and c of this

section All notices to take depositions written interrogatories requests

for production of documents and other things requests for admissions

and any motions in connection with the foregoing shall be served on

the Secretary ofthe Commission

b The General Counsel shall designate an attorney to represent any

Commission staff personnel to whom any discovery requests or motions

are directed The attorney so designated shall not thereafter participate

in the Commission s decision making process concerning any issue in

the proceeding

c Rulings of the presiding officer issued under 502 208 a shall

become final rulings of the Commission unless an appeal is filed within

25 FM C
300 FEDERAL MARITIME COMMISSION

ten 10 days after date of issuance of such rulings or unless the

Commission on its own motion reverses modifies or stays such rulings

within twenty 20 days of their issuance Replies to appeals may be

ftled within ten 10 days No motion for leave to appeal is necessary in

such instances and no ruling of the presiding officer shall be effective

until twenty 20 days from date of issuance unless the Commission

otherwise directs Rule 208

502 209 Use ofdepositions at hearings

a GeneraL At the hearing any part or all of a deposition so far as

admissible under the rules of evidence may be used against any party

who was present or represented at the taking of the deposition or who

had due notice thereof in accordance with anyone of the following

provisions

1 Any deposition may be used by any party for the purpose of

contradicting or impeaching the testimony of deponent as a witness

2 The deposition of a party or of anyone who at the time oftaking

the deposition was an officer director or duly authorized agent of a

public or private corporation partnership or association which is a

party may be used by any other party for any purpose

3 The deposition of a witness whether or not a party may be used

by any party for any purpose if the presiding officer finds i That the

witness is dead or ii that the witness is out ofthe United States unless

it appears that the absence of the witness was procured by the party

offering the depositions or ill that the witness is unable to attend or

testify because of age sickness inrmnity or imprisonment or iv that

the party offering the deposition has been unable to procure the attend

ance of the witness by subpoena or v upon application and notice

that such exceptional circumstances exist as to make it desirable in the

interest ofjustice and with due regard to the importance of presenting

the testimony of witnesses orally in open hearing to allow the deposi

tion to be used

4 Ifonly part of a deposition is offered in evidence by a party any

other party may require introduction ofall ofit which is relevant to the

part introduced and any party may introduce any other parts

5 Substitution of parties does not affect the right to use depositions

previously taken and when a proceeding in any hearing has been

dismissed and another proceeding involving the same subject matter is

afterward brought between the same parties or their representatives or

successors in interest all depositions lawfully taken and duly filed in

the former proceeding may be used in the latter as if originally taken

therefor

b Objections to admissibility Except as provided in this paragraph

objection may be made at the hearing to receiving in evidence any

deposition or part thereof for any reason which would require the

25 F MC
IMPROVEMENTS IN PREHEARING AND DISCOVERY 301

PROCEDURES

exclusion of the evidence if the witness were then present and testify

ing

1 Objections to the competency of a witness or to the competency

relevancy or materiality of testimony are not waived by failure to

make them before or during the taking of the deposition unless the

ground of the objection is one which might have been obviated or

removed if presented at that time

2 Errors and irregularities occurring at the oral examination in the

manner of taking the deposition in the form of the questions or an

swers in the oath or affirmation or in the conduct ofparties and errors

of any kind which might be obviated removed or cured if promptly

presented are waived unless reasonable objection thereto is made at the

taking ofthe deposition

3 Objections to the form of written interrogatories submitted under

502 204 are waived unless served in writing upon the party propound

ing them within the time allowed for serving the succeeding cross

interrogatories

c Effect of taking or using depositions A party shall not be deemed

to make a person its own witness for any purpose by taking such

person s deposition The introduction in evidence of the deposition or

any part thereof for any purpose other than that of contradicting or

impeaching the deponent makes the deponent the witness of the party

introducing the deposition but this shall not apply to the use by any

other party of a deposition as described in subparagraph 2 of para

graph a of this section At the hearing any party may rebut any

relevant evidence contained in a deposition whether introduced by him

or by any otherparty Rule 209

502 210 Refusal to comply with orders to answer or produce docu

ments sanctions enforcement

a Sanctions forfailure to comply with order If a

party or an officer or

duly authorized agent of a party refuses to obey an order requiring

such party to answer designated questions or to produce any document

or other thing for inspection copying or photographing or to permit it

to be done the presiding officer may make such orders in regard to the

refusal as arejust and among others the following

1 An order that the matters regarding which the order was made or

any other designated facta shall be taken to be established for the

purposes of the action in accordance with the claim of the party

obtaining the order

2 An order refusing to allow the disobedient party to support or

oppose designated claims or defenses or prohibiting the disobedient

party from introducing designated matters in evidence or an order that

with respect to matters regarding which the order was made or any

25 F M C
302 FEDERAL MARITIME COMMISSION

other designated fact inferences will be drawn adverse to the person or

party refusing to obey such order

3 An order striking out pleadings or parts thereof or staying fur

ther proceedings until the order is obeyed or dismissing the action or

proceeding or any party thereof or rendering a judgment by default

against the disobedient party

b Enforcement of orders In the event of refusal to obey an order

the affected party or the Commission may apply for enforcement to a

district court having jurisdiction of the parties provided that the affect

ed party seeks court enforcement within 20 days ofthe date of refusal

to obey the order in question Failure to seek enforcement in timely

fashion will result in a waiver ofthe affected party s

rights to enforce

ment ofthe subject order

c Persons and documents located in aforeign country Orders of the

presiding officer directed to persons or documents located in a foreign

country shall become fmal orders of the Commission unless an appeal

to the Commission is filed within ten 10 days after date ofissuance of

such orders or unless the Commission on its own motion reverses

modifies or stays such rulings within twenty 20 days oftheir issuance

Replies to appeals may be ftled within ten 10 days No motion for

leave to appeal is necessary in such instances and no orders of the

presiding officer shall be effective until twenty 20 days from date of

issuance unless the Commission otherwise directs Rule 210

By the Commission

8 FRANCIS C HURNEY

Secretary

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FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 942

APPLICATION OF TRANS FREIGHT LINES INC FOR THE

BENEFIT OF MILlTZER MUENCH U S A INC

AS AGENT FOR LODGEGREEN LTD

ORDER OF PARTIAL ADOPTION

September 8 1982

The Commission has determined to review an Initial Decision issued

in this proceeding by Administrative Law Judge William Beasley

Harris The Administrative Law Judge granted permission pursuant to

section 18 b 3 of the Shipping Act 1916 46 U S C 817 b 3 and

Rule 92 a of the Commission s Rules of Practice and Procedure 46

C FR 502 92 a to Trans Freight Lines Inc to refund a portion of

the freight charges collected from Lodgegreen Ltd on the shipment

of a containerload of mixed paper products from Baltimore Maryland

to Liverpool United Kingdom The Presiding Officer found that Trans

Freight Lines had inadvertently failed to file as intended a special rate

for the shipment and that the application meets all the statutory require

ments 1 However in the belief that the carrier had initially charged less

than the applicable rate the Presiding Officer granted a refund of

1 04040 This exceeds by 13175 the amount requested in the applica

tion

The question of whether the shipment should have been assessed a

higher rate is irrelevant to refunds or waivers as provided for by

section 18b 3 The refund cannot exceed the difference between the

amount the shipper Lodgegreen actually disbursed and the amount

payable under the rate set forth in the amended tariff In this instance

the shipper paid 2 674 53 in freight charges The freight computed on

the containerload rate set forth in the corrected tariff amounts to

1 765 88 The difference between these figures is 908 65 and not

1 040 40 as stated in the Initial Decision Trans Freight Lines there

fore is granted permission to refund to the shipper the amount of

908 65

1

Section 18b 3 of the Shipping Act 1916 gives the Commission discretion to permit acarrier to

refund orwaive collectionof aportion of freight charges where it finds that there is

an error in the tariffdue to inadvertence in failing to file anew tariff

25 F M C 303
304 FEDERAL MARITIME COMMISSION

THEREFORE IT IS ORDERED That Trans Freight Lines Inc

is granted permission to refund a portion of the freight charges collect

ed from Lodgegreen Ltd in the amount of 908 65 2

IT IS FURTHER ORDERED That except as herein modified the

Initial Decision issued in this proceeding is adopted by the Commission

and made a part hereof

IT IS FURTHER ORDERED That Trans Freight Lines Inc shall

promptly publish in its tariff the following notice

Notice is hereby given as required by the decision of the

Federal Maritime Commission in Special Docket No 942 that

effective February 12 1982 through March 4 1982 for pur

poses of refund or waiver of freight charges the rate for

containerIoads of mixed paper products viz napkins invita

tions plates tablecloths candy cups is 1 700 00 per 20 ft

container subject to all applicable rules regulations terms and

conditions ofsaid rate and tariff

IT IS FINALLY ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

Mililzer Muench US A are direcled 10 certify 10 Ihe Commission within 4 day from the date

of this Order tlat it has remitted to Lodgegreen the refund or explain why such remittance has not

been made

25 F MC
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 942

APPLICATION OF TRANS FREIGHT LINES INC FOR

THE BENEFIT OF MILITZER MUENCH U S A INC

AS AGENT FOR LODGEGREEN LTD

PERMISSION GRANTED TO REFUND A 1 040 40 PORTION

OF AGGREGATE OCEAN FREIGHT CHARGES OF 2 806 28

Rose Murphy Rate Analyst Trans Freight Lines Inc for carrier applicant

INITIAL DECISION 1 OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Partially Adopted September 8 1982

This is a special docket application pursuant to section 18b 3 of the

Shipping Act 1916 as amended and Rule 92 of the Commission s

Rules of Practice and Procedure 46 CFR 502 92 The application

contains a certification of having been mailed June 23 1982 to the

Secretary of this Commission Under those circumstances and the Act

and Rule above the date of the filing of this application is June 23

1982

On February 10 1982 the carrier applicant received through Rose

Murphy a rate request from Fritz Oltman of Forwarder Militzer

Muench U S A Inc FMC 1664 for mixed containerload of paper

products consisting of Napkins Invitations Plates Tablecloths and

Candy Cups This request was brought before Trans Freight Lines

Inc s Pricing Committee on February 11 1982 and it was agreed to

offer Lump Sum rate of 1 700 00 plus TH C 2 50 M per 40 eft

and this was quoted by Rose Murphy to Fritz Oltman The following

day Mr Oltman contacted Rose Murphy to file the agreed rate

At the above time Rose Murphy was involved in preparing for a

General Rate Increase in Trans Freight Lines Incs tariffs The request

to filethe rate was misplaced in a dead file

Trans Freight Lines Incs Bill of Lading No 191721 dated Febru

ary 26 1982 shows 1 X 20 Ft HIH Container No INTU 245654 said

to contain Mixed Lot Party Items viz Napkins Table Cloths Party

Plates Cups Invitations Gross Weight 9916 Ibs measurement 1054 4

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

Commission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

2S F M C 305
306 FEDERAL MARITIME COMMISSION

eft was loaded at Baltimore on the vessel SS TFL Adams Voyage

lIE for discharge at Felixstowe for delivery to Liverpool Freight

payable at destination The shipment sailed February 28 1982

The application shows the original charge as

99 00 Mper 40 eft at 1054 eft

plus T H C 2 50 per 40 eft

2608 65

65 88

2 674 53

The BIL 191721 shows the same charge However there is no

support showing the 99 00 M rate but the 104 rate

The application states that the rate applicable at the time of shipment

was 104 00 Min 800 eft per HIH Ctr Exhibit No 3 Exhibit No 3

is a

copy ofTrans Freight Lines Incs TariffNo 39 FMC 39 From

United States Atlantic Ports in the Eastport MelHampton Roads Va

Range To Ports ofCall in England Scotland Wales Northern Ireland

and Erie 2nd Revised Page 185 effective date February 22 1982

showing Item No 9316OO1001 Commodity Party Decorations

Favors VIZ Napkins Cups Plates Ribbons Wrappings Paper Table

cloths Party Favors Stationery Books Candles Vinyl Plaques Puz

zles Desk Accessories Packed Minimum 800 eft per HIH Container

Rate 104 00 M

On this rate the charges would be

104 00M per 40 eft at 1054 eft

plus TH C 2 50 per 40 eft

2 740 40

65 88

2 806 28

This 2 806 28 charge is 13175 more than the charge shown in the

application and that on the B L No 191721 of 2 674 53

The rate sought to be applied is Lump Sum per 20 ft HIH Ctr

1 700 00 The 4th Revised Page 185 effective date March 9 1982

I R effective 3 4 82 per telex to FMC3 4 82 shows Item No

9316002 001 1 Mixed Containerloads of Paper Products VIZ Nap

kins Invitations Plates Tablecloths Candy Cups R Per 20 ft HIH

Ctr thru 4 3 8 Rate Basis LS 1 700 00 At this rate the sought

charges are

Lump Sum

Plus T H C 2 50 per 40 eft

1 70000

65 88

1 765 88

Charges sought to be refunded in the application are stated as

908 65 but the calculation made above under the difference between

the 99 00 rate and the 104 rate revealing the 13175 error added to

the 908 65 makes the refund total 1 040 40

DISCUSSION

The carrier applicant asserts there are no other docket applications or

formal proceedings involving the same rate situation presently before

the Commission that there were no other shipments ofthe same com

25 FMC
TRANS FREIGHT LINES INC FOR THE BENEFIT OF 307

MILlTZER MUENCH

modity by other than the shipper for whose benefit the refund is sought

during the same period of time at the rate applicable at time of the

involved shipment

The sought to be applied rate was agreed to February 12 1982 The

request to file the agreed upon rate was misplaced in a dead file On

March 4 1982 the shipper stated that the cargo moved on February

26 1982 and that the consignee was overcharged in excess of the

agreed rate The carrier applicant filed the agreed rate effective March

4 1982 via temporary filing to the Commission which was before this

application was filed on June 23 1982 The application was filed within

180 days of the February 28 1982 sailing of the involved shipment

Upon consideration ofthe above and the record herein the Presiding

Administrative Law Judge finds and concludes that the carrier applicant

has conformed to and complied with section 18 b 3 of the Shipping

Act 1916 as amended and Rule 92 referred to above and that permis

sion to refund should be granted

Wherefore it is ordered subject to review by the Commission as

provided in the Commission s Rules of Practice and Procedure that

A Trans Freight Lines Inc be and hereby is granted permission to

refund a 1 040 40 portion of aggregate ocean freight charges of

2 806 28 for the benefit of Militzer Muench U S A Inc as Agent

for Lodgegreen Ltd

B Trans Freight Lines Inc shall make any adjustments in compen

sation necessitated by this refund and notify the Commission thereof

C The carrier applicant shall publish an appropriate notice of this

decision in the applicable tariff

D This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 17

AROUNDWORLD SHIPPING CHARTERING INC LICENSE

NO 1860

AND JOHN TARNOWSKI APPLICANT FOR A LICENSE AS AN

INDEPENDENT

OCEAN FREIGHT FORWARDER

I

NOTICE

September 9 1982

Notice is given that no exceptions have been filed to the July 28

1982 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

5 FRANCIS C HURNEY

Secretary

308 2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 17

AROUNDWORLD SHIPPING CHARTERING INC

LICENSE NO 1860 AND JOHN TARNOWSKI

APPLICANT FOR A LICENSE AS AN

INDEPENDENT OCEAN FREIGHT FORWARDER

Aroundworld Shipping Chartering Inc found to have violated certain sections of

General Order 4 to have turned in its independent ocean freight forwarder license

and to be insolvent and therefore that no civil penalty should be assessed against

ASC John J Tarnowski found to have violated a section of General Order 4 and fit

to be licensed as an independent ocean freight forwarder

Duane E Crowley Jr and Alvin C Askew Jr for respondent Aroundworld

Shipping Chartering Inc

Eliot P Tucker for respondent John Tarnowski

John Robert Ewers Joseph B Slunt Alan J Jacobson and Stuart James as Hearing

Counsel

INITIAL DECISION 1 OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

Finalized September 9 1982

This proceeding 2

is an investigation instituted by the Commission to

determine whether one ofthe two respondents Aroundworld Shipping

Chartering Inc ASC a licensed independent ocean freight for

warder had violated certain sections of the Commission s General

Order 4 46 CFR 510 whether a civil penalty should be assessed

against ASC pursuant to section 32 e of the Shipping Act 1916 the

Act and if so the amount of any such penalty and whether ASCs

independent ocean freight forwarder license No 1860 should be sus

pended or revoked pursuant to section 44 d ofthe Act

This proceeding also ordered an investigation and hearing as to the

respondent Tarnowski as follows

IT IS FURTHER ORDERED that pursuant to the above

cited sections of the Shipping Act 1916 this proceeding also

determine whether John J Tarnowski in light ofthe evidence

adduced pursuant to the first second third and fourth issues

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

Commission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

2

This proceeding was reassigned toAdministrative Law Judge Charles E Morgan after the Admin

istrative Law Jwlge who had presided at the hearing transferred to anotheragency

25 F M C 309
310 FEDERAL MARITIME COMMISSION

together with any other evidence adduced possesses the requi

site fitness within the meaning of section 44 b Shipping Act

1916 to be licensed as an independent ocean freight forward

er

IT IS FURTHER ORDERED that Aroundworld Shipping

Chartering Inc and John J Tarnowski be made Respondents

in this proceeding

The matter of ASC will be taken up herein first The issues relating

to ASC were itemized in the order ofinvestigation as follows

THEREFORE IT IS ORDERED that pursuant to sections

22 32 and 44 USC 821 831 and 841 b of the Shipping Act

1916 and section 510 9 of General Order 4 46 CFR 510 9 a

proceeding is hereby instituted to determine

1 Whether ASC has violated section 510 5 c of the Commis

sion s General Order 4 by failing to inform the Commission of

changes in its management and location within the thirty day

time limit

2 Whether ASC has violated section 510 23 a of General Order

4 by permitting its license to be used by a person not in its

employ to perform ocean freight forwarding services on 16

shipments from December 17 1979 through January 25 1980

3 Whether ASC violated section 510 23 fof General Order 4

by failing to promptly refund monies due one shipper in

March 1978

4 Whether ASC has violated sections 51O 23 d 51O 23 e and

510 230 ofGeneral Order 4 by incorrectly invoicing shippers

for the cost of cargo insurance and accessorial services on at

least 31 instances during the period September 15 1977

through March I 1979

5 Whether a civil penalty should be assessed against ASC pursu

ant to section 32 e Shipping Act 1916 for violations of

sections 510 5 c and 51O 23 a d e f

and jofthe Commis

sion s General Order 4 and if so the amount of any such

penalty

6 Whether ASC s

independent ocean freight forwarder license

should be suspended or revoked pursuant to section 44d of

the Shipping Act 1916 for

a willful violations of the sections ofthe Commission s Gen

eral Order 4 listed in subparagraph 5 above or

b such conduct as the Commission shall find renders ASC

unfit to carryon the business of forwarding in accordance

with section 510 9 e ofGeneral Order 4

An opening brief was filed by Hearing Counsel on behalf of the

Bureau of Hearings and Field Operations in which it proposed numer

2S FMC
AROUNDWORLD SHIPPING CHARTERING INC LICENSE 311

NO 1860

ous findings of fact ASC did not file a

reply brief but instead on

November 20 1981 turned in its forwarder license to the Commission

along with a letter stating that ASC had become insolvent and would

no longer be an active participant in this proceeding

Because ASC did not reply in general the proposed findings of fact

of Hearing Counsel herewith are adopted subject to any mathematical

or other necessary corrections The facts show that ASC experienced a

number of changes in its location and its management during the last

few years and the Commission was not promptly advised of the

changes as required by section 51O 5 c of General Order 4 ASC

moved its Houston branch office from 609 Fannin Building Houston

to 16515 Hedgecroft Houston on March 24 1978 but the Commission

was not advised until much later on December 28 1978

The principal headquarters of ASC in Washington D C ceased

operating on November I 1978 and the Commission was advised on

December 28 1978 On the same date John Tarnowski the qualifying

officer of ASC s Houston office advised the Commission of the resig

nation of ASCs president Reginald Slocombe on November I 1978

There were other such occasions offailure by ASC to promptly advise

within the 30 day period required by General Order 4 John Tar

nowski in time became acting president of ASC and he also failed to

advise the Commission within the 30 day period of changes in ASC s

location and management

ASC did not promptly refund to E Systems Inc on a shipment

handled by Delta Line when E Systems had overpaid ASC for ocean

freight on the shipment Delta Line had issued a corrected manifest for

the shipment on June 27 1978 but it was not until March 28 1979 that

ASC refunded the amount owed to E Systems Inc A

prompt refund

was required by section 510 23 f

ofGeneral Order 4

Between September 15 1977 and March I 1979 ASC improperly

invoiced six of its clients on nine occasions for wharfage or terminal

charges on shipments which ASC forwarded in amounts greater than

the amounts entitled to ASC Also in this same period ASC improperly

invoiced ten of its clients on 13 occasions for insurance charges stating

premium rates greater than the rates billed to ASC Sections 510 23 d

e and jof General Order 4 required that ASC bill the proper

charges

During the period December 17 1979 through January 15 1980

sixteen shipments were billed by Robert Tinder under the name of

Professional Freight Forwarder International P F F I using the for

warder license number of ASC Tinder s relationship with ASC was

not as an employee

John Tarnowski drafted the contract with Robert Tinder and Tinder

had complete control over the two accounts clients with whom he

dealt Tinder worked out of his own separate location Tarnowski had

25 F M C
312 FEDERAL MARITIME COMMISSION

no knowledge of how Tinder was billing the accounts further proof

that Tinder was not an employee of ASC Also Tinder was not on

ASC s payroll but operated strictly on a commission basis The two

clients of Tinder were his before he established any relationship with

ASC It is concluded that ASC violated section 51O 23 a of General

Order 4 which provides that no licensee shall permit his name to be

used by any person not an employee ofthe licensee

Hearing Counsel originally recommended that ASC should be as

sessed a civil penalty in the amount of 15 000 in view of certain

mitigating circumstances Much of ASC s billing problems occurred as

a result of its Washington headquarters closing down with the confu

sion associated with a transfer of records to Houston Hearing Counsel

state that ASC realized 4 424 71 from its improper invoicing methods

and that in view of this and of all of ASC s violations that 15 000 is

proper considering also the institution of corrective measures by ASC

to prevent future violations These views and the 15 000 fine recom

mendation were contained in Hearing Counsel s opening brief received

prior to the time that ASC turned in its forwarder license on November

30 1981

Since that time at the request of the formerly presiding Administra

tive Law Judge Hearing Counsel has provided additional information

and has withdrawn the recommendation for a 15 000 fine

By motion dated May 12 1982 Hearing Counsel request that certain

documentation attached to said motion be received and that their

revised recommendation be adopted Said motion to receive the addi

tional documentation hereby is granted It includes ASCs financial

statements an analysis of said statements by the Commission s Office of

Financial Analysis OFA a statement ofthe attorney for ASC and a

statement of a certified public accountant CPA The financial state

ments are unaudited and the CPA expresses no opinion or any form of

assurance in them The CPA has withdrawn its further services because

ASC has been unable to pay it the 7 000 plus balance already due to

the CPA

ASC s attorney points out that since the date of the financial state

ments September 17 1981 both ofthe two primary customers of ASC

have been lost one filing for bankruptcy and one transferring its

business to another forwarder A comparison of current assets and

current accounts payable of ASC shows more payable Furthermore

one account receivable is in the doubtful category

The Commission s Office of Financial Analysis on review believes

that ASC cannot afford a fine Based on ASC s

insolvency Hearing

Counsel assert that assessing a fine would be an exercise in futility and

now recommend that no civil penalty be assessed against ASC

As to ASC it is concluded and found that ASC violated sections

510 5 c 51O 23 a 51O 23 d 51O 23 e 510 23 fand 510 23jof the

25 F MC
AROUNDWORLD SHIPPING CHARTERING INC LICENSE 313

NO 1860

Commission s General Order 4 that ASC has turned in its independent

freight forwarder s license and accordingly this action has made moot

the issue of whether ASC s forwarder license should be suspended or

revoked and that while a fine of 15 000 would be justified for the said

violations no fine should be assessed ASC because ofits insolvency and

inability to pay

Attention is now directed to the issue of the fitness of John J

Tarnowski to be licensed as an independent ocean freight forwarder

As seen from the facts found with regard to ASC some ofthese also

pertain to Tarnowski because he was the Houston office manager and

a vice president of ASC since December 21 1976 Tarnowski was

president and a director of ASC from January 16 1979 until he was

removed from his position of president of ASC on June 10 1981

Tarnowski made the arrangements with Tinder to use ASC s license

number but Tarnowski took the position that Tinder became an em

ployee ofASC even though Tinder operated out of a separate location

and with a separate freight forwarder name Tinder had complete

control over the two accounts which he handled

A civil lawsuit is pending in the state District Court in Harris

County Texas in which Aroundworld Shipping Chartering Inc is

the complainant and John J Tarnowski is the defendant Because ofthe

backlog of cases in Harris County apparently a trial on a

jury case as

is this one against Mr Tarnowski will not occur sooner than 2 12 to

3 12 years from the filing date of the suit Also more time might be

involved should appeals be filed with higher courts

The above suit in Harris County and counterclaims are based on

al1eged facts said to have occurred during Mr Tarnowski s tenure as

president of Aroundworld Shipping Chartering Inc

The order of investigation herein with regard to Tarnowski names

certain specific matters to be considered to determine the fitness of

Tarnowski But the order is not limited to these specifics inasmuch as

it contemplates consideration of any other evidence adduced in the

proceeding Further section 44b of the Act sets the requirements

necessary to be met for the issuance of a license including a finding

that the applicant is fit

Any applicant whose past conduct shows him to be not fit shal1 not

be issued a license as a freight forwarder and any applicant who

receives such a license and subsequently is shown to be unfit shal1 have

his license revoked

On the other hand an applicant is entitled to areasonably prompt

ruling on his application

The former presiding Administrative Law Judge apparently was

faced with reconciling the above two general principles when he ruled

at the oral hearing in this proceeding denying the request of Hearing

Counsel for more time to develop certain facts as to Mr Tarnowski s

2S F MC
314 FEDERAL MARITIME COMMISSION

conduct as president ofASC In effect since the matter was pending in

Harris County it was ruled out of the present case before the Federal

Maritime Commission As shown on the transcript page 29 the former

presiding Administrative Law Judge asked if what Hearing Counsel

were suggesting was a collateral investigation concurrent with that of

the Harris County Court The answer was yes and the motion of

Hearing Counsel was denied

An offer of proof was made that an investigator employed by the

Federal Maritime Commission would have testified that during his

investigation of ASC he was shown and obtained copies of ledger

pages indicating payments to J E Enterprises totalling 37 328 28

paid by checks number 1140 dated May 29 1979 and ending with

check number 3727 dated May 29 1981 and that when the investigator

questioned Mr Tarnowski about these findings on July 28 1981 Mr

Tarnowski advised that his attorneys had advised him not to comment

on this topic

In their first brief in this matter Hearing Counsel on page 21 state

While there are a number of allegations concerning John Tarnowski

which the Commission is aware of which might affect his fitness these

allegations are not involved in this proceeding and this recommendation

is made based only on the facts of record and the issues in the Order of

Investigation as interpreted by the Presiding Administrative Law

Judge 2 Footnote 2 on this page states that Hearing Counsel intend

to except to the Administrative Law Judge s decision whiCh bars any

examination of these allegations as they relate to John Tarnowski s

fitness in this proceeding

The recommendation of Hearing Counsel with the caveat above is

After examining the facts of record itl this proceeding Hearing Coun

sel contend thatJohn Tarnowski is fit to be licensed as an Independent

Ocean Freight Forwarder

Hearing Counsel state that denial of such a license is an extreme

sanction and that John Tarnowski on this record has not evidenced

any unwillingness to comply with the Commission s rules and regula

tions in the future

In all of the above circumstances and especially in view ofthe long

time which apparently would have been necessary to determine the

facts as to the matters pending in the Harris County Court there

appears no good reason now to reconsider the ruling of the former

Administrative Law Judge While Hearing Counsel asked him torecon

sider which motion he denied and while Hearing Counsel stated they

intended to except to his decision which bars any of the allegations

related to the Harris County case Hearing Counsel have not asked the

present Administrative Law Judge to reconsider that ruling although

they have had ample opportunity to do so

2S F MC
AROUNDWORLD SHIPPING CHARTERING INC LICENSE 315

NO 1860

Accordingly it is ruled that the record must stand as it is and there

is no good cause for reopening this record

As to Mr Tarnowski it is concluded and found that he violated

section 51O 5 c of the Commission s General Order 4 by failing

promptly to advise the Commission of change in the location of ASC s

Houston office and of change in its officers and directors

No civil penalty is recommended to be assessed against Mr Tar

nowski and based upon the limited facts of record herein Mr Tar

nowski is found fit to be licensed as an independent ocean freight

forwarder

S CHARLES E MORGAN

Administrative Law Judge

25 EM C
FEDERAL MARITIME COMMISSION

46 C F R PART 507

GENERAL ORDER 39 DOCKET NO 82 31

ACTIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE

TO

SHIPPING IN THE FOREIGN TRADE OF THE UNITED

STATES

ACTION

SUMMARY

September 9 1982

Removal ofPart 507

This removes regulations designed to meet or adjust

conditions unfavorable to shipping in the United

States Guatemalan trade resulting from a since re

pealed Guatemalan decree

DATE September 14 1982

SUPPLEMENTARY INFORMATION

On June 28 1982 the Commission issued a notice of proposed rule

making requesting comments on the proposed removal of Part 507 of

Title 46 of the Code of Federal Regulations 47 F R 27875 No

comments were received in response to the Commission s Notice

Part 507 was promulgated pursuant to section 19 of the Merchant

Marine Act of 1920 46 U S C g 19 1 b to offset the discriminatory

effects of a Guatemalan decree on the United States foreign commerce

Because the Guatemalan Decree has now been repealed there is no

longer any need for the regulations in Part 507

THEREFORE IT IS ORDERED That pursuant to 5 U S C g 553

and section 43 Shipping Act 1916 46 U S C g 841 a and section

19 1 b

Merchant Marine Act 1920 46 U S C g 876 1 b Part 507

ofTitle 46 ofthe C F R is removed

IT IS FURTHER ORDERED That this proceeding be discontin

ued

I

By the Commission

S FRANCIS C HURNEY

Secretary

316 25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 72

SEALD SWEET INTERNATIONAL INC

v

SEA LAND SERVICE INC

ORDER ADOPTING INITIAL DECISION

September 10 1982

This proceeding is before the Commission upon its determination to

review the Initial Decision ofAdministrative Law Judge William Beas

ley Harris finding for Complainant and against Sea Land Service Inc

The Initial Decision also ordered

Sea Land Service Inc shall publish in the applicable tariff an

appropriate notice of the decision in this proceeding so that

shippers similarly situated during the time period involved are

not discriminated against and receive the same treatment if

eligible as the complainant

Initial Decision at 10 11

Publication in a tariff of notice of a Commission decision concerning

that tariff is a Special Docket procedure It has not been a requirement

in misclassification proceedings arising under section 18b 3 of the

Shipping Act 1916 46 U S C 817 In the instant proceeding the

phrase shippers similarly situated during the time period involved

could be interpreted as including shippers already time barred by the

two year statute of limitations prescribed at 46 U S C 821 Although

there may be some benefit in the notice requirement for shippers who

are not time barred the possibility of unintended implications and con

fusion regarding the statute of limitations outweighs the usefulness of

such publication The Initial Decision shall therefore be adopted except

for the notice requirement prescribed in paragraph 3 of the Presiding

Officer s conclusions and paragraph B ofthe ordering language

THEREFORE IT IS ORDERED That the Initial Decision is

adopted to the extent indicated above and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

25 F M C 317
FEDERAL MARITIME COMMISSION

DOCKET NO 81 72

SEALD SWEET INTERNATIONAL INC

v

SEA LAND SERVICE INC

Besides admission by the parties the record clearly evinces a course of conduct strongly

indicating that both the carrier and the shipper understood that the commodity

Fruits Citrus N E S VIZ Temperature Controlled Fibre Cartons Minimum 950

cartons per container thru March 31 1980 EA R 3 65 Item No 0510005 803 in

SANE TariffNo 5 FMC 13 11th Revised Page 138 effective December 17 1979

would be applicable to all these shipments

The conflicting interpretation of the applicable tariff by the complainant shipper and

respondent carrier points up a definite ambiguity in the tariff as demonstrated by the

fact that respondent itself at first applied the interpretation the complainant did of

950 4 5 bushel cartons or 215 bushel cartons bundled together or not totalling 950 4

5 bushel cartons to a container However subsequently in supplemental billings

respondent interpreted the tariff as requiring that a 2 5 bushel carton be counted as

one carton

The action of the carrier and the shipper are factors to be considered in determining what

was a fair and reasonable interpretation of an ambiguous tariff item The ambiguity is

resolved against the carrier and in favor of the shipper

The carrier should remove any ambiguity as to the tariff Item No 0510005 503 by

making its tariff specific and plain

Michael Joseph and Timothy Trushel of Kominers Fort Schiefer Boyer for the

complainant

Claudia E Stone and John M Ridlon for the respondent

INITIALDECISION 1 OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Adopted September 10 1982

The complainant Seald Sweet International Inc alleges a charge

and demand by the respondent Sea Land Service Inc for a

greater

compensation for the transportation in containers oforanges packep in

2 5 bushel cartons bundled together than the rates and charges speci

fied in Sea Land s tariff Seald Sweet alleges this is a violation of

section l8b 3 ofthe Shipping Act 1916 46 U S C 817 b 3 and an

1 This decision wilt become the decision of the Commission in the absence of review thereof by the

Commission Rule 227 Rule of Practice and Procedure 46 CFR 502 227

318 25 FMC
SEALD SWEET INTERNATIONAL INC V SEA LAND 319

SERVICE INC

unjust discrimination between shippers in violation of section 17 of the

same Act 46 U S C 816

This proceeding as requested by the complainant and agreed to by

the respondent was conducted under shortened procedure without oral

hearing pursuant to 46 CFR 502 181 et seq

The Presiding Administrative Law Judge from the record herein

finds the following facts

FACTS

There are seven 7 involved shipments of U S 1 Fresh Temple

Oranges from Jacksonville Florida to Rotterdam Holland Two 2 of

the seven 7

shipments sailed under the following Bills of Lading on

the vessel Producer Voy 66 East

I B L No 971787210 3 dated 16 80 1 6342 5 Bushel Cartons

Gross Weight 32 680 Ibs Freight and Charges Prepaid 4 307 79

2 B L No 971787411 3 dated 16 80 1 573 25 Bushel Cartons

Gross Weight 31 460 Ibs Freight and Charges Prepaid 4 30167

The remaining five 5 of the seven 7 shipments sailed under the

following Bills of Lading on the vessel Economy Voy 119 East

I B L No 971787456 3 dated 110 80 1900 2 5 Bushel Cartons

Gross Weight 38 000 Ibs Freight and Charges Prepaid 4 334 52

2 B L No 971787457 4 dated 110 80 1900 25 Bushel Cartons

Gross Weight 38 000 Ibs Freight and Charges Prepaid 4 334 52

3 B L No 971787484 3 dated 110 80 1900 2 5 Bushel Cartons

Gross Weight 38 000 Ibs Freight and Charges Prepaid 4 334 52

4 B L No 971787485 4 dated 110 80 2 600 2 5 Bushel Cartons

Gross Weight 32 020 Ibs Freight and Charges Prepaid 4 304 38

5 B L No 971787486 5 dated 110 80 1 601 2 5 Bushel Cartons

Gross Weight 32 020 Ibs Freight Charges Prepaid 4 304 48

The tariff applicable here is that of South AtlanticNorth Europe

Rate Agreement FMC No 9984 SANE TariffNo 5 FMC 13 From

South Atlantic Ports of the United States below Hampton Roads

Virginia to and including Key West Florida To Antwerp Rotter

dam Amsterdam Hamburg Bremen Bremerhaven and French Atlan

tic Ports in the BordeauxlDunkirk Range Each involved shipment

moved under the Tariff Item No 0510005 803 11th Revised Page 138

effective December 17 1979 Commodity Fruits Citrus N E S VIZ

Temperature Controlled Fibre Cartons

Item No

Up to incI 4 eft each

Minimum 950 Cartons per container

fhru March 31 1980

EfT April I 1980

EA 6 65 051 0005 477

EA

EA

R

A

3 65 0510005 503

4 05 0510005 803

25 F M C
320 FEDERAL MARITIME COMMISSION

Complainant Seald Sweet International Inc is a Florida corporation

with principal place of business in Tampa Florida engaged in the

exporting ofcitrus fruit

Respondent Sea Land Service Inc is a common carrier by water

engaged in transportation between ports on the South Atlantic Coast of

the United States and ports in North Europe and as such is subject to

the provisions ofthe Shipping Act 1916 as amended

The majority of Seald Sweet s shipments consisted of approximately

950 packages each comprised of one 4 5 bushel carton for which

Seald Sweet was charged for example 950 cartons at 3 65 per carton

or 3 467 50 per container

Respondent admits to carrying 7 shipments between January 6 and

II 1980 for the complainant which consisted of approximately the

same volume of oranges but were shipped in approximately 950 pack

ages each consisting of two 2 5 bushel cartons bundled together for

which Seald Sweet has been charged for example 1 900 cartons at

3 65 per carton or 6 935 00 per container

In each ofthe seven involved shipments the oranges were packed in

single cartons each comprised of two 25 bushel cartons bundled to

gether Freight charges were computed on the basis of the 950 carton

minimum for each

By means of seven freight bills dated January 30 1980 Sea Land

charged and demanded that Seald Sweet pay supplemental billings in

the aggregate amount of 23 806 43 reflecting charges of 3 65 for each

25 carton in each shipment plus currency surcharges

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

The respondent seeks to apply the rate applicable to the cargo which

moved on the basis ofthe number of cartons which weretransported

on behalf ofthe complainant irrespective ofwhether they were bundled

or single individual cartons The respondent asserts it is required to

apply the tariff as it seeks to do here that the applicable tariff provision

specifies clearly that it refers to cartons up to and including I 4 eft

each without specificity as to the manner ofpackaging

The complainant contends The facts alleged in the complaint estab

lish that consistent with the fair import of the language of the tariff

Sea Land routinely accepted standard 4 5 bushel cartons including

half cartons bundled together for shipment as cartons under Item No

0510005 803 ofthe tariff For a typical containerload under that item

where the container was sufficiently filled or deemed to be filled to

meet the 950 carton minimum incentive rate freight was customarily

and properly charged for 950 cartons at 3 65 totalling 3 467 50

regardless whether the cartons used were single cartons of 4 5 bushel

capacity or were half cartons bundled together By attempting to

charge Seald Sweet for the number of half cartons shipped in excess of

2S F MC
SEALD SWEET INTERNATIONAL INC V SEA LAND 321

SERVICE INC

950 in each of seven shipments Sea Land takes the position that SANE

Tariff No 5 should be construed to require that a shipment of 950

single cartons notwithstanding that each pair of bundled half cartons is

less than the maximum dimension allowed in the tariff for each carton

Such a

reading ofTariffNo 5 according to the complainant is support

ed neither by its language nor by common sense

The complainant asserts the case of Joseph P Sullivan Co v Sea

Land Service Inc Docket No 571 F 21 FM C 734 18 SRR 1493

1979 is directly on point with the instant case The complainant

shipper had shipped 13 containers under tariff items described as

Apples Temperature Controlled

In Wooden Boxes or Fibreboard Cartons or in

Cartons Bundled Two Together Viz

Not Exceeding l 2 EA 145

Not Exceeding 2 2 EA

Not Exceeding 2 2

Minimum 725 Packages per Container EA 2 90

The shipments consisted of by way of illustration 615 full cartons

2 2 and 200 unbundled half cartons 1 2 ofapples The respondent

carrier Sea Land was willing to count individual half cartons as car

tons for the purpose of the 725 carton minimum and charged the

shipper 2 90 each for 725 cartons actually 615 full cartons and 110

half cartons plus 145 each for the remaining 90 half cartons The

shipper s reasonable interpretation was that while pairs of half cartons

bundled or not should be counted as cartons for purposes of the 725

carton minimum nothing in the tariff authorized application ofthe full

carton rate to individual half cartons The Commission upheld the

shipper s interpretation The complainant argues that if for the pur

poses of an item described as wooden boxes or fibreboard cartons or in

cartons bundled together a pair of unbundled half cartons is to be

deemed a carton then a fortiori for the purposes of an item described

as fibre cartons Up to incl l 4 cft each minimum 950 cartons per

container a pair ofhalf cartons bundled together must be considered to

be a carton so long as the maximum dimension of I 4 cft is not

exceeded

Respondent in its January 15 1982 answering memorandum p 12

asserts It is abundantly clear from the Complaint the Exhibits and the

Argument of Complainant that the entire proceeding before the Com

mission in this case rests upon a single dispute as to the interpretation

and application of a particular tariff rate In its barest form the dispute

may be resolved into a disagreement between the parties as to its

applicability of a particular rate to cartons It is clearly the position of

Complainant that its use of215 bushel capacity cartons when bundled

together into a single package constitutes a single carton rather than

two cartons forming one package

2S F M C
322 FEDERAL MARITIME COMMISSION

Asked to explain in more detail whether or not the case of Joseph P

Sill van Co v Sea Land Service Inc Docket No 571 f21 F MC

734 18 SRR 1493 1979 is directly on point with the instant case the

complainant stated the case is directly on point with the instant case on

the facts in that it wasthere held that pairs of half cartons of fruit must

be counted as cartons where the applicable tariff does not clearly call

for different treatment and it is directly on point on the law in that it

applied the principle that ambiguities in a tariff are to be construed

against the carrier The respondent says the Sullivan case supra al

though facially similar is distinguishable in law and fact and is thus not

controlling of the instant case In both cases the commodity at issue

was fruit Similarly both cases involved shipments of fruit in cartons

In both cases the issue was one of tariff application However at that

point the cases diverge The respondent says in the tariff at issue in the

Sullivan case the relevant wording of the commodity description read

In Wooden Boxes or Fibreboard Cartons or in Cartons Bundled Two

Together rated on a half carton basis not exceeding l2 each or

rated on a full carton basis not exceeding 2 2 each subject to a

minimum of 725 packages per container The issue in the Sullivan case

was whether half cartons were required to be bundled together to

obtain the half carton rate Thus the case concerned an ambiguous

tariff item In the subject proceeding according to the respondent

however no ambiguity exists with respect to the tariff provision appli

cable to a commodity description The respondent continues the tariff

item at issue in this docket applies to Fibre Cartons rated on a per

carton basis as the BA designation states If an ambiguity exists it is

in the shipper s commodity description ofthe contents ofthe container

In the instant case there is no tariff provision for cartons bundled two

together nor is there a rate for half cartons There is only a rate on

cartons applicable to each carton Moreover the Sullivan case provided

for a rate based on cartons or cartons bundled together and limited by a

minimum of 725 packages to obtain the rate for full cartons The

subject tariff description at issue here rates cargo on the basis of each

carton and contains a 950 carton minimum

In short says the respondent the Sullivan case is not directly on

point with the subject proceeding

The Presiding Administrative Law Judge finds that he does agree

with the complainant that the Sullivan case applied the principle that

ambiguities in a tariff are to be construed against the carrier and the

Presiding Judge also does agree with the respondent that the Sullivan

case is distinguishable and not controlling of this case The parties are

in conflict as to their interpretation of the Sullivan case As to the

instant case too they conflict on tariff interpretation The conflicting

interpretation of the applicable tariff by the complainant shipper and

respondent carrier points up a definite ambiguity in the tariff as demon

2S FMC
SEALD SWEET INTERNATIONAL INC V SEA LAND 323

SERVICE INC

strated by the fact that the respondent itself at first applied the interpre

tation the complainant did of 950 4 5 bushel cartons or 215 bushel

cartons bundled together or not totalling 950 4 5 bushel cartons to a

container However subsequently in supplemental billings respondent

interpreted the tariff as requiring that a 2 5 bushel carton be counted as

one carton The conflicting interpretation points up a definite ambiguity

in the tariff Peter Pratli Associates Inc v Prudential Lines Inc

WINAC Docket No 1172 Hellenic Lines WINAC Docket No 1173

8 FMC 375 1965

This action ofthe carrier and the shipper is a factor to be considered

in determining what was a fair and reasonable interpretation of an

ambiguous tariff item See Aleutian Homes Inc v Coastwise Lines et al

Docket No 799 5 F MB 602 609 1959 Also the respondent and

complainant both say the applicable tariff does not include a definition

ofthe term carton and Seald Sweet is aware of no understanding of

the term carton I 4 cft among those involved in shipping the

respondent cannot state precisely what is meant by carton I 4 eft as

used in the applicable tariff and adds that on information and belief this

language was added to the tariff at the request of a shipper of citrus

fruit but respondent cannot reconstruct the source of such request

Upon consideration of the above and the record herein the Presiding

Administrative Law Judge finds and concludes in addition to those

heretofore found and concluded that

1 There is an ambiguity as explained above in the applicable tariff

2 The ambiguity is resolved against the carrier in favor of the

shipper This ambiguity with the resulting supplemental billings in the

aggregate amount of 23 806 43 if allowed to stand under the circum

stances of this case would be violative of section 18b 3 of the

Shipping Act 1916 and section 17 of that Act Sea Land is to rescind

such supplemental billings

3 To avoid discrimination among shippers Sea Land shall publish an

appropriate notice in the applicable tariff so that shippers similarly

situated during the time period involved herein may also utilize the

results hereof

4 The carrier respondent should remove any ambiguity as to its

tariff

Wherefore it is ordered subject to review by the Commission as

provided in the Commission s Rules ofPractice and Procedure

A Due to the ambiguity in the applicable tariff as explained above

the ambiguity is resolved against the carrier and in favor of the com

plainant shipper The carrier Sea Land Service Inc is directed to

rescind the supplemental billings in the aggregate amount of 23 806 43

B Sea Land Service Inc shall publish in the applicable tariff an

appropriate notice of the decision in this proceeding so that shippers

25 F M C
324 FEDERAL MARITIME COMMISSION

similarly situated during the time period involved are not discriminated

against and receive the same treatment if eligible as the complainant

C Sea Land Service Inc shall clear up any ambiguity as to the

Tariff Item No OS1000S 803 by making its tariff specific and plain

0 This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

2 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 45

PACIFIC LUMBER SHIPPING COMPANY INC ET AL

v

STAR SHIPPING A S

NOTICE

September 14 1982

Notice is given that no appeal has been taken to the August 5 1982

order ofdismissal in this proceeding and that the time within which the

Commission could determine to review has expired No such determi

nation has been made and accordingly the dismissal has become admin

istratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 325
FEDERAL MARITIME COMMISSION

DOCKET NO 81 45

PACIFIC LUMBER SHIPPING COMPANY INC ET AL

v

STAR SHIPPING A S

UNOPPOSED MOTION FOR DISMISSAL WITH PREJUDICE

GRANTED

Finalized September 14 1982

This proceeding wascommenced by complaint served by the Federal

Maritime Commission on July 2 1981 asserting violations of section 14

Third and Fourth and section 16 of the Shipping Act 1916 A cause of

action under section 18 of the Shipping Act 1916 was later added by

amended complaint

Initiation of the administrative proceeding followed and arose from

the initiation of a Federal District Court action commenced in Seattle

Washington on or about February 8 1979 That action was styled

Pacific Lumber Shipping Co Inc et al v Star Shipping A S and the

MS Star Clipper No C79 140B At the time of filing of this motion

neither the District Court proceeding nor the administrative proceeding

have gone to final hearing although the administrative proceeding has

been set by procedural order ofthe Presiding Officer for September 24

1982

On or about July I 1982 Complainants and Respondent entered into

an agreement to settle the District Court action That settlement agree

ment is conditional upon payment of an agreed sum and upon the

closing of the administrative proceeding In order to meet the latter

condition Complainants file this Unopposed Motion for Dismissal with

Prejudice for the approval ofthe Presiding Officer

In support oftheir motion the Complainants cite several cases which

indicate that the settlement ofadministrative proceedings is favored by

the Congress the Courts and the Administrative Agencies themselves 1

Further as to the basis ofthe settlement they state that

It is based upon the sound commercial judgment of the

parties that continued litigation would cause greater expense

1 Quality Food Corparation v Tropical Shipping Co Ltd 23 F M C 602 1980 see also the authori

lies summarized in Ellenvllle Handle works Inc v Far Eastern Shipping Co 23 F M C 707 1981 and

Old BenCoal Co v Sea Land Service Inc 21 F M C 50S 1978

326 2S F M C
PACIFIC LUMBER SHIPPING CO INC ET AL V STAR 327

SHIPPING A S

to all parties than any recovery on the merits that settlement

of both proceedings at this stage would avoid months and

perhaps years of continued wasteful litigation at tremendous

expense to the parties and that insofar as the compromise is

based upon the foregoing factors it embodies no intention to

contravene either the law or policy generally or the provi

sions of any ofthe applicable shipping statutes

Wherefore in view of the above and the entire record so far made in

this case it is

Ordered that the Complainants Unopposed Motion for Dismissal

With Prejudice is hereby granted

8 JOSEPH N INGOLIA

Administrative Law Judge

25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 27

BURLINGTON INDUSTRIES INC

v

THE ITALIAN LINE STEAMSHIP CO

NOTICE

September 14 1982

Notice is given that no appeal has been taken to the August 6 1982

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

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has become

administratively final

8 FRANCIS C HURNEY

Secretary

328 2S FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 27

BURLINGTON INDUSTRIES INC ACTING

ON BEHALF OF WHOLLY OWNED SUBSIDIARY

KLOPMAN INTERNATIONAL S P A PROSINONE ITALY

v

THE ITALIAN LINE STEAMSHIP COMPANY

MOTION FOR DISMISSAL OF COMPLAINT

AND APPROVAL OF SETTLEMENT GRANTED

Finalized September 14 1982

This action began as the result of a complaint filed by Burlington

Industries against Italian Lines Steamship Company served on May 14

1982 Answer to the complaint was filed on June 16 1982

On June 27 1982 the parties jointly filed a Joint Motion for Dismis

sal of Complaint and Approval of Settlement Accompanying the

Motion was an Agreement of Settlement and Mutual Release and a

Joint Affidavit in Support ofSettlement Agreement

It is clear from the reading of the above documents that the settle

ment effected by the parties whereby the plaintiff is to receive 18 000

from the respondent in return for the respondent s agreement to fore

bear is a commercial one As the parties state In due course it readily

became apparent that litigation of the involved issues would be both

complex and costly Accordingly in an effort to resolve their

differences in a commercially reasonable manner and without the ex

pense and uncertainty of further litigation the parties have after arms

length negotiations reached the settlement agreement

In view ofthe above and in light of the cases and argument set forth

in the Motion it is

Ordered that the Joint Motion for Dismissal of Complaint and Ap

proval of Settlement is hereby granted and the instant proceeding is

dismissed with prejudice

S JOSEPH N INGOLIA

Administrative Law Judge

25 F M C 329
FEDERAL MARITIME COMMISSION

DOCKET NO 82 15

KERR STEAMSHIP COMPANY INC

v

THE BOARD OF COMMISSIONERS OF THE PORT OF NEW

ORLEANS AND

RYAN WALSH STEVEDORING CO INC

NOTICE

September 16 1982

Notice is given that no appeal has been taken to the August 10 1982

order styled Withdrawal ofComplaint in this proceeding and that the

time within which the Commission could determine to review has

expired No such determination has been made and accordingly the

order has become administratively final

8 FRANCIS C HURNEY

Secretary

330 25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 15

KERR STEAMSHIP COMPANY INC

v

THE BOARD OF COMMISSIONERS OF THE PORT OF NEW

ORLEANS

AND RYAN WALSH STEVEDORING CO INC

WITHDRAWAL OF COMPLAINT

Finalized September 16 1982

By motion dated and served July 21 1982 the complainant in this

proceeding moves for leave to withdraw its complaint and for an order

ofdismissal without prejudice

The complainant points out that a suit has been filed in the United

States District Court for the Eastern District of Louisiana New Orle

ans Division entitled The Board of Commissioners of the Port of

New Orleans v Kerr Steamship Co Inc and Ryan Walsh Stevedor

ing Co Inc Civil Action 81 4691 This suit concerns certain demur

rage charges and crossc1aims have been filed by Kerr Steamship Co

Inc in such suit

The complainant states that since liability for the demurrage charges

will be decided by the United States District Court in this named suit

that the expenses to all parties in the present proceeding before the

Federal Maritime Commission No 82 15 will in all probability be not

justified Therefore the complainant in No 82 15 desires withdrawal of

the complaint in No 82 15 without prejudice

One respondent the Board of Commissioners of the Port of New

Orleans the Board opposes the motion and alternatively suggests or

moves that the complaint be dismissed with prejudice or that the

motion to withdraw without prejudice be granted only upon the two

conditions that Kerr pay the Board its costs and expenses and that

Kerr covenant not to bring an action against the Board on this matter

in the future The Board points out that the parties are exchanging

written testimony and an oral hearing has been scheduled and that the

Board has incurred costs in defending itself in the subject case No 82

15

Also since it appeared that the proceeding in the District Court

might not settle all the matters raised in the complaint in No 82 15

particularly regarding the allegation of a violation of section 17 of the

25 F M C 331
332 FEDERAL MARITIME COMMISSION

Shipping Act Kerr s

request made at the prehearing conference for a

stay then was denied

Insofar as the Board suggests withdrawal with prejudice this

amounts to a motion by the Board to which other parties would be

entitled to reply

No response to Kerr s motion for leave to withdraw the complaint

has been made by Ryan Walsh Stevedoring Co Inc nor by Hearing

Counsel

It is now not certain whether the District Court case will resolve all

ofthe questions brought in No 82 15 but there is some probability that

the ruling of the District Court may make it unnecessary for the

complainant to pursue its complaint in No 82 15 Therefore in view of

this possibility it is concluded that the complainant s motion should be

granted subject to condition

Complainant s motion hereby is granted and it is allowed to with

draw its complaint without prejudice but subject to the condition that

any party may file an appropriate motion for or against reopening the

complaint in No 82 15 depending upon the outcome ofthe proceeding

before the District Court in its Civil Action 81 4691 with such motion

for or against reopening in No 82 15 to be filed within 30 days

following the ruling ofthe District Court

S CHARLES E MORGAN

Administrative Law Judge

2S F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 25

SUN CHEMICAL EXPORT CORPORATION

v

LYKES BROTHERS STEAMSHIP CORP

NOTICE

September 16 1982

Notice is given that no appeal has been taken to the August 12 1982

order of discontinuance in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly the order has become

administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 333
FEDERAL MARITIME COMMISSION

DOCKET NO 82 25

SUN CHEMICAL EXPORT CORPORATION

v

LYKES BROTHERS STEAMSHIP COMPANY

NOTICE OF 1 WITHDRAWAL OF COMPLAINT

2 CANCELLATION OF TUESDAY AUGUST 17 1982

HEARING

3 DISCONTINUANCE OF PROCEEDING

Finalized September 16 1982

A letter dated August 2 198 received August 5 1982 to the

Presiding Administrative Law Judge states

Reference the subject Docket

Mr Anthony J Calzaretta of our company had no authority

to file this complaint

Ihave communicated with Mr David W Gunther Manag

er Traffic Advisory Services of Lykes Bros Steamship Co

Inc stating that Sun Chemical Corporation is withdrawing

the above complaint and will not file future complaints on the

same matter

Yours truly

S JERRY R BOLZAK

Jerry R Bolzak

Director of Corporate

Transportation Distribution

Upon consideration ofthe above it is ordered that

A The complaint herein is withdrawn

B The hearing in this proceeding set for Tuesday August 17 1982

is cancelled

C This proCeeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

334 25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 35

LUIS A AYALA COLON SUCRS INC

v

BENEDICT SHIPPING INTERNATIONAL INC

NOTICE

September 17 1982

Notice is given that no appeal has been taken to the July 14 1982

Order of Discontinuance as reconsidered by order served August 12

1982 in this proceeding and that the time within which the Commission

could determine to review has expired No such determination has been

made and accordingly the dismissal has become administratively final

8 FRANCIS C HURNEY

Secretary

25 FM C 335
FEDERAL MARITIME COMMISSION

DOCKET NO 81 35

LUIS A AYALA COLON SUCRS INC

v

BENEDICT SHIPPING INTERNATIONAL INC

NOTICE ON MOTION FOR RECONSIDERATION AND

REQUEST

VOLUNTARY DISMISSAL OF COMPLAINT

Finalized September 17 1982

On July 14 1982 the Presiding Administrative Law Judge served an

order discontinuing this proceeding for failure of the complainant to

comply with a proper order of this Commission to submit a status

report on or before July 1 1982 and to prosecute diligently the com

plaint

In the instant motion served August 3 1982 received August 9

1982 the complainant states among other things that the case in the

U S District Court for the District of Puerto Rico Civil Action 81

0786 consolidated with Civil Action 81 1712 unfortunately for reasons

beyond the control of the complainant or its legal representative said

case has been delayed more than expected that the complainant s

failure to file a status report was not deliberate or intentional as the

parties had not yet received a decision from the U S District Court

Judge which was expected at any moment that to continue this com

plaint before the Commission would achieve no justiciable purpose

The complainant requests it be allowed to voluntarily dismiss its

claim and to discontinue the present case without prejudice

DISCUSSION

The complainant served the instant motion within 20 days ofthe July

14 1982 order requested to be reconsidered the motion was received

within 26 days The motion did not answer why the lawyer could not

have filed the requested status report within the time ordered It is

possible he was confused prosecuting the cause in this Commission and

the Court in Puerto Rico Because of the possible confusion and less

than 30 days have passed since the July 14 1982 order the said order

has been reconsidered The request ofthe complainant to be allowed to

voluntarily dismiss its claim will be granted The request to discontinue

the present case without prejudice is made in the face of the fact that

336 2S F MC
LUIS A AYALA COLON SUCRS INC V BENEDICT 337

SHIPPING INT L INC

the complaint in this case was served May 19 1981 so that the present

case will be discontinued only

Upon the reconsideration and consideration of the above the July 14

1982 order herein having been reconsidered said order will be vacat

ed The motion to voluntarily dismiss the claim herein is granted and

the proceeding discontinued

Wherefore it is ordered subject to review by the Commission as

provided in the Commission s Rules of Practice and Procedure that

A The July 14 1982 order herein discontinuing the proceeding for

failure to prosecute is reconsidered and upon reconsideration is vacat

ed

B Complainant s motion for its voluntary dismissal of the complaint

is granted

C This proceeding is discontinued

8 WILLIAM BEASLEY HARRIS

Administrative Law Judge

25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 81 3S

LUIS A AYALA COLON SUCRS INC

v

BENEDICT SHIPPING INTERNATIONAL INC

Jose F Sarraga for complainant

Harry A Ezratty for respondent

PROCEEDING DISCONTINUED FOR FAILURE TO

PROSECUTE

Finalized September 7 982

By notice served May 26 1982 the parties were ordered to file on or

before Thursday July 1 1982 an up to date status report and include

therein reasons for the continuance ofthis Docket No 81 35 as well as

a schedule for proceeding should proceeding be desired The respond

ent served a status report July 1 1982 received July 6 1982 which is

really a motion to dismiss and for reconsideration of May 26 1982

order The complainant has not submitted the requested status report

Upon consideration of the above the record herein and that the

complaint herein was served May 19 1981 the Presiding Administra

tive Law Judge finds and concludes that the complainant has failed to

comply with a proper order of this Commission and has failed to

prosecute diligently in this Commission the complaint that as a result

thereof this proceeding should be discontinued

Wherefore it is ordered subject to review by the Commission as

provided in the Commission s Rules of Practice and Procedure that

This proceeding is discontinued for failure of the complainant to

prosecute its claim diligently in this Commission

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

338 2S FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 81 43

INDEPENDENT FREIGHT FORWARDER LICENSE NO 1483

TOKYO EXPRESS CO INC AND KOZO AND

KATHLEEN KIMURA D B A COSMOS TRADING COMPANY

ORDER ADOPTING INITIAL DECISION

September 17 1982 Finalized November 8 1982

This proceeding was initiated by Order of Investigation and Hearing

served July 7 1981 to determine whether Tokyo Express Co Inc I

violated section 16 Initial Paragraph Shipping Act 1916 46 U S C

815 by obtaining transportation at less than applicable tariff rates

through the device of collecting compensation on the shipments of

Cosmos Trading Company a

company owned by Tokyo s principals

2 violated section 16 Initial Paragraph by obtaining transportation at

less than applicable tariff rates by falsely declaring cargo measurements

to ocean carriers 3 violated sections 51O 23 d e j

and k of

Commission General Order 4 46 C F R 510 23 1980 by withhold

ing information from its principals by marking up the ocean freight and

other charges without separately invoicing the shipper for actual cost

and by failing to maintain books and records in accordance with the

requirements of the Commission s General Order 4 4 should have its

license suspended or revoked because it is no longer fit to carryon

the business of forwarding and 5 should be assessed civil penalties

pursuant to section 32 e of the Shipping Act 46 D S C 83I e for

any violations ofthe Act found

On April 20 1982 Administrative Law Judge Charles E Morgan

served his Initial Decision which I

approved the settlement agree

ment between Tokyo and the Commission s Bureau of Hearings and

Field Operations Hearing Counsel but increased the civil penalty

settlement from 15 000 to 20 000 and 2 found that the revocation

or suspension of Tokyo s ocean freight forwarder license is not war

ranted by the record in this proceeding This decision is before the

Commission on Tokyo s Exceptions and Hearing Counsel s

supporting

Reply to the Presiding Officer s increase ofthe civil penalty

BACKGROUND

The record before the Presiding Officer consisted of Hearing Coun

sels

request for admissions to Tokyo Tokyo s admissions uncontested

affidavits confidential financial data and a Settlement Agreement the

essential parts ofwhich are summarized below

25 F M C 339
340 FEDERAL MARITIME COMMISSION

Tokyo is a California corporation 80 of which is owned by Kozo

and Kathleen Kimura Mrs Kimura is employed part time as the com

pany s secretary while Mr Kimura is President and work fulltime

Toshinori Saiki owns 20 of Tokyo is Vice President and is em

ployed full time

The Kimuras were also co owners of Cosmos Trading Company

from 1975 to 1979 at which time the company appears to have been

dissolved Mr Kimura admitted that Cosmos was a purchasing agent

for his brother s Japanese electrical contracting company as well as

purchasing agent for Nippon Ace Ltd of Okinawa Japan During the

period November 29 1977 to June IS 1979 Mr Kimura acted as

purchasing agent and forwarder on 29 shipments for the above men

tioned companies Cosmos was named as the shipper on the bills of

lading and Tokyo invoiced the consignees for the freight and other

charges Tokyo invoiced approximately 14 000 in excess of the actual

freight charges as well as approximately 2 SOO in excess of actual

drayage charges on these shipments 1

In addition Tokyo invoiced the

consignees for a total ofapproximately Soo in forklift charges when no

such charge was assessed on any of the shipments Tokyo also misde

elared the cubic measurements of the 29 shipments 2

Tokyo received a

total of 276 in freight forwarder compensation on these shipments

In the Settlement Agreement Tokyo admitted that it engaged in

activities that may be violative of section 16 Initial Paragraph and

General Order 4 as alleged in the Order of Investigation To avoid the

expense of litigation Tokyo agreed to pay a civil penalty of IS ooo by

executing a promissory note in favor of the Commission The Agree

ment provides that Tokyo will pay 1 SOO within 30 days of its approv

al by the Commission and the balance in installments of 2 2S0 at 6

month intervals Tokyo also agreed to take reasonable measures to

avoid any future unlawful conduct and to inform owners directors

officers and employees ofthe Settlement Agreement s terms

INITIAL DECISION

The Presiding Officer found that the Settlement Agreement is gener

ally fair and consistent with the public interest except for the penalty

amount which he increased to 20 000 He based the increase in penalty

on findings that Tokyo had realized between 16 Soo and 25 000 in

additional revenue as a result ofthe alleged unlawful activity and that

Tokyo paid approximately 527 000 in freight charaes and 5823 in dray ae The Presiding Omcer

found approximately 2000 in drayage overcharges The record however indicates atotal of 2S12

insuch overcharges

a

The record does not indicate the freight savings that Tokyo realized from the misdeclarations

However Hearing Counsel allqes that Tokyo s activities generated approximately 25000 in profit

The overcharges to Shippers total approximately 17000 It appears therefore that the misdeclarations

amounted to 58 000

25 FMC
TOKYO EXPRESS INDP FRT FORWARDER LICENSE NO 341

1483

Tokyo ssalary increases undermined its claim of financial hardship

resulting from its 1981 operations Tokyo s

corporate officers rather

than the employees were deemed the recipients of the salary increases

because Tokyo s expenses for employee benefits were decreasing during

the period relevant to this proceeding 3

The Presiding Officer found

that the stockholders current equity and increases in entertainment and

travel expenses also warranted an upward adjustment in the proposed

settlement figure of 15 000 4

The penalty was therefore increased

from 15 000 to 20 000 by the addition of two installments of 2 500

Finally the Presiding Officer found that the revocation or suspension

of Tokyo s license was not warranted under the circumstances present

ed in this case

POSITION OF THE PARTIES

Tokyo and Hearing Counsel urge the Commission to approve the

proposed civil penalty because it is within a zone of reasonableness

and allegedly meets the Commission s criteria for approving settle

ments These criteria are said to include the furtherance ofthe Commis

sion s enforcement policy the respondent s ability to pay the respond

ents cooperation with the Commission s staff and the taking of remedi

al action

Respondent and Hearing Counsel point out that Tokyo took immedi

ate corrective action when it became aware of the alleged unlawful

activity and that it fully cooperated with the Commission s staff

throughout this proceeding In addition the 15 000 penalty and the

legal expenses associated with this proceeding are said to have elimi

nated any economic benefit that might have enured from the viola

tions Respondent also notes that the Presiding Officer did not find

that salary expenses were so unreasonably high that they warranted

an increase ofthe penalty In the absence of such a

finding and given

the confidential exhibits which allegedly demonstrate that Tokyo would

suffer serious financial hardship if the penalty amount is increased

Tokyo urges the Commission to approve the 15 000 penalty

Finally the parties point out that the Commission has indicated that

it will engage in every presumption which favors a

finding that a

settlement is fair correct and valid In this regard Hearing Counsel

argues that the Commission should not adopt the increased penalty

because to do so could create the impression that amounts agreed to

3

In 1979 1980 and 1981 Tokyo had salary expenses of approximately 110 853 167 000 and

195 864 respectively In 1980 the only year for which exact figures were presented Mr Kimura

received a

salary of 52 400 Mr Saiki 39 300 and Mrs Kimura 13 400 Cost for employee benefits

declined from 9546 in 1980 to 1 230 in 1981 Mr Kimura in aJuly 27 1981 letter to Hearing Coun

sel advised that Tokyo had six employees including himselfand his wife

4

Tokyo s travel and entertainment expenses increased from 10075 in 1979 to 17 175 in 1980 to

29 016 in 1981

25 F M C
342 FEDERAL MARITIME COMMISSION

during settlement will be subjected to adjustment by Administrative

Law Judges even when the amount is fair and reasonable to both

parties to the dispute

DISCUSSION

Upon review ofthe record and Tokyo s Exceptions the Commission

finds that the Respondents arguments generally constitute matters pre

sented to and properly disposed of by the Presiding Officer The

Commission further finds that the Presiding Officer did not abuse his

discretion by conditioning hisapproval of the proposed Settlement The

Commission will therefore adopt the Presiding Officer s Initial Decision

in this proceeding

Tokyo s only exception to the Initial Decision challenges the Presid

ing Officer s increase in the civil penalty agreed to between it and

Hearing Counsel After carefully considering the matter the Commis

sion finds that the Presiding Officer s action is both procedurally proper

and substantively correct under the circumstances

Section 32 e of the Shipping Act 1916 46 U S C 5 3l e authorizes

the Commission to assess or compromise all civil penalties provided for

in that Act Pursuant to this authority the Commission has adopted

procedural regulations which authorize Hearing Counsel as the pros

ecutor in assessment proceedings to enter into stipulations and pro

posed settlements ofthe civil penalties that could be levied However

the settlement of a formal assessment proceeding must in the first

instance be approved by the presiding officer

While settlements are generally presumed to be fair correct and

valid presiding officers are not compelled to accept the offer of settle

ment against their better judgment Pinkus v Reilly 178 F Supp 399

1959 On the contrary a presiding officer has an obligation to ensure

that the proffered settlement is consistent with the regulatory objectives

of the Shipping Act 1916 including its penalty provisions The legisla

tive history of section 32 indicates that the Act s penalty provisions are

designed to ensure a sufficient penalty to deter the offender or others

from transgressing the Act and the Commission s

regulations 6

The

penalty amount necessary to achieve these objectives turns in part on

the nature of the violation and the financial benefit derived as well as

the factors presented in mitigation 7

Inthis proceeding the record supports the Presiding Officer s adjust

ment of the proposed settlement First Tokyo has realized some

See 46 CF R f505 3 1981 44 F R 67660 1979

Senate Report 921014 92nd Cong 2d SeA reprinted in 1972 us Cod Co alld Ad N

3121 HOU8ll Report No 96232 96th Cong 18t S reprinted tn 1979 us Cod Coog alld Ad

N

J02

T

B hrllll lotern tlooal oc lodpelld otOceao FroiBht Fonvarder LI No 910 Initial Decision

served March 17 1981 Notice of Adminl8trative Finality served June 30 1981 23 F M C 973

25 FMC
TOKYO EXPRESS INDP FRT FORWARDER LICENSE NO 343

1483

25 000 in profit from its activities and there is no evidence of record

which would indicate that Tokyo has made restitution to the affected

shippers Second the serious nature of the violations warrants the

increased penalty proposed by the Presiding Officer Tokyo has not

only admitted misdeclaring cargo measurements but also invoicing its

principals for charges that either were not incurred or were in excess of

those actually incurred

The Commission does not believe that a 20 000 penalty will cause

the serious financial hardship that Tokyo alleges Stockholders

equity and increased entertainment and salary expenses evidence

Tokyo s ability to bear a 5 000 increase in the penalty Moreover the

payment procedure derived by the Presiding Officer Le adding two

additional installments rather than increasing the installment payments

already provided should serve to minimize the impact of the increased

penalty

THEREFORE IT IS ORDERED That Tokyo s Exceptions in this

proceeding are denied

IT IS FURTHER ORDERED That the Settlement Agreement ar

rived at in this proceeding is approved on the condition that

1 Itbe modified as provided for in the Presiding Officer s Initial

Decision and

2 The Commission receive within 45 days of the service of this

Order an executed copy of the Settlement Agreement and

promissory note modified as required above

IT IS FURTHER ORDERED That if the above conditions are met

the Commission will adopt the Presiding Officer s Initial Decision and

discontinue this proceeding

IT IS FURTHER ORDERED That if the above conditions are not

met these proceedings will be remanded to the Presiding Officer for

further hearings on the merits of the issues raised in this proceeding

By the Commission

S FRANCIS C HURNEY

Secretary

25 EM Co
FEDERAL MARITIME COMMISSION

DOCKET NO 81 43

INDEPENDENT FREIGHT FORWARDER LICENSE NO 1483

TOKYO EXPRESS CO INC AND KOZO AND KATHLEEN

KIMURA O D A COSMOS TRADING COMPANY

Settlement jointly proposed by the Bureau of liearings and Field Operations and by the

respondents approved in principle provided that the condition of settlement include

among others payment of 20 000 by Tokyo Express rather than the 1 000

proposed by the parties to compromise pursuant to section 32 e of the Shipping

Act 1916 46 U S C section 831 e all civil penalty claims arising from certain

violations of the Shipping Act and of Oeneral Order 4 of the Commission

Tokyo Express found to have taken corrective steps to effect its present and future

compliance with the Act and under the circumstances revocation or suspension of

its ocean freight forwarder license notwarranted

Eliot J Halperin for the respondents

John Robert Ewers Joseph B Slunt and JanetF Katz as liearlng Counsel

INITIAL DECISION 1 OF CHARLES E MORGAN

ADMINISTRATIVE LAW JUDGE

Adopted September 17 1982

Defore considering the issues in this proceeding there is one prelimi

nary matter It concerns the motion for a protective order filed by the

respondents relative to certain confidential exhibits submitted by the

respondents in support of the proposed settlement herein The data

submitted concerns only respondents ability to pay a penalty and does

not bear on any other matters in issue The data consists of copies of

financial statements including balance sheets income statements

changes in financial position and an income tax return Hearing Coun

sel do not oppose the motion Inasmuch as the data largely is sensitive

private information and because it does not bear upon the allegations

of violation of the Shipping Act the motion to treat the said data as

confidential hereby is granted Rule 167 ofthe Commission s Rules of

Practice and Procedure 46 CFR 502 167 This rule in part provides

that any information given pursuant thereto may be used by the presid

ing officer or by the Commission if it is deemed necessary to a correct

decision in the proceeding

1 This decision wilt become the decision of the Commission in the absence of review thereof by the

Commission Rule 227 Rules of Practice and Procedure 46 CPR S02 227

344 2 FMC
TOKYO EXPRESS INDP FRT FORWARDER LICENSE NO 345

1483

This proceeding was instituted by order of investigation and hearing

served July 7 1981 pursuant to sections 1 16 22 32 and 44 of the

Shipping Act 1916 the Act and section 510 9 ofGeneral Order 4 46

C FR 510 9 to determine

1 Whether Tokyo Express relation with Cosmos was of such a

nature that Tokyo Express and Kozo and Kathleen Kimura through

their ownership of Cosmos violated section 16 Initial Paragraph by

obtaining transportation by water for property at less than the rates and

charges which would otherwise be applicable through the device of

collecting compensation on shipments on which Tokyo Express was

the forwarder and Cosmos was the shipper

2 Whether Tokyo Express violated section 16 Initial Paragraph by

obtaining transportation by water for property at less than the rates and

charges which would otherwise be applicable through the device of

falsely declaring the cargo measurements to ocean common carriers

3 Whether Tokyo Express violated section 51O 23 d of General

Order 4 by charging shipper clients other than actual ocean freight

drayage and accessorial service

4 Whether Tokyo Express violated section 51O 23 e of General

Order 4 by withholding information relative to a forwarding transac

tion from clients in regard to charges

5 Whether Tokyo Express violated section 510 23j of General

Order 4 by not using invoices that stated separately as to each shipment

actual charges for ocean freight insurance and accessorial service

6 Whether Tokyo Express violated section 51O 23k of General

Order 4 by failing to maintain records and books of account in the

required manner

7 Whether civil penalties should be assessed against Tokyo Express

and Kozo and Kathleen Kimura pursuant to section 32 e of the Ship

ping Act 1916 for violations of section 16 of the Shipping Act 1916

and or the Commission s rules and regulations and if so the amount of

any such penalty which should be imposed

8 Whether Tokyo Express independent ocean freight forwarder

license should be suspended or revoked pursuant to section 44 d ofthe

Shipping Act 19 I6 for

a willful violations of section 16 Initial Paragraph of the

Shipping Act 1916 andor sections 510 23 d e

j

or k of

the Commission s Rules and Regulations or

b such conduct as the Commission finds renders Tokyo

Express unfit to carryon the business offorwarding in accord

ance with section 51O 9 e ofthe General Order 4

In lieu of a hearing and in order to avoid the delays and expenses of

extended litigation the parties agreed upon a settlement The formal

record herein in addition to the proposed settlement includes Hearing

Counsels

request for admission dated August 7 1981 and the record

25 F M C
346 FEDERAL MARITIME COMMISSION

includes Tokyo Express answer dated August 18 1981 confirming the

truth of 80 ofthe 81 proposed facts As to the other item fact number

8 the answer was that Kozo and Kathleen Kimura were coowners of

Cosmos Trading Company Cosmos but that Cosmos wasno longer in

existence

The record also includes the affidavit ofMr Kozo Kimura president

of Tokyo Express and the affidavit of Lyndon E Berezowsky a

former investigator for the Commission Finally the record includes the

financial data referred to above and ruled confidential of Tokyo Ex

press Co Inc

The stipulated facts show that Kozo Kimura and his wife Kathleen

own 80 percent of Tokyo Express He is president and she is secretary

He works full time and she part time Toshinori Saiki owns 20 percent

is vice president and works full time

The Kimuras were co owners of Cosmos Trading Company from

1975 to some time in 1979 when Cosmos became no longer in exist

ence Using the Cosmos name Kozo Kimura became purchasing agent

for his brother who owned a Japanese electrical contracting company

Mr Kimura also became purchasing agent for Nippon Ace Ltd in

Okinawa Japan Kimura made purchases for his brothers company

Nakae Denki Kenetsu Co Ltd as well as for Nippon Ace with

checks drawn on Tokyo Express Later such checks were drawn on

Cosmos beginning on or about November 1 1977

The stipulation states that Mr Kimura acted as purchasing agent for

30 shipments during the period November 29 1977 to June 15 1979

Actually a close check of listed invoice numbers shows 29 shipments

On these 29 shipments Tokyo Express acted as the freight forward

er and Cosmos waslisted as shipper on the bills oflading

On the shipments Tokyo Express paid the ocean carriers a total for

ocean freight of 23 400 60 However Tokyo Express as freight for

warder invoiced the actual shippers not Cosmos a total of 37 322 68

for ocean freight or a total overcharge of 13 922 08

Similarly for drayage Tokyo paid out atotal of 823 00 but in

voiced the shippers 2 88500 or a total overcharge of 2 062 00

Similarly for forklift charges Tokyo paid out nothing but invoiced

550 00 total all overcharges

The composite total for ocean freight cartage and forklift charges

charged by Tokyo Express for these 29 shipments was 40 757 68 with

24 223 60 paid for such services and a composite overcharge of

16 534 08

Hearing Counsel state as one oftheir criteria for settlement that

the excess profit generated by the activities of Tokyo Express was

approximately 25 000 nHearing Counsel do not explain what

other shipments or activities may have been included in their 25 000

calculation Counsel for Tokyo Express do not offer any comparable

25 F MC
TOKYO EXPRESS INDP FRT FORWARDER LICENSE NO 347

1483

figures but do state that the relevant criteria for settlement include

respondents inability to pay cost of collecting the claim effect on

enforcement policy among others

Further stipulated facts include that Tokyo Express did not maintain

receipts and documents to support the charges on the above 29 ship

ments and Tokyo Express declared cubic measurements which were

less than the actual measurement ofthe cargoes

Mr Kimura in his affidavit states that Tokyo Express is a small

company doing business primarily in the Japanese community of San

Francisco that it has always sought to deal fairly with its clients and

has fully cooperated with the Federal Maritime Commission and that

as soon as he learned ofthe impropriety ofTokyo Express relationship

with Cosmos that the operations of Cosmos were terminated immedi

ately Tokyo Express has only a few employees including me and my wife

Kimura states also that he wishes to continue the employment of

these few employees and that any settlement amount greater than the

agreed 15 000 would impose a severe burden especially in view of the

currently depressed conditions and the considerable legal fees already

incurred

Mr Kimura s salary in 1980 was 52 400 Vice President Saiki s was

39 300 and Mrs Kimura s was 13 400 the first two working full

time and Mrs Kimura part time Also in 1980 other salaries and wages

of non officers were 61 975 making the total compensation of offi

cers and others 167 075

In 1979 the comparable total was 110 853 23 In 1981 total salaries

were 195 864 34

There is no explanation why salaries jumped to such a total in 1981

as compared with 1980 especially in view of the fact that Tokyo

Express profit in 1980 disappeared in 1981 Because there were only a

few employees besides the officers and because employee benefits were

only 1 230 in 1981 compared with 9 546 in 1980 and 10 075 30 in

1979 it is reasonable to conclude that Tokyo Express had at the most

the same and probably a lesser number of employees in 1981 compared

with 1980 and 1979 In view of this conclusion it is further concluded

that the officers compensation paid to the Kimuras and to Saiki in total

was increased very considerably in 1981 All figures for 1981 are

shown as unaudited

It is concluded further that the financial results of Tokyo Express

would have been better in 1981 than as shown in the confidential data

were it not for such increases in officers compensation in 1981

In view of the above facts regarding officer compensation also the

large increase in 1981 in entertainment and travel expenses the present

stockholders equity in Tokyo Express and especially in view of the

fact that Tokyo Express was enriched by its unlawful activities to the

25 F M C
348 FEDERAL MARITIME COMMISSION

extent of 16 534 to 25 000 it would seem that some upward adjust

ment should be made in the proposed settlement figure of 15 000

Inmitigation ofTokyo Express past illegal activities is the statement

of former District Investigator Berezowsky that Mr Kimura told him

that Kimura had no beneficial interest in the shipments forwarded to his

brother s company in Japan that Kimura had begun a separate oper

ation from his freight forwarder business as a tariffed non vessel

operating common carrier for household goods under the name Tokyo

Express Shipping Company Inc the forwarder business operates

under the name Tokyo Express Co Inc that under this new tariff

there have been no misdeclarations of cargo measurements to the ocean

carriers that ocean freight charges were itemized to the shippers in the

NVOCC bill of lading and the tariff rate was properly applied that

other ancillary charges including packing crating and drayage to the

warehouse were itemized on a Tokyo Express invoice that Mr Kimura

made available for inspection documentation on all other shipments of

Tokyo Express that Mr Kimura maintained copies of bills of lading

and invoices in both chronological and alphabetical orders

Mr Berezowsky concluded that a review of 20 complete shipment

files from July 1 1980 to January I 1981 showed that the files were

complete and were maintained in an orderly manner that there was no

evidence of misdeclarations and that all charges were itemized proper

ly on invoices to shippers Mr Berezowsky found no violations of the

Commission s General Order 4 orof the Act during this period of 1980

The proposed settlement includes provision for payment to the Fed

eral Maritime Commission by Tokyo Express of the sum of 15 000 in

installments The first installment of 1 500 is due on or before 30 days

following approval by the Commission of the proposed settlement

Thereafter 2 250 would be paid every six months for a period of 36

months

It is concluded and found that the proposed settlement terms are

generally fair and consistent with the public interest except that the

payment to the Commission by Tokyo Express should be 20 000 in

lieu of the proposed 15 00 The first installment will remain 1 500

the next six installments will remain 2 250 for each six months for 36

months for a subtotal of 15 000 and there will be two further install

ments of 2500 each of which shall be due at six month intervals

following the originally provided installment payments These last two

installments of 2 500 each will be due respectively 42 months and 48

months following the approval by the Commission of the proposed

settlement as herein modified Thus the effect ofthe revision approved

herein will merely add two installment payments and Tokyo Express

will have another year to pay

Revocation of the existing license of Tokyo Express as an independ

ent ocean freight forwarder would be an extreme sanction Tokyo

25 F MC
TOKYO EXPRESS INDP FRT FORWARDER LICENSE NO 349

1483

Express has not evidenced an intent presently or in the future to engage

in conduct violative of the Shipping Act Rather Tokyo Express has

taken steps to comply with the Act It further is concluded and found

that revocation or suspension of Tokyo Express ocean freight forward

er license is not warranted

S CHARLES E MORGAN

Administrative Law Judge

25 F MC
FEDERAL MARITIME COMMISSION

SPECIAL DOCKET NO 919

APPLICATION OF PACIFIC WESTBOUND CONFERENCE

ON BEHALF OF KOREA MARINE TRANSPORT CO LTD

FOR THE BENEFIT OF MITSUI AND

COMPANY uS A INC

Initial Decision denying permission to waive collection of a portion of freight charges

reversed Application for permission to waive collection of 143 610 40 from the

shipper granted

Open minimum established by Conference for individual rates of member carriers may

notserve as basis for computing freight charges

Carrier s consistent requests for the ftling and application of rates at minimum level

evince intent of having on file a rate matching the open minimum established by the

Conference at any given time

In order to avoid disctimination among shippers similar relief will be extended to earlier

shipments

Mark R Weaver for Korea Marine Transport Co Ltd

Palricla Pelzar for Pacific Westbound Conference

REPORT AND ORDER

September 24 1982

BY THE COMMISSION ALAN GREEN JR Chairman THOMAS P

MOAKLEY Vice Chairman JAMES JOSEPH CAREY RICHARD J

DASCHBACH AND JAMES V DAY Commissioners

This proceeding instituted pursuant to the provisions of section

18b 3 of the Shipping Act 1916 46 U S C 817 b 3 and Rule

92 a of the Commission s Rules of Practice and Procedure 46 C P R

502 92 a is before the Commission on Exceptions filed by Korea

Marine Transport Co Ltd KMTC and the Pacific Westbound Con

ference PWC to the Initial Decision of Administrative Law Judge

William Beasley Harris denying permission to waive collection of

143 610 40 in freight charges 1

on two shipments of woodpulp from

Seattle Washington to Kaohsiung Taiwan

1

PacifIC Westbound Cenference Localand Overland Tariff No 11 PMC 19

350 25 F MC
PACIFIC WESTBOUND CONF ON BEHALF OF KOREA

MARINE TRANSPORT CO LTD FOR THE BENEFIT OF 351

MITSUI COMPANY U S A INC

BACKGROUND

Effective February 1 1981 PWCopened its rate on woodpulp there

by permitting individual carriers to establish their own rates subject to

a specified minimum established by the Conference 2 On March 31

1981 KMTC a PWC member line instructed PWC s tariff compiler to

file a rate for woodpulp to Kaohsiung Keelung at the minimum level

allowed by the Conference of 5100 WT 3 which was to become

effective April 1 1981 Due to error no such rate was filed until April

7 1982 when a tariff supplement showing a rate of 67 00 WT was

filed by PWC on behalf of KMTC 4

The Mitsui and Company U S A Inc shipments at issue moved on

December 5 1981 In the absence of a specific commodity rate freight

charges in the amount of 196 023 60 were assessed on the basis of the

PWC Cargo NOS rate of 250 00 W1M Mitsui prepaid 52 413 20

computed on the basis of a 64 00 WT rate which reflected the open

minimum in effect at the time of shipment KMTC now seeks permis

sion to waive collection ofthe remaining balance of 143 610 40

The application furthermore seeks permission

to waive the assessment of the Cargo NOS rate of 250 00

WT erroneously applicable to Kaohsiung Keelung from the

dates of April 1 through July 4 1981 when the rate should

have been 5100 WT July 5 1981 through October 31 1981

when the rate should have been 53 00 WT and November

1 1981 through March 31 1982 when the rate should have

been 64 00 WT and April 1 through April 5 1982 when

the rate should have been 67 00 WT the error being correct

ed on April 6 1982 per 17th revised page 835

DISCUSSION

Section 18 b 3 grants the Commission discretion to permit a carrier

or conference of carriers to waive collection of a portion ofthe freight

charges payable under the tariff in effect at the time of shipment where

it appears that there is an error in the tariff due to inadvertence in

failing to file a new tariff provided that prior to applying for a refund

or waiver the carrier filed a tariff upon which such refund or waiver

would be based that the application be timely filed and that grant of a

waiver will not result in discrimination among shippers 5

2

10th Rev Page No 285 effective February I 1981

S

Individual rates are filed by PWC on behalf of its members in separate supplements to the tariff

4

The open minimum of 48 00 WT for Woodpulp Not over 1 56 m31KT destination Kaohsiungl

Keelung set by PWC on February 1 1981 roseby April 1 1982 to 67 00 WT

IS The Presiding Officer denied the application on the theory that there was a 64 00 rate on fiJe on

December 5 1981 whichobviated the need for awaiver However the 64 00 rate which appears in

the tariffon 6th revised page 285A effective November 15 1981 was not a commodity rate but the

minimum established by the Conference for rates to be filed by individual carrier members Therefore

it cannot serve as abasis for computing freight Chevron ChemicalIn ernational Inc v Barber Blue Sea

Continued

25 F MC
352 FEDERAL MARITIME COMMISSION

KMTC requested the filing of a 5100 WT rate 6

The application

seeks a waiver on the basis of a 64 00 WT rate The corrected tariff

sets forth a rate of 67 00 WT The issue therefore becomes what was

the rate KMTC intended to have on file before the shipments moved

and whether the corrected tariff reasonably reflects that rate

It should be noted that subsequent to the Conference opening its rate

on woodpulp KMTC requested the filing of a rate at the level of the

open minimum in effect on March 31 1981 ie 5100 WT Likewise

the 64 00 WT rate KMTC now seeks permission to apply matches the

minimum in effect on December 5 1981 the date the shipment moved

This indicates KMTC s intent to take advantage of the open rate

provision by having on me a rate at the minimum level allowed by the

Conference at the time ofshipment

With respect to the 67 00 WT rate which appears in the amended

tariff the application states that it includes a 10 general rate increase

which went into effect in April 1982 Under Rule 3 12 of the confer

ence tariff 8this increase was inapplicable to cargo received by a

conference carrier prior to the effective date of the increase The

shipments here moved on December 5 1981 Applying the provisions

of the rule and disregarding the general rate increase the rate set forth

in the amended tariff amounts therefore to 64 OQ the rate upon which

the request for awaiver is based

Even disregarding the general rate increase the waiver would be

based on a 53 00 or 64 00 rate after the incorporation of the bunker

surcharge 9

but not on the 5100 rate originally requested to be filed

by KMTC However in Nepera Chemical Inc v Federal Maritime

Commission 662 F 2d 18 D C Cir 1981 the court in reversing the

Commission s denial of a waiver noted that while the corrected tariff

Line 20 F M C 594 1978 Petition for Reconsideration denied 20 F M C 806 1978 qfftrmed without

opinion sub nom Chevron Chemlcol International Inc v FMC 600 F 2d 279 DC Cir 1979 Table

He also denied the request for waivers relating back from April I 1981 to April 5 1982 on the basis

of the 180day limitation of section 18b 3 for applying for refunds and waivers

The tariff page which set forth the 55100 open minimum also projected an increase in this mini

mum to 553 00 effective July 2 1981 KMTC thus was on notice that the 55100 ratewould no longer

be applicable on July 2 1981 Furthermore as explained in the application the open minimum of

564 00 in effect at the date of shipment does not represent an increase in the 53 00 minimum but

results from the incorporation of 11 00 from thebunker surcharse of 13 00 which was then in effect

13th rev page 285 effective April I 1981 This reduced the bunker surcharge to 52 00 Freight com

puted on the basis of either 553 00 plus 513 00 bunker surcharge per ton or 564 00 plus a 52 00

bunker sUlcharae yields the same amount

While KMTC had no rate for woodpulp to KaohsiunglKeelung it has had arate on file to Susan

since February 1 1981 The rate to Busan shows increases which reflect the Conference s

open mini

mumfrom 548 00 on February I 1981 to 55100 on April I 1981 to 553 00 On July 2 1981 to 564 00

on November I 1981 and to 567 00 by April I 1982 Thus the changes in the rates to Susan would

also confirm the intent of the carrier to take advantage of the minimum level established by the Con

ference forflUng an independent rate

s

5thRev Page 58 effective August I 1979

9

See note 6 supra

25 FMC
PACIFIC WESTBOUND CONF ON BEHALF OF KOREA

MARINE TRANSPORT CO LTD FOR THE BENEFIT OF 353

MITSUI COMPANY U S A INC

must reflect a rate which was intended to be applicable by both

shipper and carrier the legislative history of section 18 b 3 is silent

on the issue of whether the intended and filed rates need be precisely

equivalent Although mindful that the remedy not be used as a means

for obtaining rebates or result in discrimination among shippers the

court suggested that in view of its remedial purpose the statute should

be given a reasonable construction 10

In conclusion it appears that from April 1 1981 KMTC intended to

have a rate on file which would meet the Conference s open minimum

which at the time ofthe shipment here was set at 64 00 and that after

the deduction ofthe 10 general rate increase from the 67 00 rate the

amended tariff does set forth the rate of 64 00 as intended Japan Line

USA Ltd for the Benefit of Nomura America Corp 22 FMC 825

1980 Hence the requirements ofthe statute have been met

Finally in order to avoid any discriminatory treatment of shippers

the rate upon which the waiver is based is made applicable to ship

ments which took place at the time the rate should have been filed See

Application of Pacific Westbound Conference on Behalf of Sea Land Serv

ice Inc for the Benefit of Minnesota Minning Manufacturing Co 21

S RR 793 1982 As explained the rate set forth in the amended tariff

reflects the 53 00 minimum which went into effect on July 5 1981

This 53 00 rate represents a 2 00 projected increase over the 5100

minimum in effect on April 1 1981 which KMTC had requested be

filed Consequently the rate upon which the waiver is based will relate

back to April 1 1981

THEREFORE IT IS ORDERED That the Exceptions of Pacific

Westbound Conference are granted

IT IS FURTHER ORDERED That the Initial Decision issued in

this proceeding is reversed

IT IS FURTHER ORDERED That Korea Marine Transport Co

Ltd is granted permission to waive collection from Mitsui and Compa

ny USA Inc of 143 610 40 of the freight charges payable on the

two shipments ofwoodpulp which moved on December 5 1981

IT IS FURTHER ORDERED That the Pacific Westbound Confer

ence shall promptly publish in its tariff as a supplement on behalf of

Korea Marine Transport Co Ltd the following notice

Notice is hereby given as required by the decision of the

Federal Maritime Commission in Special Docket No 919 for

the purposes of refund or waiver of freight charges on any

10 See note 6 supra There is no reason to believe that the waiver here has been requested as a

means of obtaining rebates The carriers were free to establish their own rates within the open mini

mums in effect from time to time which were wen below the previous Conferencerate of 94 00 The

64 00 rate which appears in the amended tariff reflects as mentioned the 53 00 rate the open mini

mum ineffect on July 5 1981

2S F M C
354 FEDERAL MARITIME COMMISSION

shipments ofwoodpulp not over 156 m3KJT to Kaohsiung

Keelung from April I 1981 through July 4 1981 the rate is

5100 WTj from July 5 1981 through October 31 1981 the

rate is 53 00 WTj from November I 1981 through March 31

1982 the rate is 64 00 WTj and from April I 1982 through

April 6 1982 the rate is 67 00 WT applicable to KMTC

subject to all applicable rules regulations terms and condi

tions of said rate and this tariff

FINALLY IT IS ORDERED That this proceeding is discontinued

S FRANCIS C HURNEY

Secretary

2S F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 17

INTERNATIONAL HARVESTER COMPANY

v

SOUTH AFRICAN MARINE CORP LTD

NOTICE

October 4 1982

Notice is given that no exceptions have been filed to the August 30

1982 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 JOSEPH C POLKING

Assistant Secretary

25 F M C 355
FEDERAL MARITIME COMMISSION

DOCKET NO 82 17

INTERNATIONAL HARVESTER COMPANY

v

SOUTH AFRICAN MARINE CORPORATION LTD

Complainants a shipper and freight bill auditor alleged that respondent carrier over

charged the shipper on two shipments of automobile parts for assembly in violation

of section 18b 3 of the Shipping Act 1916 for which complainant shipper seeks

21 385 97 in reparation Complainants allege that respondent failed to rate the

individual boxed packages of each shipment under a low special boxed rate of 84 75

per cubic meter but either charged the entire shipment under an unboxed rate of

109 25 orportions of one shipment under a higher boxed rate of 9125 Respondent

contended that it followed the bill of lading descriptions that the claims had been

filed too late under the tariff rule that complainant shipper had not shown it had

paid the freight that the two shipments were not completely boxed and that the

tariffdid notclearly allow rating by individual boxed portions It is held

I Respondent s

preliminary defenses that the tariff barred claims submitted more than

six months after shipment that the bill of lading descriptions governed and that

complainant shipper had not shown proof of payment of the freight are not valid as a

matter of law or as to the last defense because complainants submitted proof of

payment by the shipper

2 The tariff item in question governing the commodities shipped is more reasonably

read to mean that shipments consisting of pieces or packages of automobile parts for

assembly should be rated by boxed and unboxed portions and assessed the boxed and

unboxed rates respectively Even respondent when the bill of lading so broke down

the shipments rated them in that fashion on one shipment Even if the tariffdid not

clearly show that the shipments should be so broken down respondent s inability to

clarify the tariff item shows that the tariff is ambiguous in which case the law has

always held that the ambiguity mustbe construed against the carrier not the shipper

3 The best available calculation of the overcharge is 21 385 97 Reparation is award

ed in that amount with interest as calculated under the Commission s General Order

16 Amendment 40 46 CFR 502 253

Russell S Ragsdell for complainants

David A Brauner for respondent

356 25 FMC
INTERNATIONAL HARVESTER CO V SOUTH AFRICAN 357

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INITIAL DECISION 1 OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Finalized October 4 1982

This case began with the filing of a complaint which was served on

March 18 1982 Complainant International Harvester Company IHC

is a manufacturer oftruck parts with a home office in Chicago Illinois

Complainant Continental Freight Data Systems Inc CONDATA is

a

freight bill auditing firm located at South Holland Illinois Complain

ants alleged that respondent South African Marine Corporation Ltd

Safmarine a carrier by ocean vessel transported two shipments of

truck parts for assembly from Baltimore Maryland to Durban South

Africa in May and July of 1980 on respondent s vessels Iktinos and

Ghikas respectively and overcharged the shipments in violation of

section 18 b 3 of the Shipping Act 1916 the Act Complainants

originally calculated the alleged overcharge to be 22497 76 but later

amended this amount first to 22 370 97 and finally to 21 385 97

upon which last figure they now rest Complainants requested that the

complaint be handled under the shortened procedure set forth in Sub

part K of the Commission s Rules of Practice and Procedure 46 CFR

502 181 et seq In support of their complaint complainants attached

various documents consisting of claim forms prepared by CONDATA

bills of lading invoices of forwarding charges seller s invoices and

packing lists

In response to the complaint respondent Safmarine filed an answer

ing memorandum of facts and arguments on April 6 1982 Respondent

agreed to the use of the shortened procedure In addition respondent

contended that it had no knowledge of the actual nature of the goods

shipped except as reflected on the shipping documents prepared by

complainants Respondent cited its tariff rule Article 16 of the U S

South and East Africa Conference Southbound Tariff No 6 F MC

No 8 by which respondent is not obligated to consider claims based

on alleged rating errors if the claims are presented after the shipment

leaves the custody of the carrier or if claims are submitted more than

six months from date of shipment However respondent noted that its

tariff notifies shippers of their rights to file complaints with the Com

mission within the statutory two year period provided by section 22 of

the Act Respondent also contended that its tariff provides that the

commodity description set forth in the bill of lading shall determine the

rate to be applied

In addition to the above contentions respondent asserted several

affirmative defenses First respondent contended that complainants had

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

Commission Rule 227 Rules of Practice and Procedure 46 CFR 502 227

25 F M C
358 FEDERAL MARITIME COMMISSION

failed to show that they paid the freight because they had failed to

provide paid freight bills as required by Rule 186 46 CFR 502 186

Second respondent contended that complainants were seeking to have

the two shipments rated under a special rate for completely boxed

automobiles knock down of 84 75 per cubic meter instead ofthe rate

applicable to unboxed automobiles which was 109 25 per cubic meter

Respondent citing the packing lists submitted with the two shipments

contended that the shipments contained were not completely boxed

since both of them contained portions consisting ofunboxed bundles of

rails as well as boxed truck parts Therefore according to respondent

the special lower rate of 84 75 as well as another special boxed rate of

9125 for boxed automobiles and parts would not apply because the

shipments cannot be broken down into their boxed and unboxed por

tions under the tariff but must be considered as an entirety in which

case neither shipment was completely boxed Respondent also cited

another tariff rule Note 4 to the special rates which further requires

that shipments must be completely boxed on skids and so noted on the

dock receipt and bill oflading requirements that werenot met as to the

two shipments in question In short respondent argued that the two

shipments were not completely boxed and therefore were not entitled

to either of the two lower special rates for boxed automobiles and

parts 84 75 or 9125 Before I could proceed to the merits of the

ultimate issue concerning whether the shipments or any portion ofthem

were entitled to either of the two lower rates for boxed automobiles

and parts it was necessary to clear the case of several preliminary

technical problems and to ensure that the record was adequately devel

oped at minimal cost and delay in the spirit ofthe shortened procedure

which both parties had requested

RESOLUTION OF PRELIMINARY TECHNICAL ISSUES

The preliminary technical issues arose from the complaint and an

swering memorandum They dealt with the following matters 1 re

spondent s defense that the claims had been submitted more than six

months after date of shipment 2 respondent s defense that its tariff

provides that the description on the bill oflading determines the rate to

be applied 3 complainants failure to provide paid freight bills as

evidence of payment of freight and 4 the unclear status of CON

DATA a freight auditing firm which had not paid the freight as a

complainant in the case These matters can be quickly resolved and

dismissed so that the matter can proceed to the essential question

concerning the proper rating ofthe goods shipped

First as to the defense that the claims were not submitted within six

months after date of shipment it is well settled that rules in tariffs

restricting the time for claims to be submitted to carriers are not valid

defenses in complaint cases before the Commission inasmuch as section

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22 ofthe Act permits complaints to be filed within two years after the

cause of action accrues See e

g Sun Co v Lykes Bros 20 FMC 67

69 1977 Kraft Foods v FMC 538 F 2d 445 D C Cir 1976

Polychrome Corp v Hamburg America Line 15 F MC 220 222 1972

Union Carbide Corp v Nippon Yusen Kaisha N YK Lines 24 F MC

159 162 1981 2

Second as to the defense that respondent s tariff requires the carrier

to follow the commodity description on the bill of lading when rating

the shipment this may explain why a carrier believes that overcharge

claim submitted after the goods have left the carrier s

custody and

cannot be re examined are unfair but it does not bar a

reparation claim

under longstanding Commission precedent As has been held in count

less cases of this type a shipper is entitled to show what was actually

shipped notwithstanding bill oflading commodity descriptions or tariff

rules requiring notations of one type or another to be inserted on bills

of lading Sanrio Ltd v Maersk Line 23 FMC 150 159 164 189

1980 Western Publishing Co v Hapag Lloyd AG 13 SRR 16 17

1972 Sun Co v Lykes Bros cited above 20 F MC at 69 70 Durite

Corp Ltd v Sea Land 20 F MC 674 675 676 1978 affirmed under

the name Sea Land Service Inc v FMC 610 F 2d 1000 D C Cir

1979 Cities Service International Inc v Lykes Bros 19 FMC

128 1976 Union Carbide Corporation v American and Australian Steam

ship Line 17 F MC 177 178 1973

As to respondent s contention that complainants failed to provide

paid freight bills as evidence that the shipper IHC paid the freight

complainants cured this problem by submission of evidence and expla

nations in response to my instructions issued in a

preliminary ruling

See Order to Supplement the Record May 6 1982 pp 6 7 n 2

Because payment of freight by complainant or an assignment of the

claim to complainant is a jurisdictional prerequisite if a complainant

seeks reparation in an overcharge case it is necessary that the record

show that complainant so qualifies See e

g Sanrio Inc v Maersk

Line 19 SRR 907 908 1979 and the numerous cases cited therein 3M

v Hapag Lloyd 23 F MC 352 1980 Although the complaint alleged

that IHC had been subjected to payment of the overcharge the sup

porting evidence which consisted of a forwarder s invoices to IHC

purportedly covering the shipments involved did not appear to corre

late exactly with the amount of ocean freight due and paid See ruling

cited above p7 n 2 and my letter of instructions dated June 29 1982

2 Moreover the Commission has recently issued anew regulation which willprohibit carriers from

imposing time limits of six months orotherwise less than two years after the cause of action accrues

for shippers desiring to file overcharge claims Therefore in the future the six months defense will no

longer appear in these cases See General Orders 13 and 38 Docket No 81 51 Time Limit for Filing

of Overcharge Claims 25 F M C 185 1982

25 F M C
360 FEDERAL MARITIME COMMISSION

p

2 In response to my instructions complainants submitted additional

evidence and explanations consisting ofcopies of the forwarder s debit

memoranda to IHC and a further sworn statement explaining how the

vouchers and invoices reflect payment See complainant s supplemental

arguments and evidence May 26 1982 para 2 and appendix 1 verified

statement of Nils G Wickstrom received July 27 1982 p

1 This

evidence shows payment by IHC on IHC s vouchers of ocean freight

for shipments listed on the forwarder s debit memoranda which show

identical lot numbers as those shown on the packing lists and on IHC s

invoices which accompanied the shipments in question There is thus

ample proof of payment of ocean freight for these shipments by IHC

Fourth as to the status of CONDATA although CONDATA is not

a shipper and did not pay the freight or obtain an assignment of the

shipper s claim it has standing to file a complaint alleging a violation of

the Act Any person may file such a complaint See e g Cargill Inc v

Waterman Steamship Corporation 24 F MC 442 460 1981 Anglo

Canadian Ship Co Ltd v Mitsui SS Co Ltd 4 F MB 535 539

1955 Ace Machinery Co v HapagLloyd 16 SRR 1258 1262 1976

However CONDATA is not entitled to recover reparation if a viola

tion has been shown such reparation being due to the shipper More

over as a corporation the Commission s rules preclude CONDATA

from representing IHC and since the only appearance entered for IHC

is by an F MC practitioner Mr Russell S Ragsdell who stated in the

complaint that he was authorized to act on behalf of IHC it appeared

that CONDATA was not represented as well as being not entitled to

recover reparation See Rule 21 a 46 CFR 502 21 a Wilmot Engineer

ing Company v United States Lines Inc 19 F MC 403 1976 To make

a long story short Iadvised CONDATA that under the circumstances

Iwould either dismiss CONDATA as a party complainant or allow it

to remain in the case as a complainant which was alleging a violation of

the Act but was not seeking reparation See ruling of May 6 1982

cited above pp 8 9 In response to this ruling CONDATA through

the registered F M C practitioner Mr Ragsdell agreed that it would

be considered a nominal complainant which was not seeking reparation

See complainant s supplemental arguments and evidence May 26

1982 para 1

Having disposed of the four preliminary technical issues and prob

lems the matter is ripe for decision on the merits of complainants

contentions that portions of the two shipments were entitled to the

lower oftwo special rates for boxed automobiles and parts

DISCUSSION AND CONCLUSIONS

THE CONTENTIONS OF THE PARTIES

The main issue in this case is simply whether the two shipments

which consisted of numerous boxes of truck parts for assembly plus

2S F MC
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several bundles of rails should have been rated only under an un

boxed rate of 109 25 W M in practice per cubic meter or whether

the shipments should have been broken down by their boxed and

unboxed portions and assessed one of the lower special rates for boxed

automobiles and parts either 9125 W M or 84 75 W1M as to the

boxed portions The question arises because respondent s tariff United

States South and East Africa Conference South Bound Freight Tariff

No 6 FMC No 8 at the time of the shipments published three

different rates for automobiles trucks etc and parts for assembly as

Item No 350 Copies of the relevant tariff pages in effect at the time

of shipments are attached in the appendix to this Initial Decision for

ready reference As seen by the tariff pages cited the rate of 109 25

appears to apply to commodities described in Item No 350 if they are

Unboxed and are destined to ports in the CapetownlDurban

Range As also seen from the tariff pages however a special rate of

9125 applies to the commodity shipped if Completely Boxed Com

pletely Knocked Down to the same range ofports and an even lower

special rate of 84 75 applies to such completely boxed commodities

On quantities of 150 Metric tons or more which are shipped from

one loading port to one discharge port from one shipper to one con

signee To make the matter more complex the tariff also publishes

four conditions called Notes which appear to apply to all three

rates Thus Note 1 states that the rates apply on packages or pieces

weighing up to and including 5080 KOS each Note 2 states Other

than completely boxed must be assessed the unboxed rate Note 3

states that Accessories Parts and Tires when accompanying ship

ments of automobiles will be assessed the completely boxed rate

and Note 4 states that On K D Automobiles and Manufacturer s parts

for assembly completely boxed on skids and so noted on Dock Receipt

and Bill of Lading freight will be calculated on overall measurement

less skids

Complainants contend that the two shipments should be broken

down by boxed and unboxed portions and that the boxed portions

should be assessed the rate of 84 75 whereas the unboxed bundles

should be assessed the unboxed rate of 109 25 They have done this for

both shipments calculated the total freight including any additional

charges such as heavy lift and bunker surcharge and conclude that

total freight on such basis amounts to some 21 385 97 less than what

IHC actually paid on the two shipments Accordingly they claim that

respondent overcharged IHC by that amount for which IHC seeks

reparation

Respondent in its first answering pleading contended that the ship

ments should not be broken down into their boxed and unboxed por

tions for rating purposes Respondent argued that Note 2 of the tariff

item cited above stating that other than completely boxed must be

25 F M C
362 FEDERAL MARITIME COMMISSION

assessed the unboxed rate means that the entire shipment must be

completely boxed and that since each shipment contained some portions

which were unboxed the entire shipment should be assessed the un

boxed rate of 109 25 Respondent also cited Note 4 providing that

automobile parts for assembly completely boxed on skids and so noted

on the dock receipt would be measured on overall measurement less

skids Respondent claimed that there was no evidence that either ship

ment was completely boxed on skids or that such notations were

made on bills of lading or dock receipts Complainants in their supple

mental arguments of course disputed respondent s interpretations of the

tariff and of Notes 2 and 4 contending that nothing in the tariff

precluded rating the shipments by their boxed and unboxed portions

and that Note 4 merely indicated how the carrier would determine

measurement of a package of automobile parts on skids Le that the

shipper would not be charged for the cubic measurement of the skids

See complainant s supplemental arguments May 26 1982 para 3

Complainants also contended that the lower special rate of 84 75 was

properly applicable to the boxed portions ofthe shipments because as

the tariff required both shipments exceeded 150 metric tons of boxed

freight and both were consigned to one port ofdischarge Durban and

were loaded at one port Baltimore Id

In its final reply ofMay 27 1982 submitted in response to my rulings

of May 6 1982 ordering supplemental arguments and evidence as

provided by Rule 184 46 CPR 502 184 respondent appeared to be less

certain ofits argument that both shipments had to be completely boxed

in all of their portions in order to qualify for either of the two lower

special rates Respondent acknowledged the fact that respondent itself

had rated the two shipments inconsistently rating the first Iktinos

shipment by breaking out the boxed and unboxed portions applying the

9125 rate for the former portion and the 109 25 rate for the unboxed

portion but rating the second shipment Ghikas merely by applying the

unboxed rate of 109 25 to the entire shipment 674 426 cubic meters

without any breakdown 8

Respondent noted however that on the first

shipment the bill of lading on which the carrier presumably relied

had itself broken the shipment into boxed and unboxed portions where

as the bill of lading for the second shipment showed no such break

down However because respondent itself had rated the first shipment

apparently under complainants interpretation except for the applica

tion of the 9125 special rate rather than 8175 special rate respond

ent made further inquiries requesting a clarification of tariff Item No

a

In fairness to respondent it should be pointed out that respondent noted that the bills of lading

and shipping documents were filled out by claimant rather than respondent and that part of the confu

sion resulting in different methods of rating the two shipments may therefore have stemmed from the

inconsistent descriptions contained in the bills of lading

2S FMC
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350 from the Chairman of the United States South and East Africa

Conference Mr Charles F Fischer Respondent received a letter of

attempted clarification from Mr Fischer which stated that each pack

age or piece of the shipment must be considered separately so that the

rating on a single bill of lading presumably could be split between

boxed and unboxed commodities However Mr Fischer went on to

describe the purpose of Note 2 in such a way that respondent confess

es itself to be at this point uncertain itself as to the proper application

of the tariff Respondent s supplemental submission May 27 1982 p

3 To this statement complainants respond by stating that Mr

Fischer s letter supports their contentions and note that respondent s

own confessed uncertainty as to the meaning of the tariff demonstrates

an ambiguity in the tariff which the Commission holds must be con

strued against the carrier Complainant s Response to Defendant s sic

Supplemental Submission July 27 1982 p 2

WHY COMPLAINANTS CONTENTIONS ARE VALID

There are both facts in this case as well as principles of law that

support complainants argument that both shipments should have been

rated by applying the boxed rate for the boxed portions of the ship

ments and the unboxed rates for the unboxed portions

In point of fact as noted above respondent itself when provided a

filled in bill oflading by the forwarder which showed that the shipment

on the Iktinos consisted of 1l6 boxes and 8 bundles applied the

special boxed rate of 9125 to the boxed portion 787 049 cubic meters

and the unboxed rate of 109 25 to the unboxed portion 6 898 cubic

meters See bill of lading attached to the complaint as Exhibit B

page 2 On the second shipment the Ghikas when presented a bill of

lading showing only 92 packages and 674426 cubic meters re

spondent merely applied the unboxed rate of 109 25 per cubic meter to

the total measurement of the undivided shipment 674 426 cubic meters

This suggests that when respondent is informed that a portion of the

shipment of automobile parts for assembly is in boxes it will rate that

portion under the boxed special rate In other words respondent s

rating clerks may in practice accept the interpretation of Item No 350

advocated by complainants as to separation of the shipment into boxed

and unboxed portions 4

A second basis for concluding that both shipments should be rated by

their boxed and unboxed portions is the opinion of Mr Fischer the

4

It may be true that it is not the carrier s intent or practice which ultimately determines how a

tariff is to be interpreted cr National Cable Metal Co v American Jawaiian S S Co 2 U S M C

470 473 1941 Allied Chemical SA v Farrell Lines Inc 23 F M C 375 398 1980 However the

fact that acarrier has in effect interpreted its tariff rule in away which is against its own pecuniary

interest by allowing a lower special boxed rate on aportion of the shipment lends support to com

plainants arguments that such an interpretation is morereasonable than one contrary

25 EM C
364 FEDERAL MARITIME COMMISSION

Conference Chairman mentioned above In his letter as complainants

have noted Mr Fischer twice indicated that shipments under tariff

Item No 350 should be rated by each individual package or piece as

shown on the bill oflading Thus he states in relevant part fi

In determining whether the Completely Boxed or the Un

boxeds rate should apply each package or piece in the ship

ment must be considered separately Thus one ocean Bill of

Lading may have some cargo under this Tariff item number

rated as Completely Boxed and other freight rated as Un

boxed Emphasis in the original

The stipulation under note 2 which reads Other than Com

pletely Boxed must be assessed the Unboxed rate applies

separately to each individual package or piece on the Bill of

Lading

The note was originally placed in the Tariff to clarify the

assessment or freight on set up vehicles which wer sic par

tially boxed

A third basis indicating that the tariff item No 350 contemplated

rating shipments of automobiles and automobile parts for assembly by

individual packages or pieces rather than by the shipment as an entirety

is Note I in the tariff As quoted earlier this Note states that the rates

apply on packages or pieces weighing up to and including 5080 kgs

each It is somewhat difficult to conceive how such a Note could

reasonably be interpreted as applying to a gross shipment rather than to

the packages or pieces which are the component parts of the ship

ment especially with such a size limitation of only 5 080 metric tons

The packing lists for the two shipments show that the total weight for

each was several hundred thousand kilograms consisting of numerous

packages or pieces weighing under 5 000 kilograms each

Finally respondent cites Note 2 in the tariff which states that other

than completely boxed must be assessed the unboxed rate Respondent

seems to find some confusion in Mr Fischer s explanation of this Note

however Because Mr Fischer explained that the purpose of the Note

was to clarify the assessment offreight on set up vehicles which were

not completely boxed and because the subject shipments contained

unboxed bundles of rails which were presumably parts of vehicles

respondent sees a problem in that each boxed vehicle or part in the

shipments was not therefore completely boxed I do not necessarily

agree with respondent s analysis since the Note supposedly was de

signed to apply to set up vehicles according to Mr Fischer not

knock down vehicles and parts as the shipments appear to have com

Ii The complete letter of Mr Pischer is attached to respondent s

supplemental submission dated May

27 1982

25 F MC
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prised 6 However even if each supposedly boxed vehicle part cannot

be considered completely boxed because some bundles of rails in the

shipments were unboxed thereby requiring every individual boxed ve

hicle or part thereof to be assessed an unboxed rate such a result

would not be permissible under applicable principles of law First it

seems to represent a strained and unnatural construction of the tariff

which one is not permitted to employ when applying tariffs See e

g

Bulkley Denton Overseas SA v Blue Star Shipping Corp 8 F MC 137

140 1964 Thomas G Crowe et al v Southern SS et aL 1 V S S B

145 147 1929 Moreover even if respondent s interpretation is not

strained respondent has confirmed the fact that tariff Item No 350

with its various Notes and conditions is ambiguous and it is ancient

law that ambiguities in tariffs are construed against the carrier not the

shipper See e g Bulkley Dunton Overseas SA v Blue Star Shipping

Corp 8 F MC 137 140 1964 Thomas G Crowe et aL v Southern SS

Co et aI cited above 1 VS S B at 147 Eli Lilly S A v Mitsui OSK

Lines Ltd 24 F M C 534 537 1982 United States v Hellenic Lines

Ltd 14 FMC 255 260 1971 Sacramento Yolo Port Dist v Fred F

Noonan Co Inc 9 F MC 551 558 1966 Dow Corning Corp v

Atlantic Container Line Inc 24 FMC 14 22 1981 and the numerous

cases cited therein

On a number of grounds therefore Ifind that this record supports

the conclusion that the two shipments rated under tariff Item No 350

should be rated by individual pieces or packages and that for each

piece or package that is boxed either of two special rates 9125 or

84 75 per cubic meter should apply but for each piece or package

that is unboxed the unboxed rate of 109 25 per cubic meter applies I

find furthermore that of the two special lower rates for boxed pieces

or packages the shipments qualified for the lower ofthem i e the rate

of 84 75 per cubic meter This is because the shipments moved from

one loading port Baltimore to one port of discharge Durban and

from one shipper International Harvester Company of Chicago Illinois

to one consignee International Harvester Company S A Pty Ltd of

Durban as the bills of lading show Moreover the shipments weighed

more than 150 metric tons in their entirety as the packing lists show

Thus all the conditions set for the 84 75 rate have been met as shown

in the tariff

6

It is possible that I may not hllVe correctly understood respondent s

apparent confusion as to Mr

Fischer s explanations as explained by respondent in its supplemental submission of May 27 1982 p

3

However respondent appears to be so confused by its attempt to explain the purported confusion in

Me Fischer s explanations that it confessed itself uncertain itself as to the proper application of the

tariff and expressed no objection if I were to seek to unravel Mr Fischer s explanations by going

directly toMr Fischer

25 F M C
366 FEDERAL MARITIME COMMISSION

CALCULATION OF THE AMOUNT OF OVERCHARGE AND

REPARATION

Complainants originally alleged that IHC had been overcharged in

the amount of 22 497 76 However during the course of the proceed

ing it became clear that this figure was not sufficiently accurate Ac

cordingly complainants recomputed the amount two more times and

finally have calculated it as 21 385 97 This last amount appears to be

the most accurate of the three calculations has not been challenged by

respondent and considering the time and expense necessary to make

further refinements should suffice 7

The calculations supporting the figure of 21 385 97 as the total

amount of overcharges for which reparation is sought on the two

shipments is shown in detail in the record See Complainant s Response

to Defendant s Supplemental Submission received July 27 1982 For

the first shipment on the Iktinos the overcharge is shown as 5 115 84

The record shows that the only difference between complainants cal

culations of freight due and those shown on respondent s bill of lading

for this shipment is that respondent rated the boxed portion of the

shipment at the higher boxed rate of 9125 whereas complainants rated

the boxed portion of the shipment at the lower boxed rate of 84 75 on

the ground that the shipment moved from one shipper to one consignee

and from one port ofloading to one port ofdischarge thereby qualify

ing under the tariff for the lower of the two special boxed rates as I

mentioned above As for the rest of the charges unboxed portion of

the shipment heavy lift and bunker surcharge the parties do not

differ The calculations are shown as follows

The fl1lt calculations of the overcharges were not sufficiently accurate because complainants had

merely rated the entire cubic measurement of the shipments underthe 84 75 rate without breaking the

shipment down into boxed and unOOxed portiODS The second calculation was an improvement but it

merely factored in the unOOxed portion on the Ghiklls shipment On my inquiries and instructions

complainants calculated the overcharge a third time by accounting foe the boJl ed and unbo xed por

tiODS of both shipments On the Iktinos shipment complainants used the breakdowns shown on the bill

of lading without romeasuring each package of the entire shipment of 124 packages by using the pack

ing list dimensions for each package Onthe Ghik4s shipment complainants had to use the packing list

to remeasure seven unboxed bUJJdles of rails because the bill of lading contained no breakdown but

otherwise relied upon the total measurement for the 92 packages sbown on the bill of lading It is

possible that bad complainants remeasured all 92 packages by using the packing list tbey may have

arrived at adifferent total measurement than that shown on the bill of lading However as complain

ants explained in a

supplemental sworn statement responding to my inquiries such an exercise would

take more time and cost more than it was worth in terms of poaaible reimements and complainants

were prepared to accept the bill of lading figures for total measurement Similarly to determine if a

heavy lift charge was applicable to the Ghlkas shipment merely because one was applied to thelktinos

shipment llS I had noted in my inquiries by acquiring old tariff pages and reameasuring or reweighing

the entire Ghikas shipment would be time consuming and out of proportion to any possible adjust

ment assuming any adjustment werein fact necessary See verified statement of Nils O Wickstrom

received August 17 1982 Respondent has not challenged these calculations and I advised all parties

that unless I heard to thecontrary I would find that the last calculations were suffiCiently reasonable

See my leu r to Messrs Ragsdell and Brauner dated August 13 1982

25 FMC
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MARINE CORP LTD

Boxed Rate

Unboxed Rate rails

Heavy Lift

Bunker Surcharge

787 049 CBM

7 898 CBM

70 35 CBM

793 947 CBM

@ 8475

per CBM

@ 109 25 per CBM

@ 3 90 per CBM

@ 30 00 per CBM

TOTAL CHARGE

66 702 40

753 61

274 37

23 818 41

91 548 79

TOTAL PAID 96 664 63

CORRECTED TO 91 548 79

OVERCHARGE 5 115 84

On the second shipment on the Ghikas complainants measured the

portion of the shipment consisting of unboxed bundles of rails taking

the measurement data from the packing list because the bill of lading

did not break the shipment down into boxed and unboxed portions

They determined that the unboxed portion of the shipment measured

10 339 CBM and applied the unboxed rate of 109 25 per CBM to that

portion They subtracted that portion from the total cubic measurement

shown on the bill of lading for the shipment 674426 CBM and

applied the lower boxed rate of 84 75 per CBM to the remainder of

the shipment which consisted of boxed packages There was no heavy

lift charge shown on the bill of lading for this shipment The result was

a calculation of overcharge amounting to 16 270 13 as shown below

Boxed Rate 664 087 CBM @ 84 75 per CBM 56 281 37

Unboxed Rate rails 10 339 CBM @ 109 25 per CBM 1 129 54

Bunker Surcharge 674426 @ 29 00 per CBM 19 558 35

TOTAL CHARGE 76 969 26

TOTAL PAID

CORRECTED TO

OVERCHARGE

93 239 39

76 969 26

16 270 13

TOTAL OVERCHARGES

lktinos shipment 5 115 84

Ghikas shipment 16 270 13

21 385 97

In view of the passage of time since the shipments occurred and

consequent dispersal of the goods shipped Ifind reliance on the bills of

lading and packing list to compute the amount of overcharge to be

reasonable and that further attempts to refine these amounts by even

more calculations for the sake of relatively minimal adjustments to be

more costly and burdensome than would be justified as Iexplained in

footnote 7 above Accordingly I conclude that respondent Safmarine

has overcharged the shipper complainant International Harvester Com

pany in the amount of 21 385 97 In accordance with the Commis

sion s standing regulation respondent shall therefore pay IHC such

amount together with interest computed under the formula provided by

25 F M C
368 FEDERAL MARITIME COMMISSION

that regulation See General Order 16 Arndt 40 46 CFR 502 253 24

F MC 145 1981 8

S NORMAN D KLINE

Administrative Law Judge

8

The regulation cited provides that simple interest wiJJ accrue from date of payment of freight

charges to the date reparations are paid It also provides that Ut he rate of interest will be calculated

by averaging the monthly rates onsix month US Treesury biUs commencing with the rate for the

month that freight charges were paid and concluding with the latest available monthly Treasury bill

rate at the time reparations are awarded II The Commission also stated that where facts are not reason

ably ascertainable parties could settle overcharge cases in which case the amount of interest could be

left to the parties See 24 F M C at 149 and the text of 46 CFR S02 2S3

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APPENDIX

UNITED STATESSOUTH AND EAST AFRICA CONFERENCE Revision Page

First 161

SOUTH BOUND FREIGHT TARIFF NO 6 F M C NO 8 Cancels Page

FROM United States Atlantic and Gulf Ports Original 161

TO Ports in Southwest South Southeast and East Africa and the Effective Date

Islands of Malagasy Republic Madagascar Reunion Mauritius

Comoros Ascension Seychelles SI Helena as named herein March 1 1980

UNLESS OTHERWISE HEREIN PRDVIOED RATES APPLY PER CUBIC METER Correction 566

OR 1000 KILOS WHICHEVER PRODUCES THE GREATER REVENUE

cDENOTES CONTRACT RATES 5DENOTES SINGLE RATES

SEE RULE 14 FOR NON CONTRACT RATES

UNLESS OTHERWISE SPECiFICAlLY INDICATED RATES SHOWN HEREIN APPLY TO CAPETOWN FOR

APPLICATION OF RATES TO OTHER PORTS WITHIN THE SCOPE OF THIS TARIFF SEE PAGE 6

T

COMMODITY DESCRIPTION AND PACKAGING

Y

COMMODITY P RATE CAPE ITEM

CODE E BASIS TOWN NO

AContinued

AUTOMOBILES PASSENGER AND COMMERCIAL

Subject to Notes 1 2 3 and 4 350

Completely Boxed

CapetowniOurban Range C 91 25

SPECIAL RATE

Completely boxed Completely Knocked Down

CapetowniOurban Range

On quantities of 150 Metric tons or more Rate

applies from one loading port to one discharge port

from one shipper to one consignee

Subject to Tariff Rules and Regulations C 8475

Unboxed

CapetownlDurban Range C 109 25

Freight to be assessed on overall measurement less bumpers

Usual differentials to other ports as shown on Page 6

NOTE 1 Rates apply on packages or pieces weighing up to and including 5080

KGS each

NOTE 2 Other than completely boxed must be assessed the unboxed rate

NOTE 3 Accessories Parts and Tires when accompanying shipments of auto

mobiles will be assessed the completely boxed rate but subject to car

riage at risk of cargo and Bill of Lading to be claused Unprotected at

shippers risk

NOTE 4 On KD Automo les and Manufacturer s parts for assembly completely

boxed on skids and so noted on Dock Receipt and Bill of Lading freight

will be calculated on overall measurement less skids

This is an all inclusive classification and embraces Automo les Bodies Trucks

Buses Chasis Trailers Truck or Truck Tractor Type and Dump Trucks

A Increase
370 FEDERAL MARITIME COMMISSION

APPENDIX

UNITED STATEsISOuTH AND EAST AFRICA CONFERENCE Revision Page

Seoond 161

SOUTH BOUND FREIGHT TARIFF NO S F M C NO S Cancels Page

FROM United States Mantic and Gulf Ports First 161

TO POrts in Soulhwes South Southeast and East Africa and the Effective Dale

Islands of Malagasy Republic Madagascar Reunion Mauritius

Comoros Ascension Seychelles St Helena as named herein June 24 1980

UNlESS OTHERWISE HEREIN PROVIDED RATES APPLY PER CUBIC METER Correction 1043

OR 1000 KILOS WHICHEVER PRODUCES THE GREATER REVENUE

cDENOTES CONTRACT RATES DENOTES SINGLE RATES

SEE RULE 14 FOR NON CDNTRACf RATES

UNLESS OTHERWISE SPECIFICALLY INDICATED RATES SHOWN HEREIN APPLY TO CAPETOWN FOR

APPLICATION OF RATES TO OTHER PORTS WITHIN THE SCOPE OF THIS TARIFF SEE PAGE S

T

COMMODITY DESCRIPTION AND PACKAGING

Y

COMMODITY P RATE CAPE ITEM

CODE E BASIS TOWN NO

AConlinued

AUTOMOBILES PASSENGER AND COMMERCIAL

Subject to Notes 1 2 3 and 4

I

Range C 91 25

SPECIAL RATE

Completely boxed Complete Knocked Down

CapetownllJurban a e

On quantities of 150 etnc tons or more Rate

applies from one loading portIo one discharge port

from one shippllr to one oonsignee

Subject to Tariff Rules and Regulations C 84 75

Unboxed

CapetownlDurban Range C 109 25

Freight to be assessed on overali measurement less bumpers

Usual differentials to other ports as shown on Page 6

NOTE 1 Rates apply on peckages or pisces weighing up to and including 5080

KGS each

NOTE 2 Other than completely boxed must be asSS68ed the unboxed rate

NOTE 3 Accessories Parts and Tires when acoompanying shipments of auto

mobiles wili be S68esSed the

oomr eiY boxed rate but subject to car

ri e at risk of cargo and Bill of ing to be claused Unprolected al

shippers nsk

NOTE 4 On K D Automobiies and Manufaclurers parIS for assembly complete

boxed on skids and so noted on Dock Receipt and Bill of lading freight

will be calculated on overall measurement less skids

This is an all inclusive classificetlon and embraces Automobiles Bodies Trucks

Buses Chasis fraMers Truck or Truck Traclor Type and Dump Trucks

SPECIAL RATE RI

Truck Weigh approx 7420 meas approximate 44 890 CBM each

Truck Weigh approx 11 360 s meas approximateiy 50505 CBM each

NOTE Subject 10 ten percent 1 Ueduction off Tariff Rate fifteen percenl

15 reduction off Heavy ft Long Length charges icable at

lime of shipment To Oar es Salaam Only Eff thru 922
FEDERAL MARITIME COMMISSION

DOCKET NO 77 7

AGREEMENT NOS 9929 6 10266 3 AND 10374

ORDER OF FURTHER INVESTIGATION AND HEARING

October 6 1982

Agreement No 9929 5 which was the subject of the earlier investi

gation and hearing in this proceeding had two distinct parts Part I

called for the joint operation of a LASH and conventional vessel

service by Hapag Lloyd AG Hapag Lloyd Intercontinental Trans

port B V lCT and Compagnie Generale Maritime CGM Propo

nents This service was to be known as Combi Line Part II ofthe

Agreement would have authorized Proponents to cross charter contain

er space from one another on any and all vessels separately operated by

them in the trade Because Agreement No 9929 5 did not adequately

reflect the distinct activity proposed by Proponents the Commission

divided it into separate agreements Part I the Combi Line Joint LASH

service between Hapag Lloyd and ICT became Agreement No 9929 6

and Part II which authorized the cross charter container arrangement

among Hapag Lloyd ICT and CGM became Agreement No 10374

The Commission s order approving Agreement No 10374 authorized

Hapag Lloyd on the one hand and ICT CGM on the other hand to

exercise separate votes in any conference or rate agreement of which

they might be members

On review the U S Court of Appeals for the District of Columbia

Circuit found inter alia that the voting provision authorized by the

Commission s order appeared to expand the scope of anticompetitive

authority proposed by the Proponents While recognizing the Commis

sion s statutory authority to modify a proposed agreement the court

held that modifications which expand the anticompetitive authority

contemplated by Proponents must be preceded by notice and opportu

nity for hearing Sea Land Service Inc v FMC 653 F 2d 544 D C Cir

1981 The court remanded the proceeding in part because the factual

record with respect to voting did not adequately support the contention

that multiple voting restricted the scope of Agreement No 10374

By Order served October 9 1981 the Commission in response to the

court s remand directed the parties to this proceeding to address

Whether in light of its own structure and the structure of

Agreement Nos 9929 6 and 10266 3 Agreement No 10374

should provide that Hapag Lloyd on the one hand and ICT

CGM on the other hand shall exercise separate votes in

25 F M C 371
372 FEDERAL MARITIME COMMISSION

conferences or rate agreements with respect to their respective

container services and the impact on competition in the trades

of such a provision Submissions by the parties on this issue

should include if possible a discussion as to how Hapag and

ICT CGM have voted on conference and rate agreement de

cisions regarding container services since Agreement No

10374 was given final approval by the Commission on Decem

ber 28 1979

Although the proceeding on remand was limited to the submission of

affidavits of fact and memoranda of law on the impact of the voting

provisions the parties were given the opportunity to submit recommen

dations as to the necessity for further proceedings and form that they

should take After reviewing the submissions of the parties the Com

mission has concluded that further evidentiary hearings are required

The issue to be resolved with respect to voting is whether the

members of Agreement No 10374 have an identity of interest when

measured against the guidelines established by the Commission in

Johnson Scanstar Agreement No 9973 3 21 F MC 218 1978 Whether

the Johnson Scanstar factors exist here is primarily a factual dispute

which cannot be resolved from the face ofthe documents submitted by

the parties Moreover none of the submissions provide any probative

evidence which would show whether the parties to Agreement No

10374 have in fact engaged in bloc voting Accordingly a further

hearing will be instituted on the voting issue

THEREFORE IT IS ORDERED That pursuant to sections 15 and

22 of the Shipping Act 1916 46 U S C 814 821 an investigation is

hereby instituted to determine whether Agreement 10374 should be

modified to provide that the parties to that agreement can exercise only

a single vote in any conference or rate agreement in the trades covered

by Agreement No 10374

IT IS FURTHER ORDERED That this matter be assigned to an

Administrative Law Judge for public hearing and decision within the

time limitations of Rule 61 of the Commission s Rules of Practice and

Procedure 46 C F R 502 61 at a date and place to be hereafter

determined by the Administrative Law Judge This hearing shaH in

clude oral testimony and cross examination in the discretion of the

Presiding Officer only upon a proper showing that there are genuine

issues of material fact that cannot be resolved on the basis of sworn

statements affidavits depositions or other documents or that the

nature of the matters in issue otherwise requires an oral hearing and

cross examination for the development of an adequate record

IT IS FURTHER ORDERED That notice of this Order be pub

lished in the Federal Register and that a

copy thereof be served upon all

parties ofrecord

25 FMC
AGREEMENT NOS 9929 6 10266 3 AND 10374 373

IT IS FURTHER ORDERED That other persons having an inter

est in participating in this proceeding may file petitions for leave to

intervene in accordance with Rule 502 72 of the Commission s Rules

46 CF R 502 72

IT IS FURTHER ORDERED That all future notices orders or

decisions issued in this proceeding Including notice of the time and

place of hearing or prehearing conference be mailed directly to all

parties ofrecord and

IT IS FURTHER ORDERED That all documents submitted by any

party of record in this proceeding shall be directed to the Secretary

Federal Maritime Commission Washington D C 20573 in accordance

with section 502 118 of the Commission s Rules of Practice and Proce

dure 46 C F R 502 118 as well as being mailed directly to all other

parties of record

By the Commission

S JOSEPH C POLKING

Assistant Secretary

Commissioner Richard J Daschbach dissenting

This is yet another agonizing step in a case in which the Commission

by a 3 2 vote Commissioners Daschbach and Day dissenting totally

rewrote the presiding Administrative Law Judge s well reasoned and

legally sound initial decision Judge Stanley M Levy s January 30 1979

Order to which no exceptions were filed inter alia embodied a com

promise between the proponents and protestants of the relevant agree

ments

The Commission majority s June 5 1979 decision pursuing some

nebulous and nonsensical theory of procedural and philosophical purity

has resulted in over three torturous years oflegal wrangling For what

purpose

I dissent

Commissioner Richard J Daschbach s dissent is attached

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 20

COMBI LINE JOINT SERVICE

AGREEMENT NO 9929

ORDER OF DISCONTINUANCE

October 6 1982

Agreement No 9929 is a cooperative working arrangement between

Hapag Lloyd A G and Intercontinental Transport B V two common

carriers by water in the foreign commerce of the United States It

authorizes the parties to conduct a two vessel LASH joint service

trading in the name of Combi Line between Europe and the United

States GulfCoast

On March 24 1982 the Commission issued an Order directing the

parties to Agreement No 9929 to show cause why that Agreement

should not be cancelled pursuant to section 15 of the Shipping Act

1916 46 U S C 814 because it was inactive and as a result no

longer represented an active working arrangement between the parties

nor met a serious transportation need important public benefit or valid

regulatory purpose

In response to the Commission s Order to Show Cause the parties

filed an amendment Agreement No 9929 7 terminating Agreement

No 9929 effective April 30 1982 Agreement No 9929 7 was approved

pursuant to delegated authority on June 11 1982

THEREFORE IT IS ORDERED That this proceeding is discon

tinued

By the Commission

S JOSEPH C POLKING

Assistant Secretary

374 25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 57

TRACTORS AND FARM EQUIPMENT LTD

v

WATERMAN STEAMSHIP CORP AND COSMOS SHIPPING

COMPANY

ORDER ON APPEAL

October 8 1982

This proceeding was initiated upon the complaint of Tractors and

Farm Equipment Ltd against Waterman Steamship Corporation and

Cosmos Shipping Company Inc alleging violations of sections 14

Fourth and 44 of the Shipping Act 1916 46 U S c 812 and 841 b

and section 121 of the Bills of Lading Act 49 U S c 812 1Com

plainant seeks reparations in the amount of 618 941 12

On April 1 1982 Administrative Law Judge Norman D Kline issued

a decision wherein he granted Cosmos Motion to Dismiss 2

Tractors

filed an appeal to this ruling to which Cosmos replied 3

THE PRESIDING OFFICER S RULING

The Presiding Officer found that section 22 of the Shipping Act

1916 46 Us C 821 does not provide Complainant with a

right of

action for alleged violations of section 44 of the Act 4

Ruling at 24

He held that section 44 is a licensing provision which does not pro

scribe any activity amenable to a section 22 complaint other than

perhaps operating without a license or bond Ruling at 28

1 The original complaint alleged only BiJls of Lading Act violations The Shipping Act allegations

arc set forth albeit inartfully in aSeptember 14 1981 letter from Complainant to the Commission s

Secretary At apreheating conference held on January 26 1982 the Presiding Officer accepted the

September 14 letter and Complainant s explanations of its allegations as an amendment to the original

complaint

2 Cosmos Motion to Dismiss was originally denied by Administrative Law Judge Paul Fitzpatrick

at a prehearing conference held on January 26 19 2 Shortly thereafter Judge Fitzpatrick left the

Commission and the proceeding was reassigned to Judge Kline Judge Kline in considering Cosmos

request forleave to appeal Judge Fitzpatrick s ruHng denying its Motion to Dismiss reviewed the

merits of the Motion Upon review Judge Kline reversed Judge Fitzpatrick s January 26 ruling and

dismissed the proceeding

3 Rule 227 b of the Commission s Rules of Practice and Procedure 46 GFR 502 227 b grants an

automatic right of appeal to the Commission when amotion to dismiss is granted in whole orin part

40 The Presiding Officer also questioned whether Complainant s cause of action against Cosmos was

not more like a tort action specifically one in fraud and deceit It rather than an action cognizable

under section 22 or44 of the Shipping Act 1916 Ruling at 19

25 F MC 375
376 FEDERAL MARITIME COMMISSION

The Presiding Officer found that Congress enacted the fitness provi

sions of section 44 for the sole purpose of enabling the Commission to

police the activities of licensed forwarders and to ensure that only

qualified applicants were licensed He believed that these provisions

were not intended to authorize private persons to file section 22 com

plaints that only allege violations of section 44 ofthe Act 6

The Presid

ing Officer viewed the relief accorded private parties in these situations

as being limited to requesting the Commission to institute its own

investigation under the fitness standards of section 44 of the Act

Ruling at 24

POSITIONS OF THE PARTIES

Tractors first argues that Judge Kline improperly reversed Judge

Fitzpatrick s denial ofCosmos Motion to Dismiss It points out that the

only matter pending before Judge Kline was Cosmos Motion for

Leave to Appeal Judge Fitzpatrick s

ruling pursuant to Rule 153 ofthe

Commission s Rules of Practice and Procedure 46 C F R 502 153

Tractors also argues that the Presiding Officer erred in finding that

section 44 may not be violated within the meaning of section 22 ofthe

Act Tractors points to that portion of the legislative history of section

44 which indicates that the Commission s

regulatory authority over

forwarders was intended to prevent recurrences of malpractices that

were prevalent in the forwarding industry It also notes that section

44c specifically authorizes the Commission to ensure a forwarder s

financial responsibility and the performance of its contractual obliga

tions 6Tractors argues that the Presiding Officer improperly failed to

recognize that Congress intended the Commission to ensure the proper

performance of services and not merely issue licenses Tractors submits

that the Shipping Act is violated when an ocean freight forwarder does

not supply services in accordance with its contractual arrangements 7

Cosmos supports the Presiding Officer s Order of Dismissal Cosmos

argues that Tractors has failed to state a cause of action under the

Shipping Act 1916 It submits that Complainant s allegations raise

issues relating to the issuance of a false bill of lading and a conspiracy

The Presiding Officer acknowledged however that a private party could file a complaint seeking

reparations from aforwarder forfmancial injury caused by a violation of asubstantive provision of

the 1916 Act such aa section 16 Fint or 17 46 U S C II 81S and 816 He alae found that aprivate

party might obtain reparations if aforwarder lloperates witbout alicense orbond and that fact causes

direct a d proximate harm Ruling at 29

Section 44 c provides

The Commission shall prescribe reaaonable rules and regulations to be observed by independ

ent ocean freight forwarders and no such license shall be issued or remain in force U01088

such forwarder shal have furuiahed abond or other security approved by the Commission in

such form and amount as in the opinion of the Commil8ion will insure financial responsibility

and the supply of services in accordance with contract agreement orarrangements therefor

Tractors also argues that Congress did not intend to vitiate section 22 remedies when it enacted

section 44

2 F MC
TRACTORS FARM EQUIPMENT LTD V WATERMAN SS 377

CORP COSMOS SHIPPING CO

to defraud neither of which are cognizable under any section of that

Act Cosmos contends that the Commission may not assume section 22

jurisdiction unless a direct and basic charge of a violation of a substan

tive provision of the Act is alleged U S Navigation Co v Cunard SS

Co 284 U S 474 1932 Cosmos concludes that the language of

section 44 and its legislative history support its contention that the

statute is a licensing provision which cannot be violated within the

meaning of section 22

DISCUSSION

The Commission finds without prejudging the merits of the allega

tions that Tractors complaint against Cosmos is cognizable under

section 44 ofthe Act We reach this conclusion because the allegations

if true could support a finding that Cosmos violated certain provisions

of Commission General Order No 4 which results in a violation of

section 44 of the Act 8The Commission will therefore grant Tractors

appeal and reverse the Presiding Officer s dismissal ofCosmos from this

proceeding 9

Section 44 ofthe Act provides in pertinent part

A forwarder s license shall be issued to any qualified applicant

therefor if it is found by the Commission that the applicant

is fit willing and able to properly carryon the business

offorwarding and to conform to the provisions ofthe Act and

the requirements rules and regulations of the Commission

Section 44 b

Paragraph c of section 44 states that the Commission shall prescribe

reasonable rules and regulations to be observed by independent ocean

freight forwarders Finally section 44 d provides in part that a

forwarder s license may

U pon complaint or the Commission s own initiative after

notice and hearing be suspended or revoked for willful failure

to comply with any provision ofthis Act or with any lawful

order rule or regulation of the Commission

8 General Order No 4 GO 4 prescribes regulations governing the operations practices and con

duct of ocean freight forwarders At the time of the shipments at issue section 510 23 of G O 4 46

CF R 510 23 1980 required alicensee to refuse to participate in atransaction where the licensee

believed that its principal has made an error misrepresentation oromission from any export declara

tion bill of lading orother document in connection with the shipment Itfurther prohibited alicensee

from filing or assisting in the filing of any document which such licensee had reason to believe was

false orfraudulent

9

Our dispOsition of Tractors appeal on the merits obviates the need to address its procedural chal

lenge to Judge Kline s reversal of Judge Fitzpatrick s earlier ruling on Cosmos Motion to Dismiss

Nevertheless we would point out that wedo not consider Judge Kline s action improper A presiding

officer may properly reconsider and reverse interlocutory rulings made prior to the initial decision

whether those rulings are made by him orher or by a previously assigned administrative law judge

See Knight v Lane 228 U S 6 1912 Bookman v US 453 F 2d 1263 Ct Cl 1972 Faircrest Site

Opposition v Levi 418 F Supp 1099 ND Ohio 1976

25 F MC
378 FEDERAL MARITIME COMMISSION

Section 22 ofthe Act provides in relevant part

That any person may me with the Board a sworn complaint

setting forth any violation of this Act by a n other

person subject to the Act and asking reparations for the

injury if any caused thereby

Section 44 not only authorizes the Commission to license forwarders

and prescribe forwarder rules it also requires that these rules be

observed by forwarders The regulations mandated by section 44 were

intended to preclude licensees from engaging in certain malpractices

that had become prevalent in the freight forwarding industry O Be

cause section 44 c requires forwarders to obey the Commission s

regu

lations it therefore follows that a violation of the regulations also

violates section 44 ofthe Act

A statutory violation could result even if the authorizing statute does

not expressly command obedience ofthe underlying regulations This is

so because a lawfully adopted regulation is but an extension of the

statute pursuant to which the regulation is promulgated As such a

violation of a Commission regulation which explains interprets and

implements a substantive provision ofthe 1916 Act will also result in a

violation of the statutory provision which the breached regulations

implement Admission Withdrawal and Expulsion SelfPolicing Reports

Shippers Request and Complaints Outward Continental North Pacific

Freight Conference 10 F MC 349 354 1967 affirmed sub nom Out

ward Continental North Pacific Freight Conference v FMC 385 F 2d

981 DC Cir 1967 12 As the Commission explained in denying re

hearing in Admission to Conference Membership Paciflc Coast European

Conference 9 F MC 241 1966 afl1rmed sub nom Pacific Coast Euro

pean Conference v FMC 376 F 2d 785 DC Cir 1968

General Order No 9 was necessary to carry out the

provisions ofthe Shipping Act and was intended to effective

ly insure that the Congressional intent behind the reasonable

and equal provision ofsection 15 was realized In

this proceeding we found that respondents agreement failed to

10 The legislative ItIatory of section 44 indicates that thl tatute was enacted because of Consr

interest in the neeclto establish and molntoln tandard of fitnes consi tent with aforwarder fiduci

ary responsibilities and to aidthe Conunission in p nting the mallractices that had become prevalent

in the forwarding industry To achieve ita Objective Consre not only directed the Conunission to

consider among other things an appllcant l willingness to conform to the Commission regulltion

before Issuing a freighl forwarder license but also directed it to prescribe reasonlble rules andresula

tlon to be observed by ocean fr t forwarders Se Senate Report 691 87th Cong 1st Sass 1961

Senate Report 1096 87th Cong It S 1961 Hugo Zan W ond Compan 18 F M C 60 74 1974

Investlgotion of Proctlc Operotlon Actions ond Agrum nts of Ocean Freight FOI WN n 6 F M B 327

1961

11 Davl Admini tratlve Law of the Seventies S 03 at 147 1976

Compare Unoppro d ectlon IS Agreements aulf Unlted Kingdom Co lfe nc 7 F M C S36

1963 where the involved sener 1 order did not explain interpret or implement asubstantive provi

sion of the 1916 Act

25 FMC
TRACTORS FARM EQUIPMENT LTD V WATERMAN SS 379

CORP COSMOS SHIPPING CO

meet the requirements of General Order No 9 Therefore

since General Order No 9 was Ian explanation and

effectuation ofthe reasonable and equal provision of section

15 we found that the agreement failed to meet the require

ments of section 15 9 F MC at 262

The rationale the Commission expressed in Admission to Conference

Membership and Outward Continental supra has been recognized by the

courts for many years In Atchison Topeka Santa Fe Railway Co v

Scarlett 300 U S 471 1936 the Supreme Court in finding that the

railroad had fulfilled its duty by complying with the Interstate Com

merce Commission s regulations implementing the Safety Appliance

Act remarked

The regulation having been made by the Commission in pursu

ance of constitutional statutory authority it the regulation

has the same force as though prescribed in terms by the statute

at 474

Similarly in Westmoreland v Laird 364 FSupp 948 951 E D N C

1973 affd 485 F 2d 1237 4th Cir 1973 the court in disposing of a

federal employee s claim of an unlawful discharge stated

An administrative regulation promulgated within the authority

granted by statute has the force of law and a violation of

a valid administrative regulation even by the authority pro

mulgating same constitutes in legal effect a violation of the

statute

The courts have also found statutory violations where there have

been infractions of the implementing regulations that are enforced

through legislatively imposed penalties 13 In United States v Grimaud

220 U S 506 1911 the Supreme Court reviewed a criminal indictment

charging violations of the Forest Reserve Act and its implementing

regulations In upholding the indictment the Court established a three

pronged test for a statutory violation premised on an implementing

regulation a congressionally mandated general standard lawfully

adopted implementing regulations and finally a statutory penalty for

violating the regulation

13 In United States v Howard 352 U S 212 1957 the Supreme Court construed astate regulation

as Uthe Jaw of the state forthe purpose of acriminal prosecution There the Federal BlacK Bass Act

of May 20 1926 44 Stat 576 made it unlawful for a person to deliver fortransportation any black

bass orother fish if such transportation is contrary to the law of the state The Florida legislature had

created astate agepcy to regulate the management of fresh water fish and authorized it to promulgate

regulations to effect its statutory mandates The legislature also provided a misdemeanor penalty for

violations of the agency s regulations The agency pursuant to its authority promulgated regulations

prohibiting the transportation of certain fish outside of the state The Court upon review of afederal

criminal prosecution for violation of the Federal Black Bass Act held that the agency

s

regulations as

enforced by the state s misdemeanor provisions is a law of the State of Florida for the purposes of

the federal statute

25 F M C
380 FEDERAL MARITIME COMMISSION

In Grimaud supra Congress had created a statutory scheme which

authorized the President to designate certain lands as forest reserva

tions The Secretary of Agriculture was authorized to make rules and

regulations to protect the reservations and regulate their use Violations

of the statute or the implementing regulations were subject to a fine of

500 and or 12 months imprisonment The Court found that Congress

had not improperly delegated its legislative authority to declare activity

unlawful but rather had vested the Secretary of Agriculture with the

authority to fill in the details of the statute As the Court explained

Congress may enact a statute which gives the executive branch

The power to fill up the details by the establishment ofadmin

istrative rules and regulations the violations ofwhich could be

punished by fine or penalties fixed by Congress or meas

ured by the injury done Grimaud supra at 517 Emphasis

added

The Court therefore affirmed the indictment and noted that Congress

not the Secretary of Agriculture had declared violations ofthe regula

tions to be unlawfuLl4

Likewise in United States v Hark 320 U S 531 1944 a case

involving criminal indictments charging violations of the Emergency

Price Control Act of 1942 and its implementing regulations the Court

citing Grimaud with approval noted that

though the regulation calls the statutory penalties into

play the statute not the regulation creates the offense and

imposes punishment for violations Hark at 536 footnote and

citation omitted

In this proceeding Tractors allegations if proven could support a

finding that Cosmos violated the provisions of G O 4 Because those

regulations are designed to interpret explain and implement section 44

and are enforced through the penalty provision of section 32 c 46

U S C 831 c their violation results in a violation of section 44 and

establishes a cause ofaction for reparations under section 22 ofthe Act

THEREFORE IT IS ORDERED That Tractors Appeal from the

Presiding Officer s dismissal of Cosmos as a Respondent in this pro

ceeding is granted to the extent indicated above and

IT IS FURTHER ORDERED That the Presiding Officer s

ruling

ofApril 1 1982 is reversed and

IT IS FURTHER ORDERED That Tractors request for oral argu

ment is denied and

The Court distinsuished United States Eatan 144 US 667 1892 where the statute required

certain books to be kept under the supervision of the Commissioner of Internal Revenue The statute

also authorized the Commissioner to make rules forcarryina the statute into effect However because

thestatute in Eaton unlike the Grimoud statute did not impose apenalty for violation of the Commis

sioner s

regulatory pronouncements the Court dismissed the indictment charging violations of the stat

uteand theCommission s

implementing regulations

25 F MC
TRACTORS FARM EQUIPMENT LTD V WATERMAN SS 381

CORP COSMOS SHIPPING CO

IT IS FURTHER ORDERED That this proceeding is remanded to

the Presiding Officer for further hearing and decision on the merits of

the complaint

By the Commission

S JOSEPH C POLKING

Assistant Secretary

25 EM C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 6

WESTERN PIONEER INC POSSIBLE VIOLATION OF

SECTION 2

INTERCOASTAL SHIPPING ACT 1933

NOTICE

October 8 1982

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

1 1982 initial decision in this proceeding and the time within which the

Comniission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 JOSEPH C POLKING

Assistant Secretary

382 2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 6

WESTERN PIONEER INC POSSIBLE

VIOLATION OF SECTION 2

INTERCOASTAL SHIPPING ACT 1933

Respondent is a common carrier by water in interstate commerce as that term is

defined in unnumbered section preceding section 2 of the Shipping Act 1916 46

U S c 801

Respondent is in violation of section 2 Intercoastal Shipping Act 1933 46 U S c 844

for failure to have its tariff on file with the Federal Maritime Commission

Civil penalty found not to be warranted however respondents ordered to cease and

desist from conducting operations as a common carrier by water in interstate com

merce until such time as there is on file with the Commission a schedule tarill

showing all the rates fares and charges for orin connection with such operations

Harold E Mesirowand Richard D Gluck for Western Pioneer Inc

John Robert Ewers for Bureau of Hearings and Field Operations

Joseph B Slum and Aaron W Reese for Office of Hearing Counsel

INITIAL DECISION 1 OF SEYMOUR GLANZER

ADMINISTRATIVE LAW JUDGE

Finalized October 8 1982

This proceeding was instituted by Order ofInvestigation and Hearing

Order served January 18 1982 to determine whether the respondent

Western Pioneer Western had violated section 2 of the Intercoastal

Shipping Act 1933 46 U S C 844 by engaging in operations as a

common carrier by water without having a tariff on file with the

Federal Maritime Commission and if so to determine whether penal

ties should be assessed against Western

Specifically the Order required the determination of the following

issues

1 Whether Western is a common carrier by water in interstate

commerce as that term is defined in unnumbered section

preceding section 2 of the Shipping Act 1916 as amended 46

U S C 801 for obvious reasons the unnumbered section is

sometimes referred to as section I of the Shipping Act 1916

1

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

Commission RuJe 227 Rules of Practice and Procedure 46 CFR 502 227

25 F MC 383
384 FEDERAL MARITIME COMMISSION

2 Whether Western is in violation of section 2 Intercoastal

Shipping Act 1933 46 V S C 844 for failure to have its tariff

on file with the Federal Maritime Commission and

3 Whether civil penalties should be assessed against Western

pursuant to section 32 of the Shipping Act 1916 46 V S C

83l e if it is found to be in violation ofsection 2 Intercoastal

Shipping Act 1933 and if so the amount of any such penalty

which should be imposed taking into consideration factors in

possible mitigation of such a penalty

The matter is before me for final determination on submissions which

are tantamount to a joint proposed settlement

PROCEDURAL BACKGROUND TO THE SETTLEMENT

Shortly after the Order instituting this proceeding was issued I was

advised by counsel for respondent and by Hearing Counsel orally that

they were undertaking discovery procedures informally in the belief

that all issues were susceptible to settlement At a later prehearing

conference counsel confirmed that advice In accordance with an

agenda established at the prehearing conference counsel entered into a

Joint Stipulation of Relevant Facts 2

which they submitted on July 23

1982 Simultaneously Western s counsel submitted another document

entitled Respondents Offer of Proposed Settlement and Argument in

Support Thereof Hearing Counsel considered that document to be a

motion for termination ofthe proceeding to which it desired to reply s

On August 6 1982 Hearing Counsel filed its Reply 4

There is no real dispute between Western s counsel and Hearing

Counsel on the legal issues The only fault that Hearing Counsel finds

Attached to the Joint Stipulation arethe following

1 Affidavit of Max Soriano Western s Vice President and General Counselj

2 Mr Soriano a second affidavit

3 Affidavit of Earl K Peteraen quondam inhonae accountant for Western 197S 1980

4 Letter dated February 10 1978 from the CommlHlon sstaff Newton Frank for Albert

J K1i lel Jr Director Bureau of Industry Economico to Western Peterocn

AlTidavlt ofAlbert E Holman Western s Trstl ic and Pricin Manager

6 Letter dated February 13 1978 from Western Soriano to the Commiasion Klingel

1 Leller dated April 18 1978 from Western Holman to the CommlHion s San Francisco

office L A Hammond

8 Letter dated May 22 1978 from the Commiasion James A Warner Chief Domestic

Tariff Branch to Western Holman

9 Western file memorandum Holman dated May 30 1978

10 Letter Transmittal No S dated June 21 1978 Western Holman to the Commiasion

Bureau of Domestic Regulation

11 Letter Transmittal No 6 dated June 21 1978 Western Hohnan to the Commlaslon

Bureau of Domestic Reaulation

12 Supplement No I to FMC F No 3 canceling FMC F No 3 effective June 30 1978

13 Supplement No 3 to FMcF No 2 canceling FMC F No 2 effective June 30 1978

a

Letter dated July 29 1982 from Hearing Counsel to me

The Reply is entitled Reply of Hearing Counsel to Respondent s Offer of Proposed Settlement and

Argument in Support Thereof

25 F MC
WESTERN PIONEER INC POSSIBLE VIOLATION OF 385

SECTION 2 INTERCOASTAL SHIPPING ACT 1933

with Western s Offer is that it does not go far enough in explicitly

addressing the three issues enumerated in the Order

Hearing Counsel perceives the Offer as a motion to terminate the

case without assessment of a civil penalty Issue No 3 on condition

that Western file a tariff with the Commission Hearing Counsel do not

object to this disposition of Issue No 3 but do ask for findings with

respect to the other issues Accordingly Hearing Counsel want West

ern to be found to be a common carrier by water in interstate com

merce Issue No I and to be in violation of section 2 ofthe Intercoas

tal Shipping Act Issue No 2 To remedy the violation Hearing

Counsel seek an Order requiring Western to cease and desist from

operating as a common carrier by water in interstate commerce until it

files an appropriate tariff with the Commission Itis implicit in the very

nature of Western s offer that Hearing Counsels position with respect

to Issue No 3 makes Hearing Counsels views with respect to Issues

No I and No 2 agreeable to Western This together with the fact that

Western has not sought leave to respond to Hearing Counsels Reply

warrants the conclusion that the various submissions are the equivalent

of a

jointly proposed settlement

THE STIPULATION

By way of introduction the parties agree that the stipulated facts

address the issues raised in the Order by describing Western s past and

present operation and by explaining the reasons why after consultation

with the Commission s staff Western discontinued the filing of its tariff

with the Commission in 1978 They add that the stipulated facts are

drawn from and based on relevant information and documents set forth

in n 2 supra These then are the stipulated facts 5

1 Western is the successor to Pioneer Alaska Lines a contract water

carrier which began service to Alaska in 1958 Western purchased the

assets of Pioneer Alaska Lines in 1972 and Western has operated be

tween the Pacific Northwest and Western Alaska since that time

2 Between 1972 and 1976 Western maintained two types of service

a common carrier service offered to all types of shippers and a special

ized service which served only the fisheries trade

3 During 1975 and 1976 Western s common carrier operation was

conducted with two vessels the Western Pioneer and the Pribilof Due

to a fire the Western Pioneer was withdrawn permanently from service

in January 1976 The Pribilofwas withdrawn from Western s service at

the end ofthe same year when its charter expired

4 Thereafter the only vessels Western continued to operate were

those serving the fisheries trade These vessels were and are operated

5

The stipulation was edited to conform to terminology and usages which appear elsewhere in this

decision No substantive changes weremade

25 FMC
386 FEDERAL MARITIME COMMISSION

pursuant to provisions found in 46 U S C 0088 b 367 and 404 which

exempt vessels engaged solely in the fisheries trade from certain Coast

Guard inspection requirements In contrast the Western Pioneer and the

Pribilol had been inspected by the Coast Guard and had been eligible

for unlimited general cargo operations

S The annual income and operating statements Form FMC 64

submitted to the Commission by Western for the period 1972 1976 re

ported specific detailed data concerning only the company s common

carrier operations involving the Western Pioneer and the Pribilo Infor

mation about the operation of Western s fisheries vessels was also re

ported on Form FMC 64 but only as a separate and distinct item on

Schedule 302 separate and apart from Western s common carrier oper

ations This method of reporting was consistent with past accounting

practice used by Western s accountant and it was never challenged by

the Commission

6 Western followed this separate form of reporting information be

cause it believed that its fisheries service was not a common carrier

undertaking In fact the Coast Guard insisted that the fisheries vessels

could not qualify for the inspection exemption unless they carried only

cargo that was directly fisheries related

7 As noted above the operation of both Western s non fisheries

related vessels had ceased by the end of 1976 However Western

received an inquiry from the Commission dated February 10 1978

requesting operating and income data for the year 1977 and enclosing a

copy of Form FMC 64 By letter dated February 13 1978 Western

asked the Commission whether it was any longer required to file such

reports inasmuch as the two inspected vessels which it had used in

unlimited general cargo service were not operated by Western in 1911

Western was advised by the Commission that only common carrier

vessel operations had to be reported On that basis Western did not file

a report in 1977 and discontinued filing ofany further FMC 64 reports

8 In April 1978 Western received a telephone inquiry from the

Commission s staff office in San Francisco requesting copies of bills of

lading used on Western s vessels By transmittal letter dated April 18

1918 Western sent to the San Francisco office sample bills of lading

from each of Western s four vessels and a

copy of Western s tariff

9 By letter dated May 22 1978 the Chief of the Commission s

Domestic Tariff Branch informed Western that the Commission was in

receipt of information that your company is no longer operating as a

common carrier by water in the Alaska trade This letter advised

Western that its then effective tariff FMC F No 2 should be canceled if

Western did not intend to provide the service set forth in this publica

tion and it enclosed a specimen copy of a cancellation supplement for

the Western tariff The letter asked Western to notify the Commission

ifour information concerning your discontinuance is correct

25 F MC
WESTERN PIONEER INC POSSIBLE VIOLATION OF 387

SECTION 2 INTERCOASTAL SHIPPING ACT 1933

10 On May 30 1978 Western s Traffic and Pricing Manager spoke

with a Commission staff person concerning the specific explanatory

language to be used on the Western cancellation supplement and he

was advised that the statement cancelled in its entirety account

discontinuance of our common carrier operation would be acceptable

He was also advised by the staff person that it would be permissible to

postpone cancellation of the existing Western tariff for 30 days until

Western could issue a memorandum type tariff

11 In approximately March and November of 1979 Commission

field investigators visited Western to discuss and review its operations

including the discontinuation of its tariff filings with the Commission

Although these investigators tentatively concluded that they felt West

ern was operating as a common carrier on a limited basis Western

advised them that both the Coast Guard and the Commission had

previously said that Western was not operating as a common carrier At

the conclusion of their visit the Commission investigators did not

caution Western to file a tariff with the Commission nor did they

contact Western later to advise itofany potential violations

12 Western publishes and maintains a memorandum freight tariff

establishing rates on more than 400 commodities for the carriage of

cargo between Seattle and Bellingham Washington on the one hand

and ports in Alaska and the Aleutian Islands on the other

13 Western limits its service to the fisheries trade in order to pre

serve the exemption of its vessels from Coast Guard inspection require

ments pursuant to 46 U S C 88 b 367 and 404

14 Western offers its services to all shippers and consignees in the

trade it serves subject to the fisheries trade limitation discussed in

stipulation number 13

15 Western issues bills oflading for all cargo carried

16 Western provides regular service between the ports named in its

tariff Some services however are seasonal as a result of weather

conditions and the seasonal peculiarities ofthe fishing trade

17 Western advertises its sailings

18 Western accepts responsibility for the carriage of cargo pursuant

to the provisions of its tariff and bill of lading

THE STATUTES INVOLVED

As pertinent the unnumbered section preceding section 2 of the

Shipping Act provides the following definition of a common carrier

by water in interstate commerce

The term common carrier by water in interstate commerce

means a common carrier engaged in the transportation by

water of property on the high seas on regular routes

from port to port between one State of the United States

and any other State ofthe United States

25 F M C
388 FEDERAL MARITIME COMMISSION

As pertinent section 2 of the Intercoastal Shipping Act 6

provides

That every common carrier by water in intercoastal commerce

shall tile with the Commission and keep open to public

inspection schedules showing all the rates fares and charges

for or in connection with transportation between intercoastal

ports on its own route

DISCUSSION

I

WESTERN IS A COMMON CARRIER BY WATER IN

INTERSTATE COMMERCE IT IS IN VIOLATION OF

SECTION 2 OF THE INTERCOASTAL SHIPPING ACT

BECAUSE IT DOES NOT HAVE A TARIFF ON FILE

WITHTHE COMMISSION

The law is well established that the term common carrier as used

although not defined in the Shipping Act means a common carrier at

common law Philip R Consolo v Grace Line Inc 4 F M B 293 300

1953 Galveston Chamber of Commerce v Saguenay Terminals 4

F MB 375 378 1954 Activities Tariff Filing Practices and Carrier

Status of Containerships Inc Activities 9 F MC 56 62 1965 McAl

lister Brothers v Norfolk Western Railway Company 20 F MC 63 65

1977 Common carrier status is not determined by a rigid and unyield

ing dictionary definition but is a flexible regulatory concept The

regulatory significance of a carrier s operation may be determined by

considering a variety ofrecognized criteria even though the absence of

one or more of them does not rule out common carrier status Rather

the determination is made upon consideration ofthe combined effect of

those factors Activities supra 9 F MC at 65

Itis generally understood that among the factors to be considered are

the following indicia I the variety and type of cargo carried 2

number of shippers 3

type of solicitation utilized 4 regularity of

service and port coverage 5 responsibility of the carrier towards the

cargo 6 issuance of bills of lading or other standardized contracts of

carriage and 7 method of establishing and charging rates United

States v Stephen Brothers Line 384 F 2d 118 5th Cir 1967 McAllister

Brothers v Norfolk Western Railway Company supra Possible Violations

of Section 18 a of the Shipping Act 1916 etc 19 F M C 44 1975

Activities supra and Investigation of Tariff Filing Practices of Carriers

Between Contiguous States of the United States and Alaska Investigation

of TariffFiling Practices 7 F MC 305 1962

Section of the Intercoastal Shipping Act46 US C 84 b makes the provisions of that Act appli

cable Uto every common carrier by water in interstate commerce 81 defined in aeotion 1 of the Ship

ping Act 1916

2S F MC
WESTERN PIONEER INC POSSIBLE VIOLATION OF 389

SECTION 2 INTERCOASTAL SHIPPING ACT 1933

Measured against all of those enumerated indicia Western s oper

ations are those of a common carrier Unquestionably Western adver

tises its services No 3 it provides a regular service between points in

the State of Washington and points in the State of Alaska No 4

under its bills of lading and tariff it is responsible for the cargo during

carriage No 5 it issues bills of lading No 6 and it publishes a tariff

of standard rates and charges and bills its customers accordingly No

7 Just as certainly Western s operations are those of a common

carrier under indicia Nos I and 2 as will be seen

It has been said that the most frequently mentioned characteristic of

common carriage is the holding out by a course ofconduct to accept

goods from the general public to the extent of a carrier s ability to

carry Activities supra 9 F M C at 62 Transportation by Southeastern

Terminals and S S Co 2 U S MC 795 797 1946 But this does not

mean it is necessary for a carrier to offer to carryall commodities for

all shippers A line may be a common carrier of certain commodities

as long as it is willing to carry those commodities for all who wish to

ship them Investigation of Tariff Filing Practices supra 7 F MC at

318

Thus the limitation of service to shipments related to the fisheries

trade does not change Western s status from that of a common carrier

Western s holding out has been made to all those willing to use its

proffered service and that includes any shipper of any commodity

related to the fisheries trade 7

A carrier may be a common carrier of

only one commodity Activities supra 9 F M C at 65 Western s tariff

lists more than 400 commodities Here of course Western s holding out

is to all who wish to ship them and that satisfies the test After all it

is well settled that The public does not mean everybody all the time

Terminal Taxicab Co v Kutz 241 U S 252 1916

In consideration of the combined effect of the factors generally

associated with common carrier status Ifind that Western is a common

carrier in interstate commerce

Under the express provision of section 2 of the Intercoastal Shipping

Act common carrier operations in interstate commerce are prohibited

unless the person engaged in such operation maintains an effective tariff

on file with the Commission Transportation U S Pacific Coast and

Hawaii 3 U S MC 190 195 1950 Investigation of Tariff Filing Prac

tices supra 7 FMC at 330 Therefore Western which has been

operating as a common carrier in interstate commerce without an

effective tariff on file with the Commission is found to be in violation

of section 2 of the Intercoastal Shipping Act Under the terms of the

1

The stipulation does not mention the number of shippers using Western s services but the fair in

ference to be drawn is that the number of shippers and consignees served is as extensive as its holding

outand the industry it serves

25 F MC
390 FEDERAL MARITIME COMMISSION

order which follows itwill be required consistent with the terms of its

own undertaking to do so to have an effective tariff on file with the

Commission prior to conducting any further common carrier oper

ations

II

CIVIL PENALTY NOT WARRANTED

Sometime after the inception of this proceeding Western came to

understand for the first time that the specialized fisheries service it had

been conducting since 1972 was and is a common carrier operation

subject to the tariff filing requirements of the Intercoastal Shipping Act

Western s erroneous perception i e that the fisheries service was not a

common carrier operation appears to have been shared by the Com

mission s staff when Western canceled its tariff in 1978

There is no dispute that the mutual misperception of the fisheries

service by Western and the Commission s staff resulted from a misun

derstanding by both ofthem ofthe reach and purpose of laws adminis

tered by the United States Coast Guard and the effect of certain

administrative determinations under those laws upon the coverage of

the Intercoastal Shipping Act There is also no dispute that from 1972

to the present Western fully and voluntarily disclosed all the facts

concerning its carrier operations to the Commission staff

Inasmuch as the stipulated facts and attachments suggest that West

ern was encouraged to substitute an unfiled memorandum tariff for the

ones filed with the Commission until June 30 1978 it is reasonable to

conclude that when Western did cancel its filed tariffs it did so in the

belief that it was complying with and not thwarting regulation

Nothing that occurred during the field office s

investigation ofWest

ern in March and November 1979 alters the conclusion that Western

contiJlUed to believe it was complying with regulation until it received

the Order instituting this proceeding It should be remembered that the

investigators offered only a tentative conclusion that Western was oper

ating as a common carrier in interstate commerce As the attachments

to the stipulation show Western was assured that the tentative conclu

sion would be reviewed by the staff and that Western would be in

formed of the staffs determination Inasmuch as Western was not

informed ofthe results ofthe staff review it wasjustified in continuing

to believe in the validity of the Commission s staffs earlier albeit

mistaken conclusion that the fisheries service was not common car

riage 8

8

The second Soriano affidavit see n 2 supra contains the following uncontroverted passages

Continued

2S FM C
WESTERN PIONEER INC POSSIBLE VIOLATION OF 391

SECTION 2 INTERCOASTAL SHIPPING ACT 1933

It should be observed in passing that a staff position whether

expressed or implied is not binding upon the Commission in carrying

out its adjudicatory function See e g Investigation of Tariff Filing

Practices supra 7 FMC at 330

We take occasion here to point out primarily for the future

that failure of Commission personnel to advise that an organi

zation which has furnished full operating details is a common

carrier and required to file tariffs in no way militates against

Commission decision that the organization is a common carri

er and required to file Neither would a direct statement by

our staff that the organization is not a common carrier

To the same effect see United States v New York New Haven and

Hartford Railroad Company 276 F 2d 525 535 2 Cir 1959 cert

denied sub nom Tri Continental Financial Corp v United States 362

U S 961 1960 and sub nom Tri Continental Financial Corp v Glen

more 362 U S 964 1960

Western explicitly and Hearing Counsel implicitly agree that West

ern did not intentionally violate the tariff filing requirements of the

Intercoastal Shipping Act Relying upon the mitigating factors they

stipulated to Hearing Counsel supports Western s

request that no civil

penalty be assessed in this proceeding 9 Chief Administrative Law

Judge John E Cograve in his recent Initial Decision in Docket No 81

59 General Transpac System Possible Violations of Section 15 Shipping

Act 1916 25 F MC 270 1982 established that motive and intent are

relevant to the determination ofthe amount if any of a civil penalty to

be assessed in proceedings brought pursuant to section 32 of the Ship

ping Act Upon a finding that the degree of culpability was slight

indeed Judge Cograve concluded that a penalty is neither dictated

by the respondent s past actions resulting in the violation nor warranted

as a deterrent to future unlawful activity by the respondent Id at 281

On the facts here presented the record is devoid of any evidence

from which one might draw an inference that Western intended to

violate the Intercoastal Shipping Act Ifind that the violation of section

In approximately March and November of 1979 investigators from the Federal Maritime

Commission field officevisited the officeof Western Pioneer Inc to investigate the nature of

Qur operation In Particular sic the fact that wewereno longer filing atariffwith the FMC

When they finished their last visit the invest8gators sic stated their tentative conclusion to

us was that they felt we were operating as a common carrier on alimited basis In turn we

told them that in our view we were not operating as a common carrier and that both the

FMC and the Coast Guard had already said so as well

When the jnvestigators left they did not caution us to file atariff with the FMC They said

only that they would go back to San Francisco and review the matter with Washington and

get back to us We never heard from them again The next communication to us on this was

when the FMC in Washington issued it s sic order of investigation and hearing in January

of this year

9

I construe Hearing Counsel s measured statement that it does not oppose Western s

request for no

monetary assessment to mean that Hearing Counsel are supporting Western s

position on this issue

25 F M C
392 FEDERAL MARITIME COMMISSION

2 ofthat Act was unintentional Accordingly Ifind that Western s past

actions do not call for a penalty and that a penalty would serve no

useful purpose to deter future unlawful activity in these circumstances

Nevertheless Western is in violation of section 2 of the Intercoastal

Shipping Act now and it will remain in violation if it continues to

conduct common carriage operations without an effective tariff on file

as required by section 2

ORDER

Accordingly it is ordered that Western Pioneer Inc cease and

desist from acting as a common carrier of property by water in inter

state commerce unless and until such time as it shall file with the

Federal Maritime Commission and keep open to public inspection

schedules tariffs showing all the rates fares and charges for or in

connection with transportation between intercoastal points on its own

route

S SEYMOUR GLANZER

Administrative Law Judge

2S FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 9

CARRIER INTERNATIONAL CORPORATION

v

AMERICAN ATLANTIC LINES

NOTICE

October 8 1982

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

2 1982 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

S JOSEPH C POLKING

Assistant Secretary

25 FM C

393
FEDERAL MARITIME COMMISSION

DOCKET NO 82 9

CARRIER INTERNATIONAL CORPORATION

v

AMERICAN ATLANTIC LINES

Respondent s tariff found unambiguous Claim for reparation denied and complaint dis

missed

Henry L Martin for complainant

John P Love for respondent

INITIAL DECISION 1 OF JOHN E COGRAVE

ADMINISTRATIVE LAW JDUGE

Finalized October 8 1982

Carrier International Corporation seeks 23 255 30 as reparation for

an alleged misapplication of rates by American Atlantic Lines As

described on the bill of lading the shipment in question consisted of

refrigerating machines and air conditioning machines The shipment

was delivered to American Atlantic s facilities packed in export

crates American Atlantic placed the cargo on flatracks and loaded it

into containers because the next of its vessels on berth was a container

ship The shipment was rated as Appliances Commercial and House

hold NOS U S Atlantic Gulf Southeastern Caribbean Conference

Freight Tariff FMC No 9 8th Revised Page 63 The rate under this

item was 145 00 per ton WM

The nature weight or dimensions of the shipment are not in issue

The sole question presented is whether the shipment should have been

assessed the lump sum container rate of 1 850 per 20 container and

3 690 per 40 container Complainant s basic contention is that since

the shipment actually moved in containers it is entitled to the con

tainer rate Respondent however points to Rule 40 ofthe Southeastern

Conference tariff and argues that since complainant s shipment met

none of the Rule s

requirements it is not entitled to the lump sum rate

Rule 40 provides in pertinent part

These rules and regulations govern the carriage of cargo in

ocean carrier s hereinafter called the Carrier containers

1

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

Commi oion Rule 227 Rulesof Practice and Procedure 46 CPR 502 227

394 25 FMC
CARRIER INTERNATIONAL CORPORATION V AMERICAN 395

ATLANTIC LINES

which the shipper or consolidator or inland common carrier

subject to prior booking arrangement with the Carrier may

file and ship the cargo therein pursuant to the following terms

and conditions and will apply unless otherwise indicated only

when the container has been filled by shipper consolidator or

inland common carrier as agent for the shipper at his expense

off the premises ofthe Carrier and or unloaded by consignee

at his expense off the premises of the carrier or port

This opening paragraph is followed by a series of conditions covering

such things as the actual pick up of the container the use by more than

one shipper of a single container liability for the container and deliv

ery to the carrier ofthe loaded container 2

A review of the circumstances giving rise to the complaint is neces

sary to place the complainant s claim for reparation in its proper per

spective

On authorization from Carrier International the complaint here was

filed by Mr Henry Martin Vice President Ocean Freight Consultants

Inc OFC 3

The complaint was based upon the fact that since the shipment had

actually moved in containers the container rate not the breakbulk rate

should have applied In a Statement of Facts attached to the com

plaint 4 Carrier International based its claim on the following

The shipment was rated as per rate on tariff page 63 8th

revision Appliances Commercial and Household NOS as

class 4 145 00 per ton 40 cu ft Normally the rate applied

would be correct had the shipment not moved in containers

since the tariff provides a special lump sum rate of 1 850 00

per 20 container and 3 69000 per 40 container for Trinidad

The applicable lump sum rate is based on full container with

out any condition that the container be house to house or pier

to pier We discussed this matter with Southeastern Caribbean

Conference on 6 8 81 and they agreed with our interpretation

that the container rate is applicable to all containerized ship

ments notwithstanding the fact that container moves house to

house or pier to pier

There follows a general statement on ambiguous tariffs and their con

struction against the maker of the tariff Complainant s next statement

of its position appears in its response to respondent s motion to dis

miss 5Here complainant states that the full container rate does not

2

The text of Rule 40 is set out in the Appendix to this decision

3

The complaint was made necessary when respondent rejected Mr Martin s claim against it The

record does not show the precise grounds for the denial

4 Complainant requested the Shortened Procedure of Subpart K of the Commission s Rules of Prac

tice and Procedure This was modified to allow respondent to use the discovery procedures in Subpart

L

IS Reply of Carrier International dated April 6 1982

25 F M C
396 FEDERAL MARITIME COMMISSION

make reference to rule 40 and it is not conditioned upon the fact that

shipment moved house to house or pier to pier Complainant points to

the rate on bottles to show that where a particular rate is conditioned

on other provisions of the tariff a notation to that effect is made

Additionally complainant states

Shipments not intended for containers do not have container

numbers listed on the bill of lading as on the attached bill of

lading Attachment II The bill of lading covering the ship

ment in dispute has container clearly printed on it confirming

that the shipment was intended and meant fOr movement in

containers Emphasis mine

The only inference to be drawn from this statement is that from the

beginning Carrier International had intended that the shipment move in

containers The facts ofrecord show otherwise The container numbers

which complainant rely upon at this stage of the case were added to

the bill of lading by the complainant or its forwarder after being

informed by the respondent that the cargo had been loaded into con

tainers by the respondent and after the respondent gave the complain

ant the list of container numbers to facilitate the tracing of the ship

ment 6The original bill described the cargo as breakbulk and it was

delivered to American Atlantic as breakbulk cargo

Finally complainant in its reply memorandum states

As for the application of Rule if the 1 855 per container rate

was conditioned upon any other provision of the tariff it

should have been so noted Shipments are clearly marked as

moving in containers and hence entitled to container rate

listed on page I59 ofthe taritl

It must be remembered that the basis for complainant s claim here is

an alleged ambiguity in the respondent s tariff However complainant

never says what that ambiguity is or where in the tariff it can be found

The only conclusion to be drawn is that complainant s notion of an

ambiguity is as vague as the argument it offers in support of it If I

understand complainant the argument demonstrates the alleged ambi

guity as follows Page 159 ofthe tariff provides for a full container rate

to Trinidad Nowhere on page 159 is there any reference to Rule 40 or

any other condition which would affect complainant s

right to that rate

Since there is no reference to Rule 40 on page 159 and its application to

the full container rate an ambiguity is created which must be resolved

II This would not appear to be adeliberate attempt by compJainant to mislead but rather the result

of alack of knowledge on the part of Mr Martin who it can be presumed was in po ion of only

those facts produced by hi audit of Carrier International s

freight bills Since he was not privy to

the circumstances of the shipment he apparently assumed the container numbers on the bill of lading

werepart of the original

2S FMC
CARRIER INTERNATIONAL CORPORATION V AMERICAN 397

ATLANTIC LINES

against the respondent as the maker of the rate ie the full container

rate is the proper rate

Presumably as an example ofhow it was led astray complainant cites

respondent s tariff item on BOTTLES Jars and Jugs Glass or Plastic

Empty as showing that where a rate is conditioned upon some other

provision ofthe tariff it is so noted on the page containing the rate The

item as it appears on 1st Rev Page 69 is

BOTTLES Jars and Jugs Glass or Plastic

Empty

Plastic in carrier s containers minimum

l8 cubic feet to

Trinidad

Through June 14 1980

See also section A

Here once again complainant does not say which notation it means If

it is referring to the specific provision for Plastic in carrier s contain

ers then the argument is less than precise because there is no reference

to another provision of the tariff If however the reference is to the

asterisk preceding BOTTLES then complainant as it has throughout

its assertion of this claim simply ignores crucial points against it The

asterisk directs the reader s attention to the statement See also section

A Section A ofrespondent s tariff contains its full container rates and

it need only be noted here that the item under which complainants

shipment was rated reads in relevant part

Appliances Commercial and Household NOS

See also Section A

Thus complainant was put on notice that full container rates were

available to it under section A ofthe tariff

While subject to the complexities of all ocean carrier tariffs the

format of respondent is reasonably designed to guide even the minimal

ly diligent user through its intricacies The Table of Contents runs from

Abbreviations and Symbols Rule 42 through Livestock Other Ani

mals Poultry and Birds Rule 38 to Weights Measurements and

Disposition of Fractions Rule 49 Included in the Table is a specific

reference to Shipments in Shipper s Carrier s Containers which di

rects the user to Rule 40 and the conditions under which the full

container rates found in Section A are available But throughout this

case complainant has refused to accept any obligation to acquaint itself

with the provisions of the tariff Instead it attempts to create an ambi

guity because of the absence of any specific reference to Rule 40 on

page 159 ofthe tariff

Ifaccepted complainant s position would impose upon carriers the

duty of establishing an elaborate cross referencing system the complex

ity of which fairly boggles the mind Under such a system the tariff

25 F M C
398 FEDERAL MARITIME COMMISSION

page upon which a specific commodity rate appeared must also contain

a specific cross reference to each and every rule regulation term or

condition which couId in any way affect the application of that rate to

a particular shipment The physical limitations ofthe page itself would

preclude such a system and complainant has not pointed to a single

authority which would impose such a duty upon a carrier

Tariffs must be read in whole not in part Storage Practices at Long

view Wash 6 F MB 178 182 1960 and a shipper is conclusively

presumed to have knowledge of the rates rules and regulations of the

tariff Kraft Foods v Moore McCormack Lines 17 F MC 320 322

1974 revdon other grounds 538 F 2d 445 The failure ofrespondent

to include a specific reference to Rule 40 on the tariff page bearing the

full container rate did not render that rule inapplicable to complainants

shipment and since complainant did not comply with the terms ofRule

40 its shipment was not entitled to the fullcontainer rate

Complainant makes the further argument that equity demands that it

be given the full container rate The carrier loaded the shipment into

containers for its own convenience and since containerized shipments

are easier to handle and are more economical complainant contends

that it is unfair to let respondent reap these benefits without giving

complainant the benefit of the container rate Respondent on the other

hand points out that it bore the costs of loading the cargo into the

containers Complainant s position is dependent upon the establishment

of a windfall by respondent because of its containerizing the ship

ment otherwise the equities would not be on complainant s side The

record is devoid of any such evidence 7

Finally respondent argues that complainant has no standing to bring

its claim because it did not have title to the goods at the time of

shipment 8

Complainant paid the freight and this fact is dispositive of

the issue Trane Co v South African Marine Co 19 F MC 375 1976

The complaint is dismissed

8 JOHN E CoORAVE

Administrative Law Judge

1

This is not to say that equitable considerations enter into matters of tariff interpretation Union

Carbide Inter America Y Venezuelan Line 17 F M C 181 1973

8

Respondent s

argument is constructed upon bue of the Uniform Commercial Code which is the

law in every state and the Revised American Foreign Trade Definitions adopted by ajoint commit

tee of the Chamber of Commerce of the U S the National Council of American Importers and the

National Foreign Trade Council Complainant has supplied a

copy of the canceled check demonstrat

ing that it paid the freight Respondent says that even if complainant paid freight it was only as a

conduit tbrtheconsignee

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 80 75

CARGO EXPORT CORPORATION

v

INTERMODAL CONTAINER SERVICE LTD ET AL

NOTICE

October 12 1982

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

3 1982 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

S JOSEPH C POLKING

Assistant Secretary

25 F MC 399
FEDERAL MARITIME COMMISSION

DOCKET NO 80 75

CARGO EXPORT CORPORATION

v

INTERMODAL CONTAINER SERVICE LTD ET AL

Held

1 Where the Respondents filed a tariff change one day before the shipment took

place which change reflected a reduced rate and the only errors in the tariff were

of a technical nature there was no violation of the Shipping Act and relief under

section 22 Shipping Act 1916 is unwarranted

2 Where the record fails to disclose any causal connection between any violation of

the Shipping Act and any damages alleged to have been suffered by the Complain

ant relief under section 22 is unwarranted

3 Where the Complainant freight forwarder hires an NVOCC which enables the

forwarder to receive a commission 400 percent greater than it would have received

had it hired the carrier directly and where the forwarder or one of its principal

officers received an additional 15 000 payment and where the evidence established

a conspiracy to defraud between the Respondent NVOCC and at least one principal

officer of the Complainant and where any damages which may have been suffered

by the Complainant are the result of the Respondent NVOCCs misappropriation of

the actual shipping charges no relief will lie under section 22 in favor of the

Complainant either with respect to the carrier and his agent or the NVOCC

Anthony V Barbiero for Complainant Cargo Export Corporation

Arthur A Appleman for Respondent Intermodal Container Service Ltd

William 1 Burke for Respondents Bangladesh Shipping Corporation and Peralta

Shipping Corporation

INITIAL DECISION 1 OF JOSEPH N INGOLIA

ADMINISTRATIVE LAW JUDGE

Finalized October 12 1982

BACKGROUND INFORMATION

This case began with the filing of Complaint pursuant to the provi

sions of section 22 of the Shipping Act of 1916 46 U S C 821 The

Complaint was filed by Cargo Export Corporation CEC against Inter

modal Container Service Ltd Intermodal the Bangladesh Shipping

Corporation BSC and Peralta Shipping Corporation Peralta It al

1

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

Commission Rule 227 Rulesof Practice and Procedure 46 C F R 502 227

400 25 FMC
CARGO EXPORT CORPORATION V INTERMODAL 401

CONTAINER SERVICE LTD ET AL

leges that the Respondents knowingly and willfully combined and con

spired to obtain and permit transportation by water at less than the

rates otherwise applicable in violation of section 16 of the Shipping

Act 1916 subjected the Complainant to rates for transportation in

violation of sections 14 16 and 18 of the Shipping Act 1916 and

further engaged in an unlawful and unreasonable practice in violation

of section 17 and unlawful retaliation in violation of section 14 of the

Act The Complaint seeks reparation and damages totalling 1 119 527 2

During the pendency of this proceeding Respondent Intermodal

although properly served failed to file any pleadings or to appear at

any time The Complainant as well as both Peralta and BSC filed a

motion for a default judgment and an Order To Show Cause why

default judgment should not be entered against Intermodal was served 3

Intermodal never responded to the Order To Show Cause In addition

Peralta and BSC have filed a Motion To Dismiss this proceeding on the

basis that I additional parties not joined in the case are indispensable

to the proceeding under Commission Rules of Practice and Procedure

41 42 and 62 2 the Complaint is premature in that it seeks an

anticipatory refund of monies from Peralta and BSC which are the

subject of a suit in the United States District Court for the Eastern

District of New York 4

3 the Commission lacks jurisdiction over

certain conduct occurring in Bangladesh under the provisions of the

Foreign Sovereign Immunities Act of 1976 and 4 the claim is barred

by the statute oflimitations

This case was set down for hearing to begin on September 28 1981

The parties did not submit a written stipulation of facts However

some documents were stipulated and others w re placed in the record

through various witnesses The documentary exhibits are referred to

throughout this discussion as follows

Stipulated Exhibit SE

Complainant s Exhibit C

Respondent s Exhibit R

By Order served August 12 1982 and on Motion of the Complain

ant the record was reopened to admit the statement ofthe Complain

ant s principal witness Pertinent excerpts from that testimony are set

forth and commented on in Note 12 infra

2

As will become evident from this decision Complainant has in effect amended the Complaint

both as to the specific nature of the alleged offenses and the amount of reparations and damages

claimed

3

See OrderTo Show Cause served August 31 1981

4

There are several federal District Court casespending orrecently concJuded which are related to

this proceeding They will be discussed as is necessary throughout this decision It should be noted

that these cases one of which involves acriminal information and indictment have caused some delay

in the disposition of the instant case

25 F M C
I

402 FEDERAL MARITIME COMMISSION

FINDINGS OF FACT

1 The Complainant CEC is a corporation organized and existing

under the laws of the State of New York whose principal office is

located at 1975 Linden Boulevard Elmont Nassau County New York

It is alicensed ocean freight forwarder and is subject to the rules and

regulations ofthe Federal Maritime Commission

2 The Respondent Intermodal is an NVOCC Non Vessel Operating

Common Carrier

3 The Respondent BSC is a common carrier as defined in the

Shipping Act 1916 is a foreign corporation and is the national flag

carrier ofthe government of Bangladesh Its principal offices are locat

ed at Dacca People s Republic ofBangladesh

4 Peralta is the designated general agent of BSC in the United

States whose principal office is located at 25 Broadway New York

New York

5 In accordance with the Foreign Assistance Act of 1961 fi

as

amended the Administrator ofthe Agency for International Develop

ment AID entered into a loan agreement with the People s Republic

of Bangladesh the purpose of which was to supply financing for part

of the cost of a fertilizer plant in Bangladesh 6

6 Pursuant to the Letter of Commitment dated May 25 J977 AID

agreed to provide loan funds in the sum of 7 000 000 00 to the People s

Republic ofBangladesh structured as follows

Ashuganj Fertilizer and Chemical Co Inc AFCC acting

on behalf of Bangladesh established an account at the Pubali

Bank at Dacca in Bangladesh Through the Pubali Bank

AFCC arranged for letters of credit to be issued by the Manu

facturers Hanover Trust Company MHT in favor of Foster

Wheeler Limited FWL FWL is a foreign corporation based

in Reading England which was the general contractor in

charge of designing supervising and erecting the fertilizer

plant in Bangladesh

The first letter of credit No 727 000 was opened in favor

of FWL on August 15 1977 Pursuant to the letter of commit

ment FWL was given the option to establish subsidiary letters

of credit Acting with MHT FWL establishec a document

called transferred confirmed irrevocable straight credit No

727000E in favor ofCEC

CEC had been selected by FWL and approved by AFCC as

the freight forwarder for the fertilizer plant prOject for all

goods originating in the United States It was part of CECs

duties to receive goods which had been manufactured for the

project in the United States to issue warehouse receipts to the

See 22 US C 2151 et leg

SB62

2S F MC
CARGO EXPORT CORPORATION V INTERMODAL 403

CONTAINER SERVICE LTD ET AL

suppliers and fabricators and to generally handle store and

call forward the supplies at the request of FWL and to ar

range for shipment of those supplies to the project by either

air orocean carrier

In order to use the letter of credit shipment to any Bangla

desh P O E Port ofEntry was to be made on vessels bearing

the flag of a country included in AID geographic code 941

Ex 62 63 64 Tr 117 119

7 In September of 1978 CEC received information from FWL

indicating that a particular shipment oftrucks was urgently needed and

undertook to arrange the shipment Ex C l C 2 C 3 Tr 118120 126

8 After receiving the order numbers of the trucks from FWL CEC

learned that they were being sold to FWL by Gateway Overseas Inc

Gateway and CEC s Secretary Treasurer called Gateway and se

cured the dimensions of the trucks and began looking for a suitable

carrier Tr 127 128

9 CEC checked the sailing dates of various carriers and in Septem

ber of 1978 its Secretary Treasurer called Peralta 7 He gave them the

cubic measurement and weight of the shipment and received a rate

from Peralta According to the Secretary Treasurer the base rate was

121 50 a 4 Suez charge plus a 25 50 bunker charge for a total of

15186 He then applied this rate to the measurement tons of 1 440 3

which gave him 218 723 95 to which he added heavy lift charges

which increased the total charge to 238 528 73 Ex SE 6 Tr 134

135 8

10 After talking with Peralta CEC s Secretary Treasurer contacted

Intermodal and orally gave them the contract of carriage for an all

inclusive rate of 150 a ton Tr 137 138

11 CEC then prepared dock receipts for the trucks and sent them to

Phoenix Manufacturing which was the truck fabricator The dock

receipts contained the following pertinent information

10 Dump Trucks 1528 cuft EA 18 500 Ibs EA

10 A Frame Trucks 2072 cuft EA 17 000 Ibs EA

I Fuel Bowser 2069 cuft 16 600 Ibs

10 Flat Bed Trailers 1864 cuft EA 14 900 Ibs EA

I Ambulance 923 cuft 4 500 Ibs

Ex SE 4 Tr 139

J Complainant s witness testified he originally contacted Gateway between September 18 and Sep

tember 22 1978 and then caned Peralta shortly thereafter This seemsunlikely since Intennodal called

Peralta on September 13 1978 after being contacted by CEC In any event the time sequence is not

determinative of theissue involved

8

The computation mistakenly did not include a4 add on for ChaIna Tr 136

25 F MC
404 FEDERAL MARITIME COMMISSION

12 On September 13 1978 Intermodal by its Executive Vice Presi

dent telephoned Peralta and spoke with the booking clerk in charge of

the Bangladesh trade An all inclusive rate of 90 per 2240 Ibs or 40

cu ft from the United States to Chalna Bangladesh was quoted to

Intermodal for transportation of the equipment described in paragraph

11 above On September 20 1978 Peralta confirmed the quoted book

ing in writing on behalf of BSC Ex R 7 Tr 630 632 640 641

13 As ofSeptember 20 1978 and prior thereto BSC had a tariff on

file with the Commission entitled Bangladesh National Line India

Pakistan Bangladesh Ceylon and Burma Freight Tariff No I F MC

No I From U S Atlantic and Gulf Ports To India Pakistan Bangla

desh Ceylon and Burma Ports Page 123 of the tariff was in pertinent

part as follows 9

COM

MODITY

CODE

COMMODITY

DESCRIPTION AND

PACKAOINO

AUTOMOBILES S U

K D OR C K D

Busses

Chassis

P88lIenger C9rs

Trucks including

dump N OS

Boxed

Unboxed Rate

to be assessed

on overall

measurements

less bumpers

AUTOMOBILE

PARTS

and Materials for

Assembly N O S

RATE

BASIS

BOMBAY

CALCUT

TA

ITEM

NO

C0

LOMBO

KARA

CHI

85

65 75 79 00 72 75

82 00 98 00 90 50

65 75 79 00 72 50

Page 242 was almost blank except for the following entries

v

VALVES N OS

VANADIUM

PENTOXIDE

Ex 8 9

110 00 13125 12125 1560

w 70 75 84 50 78 00 1565

25 FMC
CARGO EXPORT CORPORATION V INTERMODAL 405

CONTAINER SERVICE LTD ET AL

Page 239 was in pertinent part as follows

COM COMMODITY RATE BOMBAY CO KARA ITEM

MODITY DESCRIPTION AND CALCUT

CODE PACKAGING

BASIS

TA

LOMBO CHI NO

TRUCKS

Equipped with

Mechanical

Equipment or

Devices N OS 121 50 145 00 121 50 1550

Packed orUnpacked

Fork Lift

Tank without

special equipment

other than pump

Boxed 7275 87 25 72 75

14 When Peralta booked the truck shipment it knew that it would

have to file a new tariff incorporating the 90 00 all inclusive rate It

waited a period of time to insure that the booking would not be

cancelled and then on October 10 1978 filed a new corrected tariff

page 242 as follows 10

I R VEHICLES

TO CHALNA ONLY

Minimum 32 units viz 90 00

ALL

INCLUSIVE

Lbs Cu Ft

I Fuel Truck

I Ambulance

10 A Frame Trucks ea

lO Dump Trucks ea

lO Flatbed Trailers ea

16600

4500

17000

17000

14900

2069

923

2072

1526

1864

Expires November 13 1978

15 On October 17 1978 the truck shipment began from Philadel

phia Pennsylvania aboard the Banglar Maan Ex SE l1

10 The effective date of thetariff was no later than October 16 1978

25 F M C
406 FEDERAL MARITIME COMMISSION

16 Peralta issued its own bill of lading for the truck shipment The

original waspunch stamped non negotiable Ex C 12 C25

17 On October 17 1978 Intermodal issued its own bill oflading for

the truck equipment which showed prepaid freight charges of

216 045 00 Ex C 4

18 On October 23 1978 CEC presented a sight draft to MHT

drawn on the letter of credit described above together with documen

tation including the Intermodal bill of lading CEC received

216 200 00 from MHT Ex C4 C 17

19 Later on November 6 1978 CEC paid Intermodal 216 045 00

after receiving a bill from Intermodal for that amount Ex C 18 Tr

290

20 Also on November 6 1978 Intermodal by check paid CEC

21 604 50 10 percent in brokerage fees Had CEC hired the carrier

B8C directly its fee could only have been 5 301 13 2 12 percent l1

Tr 305

21 By telex dated November IS 1978 Peralta advised B8C not to

release the cargo to the consignee since it was holding the original bill

of lading for non payment of the ocean freight in the amount of

129 627 00 Ex 8E l3

22 By letter dated December 8 1978 Intermodal requested that the

cargo be remeasured saying it should be 53 103 cft and not 57 612 cft

The Peralta employee responsible for the truck shipment believed Inter

modal was stalling on payment for the shipments by requesting the

remeasurement Peralta then sent a letter to Intermodal asking for

payment ofthe amount not in dispute Ultimately Peralta agreed to the

lesser measurement and sent Intermodal a bill of lading showing re

duced freight charges totalling 1l9 526 75 and requesting payment

Exs 8E 16 through 8E 21 8E 66 67

23 In December of 1978 and through January of 1979 there was

correspondence between Peralta B8C and Intermodal regarding the

latter s failure to pay the ocean freight and the fact that the cargo was

not being released During that period BSC directed Peralta to contact

CEC and the attorney for Intermodal suggested a quick solution to

the problem Exs 8E 22 through 8E 32 8E 68

24 In addition beginning on December 30 1978 B8C began a series

of correspondence with FWL as well as Peralta in which it sought

payment of the ocean freight on the truck shipment The correspond

11 The cancelled check evidencina payment was not available in CEC l records Its witness testi

fied We don t

keep copies IIgoes to the accounting department and they depoait it Also will

be noted and discUBBed morefully later acriminal information wai filed in the United States District

Court Southern District of New York charging CEC s principal witness with criminal conspiracy

The information among other charges alleges the witness personally received 15 123 15 from Inler

modal on November 6 1978 with respect 10 the truck shipment A plea of guilty to the information

has been entered

25 FMC
CARGO EXPORT CORPORATION V INTERMODAL 407

CONTAINER SERVICE LTD ET AL

ence indicates that BSC wished to avoid legal proceedings It requested

that Peralta attempt to collect the freight charges without legal action

but directed it to inform FWL that government ministry action would

be taken Nevertheless Peralta did threaten legal action against FWL

and ultimately BSC sought to press its claim by seizing any property it

could find belonging to FWL in Bangladesh Finally FWLs reputation

and future prospects were endangered and it paid the freight charges

to BSC Exs SE 35 through SE 39

25 In the meantime Intermodal and CEC began corresponding with

respect to Intermodal s failure to pay BSC By letter dated February

14 1979 Intermodals President informed CEC s President that due to

certain described management misjudgments Intermodal did not

have the cash to pay BSC As a result CEC corresponded with FWL

In that correspondence FWL asked why Intermodal was used at all

and ultimately demanded that CEC pay BSC directly SE 40 through

SE 43 SE 45 46 SE 48 through SE 51 SE 53 through SE 58 C 19

through C 23

26 On April 27 1979 CEC filed suit against Intermodal in the

Supreme Court ofthe State of New York County of New York The

Complaint contains the following pertinent provisions

THRID sic Plaintiff entered into an agreement with the

defendant whereby the defendant would containerize and de

liver certain cargo for plaintiff and plaintiffs client Foster

Wheeler Ltd of Bangledesh sic from the point of shipment

to the point of destination It was further agreed that upon

delivery of the cargo the defendant was to receive from the

plaintiff the sum of 216045 00 from which the defendant was

to pay the carrier vessel the freight charge oftransportation in

the amount of 119 526 75

Exs R l

through R 6

27 Sometime in 1980 the United States of America brought suit

against CEC in the United States District Court Eastern District of

New York CV 80 0670 In that suit the judge granted the Plaintiffs

Motion for Summary Judgment by Order dated March 31 1981 The

pertinent parts ofthe Order are as follows

This is an action brought by the United States to recover

216 045 paid by the Agency for International Development

AID to Cargo Export Corporation CEC pursuant to

a Supplier s Certificate and Agreement the Form 282 Agree

ment entered into to finance CEC s shipment of cargo to

Bangladesh AID seeks refund of its payment for the ocean

freight charges alleging that CEC breached the Form 282

Agreement by transporting the cargo on a foreign flag vessel

that was ineligible for AID financing and by improperly certi

fying that the vessel used was a United States flag vessel

25 F MC
408 FEDERAL MARITIME COMMISSION

The United States has moved for summary judgment pursuant

to Rule S6 a of the Federal Rules ofCivil Procedure For the

reasons set frth below the motion is granted

On October 23 1978 CEC executed a Form 282 Agreement

with A lD which through its incorporation of Letter of

Credit 727000 E dated November 4 1977 and issued by

Manufacturers Hanover Trust Company in favor of CEC

enabled CEC to draw down sums to cover freight charges

The Form 282 Agreement specified inter alia that shipment

was to be made in accordlnce with the terms ofthe Letterof

Credit The Letter of Credit specifically stated that shipment

was to be made on vessels bearing the flag of a country

included in AlD Geographic Code 941 and flag ships of a

cooperating country which the parties agree in this case

was Bangladesh were expressly excluded from the Code 941

list Hence under the terms of the Letter of Credit the Ban

gladesh flag vessel 5S BANGLAR MANN on which CEC

transported the cargo here at issue to Bangladesh was ineligi

ble for AID financing CEC argues that because Code 941

was amended effective June IS 1978 before the Form 282

Agreement was signed to permit use of vessels ofcooperating

country registry the shipment was eligible for A ID fmanc

ing under the terms ofthe Letter ofCredit However plaintiff has established without genuine dispute from defendant that

the amendment did not retroactively modify contractual re

quirements under already existing letters of credit including

the November 4 1977 Letter of Credit at issue here Indeed

in letters of August 8 1979 and October 22 1979 CEC

acknowledged that it was not entitled to AlD financing for

this shipment The parties agree that CEC might have ob

tained AID funds by requesting A ID s prior written

waiver of the Code 941 restrictions CEC however failed to

make such a request In fact in its Form 282 Agreement CEC

represented that the ship to be used was a United States flag

ship and thus eligible for A ID fmancing not that it was to

be a ship of a

cooperating country made eligible for fmancing

under the amendment

Accordingly the record requires a conclusion that CEC

breached the Form 282 Agreement in two respects first by its

use of a Bangladesh flag vessel a vessel expressly ineligible for

A ID fmancing and second by improperly certifying that

the vessel was a United States flag ship By breaching the

terms ofthe Form 282 Agreement and ofthe Letter of Credit

incorporated therein CEC wrongfully obtained AlD financ

ing for this shipment and must under the case law and con

tract make appropriate refund to AID See United States v

Framen Steel Supply Co 43S F Supp 681 68S S D N Y

25 FMC
CARGO EXPORT CORPORATION V INTERMODAL 409

CONTAINER SERVICE LTD ET AL

1977 United States v Emons Industries Inc 406 F Supp 355

358 S D N Y 1976

28 In June of 1982 the United States Attorney for the Southern

District of New York filed a criminal felony Information entitled

United States v Munsch 82 Cr 0461 The Information charges CEC s

principal witness with wilIful conspiracy with CEC s President and a

former employee to defraud FWL the World Bank and AID by

making false fictitious and fraudulent claims to AID and then with

concealing and covering up material facts by trick scheme and device

The more pertinent portions ofthe Information are as follows

10 From in or about July 1975 up to and including December

1979 in the Southern District of New York and elsewhere

PAUL MUNSCH the defendant along with Eugene Pagano

and Armand Ventura who are named herein as coconspirators

but not as defendants unlawfully wilfully and knowingly did

combine conspire confederate and agree together and with

other persons to the United States Attorney known and un

known to defraud FWL the World Bank and the United

States and its agencies thereof to wit the Agency for Interna

tional Development AID and to commit offenses against

the United States to wit violations ofTitle 18 United States

Code Sections 287 1001 1341 and 1343

14 Among the means which the defendant and his co con

spirators would and did employ to effectuate and carry out the

conspiracy were the following

a On four occasions CEC solicited the services of a

NVOCC to act as a middleman in order to inflate the cost

ofthe ocean freight charged FWL and AID

b On these occasions CEC would agree with the NVOCC

on an ocean freight rate to charge FWL and AID which

was significantly in excess of the ocean freight rate actually

charged by the steamship line that carried the cargo

c Thereafter CEC would bilI AID and on one occasion

the World Bank at the inflated high rate without disclosing

the actual lower rate charged by the steamship line for the

shipment

d The defendant and his co conspirators would then split

the substantial difference between the high rates charged

AID and the low rates charged by the steamship line with

the NVOCC without disclosing among other things their

excessive gain to FWL or AID

e The defendant and his co conspirators employed their

scheme on the first three cargoes they handled for the

Bangladash sic Project The first cargo was shipped on or

25 F M C
410 FEDERAL MARITIME COMMISSION

about November 17 1977 and consisted of a bulky rock

crushing and cement batching plant rock crusher

Rather than offer the rock crusher to an ocean carrier of the

Conference to ship as required by the Contract the defend

ant and his co conspirators instead used a NVOCC to ship

the rock crusher on the excluded BSC line In this case

CEC billed the World Bank 158 039 12 for ocean freight

although BSC only charged 106 267 69 to actually ship the

goods for an undisclosed 51 708 profit to the defendant

and his co conspirators which was split with the NVOCC

and others

0 On the second and third cargoes of some appliances

which were shipped together from Los Angeles on a Scin

dia ship CEC billed AID 32 000 llnd 11 578 62 respec

tively although Scindia charged only 23 857 79 and

10 480 99 to ship the goods for an undisclosed total profit

of 9 239 84 to the defendant and his co conspirators which

was split with the NVOCC and others

g CEC billed and received from AID 67 143 37 for costs

incurred for handling storing and heavy lifting the rock

crusher before the shipment whereas in fact the actual cost

was approximately 50 000

h From in or about February 1978 up to and including

August 1978 AID was billed 588 926 26 for ocean freight

on 32 cargoes shipped on five Waterman ships For these 32

cargoes CEC invoiced AID at a rate approximately 10

higher than was charged by Waterman In each instance

CEC received an invoice from Waterman for the 10

project discount rate but nevertheless billed AID at the

higher non discounted rate The overcharges to AID for

these claims exceeded 50 000

i In or about October 1978 CEC handled a large ship

ment of 31 trucks and an ambulance the truck shipment

to the Bangladesh Project Again rather than offer or book

the truck shipment with the Conference as required by the

Contract CEC again used a NVOCC to ship the tr cks on

the excluded BSC line For this truck shipment CEC billed

AID 216 045 for ocean freight but only had to pay BSC

119 526 75 to ship the trucks for an undisclosed 96 518

profit which was split with the NVOCC

III III III

u In or about September 1978 CEC agreed with a

NVOCC to book the truck shipment from the United States

to Bangladesh

2S F MC
CARGO EXPORT CORPORATION V INTERMODAL 411

CONTAINER SERVICE LTD ET AL

V On or about September 20 1978 a NVOCC booked the

truck shipment with BSC through Peralta

w On or about October 17 1978 a NVOCC issued a bill

oflading for the truck shipment rated at 216 045

x On or about October 23 1978 CEC submitted a claim to

AID through Manufacturers Hanover Trust Company for

216 045 for the ocean freight charges on the truck ship

ment

y On or about October 23 1978 CEC submitted an AID

Form 282 to AID through Manufacturers Hanover Trust

Company falsely certifying among other things that the

ocean freight charges for the truck shipment were 216 045

and that the ocean carrier was a United States flag vessel

z On or about October 26 1978 Manufacturers Hanover

Trust Company mailed a 216 045 check to CEC as pay

ment for the truck shipment

aa On or about November 6 1978 a NVOCC issued a

check to CEC for 21 604 50 and a check to defendant

PAUL MUNSCH for 15 123 15 as part ofthe profit on the

truck shipment

Ex R 13

29 On June 24 1982 Mr Munsch pleaded guilty to the criminal

information Some of the more pertinent portions of it are as follows

THE DEFENDANT In 1975 Cargo Export was designat

ed as an exclusive freight forwarder to book ocean shipments

from the United States to an AID finance project in Bangla

desh

THE COURT Excuse me This is being taken down by the

court reporter So you will have to read it a little more slowly

and distinctly

THE DEFENDANT Yes sir Eugene Pagano was presi

dent I was secretary treasurer Armand Ventura was director

ofmarketing in charge ofthe Bangladesh project

Eugene Pagano Armand Ventura and I Paul Munsch

agreed to submit false certifications to the Agency for Interna

tional Development showing high ocean freight rates to be

paid to Cargo Export Corporation by the agency when in fact

the true ocean freight rates were much lower We did this by

using an NVOCC as a middle We split the difference between

the higher rates and the lower rates between ourselves and

others

There were three cargoes shipped to Bangladesh by Cargo

Export that were falsely certified to the agency and in one

case the World Bank by Cargo Export in the fall of 1977

25 F MC
412 FEDERAL MARITIME COMMISSION

One cargo of a rock crusher aboard a Bangladesh vessel we

billed 158 000 but the actual cost was only 106 000 Two

cargoes of house appliances that were shipped on an Indian

vessel we billed at 32 000 and 11 000 but the actual cost was

only 24 000 and 10 000 respectively

When we billed we had to complete government forms

which were falsely certified Eugene Pagano and I Paul

Munsch in the fall of 1977 falsely certified to the agency that

the handling cost for the rock crusher that we had shipped to

Bangladesh aboard a Bangladesh vessel was 67 000 when in

fact the true cost was approximately 50 000

Eugene Pagano and I Paul Munsch for a period of Febru

ary 1978 through the fall of 1978 shipped 32 cargoes aboard

five vessels to Bangladesh for which we falsely certified to the

agency 32 times that the ocean freight was 10 percent higher

than the true cost which amounted to 52 000

During the course of the AID investigation I created ten

credit memos which Gene Pagano had knowledge of in order

to balance the prior billings to AID for the cargo shipped on

Waterman vessels

Eugene and I Paul Munsch in the fall of 1978 shipped a

cargo of trucks to Bangladesh aboard a Bangladesh vessel for

which we falsely certified to the agency that the ocean freight

was 216 000 when I knew the ocean freight was much lower

The difference was split between ourselves and others

It was also falsely certified to the agency that the vessels

carrying trucks was aU S flag vessel

Q And you and the other officers ofCBC namely Eugene

Pagano and Armand Ventura combined and conspired and

agreed together that you would defraud AID and Foster

Wheeler in connection with your participation as the exclusive

freight forwarder for this project

A Yes sir

Q And it was part of that conspiracy that you would

present claims for payment for expenses in connection with

freight shipments which you knew were in part false and

fraudulent

A Yes sir

Q And in order to do that you solicited the services of a

nonvessel operating common carrier or NVOCC to act as a

middleman in order to inflate the cost

A Yes sir

Q And on those occasions you agreed with the NVOCC to

charge Foster Wheeler and AID a freight rate which was

substantially in excess of the freight rate actually charged

A Yes sir

2S F MC
CARGO EXPORT CORPORATION V INTERMODAL 413

CONTAINER SERVICE LTD ET AL

Q And thereafter you billed AID at the inflated rate with

out disclosing the actual lower rate

A Yes sir

Q And on another occasion in about October 1978 in

connection with a shipment of 31 trucks and an ambulance

you billed 216 000 for ocean freight but only paid out

119 000 for an undisclosed profit ofabout 96 500

A Yes sir

Q How did these overcharges come to light

A WelI on the 216 000 shipment I knew what the

NVOCC was going to pay On the first three I did not know

But to my knowledge I know that they work on a 40 per

cent approximately 40 percent markup

Q Which you didn t

realIy have to pay and you split that

markup with them

A Yes we got a percentage ofthat

Q So CEC received substantial amounts

A Yes

Q And you knew they were receiving substantial amounts

on alI these overcharges

A Yes If you compare it to the brokerage that the confer

ence carriers pay yes we did receive much more

Q Were you a stockholder in CEC

A Yes sir

Q And did you receive additional dividends How did this

money appear Did it appear on your books or was it off your

books

A No it wasalI deposited in the corporation

Q And you paid corporate income taxes on it

A Ibelieve so My accountant does alI that sir

Q But you received increased dividends as a result of this

A I

personalIy

Q Yes

A Yes WelI we took we got some personal money out of

it sir

Q And you knew that this was a fraud on the Agency for

International Development

A Yes sir

Q And you knew that that was an agency operating under

the auspices ofthe United States Department ofState

A Yes sir

Q Have you gone over with your attorney the complete

information alI of the charges made in it including alI of the

overt acts that are alIeged

A Yes sir

25 F M C
414 FEDERAL MARITIME COMMISSION

Q Are all ofthem all ofthose charges accurate

A Yes sir

I

i

THE COURT The court finds that the plea is knowledgea

ble and voluntary and that it has a basis in fact

Mr Munsch how do you plead to the information guilty or

not guilty

THE DEFENDANT Guilty your Honor

Ex R l4

30 In June of 1982 the United States Attorney for the Southern

District of New York indicted the President of CEC and one of its

former employees in a case styled United Stotes v Pagano et al 82 Cr

0433 The indictment contains the same charges as are contained in the

criminal Information discussed in paragraphs 28 and 29 above Mr

Pagano has pleaded not guilty to the charges Ex R lS

ULTIMATE FINDINGS OF FACT

31 The Complainant has failed in its burden to show that co re

spondents asc and Peralta violated the Shipping Act in any substan

tive manner

32 Even if the facts were sufficient to show a substantive violation

the record is devoid of any evidence which establishes that the Com

plainant suffered damages and is entitled to reparations under section 22

as a result ofthose damages

33 Any damages suffered by the Complainant were due to Intermo

dal s the NVOCC illegal actions and especially its failure to pay the

freight charges to asc Further the Complainant is itself at fault in

that it knew or should have known of what was transpiring both with

respect to the filing of a new tariff and the failure of Intermodal to pay

the freight charges

34 The record establishes that the Complainant through one or

more of its officers conspired to defraud the United States AID

regarding the truck shipment involved here

3S The facts of record do not warrant any judgment in favor of the

Complainant either as to co respondents asc and Peralta or as to

Intermodal While the latter did not appear in the proceeding and was

obviously engaged in illegal conduct respecting the truck shipment it is

clear that the Complainant took part in that conduct Also it is clear

that any damages the Complainant may have suffered as a result of

Intermodal s actions were not the result of violations of the Shipping

Act but rather resulted from Intermodal s failure to complete the

illegal scheme it was engaged in with CEC i e it did not pay the

actual shipping charges after splitting the excess charges received from

AID with CEC

25 FMC
CARGO EXPORT CORPORATION V INTERMODAL 415

CONTAINER SERVICE LTD ET AL

DISCUSSION AND CONCLUSIONS

As has been noted the Respondent has filed a Motion to Dismiss this

proceeding based on various factors They include argument regarding

the absence ofindispensable parties prematurity jurisdiction and immu

nity and untimeliness We have concluded that the Commission does

have jurisdiction to render a decision on the merits in this proceeding

The Initial Decision on the merits makes any further ruling on the

Respondent s dismissal motion unnecessary and therefore no such

ruling will be forthcoming herein

Section 22 of the Shipping Act 1916 provides in pertinent part

SEe 22 a That any person may file with the board a sworn

complaint setting forth any violation ofthis Act by a common

carrier by water or other person subject to this Act and

asking reparation for the injury if any caused thereby

The board if the complaint is filed within two years after the

cause ofaction accrued may direct the payment on or before

a day named of full reparation to the complainant for the

injury caused by such violation

Case law has established certain well settled rules and principals In

reparation proceedings the claimant has the burden ofestablishing by a

preponderance of the evidence that the respondent exacted charges in

excess ofthose lawfully applicable Madeplac SA Industria de Madeiras

v L Figuriedo Navegacao SA a k a Frota Amazonica SA Docket 75

45 Adoption of Initial Decision dated 4 12 78 page 3 16 F Me 87

afrd 21 F Me214 1978 Further even if the rate under investigation

is a new rate in a complaint proceeding the burden of proof is upon

the complainant Hawaii Meat Co Ltd v Matson Navigation Co 21

FMC 43 1978 See also West GulfMaritime Assn v Portof Houston

Authority 21 FMC 244 1978 afrd 610 F2d 1001 cert denied 449

U S 822

As to adherence to the tariff rate in the light of violations claimed

under section 22 it is unlawful to charge or demand or collect or

receive a

greater or less different compensation for transportation of

property than the rates fares and or charges which are specified in

tariffs filed with the Commission and in effect on the date of the

shipment Aluminum Products of Puerto Rico Inc v Trans Caribbean

Motor Transport Inc 5 F M B 1 1956 Corn Products Co v Hamburg

Amerika Lines 10 F Me388 1966 The rate of the carrier as filed in

the tariff is the only lawful charge Ocean Freight Consultants Inc v

Bank Line Ltd 9 F M C 211 1966 Further with respect to tariff

rules and regulations there is a presumption that the shipper s knowl

edge of the lawful rate is conclusively presumed Kraft Foods v Moore

McCormack Lines Inc 17 F M C 320 323 note 4 1974 citing 227

U S 639 Finally on this point the legality ofthe actions of a common

carrier by water can only be judged against the rates and charges

25 F M C
416 FEDERAL MARITIME COMMISSION

which are specified in its tariffs on file with the Commission and duly

published and in effect at that time A shipper and carrier are free to

negotiate whatever terms they may wish Until those understandings

are fixed as specified by the Shipping Act the Federal Maritime Com

mission is not involved Sidney Williams Co v Maersk Line 20 F M C

324 l977

Finally as to reparations claimed under section 22 it is well settled

that while any person may file a complaint reparation may be

awarded only to a complainant who has shown that it was injured by a

violation of the statute Williams Clarke Co Inc v Sea Land Service

Inc Order on Remand S D No 489 dated 11129 77 Section 22 does

not require the award ofreparations even when a violation has been

found The language ofthe section is that the Commission may direct

the payment of full reparation for injury caused by the violation The

language is permissive not mandatory and the mere fact that a viola

tion of the Shipping Act has occurred does not compel a grant of

reparations Philip R Consolo v Flota Mercante Grancolumbiana 7

F MC 635 1963 Parsons Whittemore Inc v Johnson Line et aI 7

F MC 731 1963 Further no principle of equity or justice authorizes

the Commission to base an award of reparation to any party upon that

party s prospective reliance upon the unlawful act of another LAlu

minum Francois v American Export Lines Inc 8 F MC 87 1964 and

finally businessmen engaged in the import and export trade are not

innocent but rather negligent when they make no effort to determine

and follow through on the cost of shipping services they intend to

utilize Unilateral assumptions by shippers unrelated to amisleading act

of a carrier will not support equitable relief A shipper is charged with

knowledge of the correct rate and the only lawful rate is the one on

file with the Commission Bernard Bauman Corp v American Export

Lines Inc 8 F MC 155 1964 citing 262 F 2d 474

Despite the holdings in the above cited cases the Complainant here

would have the Commission determine that BSC and Peralta have

violated the Shipping Act as well as the rules of this Commission such

that the Respondents should be held in damages in an amount equal to

213 429 40 In support ofits contention that the Respondents demand

ed and collected untariffed rates the Complainant notes that 1 the

tariff was not filed until October 16 1978 2 the symbols I R were

used erroneously 3 the tariff correction was rued on the wrong page

at least with respect to those trucks which were specially equipped 4

the corrected tariff continued the wrong cubic measurement of 57 612

cft instead of 53 103 cft The Complainant asserts that BSC and Per

alta virtually ignored its filed tariff rates offering contracts ofcarriage

at whatever the market would bear It states that BSC and Peralta s

practice of filing tariff changes within one day of sailing was not

calculated to give notice as required by the Commission but appears to

25 FMC
CARGO EXPORT CORPORATION V INTERMODAL 417

CONTAINER SERVICE LTD ETAL

have been motivated by the Responent s sic attempt to disguise its

practice of operating outside of its filed tariffs The Complainant

concludes that BSC and Peralta s actions resulted in an unreasonable

preference in favor of Intermodal against CEC and amounted to

unreasonable prejudice and unjust discrimination against the Complain

ant and that BSC and Peralta collected untariffed rates in violation of

the rules of the Commission Generally in support of its views CEC

cites First International Development Corporation v Shipper s Overseas

Services Inc 23 F MC 47 1980 Roco Worldwide Inc v Constella

tion Navigation 660 F 2d 992 4th Cir 1981 and Trans Pacific Freight

Conference of Japan Korea v FMC 650 F 2d 1235 CA DC 1980

On the basis of BSC and Peralta s dealings with Intermodal the

Complainant argues that the Respondent BSC Peralta engaged in un

lawful practices within the boundaries of the United States in attempt

ing to secure collection of its untariffed freight charges It seems to

consider BSC and Peralta guilty of wrongdoing because they did not

notify CEC when Intermodal defaulted and cites a debt owed by

Intermodal to BSC and Peralta on a

previous shipment as a

possible

reason for BSC and Peralta s actions CEC then concludes that the

contractual liabilities created bwteeen sic the Respondent BSC Per

aHa and the Respondent Intermodal were such that Intermodal alone

was responsible for the payment offreight charges It then argues that

BSC and Peralta coerced Complainant s principal to pay for freight

charges in the sum of 119 516 75 for which it was not obligated to

pay CEC finally alleges that BSC and Peralta violated sections 817

and 815 ofthe Shipping Act

The Complainant also alleges that BSC and Peralta s actions outside

the United States are subject to the jurisdiction of this Commission

and that such actions constitute unreasonable practice in violation of

the Shipping Act as well as the Hamburg Convention

Finally the Complainant computes the reparations due it totalling

213 429 40 asserting that 93 902 65 is the difference between the

higher tariff rate and the lower special rate It states the remaining

119 526 75 is due to it as reparations penalizing the Respondent BSC

Peralta for unlawful practices within and without the United States in

collecting 119 526 75 freight charges from Complainant s ultimate user

and principa1

In answer to the Complainant s

arguments BSC and Peralta state

If this claim has any merit at all it lies only against the

defaulting lead co respondent Intermodal Container Service

Ltd Intermodal As to all other respondents it is an artifi

cial claim based solely on their solvency At most Complain

ant has proven a harmless clerical error by co respondent

Peralta Shipping Corporation Peralta and b enforcement

of a written security agreement in accordance with its terms

25 F M C
418 FEDERAL MARITIME COMMISSION

and applicable law by the other co respondent Bangladesh

Shipping Corporation Bangladesh Such proof does not

justify the windfall bonanza sought from these litigating re

spondents

The Respondents point out that the Complainant s use of Intermodal

allowed CBC to receive a 400 percent higher commission than it would

otherwise have received They pointed out that their dealings with

Intermodal were documented and not oral as was Intermodal s agree

ment with CBC They note that Intermodal was unavailable to give its

version of the agreement and that all we have is the word of Com

plainant s operating officer

As to the case law cited by the Complainant the Respondents note

that International Development Corp v Ship sOverseas Services Inc

supra has been reversed on jurisdictional grounds in Ship s Overseas

Services Inc v Federal Maritime Commission 670 F 2d 304 D C Cir

1984 Even further they differentiate the facts ofthe above case from

those present in the instant case

As to the tariff violations cited by the Complainant the Respondent

Peralta asserts there were no violations of the Shipping Act It argues

that there was an offer of business from Intermodal with whom Peralta

negotiated a commercially reasonable rate that it prepared the new

tariff upon the specifications and measurements given it by Intermodal

that the tariff was on file before the vessel sailed and that the freight

collected was in accordance with the amended tariff It states that at

most the Complainant has raised a quibble over a typographical error

in a citation the use of two code letters in a tariff instead of one and

the choice of a page on which a tariff amendment appears matters

which if proven never harmed Complainant

On the basis of the facts presented in this case and the case law

applicable to those facts we must hold that the Complainant is not

entitled to relief under section 22 of the Shipping Act First of all even

if we were to accept all of the Complainant s evidence as fact and we

do not it still would have failed in its burden We agree with the

Respondent that Peralta s dealings with Intermodal which was hired by

the Complainant to handle the shipment were entirely proper They in

effect negotiated a special rate for the truck equipment which was a

lower rate than that previously on file and the new rate was filed prior

to the date of shipment The Complainant s assertion that the flling

was not calculated to give notice is an entirely gratuitous statement

unsupported by any evidence of record Indeed if the shipment was as

large and as important to CBC as its principal witness states it was it is

inconceivable that it did not know or should not reasonably have

known of the new tariff and the new rate Further in light of state

ments made by CBC s principal witness in pleading guilty to the crimi

nal conspiracy Information such an argument is frivolous The witness

2S FMC
CARGO EXPORT CORPORATION V INTERMODAL 419

CONTAINER SERVICE LTD ET AL

clearly stated that CEC and Intermodal knew what the actual freight

charges were Indeed from them they computed their respective shares

of the excess they illegally obtained from AID As to the use of the

initials Iand R the tariff page on which the new rate wasfiled and the

original error in measurement as well as similar matters these are

technical errors as the Complainant itself admits in its Post Trial

Memorandum of Law at page 27 Some occurred because of Intermo

dals actions and not those of Peralta More importantly if CEC had

exercised the care and diligence it should have it would have possessed

the knowledge the law presumes it to have Kraft Foods and Bernard

Bauman supra

With regard to BSC and Peralta s actions in attempting to collect the

freight rate after Intermodal defaulted we do not believe they violate

any section of the Shipping Act When BSC did not receive the freight

charges due it contacted the notify party FWL as set forth on the

bill oflading It asked for payment and waited a reasonable time When

payment was not forthcoming it exerted pressure through its govern

ment and otherwise and finally secured the funds due it Whether it did

so under a

separate agreement as it alleges or under the bill of lading

CEC has no cause to complain It seems to argue that once it paid

Intermodal its responsibility ceased but this is completely untenable

Intermodal was working for CEC and or the shipper or consignee not

BSC or Peralta There was no duty on BSC and Peralta to monitor

what went on between Intermodal and CEC They carried the goods

and sought the payment due them from the shipper or consignee notify

party That Intermodal embezzled or misappropriated the funds given

them by CEC certainly cannot be imputed to BSC or Peralta and be

used by CEC as a basis for a reparations claim against BSC and Peralta

So here even if we found the facts that the Complainant would have

us find we could not rule in his favor because they do not establish a

wrong under the Shipping Act nor a basis for a

finding ofreparations

However there is more to consider This record is replete with indica

tions that the pealings between Intermodal and the Complainant were

not the normal arm s

length business transactions one might expect For

example the record indicates that CEC not only received a 400 percent

larger commission by using Intermodal rather than dealing with BSC

directly but that its principal witness received a check for over 15 000

besides In addition CEC through at least one of its officers fraudu

lently obtained federal funds from AID by falsifying records On at

least two separate occasions it erroneously stated that Intermodal was

being paid to containerize the shipment when in fact it was not Even

more to the point it appears that CEC engaged in a course of conduct

using Intermodal and others whereby it defrauded the United States

and others by overstating the shipping charges and then splitting the

proceeds of those overcharges with its co conspirators A reading of

25 F M C
420 FEDERAL MARITIME COMMISSION

the exhibits in evidence which relate to the pending or completed

related federal court cases clearly indicates that CEC is before us with

unclean hands In essence we believe that what happened here is all

too clear CEC hired Intermodal knowing the freight rates it was

collecting from AID were inflated It secured the money from AID by

false pretense gave it to Intermodal and then on the same day received

its share of the excess freight rates from Intermodal Whether it knew

every detail ofthe truck shipment is not really important the fact is it

was well aware of what was transpiring Its mistake was that it relied

on Intermodal to complete the transaction It did not foresee that

Intermodal would fail to pay any of the freight charges and it now

seeks to be made whole because of Intermodal s failure to complete

what between them was a fraudulent and illegal activity Of course in

light of the facts as found and the case law previously cited any such

holding on our part would be completely erroneous So here we find

in favor of the Respondents BSC and Peralta and hereby deny the

relief sought by the Complainant As to Intermodal and the Order to

Show Cause why it should not have a default judgment rendered

against it we would ordinarily find in favor of the Complainant since

Intermodal misappropriated the shipping charges and failed to appear at

all in these proceedings However given the fact that other court

proceedings are pending and the complicity of CEC s actions with

those of Intermodal we do not believe reparations awarded under

section 22 is the proper vehicle for settling accounts between two

wrongdoers Therefore we will not enter a default judgment against

the Respondent Intermodal 12

It is hereby Ordered that this case be dismissed

S JOSEPH N INGOLlA

Administrative Law Judge

12 Complainant s Motion to Reopen the record to admit the testimony of its principal witness was

made and granted after this Initial Decision was written Initially it was thought that the Decision

would be rewritten and the additional testimony added and discussed where necessary On reflectioD

this was not done because while the testimony supports and buttrewhat had already been written

in the Decision it is not necessary to it The testimony speaks for itselfand is as follows

STATE OF NEW YORK

COUNTY OFNASSAU sa

PAUL G MUNSCH being duly wom depo e sod says

1 In the above mentioned proceeding I

gave testimony regarding the amount of commission which

CARGO EXPORT CORPORATION hereinafter CEC received as re ult of the truck shipment

The testimony given by me in that regard both in depositions before trial and at the trial was incor

recti such that by this affidavit I wish to correct said testimony In my testimony before the Commis

sion at page 304 line I was asked the following question

Continued

2S F M C
CARGO EXPORT CORPORATION V INTERMODAL 421

CONTAINER SERVICE LTD ET AL

Q Now you have testified I believe that you placed two phone calls strike that It is

one area I wanted to touch but neglected to

Mr Munsch you testified that you awarded the shipping contract to IntennodaI and you

did not award it to Bangladesh Shipping

Did Cargo Export Corporation receive any fee as aresult of the awarding of the contract

to Intermodal

AYes wedid

Q What did you receive

A 10

Q Of what

A Of the freight

Q Is it 10 of the cargo or 10 of the freight bill

A 10 of theamount of the money that we paid to Intermodal

Q I don t understand youranswer sir

A In other words I paid Intermodal 216 000 and Ireceived a10 brokerage orcommission

from Interrnodal

Q Did you in fact collect that 10 commission

A Yes wedid

Q When did you receive it

A Ibelieve we received it the same day as wepaid them

Q And how did you receive it

AIn the form of acheck

Q AnIntermodal check

A I believe it was I mean 1 don t recall thecheck

Further in my examination before trial at page 105 line 22 1 was asked the following questions

Q Return for amoment to the Intermodal Cargo Export Corporation agreement Did CEC

receive abrokerage fee of any kind

A Yes it did

Q How much was the fee

A 10

Q Of what

A Of thefreight

Q Did the 10 brokerage fee affect yourselection of Intermodal as the carrier

AIt was not the prime consideration

Q Was it one of theconsiderations

AYes it was

Q Did eEC receive any other fee or income as a result of its agreement with Intermodal

apart from the 10 fee you just referred to on this shipment

ANo it did not

Q No remuneration of any kind other than the 10 fee

AOn this shipment

Q Yes

ANo it did not

2 Prior to giving the shipment to Intermodal 1 was in touch by telephone with Dennis McCabe I

cannot recall whether he called me or 1 called him but 1 do recall that he had called me to solicit

business from CEC before and 1 do recall that wehad neverdone business with him sic firm before

this shipment

3 Shortly after our initial contact McCabe called me with his final proposition forthe freight He

indicated to me that he could pay acommission of approximately 35 000 00 and that the commission

would be paid in the form of a check for 10 drawn to the order of CEe with the balance in a

separate check He indicated that the maximum allowed on his tariff was 10 and that is why the

amount of thecheck to the company would reflect that amount

4 After the freight had been shipped and after we had received the freight charges from our princi

pal both myself and Eugene Pagano President of CEC met with McCabe and his associate Gunther

Perl at our office We exchanged checks as follows

aJ 216 045 00 was paid toCEC by Intermodal

b 2J 604 50 was paid in the form of acheck from Intermodal to CEC and

c 15 123 15 in an additional check was drawn to my order

1 accepted the additional check and deposited it in the CEC account

Continued

25 F M C
422 FEDERAL MARITIME COMMISSION

5 During my n

gotiatlon with Mr McCabe b for agre ing to give him the freight h disclosed

to m the approximate amount that he was upposed to be paying the teamahip Iin H rpresented

that amount to be appro lmately 5100 p

r ton H furth r

represented that our commission would be

appro imately 535 000 00 He said that um would be computed by ubtracting the 5100 per ton from

the amount I was going to charg the hipper infact H furth rrepresented that after d ducting

53 000 00 or 54 000 00 for oth r pen which he had Incurred the diff rence would be halved

thus generating the 535 000 00 commission

6 Althoupthe actual amount paid to CEC as reflected by th two chocka amounla to actly 17

of the frelabt charges which I ubntllted to the hipper in fact at no time did w ev r agree on this

llxed percentage Th amount of the final dollars and cenla of th diff rential check was left up to

Mr McCabe and was substantially in accordance with our agreement such that it was accepted with

out question

7 I do not off r this affidavit as an e cuse for my action Although th cu tom of u ing an N V O

is well entrenched in our business I now realize that I was wrong to entrust this shipment to Inter

modal for reasons that are obvioua that I was wrong to accept apaym nt in ecess of an amount I

beli ved th N V O taritT perntllled and finally and mo timportantly that I

was wrong not 10 dis

close the additional payment in my testimony before thi Commission That I receiv d an unlawful

commission doe not chang the thru t of the action which CEC has presented before this Commi

sian

For th reason ahov t forth I

respectfully request that the record be am nded and that upon

the record as amended judgment be awarded on the complaint

S Paul G Munsch

2S F MC
FEDERAL MARITIME COMMISSION

46 C F R PART 522 DOCKET NO 76 63

FILING OF AGREEMENTS BY COMMON CARRIERS AND

OTHER PERSONS SUBJECT TO THE SHIPPING ACT 1916

GENERAL ORDER 24 AMENDMENT 2

October 13 1982

Final Rules

This revises the Commission s

regulations prescribing

procedures for filing of agreements pursuant to sec

tion 15 of the Shipping Act 1916 The purpose ofthe

revision is to ensure the fair orderly and expeditious

processing ofagreements

DATES Effective January I 1983

SUPPLEMENTARY INFORMATION

By Notice published in the Federal Register of June 20 1979 44 F R

36077 36080 the Commission proposed to revise its regulations 46

C F R Part 522 governing the filing of agreements by common carri

ers and other persons subject to section IS of the Shipping Act 1916

46 U S C 814 This further proposed revision was published in

response to the original Notice of Proposed Rulemaking which ap

peared in the Federal Register of November 23 1976 41 FR 51622

Comments on the proposal were submitted by conferences of carriers

individual carriers shipowners associations port authorities a shipper

and the United States Department of Justice A list of commentators is

set forth in Appendix A hereto

Although many of the commentators welcome the concept of the

proposed procedures certain general objections are raised which are

discussed below

ACTION

SUMMARY

1 Delay in Processing Agreements

A number of commentators object to the perceived premise for the

proposal ie that those filing agreements were responsible for the

delay in processing Commentators assert that much of the delay rests

with the Commission and that internal deadlines should be established

for processing and incorporated into the rules

The purpose of the proposed revision was to provide for standard

ized expeditious processing of agreements there was no intention to

assign blame for delay to anyone Internal deadlines and procedures

have been established and are now in the process of being further

updated However these matters are inappropriate for inclusion in a

25 EM C 423
424 FEDERAL MARITIME COMMISSION

Commission General Order and are more properly the subject of an

internal Commission directive

2 Filing ofSupporting Statements

Of great concern is the requirement for the filing of a supporting

statement along with the agreement Many arguments are asserted

which need not be dealt with in light of the final rule promulgated

here The final rule makes the filing of statements supporting the

approval ofagreements optional with the filing parties 1 However the

Commission will require that a letter of transmittal accompany the

agreement which summarizes its contents and expressly requests ap

proval pursuant to section 15 This will facilitate preparation of the

Federal Register notice of filing

3 Scope ofthe Rules

Several port authorities believe that the rules should not apply to

terminal agreements Much of their argument goes to the originally

proposed requirement for submission of supporting statements The

elimination of that requirement should serve to obviate the port au

thorities concerns In any event we see no reason to make an excep

tion for this or any other type ofagreement

4 Rejection ofAgreements

Objection is made to the provision that empowered the Commission

staff to reject agreements for failure to comport with the requirements

of the proposed agreement processing rules Again the basis of these

arguments is the requirement for submission of supporting statements

which has been eliminated Rejection now will be made only for failure

to comply with procedural requirements

5 Miscellaneous Comments

a In proposed section 522 2 comment is made that the definition of

modification to an agreement would require the submission of a

supporting statement for cancellation of an agreement In light of the

elimination of the supporting statement requirement no further consid

eration of this comment is necessary In addition we have simplified

the definition of modification

b In proposed section 522 3 objection is made to the filing of 15

copies of an agreement The Commission has carefully considered its

internal requirements and concludes that 15 copies are necessary

1

This does not however eliminate the need for supportina statements where they are otherwise

legally required It is established that propon nta of an agreament which is anticompatltlve by ita

nature haveaburden to demonstratethat itis required by a serious transportation need is necessary to

secure important public benefits or is infurtherance of avalid regulatory purpose of the hipping Act

Federal Mo ltime Commission v Aktlebolaget Svenska Amlka Llnlen 390 US 238 1968 United Stotes

Llne Inc v FMC 584 F 2d 519 DC Cir 1978

25 F M C
FILING OF AGREEMENTS 425

c Objection is made to the elimination of current section 522 6 which

prescribes suggested language for agreements The existence of this

section although providing some uniformity conveys a false impression

of automatic approvabiIity It is the economic consequences of an

agreement which should control not its form

d With respect to proposed section 522 6 certain commentators

suggest a limitation on public access to information submitted in sup

port of the filing of an agreement A section 15 agreement is not a

private contract but one impressed with the public interest Limitation

on access to information would stifle candid justification and explicit

protests Accordingly no claims for confidentiality will be allowed

e A number of technical comments were submitted regarding pro

posed section 522 7 which governs the content of comments and pro

tests to agreements The Commission has considered carefully all of

these and concludes that the proposed rule should be adopted in sub

stance Some technical changes have been made to the rule and a

provision for the filing of supplemental documents upon a showing of

good cause has been added

f One commentator suggests that proposed section 522 8 which

provides that nothing in the rules should be construed as limiting the

Commission s authority to require information from persons subject to

its jurisdiction is extraneous We agree and it has been eliminated in the

final rule This action should in no way be interpreted however as a

retreat from the proposition reflected in the section

g

Several commentators suggest that proposed section 522 9 is un

necessary and one suggests that it await further study We are satisfied

that inclusion of the section is worthwhile The section has undergone

revision however mostly in the interest of simplification and clarifica

tion Another commentator suggests an amendment to provide for

interim approval This was not contemplated by the proposed rule and

cannot be dealt with in this proceeding

Other commentators suggest certain changes as to technical details

which we believe to be either satisfied by the final rule orunwarranted

Certain purely editorial changes have also been made in the text ofthe

final rule All comments not specifically discussed herein have been

carefully considered and either incorporated in the final rule or reject

ed

List ofsubjects in 46 C F R Administrative Practice and Procedure

Therefore pursuant to 5 V S C 553 and sections 15 21 22 and 43

of the Shipping Act 1916 46 VS C 814 820 821 and 841a Part

522 of Title 46 Code of Federal Regulations is amended as follows

1 Part 522 is amended by deleting the title of Part 522 FILING OF

AGREEMENTS BETWEEN COMMON CARRIERS OF

FREIGHT BY WATER IN THE FOREIGN COMMERCE OF THE

25 FMC
426 FEDERAL MARITIME COMMISSION

UNITED STATES and substituting therefor the following

FILING OF AGREEMENTS BY COMMON CARRIERS AND

OTHER PERSONS SUBJECT TO THE SHIPPING ACT 1916

2 Section 522 1 is revised to read as follows

522 1 Purpose

This part establishes procedures for a filing agreement approval

requests pursuant to section 15 Shipping Act 1916 46 U S C 814

including statements in support thereof b filing comments and pro

tests to such agreements and responsive pleadings thereto and c the

disposition of agreement approval requests The purpose ofthis part is

to ensure the fair orderly and expeditious processing of agreement

approval requests

3 Section 522 2 is amended to read as follows 2

522 2 Definitions

For the purposes of the provisions in this part the following defini

tions ofterms used therein shall apply

a Agreement As used in this part an agreement is a written docu

ment which reflects an understanding arrangement or undertaking

between two or more common carriers by water or other persons

subject to the Shipping Act 1916 which is required by section 15 of

the Act to be filed with the Commission The term agreement in

cludes but is not limited to the following types

b Modification An amendment to an approved agreement

c Proponents The parties to an agreement for which section 15

approval has been requested pursuant to this part

4 Section 522 3 is revised to read as follows

522 3 Filing of agreements

Agreement approval requests shall be submitted to the Secretary

Federal Maritime Commission Washington D C 20573 Such requests

shall consist of a true copy and 15 additional copies of the agreement

and all supporting information Requests shall also be accompanied by a

letter of transmittal which summarizes the agreement s contents and

expressly requests Commission approval pursuant to section 15 The

true copy shall be signed by each ofthe proponents personally orby an

authorized representative and shall show immediately below each sig

nature the name position and authority of the signer Requests for

Only those portions of section 22 2 which werethe subject of Ibe Commission rulemaking pro

ceeding In Docket No 76 63 are included here The definitions of variou types of aieemenll enn

tained in subparagraph aXI throuah a 7 of elstlng section 22 2 were not pari of tbe rulemakina

and while not republished here remain unchanged

2S F MC
FILING OF AGREEMENTS 427

approval which do not meet the requirements of this section shall be

rejected within 30 days ofreceipt

5 Section 522 4is revised to read as follows

522 4 Modifications

a

A request for approval of an agreement modification shall be filed

in accordance with the provisions of section 522 3 and shall identify the

page and paragraph to be amended and restate each such paragraph

The language to be excised should be struck through but not obliterat

ed and the substituted language if any should be inserted directly

following that which is to be excised The new language should be

underscored Ifthe modification does not completely replace approved

provisions the page or pages on which the proposed amendments will

appear should be restated with the proposed amendments underscored

and placed in proper sequence on the page

b Whenever an approved agreement shall have been modified three

times in the manner stated in paragraph a the next succeeding modifi

cation shall be accomplished by restating the entire agreement incorpo

rating all previous modifications and showing the latest change in the

manner required by paragraph a

6 Section 522 5 is revised to read as follows

522 5 Supporting statements

Agreements submitted for approval may be accompanied by a

sup

porting statement signed by an authorized representative of the propo

nents indicating the reasons which caused the making ofthe agreement

and the results intended to flow from its implementation or other facts

or arguments which support approval Affidavits or other evidence

may be attached to such statements Supporting statements are public

records No claims ofconfidentiality will be allowed

7 Section 522 6 is deleted and new section 522 6 is added as follows

522 6 Federal Register Notice

Requests for approval which are not rejected pursuant to section

522 3 shall be noticed in the Federal Register The notice shall include

a a short title for the agreement

b the identity ofthe proponents

c the Federal Maritime Commission agreement number

d a concise summary ofthe agreement s contents

e a statement that the agreement and any supporting statement are

available for inspection at the Commission s offices

f

the final date for filing protests or comments regarding the agree

ment and

g

the name and address ofthe filing agent

8 Section 522 7 is deleted and new section 522 7 is added as follows

25 FMC
II

428 FEDERAL MARITIME COMMISSION

522 7 Comments andprotests

a A comment is a written statement regarding the approvability of

an agreement Comments have no prescribed form or content and are

not limited in any way except by the time limits provided in the

Federal Register notice A written communication regarding the approv

ability of an agreement not conforming to the requirements of para

graph b of this section shall be considered a comment Filing a

comment shall not necessarily entitle a person to 1 any discussion of

the comment in a Commission order disposing ofthe agreement 2 the

institution ofany further Commission proceeding or 3 participation in

any further proceeding which may be instituted

b A protest is a written opposition to the approval of an agreement

which complies with the requirements ofthis paragraph A protest also

constitutes an undertaking by the protestant to actively participate as a

party in any further proceeding concerning the agreement and protes

tants shall be so named in any Commission hearing order which may be

issued Protests shall

1 identify with particularity the reasons why the agreement or

any constituent part should be disapproved

2 address the accuracy of any statements and conclusions sub

mitted by the proponents pursuant to section 522 5 ofthis part

3 allege facts which support the arguments made in subpara

graphs 1 and 2 of this paragraph and

4 specify the source or derivation of the facts alleged pursuant

to subparagraph 3

c A copy of all comments and protests filed with the Commission

shall be served upon the filing agent identified in section 522 6 gon

the same date they are filed with the Commission A certificate of

service attesting that this requirement has been met shall be attached to

the comment orprotest

d Within 15 days from the date that comments or protests are due

as specified by the Federal Register notice or as subsequently extended

by the Commission the proponentSc or their authorized representative

may file a response to each such comment or protest with service to all

persons which have filed comments or protests

e Except as provided in this section and section 522 5 or unless

specifically requested in writing by the Commission with copies to the

proponents and persons which have filed protests or comments no

other written or oral communication concerning a pending agreement

shall be permitted Amendments or supplements to documents submit

ted pursuant to section 522 5 and this section shall be permitted in the

discretion of the Commission upon a showing of good cause provided

that in no case shall such permission be granted where the agreement

has been scheduled and noticed for an agency meeting pursuant to 46

C F R 503 82 A change in material fact or in applicable law occurring

25 F M C
FILING OF AGREEMENTS 429

after the submission of the initial statement comment or protest will

normally constitute good cause Inquiries as to the status ofagreements

shall be made to the Secretary of the Federal Maritime Commission

9 Section 522 8 is deleted and new section 522 8 is added as follows

522 8 Disposition of agreement approval requests

a The Commission shall by conditional or unconditional orders

approve disapprove or institute further proceedings regarding agree

ments filed with it

b Further proceedings regarding an agreement will be instituted

when

I the Commission in its discretion considers further inquiry

advisable

2 a

protest alleges material facts which if true and reasonably

subject to proof on the basis of their source and derivation

and arguments advanced would preclude approval of the

agreement provided however that no further proceeding will

be instituted if the disputed factual issues are resolved by the

proponents acceptance of conditions imposed by a conditional

order in accordance with paragraph c ofthis section

3 the proponents of an agreement which seemingly contravenes

the standards of section 15 properly exercise their right to

request a further hearing pursuant to paragraph d 2 of this

section

c The Commission may issue a conditional order prescribing modi

fications in the agreement necessary to obtain approval when the agree

ment 1 does or appears to contravene the standards of section 15 and

2 if so modified would be approvable without further proceedings If

conditions imposed by the Commission are met within the time speci

fied by a conditional order the revised version will stand approved

from the date of receipt Notice of such date shall be given to propo

nents or their representative by the Commission

d Failure to meet conditions imposed by the Commission will result

in either I the automatic disapproval of the agreement or 2 the

institution offurther proceedings by the Commission on its own initia

tive or where the conditional order found that the agreement was

unapprovable pursuant to a request from proponents Any such request

shall include a detailed recital of the facts that they intend to prove at

that hearing a description of evidence intended to be used to prove

those facts and an explanation as to why the facts sought to be proven

support the approval ofthe agreement If afinding of unapprovability

was made the conditional order will expressly state the date upon

which disapproval would take place

25 F M C
430 FEDERAL MARITIME COMMISSION

e It is unlawful to carry out the provisions of a conditionally

approved or disapproved agreement prior to approval by the Commis

sion in this section

By the Commission

8 JOSEPH C POLKING

Assistant Secretary

25 FMC
FILING OF AGREEMENTS

APPENDIX A

I Conferences

A Conference Group A

Agreement No 10140 Australia Eastern USA Shipping Con

ference Continental North Atlantic Westbound Freight Con

ference ContinentallUS GulfFreight Association The 8900

Lines GreecelUnited States Atlantic Rate Agreement Gulf

European Freight Association Gulf United Kingdom Confer

ence IberianlUS North Atlantic Westbound Freight Confer

ence MarseillesINorth Atlantic USA Freight Conference

North Atlantic Baltic Freight Conference North Atlantic

Continental Freight Conference North Atlantic French Atlan

tic Freight Conference North Atlantic Mediterranean Freight

Conference North Atlantic United Kingdom Freight Confer

ence North Atlantic Westbound Freight Association Scandi

navia BalticlUS North Atlantic Westbound Freight Confer

ence South Atlantic North Europe Rate Agreement UK

USA Gulf Westbound Rate Agreement US Atlantic and

Gulf Australia New Zealand Conference US North Atlantic

Spain Rate Agreement US South Atlantic Spanish Portu

guese Moroccan and Mediterranean Rate Agreement The

West Coast of Italy Sicilian and Adriatic Ports North Atlan

tic Range Conference

B Conference Group B

Associated Latin American Freight Conference Atlantic

GulfPanama Canal Zone Panama City Conference Atlan

tic and GulflWest Coast of Central America and Mexico

Conference Atlantic and GulflWest Coast of South America

Conference East Coast Colombia Conference Leeward and

Windward Islands and Guianas Conference United States At

lantic and Gulf Haiti Conference United States Atlantic and

Gulf Jamaica Conference United States Atlantic and Gulf

Santo Domingo Conference US Atlantic and GulfVenezuela

and Netherlands Antilles Conference and West Coast South

America Northbound Conference

C Conference Group C

Inter American Freight Conference The Far East Conference

The Atlantic and Gulf Indonesia Conference and the Atlantic

and Gulf Singapore Malaya and Thailand Conference

D Conference Group D

Japan Korea Atlantic and Gulf Freight Conference Japan

Puerto Rico and Virgin Islands Freight Conference New

York Freight Bureau Philippines North America Conference

StraitsINew York Conference TransPacific Freight Confer

25 F M C

431
432 FEDERAL MARITIME COMMISSION

ence Hong Kong TransPacific Freight Conference ofJapan

Korea Agreement No 10107 Agreement No 10108 and their

member lines

E Conference Group E

Latin America Pacific Coast Steamship Conference North

Europe US Pacific Coast Freight Conference Pacific Coast

Australasian Tariff Bureau Pacific Coast European Confer

ence Pacific Coast River Plate Brazil Conference

F Conference Group F

Pacific Westbound Conference Pacific Straits Conference Pa

cific Indonesia Conference

II Carriers

A Seatrain International S A

Seatrain Pacific Services S A

B Moore McCormack Lines Inc

C Sea Land Service Inc

III Shipowners Associations CENSA

European and Japanese National Shipowners Association Council

of CENSA National Shipowners Associations of Belgium

Denmark Finland France the Federal Republic of Germany

Greece Italy Japan the Netherlands Norway Sweden and the

United Kingdom plus individual liner operators container consor

tia from most of these countries

IV Port Authorities

A California Association ofPort Authorities

Northwest Marine Terminal Association Inc

California Association of Port Authorities Port of Long

Beach Port of Los Angeles Port of Oakland Oxnard Harbor

District Port of Hueneme Port of Redwood City Port of

Richmond Port of Sacramento Port of San Diego Port of

San Francisco Port of Stockton and the Northwest Marine

Terminal Association Port ofAnacortes Port ofAstoria Port

ofBellingham Port of Everett Port of Grays Harbor Port of

Longview Port of Olympia Port of Port Angeles Port of

Portland Port of Seattle Port ofTacoma Port of Vancouver

SeaTerm Services Inc

B Port ofHouston Authority

C Maryland Port Administration

D Port ofNew Orleans

E Port Authority ofNew York and New Jersey

F Virginia Port Authority

V Shippers Outboard Marine Corporation

VI U S Government Department ofJustice

2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 12

AGREEMENT NO 7680 39

NOTICE

October 20 1982

Notice is given that no appeal has been taken to the September 15

1982 Order of Discontinuance in this proceeding and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the dismissal has

become administratively final

S FRANCIS C HURNEY

Secretary

25 FMC 433
FEDERAL MARITIME COMMISSION

DOCKET NO 82 12

AGREEMENT NO 7680 39

DISCONTINUANCE OF PROCEEDING

Finalized October 20 1982

The proponents of the subject agreement move that the Commis

sion s Order of Investigation served February 23 1982 be terminated

and that this proceeding be dismissed This proceeding concerns an

amendment to a basic conference agreement which amendment would

grant intermodal rate making authority to the American West African

Freight Conference

In reply to the motion Hearing Counsel state that the investigation

should be terminated and the proceeding discontinued

By letter dated September 10 1982 addressed to the Commission s

Secretary the American West African Freight Conference has with

drawn the subject agreement

Good cause appearing the subject proceeding hereby is discontinued

S CHARLES E MORGAN

Administrative Law Judge

434 25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 19

COCOON HOLLAND B V

v

HAPAG LLOYD AKTIENGESELLSCHAFT

NOTICE

October 26 1982

Notice is given that no appeal has been taken to the September 21

1982 Order of Discontinuance in this proceeding and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the order has

become administratively final

S FRANCIS C HURNEY

Secretary

25 F MC 435
FEDERAL MARITIME COMMISSION

DOCKET NO 82 19

COCOON HOLLAND B V

v

HAPAG LLOYD AKTIENGESELLSCHAFT

Leon Dembo of Jubanyik Varbalow Tedesco Shaw for the Complainant

Dorothy Nichols of Billig Sher lones for the Respondent

APPROVAL BY WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE OF

AGREEMENT OF SETTLEMENT

Finalized October 26 1982

The complaint in this proceeding was served March 22 1982 subse

quently permission was granted to amend the complaint The amended

complaint was served June 4 1982

The parties entered into the following Agreement of Settlement

AGREEMENT OF SETTLEMENT

WHEREAS complainant Cocoon Holland B V CH

has filed an Amended Complaint alleging that respondent

Hapag Lloyd AG H L overcharged it on several ship

ments of coating solution shipped under Bills of Lading Nos

19615117 19637110 19649192 and

WHEREAS CH has fully investigated its claims and after

investigation has concluded that it is in its interest to settle this

matter in order to avoid the expense and interruptions to its

business which continued litigation would cause and that the

settlement as hereinafter set forth is a fair and reasonable

compromise ofthe dispute between the parties and

WHEREAS H L without admitting liability or conceding

any defenses has nevertheless agreed to enter into this Agree

ment of Settlement Agreement to avoid further expense

inconvenience and distraction of burdensome and protracted

litigation

NOW THEREFORE it is agreed by and between the

undersigned parties that the claims of CH as embodied in the

Amended Complaint in Docket No 82 19 should be fully

settled and compromised as hereinafter expressly set forth

upon approval by the Federal Maritime Commission FMG

436 2S F M C
S DOROTHY L NICHOLS

BILLIG SHER JONES P c

2033 K STREET N W

WASHINGTON D C 20006

Attorneyfor Hapag Lloyd AG

COCOON HOLLAND B V V HAPAG LLOYD 437

AKTIENGESELLSCHAFf

1 H L shall pay to CH the sum of 19 500 in full and

complete settlement of CH s claims asserted in the Amended

Complaint in Docket No 82 19 Payment shall be made within

ten days after date of service of the FMCs notice rendering

approval ofthis Agreement administratively final

2 Upon approval of this Agreement by the Administrative

Law Judge a final order and judgment shall be entered pro

viding that all claims ofCH against H L arising under sections

22 and 18 b 3 of the Shipping Act 1916 as amended 46

U S c 821 817 b 3 which have been now or could have

been asserted in the Amended Complaint shall be dismissed

with prejudice

3 In consideration of said payment as provided in para

graph 1 above CH hereby releases H L from all claims arising

under sections 22 and 18 b 3 of the Shipping Act 1916 as

amended 46 V S C 821 817 b 3 which have been now

or could have been asserted in the Amended Complaint CH

shall in addition refrain from pursuing its claims in this or

any future proceedings

4 In the event that the FMC fails to approve this Agree

ment or any material part thereof this Agreement shall

become null and void unless the parties hereto promptly agree

to proceed with the Agreement as and if modified by the

FMC

5 The provisions of this Agreement shall be binding upon

and inure to the benefit ofthe parties hereto and their respec

tive successors and assigns

6 This Agreement shall become effective upon its execution

by undersigned counsel for the respective parties

On behalf ofcomplainant Cocoon Holland B V

Dated Aug 26 1982

S LEON D DEMBO

JUBANYIK VARBALOW TEDESCO

SHAW

900 HADDON AVENUE

COLLINGSWOOD N J 08108

Attorney for Cocoon Holland B V

On behalf ofrespondent Hapag Lloyd AG

Dated Aug 31 1982

25 F M C
438 FEDERAL MARITIME COMMISSION

The parties filed on September 16 1982 the following Joint Affidavit

in Support ofthe Agreement ofSettlement

JOINT AFFIDAVIT IN SUPPORT

OF THE AGREEMENT OF SETTLEMENT

We the undersigned on behalf ofcomplainant Cocoon Hol

land B V CH and respondent Hapag Lloyd AG H L

and being each first severally sworn depose and say for and

on behalf ofour respective parties

1 The claims involved in Docket No 82 19 arise under

Sections 22 and 18b 3 ofthe Shipping Act 1916 as amend

ed 46 U S C 821 817 and present a genuine dispute the

facts critical to the resolution of which are not readily ascer

tainab1e

2 The parties to Docket No 82 19 have entered into the

accompanying Agreement of Settlement Agreement

which upon approval by the Federal Maritime Commission

FMC will conclusively resolve their dispute

3 The accompanying Agreement was entered into after full

and thorough investigation and consideration ofall the materi

al circumstances involved herein including among other

things the estimated cost offurther litigating the issues herein

the inconvenience and distraction of continued litigation the

possibility for each party of an unfavorable decision on the

merits after continued litigation and the desirability of main

taining amicable relations between the parties

4 The accompanying Agreement is a fair and reasonable

commercial settlement of the dispute in this case which will

avoid the need for further extensive costly burdensome and

economically unjustified litigation

5 The accompanying Agreement is a bona fide attempt by

the parties to terminate this controversy in a commercially

reasonable manner and is not a device to obtain transportation

at other than the lawfully applicable rates and charges or

otherwise circumvent the requirements of the Shipping Act

1916 the Intercoastal Shipping Act 1933 or any other appli

cable law

2S F MC
COCOON HOLLAND B V V HAPAG LLOYD 439

AKTIENGESELLSCHAFT

WHEREFORE for all the foregoing reasons the parties

respectfully request FMC approval of their settlement and

dismissal of the proceeding herein in accordance with the

terms ofthe accompanying Agreement

COCOON HOLLAND B V

BY S BOB BOYD

Title Agent

Subscribed and sworn to before me

this 26th day ofAugust 1982

S Eileen W Grossmick

Notary Public

My Commission Expires June 11 1983

HAPAG LLOYD AG

BY S VINCENT S BROOKS

Title Pricing Manager

UNITED STATES NAVIGATION INC

AGENTS

Subscribed and sworn to before me

this 10th day of September 1982

S Norma Frevola

Notary Public

My Commission Expires March 30 1983

The parties submitted the following Joint Memorandum in Support

ofthe Agreement ofSettlement

JOINT MEMORANDUM IN SUPPORT

OF THE AGREEMENT OF SETTLEMENT

The undersigned complainant Cocoon Holland RV and

respondent Hapag Lloyd AG hereby respectfully submit this

memorandum in support of the Agreement of Settlement at

tached hereto as Exhibit A The parties are requesting that the

proposed settlement be approved as fair and reasonable and

that an appropriate judgment be entered directing the parties

25 F MC
J

1

440 FEDERAL MARITIME COMMISSION

to carry out the terms of the settlement and dismissing the

Amended Complaint on the merits in accordance with the

provisions ofthe Agreement of Settlement

I

BACKGROUND

1 This proceeding arises out of a

reparations complaint filed

on March 19 1982 by Cocoon Holland B V pursuant to 22

and 18b 3 ofthe 1916 Shipping Act 46 U S C 821 817

Essentially complainant alleged that respondent overcharged

it on a shipment of coating solution due to an error it made in

classification

2 On May 11 1982 Hapag LloYd AG answered the com

plaint denying the substantive allegations raised by complain

ant and objecting to handling this proceeding under the short

ened procedure

3 On May 25 1982 a prehearing conference was held

before Judge William Beasley Harris At this conference com

plainant agreed to certain discovery requests made by re

spondent and was granted permission to amend its original

complaint

4 On June 8 1982 complainant filed its Amended Com

plaint adding two more shipments on which it alleged an

overcharge Under the Amended Complaint complainant

seeks to recoveralleged overcharges of 21 054 41 Were com

plainant to succeed and interest awarded on these claims

recovery could be as much as 27 590

5 In due course it became apparent that litigation of the

issues would likely be complex and costly particularly in view

of the significant differences between the litigants on various

questions oflaw and fact Accordingly in an effort to resolve

their differences in a commercially reasonable manner and

without the burden expense and uncertainty of further litiga

tion the parties have after arms length negotiations

reached and request approval of the settlement agreement

more fully described below and in the accompanying docu

ments

II

THE SETTLEMENT

6 The main issue in this action involves a determination of

the applicable rates for three shipments of coating solution

shipped pursuant to Bills of Lading Nos 1915117 19637110

19649192 This involves the proper identification of commod

ities which were shipped over two years ago a determination

of the proper tariff rates and proof as to whether the alleged

overcharges were paid by Cocoon Holland B V within two

23 F MC
25 FM C

COCOON HOLLAND B V V HAPAG LLOYD 441

AKTIENGESELLSCHAFT

years of the date on which the complaints were filed Resolu

tion of these questions if fully litigated could require each of

the parties to produce expert witnesses and incur substantial

legal expenses Moreover continued litigation of this contro

versy would undoubtedly inconvenience employees of both

parties and distract from their every day corporate duties

7 There is accordingly little likelihood that this action

could be resolved by litigation without burdening the parties

and incurring substantial expenses Accordingly in light of all

of the circumstances of this case and the Federal Maritime

Commission s the Commission policy of promoting settle

ments wherever possible the parties after several offers and

counteroffers have agreed to a negotiated arms length settle

ment oftheir dispute and request approval thereof

8 It is well established that both law and Commission

policy encourage settlements and engage in every presump

tion which favors a

finding that they are fair correct and

valid Ellenvi l Handle Works Inc v Far Eastern Shipping

Co 23 FMC 707 709 1981 Old Ben Company v Sea Land

Service Inc 21 F MC 505 1978 accord 46 C F R 502 91

502 94 and 5 D S C 554 c I Settlements are particularly

warranted where as here the parties are faced with the

uncertainty and expense offurther litigation Celanese Corp v

Prudential Steamship Co 23 F MC I 5 1980 Moreover as

demonstrated in various Commission cases proceedings may

now be terminated by mutual settlement for amounts less than

those originally sought in the complaint and without admis

sions of statutory violations Del Monte Corp v Matson Navi

gation Company 22 FMC 364 368 369 1979 citing cases

ElIenville 23 F M C at 711

9 This is equally true with respect to the settlement of

18 b 3 complaints where as here certain conditions have

been satisfied As the Commission has held it would be un

necessarily restrictive to bar the settlement of such claims

unless and until a statutory violation has been admitted or

conclusively established on the record Rather such settle

ments are to be presumed valid provided the parties thereto

a submit a signed agreement to the Commission and apprise

the Commission of the reasons for settlement b attest that

the settlement is a bona fide attempt to terminate the contro

versy and not a device to circumvent the requirements of law

and c show that the complaint on its face presents a genuine

dispute and that the facts critical to the resolution of the

dispute are not reasonable ascertainable Organic Chemicals v

Atlanttrafik Express Service 18 S RR 1536a 1539 40 FMC

1979 Organic Chemicals v American Export Lines Inc 19

S RR 240 Settlement Officer 1979 administratively final

June 4 1979 Celanese Corp v Prudential Steamship Compa

ny supra 23 FM C 1 It is also well established that the
442 FEDERAL MARITIME COMMISSION

parties to a settlement agreement may decline the award of

interest lnterest in Reparation Proceedings 24F MC 145 149

1981 Because interest is not part of the freight rate it is

appropriate that its treatment in settlement agreements be left

to the parties 1

10 In the instant case al1 these conditions have been ful1y

satisfied and the accompanying Agreement of Settlement

should therefore be approved The Commission has been fully

apprised both herein and in the attached supporting affidavit

see Exhibit B ofthe various reasons for the parties desire to

settle this case without further expense and litigation The

precise terms of the settlement are contained in the accompa

nying signed Agreement Of Settlement and the principals have

duly attested in the accompanying sworn affidavit that the

settlement is a bona fide attempt to terminate the controversy

in a commercially reasonable manner and is not a device to

circwnvent any requirements oflaw 2

11 Further as previously discussed the complaint on its

face presents a genuine dispute and the facts critical to its

resolution are not reasonably ascertainable without further liti

gation which in turn would entail the wasteful expenditure of

additional funds Accordingly the parties submit that in view

ofthe respective merits ofthe case the costs of further litigat

ing the issues and the parties desire to reach a commercially

sound and mutual1y acceptable compromise the settlement

negotiated by the parties herein is just and reasonable and

should be approved

III

CONCLUSION

WHEREFORE for al1 the foregoing reasons the parties

respectful1y request that the attached Agreement of Settlement

be approved and that thisproceeding be dismissed with preju

dice

1 Heretheparties were awareof the potential for recovery under Rule 253 46 CF R 1502 253 of

the Commission s Rules of Practice and Procedure and took this factor into consideration in their ne

gotiatioDs

a

The settlement agreement and supporting affidavit have moreover been generally modeled after

the form approved in Organic Chemica sup 19 S RR 240 and Celanese supra 23 F M C 1

2S FMC
COCOON HOLLAND B V V HAPAG LLOYD 443

AKTlENGESELLSCHAFT

RESPECTIVELY SUBMITIED

S LEON D DEMBO

JUBANYIK VARBALOW TEDESCO

SHAW

900 HADDON AVENUE

COLLINGSWOOD N J 08108

Attorney For Complainant

COCOON HOLLAND B V

8 DOROTHY L NICHOLS

STANLEY O SHER

BILLIG 8HER JONES P e

2033 K STREET N W

WASHINGTON D e 20006

Attorneys For Respondent

HAPAG LLOYD AG

DISCUSSION

The Presiding Administrative Law Judge has been advised by coun

sel for the parties of the Agreement of Settlement setting forth the

terms and conditions upon which the parties propose to settle the

claims pending in this proceeding Upon review of the Joint Affidavit

In Support Of Settlement Agreement explaining the parties reasons for

the settlement and the cases and argument set forth in the Joint Memo

randum In Support Of The Agreement Of Settlement the Presiding

Administrative Law Judge is satisfied that the settlement is fair and

reasonable and should be approved

Therefore it is ORDERED subject to review by the Commission as

provided in the Commission s Rules of Practice and Procedure that

1 The Agreement of Settlement as proposed by the parties is

approved

2 The claims asserted in The Amended Complaint are dismissed with

prejudice and Hapag Lloyd AG is discharged from all liability to

Cocoon Holland BY in respect to any claims arising under sections 22

and 18 b 3 of the Shipping Act 1916 as amended 46 U S C 821

817 b 3 which have been now or could have been asserted in the

Amended Complaint

3 Hapag Lloyd AG shall pay 19 500 to Cocoon Holland RV in

accordance with the terms of the Agreement of Settlement and notify

the Commission of how and when this was done

25 F M C
444 FEDERAL MARITIME COMMISSION

4 The provisions of this Order and Judgment shall inure to the

benefit of and be binding upon each of the parties in this proceeding

and each oftheir respective successors and assigns

5 This proceeding is discontinued

8 WILLIAM BEASLEY HARRIS

Administrative Law Judge

2S F MC
FEDERAL MARITIME COMMISSION

46 C F R PARTS 521 522 DOCKET NO 76 63

FILING OF AGREEMENTS BY COMMON CARRIERS AND

OTHER PERSONS SUBJECT TO THE SHIPPING ACT 1916

GENERAL ORDER 17 AMENDMENT 3

GENERAL ORDER 24 AMENDMENT 2

ACTION

SUMMARY

October 28 1982

Supplement to Final Rules

This supplements final rules in this proceeding by

adding matters unintentionally omitted from previous

publication

Effective January I 1983 pending OMB review of

revision to reporting requirements

DATES

SUPPLEMENTARY INFORMATION

The Commission published its final rules in this proceeding on Octo

ber 18 1982 47 F R 46284 revising procedures for filing and process

ing of agreements under section 15 of the Shipping Act 1916 The

following matters were unintentionally not included in that final rule

Section 522 I Purpose of Title 46 C F R was revised in its entirety

However certain material recently adopted by the Commission De

cember 28 1981 46 FR 62652 was inadvertently omitted from the

revision ofthis section This supplement corrects that omission

Section 522 6 Federal Register Notice ofTitle 46 C F R contains new

provisions regarding notice and comment on section 15 agreements and

is largely duplicative of existing provisions in 46 C F R 521 10 521 10

was intended to be deleted and that deletion is accomplished by this

supplement

Finally the final rule failed to give notice that OMB approval of

reporting requirements is pending That notice is included immediately

below

OMB CONTROL NUMBER Approval by OMB is pending In ac

cordance with the Paperwork Reduction Act of 1980 P L 96 511 the

revisions to the reporting requirements that are included in this regula

tion have been or will be submitted to the Office of Management and

Budget They are not effective until OMB action has been completed

A Federal Register notice will be published when the revision has been

approved by OMB

Accordingly pursuant to 5 V S C 553 and sections 15 21 22 and 43

of the Shipping Act 1916 46 U S C 814 820 821 and 841a the

25 F MC 445
446 FEDERAL MARITIME COMMISSION

Commission s final rule in this proceeding is supplemented to amend

Title 46 C F R in the following respects

1 The title of Part 521 is revised to read TIME FOR FILING

CERTAIN AGREEMENTS

2 Section 521 10 Notice offiling ofagreements and modifications under

section 15 of the Act and application under section 14 b of the Act is

removed

3 Section 522 1 is revised to read as follows

522 1 Purpose

a This part establishes procedures for 1 filing agreement approval

requests pursuant to section 15 Shipping Act 1916 46 U S C 814

including statements in support thereof 2 filing comments and pro

tests to such agreements and responsive pleadings thereto and 3 the

disposition of agreement approval requests The purpose of this part is

to ensure the fair orderly and expeditious processing of agreement

approval requests

b Adherence with the statute and rules ofthe Commission is man

datory and persons operating under agreements without prior Commis

sion approval may be liable to penalties and damages for violations of

the anti trust laws of the United States and may be subject to civil

penalties of up to 1 000 for each day of such default 46 U S C 814

and or disapproval ofagreements

By the Commission

S FRANCIS C HURNEY

Secretary

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 24

AGREEMENT NO 9925 3

ORDER OF CONDITIONAL APPROVAL

November 2 1982

This proceeding was initiated to investigate several issues which had

been raised by Agreement No 9925 3 a proposed extension of the

Pacific America Container Express PACE cooperative working ar

rangement

1 which had been filed for approval pursuant to section 15

of the Shipping Act 1916 46 U S C 814 During the course of this

proceeding the parties Proponents Protestant Farrell Lines Inc

Intervenor Trader Navigation Co Ltd and the Commission s Bureau

of Hearings and Field Operations reached a settlement concerning the

issues raised by the Order and consequently submitted a

proposed

Order of Conditional Approval to Administrative Law Judge Norman

D Kline

In an Initial Decision served September 16 1982 the Presiding Offi

cer concluded that the proffered settlement should be accepted and

approval granted upon receipt of an amended Agreement containing

the conditions set forth in a Proposed Second Order of Conditional

Approval which was attached as an appendix to the Initial Decision

Proponents filed Exceptions to the Initial Decision pointing out

that the proposed Order attached to the Initial Decision was never

actually issued by the Presiding Officer and contending that the Com

mission should therefore issue an Order ofConditional Approval in the

form proposed so that the settlement which was accepted by the Pre

siding Officer could be effectuated Farrell concurred but requested

that any order issued by the Commission be served no later than

October 16 1982

The Commission has reviewed Proponents Motion for Order of

Dismissal Clarification and Order of Conditional Approval the Replies

thereto the Initial Decision of the Presiding Officer the Exceptions

thereto and Replies to Exceptions and concludes that Agreement No

9925 3 should be approved subject to the conditions set forth in the

Presiding Officer s proposed second order of conditional approval

1 Proponents of Agreement No 9925 3 are Associated Container Transportation Australia Ltd a

Commission llpproved joint containership service among Blue Star Line Ltd Port Line Ltd and

Ellerman Lines Ltd Agreement No 9767 and the Australian Shipping Commission trading as Aus

ttalian National Line ANL

25 F MC 447
448 FEDERAL MARITIME COMMISSION

THEREFORE IT IS ORDERED That Agreement No 9925 3 is

approved pursuant to section 15 of the Shipping Act 1916 on the

condition that the Commission receives within 60 days of the date of

the letter transmitting this Order a complete and accurate copy of

amended Agreement No 9925 signed by both parties thereto modified

as follows

IArticle 1 be amended to read

1 When participating in any conference or rate agreement

in connection with their services under this Agreement the

parties shall do so jointly as a single member for all purposes

Deluding without limitation voting and the apportionment of

expenses under such conference or agreement

II Article 4 be amended to read

4 The parties may operate both containerized and conven

tional vessels under thIS Agreement provided that no more

than six such vessels may be operated at anyone time and no

more than 19 000 loaded TEUs may be carried northbound or

southbound under this Allreement during any calendar year

For purposes of this Article one loaded TEU of breakbulk

carso shall be deemed to consist of 16 weight tons of 2 240

Ibs in the case of reefer cargo and 10 such weight tons in the

case ofall other breakbulk cargo

III Article 5 be amended to read

5 The parties shall provide equipment such as containers

and related equipment by such means and in such proportions

as they may determine

IV Article 13 be either deleted or amended to substitute the phrase

different vessels for additional vessels

V The last sentence ofArticle 14 be amended to read

The parties shall also submit to the Commission a semi annual

report setting forth the name refrigerated cargo capacity gen

eral car o capacity and ownership of each vessel employed

under thiS Agreement and the carryings under this Agreement

per voyage northbound and southbound separately of each

such vessel in loaded TEUs 2and revenue tons for both refrig

erated and general cargo Reports shall be submitted to the

Commission within 4S days following the end of each semi

annual reporting period

VI Articles 8 and 9 be amended to read

8 ACTA through its agents shall be responsible for the

collection of all revenues The respective parties shall be re

The Commission assumes that this will inclUde breakbulk cargo converted to lolided TEU in the

manner set forth inArticle 4 of theAsreement

25 FMC
AGREEMENT NO 9925 3

sponsible for the operation and provision of their own vessel

or vessels

9 Revenues and all other expenses such as cargo and con

tainer handling costs agency commissions and administrative

expenses shall be shared between the parties on such basis as

they shall determine the parties hereby agreeing promptly to

notify the Commission of such basis and any changes therein

On an annual basis ACTA through its agents shall settle

accounts and shaH distribute to the parties their respective

shares of such revenues after deduction of aH such expenses

or in the event of a loss shaH collect from the parties their

respective shares of the excess of such expenses over reve

nues Pending final accounting advances of such shares of

revenues less expenses shall be made periodically during the

year

VII Article 21 be amended to read

21 This Agreement shaH be governed by and construed in

all respects in accordance with the law of England and the

United States statutes administered by the Federal Maritime

Commission

VIII Article 22 be amended to change March 31 1991 to October

30 1985

IT IS FURTHER ORDERED That within 10 days after the date

of this Order the parties to Agreement No 9925 3 shaH apply to each

of Agreements Nos 6200 and 10268 for merger of their separate mem

bership into a single membership provided that such merger shall not

require the payment of a new admission fee and shall submit evidence

of such applications to the Commission

IT IS FURTHER ORDERED That if any information including

reports submitted to the Commission under Agreement No 9925 3 and

marked confidential submitted under Agreement No 9925 3 and sub

ject to the Federal Maritime Commission s final order in Docket No

82 24 shall be requested under the Freedom of Information Act the

Commission shaH at least 10 days prior to the release of any such

information give notice to the submitter identifying the information to

be released and the name and address ofthe requester and

IT IS FURTHER ORDERED That the approval contained herein

shaH be effective on the date upon which the Commission receives a

copy of Agreement No 9925 which meets the above conditions at

which time this proceeding will stand discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

25 F MC

449
FEDERAL MARITIME COMMISSION

DOCKET NO 81 43

INDEPENDENT FREIGHT FORWARDER LICENSE NO 1483

TOKYO EXPRESS CO INC AND KOZO AND KATHLEEN

KIMURA

D BIA COSMOS TRADING COMPANY

ORDER OF DISCONTINUANCE

November 8 1982

The Commission s Order Adopting Initial Decision in this proceeding

served September 17 1982 approved the Settlement Agreement prof

fered by the parties on the condition that the amount of penalty be

increased from 15 000 to 20 000 by the addition oftwo installments of

2 500 and that an executed copy of the modified Settlement Agree

ment and promissory note be submitted within 45 days Upon receipt of

such submission this proceeding would be discontinued

The parties now have submitted the modified Settlement Agreement

and promissory note to comply with the earlier order Accordingly

proceedings in this matter are discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

450 2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 39

AGREEMENT NOS 10333 10333 1 AND 10333 2

CALCUTTA BANGLADESH USA POOL AGREEMENT

NOTICE

November 12 1982

Notice is given that no appeal has been taken to the October 7 1982

Order of Discontinuance in this proceeding and that the time within

which the Commission could determine to review has expired No such

determination has been made and accordingly that order has become

administratively final

8 FRANCIS C HURNEY

Secretary

25 F MC 451
FEDERAL MARITIME COMMISSION

DOCKET NO 81 39

AGREEMENT NOS 10333 10333 1 AND 10333 2

CALCUTfA BANGLADESH U S A POOL AGREEMENT

INVESTIGATION DISCONTINUED WITH PREJUDICE

AGAINST

A RENEWAL OF INFORMAL OR FORMAL PROCEEDINGS

CONCERNING THE QUESTION OF PRE APPROVAL

IMPLEMENTATION OF AGREEMENT NO 10333 2

Finalized November 12 1982

Proponents seek dismissal of this proceeding with prejudice against

renewal by way of an informal staff investigation into allegations of

pre approval implementation of Agreement No 10333 2

1

Reversing

their initial opposition to this with prejudice feature of Proponents

motion for dismissal Hearing Counsel now joins in support of the

motion

In my judgment the motion to terminate the proceeding with preju

dice should be granted

PROCEDURAL BACKGIOUND

The proceeding was initiated by Order ofInvestigation and Hearing

Order served June 17 1981 to determine the approvability ofAgree

ment No 10333 2 Amendment No 2 and the continued approvability

of Agreement Nos 10333 Agreement and 10333 1 Amendment No

I

2

under section 15 of the Shipping Act 1916 46 U S C 814 With

respect to the general issues of approvability the Order directed the

parties to address eleven particular questions which were specified by

number Only one ofthose questions No ll is presently relevant It

asks Have the terms of Agreement No 10333 2 been implemented in

any way prior to approval of that Agreement by the Commission 3

1 As used by Hearing Counsel the term Uinformal staff investigation subsumes informal orformal

civil penalty proceedinss See e

g transcript l

r of prehenring conference held April 13 1982 at

Tr 31 32

a Hereafter the Agreement and Amendment No I will sometimes be referred to together as the

Amended Agreement

sHearing Counacl poailed that Questions No 9 and No 10 might be linked subordinately to Quea

tion No 11 Question No 9 reads Haa Waterman been prevenled by it membership in Agreement

No 10333 from oITering service to shippers who have otherwise been unable to obtain adequate serv

ice Question No 10 reads has Waterman been limited to carriaae of a

specific amount of cargo

prior to the approval of individual carrier shares by the Commission

452 25 FM C
POOL AGREEMENT NOS 10333 10333 1 AND 10333 2 453

The Order named Bangladesh Shipping Corporation BS C

Cunard Brocklebank Ltd Cunard Farrell Lines Inc Farrell Hel

lenic Lines Ltd Hellenic Scindia Steam Navigation Co Ltd Scin

dia Shipping Corporation of India Limited S C I and Waterman

Isthmian Line Division of Waterman Steamship Corporation Water

man as Proponents in the proceeding The Bureau ofInvestigation and

Enforcement Hearing Counsel was named a party to the proceeding

Inasmuch as the Order did not contemplate an assessment proceeding 4

under section 32 e of the Shipping Act 1916 46 V S C 831 e none of

the Proponents was named a

respondent

The Agreement and Amendment No 1 were approved January 30

1980 The Amended Agreement established a framework for a

cargo

revenue pool in the inbound trade from Calcutta 5

India and from

ports in Bangladesh to ports on the Atlantic and Gulf Coasts of the

United States However the Amended Agreement did not assign indi

vidual revenue shares to members of the pool Had it been approved

Amendment No 2 would have established such shares for active mem

bers ofthe pool and would have reserved such shares for Hellenic and

Cunard who are signatories to the Agreement but not to either

Amendment

In November 1981 Proponents moved for termination stay or modi

fication of the Order Administrative Law Judge Paul J Fitzpatrick to

whom the case was then assigned certified the motion to the Commis

sion for decision The motion was premised upon changed circum

stances induding Farrell s

resignation from the Agreement and from

the conference in the trade 6

Proponents withdrawal of Amendment

No 2 from consideration for approval and Proponents representation

that negotiations were in progress which might result in a new agree

ment to supersede the AmendedAgreement

Hearing Counsel opposed that motion noting among other things

that the investigation concerned present operating conditions under the

still effective Amended Agreement and pre approval implementation of

Amendment No 2

By Order On Motion To Terminate And Stay Second Order

served February 25 1982 the Commission denied Proponents motion

to terminate basing its decision on essentially the same grounds relied

upon by Hearing Counsel in opposing the motion However the Com

mission did grant a limited stay of the proceeding 7

to allow Propo

nents time to complete their negotiations and file a proposed supersed

ing agreement In this connection the Second Order contained the

4 Anassessment proceeding is aformal civil penalty proceeding cr n I supra

6 UnderArticle 2of the Agreement Calcutta is defined to include the port of Haldia

6

Agreement No 8650 Calcutta East Coast of India and Bangladeshi USA Conference

7

The stay was for aperiod of 30 days from the date of service of the SecondOrder

25 F MC
454 FEDERAL MARITIME COMMISSION

suggestion that Proponents should consider canceling the Amended

Agreement because it simply could not be operated effectively without

individual revenue shares without prejudice to the ming of the super

seding agreement 8

When the stay expired without the filing of a superseding agreement

Inoticed a prehearing conference for April 13 1982

On April 7 1982 Proponents notified the Secretary of the Commis

sion that the AmendedAgreement had been terminated and on April 9

1982 they filed a new motion to dismiss the proceeding without

prejudice to the filing of a superseding agreement as the Commission s

Second Order had suggested although not within the exact time frame

contemplated by the Commission

At the prehearing conference Hearing Counsel tendered their reply

to Proponents motion in which they advised that they support Propo

nents motion and urge me to discontinue the proceeding

But Hearing Counsel added another condition to their support ofthe

motion Hearing Counsel wished to continue to pursue their inquiry

into pre approval implementation of Amendment No 2 after discon

tinuance of the proceeding Thus they urged that the dismissal be

without prejudice to an informal staff investigation and appropriate

action 9

Iwas not favorably disposed to do what Hearing Counsel proposed

It seemed to me that Hearing Counsel should have opposed the motion

to dismiss if they had a prima facie case ofpre approval implementation

or if they had reason to believe that a prima facie case could be made

following prehearing discovery On the other hand if Hearing Counsel

did not believe it could make out a prima facie case at a hearing they

should not have sought the condition they wanted imposed

In general I was concerned about the obvious due process and

vexatious prosecution problems stemming from Hearing Counsel s pro

The Second Order di miued Hellenic and Cunard from the proceedinll Farrell was Dot di miaaed

on Hearing Counsel srepresentation that Farrell might have been involved in pre approval implemen

tation

Hearing Counsel reply contained the following rematka

In that the withdrawal of Agreement No 10333 and 10333 1 haa effectively eliminated the

ubject matter of the in tant proceeding Hearing Counael allree with Propenenta that no

valid regulatory purpcae would be aerved by continulnll this investigation Althoupthe iaaue

of Propenenta possible preapproval implementation of Agreement No 10333 2 survives the

cancellation of the baale pool agreement it is Hearing Counsel s beliefthat this matter can be

adequately addreued throup informal investigation Use of informal methods would make

po88ible a more efficient utilization of Commission resources while maintaining maximum

flexibility in the punuit of this issue

Upon dismissal of the present investigation the question of Proponents possible

preapproval implementation of Agreement No 10333 2 will be referred to the

appropriate statT officefor further inquiry and appropriate action

2S F MC
POOL AGREEMENT NOS 10333 10333 1 AND 10333 2 455

posal In particular Iwas concerned about dismissing an issue specified

by the Commission upon the casual showing made by Hearing Coun

sello because the Commission stressed the importance of the issue in

denying Proponents earlier motion to terminate this proceeding and

because of the implied suggestion that the serious issue of a possible

violation of section 15 ofthe Shipping Act was merely an add on and

not intrinsically worthy of survival in a formal proceeding 1 1

Therefore Ireserved decision on the motion to dismiss and author

ized the parties to perfect their positions in subsequent briefs The

briefing schedule called for Hearing Counsel to open by May 13 1982

and Proponents to reply by June I 1982 Hearing Counsel was given

the option offiling or not filing an answering brief

The opening and reply briefs were timely filed but because Hearing

Counsel did not adequately address the issues which I stressed as being

of most concern Iissued a Further Order on Motion to Dismiss 12 in

which I directed Hearing Counsel to file an answering brief containing

the following numbered items

I A statement in the form of an offer of proof showing all

the material Hearing Counsel has at hand and which it would

seek to introduce in evidence in order to prove preapproval

implementation of Agreement No 10333 2 Question Nos 9

10 and 11 of the Order of Investigation and Hearihg served

June 17 1981

2 A detailed explanation showing the difference between the

informal methods of investigation to be pursued and the meth

ods of investigation Hearing Counsel would use in this formal

proceeding The explanation shall contain a time and cost

study showing whether the informal staff investigation would

at this stage of events be a more efficient allocation of Com

mission resources as alleged by Hearing Counsel Marginal

note omitted

In their answering brief of July 16 1982 Hearing Counsel modified

their position They urged that I defer ruling on Proponents motion to

dismiss with prejudice a course contained in Proponents reply brief

for a period of 90 days during which Hearing Counsel would try to

develop their case which they outlined in response to item 1

13 ofthe

Further Order on Motion to Dismiss Hearing Counsel did not respond

10 See n 8 supra

11 See Tr passim and Orderon Motion to Dismiss served April IS 1982

12 ServedJune 15 1982

13 Hearing Counsel attached two sets of exhibits to their answering brief One set was labeled confi

dential Hearing Counsel asked that the confidential set be covered by a protective order I

issued a

temporary protective order on August 2 1982 and later extended the temporary order nthe light of

the disposition of this proceeding the order which follows will direct the Secretary of the Commis

sion to return theconfidential exhibit toHearing Counsel

25 F M C
456 FEDERAL MARITIME COMMISSION

to item 2 because they believed that their new approach made that

item moot

Hearing Counsel s

response to item 1 served the useful purpose of

informing Proponents of the nature and details of the allegations con

cerning pre approval implementation To meet those allegations Propo

nents asked for and obtained leave to me a reply brief On August 19

1982 Proponents reply brief was filed together with exhibits consist

ing of affidavits of Charles F Fischer who was the Chairman of the

Amended Agreement Among other things the reply brief contained

proposed findings of fact meeting the allegations head on Proponents

concluded by renewing their request for dismissal with prejudice

Proponents reply brief evoked a motion from Hearing Counsel for

leave to file a response Their response was included as part of the

motion For the purpose of the motion Hearing Counsel does not

dispute the proposed findings of fact based primarily upon Mr

Fischer s affidavits as a correct statement of what the record would

show if evidence had been introduced in the case by Proponents Based

upon that showing Hearing Counsel now joins with Proponents in

support oftheir motion to dismiss with prejudice

FACTS 14

1 The Agreement and Amendment No I were approved by the

Commission on January 30 1980 The Amended Agreement provided

for revenue pooling and service rationalization in the trades between

the United States and the East Coast of India and Bangladesh The

Pool was divided into Indian and Bangladesh Sections also called

Calcutta and Chittagong Sections each with a General Commit

tee The General Committees were to be overseen by a New York

Governing Committee Although there were no approved individual

carrier pool shares the AmendedAgreement did include Flag Group

Basic Entitlements for United States Indian and Bangladesh flag carri

ers

2 In the Indian Section the approved Basic Entitlements were 45

for U S flag carriers Waterman and Farrell 45 for Indian flag lines

Scindia and SCI and 10 for B SC In the Bangladesh Section the

approved Basic Entitlements were 40 for the U S flag group 40

for Bangladesh Shipping and 20 for the Indian lines

N b The finding of fact are intended solely for the purpose of deciding the motion to dismiss

with prejudice Because 0 many of them are designed to place the matter of allegations of pre ap

proval implementation in perspective they should not be construed as binding by way of resjudicata

orcollateral estoppel in any futureproceeding including a

proceeding hould there be one to deter

mine the approvabllity of a

uperseding pool agreement Of course the foregoing limitation de8not

apply to the question of pre approval implementation

25 F MC
POOL AGREEMENT NOS 10333 10333 1 AND 10333 2 457

3 The functions of the Pool Committees in implementing rationaliza

tion measures are summarized in the Commission s Order of Approval

ofJanuary 30 1980 at p

2

The activities of each of the two sections which are both

domiciled in the Bay of Bengal area and are responsible to the

New York Governing Committee are monitored by a General

Committee The primary function ofthe General Committee is

to make continuing assessments of trade conditions in order to

determine whether the service offered by the participating

lines is adequate excessive or insufficient for the trade s needs

and to ensure that each line is meeting its obligations arising

from its participation in the Pool In appropriate circum

stances the Committees are authorized to request of the

individual lines that they adjust their service offerings sched

ules and or itineraries to accommodate the trade or to insure

that their cargo liftings approximate their basic entitlements

It was the intention of the parties that each flag group would provide

sufficient space to carry its portion ofthe Basic Entitlement

4 This Pool Agreement was formed primarily to preserve the ability

of the member carriers to serve this trade with its difficult service

characteristics and low rated commodities The trade has lost several

carriers in recent years including most recently Cunard and Farrell

and the idea of the pool was to rationalize services so as to reduce

costs maintain rate stability and maintain an optimal level of service for

shippers

5 Among the difficulties in serving the trade which gave rise to the

need for rationalization and pooling are the difficult port conditions

climate conditions and business practices of the trade In the Indian

portion of the trade the primary ports are Calcutta and Haldia Calcut

ta is located 126 miles up the Hooghly River and accordingly is subject

to silting and draft limitations while Haldia is about 76 miles up the

Hooghly River Two natural phenomena monsoons and bore tides

make the ports unusually difficult to serve during the monsoon season

From June until September congestion invariably occurs The bore

tides are not always a problem but several times a

year make loading of

cargo extremely difficult and sometimes impossible The river is serv

iced by a series of lock gates through which most lighters and vessels

must pass from time to time Substantial sections of the port become

non operative when difficulties occur with the gates The port areas are

heavily labor intensive and due to economic and societal circum

stances the introduction of mechanized cargo handling equipment is

kept to a bare minimum The vessels used in the trade are generally

break bulk or lighter aboard ship LASH type vessels The great ma

jority of all cargoes flowing to the port are jute products which are

transported mainly from upriver mills in lighters that are brought to

ship side in the stream Loading is therefore relatively slow and

25 FM C
458 FEDERAL MARITIME COMMISSION

laborious Strikes are frequent occurrences Although there had been

rumors of rebating in the trade prior to implementation of the pool

those rumors appeared to Respondents to subside during the period of

the Pool s operations

6 Major items moving in the trade are jute and jute products which

are relatively low rated and not highly profitable to transport Jute

products are sold under very ancient contracts between the mills and

the exporters and the buyers Under the contracts there are two kinds

ofshipments one being end month and the other mid month Most

of the goods move on the end month vessels which under the terms of

the contract must basically qualify for carriage of jute products by

arriving in port before the end of the month The procedure has

resulted for many years in the bunching of vessels to pick up end

month cargoes The consequences of this antiquated contractual ma

chinery have been therefore to cause the expenditure of additional

time in port Further difficulties encountered in Calcutta include fre

quent strikes slowdowns by supervisory and clerical staff of the Cal

cutta dock labor board severe bore tides power shortages general

strikes berthing delays insufficient dock labor monsoon rains etc

7 Port conditions in Bangladesh also are difficult The principal

loading port for jute carpet backing is Chalna a river anchorage AIl of

the cargoes delivered to Chalna arrive by barge Barges are always in

short supply and are usually in bad condition Loading from barges is a

much slower process than loading from a shoreside facility There is

also a bar problem at Chalna The other major Bangladesh port is

Chittagong which is a river port but not a lighterage port There is also

a bar condition which restricts the draft of arriving vessels Berths are

scarce When grain imports are heavy the port becomes congested to

the point where berthing delays are common and these delays are

aggravated by the monsoon season and in October delays are further

aggravated by cyclones one of which completely devastated the port

several years ago

8 The Pool Agreement was envisioned as a means by which the

parties could achieve economies and improve service despite the diffi

cult conditions discussed above The basic notion was that lines would

cooperate under the guidance of Pool Committees for the Bangladesh

and Calcutta Sections in scheduling sailings and port calls and thereby

reducing the number of sailings as weIl as port time and costs neces

sary for each sailing In addition national flag and individual line

entitlement percentages were included so that each line and national

group could be assured of maintaining a significant and reasonable

portion of the trade revenues The lines thereby anticipated that their

resources would be put to their optimum uses that port service could

be improved through better vessel utilization that fuel savings would

result that rate pressures would diminish and that the ability of the

2S FMC
POOL AGREEMENT NOS 10333 10333 1 AND 10333 2 459

members to serve this trade with its low rated commodities would be

preserved

9 When the Pool Agreement was approved by the Commission in

January of 1980 no individual shares were in effect Although the lines

had not yet agreed to individual pool shares there was an agreement as

to national flag Basic Entitlements which were approved by the

Commission as part of Amendment No 1 After approval by the

Commission the lines began in June of 1980 to implement the pool so

as to permit rationalization pursuant to the guidelines approved by the

Commission

10 When the Pool commenced it developed that only Waterman

sailed from both Calcutta and Bangladesh in June of 1980 Waterman

lifted the available cargo and thereby carried the entire first month s

cargo under the pool Thus Waterman s carryings were far above the

U S flag Basic Entitlements In an effort to implement rationalization

and to bring the lines carryings into closer balance with the Basic

Entitlements Waterman restricted the U S discharge port itinerary on

their July vessel with the understanding that other carriers would

schedule calls for those ports The Trade in the U S reacted with

complaints One problem was that a significant amount of the cargo

shipped in June and July of 1980 consisted of goods as to which the

letter of credit issued prior to commencement of the Pool had com

mitted Waterman as the carrier Thus the shippers were not satisfied

by vessels ofthe other pool members

II Waterman related the situation to the other pool members sug

gesting that the Pool be suspended so that the problems could be

discussed at the scheduled September owners meeting Not all mem

bers were agreeable and Waterman submitted its resignation on August

14 1980 Waterman advised the Commission of its resignation and

stated in a letter of August 27 1980 that the reason for the resignation

was its forced overcarrier status The Commission s Office of Agree

ments advised the member lines in a letter of September 25 1980 of

their concern that the Pool had been operating to force Waterman to

become an overcarrier At the owners meeting in London in Septem

ber of 1980 the situation was discussed and Waterman agreed to

withdraw its resignation after satisfying itself that the pool members

understood its apprehensions as to its overcarriage and werewilling to

take necessary steps to improve the operations of the pool so that

Waterman could reduce its overcarriage

12 Accordingly Waterman withdrew its resignation on September

24 1980 Nevertheless it continued to prove difficult to rationalize

service inasmuch as Waterman continued to carry a portion of trade

cargo far above the approved United States flag share of 45 in the

Calcutta section ofthe Pool Indeed Waterman s carryings rose from a

level of 60 of pool tonnage in August 1980 to 76 at the end of

25 F MC
I

I

I

460 FEDERAL MARITIME COMMISSION

December 1980 Conversely the share ofthe Indian lines in the Calcut

ta section declined far below their approved 4S joint entitlement to

an aggregate total of only 12 of revenues and tonnages Letter of

credit nominations continued to be a problem as the Indian carriers

reported that their vessels were several times withdrawn because of

lack of cargo A dock labor strike in November and December of 1980

created further loading difficulties

13 Ina further owners meeting held on January 27 1981 in Dacca

Bangladesh the members discussed the difficulties encountered in bal

ancing carryings with entitlements in the Pool The Indian Flag carriers

expressed grave concern at Waterman s 76 carrying in the Calcutta

section Waterman responded that its overcarrier position was involun

tary and a matter of great concern to it as well The lines therefore

agreed among other things that the Calcutta General Committee

would assist Waterman and the other lines in rationalizing the services

offered by the lines by scheduling U S discharge ports of call so as to

reduce Waterman s percentage of pool carryings to a target of 60 of

total revenues and tonnage by May of 1981 This 60 figure was of

course far above the approved United States Flag share of 4S which

applied to Farrell as well as Waterman in the Calcutta Section

14 At the same meeting there was a discussion concerning the status

of B S C as an overcarrier in the Chittagong section It was agreed that

B S C would attempt to stay within the limits of its entitlement in the

Chittagong section Of course since B S C was the only Bangladesh

Elag carrier in the Pool it was entitled to the entire Bangladesh

Flag share of 40 which had Commission approval under Agreement

10333 1

15 After the January 1981 owners meeting efforts were made

through the Calcutta Pool Committee to rationalize ports of call in the

Eastern United States The Committee requested Waterman to load

cargo only for a limited range of U S ports while other member lines

sought to provide appropriate coverage for the trade Still problems

remained because ofshipper nominations and also because due to high

interest rates many shippers anticipated financial benefits from Water

man s faster transit time The Indian lines were often unable to obtain

sufficient cargo amounts and complained of having to withdraw their

vessels

16 In March of 1981 a complaint was received from the Burlap and

Jute Association that the service to certain ports Wilmington Del

Norfolk and Newport News Va and Wilmington N C was inad

equate Other complaints were also received for the same reasons

including a call from a Commission staff member who stated that a

complaint had been received concerning inadequate service to Norfolk

Efforts were made to resolve the complaints by ensuring that all

relevant U S discharge ports were adequately covered by the Pool

2S F MC
POOL AGREEMENT NOS 10333 10333 1 AND 10333 2 461

members The Chairman of the New York Governing Committee was

aware of no cargo which went uncarried because of the rationalization

efforts For the first year of Pool operations ending May 31 1981

Waterman s

carryings in the Calcutta section did not drop below 60

of pool revenues Although proposals were made to exclude certain

ports from the Pool so that Waterman could lift cargo to those ports

without increasing its overcarriage the member lines were unable to

reach agreement on such proposals

17 The pool revenues were never liquidated on any basis Under

Articles 5 and 6 of the Amended Agreement the only sanctions for

deliberate under or overcarriage would have involved adjustments to

Basic Entitlements or denial of carrying allowances at the time of

settlement upon a determination by the New York Governing Commit

tee that deliberate under or overcarriage had occurred As no pool

settlement ever took place no sanctions were ever considered for any

under or overcarrier In no case was any member line restricted to the

pool share contained in Amendment No 2 in any respect The de

scribed actions taken by the Pool members were all considered to be

consistent with the authority approved by the FMC in its order of

approval concerning the Amended Agreement

DISCUSSION AND CONCLUSION

While it lasted the Amended Agreement provided a framework for a

pool which established basic carrying entitlements for flag groups

rather than for individual carrier participants General Committees one

for each of the two geographic sections into which the Amended

Agreement was divided monitored the activities These committees

were empowered to request that participants undertake certain rational

ization functions in order to carry out their responsibilities under the

Amended Agreement In order to meet those obligations the partici

pants were authorized to adjust their offerings schedules and or itin

eraries to accommodate the trade or to insure that their cargo liftings

approximate their basic entitlements

The obvious defect in the Amended Agreement was that it was

merely a skeleton As the Commission commented in its Second Order

it could not be operated effectively until it was fleshed out with

individual revenue shares Amendment No 2 might have remedied that

defect had it not been withdrawn and had it been approved

Hearing Counsel s concern about pre approval implementation of

Amendment No 2 apparently arose from fragments of information

imparted by shippers consignees at bypassed United States Ports and

by Waterman itself Those bits and pieces ofcomplaints and conversa

tions led Hearing Counsel to believe that individual pool shares were

being distributed in advance of approval of Amendment No 2 or that

25 F M C
462 FEDERAL MARITIME COMMISSION

some forms ofimpermissible sanctions werebeing imposed upon Water

man by the pool s committees

However it is clear that the measures undertaken by the committees

and by Waterman were authorized rationalization procedures under the

Amended Agreement There were no sanctions and there were no

settlements ofindividual revenue shares

Accordingly Ifind that the answer to Question No 11 is no

16 there

wasno pre approval implementation ofAmendment No 2

ORDER

The investigation instituted under the terms of the Order of Investi

gation and Hearing as modified by the Order On Motion To Terminate

And Stay is discontinued with prejudice against its renewal by way of

informal or formal investigation into allegations ofpre approval imple

mentation ofAgreement No 10333 2

The confidential exhibits attached to Hearing Counsels answering

brief ofJuly 16 1982 shall remain confidential and shall be returned to

Hearing Counsel by the Secretary of the Commission upon this order

becoming the final order ofthe Commission

5 SEYMOUR GLANZER

Administrative Law Judge

16 The answersto tbe subordinate Questions Nos 9 and 10 are also in the negative

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 37

UNION CARBIDE CORPORATION

v

DELTA LINES

NOTICE

November 12 1982

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

1982 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 463
FEDERAL MARITIME COMMISSION

DOCKET NO 82 37

UNION CARBIDE CORPORATION

v

DELTA LINES

Respondent carrier found to have overcharged complainant shipper in the amount of

8 80102 in connection with a shipment consisting of twelve 20foot containers

loaded with insecticides Respondent is ordered to pay reparation in that amount plus

interest as required by the Commission s

regulations

Respondent erred in rating the shipment by failing to include 432 loose cartons when

calculating freight charges Had respondent included these cartons it would have

seen that the shipment satisfied the minimum size requirement published in the tariff

and that it should therefore have used actual weight of the shipment not a higher

minimum weight when beginning its freight calculations

Peter Nelson for complainant

Sean G Burke for respondent

INITIAL DECISION 1 OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Finalized November 12 1982

This case began with the filing and service of a complaint on August

11 1982 in which complainant Union Carbide Corporation alleges that

respondent Delta Steamship Lines Inc had violated section 18b 3 of

the Shipping Act 1916 by overcharging Union Carbide on a shipment

of insecticides which Union Carbide had shipped via Delta from

Charleston South Carolina to Guayaquil Ecuador under Delta s bill

of lading dated March 30 1981 Union Carbide alleges that it was

overcharged in the amount of 8 80102 because Delta failed to include

certain portions of the shipment consisting of 432 loose cartons when

rating the shipment with the result that Delta mistakenly believed that

the shipment fell below the minimum size required for the twelve 20

foot containers which held the shipment Because of that mistaken

assumption Delta allegedly raised the actual weight ofthe shipment to

a

required minimum weight of 85 percent ofthe weight capacity ofthe

containers under the pertinent tariff rule applied the tariff rate of 161

per 2 000 Ibs to such minimum weight to derive ocean freight and

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

Commission Rule 227 Rules of Practice and Procedure 46 CF R 02 227

464 2S FMC
UNION CARBIDE CORP V DELTA LINES

similarly applied incidental container usage bunker surcharge and port

congestion surcharges to the minimum weight rather than actual weight

of the shipment in accordance with other tariff rules Had Delta

correctly included the 432 loose cartons in rating the shipment com

plainant alleges that Delta would not have had to raise actual weights

to 85 percent of the containers weight capacities before applying the

rate of 161 per 2 000 1bs and similarly could have utilized actual

weights when determining the three incidental charges If Delta had

used actual weight furthermore complainant alleges that Delta would

have seen that actual weight times the rate of 161 would have fallen

below a minimum revenue rule in the tariff and Delta would merely

have applied that minimum revenue 2 318 per 20 foot container to

the 12 containers in the shipment the incidental charges remaining at

actual weight times each charge Under this latter method of rating

complainant alleges that total freight would have been 8 80102 below

what Delta actually charged Complainant therefore seeks reparation in

this amount together with interest

In support of its claims Union Carbide furnished the relevant tariff

pages bill oflading packing list and a letter from Delta Line acknowl

edging the claim but declining to honor it because of its tariff rule

which barred such claims if submitted more than six months after

shipment Complainant asks that this case be decided under the Com

mission s shortened procedure Subpart K ofthe Commission s Rules of

Practice and Procedure 46 C F R 502 181 through 502 187

Although the complaint had been served on August 17 1982 as

noted above and Delta was supposed to have filed an answer either

within 20 days if it declined to consent to the shortened procedure or

within 25 days if it consented to such procedure Delta initially failed to

respond Rather than issue some type of default judgment without

affording Delta an opportunity to explain its failure to respond to the

complaint Iprovided Delta with such opportunity under less technical

administrative procedures and to assure myself that Delta had been

given a full opportunity to present its defense See Order to Show

Cause Why Initial Decision Should Not Issue Under the Shortened

Procedure September 20 1982 2

Shortly thereafter I was contacted

by Delta s general counsel Mr Sean G Burke who advised that the

2

In the Order to Show Cause cited I relied upon anumber of court and agency decisions which

hold that administrative agencies like the Commission are not courts are not bound by hard and fast

technical rules applicable to courts and ought not to use their rules of procedure to defeat the ends of

justice See Oakland Motor Car Co v Great Lakes Transit Corp 1 V 8S B B 308 311 1934 Utd

Buckingham FrI Lines v United States 288 F Supp 883 886 D Neb 1968 NL R B v Monsanto

Chemical Co 205 F 2d 763 764 8th Cir 1953 However agencies whiJe relaxing rules of pleadings

and procedure must ensure that every party has had an opportunity to make its case ordefense City

of Portland v Pacific Westbound Conference S F M B 118 129 1956 Pacific Coast European Con

Limitation on Membership 5 FM B 39 43 1956

25 F MC

465
466 FEDERAL MARITIME COMMISSION

complaint which had been served on Delta s New York office had

apparently become mislaid and had not been transmitted to Delta s

home office in New Orleans Mr Burke further advised that he would

submit a response to the complaint and did so by letter of September

24 1982 Inthat letter he stated that Delta does not dispute the merits

of Union Carbide s claim but denied the claim initially only because of

the tariffs so called six months rule He further advised that Delta does

not wish to defend the validity ofthat rule in consideration of previous

decisions by the Commission and that Delta respectfully requests that

the appropriate order be issued for the refund 3

DISCUSSION AND CONCLUSIONS

The basic principle oflaw which governs overcharge cases is essen

tially the principle enunciated in Western Publishing Company v Hapag

Lloyd A G 13 S R R 16 1972 and its progeny Very simply com

plainants in these types of cases are permitted to show what actually

moved in a shipment notwithstanding bill of lading descriptions How

ever they are required to show the validity oftheir claims on the basis

of a preponderance of the evidence and must set forth sufficient facts

to indicate with reasonable certainty and definiteness the validity of the

claim Merck Sharp Dohme v Atlantic Lines 17 F MC 244 245

1973 See discussion and case citations in Sanrio Co Ltd v Maersk

Line 23 F M C 150 159 164 1980 4

The instant case does not present the problem usually encountered in

overcharge cases in which shippers claim that the carriers charged

higher rates than those specified in the tariffs because the cargo was

misdescribed on the bill of lading on which the carrier relied when

rating the shipments The problem here is not that the cargo was

misdescribed on the bill of lading as to the nature of the commodity

shipped but that the measurement of the shipment was erroneously

understated with the result that Delta invoked a minimum size rule so

as to increase freight charges The facts necessary to establish the

validity of the claim and to support the foregoing conclusion are

I

Also following issuance of the Order to Show Cause Mr B T Woods Area Manager Liner

Services for Union Carbide called me to inquire as to the status of the caae I advised him that in

view of Delta s

response to the complaint and Order to Show Cause as shown in the Jetter of Septem

ber 24 1982 complainant need not file anythinll further in the case and that my Initial Decision would

issue promptly

A Delta hss correctly noted furthermore tariffrules which bar the filing of claim with carriers

beyond i months fler shipment or cause of action accrues cannot be used as defenses 10 complaints

alleging overcharge in violation of section 18b 3 of the Act Furthermore the Commisaion has re

cently issued rule which willrequire the elimination of uch rules in the tariffs themselves 80 that in

the future carriers will be able to honor such claims as the one in the present case without forcing

hippers to me them with the Commission See Sun Co v Lyke Broa 20 F M C 67 69 1977 Kraft

Food v F M C 38 F 2d 44 D C Clr 1976 tariffrule shortening time to submit claims to carriers

are not defenses 10 formal complaint filed with Commi sion Docket No 81 1 Time Limitfor Filing

of Overcharge Claim 2 F M C 18 1982

2 F M C
UNION CARBIDE CORP V DELTA LINES

clearly shown in the shipping documents particularly the packing list

and the bill of lading and are not disputed by Delta These documents

show that the shipment of insecticides which was carried in twelve 20

foot containers weighed a total of 278 136 Ibs and measured 11 346

cubic feet However the bill of lading on which Delta relied when

rating the shipment shows 278 136 Ibs but only 10 488 cubic feet The

reason why the bill of lading shows fewer cubic feet than actually

shipped is that someone failed to carryover to the bill of lading the

measurement figures for 432 loose cartons shown on the packing list

These loose cartons measured 858 cubic feet Had Delta added these

858 cubic feet to the 10 488 cubic feet comprising the rest of the

shipment its bill of lading would have shown the correct total measure

ment of 11 346 cubic feet 10488 plus 858 This figure more than

equals 85 percent of the cubic capacity ofthe twelve 20 foot containers

Therefore according to Delta s tariff the shipment can be rated at

actual weight not at the higher minimum weight also set at 85 percent

of weight capacity of the containers 5

By using actual weight basic

ocean freight amounts to 22 389 95 278 136 Ibs times 161 per 2 000

Ibs However because this amount is below the required minimum

revenue for 12 containers rated at 2 318 per 20 foot container under

the tariff 6base freight is raised to 27 816 12 containers times 2 318

The three incidental charges container usage bunker surcharge and

port congestion are figured at actual weight times each charge The

total freight then comes to 32 683 38 the correct amount which Union

Carbide should have paid Since Union Carbide actually paid 41 484

based upon the erroneous raising of actual weight of the shipment to a

minimum weight of 85 percent of the containers aggregate weight

capacity Union Carbide seeks return of the additional amount some

8 80102 plus interest The following table illustrates the foregoing

calculations

IS Delta s tariff has arule Rule 43 N 3 which provides that if cargo rated by weight tons does not

fill acontainer to 85 percent of the recorded weight capacity the carrier willraise the actual weight

to afigure which represents 85 percent of the weight capacity of the container when rating the ship

ment Eighty five percent of the weight capacity of the twelve 2Qfoot containers used by Delta

amounts to 423 300 Ibs and Delta rated the shipment by using that amount rather than the actual

weight of the shipment which was 278 136 lbs However Delta s tariIT also has arule Rule 43 N 4

which makes the preceding 85 percent rule inapplicable if the cargo fills the container to 85 percent of

the recorded cubic capacity of the container Another tariff rule 43N1

defines 85 percent of the

cubic capacity of a20 foot container to be 935 cubic feet 85 percent of 1 100 cubic feet Because the

aggregate cargo filling the 12 containers in thesubject shipment occupied morethan 935 cubic feet per

container J 1 346 cu ft total measurement divided by 12 equals 945 cubic feet the shipment should

have been rated at the actual weight 278 I 36 Ibs rather than the minimum weight of 423 300 Ibs

6

Delta s tariffRule 43 N 8 requires aminimum revenueof 2 318 per 20 foot container

25 F MC

467
468 FEDERAL MARITIME COMMISSION

Correct Freight Calculation

12 containers 278 136 Ibs x 161 per 2 000 Ibs 22 389 9

Minimum revenue 27 816 00 required under Rule 43 N8 2 318

per container x 12

Additional Charges

Container usage 278 136 Ibs x 10 2000 Ibs

Bunker surcharge 278 136 Ibs x 22 2000 Ibs

Port congestion surcharge 278 136 x 3 2000

Ibs

1 390 68

3 O 9 0

417 20

Total 32 683 38

Delta s Freight Calculation

423 300 Ibs x 161 per 2 000 Ibs 3407 6

Additional Charges

Container usage 423 300 Ibs x 10 2000 Ibs

Bunker surcharge 423 300 Ibs x 222000 Ibs

Port congestion surcharge 423 300 Ibs x 3

2000 Ibs

2 116 0

4 6 6 30

634 9

Total 41 484 40 7

Total freijht paid

CorrectFreight

Overcharge

41 484 40

32 683 38

8 80102

I conclude that respondent Delta Steamship Lines Inc has over

charged Union Carbide in the amount of 8 80102 because of Delta s

failure to account for the measurement of 432 loose cartons in the

shipment which when added to the measurement figures relating to

the other portions of the shipment satisfied the minimum size require

ments of Delta s tariff and required Delta to rate tlie shipment on the

basis ofactual not the higher minimum weight On such actual weight

basis base ocean freight falls below another minimum revenue per

container rule but even after applying that rule total freight amounts to

8 80102 less than the amount Union Carbide actually paid Reparation

is therefore awarded in that amount In accordance with the Commis

sion s governing regulation concerning interest Delta shall pay Union

Carbide such amount plus interest computed under the formula provid

7

Correct total is 41 483 40 Delta s addition was inerror

2 FMC
UNION CARBIDE CORP V DELTA LINES

ed by that regulation See Rule 253 46 C F R 502 253 24 F MC 145

1981 8

8 NORMAN D KLINE

Administrative Law Judge

8

The regulation cited provides that simple interest will accrue from date of payment of freight

charges to the date reparations are paid It also provides that t he rate of interest will be calculated

by averaging the monthly rates on six month US Treasury bins commencing with the rate forthe

month that freight charges were paid and concluding with the latest available monthly Treasury bill

rate at the time reparations are awarded The Commission however also stated that when the facts

are not reasonably ascertainable parties could settle overcharge cases in which case the amount of

interest could be left to theparties See 24 F M C at 149

25 F M C

469
FEDERAL MARITIME COMMISSION

DOCKET NO 82 26

RASCATOR MARITIME S A

v

CARGILL INCORPORATED

ORDER

November 15 1982

This proceeding is before the Commission upon review of Adminis

trative Law Judge Charles E Morgan s Order Approving Settlement

Agreement and Discontinuing Proceeding served September 2 1982

In that Order the Presiding Officer approved the settlement negotiated

by the parties but further held that the Commission did not have

jurisdiction over the complaint because it wastime barred

The two year limitation in section 22 of the Shipping Act 1916 46

U S C 821 applies only to requests for reparations The complaint in

this proceeding alleged violations of section 17 of the Act 46 U S C

816 and asked for a cease and desist order as well as reparations

Thus the Commission retains jurisdiction over the complaint even

though the actions which form its gravamen took place more than two

years ago The Commission therefore rejects the Presiding Officer s

statements concerning its lack ofjurisdiction over the matter at issue

However we agree that the parties settlement agreement does not

appear to violate the Act and should be approved

THEREFORE IT IS ORDERED That except to the extent modi

fied above the September 2 1982 Order Approving Settlement Agree

ment and Discontinuing Proceeding is adopted by the Commission and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

470 25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 26

RASCATOR MARITIME S A

v

CARGILL INCORPORATED

RULING ON MOTION FOR ANORDER APPROVING

SETTLEMENT AGREEMENT AND DISCONTINUING

PROCEEDING

Partially Adopted November 15 1982

By complaint filed April 29 1982 and served May 5 1982 the

complainant Rascator Maritime S A Rascator alIeged that respond

ent Cargill Incorporated Cargill operated a grain elevator at Chan

nelview Texas known as the Cargill Houston Elevator that Cargill

as operator of amarine terminal filed a tariff with the Federal Maritime

Commission namely its Houston Tariff No 2 that Rascator chartered

the M V BRABANTIA and on or about September 20 1978 subchar

tered this motor vessel to the Embassy of Pakistan for the carriage of

wheat in bulk from the U S Gulf Coast to Karachi Pakistan that an

application was made to berth this vessel at the Cargill Houston Eleva

tor and that on September 27 1978 this vessel docked at the Cargill

Houston Elevator berth and commenced loading that only one vessel

could be loaded at a time at this terminal facility that loading of this

vessel reasonably could take about two days that for its own reasons

Cargill did not complete promptly the loading of the BRABANTIA

that Cargill received other vessels for loading out of turn and that

loading of the BRABANTIA was not completed until October 10 1978

and this motor vessel sailed from Houston for Karachi on October II

1978

The complainant further alIeged that Cargill on or about October 18

1978 submitted an invoice for 21 357 26 for dockage for the Septem

ber 27 to October 10 1978 period that Rascator through its agent

protested the invoice on October 25 1978 that Rascator on September

25 1981 filed suit against Cargill in the United States District Court

for the Southern District of New York based upon the above circum

stances Rascator Maritime SA v Cargill Incorporated S D N Y No 81

Civ 5956 CLB and that Rascator sought to recover damages of

409 088 77

25 F MC 471
472 FEDERAL MARITIME COMMISSION

Cargill s answer to the complaint in the Federal Court included a

defense that the allegations of the complaint fell within the exclusive

primary jurisdiction ofthe Federal Maritime Commission

Cargill in Federal Court further argued that its actions were justified

and permitted by an item in its tariff which provided

Cargill in its sole discretion may change the turn of vessels

whether berthed or not or assign a berth to vessels passed in

specific compartments when confronted by an urgent need to

receive or ship a particular grade or kind ofgrain or when in

its judgment conditions at the dock or in the elevator will be

facilitated thereby

Cargill moved for summary judgment in the Federal Court and

United States District Court Judge Brieant decided the motion on

January 29 1982 stating in part that even if the Federal Maritime

Commission found that its jurisdiction over compensatory damages

were time barred that the Commission still might grant prospective

relief to the complainant if the Commission were to sustain Rascator s

criticism of the tariff 46 U S C section 816 with regard to the Com

mission s power to make findings regarding just and reasonable regula

tions and practices related to or connected with the receiving handling

storing or delivery of property under section 17 of the Shipping Act

1916 the Act

Therefore Judge Brieant concluded that the Court should abstain in

favor of the exercise by the Federal Maritime Commission of its pri

mary statutory jurisdiction and Rascator was directed to file an appro

priate complaint with the Commission and proceedings in the Federal

Court were stayed pending action by the Commission

Further it appears that Judge Brieant reserved the right to rule on

the matter of compensatory damages to Rascator if such damages were

unobtainable before the Commission because time barred The above

matters have been recited in some detail because oftheir bearing on the

Commission s juriSdiction

Now the matter for current consideration and ruling is the Joint

Motion For an Order Approving Settlement Agreement and Discon

tinuing Proceeding filed by Rascator and Cargill on August 25 1982

The parties submit that their settlement agreement is fair to both in

view of the complex legal issues the difficulties of making full discov

ery and the estimated cost and complexity of continued litigation

Their settlement agreement provides in part after the discontinuance

ofboth ofthe proceedings the one before the Commission and the one

pending in the U S District Court that Cargill pay 25 000 to Rasca

tor without any admission of liability that Cargill will not receive and

Rascator will not be required to pay any sums with respect to Cargill s

counterclaim in either proceeding

2S FMC
RASCATOR MARITIME S A V CARGILL INCORPORATED 473

It is concluded and found that based upon the pleadings and facts

presented there is no reason shown why the Federal Maritime Com

mission should disapprove the settlement agreement ofthe parties The

settlement agreement does not appear to contravene any law or public

policy

The question remains as to the jurisdiction of the Federal Maritime

Commission The Commission may award reparation or compensatory

damages if a complaint is filed within two years after the cause of

action accrued Insofar as Rascator s complaint seeks damages in con

nection with events occurring more than two years prior to the filing

ofits complaint the complaint appears time barred

The settlement agreement on its face does not appear to be con

cerned with the present or future tariff provisions of Cargill applicable

at its Houston elevator In fact the settlement agreement does not

mention anything about the present or future terms of the tariff of

Cargill applicable at its Houston elevator and the parties are deemed to

have abandoned their contentions under section 17 ofthe Act

Under all the circumstances it is concluded that were the Federal

Maritime Commission shown to have jurisdiction it should approve the

settlement agreement But it is concluded that insufficient facts have

been presented to show that the Commission has jurisdiction over the

settlement agreement ofthe parties

The complaint in this proceeding is dismissed for lack ofjurisdiction

and the proceeding hereby is discontinued

8 CHARLES E MORGAN

Administrative Law Judge

25 EM C
FEDERAL MARITIME COMMISSION

DOCKET NO 73 17

SEA LAND SERVICE INC AND GULF PUERTO RICO

LINES INC PROPOSED RULES ON CONTAINERS

DOCKET NO 74 40

PUERTO RICO MARITIME SHIPPING AUTHORITY

PROPOSED ILA RULES ON CONTAINERS

ORDER

November 18 1982

On July 2 1982 the United States Court of Appeals for the District

of Columbia Circuit issued a Supplemental Opinion Following Remand

in Council of North At antic Shipping Associations and New York Shipping

Association Inc v FMc and U SA D C Cir No 78 1776 in which

it vacated that part of the Commission s May 19 1982 Report and

Order on Remand discontinuing these proceedings On September 23

1982 the Court denied the Commission s

request for rehearing with

respect to the Supplemental Order The Court has directed that the

Commission defer further action in its Dockets Nos 73 17 and 74 40

until it has reached its final decision in its Docket No 81 11 and until

the Supreme Court has concluded its action on a petition for writ of

certiorari with respect to the Court of Appeals March 2 1982 decision

in No 78 1776 The Commission should then reconsider its

conclusions in Dockets Nos 73 17 and 7440

THEREFORE IT IS ORDERED That these proceedings are re

opened and all action in them is stayed pending further order of the

Commission

By the Commission

5 FRANCIS C HURNEY

Secretary

On Octobef 4 1982 the Supfeme Court denied the petition

474 25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 74

AGREEMENT NO 9718 8

CALIFORNIA JAPAN KOREA SPACE CHARTER AGREEMENT

ORDER DISCONTINUING PROCEEDING

November 19 1982

On January 16 1981 the Commission conditionally approved Agree

ment No 9718 the Agreement 1

through August 22 1983 20 S RR

776 One of the conditions required the parties to limit the total con

tainer capacity operated pursuant to the Agreement to 8 512 TEU s

2

See 20 S R R at 785

The Commission s order ofapproval was appealed to the U S Court

ofAppeals for the District of Columbia Circuit by certain carriers who

had protested the Agreement In the meantime on June 23 1981 the

parties filed Agreement No 9718 8 Amendment No 8 which pro

posed to raise the capacity ceiling to 9 126 TEU s by October 21 1981

and to toOlI TEU s by March 30 1982 Protests were filed by Sea

Land Service Inc United States Lines Inc American President

Lines Ltd and Lykes Bros Steamship Co Inc By an Order of

Investigation served December 14 1981 this proceeding was instituted

to determine whether Amendment No 8 should be approved disap

proved or modified pursuant to section 15 of the Shipping Act 1916 46

U S C 814

The Order of Investigation set five issues down for investigation 1

the relevant market for purposes ofdetermining the market share ofthe

parties to the Agreement 2 the market share of the parties to the

Agreement 3 whether the trade to which the Agreement applies is

overtonnaged and if so to what extent 4 whether there is adequate

forty foot container and reefer capacity in the trade and 5 whether

there has been or will be enough cargo growth in the trade to justify

increasing the tonnage in it to the extent proposed by Amendment No

8 The proceeding wasinitially limited to simultaneous filing ofopening

1 Agreement No 9718 applies to the trade between ports in California and ports in Japan and

Korea and permits the parties to inter alia charter space aboard each other s vessels interchange

equipment and jointly schedule sailings The parties to the Agreement are Japan Line Ltd Japan

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

nihon Steamship Co Ltd Y S Line

2

Twenty foot equivalent unit

25 FMC 475
476 FEDERAL MARITIME COMMISSION

and reply affidavits of fact and memoranda of law before the Commis

sion

All of the parties written submissions have been filed However

pursuant to the decision on July 13 1982 by the Court of Appeals in

Sea Land Service Inc v United States 683 F 2d 491 DC Cir 1982

the Commission is by separate order served this date in Docket No 82

54 Agreements Nos 9718 7 et aL Space Charter and Cargo Revenue

Pooling Agreements in the United States Japan Trades initiating further

hearings on remand into the approvability of the underlying Agree

ment There is extensive congruence between the issues which pursu

ant to the Court s decision require further investigation before the

question of the approval of the Agreement can be resolved and the

issues included within the investigation of Amendment No 8 In addi

tion the issues of overtonnaging market share and projected cargo

growth should be resolved on the most recent probative data available

For these reasons the Commission hereby discontinues Docket No

81 74 The matters put at issue and the record in Docket No 81 74 will

be included in Docket No 82 54

THEREFORE IT IS ORDERED That this proceeding is hereby

discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 35

IN THE MATTER OF AGREEMENT NO 10423 BETWEEN

PHILIPPINES MICRONESIA ORIENT NAVIGATION

COMPANY AND MATSON NAVIGATION COMPANY

ORDER DENYING PETITION FOR

DECLARATORY JUDGMENT OF THE PHILIPPINES

MICRONESIA AND ORIENT NAVIGATION COMPANY

November 24 1982

The Philippines Micronesia and Orient Navigation Company

PM O has petitioned the Commission for a

declaratory order inter

preting the Commission s Order of December 17 1981 approving

Agreement No 10423 between PM O and Matson Navigation Compa

ny Matson l PM O asks the Commission to find that the Order of

Approval was limited to the westbound activities contemplated under

the agreement and was not an exercise of Commission jurisdiction

under section 15 of the Shipping Act 1916 46 U S c 814 over the

eastbound contract carriage provided for in the Agreement The Com

mission has section 15 jurisdiction over the entire Agreement and exer

cised that jurisdiction in approving the Agreement The Petition for

Declaratory Order is therefore denied

BACKGROUND

Agreement No 10423 covers the trade between the U S West Coast

and ports in Micronesia PM O operates 2 vessels between Portland

Los Angeles Oakland and Honolulu on the one hand and the Micro

nesian Islands of Majuro Ebeye Tarawa Kosrae Ponape Truk

Saipan Yap and Koror on the other PM O has a tariff on file for the

westbound service from the U S West Coast to Micronesia but carries

only contract cargo mostly pineapple in the eastbound trade Matson

is the predominant carrier in the US West Coast Hawaii trade

Matson also offers service between the U S West Coast and the Micro

nesian islands ofMajuro and Ebeye via tug and barge between Hawaii

and Majuro Ebeye

Under Agreement No 10423 Matson agrees to transship cargo for

PM O between Honolulu and U S West Coast ports at rates set forth

in a schedule of charges attached to the Agreement The transshipment

1 Notice of the filing of the Petition was published in the Federal Register on July 13 1982 47 Fed

Reg 30646 1982 No comments to the Petition were received

25 F MC 477
478 FEDERAL MARITIME COMMISSION

arrangement applies to both east and westbound trades and no distinc

tion is made in the Agreement between the trades or between PM O s

contract cargo and its common carrier cargo The purpose of the

Agreement is to permit PM O to avoid some sailings to and from the

U S West Coast without disrupting iis 25 30 day service frequency and

to provide time for annual drydocking of PM O s vessels

POSITION OF PETITIONER

PM O urges the Commission to clarify its approval of Agreement

No 10423 by limiting that approval to the activities involved in the

westbound trade in which PM O operates as a common carrier

PM O maintains that as a contract carrier in the eastbound trade it is

neither a common carrier nor an other person subject to the Act for

section 15 purposes and thus its agreement with Matson is not subject

to section 15 insofar as it concerns eastbound voyages PM O notes

that it is lawful for a single carrier to perform both common and

contract carriage Fall River Line Pier Inc v International Trading

Corp 399 F 2d 413 1st Cir 1968 PM O argues that it is the

attempted use of contract carriage to violate the Act or evade regula

tion that brings such carriage under the Commission s

jurisdiction

citing Grace Line Inc v FMB 280 F 2d 790 2nd Cir 1960 cert denied

364 U S 933 1960 Flota Mercante Grancolombiana v FMC 302 F 2d

887 D C Cir 1962 Gulf Mediterranean Ports Conference Agreement No

134 21 8 F MC 459 1965 New Orleans Steamship Association v

Bunge 8 F MC 687 1965 Puerto Rican Rates 2 U S M C 117 1939

and Puerto Rican Forwarding Co Inc Possible Violations 16 S R R 1433

ID 1976

PM O further argues that the Commission has in the past limited its

approval to those portions of agreements dealing with activities which

were subject to its jurisdiction citing cases dealing with agreements

under which some activities are subject to the Interstate Commerce

Commission s ICC jurisdiction and some are subject to FMC jurisdic

tion 2and in which the Commission has approved agreements which

include parties not subject to the Act 3

DISCUSSION

The opening phrase of section 15 establishes the Commission s Juris

diction over persons including common carriers by water without

regard to their activities 4 Neither section 15 nor section I of the Act

Freight Forwarder Agreeme t 71 7 17 F M C 302 1974 Itlgatlon of Wharfage Charges o

Bulk Grol atPacific Coast PoriS 8 F M C 653 1965 Atla tlc Gulf West Coast of South Ametlco Co

fere ce 13 F M C 121 1969

New York Shlppl gAclatlo NYSA 1LA Ma Hour To age Method Assessme t 16 F M C

381 1973 tiffdNew YOlk Shlppl gAssociation Y FMC 495 F 2d 1215 2nd Cir 1974

Specifically itprovides that

Continued

2S F MC
AGREEMENT NO 10423

46 U S c 80l in defining the term common carrier by water

limits the Commission s personal jurisdiction over such carriers to their

activities while acting as such Grace Line Inc v FMC 280 F 2d at

792

Section IS s subject matter jurisdiction extends to any agreement

fixing or regulating transportation rates or fares giving or

receiving special rates accommodations or other special privi

leges or advantages controlling regulating preventing or de

stroying competition pooling or apportioning earnings losses

or traffic allotting ports or restricting or otherwise regulating

the number or character of sailings between ports limiting or

regulating in any way the volume or character of freight or

passenger traffic to be carried or in any manner providing for

an exclusive preferential or cooperative working arrange

ment

If a contract is ofthat nature it is within the reach ofSection

15 and subject to the Commission s

jurisdiction FMC v

Pacific Maritime Association 435 U S 40 53 1978

PM O states in its Petition that it is a common carrier by water in

the U S foreign commerce Its agreement with Matson another such

common carrier provides for the giving or receiving of special rates

accommodations or other special privileges or advantages and estab

lishes a cooperative working arrangement PM O argues that its

contract carriage eastbound makes its westbound common carriage

possible In facilitating that eastbound service as well as the westbound

service the Agreement affects competition among these common carri

ers and falls within the ambit of section 15

None ofthe cases relied upon by PM O requires the Commission to

limit its jurisdiction under section 15 as requested In Agreement No

134 21 Gulf Mediterranean Ports Conference supra the Commission in

vestigated an amendment to a conference agreement exempting from

conference jurisdiction full shiploads of one commodity by one shipper

under charter conditions The conference argued that the amendment

was outside the Commission s

jurisdiction because it related to tramp or

contract operations exempted by section I of the Act The Commission

ruled that the agreement was among carriers subject to the Act and

would be disapproved if the contract operations would result in dis

crimination against common carrier patrons in violation of section 16 of

the Act 46 U S C 815 Id 8 F M C at 707 ID

adopted at 8

F MC 460 The Commission thus asserted section 15 jurisdiction over

the agreement the question of discrimination violative of section 16

Every common carrier by water orother person subject to thisAct shall file immediately

with the Commission a true copy or if ora a true and complete memorandum of every

agreement with anothersuch carrier orother person subject to this Act

25 F MC

479
480 FEDERAL MARITIME COMMISSION

related to the agreement s approvability not the Commission s

jurisdic

tion under section 15

In Fall River Line Pier Inc v International Trading Corpsupra the

court ruled that a terminal s services in connection with common carri

ers did not bring its alleged discrimination against a contract carrier

within the Commission s jurisdiction either under section 16 or section

17 of the Act 46 U S C 816 5Fall River did not deal with the

Commission s

jurisdiction under section 15 The issue raised by

PM O s Petition is not whether the Commission has jurisdiction over

its operations as a contract carrier under sections 16 and 17 but over its

relationships with other common carriers under section 15 6

The Commission s section 15 jurisdiction is not limited by the subject

matter jurisdiction granted in other sections of the Act The cases

interpreting the subject matter jurisdictional reach of section 15 have

noted the expansive nature of that jurisdiction Volkswagenwerk Akti

engesellschaft v FMC 390 U S 261 273 1967 in keeping with the

provision s purpose to regu1ate competition in the shipping indus

try FMC v Pacific Maritime Association 435 U S at 54 The Commis

sion has appropriately asserted subject matter jurisdiction over agree

ments which include some parties not subject to its personal jurisdic

tion N Y Shipping Association v FMc supra as well as agreements

among persons subject to its jurisdiction which provide for activities

not subject to jurisdiction under other sections of the Act but which

affect competition among the parties

In Freight Forwarder Agreement No 71 7 17 F MC 302 1974 the

Commission asserted jurisdiction over an agreement among parties sub

ject to its personal jurisdiction where the activities contemplated under

the agreement acquisition of ICC Part IV freight forwarder rights

were not subject to FMC substantive regulation but the agreement was

one to affect competition among the parties Contrary to PM O s

interpretation in that case the Commission did not eschew section 15

jurisdiction despite its recognition that some of the ultimate activities

contemplated would not be subject to its continuing substantive regula

tion under other sections ofthe Act

Similarly in Transpacific Freight Conference of Japan v FMC 314 F

2d 928 9th Cir 1963 the Commission s section 15 jurisdiction to

interpret a previously approved agreement was upheld despite the fact

fi This case is inconsistent with the earlier Grace Line supra and Flota Granc rnbiana supra cases

which it criticized The latter cases are better reasoned and have been consistently fonowed by this

Commission and the courts

6

Although the Commission indicated some reluctance to assert section J jurisdiction overthe seg

regated activities of a terminal operator which served contract carriers at one facility and common

carriers at another see New Orleans Steamship Assoc R Bunge supra that case cannot be read so

broadly The case did not discuss section 15 jurisdiction or distinguish between personal and subject

matter jurisdiction under section 1 S

2S FM C
AGREEMENT NO 10423 481

that the incident giving rise to the need for the interpretation involved

foreign to foreign carriage under an agreement covering both the U S

and Canadian trades with Japan 7The courts fundamental reason for

affirming the Commission sjurisdiction was that the decision of the

conference members to file a unitary agreement covering both trades

subjected the entire agreement to FMC jurisdiction under section 15

since it was among common carriers in foreign commerce as defined

in the Act Id 314 F 2d at 933 The court agreed with the Commis

sion s refusal to treat the agreement as two agreements only one of

which would be subject to its jurisdiction d 314 F2d at 934 footnote

6 The court there further noted the agreement s provisions relating to

submission ofthe agreement for FMC approval and effective date after

Commission approval Id

Agreement No 10423 similarly provides unitary treatment of the

PM O arrangement with Matson without regard to whether it is in the

eastbound or westbound trade and provides for an effective date fol

lowing Commission approval We believe the parties created a unitary

agreement which was duly submitted to the Commission for approval

pursuant to section IS The Commission exercised its jurisdiction under

section 15 in approving Agreement No 10423 in its entirety

THEREFORE IT IS ORDERED That the Petition for Declaratory

Order is denied

By the Commission

S FRANCIS C HURNEY

Secretary

1

The court however noted that the fines imposed on complainant by the neutral body and set

aside by the Commission were not based upon the foreign ta foreign transaction but upon complain

ant s

refusal to pennit inspection of its records by t neutral body which it maintained was ineligible

for appointment as such under the terms of the conference agreement Thus it was aprovision of the

agreement universaUy applicable to both trades which the Commission was interpreting and not its

direct applicability to atransaction in anon US trade

Vice Chairman Moakley s concurring opinion is attached

25 F MC
482 FEDERAL MARITIME COMMISSION

Vice Chairman Moakley concurring

The majority opinion has addressed the rather narrow question pre

sented by the subject petition and has concluded correctly in my

opinion that as a unitary interrelated package the entire agreement

between Matson and PM O is subject to our jurisdiction under section

15 of the Shipping Act However the rationale used by the majority

contains an implication that an agreement between these two parties

dealing solely with the eastbound contract carriage of PM O would

also be subject to section 15 because of its affect on competition

between the common carrier operations ofthe parties 1

I believe that this is too broad a

reading of our jurisdiction under

section 15 There are many agreements among common carriers by

water which affect competition among such carriers but which are not

subject to FMC jurisdiction Conferences serving Canadian or Mexican

ports whose members also serve U S ports are cprime examples of such

arrangements The competitive impact of such conferences on U S

common carrier service is obvious but has never been and hopefully

never will be used as a basis for jurisdiction under section 15

In order for section 15 to apply to an agreement there must be both

personal jurisdiction and subject matter jurisdiction IfPM O is purely

a contract carrier eastbound and if it should enter into an agreement

with Matson dealing solely with that contract carriage it would be

arguable whether either personal jurisdiction or subject matter jurisdic

tion attached Itherefore disassociate myself from any implication to

the contrary

1

The majority order states at p s npM tO argues that its contract carriage eastbound makes its

westbound common carriage possible In faoiUtating that eastbound service 8S welt 88 the westbound

service the Agreement affects competition among these common carriers and falls within the ambit of

section 15

2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 8

COMPLIANCE WITH GENERAL ORDER 7 REVISED

SELF POLICING

ORDER

November 26 1982

By Order served January 22 1982 the Commission directed the

member lines of five rate agreements Respondents 1

to show cause

why those agreements should not be disapproved for failure to comply

with the requirements ofGeneral Order No 7 G O 7 46 CF R Part

528 2

In response Agreement Nos 8470 8480 and 8490 Household

Goods Agreements filed a joint Motion to Dismiss and Petition for

Exemption The remaining two agreements Agreement Nos 8760 and

9247 Pacific India Agreements filed amendments to their underlying

agreements in an attempt to comply with G O 7 and simultaneously

filed identical Motions to Dismiss The Commission s Bureau of

Hearings and Field Operations submitted a memorandum in reply

POSITIONS OF THE PARTIES

The Petition filed by the Household Goods Agreements seeks an

exemption from the G O 7 neutral body requirement to permit an

employee to act as the head of their policing authority pursuant to 46

CF R 528 3 b 3 They argue that their trades are relatively free of

malpractices because they are limited to commercial movements of only

one commodity used household goods Further they contend that

because of the nature of this traffic there is no incentive for carrier

rebating It is also alleged that the agreements are so limited in scope

that the retention of an outside independent selfpolicing body would

impose an unrealistic financial burden on their members In this regard

1 Respondents are International Household Goods Rate Agreement Agreement No 8470 U S

Hawaii Puerto Rico Guam Household Goods Rate Agreement Agreement No 8480 US Alaska

Household Goods Rate Agreement Agreement No 8490 Pacific India Rate Agreement Agreement

No 8760 and Pacific India Rate Agreement Agreement No 9247

2 GO 7 was amended on September 2 1978 43 F R42760 to establish minimum standards for

judging the adequacy of selfpolicing activities assist ocean carriers to obtain expeditious approval of

their section 15 agreements concerning selfpolicing provide the Commission with reliable information

concerning the nature and performance of selfpolicing systems and curtail rebating and other mal

practices by ocean carriers 46 CF R i

528 Oa Agreements subject to the rule were given until

January 1 1979 to file conforming amendments These rules were subsequently upheld by the U S

Court of Appeals for the DC Circuit TronsPacific Freight Conference of Japan Korea v FM C 650

F 2d 1235 D C Cir 1980 cert denied 451 US 984 1981

25 FMC 483
484 FEDERAL MARITIME COMMISSION

the Household Goods Agreements point out that their total member

ship is 79 carriers that in 1980 only 20 shipments were made under the

agreements for gross revenuesof 180 464 20 and the estimated cost of

an independent policing body would be 197 500 00 These Respond

ents suggest that the president of the Household Goods Carriers

Bureau Inc is well qualified to conduct selfpolicing activities and

would be able to do so without conflicting with his other obligations

In the alternative they request that the retired former president of the

Household Goods Carriers Bureau be permitted to act as their inde

pendent policing authority If their Petition is not granted these Re

spondents contend that they will accept disapproval of their agree

ments The alleged result of this action would be the proliferation of

independent tariffs and the possibility that some carriers would leave

the trades

The Pacific India Agreements amended their underlying agreements

in an attempt to comply with the requirements of GO 7 Because they

have allegedly taken all action available to them they contend that

they should be dismissed from this proceeding and be treated in the

same manner as other agreements which presently have self policing

amendments pending before the Commission An affidavit attached to

their motions argues that these self policing amendments could not have

been filed sooner The Agreements Secretary states that they began

drafting conforming amendments in February 1981 but that it was not

until September 1981 when their petitions for exemption were denied

that they knew for a certainty that they would need to adopt a self

policing system They advise that it then took them until March 1982 to

get their final draft approved by the membership

DISCUSSION

The amendments to Agreement Nos 8760 and 9247 which were filed

to comply with G O 7 Agreement Nos 8760 12 and 9247 9 respec

tively were conditionally approved by the Commission on June 16

1982 The conditions were subsequently met and these agreements

therefore stand approved as of August 12 1982 Because the Pacific

India Agreements are now in full compliance with G O 7 no further

purpose would be served by continuing this proceeding as to them and

they will therefore be dismissed

A review of the Household Goods Agreements Petition for Exemp

tion and the affidavit attached thereto indicate that they have met the

requirements of 46 C F R gg 528 3b 3 i iii Accordingly they will

be granted an exemption from the independent selfpolicing authority

requirement so that on of their officers or employees may act as the

head of their policing authority As a result these Agreements will

likewise be dismissed from this proceeding

2S F MC
COMPLIANCE WITH GENERAL ORDER 7 REVISED SELF 485

POLICING

THEREFORE IT IS ORDERED That Pacific India Rate Agree

ment No 8760 and Pacific India Rate Agreement No 9242 are dis

missed from this proceeding and

IT IS FURTHER ORDERED That the Motion to Dismiss and

Petition for Exemption filed on behalf of the International Household

Goods Rate Agreement Agreement No 8470 the U S HawaiiPuerto

Rico Guam Household Goods Rate Agreement Agreement No 8480

and the U S Alaska Household Goods Rate Agreement Agreement

No 8490 is granted to the extent discussed above and these agreements

are also dismissed from this proceeding and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

8 FRANCIS C HURNEY

Secretary

25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 80 54

TIME VOLUME RATE CONTRACTS TARIFF

FILING REGULATIONS APPLICABLE TO

CARRIERS AND CONFERENCES IN THE

FOREIGN COMMERCE OF THE UNITED STATES

ORDER

December 8 1982

On July 8 1982 the Commission issued a final rule in the above

referenced proceeding which sets forth uniform procedures concerning

the use of time volume rates 47 Fed Reg 29671 The rule permits the

offering of time volume rates by common carriers by water in the

United States foreign commerce or conferences of such carriers sub

ject however to several conditions including the requirements that

time volume rates and related contracts be published in tariffs on file

with the Commission and that time volume contracts contain certain

minimum provisions

Sea Land Service Inc has filed a Petition seeking clarification of

certain aspects of the rule Sea Land contends that the rule should be

clarified to expressly provide that time volume rates may not be imple

mented without an executed contract between the parties which con

tract must be retained by the designated recordkeeper Inaddition Sea

Land seeks clarification from the Commission that the filing of a speci

men time volume contract complies with the tariff filing requirement

contained in the rule 46 CPR 536 7 a

The Commission believes that the rule as it presently stands is suffi

ciently clear on the point that a time volume rate cannot be implement

ed without an executed time volume contract The definition of a time

volume rate clearly indicates that such a rate can only be implemented

pursuant to the terms of a time volume contract 46 C P R 536 2p

That contract must be one executed between the offeror of the time

volume rate and the individual shipper or consignee accepting the rate

and shipping its goods pursuant to it

The rule does not however require that the designated recordkeeper

for time volume shipment records also maintain a

copy of the exe

cuted time volume contract While such a

requirement has a certain

appeal the Commission believes that this is a matter better left to the

parties discretion They are of course free to stipulate in their con

tract that the recordkeeper will maintain a

copy ofit

486 25 F MC
TIME VOLUME RATE CONTRACTS

The Commission further believes that the fact that the filing of a

specimen time volume contract does comply with the requirement that

time volume contracts be published in tariffs on file with the Commis

sion is reasonably apparent from a reading of the rule Section 536 7 a

states that t

ime volume rates and related contracts shall be published

in tariffs on file with the Commission and made available to all shippers

or consignees under the same terms and conditions 46 C F R 536 7 a

The contract to be published in the tariff and made available to all

shippers could only be a specimen contract and not an executed con

tract between the offeror and one shipper or consignee There is no

need therefore to amend the rule to make this fact clearer

THEREFORE IT IS ORDERED That the Petition for Clarifica

tion filed by Sea Land Service Inc is granted to the extent discussed

above and is denied in all other respects

By the Commission

S FRANCIS C HURNEY

Secretary

25 FMC

487
FEDERAL MARITIME COMMISSION

DOCKET NO 81 62

WESTINGHOUSE ELECTRIC CORPORATION

v

DELTA STEAMSHIP LINES INC

ORDER

December 8 1982

This proceeding came before the Commission on a proposed settle

ment submitted for approval by Complainant Westinghouse Electric

Corporation and Respondent Delta Steamship Lines Inc which would

terminate their controversy over the proper classification of oil circuit

breakers carried by Delta on behalf ofWestinghouse

The parties reached a settlement after the issuance of an Initial

Decision by Administrative Law Judge Charles E Morgan and the

filing ofExceptions by Delta

BACKGROUND

The dispute which gave rise to the settlement in question involves

three shipments of oil circuit breakers tendered by Westinghouse to

Delta for carriage from Baltimore Maryland to Rio Haina Dominican

Republic Each ofthe circuit breakers measured in excess of 1700 cubic

feet weighed 13 000 pounds and was mounted on its own skid

At the time of the first shipment in December 1980 the tariff of the

United States Atlantic and Gulf Santo Domingo Conference ofwhich

Delta is a member contained a commodity rate of 6450 M for

ELECTRICAL DEVICES Equipment and Materials in minimum

lots of 1600 cft and a Class S5 rate of 167 00 M or 247 00 W for

ELECTRICAL APPARATUS N O S Prior to the second shipment

in February 1981 the Conference revised the description of ELEC

TRICAL DEVICES to read ELECTRICAL WIRING DE

VICES which description also was in effect at the time of the

third shipment in July 1981

Delta assessed ocean freight charges on the three shipments at

167 00 M applicable to ELECTRICAL APPARATUS N O S and

1

6th Rev page 103 eITective I1 S 80 and 7th rev page 103 eITective 1 17 81 EITective August

17 1981 the tariIT description was further revised to read ELECTRICAL WIRING DEVICES

per carrier s container and by adding under Class 55 anew item CIRCUIT BREAKERS Industrial

electrical not household

488 2S F MC
WESTINGHOUSE ELECTRIC CORPORATION V DELTA 489

STEAMSHIP LINES INC

refused to accept Westinghouse s offers of payment based on the 64 50

rate applicable to ELECTRICAL DEVICES

The Presiding Officer found that at the time of shipment the

descriptions electrical devices electrical wiring devices or electrical

apparatus were equally specific Applying Rule 32 of the Tariff pursu

ant to which commodity rates take precedence over class rates 2

the

Presiding Officer determined that the circuit breakers were subject to

the 64 50 commodity rate provided for electrical devices or wiring

devices

Delta filed Exceptions to the Presiding Officer s classification ofthe

February and July shipments as ELECTRICAL WIRING DE

VICES and to the conclusion that the December 27 1980 shipment

could reasonably be classified as ELECTRICAL DEVICES Delta

also requests the correction of some minor technical errors in the Initial

Decision

THE PROPOSED SETTLEMENT 3

Under the proposed settlement the parties agree that the December

27 1980 shipment was subject to the 64 50 M rate applicable to

ELECTRICAL DEVICES whereas in view of the January 17

1981 change in the tariff 4the parties agree that the shipments which

moved in February and July 1981 were subject to the rate of 167 00

M applicable to ELECTRICAL APPARATUS N O S both rates

reduced by the applicable project rate discount 5

DISCUSSION

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

forbids ocean carriers subject to that Act from charging or collecting

a greater or less or different compensation for the transportation of

property than the rates and charges specified in their tariffs In light of

this prohibition while it has generally followed a

policy ofencouraging

the settlement of controversies 6

the Commission has set certain condi

tions for approval of settlements of claims arising under section

18 b 3 that is the parties must show that the settlement is a bona fide

attempt to settle their controversy not a device for obtaining transpor

tation at other than the applicable rates and charges the complaint on

2 As mentioned the Tariff provided acommodity rate for ELECTRICAL DEVICES and aclass

55 rate for ELECTRICAL APPARATUS NO S

3

The full text of thesettlement is attCiched to this Order as Appendix I

As mentioned the tariffwas revised to read ELECTRICALWIRING DEVICES

6

The circuit breakers were proprietary cargo entitled to project rate discounts which reduced the

64 50 to 60 50 and the 167 00 to 160 50

6

Merck Sharp and Dohme v Atlantic Lines 17 F M C 244 1973 Old Ben Coal Co v Sea Land

Service Inc 21 F M C 505 1978 Del Monte Corporation v Matson Navigation Company 22 F M C

364 1979 and cases there cited See also Rule 91 of the Commission s Rules of Practice and Proce

dure 46 CF R 502 91 and section 5b l

of the Administrative Procedure Act 5 U S C 554 c1

25 F M C
490 FEDERAL MARITIME COMMISSION

its face presents a genuine dispute and the facts critical to the resolu

tion of the controversy are not reasonably ascertainable 7In this in

stance no relevant facts are in dispute the sole issue being the proper

classification of the cargo under the applicable tariff Approval there

fore must rest on the merits to insure that the settlement is consistent

with the requirements of section 18b 3 ofthe Act and ofthe carrier s

tariff 8

As stated in the Initial Decision the intrinsic nature of the item

shipped controls the tariff rate to be applied 9

This means that while

tariff words generally are to be given their ordinary meaning matters

outside the express language ofthe tariff may have to be considered in

order to establish the import of those words in a particular context

especially where 1 the language of the tariff is itself vague Aleutian

Homes Inc v Coastwise Line 5 F M B 602 1959 Thomas C Crowe v

Southern SS Co 1 U S S B 145 1929 or 2 there exists a custom or

usage of a trade or a course of dealing of the parties which although

not specified in the tariff is such that it should be applied Sacramento

Yolo Port District v Fred F Noonan Co Inc 9 F MC 551 1966

CS c International v Lykes Bros 20 F MC 552 1978

The tariff description at issue here is arguably vague and there is

conflicting evidence of record as to whether the circuit breakers of the

size shipped are generally considered in the industry as apparatus or

devices However whatever the intent of the carrier may have been

the tariff item itself specified no size or other limitation for the term

ELECTRICAL DEVICES except for the proviso that the ship

ments be in minimum lots of 1600 cft Each of the circuit breakers

exceeded 1700 cubic feet Therefore because the words devices and

apparatus are generic terms referring to a class or group ofunspeci

fied items the classification of the December 27 1980 shipment of

circuit breakers as ELECTRICAL DEVICES does not appear un

reasonable or arbitrary

There remains the question of whether the revision to the tariff

adding the word WIRING to the phrase ELECTRICAL DE

VICES so restricted the meaning ofthe term device as to render it

inapplicable to the last two shipments Both Delta s pricing manager

and its expert witness attested that the phrase ELECTRICAL

WIRING DEVICES is a commonly accepted term in the trade which

would not encompass large oil circuit breakers In addition the

Westinghouse Quick Selector Catalog 25 000 7th Edition 1977 in

Org nlc Chemlc l Glldden Durhee Dlvlsl n of SMC Corp v Atl nttrqfik Exp Semce 18

S RR 1 36 m9 1 40 1979

In reHugoton Anord rkoArea R te C se 466 F 2d 974 9tb Cir 1972

European TrodeSpeclollsts Inc v Prudential Grace Lines Inc 21 F M C 888 890 1979 Sun

mark Inc 22 F M C 714 717 1980

2 F MC
WESTINGHOUSE ELECTRIC CORPORATION V DELTA 491

STEAMSHIP LINES INC

troduced in evidence by Delta lists under Wiring Devices various

types of switches receptacles locking devices wall plates and plugs

none of which approaches in size or description the oil circuit breakers

shipped by Westinghouse Westinghouse s expert witness did not refute

these statements or present any evidence to the contrary The prepon

derance of the evidence therefore leads to the conclusion that the oil

circuit breakers at issue here cannot be classified as ELECTRICAL

WIRING DEVICES

Consequently the proposed settlement whereby the circuit breakers

which moved in December 1980 is to be classified as ELECTRICAL

DEVICES subject to the rate of 64 50 M or as reduced by the

project rate discount to 60 50 and the shipments which moved in

February and July 1981 after the amendment to the tariff would come

under the tariff description ELECTRICAL APPARATUS N O S

subject to the rate of 167 00 M or 160 50 after the project rate

reduction appears to be in compliance with the requirements of section

18 b 3 of the Shipping Act 1916 and of Delta s tariff

THEREFORE IT IS ORDERED That the settlement reached by

Complainant Westinghouse Electric Corporation and Respondent Delta

Steamship Lines Inc which terminates their controversy over the

proper classification of three shipments of oil circuit breakers which

Delta Steamship Company Inc carried in December 1980 February

1981 and July 1981 is approved

IT IS FURTHER ORDERED That the Initial Decision issued in

this proceeding is vacated 10 and

IT IS FINALLY ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

10Approval of the settlement renders moot the Initial Decision

25 F M C
492 FEDERAL MARITIME COMMISSION

APPENDIX I

October J4 1982

Honorable Francis C Hurney

Secretary

Federal Maritime Commission

1100 L Street N W

Washington D C 20573

Re Westinghouse Electric Corporation v Delta Steamship

Lines Inc FMC Docket No 81 62

Dear Mr Hurney

Subsequent to service of the Administrative Law Judge s Initial De

cision in the above referenced proceeding and the filing of Exceptions

thereto by Respondent Delta Steamship Lines Inc Delta Delta

and Complainant Westinghouse Electric Corporation Westinghouse

have entered into further discussions regarding the appropriate rates to

be applied to the three shipments in question based on the evidence of

record As further discussed below the parties have now agreed to a

settlement of the subject dispute in accordance with the rates which

they jointly accept as being properly applicable to each of the subject

shipments

As set forth in the Initial Decision this case involves three separate

shipments of electrical circuit breakers by Westinghouse aboard Delta

vessels from Baltimore to Rio Haina Dominican Republic on Decem

ber 27 1980 February 5 and July 16 1981 respectively At the time of

the first shipment the applicable United States Atlantic and Gulf Santo

Domingo Conference Tariff FMC Tariff No 5 contained entries for

1 ELECTRICAL DEVICES Equipment and Materials in minimum

lots of 1600 cft 64 50 and 2 ELECTRICAL APPARATUS

N O S which was subject to a Class 55 rate equalling 167 00 per

measurement ton or 247 00 per weight ton whichever produced the

greater charge Subsequent to the first shipment but prior to the second

and third shipments the first of these tariff entries was revised to read

ELECTRICAL WIRING DEVICES Equipment and Materials in

minimum lots of 1600 cft 64 50 All of the rates were subject to an

applicable project discount

The Initial Decision concluded that the circuit breakers reasonably

could be considered to be either electrical devices or electrical wiring

devices and recommended that all three shipments be invoiced at the

rate applicable to those tariff entries Delta ftled Exceptions I chal

lenging the conclusion that the circuit breakers could reasonably be

considered electrical wiring devices based on the evidence of record

and maintaining that the last two shipments should have been rated in

accordance with the electrical apparatus tariff item 2 challenging the

25 F MC
WESTINGHOUSE ELECTRIC CORPORATION V DELTA 493

STEAMSHIP LINES INC

determination that the circuit breakers could be reasonably considered

electrical devices as to the first shipment and 3 requesting certain

minor corrections to the Initial Decision But for Delta s belief that the

Initial Decision was clearly erroneous as to Exceptions I and 3

Delta would not have filed its Exception 2

Following receipt of Delta s Exceptions Westinghouse requested its

technical staff to re evaluate the pertinent evidence ofrecord In regard

to Delta s Exception 1 Westinghouse s review indicates that there is

merit to Delta s position and Westinghouse therefore agrees the Initial

Decision should be amended accordingly Westinghouse further agrees

that the minor errors noted in Delta s Exception 3 should be correct

ed by the Commission

Following careful reconsideration of the record and in view of

Westinghouse s concurrence in Delta s Exceptions 1 and 3 Delta

agrees to accept the Administrative Law Judge s findings and conclu

sions in regard to the first shipment of circuit breakers which moved

prior to the tariff change discussed above and agrees that such findings

and conclusions are adequately supported by the evidence of record

Delta therefore withdraws its Exception 2

In accordance with the foregoing and the evidence of record in this

proceeding Westinghouse s December 27 1980 shipment of circuit

breakers should be subject to the tariff rate for ELECTRICAL DE

VICES Equipment and Materials while the February 5 and July 16

1981 shipments should be subject to the tariff rate for ELECTRICAL

APPARATUS N O S The parties therefore request the Commission

to approve settlement ofthis proceeding on such grounds and either to

amend the Initial Decision in accordance therewith or to direct with

drawal ofthe Initial Decision in view ofthe settlement

The parties submit that such settlement is in the public interest and

fully consistent with Section 18 b 3 and the Commission s responsibil

ities thereunder in that the settlement is based upon application offiled

tariff rates that the parties now agree are applicable to the respective

shipments and further that application of such rates is supported by the

evidence of record in this proceeding

25 F MC
494 FEDERAL MARITIME COMMISSION

For all the foregoing reasons Westinghouse and Delta respectfully

request the Commission to approve settlement ofthis proceeding on the

foregoing basis and to issue an appropriate Order in accordance there

with

Respectfully submitted

S

James W Pewett

Kirlin Campbell Keating

1150 Connecticut Avenue

N W

Washington D C 20036

202 296 4911

S

Hopewell H Darneille III

Bowman Conner Touhey Thornton

A Professional Corporation

2828 Pennsylvania Avenue N W

Washington D C 20007

202 965 7600

Attorney for Complainant

Westinghouse Electric

Corporation

Attorney for Respondent

Delta Steamship Lines Inc

JWPImh

cc Honorable Charles E Morgan

Iffor any reason the Commission declines to approve the foregoin settlement of this proceeding

the parties have agreed to and hereby request the Commission to approve an extension of time of

twelve days after receipt of notice of such adverse action for Westinghouse to file aReply to Delta s

Exceptions The parties further agree that under such circumstances the matters set forth herein will

not prejudice theposition of either party

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 48

INTERCORP FORWARDERS LTD INDEPENDENT

OCEAN FREIGHT FORWARDERS LICENSE APPLICATION

AND POSSIBLE VIOLATIONS OF SECTION 44

SHIPPING ACT 1916

ORDER ADOPTING INITIAL DECISION

December 16 1982

This proceeding wasinstituted by Order ofInvestigation and Hearing

served August 21 1981 to determine whether

I

Intercorp violated section 44 a Shipping Act 1916 46

D S C 841 b by engaging in unlicensed forwarding activi

ties

2 Civil penalties should be assessed against Intercorp pursu

ant to section 32 of the 1916 Act 46 D S C 831 for viola

tions of that Act and if so the amount of any such penalty

which should be imposed and

3 In light of the evidence adduced pursuant to the first issue

together with any other evidence adduced Intercorp possesses

the requisite fitness within the meaning of section 44 to be

licensed as an independent ocean freight forwarder

On August 9 1982 Administrative Law Judge Norman D Kline

served an Initial Decision in this proceeding which found that I

Intercorp had operated as a forwarder without a license on 27 ship

ments albeit under mitigating circumstances and had used incorrect

insurance invoices and improperly marked up the cost of accessorial

services 2

Intercorp was otherwise fit to be licensed as an independ

ent ocean freight forwarder and 3

Intercorp should be assessed a civil

penalty of 3 000 to be paid in 500 00 installments at six month inter

vals with 12 interest on the unpaid balance The Commission s

Bureau of Hearings and Field Operations Hearing Counsel filed Ex

ceptions to the Presiding Officer s fitness finding to which Respond

ent Intercorp replied

Hearing Counsel believes that the circumstances surrounding Inter

corp s violations require a finding that Intercorp is not fit to be licensed

as an independent ocean freight forwarder It contends that a

finding

1 The first installment is due 30 days from the date of this Order

2S F M C 495
496 FEDERAL MARITIME COMMISSION

would be consistent with the Commission s precedent Hearing Counsel

maintains that Intercorp s violations are not only devious but also

indicative ofits disregard for the Commission s regulations

Intercorp urges the Commission to affirm the Presiding Officer s

Initial Decision It notes that it has promised to adhere to the Commis

sions

freight forwarder regulations and agreed to periodic audits ofits

activities Finally Intercorp advises that its related business has been

adversely affected by this proceeding and its refusal to perform for

warding services pending the outcome ofthis proceeding

The Commission finds upon review of the record in this proceeding

the parties pleadings and precedent that the Initial Decision is well

reasoned and supportable both in law and fact The Presiding Officer s

fitness and civil penalty findings are supported by Commission prece

dent 2

Accordingly the Commission will adopt the Presiding Officer s

Initial Decision in this proceeding Intercorp s

freight forwarder license

which will allow it to commence business will be issued when it

satisfies the bonding requirements of section 44 ofthe Act

THEREFORE IT IS ORDERED That Hearing Counsel s Excep

tions in this proceeding are denied

IT IS FURTHER ORDERED That the Presiding Officer s Initial

Decision in this proceeding is adopted

IT IS FURTHER ORDERED That Intercorp shall submit the civil

penalty installments and the interest payments to the Commission s

Office of Budget and Financial Management at its offices in Washing

ton D C

FINALLY IT IS ORDERED That this proceeding is discontinued

By the Commission 3

S FRANCIS C HURNEY

Secretary

2

The Commission does not endorse Hearing Counsels

suggestion that applicant respondents have a

heavier burden of proof with regard tomitigation thando licensed respondents

3

Vice Chairman MoakJey dissents on the fitness issue

2S FM C
FEDERAL MARITIME COMMISSION

DOCKET NO 81 48

INTERCORP FORWARDERS LTD INDEPENDENT

OCEAN FREIGHT FORWARDERS LICENSE APPLICATION

AND POSSIBLE VIOLATIONS OF SECTION 44

SHIPPING ACT 1916

This is an investigation begun tb determine whether applicant Intercorp Forwarders Ltd

which to all intents and purposes is Mr Robert Stettner the sole salaried employee

and President deserves to obtain a freight forwarder s license inview of the fact that

allegedly Intercorp operated as a forwarder without a

license for a period of time in

the past in violation of section 44 of the Shipping Act 1916 and carried on certain

billing practices which concealed his mark ups from shippers and used incorrect

insurance invoices when billing shippers on some shipments Additionally the investi

gation is to determine whether Intercorp should pay a civil penalty for the past

violations The Commission s Bureau of Hearings and Field Operations urges a

finding that Intercorp is unfit to obtain a license and should pay a civil penalty of

5 000 for the violations On the basis of the evidence developed and governing

Commission precedent it is found that

1 Intercorp which filed its application in October 1980 deserves an opportunity to

operate its forwarding business notwithstanding past violations of law but should pay

a civil penalty of 3000 and be subjected to periodic auditing

2 The Bureau s hard nosed position marks an abrupt change from Commission prece

dent which has developed the principle that past violations of law do not automati

cally bar a person from obtaining a forwarder s license if there are mitigating

circumstances and if the record does not show that the applicant s conduct has been

so flagrant and reprehensible that he can never be trusted or redeemed In such cases

the Commission has permitted persons to carryon their forwarding businesses after

paying civil penalties and undergoing periodic auditing and surveillance

3 Applicant did carryon forwarding without a license buthad believed that it had a

valid arrangement with a licensed forwarder as a sales representative which it

terminated in early 1981 during the course of this proceeding Applicant also for

warded three shipments later in 1981 in order to retain the business of two of its

valued customers in its customs house brokerage business Applicant s billing prac

tices included mark ups for its services but without so indicating and in five instances

utilized artificial supporting insurance invoices These practices while unacceptable

are no worse than those of at least three recent forwarders who did these things and

more but were permitted to continue operating their businesses by the Commission

after paying fines and agreeing to certain types of surveillance Harsher treatment of

this applicant than that accorded to the three forwarders and others similarly situated

would be arbitrary and unfair

Robert Stettner and David Stettner for applicantrespondent Intercorp Forwarders

Ltd

John Robert Ewers Joseph B Slum Charles C Hunter and Stuart James for the

Bureau of Hearings and Field Operations Office of Hearing Counsel

25 F M C 497
498 FEDERAL MARITIME COMMISSION

INITIALDECISION 1 OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Adopted December 16 1982

This is an investigation begun by the Commission s order served on

August 21 1981 to determine after hearing whether an applicant for a

freight forwarder s license a corporation known as Intercorp Forward

ers Ltd which to all intents and purposes consists of Mr Robert

Stettner its President deserves to obtain such license or whether be

cause ofalleged past violation of section 44 ofthe Shipping Act 1916

namely carrying on the business of forwarding without a license plus

certain other alleged activities relating to Intercorp s billing practices

applicant should be denied a license and furthermore should be assessed

a civil penalty The case had its origins in the filing of an application by

Mr Stettner for Intercorp on October 6 1980 a letter of intent to deny

the application following a staff investigation because of alleged past

violations of law on April 27 1981 and Mr Stettner s

request for a

hearing on the matter submitted by letter dated May 8 1981

In response to his request for a hearing the Commission instituted

the present proceeding and framed three issues relating to Intercorp s

alleged operation without a license and to the alleged billing practices

and questioned Intercorp s fitness to obtain a license Because of these

allegations of operations and practices furthermore the Commission

questioned not only whether Intercorp should be denied a license but

whether Intercorp ought to be assessed civil penalties Specifically the

allegations concerned Intercorp s purportedly having forwarded at least

24 ocean freight shipments and sharing compensation from carriers for

its services presumably with a licensed freight forwarder In addition

applicant allegedly inflated charges for ancillary services including

inland freight and insurance charges on its invoices to shipper clients

and for some of the shipments furnished shippers with false insurance

invoices in order to support its own invoices The Commission s Order

of Investigation and Hearing therefore stated that the alleged viola

tions described above could if proven reflect adversely upon Inter

corp s fitness and set down the following three issues for determina

tion Order of Investigation and Hearing pp 2 3

1 Whether Intercorp violated section 44a ofthe Shipping Act

1916 by engaging in unlicensed forwarding activities

2 Whether civil penalties should be assessed against Intercorp

pursuant to section 32 of the Shipping Act 1916 and Part

505 3 of the Commission s

regulations 46 CFR 505 3 for

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

Commission Rule 227 Rules of Practice and Procedure 46 CPR 502 227

25 F MC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 499

FORWARDER LICENSE APPLICATION

violations of the Shipping Act 1916 and if so the amount of

any such penalty which should be imposed and

3 Whether in light ofthe evidence adduced pursuant to the first

issue together with any other evidence adduced Intercorp

possesses the requisite fitness within the meaning of section

44 b Shipping Act 1916 to be licensed as an independent

ocean freight forwarder

DEVELOPMENT OF THE EVIDENTIARY RECORD

The record in this proceeding was developed under procedures de

signed to avoid unnecessary costs and formalities Two informal confer

ences were held in my office attended by Hearing Counsel and Me

Stettner and a series of status reports were submitted by the Office of

Hearing Counsel on behalf of the Commission s Bureau of Hearings and

Field Operations the Bureau Because Mr Stettner was not represent

ed by an attorney special efforts were made to advise him of custom

ary procedures and his procedural rights Although early in the pro

ceeding it appeared from the Bureau s initial status report that the

issues involved close legal questions as to whether Intercorp s practices

had risen to the level of carrying on the business of forwarding and

the possibility of settlement had been mentioned the Bureau indicated

in their second status report that more recent information about Inter

corp s activities changed the complexion ofthe case from one of inter

esting legal issues with possible settlement to one of violations with

little likelihood of settlement See Order to Furnish Prehearing State

ment November 12 1981 Therefore it was decided that litigation was

necessary After the furnishing ofinformation by Intercorp in response

to the Bureau s discovery requests Hearing Counsel drafted a

proposed

stipulation offacts which with minor modifications was submitted into

evidence In addition Hearing Counsel submitted written testimony of

two Commission employees Mr Robert James Klapouchy ofthe Com

mission s Office of Freight Forwarders and Me Peter S Breslaw

District Investigator assigned to the Commission s Atlantic District

Office in New York City A written statement of Mr Stettner plus

recent financial statements of Intercorp were also received into evi

dence These documents together with various attached documents

constitute the documentary evidence of record In addition in order to

assure Mr Stettner a completely fair hearing the Bureau s witnesses

were presented for cross examination at an oral hearing held on Febru

ary 19 1982 and Mr Stettner was allowed to present his own testimo

ny on the record subject to such questioning as Hearing Counsel

deemed necessary Again the oral hearing was conducted with a view

toward protecting Mr Stettner who had no legal counsel from suffer

ing any disadvantage because of his unfamiliarity with Commission

hearing procedures The post hearing briefing procedure required the

25 F M C
500 FEDERAL MARITIME COMMISSION

Bureau to file first with their opening brief thereby enabling Mr

Stettner and Intercorp an opportunity to ascertain and understand fully

the Bureau s case against applicant and answer it accordingly A final

reply briefwas permitted to the Bureau

The evidentiary record established under the procedure described

above to a large extent with the full cooperation of applicant who

willingly turned over relevant business records requested by the

Bureau essentially shows no factual disputes but rather differing legal

conclusions and disputes over the terminology employed by Hearing

Counsel in describing applicant s past practices The following findings

of fact are therefore drawn largely from t e stipulation offacts entered

into by both parties but with some modifications and amplifications

drawn from other documents and evidence in the comprehensive

record

SUMMARY OF THE EVIDENCE

The Corporation

1 Respondent and applicant Intercorp Forwarders Ltd is a

corpo

ration organized under the laws of the State of New York with its

principal place ofbusiness at 32 Broadway New York N Y

2 Robert Stettner is the President of Intercorp and holder of forty

percent of the corporate stock The remainder of the stock is held by

Serena Stettner

3 Robert Stettner is the sole salaried officer employee of Intercorp

However since May of 1981 Mr Stettner s brother David became a

Vice President engaged in sales and another person named Joseph De

Fronzo became associated with Intercorp as a commission sales agent

Tr 88

4 Intercorp is a licensed customs house broker and alsooperates as

an air freight forwarder and an import consolidation break bulk agent

Robert Stettner s and Intercorp s Two Applications

5 The application which is the subject of thisproceeding is actually

Mr Stettner s second application On May 2 1977 Mr Stettner db a

Trans World Impex Forwarding Ltd applied as a sole proprietor for an

independent ocean freight forwarder license

6 In acknowledging receipt of Mr Stettner s application the Com

mission s Office of Freight Forwarders advised Mr Stettner of the

prohibition against carrying on the business of ocean freight forwarding

without benefit of a license issued by the Commission The letter dated

May 12 1977 states If you should engage in the business offorward

ing before receiving your license you will be subject to penalties

provided by law and may prejudice the issuance of your license

25 F MC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 501

FORWARDER LICENSE APPLICATION

7 By letter dated September 21 1977 Mr Stettner was advised of an

intent to deny his application on the ground that he lacked the requisite

training and experience to be licensed as an independent ocean freight

forwarder According to the information and references received by the

Commission s staff Mr Stettner s experience while working for a li

censed freight forwarder Rohner Gehrig Co had been limited to

sales rather than documentation However by letter dated July 25

1977 Mr Stettner had indicated to the Commission s staff that after

leaving Rohner Gehrig he had tried to obtain employment from freight

forwarders but without success because in his opinion the forwarding

companies deem me to be too much of a threat to their interests Mr

Stettner also indicated that he had acquired reference books on for

warding and had studied them Ex C Appendices III IV VI By

letter of September 8 1977 Mr Stettner had also written to the staff

that it s very important to me to attain this license as soon as possible

because in the meantime Ihave not been able to make a living and

also stated that he had received offers to give him business if he could

obtain a license Ex C Appendix III As part of his application file

there was a letter from an American importer located in Waltham

Massachusetts commending Mr Stettner and concluding by stating

Thank you for a

job well done and it is a pleasure to be dealing with a

man of your knowledge and business acumen Ex C Appendix III

However the file also contained a letter from Mr Stettner s supervisor

at Rohner Gehrig where he had been employed casting aspersions on

Mr Stettner s character and referring to a breach of confidence

which negative reference accounts for Mr Stettner s difficulties in

finding subsequent employment with forwarders according to Mr

Stettner Ex C Appendices III and IV

8 By letter dated October 4 1977 Mr Stettner withdrew his appli

cation stating that he wished to withdraw the application without

prejudice but wish to refile above application as soon as positive results

are received by me pursuant to the U S Customs House Broker s

License examination which Itook yesterday Ex C Appendix VI 2

9 By letter dated May I 1978 Mr Stettner advised the Commis

sion s Office of Freight Forwarders that he had incorporated his firm

and had passed the customs house broker s examination Mr Stettner

as President of Intercorp therefore asserted Intercorp s eligibility to be

licensed as an ocean freight forwarder Mr Stettner advised that he had

received a grade of 82 percent on the examination given on April 3

2

Later Mr Stettner states that he also withdrew the application because of financial difficulties and

because the requirement for bonding had been trebled Ex 0 statement of Mr Stettner February 19

1982 This statement is confusing since the bonding requirement raising forwarder s surety bonds from

10 000 to 30 000 became effective at the end of 1978 long after Mr Stettner s application had been

withdrawn in 1977

25 F M C
502 FEDERAL MARITIME COMMISSION

1978 in New York City and that i nsofar as a licensed U S Customs

House Broker s application for approval as FMC licensed independent

ocean freight forwarder represents prima facie evidence ofdocumenta

tion and procedure competence as required by the Federal Maritime

Commission and since this is in direct reply to the objection of the

Federal Maritime Commission in your letter ofSeptember 21 1977 it is

the wish of the writer to see this matter speedily concluded so that

normal business may ensue Ex C Appendix VII In a later state

ment dated February 19 1982 Mr Stettner states that he had been

advised by Mr Charles Clow former Chief of the Office of Freight

Forwarders that passage of the customs house broker s examination

would represent prima facie evidence ofexport documentation expe

rience Ex D p3 He also stated that in the course of obtaining the

broker s license he had undergone investigation by the Federal Bureau

of Investigation and that customs house brokers functions and that of

ocean freight forwarders overlapped in certain respects when importers

seek duty free treatment on goods imported into the United States and

their brokers must show proof ofthe goods previous manufacture and

exportation from the United States by using export ocean bills of lading

and export declarations Ex D p

2

10 In response to Mr Stettner s letter advising that he had passed

the broker s examination and believed himself now eligible to obtain a

forwarder s license the Commission s Office of Freight Forwarders by

letter dated May 16 1978 advised Mr Stettner that he needed to file

an application for a license as a corporation rather than as a sole

proprietor together with certain financial information pertaining to the

corporation The Office also furnished Mr Stettner with other materials

including a form letter which is sent to all new applicants detailing the

procedure for applying for a license and copies of Form FMC 18 and

General Order 4 as a convenience to the applicant Ex C Appendix

VIII This package of materials again contained a warning against

operating as a forwarder without benefit of a license

11 Between May 16 1978 and September 16 1980 the record

shows nothing to have happened between Mr Stettner and the Com

mission s staff since Mr Stettner did not as yet file his application on

behalf of Intercorp However on September 16 1980 during the

course of a conversation with Mr Robert James Klapouchy a Trans

portation Industry Analyst with the Office of Freight Forwarders Mr

Stettner detailed his ocean freight forwarding experience From this

discussion Mr Klapouchy came to believe that Mr Stettner and Inter

corp had engaged in unlicensed ocean freight forwarding activity This

is because Mr Stettner indicated to Mr Klapouchy that he had entered

into an arrangement with a licensed ocean freight forwarder Gateway

Shipping Co Inc FMC license No 648 pursuant to which Intercorp

had performed a variety ofthe duties normally performed by a licensee

25 F MC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 503

FORWARDER LICENSE APPLICATION

on a number of ocean export shipments and had shared in the forward

er s compensation received from ocean common carriers on such ship

ments

12 During the course of the September 16 1980 discussion Mr

Klapouchy advised Mr Stettner that Intercorp appeared to be carrying

on the business of ocean freight forwarding without benefit of a license

issued by the Commission According to Mr Klapouchy Mr Stettner

replied that under his agreement with Gateway he was equivalent only

to an employee of Gateway and that he was therefore acting legally

13 By letter dated September 22 1980 the Office of Freight For

warders furnished Intercorp with another application packet This

packet also contained a warning against unlicensed ocean freight for

warding which may prejudice the approval of your application and

also against use of another forwarder s license as well as against a

licensed forwarder s permitting its license number to be used by another

person Ex C Appendix IX In addition the packet contained copies

of Form FMC 18 the application for license form and copies of Gen

eral Order 4 and sections I and 44 ofthe Shipping Act 1916

14 On October 6 1980 Intercorp filed the second application by Mr

Stettner but his first on behalf of Intercorp This is the application

which ultimately triggered this formal proceeding

15 As part of the application for Intercorp Mr Stettner was asked

in a formal questionnaire whether he had read and understood all the

provisions ofthe Commission s General Order 4 and the Shipping Act

1916 as it related to the activities of an independent ocean freight

forwarder To both questions he checked the answer block marked

Yes In addition in a

separate letter dated October 6 1980 Mr

Stettner stated that he had read and understood the provisions of

General Order 4 and the relevant provisions ofthe Shipping Act 1916

Ex C Appendix X

16 By letter dated November 29 1980 the Commission s Office of

Freight Forwarders acknowledged receipt of Intercorp s application

and advised Mr Stettner once again of the prohibition against unli

censed freight forwarding activity

17 In early February 1981 the Commission s Bureau ofCertification

and Licensing requested the Atlantic District Office to institute an

investigation of Intercorp s possible unlicensed freight forwarding activ

ity This investigation was begun and Mr Peter S Breslaw a District

Investigator with that Office wasassigned to the investigation

18 By letter dated February 4 1981 the Commission s Office of

Freight Forwarders notified Intercorp that an investigation ofits appli

cation had been instituted

19 Mr Breslaw during the course of his investigation interviewed

Mr Stettner on February 13 17 and 18 1981

25 F M C
504 FEDERAL MARITIME COMMISSION

Intercorp s Arrangement and Practices With Gateway Shipping

20 In March 1978 Intercorp entered into an arrangement with

Gateway Shipping Company Inc Gateway holder of Independent

Ocean Freight Forwarder License Number 648 pursuant to which

Intercorp would handle ocean freight shipments for export in conjunc

tion with Gateway This arrangement terminated some time in Febru

ary 1981 Mr Stettner maintains that during this period oftime he was

not acting as a salaried employee ofGateway but as a sales representa

tive or as a commission sales agent for Gateway Ex B para 9 Ex

D p1 Exs 28 29 In a letter dated May 19 1978 which apparently

summarizes the arrangement between Intercorp and Gateway which is

peculiarly designated as AMK International Corporation a related

company Mr Stettner outlined their understanding Ex 28 Mr

Stettner stated that he agreed to become a sales representative of

AMK International purportedly holding the freight forwarding li

cense

8

Mr Stettner was to be paid 50 percent ofthe carrier compensa

tion payable to the licensed forwarder as well as 50 percent of the

forwarder s fees as a consequence of routing exports through the inter

mediary of the licensed forwarder and was to receive 66 percent of

these fees and compensation apparently if the business is obtained

through the assistance of a foreign agent of Intercorp Forwarders

Ltd Ex 28 The licensed forwarder was supposed to bill Intercorp

for services rendered to Intercorp under the agreement while Intercorp

billed Intercorp s own clients either before or after receipt of the

licensed forwarder s invoices to Intercorp The licensed forwarder s

name was to appear on the ocean bills of lading and that forwarder

was not to solicit clients away from Intercorp in connection with any

shipments which Intercorp had procured and in which the licensee

participated In addition to these provisions Mr Stettner quoted provi

sions of the Commission s General Order 4 forbidding licensees from

sharing any oftheir compensation or fees with shippers consignees etc

formerly 46 CFR 51O 24 c but permitting an employee of a licensed

forwarder to function without having to obtaip his or her own license

formerly 46 CFR 510 4b Moreover Mr Stettner cited a reference

book on forwarding recommending that sales representatives for

a

The designation of the other party to the arrangement in Mr Stettner s written letter Ex 28 as

AMKInternational Corporation is somewhat confusing Itis clear from the actual shipping docu

ments employed under the agreement that Gateway Shipping Co Inc the holder of FMC license

No 648 is the real ocean freight forwarder and that AMKInternational Corporation is some type

of affiliated or related company with a common officer Mr Abe Knipper Apparently Mr Stettner

addressed AMKInternational either out of confusion orforconvenience The Commission s records

as to Gateway in the Office of Forwardera show AMKInternational as apossible affiliatedcompa

ny with Mr Knipper involved poosibly as an air freight forwarder Itis clear frolD those records

however that it is Gateway that holds the ocean freight forwarder s license not uAMK Internation

al The parties in this proceeding however addressed UAMK Internationalft as a Uparentft of Gate

way

2S FMC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 505

FORWARDER LICENSE APPLICATION

licensed forwarders provide a statement to the licensee that no part of

the forwarder s revenue would revert to a person included in the

prohibited list of persons under the applicable regulation and law and

made such statement to the licensed forwarder as part oftheir arrange

ment

21 Twenty four ocean shipments were forwarded under the arrange

ment entered into by Intercorp and Gateway beginning in mid 1978 and

ending in early mid February 1981

22 The twenty four shipments forwarded pursuant to the arrange

ment were handled for clients secured by or for Intercorp

23 The bills of lading and dock receipts necessary to forward the

twenty four shipments handled pursuant to the arrangement were pre

pared by Gateway which also made payments of ocean freight charges

to the carriers involved Intercorp performed all other functions neces

sary to facilitate the export movement of the twenty four shipments

24 Among the services which Intercorp performed in handling the

twenty four shipments forwarded pursuant to the arrangement with

Gateway were the following

a

preparation and processing ofexport declarations

b preparation and processing ofdelivery orders

c

arranging for inland transportation

d arranging for cartage or drayage

e coordinating the movement of cargo to the pier

f

consular document preparation and processing

g preparation and processing of certificates oforigin

h booking arranging or confirming cargo space

i clearing shipments through customs

j arranging for insurance coverage

k preparing insurance certificates

I dealing with foreign banks

m dealing with foreign consignees

n advancing ocean freight charges and

0

receiving examining and implementing shipper instruc

tions

25 Intercorp dealt directly with the clients for whom the twenty

four shipments forwarded pursuant to the arrangement were handled

Gateway had no direct contact with these clients The record contains

also an advertised listing of Intercorp Forwarders Ltd 32 Broadway

Suite 1712 with telephone number included in an alphabetical listing of

various other companies in shipping or related businesses in the Journal

of Commerce Transportation Tickler with no indication of any rela

25 F M C
506 FEDERAL MARITIME COMMISSION

tionship with Gateway Ex 28 attached page Ex 29 answer to

interrogatory No 16

26 The clients for whom the twenty four shipments forwarded pur

suant to the arrangement were not apparently advised directly ofGate

ways role in the forwarding ofthe shipments However these shipper

clients were provided with copies of ocean bills of lading which con

tained Gateway s name on the appropriate space provided for forward

ers together with Intercorp s invoices to the shipper clients Ex 29

answer to interrogatory No 11 In several instances Intercorp itself

indicated to the shipper that AMK International was somehow in

volved Exs 6Q 8 0 90 or the shipper wrote to Intercorp in care of

AMK International Ex I T

27 Intercorp invoiced the clients for whom the twenty four ship

ments were forwarded These clients were not provided with copies of

Gateway s invoices to Intercorp

28 On ten of the twenty four shipments forwarded under the ar

rangement Intercorp deducted amounts from the sums paid to Gate

way equal to fifty or sixty percent of the ocean carrier compensation

received by Gateway on these shipments The amount of 1 642 61 was

so retained by Intercorp

29 Intercorp received 1 570 in forwarding fees on the twenty four

shipments forwarded under the arrangement

30 On February 18 1981 Mr Breslaw the Commission s District

Investigator in New York interviewed Mr Stettner and advised him to

discontinue the aforesaid activities Mr Breslaw believed that what Mr

Stettner and Intercorp had been doing constituted unlicensed forward

ing in violation of section 44 of the Shipping Act 1916 but Mr

Breslaw assuming that Mr Stettner understood the applicable law did

not go into detailed enumeration of what constituted unlicensed for

warding Nor did Mr Breslaw cite to Mr Stettner Commission deci

sions holding that the activities described above constituted unlicensed

forwarding Mr Breslaw also does not recall that he flatly stated to Mr

Stettner that these activities constituted unlicensed forwarding Howev

er Mr Breslaw did explain the nature of his investigation to Mr

Stettner and referred to the relevant portion of the Shipping Act

relating to unlicensed forwarding Tr 22 28 39 Ex B para 14 Ex

D

The Three Shipments Forwarded After Intercorp s Arrangement With

Gateway Had Terminated

31 Subsequent to Mr Stettner s discussions with Mr Breslaw in

February 1981 Intercorp forwarded three additional ocean shipments

for two clients on or about April July and August 1981 Ex A para

18 21 Ex A Appendices 25 27 Tr 39 85

2S FM C
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FORWARDER LICENSE APPLICATION

32 Intercorp prepared all documentation except perhaps for dock

receipts on two of the shipments Tr 86 and performed or arranged

for the performance of all services necessary to facilitate the export of

these three shipments for which Intercorp received 466 in forwarding

fees

33 These three shipments were handled by Mr Stettner for import

clients of Intercorp who had specifically requested that he do the

forwarding Mr Stettner acceded to the clients requests in the belief

that this was necessary in order to preserve their import business which

was very important to Intercorp Mr Stettner believed that failure to

satisfy their needs would have seriously threatened the existence of his

company and that their continued business was vital to my existing

livelihood Although since approached with more and numerous

requests Mr Stettner has declined them awaiting the Commission s

decision on his application Mr Stettner received no compensation

brokerage from ocean carriers involved on these three shipments

Ex 29 answer to interrogatory No I Ex 29 letter of November 6

1981 Ex D pp I 2

Intercorp s Practice of Marking Up Its Costs When Billing Its Clients

34 On twelve of the twenty four shipments forwarded under the

arrangement with Gateway Intercorp arranged for inland transporta

tion cartage or drayage

35 When invoicing its clients for services performed in forwarding

these twelve shipments Intercorp marked up the inland transportation

cartage and drayage costs incurred on the clients behalf Such mark

ups amounted to 2 785 06

36 On thirteen of the twenty four shipments forwarded pursuant to

the arrangement with Gateway Intercorp arranged for insurance cov

erage

37 When invoicing its clients for services performed in forwarding

these thirteen shipments Intercorp marked up the insurance premiums

paid on the clients behalf Such mark ups amounted to 4 53137

38 When invoicing clients for whom the twenty four shipments

forwarded under the arrangement with Gateway were handled Inter

corp also marked up consular fees paid on behalf of those clients

39 Intercorp s mark ups of inland transportation cartage drayage

insurance and consular costs incurred on behalf of clients for whom the

twenty four shipments forwarded pursuant to the arrangement with

Gateway werehandled were not identified as mark ups or designated as

service or placement fees These mark ups were lumped together with

the actual costs incurred and the total appeared as Intercorp s charges

to the clients on Intercorp s invoices

40 On five of the twenty four shipments forwarded pursuant to the

arrangement with Gateway Intercorp instructed its insurance agent

25 FMC
508 FEDERAL MARITIME COMMISSION

Loren Brokerage Co to prepare a second adjusted invoice which

increased the actual insurance costs shown on the first invoice Inter

corp paid the first or correct invoice The second adjusted invoice

was used by Intercorp to support its billing of its own clients The

shipments occurred only between August and December of 1978

41 Mr Stettner explained the above practice of utilizing incorrect

adjusted insurance invoices by stating that he used such invoices in

order to secure profits for lack of any other way known to us at the

time and that other functions were included in the service namely

responsibility for shipper collections He stated furthermore that his

clients did not object that he was induced to do this by the insurance

agent and was young naive and had only 600 in the bank Tr 79

In otherrespects on some shipments Mr Stettner states that he marked

up inland trucking and rail freight costs when handling shipments for a

British forwarder known as M S Shipping with whom Intercorp had

business dealings because of negative payment disputes with M S

Ex D p

3 Tr 43 Mr Stettner also explained that he used markups

on insurance costs to cover costs of collection of letters of credit

Consular fees werealso marked up

42 On the three shipments handled completely by Intercorp in 1981

after termination of the arrangement with Gateway Intercorp marked

up inland freight and insurance costs The mark up of the former

amounted to 201 50 the mark up of the latter amounted to 800 85

Intercorp s Limited Financial Situation and Small Size

43 Intercorp is as the Bureau acknowledge an extremely small

operation possessed of limited fmancial resources Opening Brief of

Hearing Counsel p

33 As noted earlier Mr Stettner is the sole

salaried officer employee For the twelve month period ending October

31 1981 Intercorp generated a net profit ofonly 894 77 after taxes on

gross income of 58 004 26 For the previous fiscal year ending on

October 31 1980 Intercorp s net profit had been 8 296 56 after taxes

out of gross income of 71 553 04 Ex E For fiscal 1979 Intercorp

showed only 414 84 net profit after taxes out of gross income of

138 156 Ex C Appendix X Financial Report Intercorp has thus

shown a steady decline from 1979 to 1981 in gross income and a sharp

decline in net profits in 1981 after a significant gain in 1980 to a

negligible amount

44 Intercorp s net worth is also rather negligible In its fiscal year

1981 its net worth assets less liabilities was only 14 582 25 in 1980 it

was 13 687 48 and in 1979 it was 5 390 92 Ex E Ex C Appendix

X Financial Report

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Background of Mr Robert Stettner

45 Since Mr Stettner is to all intents and purposes Intercorp For

warders Ltd any decision about the fate of Intercorp ought to show

something about his background and education The resume which Mr

Stettner submitted to the Commission s staff with Intercorp s applica

tion for a license in October 1980 is contained in the record Ex C

Appendix X It shows that Mr Stettner is 33 years old born January

4 1949 He was educated at the University of Vermont where he

received a Bachelor of Business Administration degree in May of 1971

with a major in Finance and a minor in Spanish According to this

resume he speaks reads and writes Spanish fluently German and

Portuguese adequately and French passably He has also graduated

from the National Credit Office in New York City the World Trade

Institute in ocean shipping and the World Trade Institute Language

School in German He had held a variety ofjobs sales clerking with

several non shipping companies until joining Rohner Gehrig Co

where he was involved in ocean freight and air freight sales traffic

administration and customs brokerage from February 1974 to February

1977 He has cleared shipments through U S customs arranged air

freight exports filled out export declarations and been involved in

other transportation related activities documentations issuing delivery

orders etc As noted before he took and passed the examination for a

U S Customs House Broker on April 3 1978 for which he also

underwent an F BI

investigation Included in his application package

Ex C Appendix X are several letters ofrecommendation or favorable

responses from several companies Rutland Maritime Management Cor

poration of New York City Capitol Records Inc as well as several

credit references for Intercorp As also mentioned earlier however

the record contains a negative report about Mr Stettner from his

previous supervisor at Rohner Gehrig as well as a favorable report

from the same person and a most favorable letter from an importer in

Waltham Mass known as Compo Industries Inc Ex C Appendices

III and IV

DISCUSSION AND CONCLUSIONS

The questions to be determined are essentially three First did Inter

corp carryon the business offorwarding without benefit of a license by

performing forwarding services on 24 shipments under its arrangement

with Gateway Shipping a licensed forwarder from 1978 to early 1981

and thereafter by forwarding three shipments on its own at the request

of two clients in violation of section 44 a of the Shipping Act 1916

46 U S c 841b Second if Intercorp did carryon such business

without a license in violation oflaw should civil penalties be assessed

under section 32 a of the Act 46 U S C 831 and if so in what

amount Third does Intercorp deserve to obtain a license in other

25 F M C
510 FEDERAL MARITIME COMMISSION

words should Intercorp be found to possess the requisite fitness

within the meaning of section 44b of the Act 46 U S C 841b if it is

found to have carried on the business without a license or to have

conducted itself in other ways suggesting unfitness

The Bureau s Contentions

The Bureau of Hearings and Field Operations Office of Hearing

Counsel are emphatic in their contentions that Intercorp engaged in

the business of forwarding without a license that for that reason and

others Intercorp has not been shown to be fit to obtain a license and

that it should be assessed a civil penalty in the amount of 5 000 The

Bureau argue that the evidence of record shows that Intercorp s ar

rangement with Gateway permitted Intercorp to perform a number of

forwarding services which are more than enough to constitute the

carrying on ofthe business offorwarding Under the arrangement with

Gateway they argue Gateway acted merely as a subcontractor to

Intercorp by performing only a few services namely preparing ooean

bills of lading dock receipts and paying ocean freight to carriers plus

sometimes booking cargo space On the other hand Intercorp did all

the rest of the forwarding services e g preparing and processing

export declarations delivery orders arranging for inland transportation

cartage drayage other documents booking arranging or confirming

cargo space handling financial matters advancing ocean freight imple

menting shipper instructions etc Moreover Intercorp held itself out to

its shipper clients in its own name and dealt directly with these ship

pers the shippers not dealing with Gateway at all nor being directly

advised of Gateway s involvement As far as the final three shipments

handled solely by Intercorp are concerned the Bureau argue that there

is no doubt that Intercorp acted as sole freight forwarder performing

all necessary services with no subcontracting to Gateway whatsoever

Insupport oftheir contentions the Bureau cite numerous authorities

section 44e ofthe Act 46 U S C 841b listing forwarding functions

relevant portions of the Commission s

regulation General Order 4 46

CFR 510 2 t

and 510 2h defining a freight forwarder and listing

forwarding functions In addition the Bureau cite Commission decisions

further defining and explaining the functions offorwarders which they

argue show clearly that Intercorp wasindeed carrying on a forwarding

business citing such decisions as Investigation of Practices Operations

Actions and Agreements of Ocean Freight Forwarders 6 F MB 327

334 1961 Dynamic International Freight Forwarder Inc Independent

Ocean Freight Forwarder License Application 23 F MC 537 1981

Independent Ocean Freight Forwarder Application AirMar Shipping

Inc 14 SRR 97 99 100 10 adopted by the Commission 14 SRR

1250 1974 Legislative history to the enactment of the Freight For

25 FMC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 511

FORWARDER LICENSE APPLICATION

warder Law is also cited to demonstrate that Intercorp s practices

constituted forwarding

On the question of Intercorp s fitness to obtain a license the Bureau

argue vigorously that Intercorp s past actions demonstrate unfitness and

unreliability and show that it would not be able to maintain a standard

of professional conduct reflecting the high degree ofbusiness responsi

bility which forwarders should and must possess before serving the

public The Bureau do not contend that past violations automatically

bar a

person from thereafter obtaining a license but cite Commission

decisions holding that such violations are relevant to the question of

fitness and militate against the issuance of a license The Bureau also

cite Commission decisions emphasizing the need for forwarders to

maintain high standards ofbusiness conduct and to show that they will

adhere to law and Commission regulations since they occupy a position

of trust and responsibility 4

They argue that the record shows Mr

Stettner to have received warnings against operating without a license

on at least four occasions by the Office of Freight Forwarders and on

two occasions by Commission investigators or employees Yet argue

the Bureau Mr Stettner continued his arrangement with Gateway and

after terminating the arrangement forwarded three shipments after

warnings from the investigator This suggests to the Bureau that Mr

Stettner cannot be trusted to follow applicable law and regulations

although he had stated in his application forms that he understood the

law and regulations The Bureau consider Mr Stettnar s conduct to

demonstrate such disregard of law that it is not likely that he can be

trusted to obey fully the mandates and requirements of law and rele

vant Commission regulations They dismiss Mr Stettner s contention

that he acted out of a feeling of financial need or desperation when

servicing the last three shipments or in the belief that his arrangement

with Gateway was permissible as indicating a weakness of character in

that according to the Bureau Mr Stettner may only conform to law

when it is convenient to do so Again past Commission decisions in

which applicants are denied licenses who have blatantly disregarded

law or have engaged in deliberate schemes to evade the licensing

4

The cases cited are Independent Ocean Freight Forwarder License Application Guy G Sorrentino

15 F M C 127 134 1972 Harry Kaufman d b aInternational Shipper Co ofNY 16 F M C 256 271

1973 Cargo Systems International CSIj 22 FM C 56 71 1979 In Harry Kaufman the Commission

found respondents unfit who had either permitted use of alicense by another person ortransferred a

license to another person without Commission approval or performed forwarding foraperson whose

license had been revoked 16 F M C at 264 However even so the Commission permitted anew

corporation formed out of certain persons involved to fefile its application for alicense once certain

defects had been cured 16 F M C at 261 In Cargo Systems International applicant had devised a

series of phony sales agency agreements which did not resemble an employee employer contract at all

and was found untit In Guy GSorrentino applicant was actually found titto obtain alicense because

of numerous mitigating circumstances although his previous forwarding company had engaged in a

misc1assitication scheme with ashipper ISF M C at 128 130

25 F M C
512 FEDERAL MARITIME COMMISSION

requirement are cited by the Bureau The Bureau are vary emphatic as

to Intercorp s practices ofmarking up invoices which they call inflat

ing and liken such practices to fraud and deception facts which

further militate against finding Intercorp to be fit since they call into

question Mr Stettner s honesty and integrity Again Commission and

other decisions are cited to justify arguments against licensing Intercorp

because of such activity

On the question of penalties the Bureau contend that ordinarily they

would urge a penalty of 20 000 because of Intercorp s operations over

a three year period without a license which the Bureau argue to have

been knowing and wilful despite numerous warnings However the

Bureau acknowledge that because of Intercorp s

relatively precarious

financial status such a large fine or even one which would recover all

of the forwarding fees received over the three year period 12 000

would seriously jeopardize the continued viability of Intercorp

Opening Brief of Hearing Counsel p

33 The Bureau also briefly

allude to Intercorp s cooperation in furnishing evidence during the

course of the proceeding presumably as a minor mitigating factor

Therefore the Bureau conclude that 5 000 would be a reasonable

penalty Such a penalty plus denial cfa license in the Bureau s view

would not leave applicant without means of support because applicant

is a licensed customs house broker and has handled over 500 000 in

gross revenues since Intercorp was incorporated largely derived from

other activities than forwarding

Mr Stettner s Arguments in Defense

Mr Stettner suffers from the handicap ofdefending himself without

benefit of trained legal counsel Therefore to some extent he defends

against contentions that were either not made against him or that are

irrelevant 5 However he does stand up and fight for himself and his

company in plain English He states that he did not believe that his

arrangement with Gateway was illegal and that he believed he was

merely a sales representative or a bona fide employee ofthat licensed

forwarder who under Commission decisions does not need his own

license He states that he never impeded his clients market penetrations

and that they never complained about him or Intercorp to the Commis

sion when he handled the twenty seven shipments He contends that he

For elllllllple Mr Stellner seem to believe that Intercorp is accused of having charged forward

ing fees which were 80 high as to be detrimental to the commerce of the United States contrary to

section l8bXS of the Act and cites Comntission decisions under that law Healsc argues that he has

suffered from ublacklistinS because of aformer employer and unjust discrimination under section t7

of the Act citing cases But the Issues and this decision have nothing to do with any alleged black

listing or discrimination a8ainst Intercorp stemming therefrom The Commission s Order does not

refer to Mr Stettner s orIntercorp s willingness oraility to perform forwarding services only tohe

question of whether their alleged past operations as aforwarder without alicense and certain billing

practices render Intercorp unfit to obtain alicense inthe future

2S F M C
INTERCORP FORWARDERS LTD INDP OCEAN FRT 513

FORWARDER LICENSE APPLICATION

acceded to the requests to perform forwarding for two clients in con

nection with the three shipments in 1981 handled solely by Intercorp in

the belief that this was necessary to retain those clients who used his

customs house brokerage services because their business was vital to

the continuation ofIntercorp Mr Stettner states that he has cooperated

with the Bureau by willingly furnishing all requested documents per

taining to his forwarding activities even though the materials furnished

were damaging to his application and he promises continued coopera

tion He also states that he voluntarily discontinued all forwarding in

August 1981 even though elsewhere stating that he has had numerous

requests from clients to perform forwarding which he has refused and

that he apparently first realized that he had possibly violated law only

after the first informal conference in Washington with me and Hearing

Counsel in September of 1981 In this regard he states that he never

received a clear cease and desist order and that violations had not been

found during the period of time that the Commission s staff had been

advising him that the Commission sinvestigator had casually inter

viewed him and cites a Commission ruling that the Commission has no

injunctive powers and can only issue cease and desist orders after

hearing and upon findings of violations of law Berthing of Seatrain

Vessels in San Juan Puerto Rico Docket No 76 41 9 7 76 16 SRR

1395 Nevertheless as noted he states that he has ceased the question

able activity and promises to adhere to law and regulations in the

future if he obtains a license for Intercorp

Mr Stettner contends furthermore that he has suffered blacklisting

because of an unfriendly separation from employment with Rohner

Gehrig and has had trouble finding employment with forwarders as a

result Therefore he asks that the Commission consider his past activi

ties in the light of his financial and personal difficulties and problems

during a period which he describes as one of extreme hardship

Respondent s Opening Memorandum of Law p

7 He cites a Com

mission decision frowning upon arbitrary or capricious exercise of the

power of licensing and expressing the Commission s intent to consider

constitutional and lawful safeguards of individuals and their right to

make a living Application for Freight Forwarder License Carlos H

Cabezas 8 F MC 130 131 1964

Mr Stettner cites other facts in support of his position He states that

none of the shippers whom he serviced ever complained to the Com

mission about Intercorp s charges that the quality of his work justified

the charges and that the shippers used Intercorp s services and made

their sales at profits to themselves showing that his charges must have

been reasonable Respondent s Memorandum p

II Furthermore he

states that Intercorp went to whatever lengths were necessary to see

that its clients were paid Respondent s Memorandum p

19 citing

25 F M C
514 FEDERAL MARITIME COMMISSION

Commission decisions condemning forwarders who misuse shippers

funds entrusted to the forwarders

As further evidence of his good character and ability Mr Stettner

cites the fact that he has been licensed by the U S Department of the

Treasury as a Customs House Broker for which he took and passed an

examination and underwent an F B I

investigation Moreover Mr

Stettner argues that the Bureau s contentions that if licensed he and

Intercorp may well depart from law and regulations are unauthorized

and violative of his due process rights since in his opinion they

represent acrimony and innuendo and are speculative He cites a

Commission decision holding that such speculation offuture behavior is

no ground for denial of a license but that if the licensee does violate

law in the future such conduct can be handled in an appropriate

proceeding at the time Independent Ocean Freight Forwarder Applica

tion Sequoia Forwarders Co19 F MC 182 189 1976

What is a Reasonable Disposition of the Application Under Commission

Precedent

The facts in this case are not especially complicated and there is no

real dispute as to what happened The real problem is that Intercorp

has carried on the business of forwarding during the period 1978

through 1981 and has utilized adjusted incorrect invoices to itself to

support some ofits charges to its customers thereby concealing mark

ups on its services as the great preponderance of evidence shows

Given those facts the question is whether this obviously struggling

young man and his Intercorp company deserve to obtain a forwarder s

license and furthermore whether Intercorp should pay a civil penalty

for having operated without a license in violation of section 44 of the

Act The problem of reaching a just and reasonable decision is made

more difficult by the fact that the Commission s many decisions in this

area have not always been consistent Sometimes licenses have appar

ently been granted or not revoked though the forwarders seemed more

culpable than Intercorp and Mr Stettner and sometimes licenses have

been denied though the applicant seemed about equally culpable with

Intercorp However in a number of recent decisions forwarders have

been permitted to retain their licenses or obtain them after paying

something in settlement of the issues of violations very similar to those

involved in this case and have been found fit to retain licenses after

recommendations of fitness were submitted by the Bureau Perhaps it is

well to bear in mind the statements in these cases that each case

requires careful consideration of the peculiar facts so that the Commis

sion s exercise of its discretion will be sound and so that it will avoid

arbitrariness or unfair discrimination against particular applicants in

cases which lie in gray areas and in which reasonable persons can

25 FMC
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FORWARDER LICENSE APPLICATION

differ Thus as the Commission stated in Fabio A Ruiz d b a Far

Express Co 15 F MC 242 243 1972

An arbitrary denial of a freight forwarder license constitues a

denial of due process of law On the other hand the govern

ment can require high standards ofqualifications such as good

moral character or proficiency in the business before it admits

an applicant The matter of fitness or good moral character is

a gray area where fair minded men draw differing judgment

from the same set offacts 6

As I explain below I believe that the Bureau s tough minded ap

proach while well argued and carefully researched lacks an element of

compassion or balance hammering as it does on strict standards and

extreme sanctions although in a gray area case such as this one

reasonable persons could differ I am also influenced by the fact that

their approach departs abruptly from their own previous positions and

Commission decisions in more recent cases of this type which refrain

from extreme sanctions preferring to fashion remedial orders and pro

tective devices enabling persons to carryon forwarding businesses

under periodic supervision when mitigating factors are present Iwould

therefore give young Mr Stettner and his Intercorp company a chance

to develop their forwarding business and extricate themselves from the

financial doldrums in which they now reside under certain protective

conditions which have been followed in numerous cases of this type

However I would also follow the distinction between the remedial

provisions of section 44 ofthe Act under which licenses can be granted

and are not revoked if protective audits and supervision are maintained

and the more punitive portion of law encompassed in section 32 of the

Act prescribing civil penalties to deter recurrence of prohibited prac

tices Therefore although I believe Intercorp should have an opportu

nity to serve clients under certain safeguards it should not walk away

from its past violation of law without a reasonable penalty which

however considers its ability to pay lest the penalty destroy the

business before it has a chance to survive I would therefore assess a

penalty of 3 000 and permit payment over a three year period oftime

6

The Ruiz decision bears further consideration and will be cited again In that case Mr Ruiz ap

plied for alicense and admitted that he had operated without alicense forwarding 23 shipments for

under two months knowing that this operation was a lie and was unlawful although he did not

defraud anyone and that he was fully aware of the licensing requirements of section 44 and General

Order 4 and had worked for freight forwarders and exporters for twenty years 15 F M C at 245

Yet both the presiding judge and the Commission found Me Ruiz to be fit notwithstanding the know

ing and wilful violations of law Since the record in the case was submitted on paper the presiding

judge did not even observe the applicant and the Commission noted that fact 15 F M C at 243

There are striking similarities between Mr Ruiz and Mr Stettner Mr Ruiz stating that he did unlaw

ful forwarding in order to be able to support my family and I did not wait for the issuance of my

License that I applied for 1S F M C at 245 I have observed Mr Stettner in this case and find his

demeanor and deportment to support his contentions that he acted under stressor misunderstanding of

the law and promises to comply with the law inthe future

25 F MC
516 FEDERAL MARITIME COMMISSION

in view of Intercorp s precarious financial situation Before elaborating

on these conclusions however I must dispose of the issue of violations

with adequate explanations

Intercorp Did Carry on the Business of Forwarding Without a License

and Did Utilize Incorrect Invoices But Prevailing Commission Decisions

Do Not Require Denial of the Application

There is little doubt on this record that Intercorp was carrying on

the business of forwarding during the period March 1978 through

February 1981 under its arrangement with Gateway Shipping during

which it handled 24 shipments and that thereafter it forwarded three

additional shipments in April July and August 1981 all on its own

The Bureau s arguments and the evidence developed are persuasive

Although Mr Stettner argues that he believed that he had only become

a sales representative or a commission sales agent and not a forward

er in his or Intercorp s own right and that not being an attorney and

not being provided with previous case law deciding what Intercorp s

arrangement with Gateway Shipping really constituted these argu

ments relate to mitigation of the offense to the question of Intercorp s

fitness to obtain a license and to the amount of civil penalty They do

not provide a defense to the violation The clear facts are as described

above that Intercorp without its own license held itself out to per

form forwarding services and performed virtually all ofthem except for

preparation of ocean bills of lading dock receipts and initial payment

of ocean freight which services it subcontracted to Gateway Shipping

under its arrangement with Gateway and furthermore that Intercorp

billed its own clients who were not billed by Gateway and were not

directly informed of Gateway s involvement generally except through

copies ofthe bills oflading given the clients on which Gateway s name

appeared Under the arrangement furthermore Intercorp shared the

compensation paid by carriers to Gateway deducting its share from the

money it remitted to Gateway for performing the limited services

which Gateway performed for Intercorp Though Mr Stettner in

drawing up this arrangement with Gateway actually addressing it to

AMK International Corporation a related company took pains to

cite the Commission s General Order 4 prohibiting shippers consignees

and other persons from receiving any portion of carrier compensation

paid to licensed forwarders and referring to the portion of General

Order 4 stating that employees of licensed forwarders need not be

licensed themselves and stating that these prohibitions would be re

spected by Mr Stettner these facts again only illustrate Mr Stettner s

belief that he might have been acting legally but do not change the fact

that under the arrangement he was carrying on the business of for

warding without benefit of a license and was in effect relying upon

Gateway s license number which was placed on bills of lading so that

25 FMC
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FORWARDER LICENSE APPLICATION

ocean carriers would pay compensation to Gateway As case law clear

ly shows the fact that Gateway performed three or so forwarding

services preparing bills oflading paying ocean freight preparing dock

receipts while Intercorp performed 15 or so other forwarding services

running the gamut from preparation and processing of export declara

tions and other shipping documents arranging inland transportation

booking cargo space implementing shippers instructions etc see Sum

mary of Evidence paragraph No 24 in no way indicates that Inter

corp did not perform forwarding services The Commission made clear

in Dynamic International Freight Forwarder Inc cited above 23 FMC

537 that a person could be carrying on the business of forwarding

without performing all of the services which forwarders may perform

The Commission held that the terms dispatching of shipments and

handling the formalities incident to such shipments contained in sec

tion I of the Act defining the term carrying on the business of

forwarding have been treated as asingle concept to describe a

range

of activities anyone of which may constitute forwarding 23

FMC at 543 The Commission furthermore explained that a freight

forwarding license is required for anyone who proposes to engage in

any of the forwarding or dispatching activities described in 46

CFR 51O 2 c now 46 CFR 51O 2 h The Commission affirmed

the presiding officer s

finding that Dynamic had violated section 44 of

the Act because Dynamic engaged in one or more of these activities

on numerous occasions without a license 23 F MC at 544 Both

the statute itself section 44 e ofthe Act and the Commission s regula

tions in the portions cited in the quoted passage immediately above

clearly include the type of services performed by Intercorp under its

arrangement with Gateway 7

and of course on the final three ship

ments in 1981 when Intercorp performed all necessary services there is

no question that Intercorp was performing as a forwarder Even if one

could argue that the final three shipments handled by Intercorp in

7

Thus section 44 e of the Act 46 D S C 84tb sets forth the following functions performed by

freight forwarders soliciting and securing cargo booking or otherwise arranging for cargo space co

ordinating the movement of cargo to shipside preparing and processing ocean bills of lading prepar

ing and processing dock receipts and delivery orders preparing and processing consular documents

and export declarations and paying ocean freight charges General Order 4 as revised effective Octo

ber 1 1981 46 CPR 51O 2 h essentially recodifies the earlier 46 CFR 51O 2 c and lists such services

as ordering cargo to port preparing and or processing export declarations booking arranging for or

confirming cargo space preparing or processing delivery orders ordock receipts preparing and or

processing ocean bills of lading preparing or processing consular documents or arranging for their

certification arranging for warehouse storage arranging for cargo insurance clearing shipments in ac

cordance with United States Government export regulations preparing and orsending advance notifi

cations of shipments or other documents to banks shippers or consignees as required handling

freight orother monies advanced by shippers j coordinating the movement of shipments for origin

to vessel and giving expert advice to exporters concerning letters of credit other documents licenses

or inspections oron problems germane to the cargos sic dispatch As the evidence shows Inter

corp performed many of the above services under its arrangement with Gateway and even moreof

them when it handled the three shipments in 1981 by itself

25 F M C
518 FEDERAL MARITIME COMMISSION

I

April July and August 1981 at the specific behest of two of Inter

corp s important customs house brokerage clients were only sporadic

and incontinuousand did not constitute carrying on the business of

forwarding but only an occasional dabbling in forwarding with no

holding out or solicitation of forwarding business as had occurred

under Intercorp s arrangement with Gateway the argument does not

detract from the three year period ofholding out by Intercorp under its

arrangement with Gateway At best therefore Intercorp is shown quite

persuasively on the evidence of record to have carried on a forwarding

business without benefit of a license notwithstanding its assertions that

it had only believed itself to be a sales representative or agent or some

other type of employee of Gateway Shipping and therefore did not

itself need to obtain a license Previous Commission decisions have held

that similar type arrangements by which unlicensed persons entered

into so called agency or employment arrangements with licensed

forwarders which did not constitute true employment relationships did

not exonerate the purported employee or agent from liability under

section 44 of the Act If furthermore the person involved deliberately

conceived a phony employment arrangement to avoid the licensing

requirement and to make use of a licensed forwarder s name and

number to effectuate the scheme such person has understandably been

found to be unfit to obtain a license If there has been no deliberate

intent to conceive such a scheme however the results may be differ

ent See e g Independent Ocean Freight Forwarder License Application

James J Boyle Co 10 F MC 121 1966 applicant devised a

phony employment relationship with a licensee s employee in order to

use the licensee s name and number the scheme being a

product of

guile and deception applicant found unfit Cargo Systems Internation

al 22 F MC 56 1979 applicant devised phony commission sales

agent agreements with a succession of licensed forwarders but ran the

forwarding operation himself with no semblance of being a mere em

ployee or sales agent ofthe licensees applicant found unfit But com

pare decisions in which applicants have been found fit when they

mistakenly arranged to use licensed forwarder s license numbers and

were found to have operated without a license in violation of law

albeit unintentionally See e g Gemini International Co Possible Vio

lations of Section 44 a 24 F MC 893 1982 licensee unintentionally

permitted unlicensed person to perform forwarding services on 290

shipments as employee of the licensed forwarder in a branch office

but discontinued this activity when discovering that the branch office

had not been properly opened under Commission regulations licensee

found fit to retain its license but paid 2 500 in settlement Paulssen

Guice Ltd Freight Forwarder License 24 F MC 583 1982 applicant

forwarded 922 shipments for two years using licensed forwarder s li

cense in mistaken belief that as a former branch office it could continue

25 FMC
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FORWARDER LICENSE APPLICATION

to use the license but discontinued the practice when advised it was

unlawful found fit and agreed to pay 5 000 in lieu of civil penalties

As I indicate below Ido not classify Mr Stettner s attempt to become

a sales representative for Gateway as a deliberate scheme full of guile

and deception because there is sufficient indication on the record that

he believed his arrangement could conform to law and did not possess

the necessary legal skills or knowledge to realize that his arrangement

crossed the line from agency or employment to independent contract

ing between Intercorp as a forwarder in its own name and Gateway a

licensed forwarder Were Intercorp s operations as a forwarder without

a license the only problem in determining Intercorp s fitness this pro

ceeding would be easier to decide since the Commission has never held

that past operations without a license act as an automatic immutable

bar forever to any applicant seeking to obtain a license if there are

mitigating circumstances See e g Independent Ocean Freight Forward

erApplication Air Mar Shipping Co 14 SRR 97 101 125 ID

adopt

ed 14 SRR 1250 1974 Dixie Forwarding Co Inc Application for

License 8 FMC 109 112 1964 license granted on reconsideration 8

F MC 167 Cargo Systems International CSI Independent Ocean

Freight Forwarder Application 22 F MC 56 71 1979 Fabio A Ruiz

cited above 15 F MC at 246 Paulssen Guice Ltd Freight Forward

er License 24 FMC 583 589 590 1982 Kuehne Nagel Inc

Independent Ocean Freight Forwarder License No 1162 24 FMC 315

337 338 1981

The more difficult problem arises because while Mr Stettner and

Intercorp carried on a forwarding business without a license Intercorp

engaged in certain billing practices which in some instances fell below

reasonable standards of honesty even though probably caused by eco

nomic hardships and pressures I

refer to Intercorp s unfortunate habit

of concealing mark ups on its invoices furnished to its clients but more

particularly to its use of incorrect adjusted insurance invoices As

described above Summary of Evidence paragraphs 34 42 Intercorp

marked up its fees on its invoices covering such services as inland

transportation cartage drayage insurance and consular costs There is

no prohibition in law against a business marking up its costs when it

performs a service in order to realize a profit Intercorp was not in

business to be a non profit charity donating its services to shippers for

nothing However Mr Stettner did two things in addition to the

normal accepted practice ofmarking up First he lumped his costs and

mark up together and presented to the shippers a charge for each

service as a single figure so that the shipper could not tell whether the

charge represented actual cost to Intercorp or cost plus profit nor of

course what that margin of profit was Second and more seriously in

order to support some of the charges for cargo insurance which Inter

corp billed its shipper clients on five of the twenty seven shipments

25 F MC
520 FEDERAL MARITIME COMMISSION

forwarded by Intercorp Mr Stettner arranged to have his insurance

broker prepare a second adjusted insurance invoice which showed a

greater premium cost than the actual cost on the first and real insurance

invoice that Intercorp actually paid the insurance broker This second

artificial invoice was used as the basis of billing the shippers Mr

Stettner explained that he utilized these artificial insurance invoices in

order to secure profits for lack of any other way known to us at the

time and that he was misled by the insurance broker was young

naive and without much money He also explained that he marked up

other costs in order to cover costs of other functions included in the

particular services performed e g

costs of letter of credit collections

and because of payment disputes with a British forwarder who appar

ently owed Intercorp money Such explanations might explain why any

business person has to mark up his or her goods or services However

they do not explain why this practice had to be done in such a devious

way

As to the practice of marking up each service performed although

not violative of normal profit making business codes as Ihave indicat

ed it does run afoul of the standards of practice prescribed by the

Commission in General Order 4 Although technically since Intercorp

did not have a license when it performed the forwarding services in

question and was not therefore perhaps bound by General Order 4 that

regulation was designed to enunciate reasonable standards ofconduct to

ensure decent behavior by licensed forwarders and protect shippers

against underhanded deceitful practices The relevant portions of Gen

eral Order 4 pertaining to forwarders billing practices are now 46 CFR

51O 32 c 51O 32 d and 5l0 32 h of General Order 4 as revised

effective October 1 1981 previously 46 CFR 51O 23 d 51O 23 e and

510 23j

These three sections ofthe regulations deal with the forward

er s duty not to knowingly impart to its shipper clients false information

relative to any forwarding transaction not to withhold information

from the forwarder s client and the forwarder s duty to itemize its

charges separately and to show actual costs for these charges separate

ly In the revision to General Order 4 however this last duty has been

somewhat modified so that forwarders while still required to list actual

costs for each charge may however provide only a general lumpsum

service fee for all services See 46 CFR 510 32 h the present provi

sion as compared to 46 CFR 51O 23jthe previous provision These

regulations obviously among other things serve the purpose of ena

bling shipper clients offorwarders to determine whether the forwarder

is marking up on its fees and services and even how much but under

the present regulation however only generally as to the total service

fee rather than as to the mark up on each service performed Shippers

can therefore change forwarders if they believe the mark ups too high

Of course they could change forwarders even without knowing the

2S FMC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 521

FORWARDER LICENSE APPLICATION

forwarders mark ups if they thought their fees were too high The

greater offense to one s sense of integrity however is the use of false

backup insurance invoices on the five shipments which could only have

been used to induce shipper clients into believing that Intercorp s fees

for obtaining cargo insurance were merely its actual costs without

mark ups Mr Stettner explained why he felt the need to do this and

stated that no shipper complained One wonders what the shipper

would say had he known about the practice however But these

excuses are not really valid The phony invoice practice was plainly

dishonest and although it was not as harmful as forwarders absconding

with shippers funds or misusing shippers funds for the forwarder s

own private purposes rather than payment to ocean carriers leaving

shippers in great debt to carriers it is inherently dishonest and deceit

ful I cannot condone it However following many Commission deci

sions I do not believe that Intercorp needs both to be penalized by

paying what for it amounts to a significant monetary penalty and also

needs to be stigmatized permanently and forever banished from the

forwarding business Nor in similar cases does the Commission For

example compare the recent case ofChumet Shipping Co Inc Freight

Forwarder License 24 F MC 609 1982 In Chumet among other

things the forwarder inflated the amount of insurance premiums it paid

to insurance companies marking up premium payments from 10 to over

100 percent without informing its clients ofthe true premium costs over

almost three years period of time realizing insurance profits of

152 836 in 1979 24 F MC at 618 619 Moreover Chumet engaged

in other unlawful practices e g misrepresenting the selling price of

certain merchandise by failing to disclose a five percent discount and

failing to account to its principal for receipt of a claim on insurance

Yet Chumet was found fit to retain its license because of mitigating

circumstances employee responsible no longer with the company dis

continuance ofthe practice sincere intention to comply with law in the

future 24 F MC at 623 624 Chumet also agreed to permit unan

nounced audits ofits books and to pay 20 000 over four years time in

lieu of civil penalties

In another recent case Independent Freight Forwarder License No

1483 Tokyo Express Co Inc and Kozo and Kathleen Kimura D B A

Cosmos Trading Company 25 FMC 339 1982 the forwarder among

other things on 29 shipments over a year and one half invoiced ship

pers substantial amounts for payment of ocean freight above the actual

ocean freight overcharging shippers by 14 000 overcharged shippers

for drayage in the amount of 2 062 over actual costs billed shippers

for forklift charges in the amount of 550 when there were no such

costs on the shipment overcharged shippers on the 29 shipments a total

amount of 16 534 08 did not maintain receipts or documents to sup

port its charges on the 29 shipments and declared cubic measurements

25 FMC
522 FEDERAL MARITIME COMMISSION

which were less than actual measurements of the cargo presumably

thereby underpaying ocean carriers 25 F MC at 346 However the

forwarder a small company serving the Japanese community in San

Francisco fully cooperated with the Commission s staff and showed an

intent to comply with law in the future discontinued its connection

with a shipper and corrected its dilatory record keeping and other past

sloppy practices In addition the forwarder agreed to pay 15 000 in

settlement of the issues of violations raised to 20 000 by the presiding

judge and was found fit to retain its license revocation being found an

extreme sanction 25 F MC at 347

Finally in an even more recent case violations similar to and even

worse than those found in this case did not result in revocation of the

forwarder s license again with the full agreement ofthe Bureau In the

case Ramon Arguelles Freight Forwarder License 25 F MC 39 1982

the forwarder among other things had for a time operated without a

lic nse which had been revoked for lack of a surety bond issued

invoices to its clients billing them for cartage and insurance without

performing any services and co mingled various components of insur

ance and accessorial charges invoiced clients for more than actual costs

of the insurance adding other expenses to the insurance charges and

even entered into a scheme with a carrier whereby the forwarder

overcharged the shipper using phony bills received refunds from the

carrier and paid the refunds to other persons Yet the forwarder was

found fit to retain its license after consideration of mitigating circum

stances and after settlement ofthe issues of violations and agreement to

pay 35 000 in lieu ofcivil penalties and after agreeing to be subjected

to an audit over a four year period The record in the Arguelles case

showed that these various violations occurred over many months time

and affected 584 shipments while the forwarder had no license and

numerous shipments over 10 in connection with the other objection

able practices As a result of the various incorrect billings and over

charges to shippers the record in that case indicates well over 16 000

was involved in monies which were improperly withheld from shippers

or carriers or paid to third persons As noted included among the

activities of Arguelles was a plan by which an ocean carrier added a

phony handling charge to a bill of lading so that it could later issue a

correction and remit funds to the forwarder who then sent them not to

the shipper but to a third person

All ofthe above activity makes Mr Stettner look like small potatoes

Mr Stettner handled only 27 shipments and on five occasions used

artificial insurance invoices to support Intercorp s own invoices on

insurance But even then he at least performed the service for the

shipper for which he thought Intercorp was entitled to a mark up and

did not extract extra money from the shipper to turn over to third

persons or withhold money from his shipper clients to which money

25 FMc
INTERCORP FORWARDERS LTD INDP OCEAN FRT 523

FORWARDER LICENSE APPLICATION

they were entitled things done by Arguelles However the Bureau

entered into a settlement with Arguelles and there were mitigating

factors cooperation with Commission staff discontinuance of the ac

tivities in question sincere commitment to obey law in the future

limited period of time during which forwarder operated without a bond

and without a license less than two months without a bond and about

five months without a license the smallness of the forwarder s business

and the dependence of the forwarder on future compliance with law

for his business and livelihood 25 FMC at 46

Ironically in view of their present position the Bureau of Hearings

and Field Operations speaking through Hearing Counsel in the Ar

guelles case after considering the above described record of transgres

sions and the law favoring settlement of the issues of violations argued

in favor of a finding of fitness stating that The law is not totally

inflexible however in regard to such sanctions ie revocation or

suspension of licenses for willful failure to comply with law The

Bureau proceeded to argue in the Arguelles case that the Commission

recognize s the persons holding a license are entitled to certain consid

erations that section 44 of the Act is remedial not a punitive statute

and that any regulatory agency ought to exercise its discretionary

powers in a fair and consistent manner and fashion appropriate reme

dies to fit particular circumstances Bureau s Memorandum in Docket

No 81 42 April 9 1982 p11 citing E Allen Brown Independent

Ocean Freight ForwarderLicense No 1246 22 F MC 583 596

In the Arguelles case furthermore the Bureau argued that the for

warder was fit citing more Commission decisions holding that even

where in cases where the violation is clear evidence of mitigation will

be considered in tailoring the sanctions to the facts ofthe specific case

because section 44 and its regulations are based on an underlying

remedial public interest purpose and the sanctions imposed must serve

such a purpose and not be punitive in character Bureau s Memoran

dum in Docket No 81 42 p 12 citing Independent Ocean Freight

Forwarder License E L Mobley Inc 21 F MC 845 847 1979

Finally the Bureau also argued that p ast violations although a

significant factor do not automatically indicate that a freight forwarder

is not fit the violations must be considered in light of all the circum

stances surrounding them Revocation should only be imposed if be

cause of those circumstances the licensee could not be trusted to

refrain from violative conduct in the future See G R Minon Freight

Forwarder License 12 F MC 75 82 1968 Bureau s Memorandum

p 12 The Bureau then concluded that r evocation would be a

draconian punitive action that would not further the underlying reme

dial public interest purpose of the Shipping Act and urge ed the

presiding Administrative Law Judge to approve the proposed settle

ment and to find MCS fit to continue to be licensed as an independent

25 FM C
524 FEDERAL MARITIME COMMISSION

ocean freight forwarder Bureau s Memorandum cited above pp 12

13

Denial of the License in This Case Which the Bureau Urge Would

Depart From the Commission s Prevailing Decisions to Apply the

Freight Forwarder Law Remedially and Without Resort to

Unnecessarily Extreme Sanctions

The Commission as noted in the preceding discussion has developed

a body of law in applying section 44 of the Act and its implementing

regulation General Order 4 Under it the Commission recognizes the

remedial nature of section 44 and the need to fashion reasonable cor

rective orders when mitigating circumstances are present in recogni

tion of the needs and frailties of human beings avoiding drastic sanc

tions of revocation or denial of licenses unless nothing short of such

sanctions will work As for proven violations the Commission has also

endorsed settlements embodying payments of money in the nature of

fines to act as deterrents together with protective audits reports or

similar types of surveillance Thus the Commission has tempered its

decisions with a degree ofunderstanding ofthe pressures ofcommercial

life by permitting the forwarder to continue its business notwithstand

ing past violations of law and has limited adverse action to fines

penalties audits reports etc This does not mean that in unusual cases

of blatantly reprehensible or dishonest conduct carried on without just

cause or excuse over a period of time with tangible harm to the

shipping public where there is no evidence that the forwarder can be

trusted to comply with law in the future the Commission has never

revoked or denied a license Such cases are extreme however and as

the present case and recent Commission decisions indicate the vast

bulk of forwarder cases involve forwarders errors and misconduct but

with mitigating circumstances In short as was stated in another recent

case Radhe Liesenfeld Inc Independent Ocean Freight Forwarder

License No 1832 2S F MC 9 21 1982

T he Commission seeks to fashion reasonable remedies

and does not merely issue draconian decrees of revocation or

suspension when such are unnecessary to achieve regulatory

purposes Moreover the Commission has avoided such drastic

sanctions even when the record shows that there have

clearly been willful violations of law The Commission seems

more concerned that it has evidence that a forwarder can be

trusted in its future business behavior to adhere to all require

ments of law and the Commission S regulations Case citations

omitted

In a similar vein in another recent decision Arguelles cited above 2S

F MC at 47 48 the decision corroborated the above stated description

ofpresent status of law stating

2S F MC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 525

FORWARDER LICENSE APPLICATION

On the one hand it has been held that where violations of the

Shipping Act have occurred and it is believed the licensee will

continue in the violative conduct that licensee cannot be

deemed fit to be so licensed Case citations omitted On the

other hand it has been held in Independent Freight Forward

er s License EL Mobley Inc 21 FMC 845 847 1979 that

Administrative sanctions should not however be blindly or

automatically imposed and even in cases where the violation

is clear evidence of mitigation will be considered in tailor

ing the sanctions to the facts of the specific case footnote

omitted Section 44 and its regulations are based on an

underlying remedial public interest purpose and the sanc

tions imposed must serve such a

purpose and not be punitive

in character footnotes omitted

and in E Allen Brown Independent Ocean Freight Forwarder

License No 1246 FMC Docket No 79 16 22 F MC 583 598

1980 that

Thus the courts as well as the Commission have recog

nized that evidence ofmitigation should be considered when

determining whether a license applicant should be found to

be fit although implicated in violations of the Act in the past

citations omitted Furthermore in previous cases the Com

mission has expressed its belief that the Freight Forwarder

Law P L 87 254 was enacted as remedial statute in order

to correct abuses in the forwarding industry citations omit

ted

The principle that the Commission should not rush to ex

treme sanctions without considering all factors of mitigation

in an effort to fashion a just and reasonable remedy is well

supported by the courts Although agencies are not required

to impose sanctions in a perfectly even manner because of

the wide latitude they are given by the courts as the expert

bodies most skilled in devising means to carry out specific

legislative purposes the agencies are nevertheless expected

to consider less drastic alternative remedies and to base

whatever remedy they select on facts and reasonable inter

pretations oflaw footnote omitted

In view ofthe prevailing view oflaw followed by the Commission it

is difficult to understand the Bureau s hard nosed position namely a

5 000 penalty and denial of a license without even a suggestion that

Mr Stettner could apply again some day in the future or might be

permitted to operate with a license provided that he agree to periodic

auditing as so many previous forwarders have agreed It is even more

difficult to understand this abrupt change in position when one consid

ers the three recent cases cited above Chumet Tokyo Express and

Arguelles in which the Bureau urged that each forwarder be found fit

to retain its license and continue its business subject to auditing after

25 F M C
1

526 FEDERAL MARITIME COMMISSION

settling other issues and agreeing that the forwarder could pay money

in lieu ofpenalties not to mention countless other cases in recent years

in which the Bureau has urged fmdings offitness where forwarders had

been involved in a wide variety of dishonest or otherwise unlawful

practices 8

But as to the three recent cases cited the Bureau s inconsist

ent position and abrupt change are rather astounding since the forward

ers in those three cases were apparently more culpable than Mr

Stettner and were much larger operations Thus in Chumet as noted

the forwarder inflated insurance premiums concealed mark ups real

ized handsome profits misrepresented the selling price of merchandise

and failed to account to the shipper for receipt of an insurance claim In

Tokyo Express as noted the forwarder substantially overcharged ship

pers on its invoices billed shippers for charges which did not exist

misdeclared cubic measurements etc In Arguelles as noted the for

warder operated without a license billed clients for services it had not

performed invoiced clients for more than actual costs without notifying

the clients and even carried on a scheme with a carrier to list phony

charges receive refunds from the carrier and remit the refunds not to

the shippers concerned but to other persons Of course in each case the

Commission found mitigating circumstances discontinuance of the

practices sincere promise to obey law in the future cooperation with

the Commission s staff smallness of Chumet s and Arguelles businesses

and dependence on them etc But in each case the Bureau urged a

fmding offitness and consideration ofthe mitigating factors Why then

is Mr Stettner and Intercorp now to be excluded from similar consider

ation In the context of the three cases cited Mr Stettner s offenses

seem rather smalllind relatively harmless On twenty four shipments he

handled most of the forwarding services under an arrangement with a

licensed forwarder Gateway Shipping in which Mr Stettner believed

he had been the forwarder s sales representative In three isolated

instances in 1981 he yielded to two customers in hisbrokerage business

because he was fearful of losing their accounts thus jeopardizing his

business which the record shows to have returned virtually no profit in

its fiscal year 1981 Thus he carried on the business of forwarding

without a license in the mistaken belief for most of the period that he

could legitimately work with Gateway without obtaining his own li

cense In previous cases involving similar employment arrangements

the Commission has found them not to excuse the forwarder from the

licensing requirement but unless there was deliberate guile and decep

tion it has also permitted the applicant to obtain a license Paulssen

Guice cited above 24 F MC 583 Gemini International Co cited

above 24 F MC 893

8

For example seeKuehne cI Nagel Inc cited above 24 F M C 31

2 FMC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 527

FORWARDER LICENSE APPLICATION

Mr Stettner s and Intercorp s other transgressions involved his bill

ing practices in which he marked up charges without so indicating to

his clients and in some instances even used artificial insurance invoices

to justify his own invoices But these offenses are no worse than and

even milder than similar conduct of Chumet Tokyo Express and

Arguelles who concealed mark ups inflated insurance premiums used

phony charges withheld money from shippers mismeasured cargo

etc affecting far more than 27 shipments and involving greater sums of

money Mr Stettner may have induced shippers to pay his fees without

disclosing his mark ups but at least he performed the services and did

not withhold money lawfully due to his shipper clients The worse that

can be said about him is that he concealed his mark ups and sometimes

induced shipper clients to believe that his fees for obtaining cargo

insurance reflected only actual costs without any mark up For all of

this even with his customs house brokerage airfreight forwarding and

break bulk consolidation agency Mr Stettner and Intercorp realized

the grand profit of 894 77 in 1981 8 296 56 in 1980 and 414 84 in

1979 Moreover Mr Stettner like the forwarders in the cited cases

who were allowed to continue in business cooperated with the staff

during the proceeding and promises to obey law in the future discon

tinued the forwarding activities explaining his past transgressions in

terms of his belief that his arrangement with Gateway was proper and

that his billing practices and the last three shipments forwarded were

caused by economic pressure or hardship or fears for his business s

continued livelihood Yet the Bureau which accepted similar defenses

and excuses from Chumet Tokyo and Arguelles now resolutely reject

them from Mr Stettner and want him banned from forwarding with no

apparent hope of redemption I

find no reasonable basis for such abrupt

inconsistency by the Bureau either on this record or under acceptable

norms and relevant principles oflaw 9

9

The Bureau may wish to argue that there are distinctions between Mr Stettner and Intercocp s

defenses and those of Chumet Tokyo Express and Arguelles if the Bureau insist on following the

hard nosed approach unlike that they followed in the three cases cited One argument they have al

ready made is that Mr Stettner was warned four times by the Commission s Office of Freight For

warders and perhaps twice more by Commission employees But aclose look at the warnings shows

that they were contained in general form letters and application packages instructing anyone applying

as to the prohibitions of section 44 As to Mr Breslaw it is not clear whether he specified in his

interview with Mr Stettner that the Gateway arrangement was definitely unlawful Tr 27 nor did he

provide detailed descriptions of unlawful forwarding Tr 27 Summary of Evidence para 30 Mr

Klapouchy appears to have been more definite about the unlawfulness of the Gateway arrangement

however Summary of Evidence para 12 However informal advice from staff members even if

correct does not constitute formal findings by the Commission nor cease and desist orders A

person

has the right to obtain aformal Commission finding after hearing and is not required to cease doing

business he believes to be lawful but which staff members believe to be unlawful See 46 CPR

SIO l6h right to ahearing after letter ofiotent to deny license application

Another argument by the Bureau is that Mr Stettner signed forms and stated that he had read

and understood section 44 of the Act and General Order 4 Therefore the Bureau castigate him for

Continued

25 F M C
528 FEDERAL MARITIME COMMISSION

Agencies Are Supposed To Apply Their Standards Consistently and

Treat Similarly Situated Persons Equally But if They Depart From

Precedent to Explain the Departure Fully

I

find that Intercorp deserves the chance to operate a forwarding

business with a license albeit after paying a civil penalty for past

violations and being subjected to surveillance findings which Ibelieve

to be fully consistent with Commission precedent as it has evolved

However because the Bureau is taking such a

rigid contrary view and

has made such an abrupt change from its previous positions in the

recent cases cited Ibelieve a brief explanation of the principles of law

governing consistency in administrative decisions would be helpful

Very briefly it is recognized and expected in administrative law that

agencies will develop standards will follow them consistently and will

not depart from them unless they provide adequate explanations for

such departure Furthermore it is expected that agencies will treat

similarly situated persons equally For example when the Interstate

Commerce Commission granted a certificate to operate to one motor

carrier but denied it to another in a similar position the court stated

There must be however a rational basis for the agency s

action Citations omitted Patently inconsistent application of

agency standards to similar situations lacks rationality and is

arbitrary Citations omitted Thus the grounds for an

agency s disparate treatment of similarly situated applicants

must be reasonably discernible from its report and order Ci

tation omitted The commission s decision does not meet these

requirements Under substantially similar circumstances Con

tractors and Russell received markedly different treatment

The commission stated no basis for its uneven disposition of

the two applicants If the commission does not alter its

decision it should explicitly state its reasons for the apparently

inconsistent treatment Contractors Transport Corp v

United States 537 F 2d 1160 1162 4th Cir 1976

In another decision concerning an agency s inconsistent decisions

Judge Brown of the Fifth Circuit stated in Mary Carter Paint Co v

F Tc 333 F 2d 654 660 5th Cir 1964 revd on other grounds 382

U S 46 1965

Our complex society now demands administrative agencies

The variety ofproblems dealt with make absolute consistency

violating section44 and the standards of GO 4 But such statements are routine on applications 80 that

every time any forwarder fouls up on 00 4 he canbe accused of a

separate offense or violation of

the statements made in the original forwarder application I have not seen any previous Commission

decision puni hing forwarders on uch ground inaddition to the violation of the regulation and law

themselves Some provisions of law and regulations are moreover sufficiently complicated 80 that

reasonable person can ditTer on their interpretation Should theerroneous interpreter be punished not

only because he followed the wrong interpretation but because he had once stated that he had under

stood the law orregulation

2S F MC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 529

FORWARDER LICENSE APPLICATION

perfect symmetry impossible And the law reflects its good

sense by not exacting it But law does not permit an agency to

grant to one person the right to do that which it denies to another

similarly situated There may not be a rule for Monday another

for Tuesday a rule for general application but denied outright in

a specific case Emphasis added

Very recently the court had occasion to rebuke an agency for treat

ing aparticular applicant under a civil service examination differently

than similarly situated other applicants for no discernible reason stating

in Jesse IEtelson v Office of Personnel Management 684 F2d 918 926

D C Cir 1982

Government is at its most arbitrary when it treats similarly

situated people differently

There are countless other court decisions emphasizing the need for

consistency or if policy is to change for reasoned explanation for the

change See e

g Greyhound Corp v Iee 551 F 2d 414 416 D C

Cir 1977 and the many cases collected and discussed in Davis 1982

Supplement to Administrative Law Treatise 17 07 See also the interest

ing case ofNLR B v Sunnyland Packing Co 557 F 2d 1157 1161 5th

Cir 1977 where according to Professor Davis op cit p 260 the

court allowed the agency to follow its most recent decisions without

further explanation although it had gone the other way in the past

This discussion does not mean that agencies cannot change their

policies However in this case I see no basis for the abrupt change

from current precedent shown in Chumet Tokyo Express Arguelles and

so many other cases by which forwarders are given an opportunity to

do business under surveillance notwithstanding past violations of law

but must pay fines or penalties and undergo certain auditing or other

types of surveillance unless there are no mitigating circumstances and

their conduct has been flagrantly dishonest with no signs of future

redemption Abruptly changing current law to conform to the Bureau s

hard nosed position when the record shows this applicant to be no

worse and less culpable than other Persons allowed to receive or retain

licenses cannot be supported on this record Furthermore the danger of

such an abrupt change in which this one applicant in a formal proceed

ing before the Commission suffers rejection not expected from previous

decisions is that confidence in the entire administrative system suffers

As one authority in the field states it

The lack of definite standards deprives applicants of sufficient

notice allows retroactive application of new policy prevents

the growth of precedent and leads to a cynical public suspi

cion of a

corrupt commission S Breyer and R Stewart

Administrative Law and Regulatory Policy Little Brown

Co 1979 p373

25 F M C
530 FEDERAL MARITIME COMMISSION

As Ihave indicated Ibelieve Mr Stettner and his Intercorp compa

ny are as fit to receive a forwarding license as Chumet Tokyo Express

and Arguelles as well as other forwarders who have reached settle

ments with the Bureau and for a variety of violations oflaw have paid

fines and undergone auditing or monitoring of their businesses As I

have also indicated Ifind Mr Stettner s defenses and excuses as valid

as the ones accepted in past cases cited discontinuance of the objec

tionable practices promises to behave in the future cooperation with

the Bureau during the proceeding mistaken belief of the law involved

etc But to provide the Commission with the flavor of this applicant s

own defense and plea Iquote his own words from a statement Ex D

which he read into the record at the hearing Tr 43 44 Thus he states

in his own defense and in pleading for a license

This case and any alleged violations ofthe law incurred by

Robert Stettner Intercorp Forwarders Ltd should be viewed

within the context of

a The naivete and extreme hardship experienced by Robert

Stettner lntercorp Forwarders Ltd dunng its early days of

business

b The repeated denials of license to Robert Stettner Inter

corp Forwarders Ltd

Robert Stettner lntercorp Forwarders Ltd commits itself to

the achievement of greater understanding of the laws which

govern the perimeters ofits activities

We hope the Commission will view our case with understand

ing ofthe business realities faced by Robert Stettner lntercorp

Forwarders Ltd in its early days of business and Robert

Stettner Intercorp Forwarders Ltd s present clarified under

standing of the law and grant Intercorp Forwarders Ltd an

independent ocean freight forwarder license with Robert

Stettner as its qualifying officer

I find drat Robert Stettner lntercorp Forwarders should be given a

chance to operate his business and that considering that he filed his

present application in October 1980 has been waiting long enough for a

license However consistent with Commission precedent like other

similarly situated forwarders he should pay a reasonable civil penalty

and be monitored by auditing conducted by Commission investigators

as Inow explain

Penalties and Future Surveillance

After permitting persons to continue forwarding businesses notwith

standing past violations of law the Commission customarily fixes upon

a reasonable civil penalty and maintains periodic surveillance over the

forwarder to ensure further against recurrence of objectionable prac

tices Fixing an amount of penalty is not an exact science However

2S FMC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 531

FORWARDER LICENSE APPLICATION

there are certain recognized criteria which are applied which to some

extent are also applied in settlements For example the standards found

in the Commission s regulations pertaining to settlements 46 CFR 505 1

which incorporate such criteria as cost of collecting claims enforce

ment policy i

e deterrent effect and ability to pay are factors which

have been considered Arguelless cited above 25 F MC at 45 Howev

er mitigating factors are also considered such as cooperation with

investigators and the voluntary taking of corrective action See eg

Continental Forwarding Inc 23 F M C 623 630 631 1981 Behring

International 23 F M C 973 1981

Ability to pay is also an important factor that has been considered

See Emmett 1 Sindik Freight Forwarder License Application 23 F MC

731 1981 Billie lone Crtalic et al Possible Violations of Section 44 a

23 F MC 565 1981 Kuehne Nagel Inc cited above 24 FM C at

332 333 Sometimes moreover if the degree ofculpability is especially

low and a

person believed in good faith that he had not violated law

and is free of past offenses no penalty at all may be warranted See

Docket No 81 59 General Transpac System Possible Violations of Sec

tion 15 Shipping Act 1916 25 F MC 269 1982 10 Furthermore in

order to alleviate the burden of penalties otherwise justified the Com

mission permits installment payment schedules over a period of months

or even years See e

g Chumet Shipping Co Inc cited above 24

F MC 609 payments to be made over four years period of time

Tokyo Express Co Inc cited above 25 FMC at 348 payments to be

made over three years Gemini International Co cited above 24

F MC at 898 2 500 payment per each respondent payable over two

years Arguelles cited above 25 F MC at 45 35 000 over five years

In the last analysis while these factors are helpful determining a

reasonable amount of civil penalty seems to require an element of

subjectivity and a belief by the decision maker that the penalty is not

out of proportion to the violation which has occurred and that it will

serve a salutary deterrent purpose while not bludgeoning a

person out

of business In this case there have been mitigating factors noted

earlier for example the belief by Mr Stettner that his arrangement

with Gateway was legal his furnishing of all requested records to the

Bureau even though they damaged his chances for a license the termi

nation of his arrangement with Gateway in February 1981 before wait

ing for a formal decision of the Commission finding it invalid business

pressures from his customs house brokerage customers to handle three

more shipments and fears ofjeopardizing his business if he had refused

hispromises to comply with law in the future and finally his refusal to

do any more forwarding despite requests and an obvious need for more

10 This decision contains a

good discussion of the standards employed in assessing penalties includ

ing ability to pay mitigating factors etc

25 F M C
532 FEDERAL MARITIME COMMISSION

income because of his company s poor financial position pending Com

mission decision Even the Bureau which otherwise have resolutely

insisted upon the most extreme sanction Le outright denial of a li

cense acknowledge that Intercorp srelatively precarious financial

status induced the Bureau to reduce the amount of penalty recom

mended from 20 000 to 5 000 Ibelieve however that even a 5 000

penalty might throw little Intercorp over the line into a non profit

situation In other words I

find little sense in granting a license to

Intercorp to enable it to resurrect itself from its current financial dis

tress while at the same time imposing a financial burden of 5 000

which is about five times Intercorp s net income before taxes for its

fiscal year 1981 1 078 03 Ex E Even if Intercorp could restore

itself to its best previous year fiscal 1980 when its net profit before

taxes was 9 995 85 and it was operating under its arrangement with

Gateway a 5 000 penalty amounts to about 50 percent of that profit

which partially came from lawful non forwarding services

The Bureau believe however that 5 000 is fair although they do not

suggest how Intercorp is to pay such a sum or even suggest a schedule

ofinstallment payments such as the type of schedule they have so often

entered into with other forwarders to spread the burden over a period

of time as the cases cited above show Again Ifind that the Bureau s

approach lacks balance and understanding of the pressures facing a

small business like Intercorp and appears to single out Intercorp from

previous forwarders for special harsh treatment in an abrupt change

from previous positions of the Bureau The Bureau however cite the

fact that when one totals all fees forwarder compensation and mark

ups realized by Intercorp over the three year period on the 27 ship

ments Intercorp received about 12 000 Included in this figure how

ever are gross revenue e g

forwarder s fees and compensation not

net profits although the other components of this figure consist of the

amount of mark ups over Intercorp s costs Even so as I have noted

the Bureau does not urge a penalty of 12 000 out oftheir concern over

Intercorp s

relatively precarious financial status

I would assess a civil penalty of 3 000 and permit Intercorp an

installment schedule not to exceed three years I do this after seeing

Intercorp s income statements for the past three fiscal years in this

record and noting a decline over that period of time in its gross

revenues a net income in fiscal 1981 of only 894 77 after taxes on

gross income of slightly over 58 000 and a net worth and working

capital of less than 15 000 Ialso consider the fact that during the bulk

ofthis time on 24 out ofthe 27 shipments forwarded without a license

Mr Stettner thought he was operating under a valid arrangement as a

sales representative and that his mark ups except for those associated

with the five artificial insurance invoices were normal business practice

albeit his failure to identify mark ups is a violation of General Order 4

2 FMC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 533

FORWARDER LICENSE APPLICATION

which not believing he was an independent forwarder he would not

have been following Finally Inote that the most objectionable of his

practices the use of artificial insurance invoices on five shipments

which by the way he used only between August and December of

1978 and not thereafter Ex A Schedules A C recovered mark ups

ofjust under 3 000 which is a gross figure since federal income taxes

would have to be paid on that amount Ex A Schedule C actually

2 993 20 gross A

penalty of 3 000 would therefore more than

remove all profit derived from that regrettable practice and if spread

over about three years time for payment should permit Intercorp to

operate as a forwarder without possibly placing it into a loss position

for the first three years of its existence as a licensed forwarder In

considering Intercorp s limited ability to pay because of its shaky

income position and attempting to permit Intercorp to pay a civil

penalty over a future period of under three years as I recommend

below and rejecting the view that Intercorp should cash in some ofits

assets of working capital to pay a penalty immediately I am following

past decisions in which ability to pay has been especially significant in

devising the amount and form of payment I cite Emmett 1 Sindik

cited above 23 F MC at 738 especially In that case the presiding

judge reduced the Bureau s recommended penalty for three forwarded

shipments without a license from 3 000 to 1 000 and suggested pay

ment of that amount out of future earnings after the applicant s license

would be granted Although applicant had assets worth over 5 000

the presiding judge reduced the penalty to 1 000 rather than require

applicant to liquidate three fifths of his assets and as noted suggested

payment out of future earnings It is true that in Sindik there were

other mitigating factors minimal revenue received from the three ship

ments no pattern of deliberate circumvention of the Act However

ability to pay without undue hardship was uppermost on the mind of

the presiding judge as the decision cited clearly shows Similarly I see

no basis to order Intercorp to extract 5 000 or even 3 000 from its last

year s net worth working capital of 15 000 but would also allow

Intercorp to payoff the 3 000 penalty from future earnings 11

I would therefore fashion a penalty payment schedule comparable

to those fashioned in similar cases requiring payments every six months

in installments of 500 each commencing 30 days after adoption or

administrative finalizing of this Initial Decision and similarly following

such schedules require payment ofinterest on the unpaid balance at 12

11 Interestingly Mr Sindik was found fitto obtain alicense notwithstanding past violations More

over the record showed that he had acustoms house brokerage license and a good reputation as a

broker and that he had lost income because of the delay inawaiting processing of his application for a

license 23 FM C at 737 Mr Stettner also has such abroker s license and has also been waiting for

a decision on his application and has stopped all forwarding since August of 1981 despite requests

from shipper clients to perform forwarding services

25 F M C
I 534 FEDERAL MARITIME COMMISSION

percent per annum with payment in full of the remaining balance in

case of default as is commonly done under such schedules See e g

the Promissory Note attached to the slip opinion in Arguelles cited

above Docket No 81 42 25 F M C 39 1982

Finally as is done in the numerous settlement agreements which the

Commission has sanctioned Iwould maintain surveillance over Inter

corp s operations during the life of the payment schedule by having

periodic audits by Commission investigators to ensure that Mr Stettner

is correctly interpreting those provisions of General Order 4 requiring

itemizations of its actual costs in its invoices to shippers and requiring a

separate showing of its total service fee 46 CFR 51O 32h See Ar

guelles cited above 25 F MC at 45 settlement agreement attached to

slip Initial Decision paragraph 3 Chumet cited above 24 F M C 609

Summary 01 Particular Factors Favoring a Grant 01 the License

As to the Bureau s contentions that Mr Stettner and Intercorp are

unfit because he cannot be trusted to follow law and Commission

regulations ifIntercorp is licensed because of past violations concealed

mark ups and continued operations after warnings from the Commis

sion s staff there are five responses First as Intercorp itself noted the

Commission has previously rejected arguments against licensing on the

basis ofspeculation as to what the forwarder might do in the future In

Independent Ocean Freight Forwarder Application Sequoia Forwarders

Co cited above 19 F MC at 189 the Commission granted a license

stating that

What an applicant might do if licensed is insufficient to

justify the denial of a license if that applicant is otherwise

qualified in fact and in law Once licensed however the

forwarder is subject to all the Commission s rules and regula

tions and any conduct or activity can be handled in an appro

priate proceeding

Second as the above quotation suggests if there is any future recur

rence by Intercorp of conduct of the type described above the Com

mission can take steps to institute action leading to suspension or

revocation of the license

Third as has been done in so many forwarder cases as a condition of

licensing the forwarder may be subject to auditing and monitoring for

a limited period of time to guard against recurrence of previous objec

tionable conduct Such monitoring can be instituted in this proceeding

Fourth although the Bureau believe Mr Stettner s character to be

suspect because of past practices of which five were bordering on

deception the U S Department of the Treasury saw fit to confer on

him a customs house broker s license after conducting its own examina

tion and investigation ofhim between April and August 28 1978 when

it issued him a license Tr 5051 Ex C Appendix X Treasury

2 FMC
INTERCORP FORWARDERS LTD INDP OCEAN FRT 535

FORWARDER LICENSE APPLICATION

Department laws and regulations pertaining to licensing of such brokers

require licensees to be of good moral character and subject licenses

to revocation if the broker is incompetent disreputable or guilty of

fraudulent conduct Moreover applicants are subjected to investigations

as to their knowledge of customs laws and regulations and fitness to

render valuable service to importers exporters and as to their

business integrity See 19 U S C A 164I a 164I b 19 C FR

1I11 a 3 19 C F R 1I13 a 19 CF R 1I14 a and d 19 C F R

1I14 c 2 19 C PR 1I16 b The fact that the Treasury Depart

ment thought enough of Me Stettner as ofAugust 1978 to grant him a

license is certainly some indication of good character and reputation

even if he committed transgressions of the Shipping Act thereafter as

he did Evidence of an applicant s good reputation as a customs house

broker has been considered in at least one forwarder case See Emmet

L Sindik cited above 23 F MC at 737

Fifth although the Bureau argue that Me Stettner may well follow

applicable law only when it is convenient for him to do so if Intercorp

is granted a license the record shows that he stopped using artificial

insurance invoices as of December 1978 that he discontinued forward

ing under the Gateway arrangement in February 1981 and handled no

forwarding except three shipments handled under pressure for two

important clients in his brokerage business the last in August 1981 and

has resolutely rejected requests to perform forwarding from these two

important clients as well as other shippers despite the loss of income

that such rejections meant Tr 39 92 93 Ex D If Mr Stettner s

character is so weak as the Bureau seem to fear and if he is prone to

devious practices would not Mr Stettner have yielded to temptation

by now in view of his company s obvious need for revenue and done

some forwarding while concealing any record of it so as not to preju

dice his application as Mr Stettner himself remarked at the hearing

Tr 93 But states Mr Stettner Tr 93 94

For whatever the reasons Icould have made far more money

in 1981 had Idone these things and I didn tIm trying to

plant the roots of my company on a firm and legal basis for

the future Ihave now an enhanced understanding of the

law as explained to me by Mr Hunter in our prehearing

conferences and if I am fortunate enough to receive this

license Iwill abide with the law to the letter

In short Ifind no more reason on this record to find Mr Stettner

any more unfit or untrustworthy than the forwarders in Chumet Tokyo

Express orArguelles cited above all of whom were found fit with the

backing ofthe Bureau

25 F M C
536 FEDERAL MARITIME COMMISSION

ULTIMATE CONCLUSIONS

Intercorp Forwarders Ltd through its President and sole salaried

employee Mr Robert Stettner has sought an ocean freight forwarder s

license since October 1980 in the name ofIntercorp After having been

advised that Intercorp would be denied such license by the Commis

sion s staff pursuant to Commission regulations Mr Stettner requested

a hearing The Commission granted him and Intercorp a hearing to

determine whether Intercorp had carded on the business of forwarding

without a license in the past in violation of section 44 ofthe Act and

had engaged in certain questionable billing practices and had disguised

mark ups on its fees and if so whether Intercorp was fit to obtain a

license and should pay civil penalties

The hearing disclosed that Interoorp had carried on forwarding with

out a license under an arrangement with a licensed forwarder known as

Gateway Shipping in which Intercorp performed most ofthe forward

ing services on 24 shipments during 1978 through early 1981 Gateway

performing limited services and on three later shipments in 1981 Inter

corp performed the forwarding entirely on its own having terminated

the arrangement with Gateway in February of 1981 Moreover Inter

corp marked up its service fees without identifying the mark ups to its

shipper clients and on five occasions used artificial insurance invoices to

disguise mark ups Intercorp and Mr Stettner operated with Gateway

in the belief that he had a valid arrangement as Gateway s sales repre

sentative thereby not requiring his own license After Intercorp termi

nated the arrangement with Gateway in February 1981 during the

course of this proceeding Intercorp forwarded three more shipments

for two of its customs house broker clients in the belief that it would

lose their business vital to its existence if it refused Its disguised mark

ups were used in the belief that such praotioes were neoessary to obtain

a profit Mr Stettner pleads economic hardship and misunderstanding

ofthe applicable law during the relevant period oftime and promises to

conform to law if given a license and cites the fact that he terminated

his forwarding although later requested by clients to perform forward

ing pending Commission decision He also states that he has been

trying since October 1980 and even sinoe 1977 to obtain a license and

has obtained a customs house broker s lioense after passing an examina

tion and undergoing an F BI

investigation facts he cites as evidence of

his fitness

Denial of a lioense plus a penalty of 5 000 with no chance at

redemption as the Bureau urge marks a radical departure from Com

mission precedent and current law which permits persons to obtain or

retain license notwithstanding past violations of law absent flagrant

abuses of law but with mitigating factors but imposes civil penalties for

the violations and requires a certain degree of monitoring and auditing

to ensure continued compliance with law In three recent forwarder

2S FM C
INTERCORP FORWARDERS LTD INDP OCEAN FRT 537

FORWARDER LICENSE APPLICATION

cases moreover in which the respondents seemed more culpable than

Mr Stettner and Intercorp by operating without licenses using phony

invoices withholding shippers moneys etc the Bureau urged findings

of fitness after settling the issues of violations The Commission ap

proved the settlements found fitness granted or allowed licenses im

posed fines and required auditing ofthe forwarders records in finaliz

ing these three cases Imposing a more severe sanction against Inter

corp than was done in the three cases which are typical of many

others would be unfair and arbitrary according to the prevailing views

of sound administrative law

Intercorp should be and is found fit and should be and is given a

chance to conduct a forwarding business subject to periodic auditing

and payment of civil penalties in the amount of 3 000 spread within a

three year period This amount is determined after consideration of

numerous mitigating factors but especially the precarious financial con

dition ofIntercorp and the danger that a greater penalty might disable

the company from getting its business underway by imposing too great

a financial onus at the very outset ofits struggle to succeed 12

S NORMAN D KLINE

Administrative Law Judge

12 Because Me Stettner is not an attorney and has represented his own corporation without famili

arity with the Commission s

rules of practice and procedure advise him that both he and the Bureau

have the right to file exceptions to this Initial Decision within 22 days after the date of service and

furthermore to me replies to the Bureau s exceptions within 22 days after the Bureau serves their

exceptions 46 Code of Federal Regulations section 227 a Furthermore as done with Respondent s

Opening Memorandum of Law he should file an original and 15 copies forthe Commission s use as

well as mailing one copy to Hearing Counsel 46 Code of Federal Regulations section 118 a Mr

Stettner should also realize that this decision is initial only and may be reversed modified oradopted

by the Commission after the Commission considers the exceptions and replies to exceptions or if none

are filed reviews the decision on its own motion if it chooses to do so

25 F M C
I

I

I

I

I

FEDERAL MARITIME COMMISSION

DOCKET NO 80 S2

AGREEMENTS NOS 10186 AS AMENDED 10332 AS

AMENDED

10371 AS AMENDED 10377 10364 AND 10329

Agreements Nos 10364 and 10371 space charter agreements approved subject to certain

reporting requirements

Agreement No 10332 approved subject to certain reporting requirements and on condi

tion that the revenue pooling provisions be deleted

Seymour H KIgler and David R Kay for proponents of Agreement No 10186

Dennis N Barne for proponents of Agreement No 10329 and Agreement No

10377

Charles F Warren and George A Quadrino for proponents of Agreement No 10332

and Agreement No 10371

Danald J Brunner for proponents of Agreement No 10364

John M Ridlon on behalf of Sea Land Industries Inc as to Agreement No 10364

Robert T Basseche and Timothy J ShUN for protestant American President Lines

Ltd

J Alton Boyer and William H Fort for protestant Lykes Bros Steamship Co Inc

Paul McElligott for protestant Sea Land Service Inc as to Agreement No 10332 1

RU9 Iell To Well and Daniel M Conaton for protestant United States Lines Inc

Charna J Swedarsky Alan J Jacobson and Paul J Koller for the Commission s

Bureau of Hearings and Field Operations Hearing Counsel

REPORT AND ORDER

December 22 1982

BY THE COMMISSION ALAN GREEN JR Chairman THOMAS F

MOAKLEY Vice Chairman JAMES JOSEPH CAREY AND JAMES V

DAY Commissioners

This proceeding was initiated to determine whether six space charter

ing agreements among Korean flag carriers and other carriers in the

U S Korea Far East trades should be approved or if currently ap

proved remain approved pursuant to section 15 of the Shipping Act

1916 46 U S C g 814 1

1

The Commlssion s Order of Investi ation and Hesrin also directed the parties to address the fol

lowing issues

Continued

538 2S F MC
AGREEMENTS NOS 10186 AS AMENDED 10332 AS 539

AMENDED 10371 AS AMENDED 10377 10364 AND 10329

Administrative Law Judge William Beasley Harris Presiding Officer

issued an Initial Decision in which he concluded that all the agreements

under investigation except two withdrawn or terminated2 during the

course of the proceeding should be approved or continue approved 3

The proceeding came before the Commission upon the Exceptions of

the Bureau of Hearings and Field Operations Hearing Counsel and

protestants Lykes Bros Steamship Co Inc and American President

Lines Ltd APL The other protestants which participated in the

proceeding before the Presiding Officer did not file exceptions or re

plies thereto

THE AGREEMENTS

There are now only three agreements remaining at issue in this

proceeding Agreements Nos 10332 10332 1 10332 2 10371 1 10364

and 10364 1 All three were granted approval pendente lite

1 whether and to what extent approval of any or all of the subject agreements will signifi

cantly affect the availability of waivers to shippers seeking to transport cargo on non Korean

flag vessels

2 whether and to what extent approval of any or all of the subject agreements will signifi

cantly affect cargo capacity in the United States tradeswith Korea

3 whetherapproval of any orall of the subject agreements will adversely affect rate stability

in the United States trades with Korea

4 whether approval of any or all of the subject agreements willresult in unjust discrimina

tion or unfairness against non signatory carriers serving the United States trade with Korea

5 the manner in which approval of any or all of the subject agreements will affect voting

patterns within steamship conferences operating in the United States tradeswith Korea

6 whether approval of any orall of the subject agreements is consistent with existing treaties

of friendship commerce and navigation between the United States and other nations whose

interests are represented in theUnited States trades with Korea

7 whether the imposition of the waiver system by the Korean Government under its Mari

time Transportation Promotion Law and other governmental cargo control activities have

forced third flag carriers to enter into these space charter agreements in order to have rea

sonable access to cargo in the US Korean trades and

8 if the waiver system and other cargo control activities of the Korean Government have

forced third flag carriers to enter these space charter agreements whether the agreements are

so impregnated with unilateral government action as to be in reality non commercial agree

ments overwhich the Commission should take no jurisdiction under section 15 of the Ship

ping Act 1916

2

Agreements Nos 10377 and 10329 were withdrawn and terminated respectively

S Subsequent to the issuance of the Initial Decision APL filed amotion to reopen the proceeding

which was supported by Lykes and Hearing Counsel APL s motion was based on two events which

allegedly had a bearing upon Agreement No 10186 These were the acquisition in late December

1980 by the owners of OOCL of a 51 interest in Seapac Container Services and the entry by the

parties to Agreement No 10186 and Neptune Orient Lines into aagreement Agreement No 10409

Ifapproved Agreement No 10409 would have superseded Agreement No 10186 APL felt that these

events warranted reopening the proceeding for the limited purpose of developing a record which

would reflect their impact on the approvability of the agreement Subsequently Agreement No 10409

was withdrawn and Agreement No 10422 anew space charter agreement among the Korean Ship

ping Corporation KSC Neptune Orient Lines NOL and Orient Overseas Container Lines OOCL

was filed to supersede Agreement No 10186 By Order dated March 3 1982 the Commission condi

tionally approved Agreement No 10422 The conditions were met and the agreement approved on

March 16 1982 With the demise of Agreement No 10186 APL s motion to reopen has been overtak

en by subsequent events and rendered moot

25 F M C
540 FEDERAL MARITIME COMMISSION

Agreement No 10332 originally approved by the Commission on

November 13 1978 between Korea Marine Transport Company

KMTC and Nippon Yusen Kaisha NYK provides for each to oper

ate a 1050 TEU container vessel in a direct service between Korea and

the U S Pacific Coast including Hawaii and Alaska It also permits

KMTC and NYK to charter space to each other on terms as they may

agree Under the agreement sailing schedules are coordinated and

revenues from containerized cargo are shared equally Each carrier

operates its own service and issues its own bills of lading KMTC

serves as NYK s agent in Korea and NYK serves as KMTC s agent in

the U S Empty containers and related equipment may be interchanged

as required and each party may upon 90 days written notice to the

other withdraw from the agreement Agreement No 10332 contains

Commission imposed reporting requirements and was due to expire on

June 30 1980 Agreement No 10332 1 would extend the term of the

basic agreement through July I 1983

Subject to a limitation of80 TEUs per week Agreement No 10332 2

would permit NYK to carry containers transshipped at Korean ports as

part of a through movement to or from Hong Kong and Taiwan

Agreement No 10371 approved August 16 1979 permits KMTC

and NYK to subcharter collectively up to 420 TEU s per month to

Showa Lines Ltd Showa must issue its own bills of lading and is

responsible to its customers for the carriage of their cargo It is also

required to carry only that cargo that moves directly between Korea

and the U S with no intervening ports of call Showa may not carry

any cargo booked forwarded transshipped or feeder fed to or from

Japan or any other East Asian nation Agreement No 10371 was

scheduled to expire on June 30 1980 Agreement No 10371 1 extends

the basic agreement through July I 1983 and also permits NYK to

serve other trades in the commerce between the U S and the Far East

The cargo carried outside of the U SKorea trade would not be sub

ject to revenue sharing but would be subject to the agreement s

report

ing requirements

Agreement No 10364 permits Sea Land Service Inc and Hanjin

Container Lines Ltd to charter up to 10 500 TEU s eastbound and

10 500 TEU s westbound per quarter on each other s vessels in the

trade between the U S West Coast and Japan and Korea Neither

carrier may charter more than 70 percent of the eastbound or west

bound total from the other and no more than 70 percent of the vessel

capacity of anyone way voyage may be chartered The agreement also

contains reporting requirements concerning vessel capacity and the

number of TEU s and revenue tons chartered by each carrier Cargo

required to be carried by U S flag vessels under U S cargo preference

laws is not subject to the terms of this agreement Agreement No

2S FMC
AGREEMENTS NOS 10186 AS AMENDED 10332 AS 541

AMENDED 10371 AS AMENDED 10377 10364 AND 10329

10364 was approved on January 14 1980 and is not scheduled to

expire until January 8 1983

POSITIONS OF THE PARTIES

Agreements Nos 10332 and 10371

KMTC NYK and Showa maintain that approval of Agreement No

10332 will permit the introduction of a direct non stop service in the

Korea U S Pacific Coast trade with less tonnage than would otherwise

be required to maintain a viable service It is argued that this will in

turn contribute to rate stability and will benefit the environment

Moreover proponents argue that by scheduling their sailings they are

able to use only a single berth at ports in Korea and the United States

thereby relieving terminal congestion

The proponents argue that the additional carryings permitted by

Agreement No 10332 2 will have a de minimis impact on the trade

while increasing competition by introducing a new service into the

Hong Kong Taiwan trade By filling these additional 80 TEU s NYK

argues that it would increase its utilization under the agreement by

more than 10 percent

The proponents further contend that without revenue sharing al

lowed it Agreement No 10332 would be less effective as a rationalizing

device because neither party could be expected voluntarily to share its

area ofexpertise with the other

Both Agreements Nos 10332 and 10371 are viewed by APL as the

initial stage of the Korean Government s program to secure for Korean

carriers 40 of the U S Korean trade cargo APL alleges that as a

result ofthe Korean Government s promotional activities cargo carry

ings on Korean flag vessels in the U S Korean trade have grown from

a few percent in 1978 to over 20 in 1979 while the U S flag carriers

share declined by 25 eastbound and more than 30 westbound be

tween 1978 and the first half of 1980

APL observes that the justification for the agreements is based upon

the premise that absent approval of the agreements proponents of

Agreement No 10332 will individually provide the service now per

formed jointly under the agreements APL argues that the third flag

members of the agreements will simply leave the trade rather than

attempt to compete without the preferred status conferred by the sub

ject agreements Moreover it is said that the Korean flag carriers are

underutilized and would not aggravate that situation by adding addi

tional vessels APL notes that Agreement No 10332 allows the sharing

of profits and use of common agents It does not believe that these

elements of the agreement can be justified on the basis that NYK

requires KMTCs Korean contacts to gain access to the Korean market

and that KMTC needs protection from ordinary market forces while it

learns to operate a container service APL notes that NYK is one of

25 FMC
542 FEDERAL MARITIME COMMISSION

the world s major ocean carriers and that KMTC is hardly inexperi

enced as it operates a total of 18 vessels APL believes that Agreement

Nos 10332 and 10371 should be disapproved or in the alternative

modified to delete those provisions relating to pooling joint agencies

and transshipment ofHong Kong cargo Finally APL believes that the

agreements if approved at all must include conditions which guaran

tee to the U S flag carriers a share commensurate with their national

flag status and their level of service

Instead of discouraging overtonnaging Lykes believes that these

space charter agreements have had the opposite effect Lykes claims

that under Agreements Nos 10332 and 10371 NYK and Showa in

creased their Far East and Korea capacities above those offered in their

existing Far East services under the Japanese agreements Lykes further

states that the agreements have contributed to overtonnaging by allow

ing KSC and KMTC to inaugurate services which they could not have

commenced by themselves It notes that while certain independent

carriers were forced out of the trade KMTC and KSC were able to

continue to operate under the space charter agreements

Lykes concedes that the agreements are not responsible for all the ills

which plague the Far East trade It suggests however that the Com

mission has a

responsibility to insure that the agreements if approved

are not unjustly discriminatory unfair to non parties or contrary to the

public interest or detrimental to the commerce of the United States

Lykes argues that the agreements should not be approved unless the

Commission first adopts certain policy guidelines and places limitations

upon the joint operations permitted under the agreements to prevent

adverse impact upon the United States Korea trade and the other

operators in the trade

Lykes urges certain specific limitations for each ofthe agreements It

believes that the authority to serve Hawaii and Alaska under Agree

ment No 10332 should be eliminated as direct service has never been

performed in those trades and no justification has been offered to

support it It would also have the Commission restrict operation under

that agreement to a bimonthly frequency and no more than 22 644

TEU s annually the capacity presently offered Lykes feels that neither

KMTC nor NYK should be permitted to carry non Korean cargo as

KMTC has never carried that cargo and to permit NYK to do so

would be to grant it an additional competitive advantage not justified

by this record Lykes like APL believes that NYK should restrict

itself to the carriage ofKorean cargo as do KMTC and Showa Finally

Lykes would like the 420 TEU per month ceiling reduced to 200

TEU s per month

Hearing Counsel argues that by permitting the parties to share reve

nues Agreement No 10332 diminishes the incentive for competition

among the participants As such Hearing Counsel argues that it re

25 F MC
AGREEMENTS NOS 10186 AS AMENDED 10332 AS 543

AMENDED 10371 AS AMENDED 10377 10364 AND 10329

quires more justification than space chartering alone and that the re

quired level ofjustification is not present Because KMTC has had two

years of experience to establish itself Hearing Counsel believes that

revenue sharing cannot be justified as part of a start up operation It

notes that the parties to the other agreements do not require revenue

sharing

Hearing Counsel would also amend Agreement No 10332 2 to con

form to the understanding of the parties that the agreement permits

each to operate any vessel of up to 1 050 TED s and does not require a

vessel of 1 050 TED capacity

Agreement No 10364

Sea Land and Hanjin argue that the January 8 1980 order approving

Agreement No 10364 is fully supported by the record which was

before the Commission at that time and that nothing has occurred

subsequently which materially affects the findings and conclusions con

tained in that Order

APL and Hearing Counsel do not oppose the continued approval of

Agreement No 10364 Lykes notes that Agreement No 10364 has been

rarely used and suggests that the Commission impose cross charter

limitations consistent with the actual use by the parties plus a reasona

ble additional amount to account for potential trade growth

DISCUSSION

Before considering the merits of Agreements Nos 10332 10371 and

10364 under the standards and criteria governing the approvability of

section 15 arrangements we will first direct our attention to the eight

specific issues which the Commission requested the parties to address as

part ofthis investigation

Generally the eight issues were not fully developed by the parties

nor directly resolved by the Presiding Officer This may in part be due

to the breadth and complexity of some of these issues and the time

restraints placed on the proceeding In any event the record is of

marginal value in actually adjudicating all of these issues We believe

however that the Commission can properly address the merits of the

agreements at issue and determine the approvability of each without

attempting to expressly resolve everyone ofthe eight issues 4

4

Thus to the extent the resolution of Issues 1 2 and 3 turn on whether ornot one believes that

absent the agreement proponents would add tonnage to the trade these issues are different facets of

the ultimate factual issue to be resolved in this case Also Issue 5 relating to the effects of the agree

ments on conference voting patterns may not be susceptible of proof under the circumstances of this

case To the extent it is the issue is in retrospect of questionable relevance to the approvability of

any particular agreement Finally Issues 6 7 and 8 relate to Commission jurisdiction overthe agree

ment which no party has challenged

25 F M C
544 FEDERAL MARITIME COMMISSION

j

Although the record does not permit detailed conclusions to be made

as to each of the eight issues it does allow certain more general

findings These are presented below

1 Whether and to what extent approval of any or all of the

subject agreements will significantly affect the availability of

waivers to shippers seeking to transport cargo on non Korean

flag vessels

Korean Ordinance No 636 effectively increases the capacity of the

Korean flag fleet by exempting from the cargo promotion law third

flag carriers to the extent they charter space to Korean flag operators

Ifthe space charter agreements were disapproved the Koreans might

replace the capacity laws with additional tonnage and enforce the

cargo promotion laws more vigorously In all likelihood this would

increase the availability of waivers However there is a wide diver

gence ofopinion among the parties as to whether this is likely to occur

Lykes believes that approval ofthe agreements will result in a reduc

tion of availability of waivers to shippers seeking to use third flag

vessels other than those operated by signatories to the subject space

charter agreements APL believes that if the agreements are disap

proved third flag capacity in the trades under Agreement No 10332

would be withdrawn which would increase cargo available to other

third flag carriers in the trade

Proponents on the other hand contend there is no evidence to prove

that approval or disapproval of the agreements will significantly affect

the availability of waivers Likewise Hearing Counsel does not believe

disapproval of the agreements would increase the availability of waiv

ers

The Commission is not satisfied that the protestants have established

a causal connection between the agreements and the availability of

waivers Accordingly it cannot be concluded on the basis ofthe record

that approval ofthe agreements would be detrimental to the commerce

of the United States or be unjustly discriminatory by reducing the

availability ofwaivers

2 Whether and to what extent approval of any or all of the

subject agreementll will significantly affect cargo capacity in

the United States trades with Korea

In the absence ofcapacity and service limitations Lykes believes that

approval of the agreements will significantly encourage overtonnaging

in the trade APL states that if the agreements are disapproved the

capacity in the U S Korea trades will be reduced

Conversely proponents argue that while approval ofthe agreements

will not significantly affect cargo capacity disapproval will cause pro

ponents to introduce additional tonnage to maintain their semi monthly

service Hearing Counsel agrees that on balance approval ofthe agree

2 F MC
AGREEMENTS NOS 10186 AS AMENDED 10332 AS 545

AMENDED 10371 AS AMENDED 10377 10364 AND 10329

ments with certain modification will have a more positive impact on

overtonnaging than would disapproval

Resolution of this issue turns on whether or not one believes that

absent the agreements proponents would add tonnage to the trade On

the basis of the evidence discussed below the Commission is satisfied

that proponents are likely to add additional tonnage to the trade if the

agreements are disapproved

3 Whether approval of any or all of the agreements will

adversely affect rate stability in the United States trades with

Korea

All parties agreed that low utilization of vessel capacity leads to rate

instability while improved utilization has a salutory effect on rate stabil

ity As discussed above the parties differ on whether the agreements

have the effect of decreasing capacity Since the Commission has con

cluded that the agreements will tend to reduce overtonnaging it fol

lows that they are not likely to adversely affect rate stability

4 Whether approval of any or all of the subject agreements

will result in unjust discrimination or unfairness against non

signatory carriers serving the United States trade with Korea

No party disputes the fact that the agreements result in a certain

degree of market concentration which enhances the member lines

ability to compete Lykes and APL allege that the member lines are

carrying cargo which but for the agreements might be carried on their

vessels This it is alleged amounts to unfair and discriminatory compe

tition against U S and third flag carriers in the trade

Proponents contend that approval of the agreements does not result

in unjust discrimination or unfairness against other carriers in the trade

Hearing Counsel agrees believing that the market advantage gained by

approval of the agreements has no significant impact on other carriers

in the trade

The capacity subject to the agreements is not large and no single

agreement under examination in this proceeding appears to provide its

members with a dominant position in the Far East trade Protestants

fear of increased competition is not in and of itself evidence that the

agreements are unjustly discriminatory or unfair

5 The manner in which approval of any or all of the subject

agreements will affect voting patterns within steamship confer

ences operating in the United States trade with Korea

The parties generally believe that the record in this proceeding fails

to establish a causal connection between the subject agreements and

conference voting patterns The Commission agrees The Korea trade is

only part of the total Far East trade There are myriad factors relating

to both the Korea trade and the total trade which would potentially

25 F M C
546 FEDERAL MARITIME COMMISSION

influence conference decisions No attempt has been made to isolate the

effect ofthese agreements on conference voting

6 Whether approval of any or all of the subject agreements is

consistent with existing treaties of friendship commerce and

navigation between the United States and other nations whose

interests are represented in the United States trades with

Korea

No party alleges that approval ofthe agreements would be inconsist

ent with the existing treaties of friendship commerce and navigation

between the United States and the other nations which participate in

the U SKorean trade In Agreement No 9939 Pooling Sailing and

Equal Access to Government Controlled Cargo Agreement 16 F MC 293

308 309 1973 the Commission concluded that a pooling agreement

which was based in part on the cargo preference laws of Peru was not

contrary to the terms of the Treaty of Friendship Commerce and

Navigation between the United States and Norway There are no facts

of record in this proceeding which would distinguish this proceeding

from that in Agreement No 9939 The reasons underlying the Commis

sion s decision in Agreement No 9939 remain valid in the instant case

7 Whether the imposition ofthe waiver system by the Korean

Government under its Maritime Transportation Promotion

Law and other governmental cargo control activities have

forced third flag carriers to enter into these space charter

agreements in order to have reasonable access to cargo in the

U S Korea trades

Unquestionably the waiver system has acted as a strong incentive to

third flag carriers to enter into space charter agreements However no

party alleges that this incentive forced third flag carriers to take this

action

8 Ifthe waiver system and other cargo control activities of

the Korean Government have forced third flag carriers to

enter into these space charter agreements whether the agree

ments are so impregnated with unilateral government action as

to be in reality non commercial agreements over which the

Commission should take no jurisdiction under section 15 ofthe

Shipping Act 1916

As discussed in connection with the previous issue no party suggests

that third flag carriers were forced into space charter agreements All

parties believe that the agreements are fully subject to section 15 and

that the waiver system and other cargo control activities ofthe Korean

Government have not removed the agreements from the Commission s

jurisdiction

With these thoughts in mind we turn now to a consideration ofthe

approvability of the particular agreements at issue under the applicable

standards of section 15

25 F MC
AGREEMENTS NOS 10186 AS AMENDED 10332 AS 547

AMENDED 10371 AS AMENDED 10377 10364 AND 10329

Agreement No 10364

Section 15 provides in relevant part that the Commission must ap

prove an agreement subject to that section unless it can find that such

agreement is or will be 1 discriminatory or unfair as between certain

specified segments of the industry 2 detrimental to United States

commerce 3 contrary to the public interest or 4 otherwise in

violation of the Shipping Act 1916 In considering an agreement under

the public interest standard of section 15 the Commission must

evaluate the possible anticompetitive consequences of an agreement and

determine whether they are outweighed by the agreement s

legitimate

commercial objectives United States Lines Inc v Federal Maritime

Commission 584 F 2d 519 D C Cir 1978

Agreement No 10364 is nothing more than an arrangement whereby

the parties charter space on each other s vessels on a space available

basis subject to a maximum There is no provision authorizing the fixing

of rates coordination of sailings joint solicitation of cargo or joint bills

of lading The vessel owner retains full control over the vessel In

short the space charter places little or no restriction on the competition

between the parties Nor has it been shown to the extent it was even

argued 5

that the agreement will adversely affect other operators in the

trade competitively

On the other hand proponents of Agreement No 10364 have come

forward with evidence indicating that the agreement will allow for

more direct calls prevent the introduction of additional tonnage to the

trade and result in a generally more efficient transportation service to

the shipping public The Commission is satisfied that these benefits

outweigh any anticompetitive features of the agreement Therefore

upon careful examination of Agreement No 10364 in light of the

record developed in this proceeding we cannot find that the agreement

presently operates or will with reasonable probability operate contrary

to the public interest or in any other manner proscribed by section 15

ofthe Act It will accordingly be approved

Agreements Nos 10332 and 10371

Because Agreements Nos 10332 and 10371 have common parties and

are otherwise interrelated they will be considered and discussed to

gether Protestants object to the revenue pooling features ofAgreement

No 10332 as well as its space chartering provisions APL questions

whether even the requested space chartering authority is justified in

terms of reducing overtonnaging in the trade which all parties agree

exists

Given the trade s overtonnaging APL does not believe that any non

Korean party to a

space charter agreement would exacerbate the situa

5

As noted earlier APL and Hearing Counsel do not oppose the continued approval of Agreement

No 10364

2S F M C
i

i

548 FEDERAL MARITIME COMMISSION

tion and increase their tonnage to offset the capacity lost as a result of

any disapproval of that agreement APL argues that the addition of

such tonnage would cause utilization levels to drop substantially there

by making the parties service even more unprofitable a situation they

would endeavor to avoid It is allegedly more likely that the non

Korean operators would in the event of disapproval withdraw that

capacity currently operated under the space charter agreements

While APL s contention has appeal at least on a theoretical basis it

is not supported by history in the trade or the record in this case The

record demonstrates that despite past serious overtonnaging several

carriers have continued to place additional tonnage in the trade Propo

nents of Agreements Nos 10332 and 10371 have made dear their

intentions to do likewise if those agreements are not approved

In his direct testimony Hiroshi Takahashi of NYK states that in the

event of disapproval NYK and KMTC would place additional vessels

in the trade Mr Takahashi claims that despite the current unfavorable

market conditions which he views as transitOry NYK would unques

tionably increase its tonnage by chartering a vessel or moving a vessel

from another trade to this one As for the Korean flag operators the

Korean Government states that in the event of disapproval Korean

flag carriers would not abandon the U S Koreantrade Korea expects

its exports to reach one hundred billion dollars by 1991 and believes

that it cannot enjoy world trade without an effective shipping program

The Korean government would if necessary provide financial assist

ance to Korean flag carriers to enable tlem to continue their service

Based on all the foregoing the Commission is satisfied that proponents

of Agreements Nos 10332 and 10371 would in the future and in the

absence of the agreements increase their individually operated tonnage

and thereby exacerbate the problem of overtonnaging To that extent

Agreements Nos 10332 and 10371 can be said to confer important

public and transportation benefits by tempering overtonnaging which is

a major cause ofmalpractices and rate instability

Undoubtedly the space chartering provisions of Agreements Nos

10332 and 10371 gives proponents some advantage over lines such as

APL and Lykes However the record fails to establish that this advan

tage is unjust discriminatory or unfair to competing lines or otherwise

contrary to the standards of section 15 The most that can be said is

that protestant carriers face greater competition for cargo than they

would in the absence of an agreement This standing alone is not

grounds for disapproving the agreements Alcoa Steamship Company

Inc v C LA Anonima Venezolana de Navigacion 7 F MC 345 361

1962 and Agreement Nos 9847 and 9848Rewmue Pools v U SBrazil

Trade 14 F MC 149 158 1970 The Commission concludes therefore

that subject to certain modifications and reporting requirements dis

25 P MC
AGREEMENTS NOS 10186 AS AMENDED 10332 AS 549

AMENDED 10371 AS AMENDED 10377 10364 AND 10329

cussed below Agreements Nos 10332 and 10371 meet the criteria for

section 15 approval

A semi annual report of vessel capacity utilization and cross charter

ing of space similar to that suggested by Hearing Counsel and Lykes

would enable the Commission to more efficiently and effectively main

tain continuing surveillance over the chartering provisions of the agree

ments and to monitor their operations to ensure that the legitimate

transportation objectives underlying the approval of those provisions

are being realized 6

Such a reporting requirement will therefore be

imposed as a condition to approval

Hearing Counsels suggestion that the provisions of Agreement No

10332 2

relating to transshipment be clarified also has merit According

ly we will require the parties to amend the agreement to conform to

the understanding of the parties that it does not require each party to

operate a 1050 TEU vessel but instead permits each party to operate a

vessel of up to 1050 TEU s

Although Agreement No 10371 and the space chartering provisions

of Agreement No 10332 modified as indicated above are found to

satisfy section 15 approval requirements the same cannot be said ofthe

revenue pooling Coordinations of sailings and joint agent provisions of

Agreement No 10332 reflect activity generally found violative of the

antitrust laws As such they are deemed contrary to the public interest

within the meaning of section 15 and must be disapproved unless

proponents can make a countervailing showing that the provisions in

question are necessary to meet a serious transportation need secure an

important public benefit or further a valid regulatory purpose of the

Shipping Act 1916 Federal Maritime Commission v Aktiebolaget

6

APL and Lykes urge the Commission to place capacity and geographic limitations on the agree

ments to protect them from unjust and unfair competition The Commission is not satisfied that such

limitations are necessary Absent a showing that the agreements are operating in adiscriminatory or

unfair manner the Commission will not impose limitations on the number of TEU s carried or the

ports served The Commission also rejects Lykes proposal that the Commission adopt certain state

ments of future policy with respect to the Korea trade These concern the Commission s continuing

surveillance of the agreements rather than the conduct of carriers They would require that the Com

missions continuing surveillance take a

particular form and thus in essence constitute conditions on

the Commission As such they would place unwarranted limitations on the flexibility of the Commis

sion in exercising continuing surveillance over the subject agreements Lykes also proposes that the

Commission adopt certain general standards and guidelines While the Commission may adopt new

standards as part of an adjudication in order to meet particular unforeseeable situations

t he function of fiUing in the interstices of the Act should be performed as much as possible

through quasi legislative promulgation of rulesto be applied in the future

Securities and Exchange Commission v Chenery Corporation 332 US 194 202

1947

The choice between proceeding by general rule or by individual ad hoc litigation is one that lies

primarily in the informed discretion of the agency Columbia Broadcasting System v United States 316

U S 407 421 1942

The Commission has established and the courts have sanctioned general standards which are applied

to all section 15 agreements We are not satisfied that conditions in the Korean trade are so unique as

to require a

separate set of standards in addition to those of general applicability

25 F M C
550 FEDERAL MARITIME COMMISSION

Svenska Amerika Linien 390 U S 238 1968 Proponents have failed to

sustain this burden The record simply will not support the approval of

the pooling and coordination arrangements A space charter is all that

can be justified on the basis ofthe record in this case

We cannot agree with Proponents that KMTC needs protection from

ordinary market forces while it learns to operate a container service As

APL points out KMTC is hardly an inexperienced carrier as it oper

ates a total of 18 vessels KMTChas had two years ofexperience in the

trade to establish itself Under the circumstances it does not need to

pool revenues with NYK one ofthe world s major carriers in order to

service the trade

THEREFORE IT IS ORDERED That Agreements Nos 10364

10364 1 10371 and 10371 1 are approved pursuant to section IS of the

Shipping Act 1916 46 U S C 814 and

IT IS FURTHER ORDERED That Agreement No 10332 2 as

amended by Agreement Nos 10332 1 and 10332 2 is disapproved pur

suant to section IS of the Shipping Act 1916 effective February 24

1983 unless the Commission actually receives at its offices in Washing

ton D C on or before February 23 1983 a modified version of that

agreement signed by the parties or their duly authorized representa

tives that

1 Deletes Article 6

2 Amends Article l a to read

a The parties will operate two vessels of a capacity of no

more than 1 050 twenty foot equivalent container units

TEU s each in a direct non intervening ports of call service

3 Amends Article 1b to limit capacity of any replacement

vessel to 1 050 TEU s rather than 1 100 TEU s

4 Amends Article l c to read

NYK will transport commodities to and from Korea in ac

cordance with Article l a and will not transport in the serv

ice authorized here any cargoes booked forwarded trans

shipped or feeder fed from or to Japan or any other Far

Eastern nation by any line including NYK except for trans

shipment cargo destined to or originating from Hong Kong or

Tll1wan The carriage of such transshipment cargo shall not

exceed 80 TEU s per month

5 Amend Article 13 B to read

B Cargo Data

For each six month period ofoperation or part thereof the

parties shall compile and submit to the FMC and to KMPA

to the extent it desires the following

25 F MC
AGREEMENTS NOS 10186 AS AMENDED 10332 AS 551

AMENDED 10371 AS AMENDED 10377 10364 AND 10329

i the name owner flag TEU capacity and number of

sailings for every vessel employed by the parties in the

trades covered by this agreement

ii for each party stated separately eastbound and west

bound the total TEU capacity Far East TEUs carried

excluding Korea Korea TEUs carried total TEUs car

ried and utilization

iii for each party stated separately eastbound and west

bound the total number of TEUs carried on its vessels

and the number of TEUs carried for each of the other

parties to this agreement and Showa Line Ltd stated

separately

IT IS FURTHER ORDERED That upon full and timely compli

ance with the conditions set forth in the above ordering clause Agree

ment No 10332 3 shall be approved

S FRANCIS C HURNEY

Secretary

By the Commission

25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 44

INGERSOLL RAND COMPANY

v

WATERMAN STEAMSHIP CORPORATION

NOTICE

December 27 1982

Notice is given that the time within which the Commission could

determine to review the November 10 1982 order of dismissal in this

proceeding has expired No such determination has been made and

accordingly that order has become administratively final

8 FRANCIS C HURNEY

Secretary

552 2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 44

INGERSOLL RAND COMPANY

v

WATERMAN STEAMSHIP CORPORATION

MOTION TO DISMISS GRANTED

Finalized December 27 1982

By order dated November 10 1982 the undersigned granted Inger

soll Rand s Motion to Dismiss the complaint In the order reference

was made to the Commission s Rules of Practice and Procedure sec

tion 536 5 d 20 46 CFR 536 5 d 20 which makes carrier custody

provisions in tariffs invalid It should be noted that the Commission has

stayed the final rule which was to become effective November 8

1982 for 45 additional days

The Commission s action in no way affects the validity of the grant

ing ofthe Motion to Dismiss the complaint here As the previous order

notes there is no real justifiable controversy so that all that is really

involved is the complainant s Motion to Dismiss the complaint which it

now properly seeks to withdraw Consequently the previous order of

November 10 1982 is hereby reaffirmed

S JOSEPH N INGOLIA

Administrative Law Judge

25 F M C 553
FEDERAL MARITIME COMMISSION

DOCKET NO 81 51

TIME LIMIT FOR FILING OVERCHARGE CLAIMS

ORDER ON RECONSIDERATION

January 5 1983

This proceeding is before the Commission upon receipt of three

Petitions for Reconsideration1 and one Petition for Amendment2 ofthe

Commission s Final Rule published August 10 1982 in the Federal

Register 47 Fed Reg 34556 25 F MC 185 proscribing carrier and

conference tariff provisions which require overcharge claims to be filed

with the carrier within six months or while the cargo is still in the

carrier s custody That rule was issued following consideration of 35

comments received from both shipper and carrier interests in response

to the Commission s earlier Notice of Proposed Rulemaking 46 Fed

Reg 43472

PETITIONS FOR RECONSIDERATION

The petitions for reconsideration generally constitute repetitions of

the arguments already raised in response to the Notice of Proposed

Rulemaking and therefore may not meet the procedural requirements

of Rule 261 46 C F R 502 261 which sets forth criteria to avoid

summary rejection of petitions for reconsideratipn However the Com

mission will waive those requirements and address the merits of the

petitions in order to consider fully the arguments presented by Petition

ers

All three Petitioners argue that this rulemaking reached a conclusion

different from previous rulemakings on the subject ofovercharge claim

time limits and did not explain or distinguish those proceedings Peti

tioners contend that the Commission s previous conclusions were

founded on evidentiary hearings and that the Commission cannot now

make a contrary decision in the absence offurther evidentiary hearings

The FEC also suggests that should the Commission determine not to

lOne Petition for Reconsideration was submitted by the Far East Conference hereafter FEe and

another was rued jointly by the Japan Korea Atlantic Gulf Freight Conference New York Freight

Bureau Philippines North America Conference TransPacific Freight Conference of JapanKorea

Trans Pacific Freight Conference Hong Kong and Agreement Nos 10107 and 10108 and their memo

bers JKAG et al A Petition for Reconsideration and Stay and Motion for Waiver of Time were

filed by the Pacific Westbound Conference PWC The motion for stay was granted by the Commis

sion on November 4 1982 deferring the November 8 effective date of the rule for 45 days for the

purpose of allowing sufficient time to rule on the petitions forreconsideration The motion for waiver

of time limit is also granted

IIThe Petition for Amendment was filed by Sea Land Service Inc

554 2S FMC
TIME LIMIT FOR FILING OVERCHARGE CLAIMS 555

rescind its decision it should at least reopen the proceeding to obtain

evidence concerning whether circumstances have changed since the

prior proceedings Petitioners also generally argue that there is no

probative evidence that six month rules and cargo custody rules are

unfair or unreasonable and that the Commission is therefore bound to

adhere to its previous findings

The Commission took note ofprevious proceedings on the subject of

overcharge claim time limits in the Final Rule Both Proposed Rule

Covering Time Limit on the Filing of Overcharge Claims 12 F MC 298

1969 reaffirming 10 F MC I 1966 and Carrier Imposed Time Limits

on Presentation of Claims for Freight Adjustments 4 F MB 29 1952

either preceded or disregarded the Commission srecognition that it is

not necessary to make specific findings of Shipping Act violations prior

to adopting substantive rules providing that the rules are in furtherance

of general Shipping Act objectives See e g

Austasia Container Ex

press Possible Violations of Section 18 b land General Order 13 19

F MC 512 521 1977 reversed on other grounds In those earlier

rulemakings the Commission focused its attention on whether the

record evidenced specific statutory violations Because the proposed

rules in those proceedings were unsupported by findings of facts

thought necessary to adopt such rules the Commission failed to do so

The Commission s factual findings and conclusions of law in that con

text are not therefore dispositive in the instant proceeding

A subsequent rulemaking Docket No 78 30 Time Limitfor Filing of

Overcharge Claims 21 F M C 713 1979 did not include hearings but

was based solely on comments to the Notice of Proposed Rulemaking

The Commission s ultimate failure to proscribe time limits in that pro

ceeding was primarily based on the inadequacy ofthe grounds set forth

in the Notice The operative portion of the Notice was limited to a

recitation oftwo provisions ofthe Shipping Act one of which section

22 seemed in retrospect to have been inappropriately applied 3

In announcing its decision in Docket No 78 30 not to prohibit time

limits for filing claims the Commission made no factual findings which

could be considered to establish contrary precedent within the meaning

of Local 777 Democratic Union Organizing Committee v NLRB 603

F 2d 862 D C Cir 1978 cited by JKAG et al The Commission s

conclusions in the Final Rule of Docket No 78 30 regarding the sec

tions 14 and 22 issues consisted ofthe following in toto

3

To the extent the Notice in Docket No 78 30 would have precluded six month time limitations

under section22 as amatter of law it was overreaching Section 22 establishes atwo year period with

respect to claims filed with the Commission not with those filed directly with the carrier The instant

proceeding considers whether the tariff time limits have the practical effect of restricting ordiscourag

ing shippers rights under section 22

2S F M C
556 FEDERAL MARITIME COMMISSION

Carrier commentators argued that neither section cited by the

Commission in its Notice ofProposed Rulemaking i e section

14 Fourth and section 22 supports the promulgation of a ban

on six month rulesUpon consideration of these comments

the Commission has decided not to adopt such a ban

21 F MC at 716

The Notice of Proposed Rulemaking in this proceeding clearly set

forth the Commission s determination that tariff time limitations may

act as an obstacle to the redress of section 18b 3 violations and

are likely to conflict with several other objectives of the Shipping Act

emphasis supplied This rulemaking was not conditioned on the actual

finding of Shipping Act violations but was premised on th principle

set forth above that rules may be adopted if they are in furtherance of

general Shipping Act objectives 4

The Notice discussed in detail why the

proposed rule was necessary to meet each of several Shipping Act

objectives and cited sections IS and 18b 3 as well as sections 14

Fourth and 22

The Commission remains satisfied that for the reasons set forth in

the Final Rule and reiterated herein promulgation ofthe Final Rule is

necessary to meet and to further those statutory objectives Moreover

the administrative burden to the Commission in adjudicating essentially

undisputed claims brought before it by the operation of six month time

limits and carrier custody requirements is less tolerable now in this era

of increasingly limited resources and therefore constitutes an addition

al compelling reason for the Commission to take action at this time

Petitioners raise a number of other arguments none of which the

Commission finds persuasive

PWC objects to carriers having to rule on post custody claims

saying it is a waste of time to do so because the shipper can always get

a de novo review before the Commission PWC s

argument overlooks

the fact that as noted in the Final Rule a large percentage of claims

before the Commission are undisputed or are even supported by the

carriers A carrier s consideration of an admittedly meritorious claim is

not a waste oftime the waste occurs when these undisputed claims are

filed with the Commission thus resulting in an unnecessary burden on

the administrative process When a claim is disputed the carrier s letter

to the claimant rejecting the claim for specified reasons need only be

copied and submitted to the Commission to constitute the carrier s

participation in any claim eventually brought before the Commission

This hardly comprises the duplicative burden of which PWC com

plains

See New York Freight Forwarders and Brokers Assn v Federal Maritime Commission 38 F 2d 981

D C Cir 1967 New York Freight Forwarders and Brokers Assn v Federal Maritime Commission 337

F 2d 289 2d Cir 1964

25 F MC
TIME LIMIT FOR FILING OVERCHARGE CLAIMS 557

JKAG et al and PWC suggest that the Commission is attempting to

absolve itself of its responsibility to resolve claims by delegating the

responsibility to the carriers The Commission fully intends to continue

to expend its resources resolving real disputes In fact those resources

will be more efficiently and effectively applied when they will no

longer be diverted toward unnecessary proceedings The Final Rule

will help the Commission to avoid only those uncontested claims which

can and should be handled without government intervention

FEC criticizes the Final Rule s statistical analysis as one sided and

complains that the statistics do not consider the total number of claims

filed with carriers and perhaps acted upon by the carriers The data of

which FEC complains were extracted from the publicly available files

ofthe 189 informal docketed proceedings which were noticed for filing

or assignment during calendar year 1981 The data showed that the

percentage of undisputed informal docketed proceedings before the

Commission as a result of six month or carrier custody rules was at

least 39 7 and probably higher They were not relied upon to draw

any negative inferences regarding the number of claims acted upon

directly by the carriers within the six month period but rather to

compute the extent to which Commission resources are expended on

uncontested claims Indeed the Commission has utmost confidence in

carriers ability to resolve overcharge claims satisfactorily including

denying claims which are unsupported

JKAG et al and PWC suggest that the Commission should adopt

simplified or expedited procedures for uncontested claims As noted at

footnote 15 of the Final Rule this suggestion has already been taken

under advisement but in any case would be an appropriate subject for a

future proceeding It is beyond the scope ofthis rulemaking

JKAG et al argue that the Final Rule will result in an increase in

claimants filing unsupportable invalid claims and in rebating by carriers

who will cater to the claims oftheir shippers Again the Final Rule

has already fully addressed and dismissed that proposition

The Commission does not believe that reliance on carriers and

shippers to resolve disputes will necessarily result in unlawful

activity either in the form of false shipper claims or unwar

ranted reparations by carriers It rejects the proposition that

both carriers and shippers need as much supervision as possi

ble because they will act in bad faith at every opportunity or

at least will be tempted to yield to pressure to do so The

Commission expects parties subject to the Shipping Act to

comply with it and will vigorously make use of the statutory

remedies for violations ofthe Act

Moreover to give credence to this argument would require the Com

mission to prohibit carriers and shippers from resolving any claims

25 F M C
558 FEDERAL MARITIME COMMISSION

among themselves including those filed within six months after the

shipment

JKAG et al argue that the assessment of an administrative fee for

filing overcharge claims a practice proscribed by the Final Rule

should in fact be permitted because the vast majority of overcharge

claims result from errors committed by shippers consignees or their

agents They argue that carriers should be permitted compensation for

expense and effort in processing claims resulting from such errors

The Commission disagrees A flat claim filing fee constitutes a penal

ty for seeking correction of a statutory violation particularly if it

applies regardless of who if anyone is at fault for the overcharge 6

The Final Rule does not however bar a tariff provision which requires

legitimate actual expenses incurred in the investigation of a claim to be

borne by the party at fault or if no error is found by the claimant

Thus those parties responsible for an error in measurement or descrip

tion could be held responsible for the expenses suffered in identifying

the error

6

THE PETITION FOR AMENDMENT

Sea Land s petition is limited to requesting reconsideration of the

decision not to prescribe minimum standard documentation in post

custody overcharge claim cases

7

Sea Land requests the Commission to

require in post custody claims involving alleged errors in weight meas

ure or cargo description that claimants submit certified copies of man

datory documentation viz the commercial invoice and either the Ship

per Export Declaration Form 7525 V or the Special Customs Invoice

Form 5515 depending upon whether it was an export or import

shipment Other types ofdocumentation such as promotional or adver

tising literature Sea Land says would be strictly corroboratory

It is not entirely clear whether Sea Land suggests these minimum

standards apply to claims filed directly with the carrier or to claims

filed with the Commission as well Should Sea Land intend the latter it

must be stated that the Commission will not consider minimum speci

fied standards of proof for Commission proceedings The Commission

shall and perhaps must under section 18b of the Shipping Act 1916

Ifan overcharae iJ the result of the carrier s misapplication of atarills

commodity descriptions to

a particular shipment then a claim ruing foo would clearly be unreasonable If the overcharge resulted

from the claimant s mismeasuresent to require the claimant to pay the carrier s

expenses in remeasur

iog in those circumstances would appear reasonable

It would appear that ina claim based solely on a dlsaarooment over which commodity description

should apply to aparticular product nO actual invostiptory exponon the part of the carrier would

be incurred and none could therefore be charged to a claimant

7

Sea Land s concern is also addressed by PWC which argues that there are no commercial stand

ards which canbe applied in post custody c and that carriers should therefore be allowed to deny

all post ustody claims Sea Land draws the opposite conclusion however and makes specific suggeS

tiODS of minimum documentary support

2 FMC
TIME LIMIT FOR FILING OVERCHARGE CLAIMS 559

continue to consider and weigh all proffered evidence both in support

ofand in opposition to claims brought before it

As to standards of proof for use in claims brought directly to the

carrier the Final Rule rejected Sea Land s original suggestion in its

comments to the Notice of Proposed Rulemaking that the Commission

impose some standards of minimum documentation The Commission

noted

Any such list of documents would on the one hand be likely

to omit means of proof which in certain circumstances would

suffice to make a shipper s case while on the other hand

include standards which in certain circumstances would be

insufficient

For example it is likely that promotional material or evidence of prior

or subsequent shipments could sometimes suffice to prove to a carrier

that a particular shipper ships only an easily identifiable product or one

which comes only in a uniform size or weight On the other hand the

documentation Sea Land would require might because of the way the

various documents are prepared all contain the same error of descrip

tion or measurement

Thus the Commission has determined not to prescribe minimum

standards for use by carriers in considering overcharge claims Howev

er the Final Rule does not prohibit carriers from adopting and publish

ing minimum requirements It would be incumbent upon carriers if

they choose to adopt requirements to maintain some degree offlexibil

ity Sea Land s proposed standards would for example appear reasona

ble if not read to mean that the existence of an error in description or

measurement must be provable in the prescribed documents alone

When adequate proof of overcharge in unspecified documents is afford

ed only corroboratory status then probative evidence is being imper

missibly excluded The Commission s endorsement of carrier imposed

minimum documentary requirements is not an endorsement of carrier

imposed exclusive means of proof What must be avoided is a situation

similar to that created by the tariff time limitations that is where

carriers acknowledge or do not contest the validity of a claimant s

argument but point apologetically to a tariff rule as an unavoidable bar

to reparation The Commission does not wish to discourage carriers

from drafting requirements which strike an appropriate balance giving

to shippers reasonable opportunity to prove their case with reliable

evidence and giving to carriers guidance in adjudging shippers claims

by requiring adequate substantiation so as to assure the integrity of the

system All questions or challenges to the lawfulness if carrier imposed

requirements will be addressed by the Commission

THEREFORE IT IS ORDERED That the Petitions for Reconsid

eration and the Petition for Amendment are denied and

25 F MC
560 FEDERAL MARITIME COMMISSION

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 28

GILA RIVER PRODUCTS

v

SEA LAND SERVICE INC

NOTICE

January 7 1983

Notice is given that the time within which the Commission could

determine to review the November 23 1982 initial decision in this

proceeding has expired No such determination has been made and

accordingly that decision has become administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 561
FEDERAL MARITIME COMMISSION

DOCKET NO 82 28

GILA RIVER PRODUCTS

v

SEA LAND SERVICE INC

Commodity properly classified and rated Respondent ordered to cease and desist from

efforts to reclassify and rerate the commodity and from all attempts to collect

additional freight charges on shipment

Frank J Dempsey Jr for complainant

Claudia E Stone and John M Ridlon for respondent

INITIAL DECISION 1 OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Finalized January 7 1983

The complainant Gila River Products alleges hat respondent Sea

Land Service Inc misrated a shipment of its products one 4Ofoot

container in violation of section 18b 3 of the Shipping Act 1916 46

U S C 819 b 3

The contents ofthe container were described on the bill oflading as

1 40 CONT S T C 1504 Cartons Plastic and Plastic Strips

Not Fabricated or Metal Clad Item No 893 0071

The item number referred to on the bill of lading 893 0071 is from the

Gulf European Freight Association GEFA TariffNo 5 FMC IO and

bears the description

Plastic Plate Sheets Strip Film or Mulch N O S Not Fabric

Backed or Metal Clad WM 78 50

The container moved from Houston to Le Harve and freight charges

of 2 073 35 were assessed based on the rate for Plastic Plate Sheets

etc Gila paid the freight charges However a routine vessel audit led

Sea Land to bill Gila for an additional charge of 5 23195

The audit was conducted by The Adherence Group TAG hired by

GEFA to perform cargo inspection selfpolicing and enforcement func

tions in the GEFA trade The audit which actually consisted of a

review of the documents covering the cargo aboard the Sea Land

This decision willbecome thedeci ion of the Commission in the absence of review thereof by the

Commission Rule 227 Rule of Practice and Procedure 46 CPR 02 227

562 2S F MC
GILA RIVER PRODUCTS V SEA LAND SERVICE INC 563

Venture on Voyage 138 showed a

discrepancy in the documentation

for the shipment in question While the bill of lading listed the contents

of the trailer as 1504 cartons of Plastic etc the Export Declaration

described the contents as 1504 Ctns containing Gila Automotive Ac

cessories After unearthing the discrepancy the TAG man called Gila

and in a letter sent in response to the call Gila described the commodi

ty as film kits and attached a

products catalog to the letter On the

basis of all this TAG concluded that the shipment should have been

rated under GEFA item No 732 1001 Automobile Passenger and

Commercial including Accessories TAG then sent Gila the bill

for additional freight Gila refused to pay the additional money and

filed this complaint asking the Commission to issue an order compelling

TAG and Sea Land to cease their efforts to collect that additional

freight

Item No 732 1001 provides

Automobiles Passenger and Commercial including Accesso

ries and Parts NOT Automobile Air Conditioners which see

under Item 719 1201 Not Tractors Trucks Trailers and

Stackers especially designed for materials handling in and

around Industrial Plants Depots Docks Terminals and simi

lar installations Vehicles shall be freighted on the basis of

extreme dimensions including bumpers as offered for ship

ment

New for Commercial Export Sale

Packed

Unpacked

New or Used NOS

Packed

Unpacked

117 50

WM 13100

WM 123 00

WM 150 00

Accessories and Parts which shippers elect to export

unprotected will be assessed the PACKED rate but

subject to carriage at owner s risk Semi boxed vehicles

MUST be assessed the UNPACKED Rate This is an

all inclusive classification and embraces Automobiles

Bodies Trucks Busses Chassis Trailers Truck and

Truck Tractor Type Special Purpose Vehicles Ambu

lances Fire engines Hearses Maintenance and Repair

Trucks etc

The commodity in question is a plastic sheeting which when placed

over glassed windows acts as an insulator by reflecting or rejecting

the sun s heat in summer and by reradiating interior heat in winter

The film can be used on any windows including automobile windows

25 F M C
564 FEDERAL MARITIME COMMISSION

The 1504 cartons actually shipped included 7592 units of Gila

Window Classics These units are kits which contain one decora

tive window covering and transfer adhesive and trim blade Ac

cording to Gila These attractive hand silk screened designs are easily

attached to the windows of most pick ups cars station wagons and

vans by the average do it yourselfer The silk screened designs range

from The American Eagle to the Rebel Flag with tributes to

Olympia Anheuser Busch and Coors along the way These pictured

coverings are most often seen on the rear and side windows ofpick ups

and vans The shipment also contained 3024 units Gila Window Film

Reflective Kits which contain Gila Window Film which blocks out

over 95 of the sun s damaging ultra violet rays virtually eliminating

fade damage to carpets drapes and furniture The shipment also in

cluded 4164 Gila Window Film Non Reflective Kits the rolls of

plastic sheet which contain no designs and can be used on either

vehicle or building windows The remainder ofthe shipment was made

up of 20 display stands for rolls of the plastic film and various

cartons holding rolls ofthe plastic itself

Complainant contends that Sea Land s insistence that the commodity

shipped should be rated as Automobile Accessories is based Ipon a

strained and unnatural interpretation ofItem 893 0071 To Gila the item

by its plain language provides for the shipment of Automobiles and

allows for the inclusion of accessories for those vehicles when they

are shipped along with them In other words The item reads includ

ing not and therefore it is not applicable for shipments ofaccessorial

items by themselves but they can be included with the vehicle when

the vehicle is shipped

Gila further points out that the item deals primarily with the vehicles

shipped under it and distinguishes between new cars for commercial

sale and new and used cars and cars which are packed and those

unpacked Moreover says Gila if Accessories were intended to be

a major entree under the items what need would there be for items

such as 732 1003 Auto Lamps 732 1005 Spray resistent flaps and or

sheets and for item 732 8922 Shock Absorbers Auto which latter

would move under the Parts heading of Item 732 1001

Sea Land s

response to Gila is most notable for its brevity

Respondent submits that as demonstrated by the commercial

invoice and the products catalog the majority of identifiable

units comprising this shipment were decorative window cover

ing kits described exclusively for application on vehicles As

such Sea Land submits that the shipment was properly re

rated by The Adherence Group as Automobiles including

Accessories and Parts pursuant to GEFA tariff item No

732 1001

2S F MC
GILA RIVER PRODUCTS V SEA LAND SERVICE INC 565

As is easily seen respondent s argument does not deal with complain

ant s contentions as to the proper construction of Item 732 1001 i e

must the accessories shipped under it be those for a particular vehicle

which they accompany Sea Land simply assumes the very point at

issue that the item covers accessories whether they are shipped with

an automobile or separately I cannot read the item that way

Tariffs are but forms of words and a fair and reasonable con

struction must be given the terms of the tariff CSC Int v Lykes Bros

20 FMC 552 555 1978

The item in question deals with Automobiles including Acces

sories and Parts I

can only read this as covering accessories which

accompany an automobile which is shipped under the item The total

context of the item virtually precludes any other construction While

one can readily understand a reference to a packed boxed automobile

how can a shipment ofaccessories be unpacked unless the accessories

are stowed within the automobile with which they are shipped How

for instance could the shipment in question be placed aboard the vessel

unpacked

It seems to me that this item allows a shipper to strip the vehicle of

such things as outside mirrors spotlights or chrome stacks which

would increase the outside dimensions of the vehicle and ship them

within the vehicle either packed or unpacked for installation after

delivery at the destination As mentioned above Sea Land simply does

not bother to deal with complainant s construction of the item offering

neither reasoned argument nor a single example to show complainant s

construction is unreasonable or wrong

But Sea Land says that Item 893 0071 Plastic Plate Sheets etc does

not cover the shipment and here again Sea Land s argument borders

on the simplistic It is simply that the overwhelming majority of the

contents ofthe container shipment as identified by the products catalog

and the commercial invoice was decorative window covering kits and

window film kits and not plastic film Sea Land says Of the entire

17 828 units comprising the container shipment only 20 units identified

as Gila Window Film Bulk Roll Displays may qualify for descrip

tion as plastic film under GEFA tariff item no 893 0071 This shows

clearly that the rate for plastic film is not applicable to the shipment

at issue

Thus Sea Land s argument is based on the characterization of the

units shipped as kits and the question becomes whether the inclusion

of a tube of adhesive and a razor blade in the box with the roll of

plastic film creates a kit which is no longer covered by the descrip

tion Plastic Plate Sheets Strip Film or Mulch The Gila

Window Film is a thin plastic sheet or film that is shipped in rolls 22

or 30 inches wide and 5 or 10 feet long The Gila Window Classics

are in rolls 18 by 64 inches These rolls are shipped in cardboard

25 F M C
566 FEDERAL MARITIME COMMISSION

cartons or tubes and except for the Bulk Roll Displays the cartons and

tubes each contain a razor blade and a tube ofadhesive The addition of

the razor blade and tube of adhesive does not of course change the

fact that the article they accompany is a roll of plastic film IfSea

Land is correct and these are plastic kits why then by the same

reasoning are they not accessory kits and as such not accessories It

seems to me that Sea Land s reasoning would just as readily serve to

remove the shipment from the accessory description as it would the

plastic item And finally what ofthe units of Window Film which it is

admitted can be used on building as well as vehicle windows Here it

would seem that their classification as auto accessories is somewhat

arbitrary

Iam well aware that the inclusion of other commodities in a package

may remove the main or primary commodity from the coverage of an

item description However in this case I

think it would do violence to

common sense to conclude that the adhesive and razor blade so

changed the nature of the roll of plastic as to require that it be rated

under some N O S classification What was shipped were rolls of

plastic sheet strip or film and Ifind that the description in item

8910071 most neaI ly describes the articles shipped

For the foregoing reasons I conclude that the shipment in question

was properly classified and respondent is ordered to cease all efforts to

collect additional freight charges the shipment

S JOHN E COGRAVE

Administrative Law Judge

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 68

MILITARY SEALIFT COMMAND

DEPARTMENT OF THE NAVY

v

MATSON NAVIGATION COMPANY INC

DOCKET NO 79 67 IMUA BUILDER SERVICES LTD

DOCKET NO 80 84 EAGLE DISTRIBUTORS INC

DOCKET NO 80 85 WAIPUNA TRADING COMPANY INC

INFORMAL DOCKET NOS

707 F UNITED STATES COLD STORAGE OF CALIFORNIA

729 F RICHARD T FUKUDA

730 F GENERAL FOODS INTERNATIONAL

A DIVISION OF GENERAL FOODS CORP

740 F OSCAR MAYER CO INC

754 F YELLOW FORWARDING CO

YELLOW FREIGHT INTERNATIONAL DIV

856 F AND 857 F SEARS ROEBUCK AND CO

944 F GRAY DISTRIBUTING COMPANY LTD

984 F 985 F AND 986 F HAWAIIAN ISLANDS

FREIGHT ASSOC

994 F CATHERINE S KANE AND 10HN M RYAN

DOING BUSINESS AS FIRE MOUNTAIN POTTERY

1000 F CONTINENTAL MECHANICAL

1001 F HUNTERS INC

1002 F METALCRAFT PRODUCTS

1003 F E E BLACK COMPANY

1004 F SERVCO PACIFIC CORPORATION

1005 F AMFAC DISTRIBUTION COMPANY

1006 F BUILDERS PRODUCT CORPORATION

l007 F BACON UNIVERSAL COMPANY

l008 F FAMCO CORPORATION

l009 F HONOLULU ROOFING COMPANY

25 F M C 567
568 FEDERAL MARITIME COMMISSION

1010 F HAWAIIAN FLOUR MILLS

1011 F OCCIDENTAL CHEMICAL COMPANY

1012 F CITY MILL COMPANY LTD

1013 F 1014 F l015 F l017 F AND 1018 F CASTLE

COOKE FOODS DIVISION OF CASTLE COOKE INC

l021 F CONSTRUCTION MATERIALS HAWAII

1022 F ATLAS ELECTRIC COMPANY

l023 F BREWER CHEMICAL CORPORATION

1024 F HAWAIIAN DREDGING COMPANY

1034 F CASTLE COOKE FOODS DIVISION OF

CASTLE COOKE INC

l053 F GENERAL ELECTRIC COMPANY

l054 F FOODLAND SUPER MARKET LIMITED

1095 F AND l096 F MCKESSON WINE SPIRITS

v

MATSON NAVIGATION COMPANY INC

NOTICE

January 18 1983

Notice is given that no appeal has been taken to the December 17

1982 dismissal of complaints in these proceedings and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the dismissal

has become administratively final

8 JOSEPH C POLKING

Assistant Secretary

2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 79 68

MILITARY SEALIFT COMMAND

DEPARTMENT OF THE NAVY

v

MATSON NAVIGATION COMPANY INC

DOCKET NO 79 67 IMUA BUILDER SERVICES LTD

DOCKET NO 80 84 EAGLE DISTRIBUTORS INC

DOCKET NO 80 85 WAIPUNA TRADING COMPANY INC

INFORMAL DOCKET NOS

707 F UNITED STATES COLD STORAGE OF CALIFORNIA

729 F RICHARD T FUKUDA

730 F GENERAL FOODS INTERNATIONAL

A DIVISION OF GENERAL FOODS CORP

740 F OSCAR MAYER CO INC

754 F YELLOW FORWARDING CO

YELLOW FREIGHT INTERNATIONAL DIV

856 F AND 857 F SEARS ROEBUCK AND CO

944 F GRAY DISTRIBUTING COMPANY LTD

984 F 985 F AND 986 F HAWAIIAN ISLANDS

FREIGHT ASSOC

994 F CATHERINE S KANE AND JOHN M RYAN

DOING BUSINESS AS FIRE MOUNTAIN POTTERY

1000 F CONTINENTAL MECHANICAL

1001 F HUNTERS INC

1002 F METALCRAFT PRODUCTS

1003 F E E BLACK COMPANY

1004 F SERVCO PACIFIC CORPORATION

1005 F AMFAC DISTRIBUTION COMPANY

1006 F BUILDERS PRODUCT CORPORATION

1007 F BACON UNIVERSAL COMPANY

1008 F FAMCO CORPORATION

25 F M C 569
570 FEDERAL MARITIME COMMISSION

1009 F HONOLULU ROOFING COMPANY

1010 F HAWAIIAN FLOUR MILLS

1011 F OCCIDENTAL CHEMICAL COMPANY

1012 F CITY MILL COMPANY LTD

l013 P l014 F 1015 F 1017 F AND 1018 F CASTLE

COOKE FOODS DIVISION OF CASTLE COOKE INC

102HF CONSTRUCTION MATERIALS HAWAII

l022 F ATLAS ELECTRIC COMPANY

1023 F BREWER CHEMICAL CORPORATION

1024 F HAWAIIAN DREDGING COMPANY

1034 F CASTLE COOKE FOODS DIVISION OF

CASTLE COOKE INC

1053 F GENERAL ELECTRIC COMPANY

10S4 F FOODLAND SUPER MARKET LIMITED

1095 F AND 1096 F MCKESSON WINE SPIRITS

v

MATSON NAVIGATIO COMPANY INC

SETTLEMENT APPROVED

COMPLAINTS DISMISSED

Finalized January 18 1983

By motion rued December IS 1982 Matson Navigation Company

Inc the respondent in this consolidated proceeding encompassing

forty three individual reparation cases requests approval of the terms

of an agreement settling all ofthose cases

In myjudgment the settlement should be approved

BACKGROUND AND HISTORY

This proceeding has its genesis in Docket No 76 43 Matson Naviga

tion Company Proposed Rate Increases in the United States Pacific

Coast Hawaii DOmestic Offshore Trade Docket No 76 43 was an inves

tigation into the justness and reasonableness of a 3 5 percent general

rate increase on nearly all cargoes carried by Matson in the trade

described in the title of thai proceeding In the Report and Order

deciding Docket No 76 43 1

the Commission determined that Matson

4

1Matson Navigation Company ProfNJdRatll lne In the United Stales Pacific Coast HawaII D0

mestic Offshore Trade 21 P M C 532 1978

25 FMC

J
MILITARY SEALIFT COMMAND DEPARTMENT OF THE 571

NAVY V MATSON NAVIGATION COMPANY INC

should be allowed a maximum rate ofreturn on equity of 13 percent for

the test year beginning August 1 1976 and ending July 31 1977 It was

found that on a projected basis Matson would earn 12 75 percent on

rate base and 13 98 on common equity Applying those factors the

Commission held that 2 8 percent of the increase was justified and the

remainder was unreasonable

Matson and Military Sealift Command MSC 2

petitioned for recon

sideration of the decision in Docket No 76 43 Matson asked for a

finding that the rate increase was just and reasonable in its entirety

Among other things MSC asked the Commission to fashion aremedy

so that shippers could recover the portion of charges found to be

unjust The Order on Reconsideration 3

denied Matson s petition and

granted MSC s petition in part

Briefly the Order on Consideration determined that any shipper

paying the unjust rates had a cause of action for reparation under

section 22 of the Shipping Act 1916 4and postulated that this cause of

action did not accrue until the date when the Comtnission found the

rates to be unjust and unreasonable 5

Thereafter these forty three proceedings were initiated As the titles

in the caption indicate four were filed as formal complaint proceedings

and thirty nine were filed under the provisions of the Commission s

Rules of Practice and Procedure for adjudication of small claims 6

Matson objected to the handling ofthe latter under informal procedures

and requested that they be processed under formal procedure in co

ordination with the other formal complaints Under the rules this

request was granted

In accordance with pertinent portions of the Report and Order and

Order on Reconsideration in Docket No 76 43 each of the forty three

complaints sought reparation for 007 7

of freight charges paid during

the period from August 2 1976 through July 30 1977 6

Two of the

complaints 9

added second causes of action based on the contention

that the unreasonable portion of the 3 5 percent rate increase continued

to be charged as an incremental part of subsequent rate increases put

into effect by Matson In its individual answers to all forty three com

2 MSC was a

party in Docket No 7643 It is the complainant in Docket No 79 68 the lead docket

in this consolidated proceeding

S Matson Navigation Company Proposed Rate Increases in the United States Pacific Coast Hawaii D0

mestic Offshore Trade 21 F M C 987 1979

46 V S C 821

I December 12 1978 the date when the Report and Order in Docket No 7643 was issued became

the date the cause of action accrued

6

Subpart S Informal Procedure for Adjudication of Small Claims 46 CPR S02 301 et seq

7

The complaint in Docket No 79 67 erroneously sought damages calculated at 07 of freight

charges but the correct rate of 007 has been applied to the settlement

8

The complaint in the lead docket 79 68 inadvertently extended the period to July 31 1977 This

was corrected

Docket Nos 79 68 and 8084

25 F MC
572 FEDERAL MARITIME COMMISSION

plaints Matson denied liability for reparation and asserted eight sepa

rate affirmative defenses 1 0

Inasmuch as the MSC complaint in Docket No 79 68 sought the

greatest amount of damages and included all of the issues raised in the

other proceedings the complainants in the other proceedings consented

to a procedure whereby their proceedings would be held in abeyance

pending the determination in Docket No 79 68 of certain legal issues

pertaining to particular affirmative defenses and to the second cause of

action

Accordingly in Docket No 79 68 the legal issues raised by the

affirmative defenses and the second cause of action were severed from

the issue of the amount of damage and Matson and MSC filed briefs

addressed to those legal issues However after those briefs were filed

Matson filed another petition in Docket No 76 43 seeking modification

of certain fmdings and conclusions contained in the Commission s

Report and Order and Order on Reconsideration By Order issued

May 2 1980 the Commission denied Matson s petition for modification

but added that it would be appropriate for Matson to introduce evi

dence of events subsequent to the Docket No 76 43 test year as

equitable defenses to ancillary actions for reparations

Itreated the briefs flled by Matson and MSC in Docket No 79 68

as cross motions addressed to the pleadings whereby MSC was asking

for dismissal of particular affirmative defenses and Matson was asking

for dismissal ofthe second cause ofaction Thereafter I

issued a ruling

on the cross motions llAmong other things I determined that 1

Matson would not be precluded from asserting its afflfmative defense

addressed to the statute of limitations This meant that Idisagreed with

what I viewed as dicta in the Order on Reconsideration concerning the

date of accrual of the first cause of action 2 Matson would not be

precluded from asserting its affirmative defense involving equitable

considerations This meant that Matson could introduce evidence show

ing that its earnings in test years before and after the Docket No 7643

test year were depressed 3 MSC s second cause of action based on

presumed inherent defects in Matson s rates subsequent to the Docket

No 76 43 test year should be dismissed However Ipreserved MSC s

right to proceed with the second cause ofaction on the basis of proof

as opposed to presumption ofunreasonableness

MSC appealed the ruling By Order of January 26 1982 the Com

mission affirmed and adopted the ruling as to the second cause of

10 With respect to the two complaints alleging second causes of action Matson denied that its rates

were excessive after luly 30 1976 and averred that there was nothing oontained in either the Report

and Order orOrder on Reoonsideration in Docket No 7643 which would support the allegations of

unreasonableness subsequent to that date

11 OrderAfTecting I Particular Affirmativo DefenAsserted By Respondent and 2 The Seoond

Cause of Action Alleged in theComplaint served May 8 1981

2S F MC
MILITARY SEALIFT COMMAND DEPARTMENT OF THE 573

NAVY V MATSON NAVIGATION COMPANY INC

action and Matson s equitable affirmative defense but the Commission

adhered to the views it expressed in the Order on Reconsideration in

Docket No 76 43 and reversed as to the statute oflimitations

Subsequent to the Order of January 26 1982 Matson moved for

consolidation of the forty three cases This was granted by Order of

Consolidation served May 20 1982 Thereafter Matson commenced

settlement negotiations with MSC alone at first and then with the

other complainants simultaneously

THE SETTLEMENT

Matson opened up negotiations to settle with MSC about the time the

cases were consolidated On June 29 1982 Matson submitted an offer

of settlement in writing to MSC As pertinent Matson offered to settle

MSC s claim on the basis of 50 percent of the damages alleged in

MSC s first cause of action 12 together with interest thereon from

December 12 1978 Interest would be calculated in accordance with

Rule 253 of the Commission s Rules ofPractice and Procedure 13 The

settlement was made contingent upon acceptance by the other com

plainantsI4 and approval by the Commission By letter dated July 14

1982 MSC accepted Matson s offer The pertinent portion ofMatson s

letter containing the offer and MSC s letter of acceptance are attached

as Appendix I

Matson informed me of the contingent agreement with MSC and

sought approval to communicate the details to the other complainants

together with similar offers patterned on the MSC agreement After

reviewing Matson s proposed letter to the other complainants Iauthor

ized its transmission The authorized mailing was sent to the complain

ants on August 25 1982 A copy of the letter and its attachments

except for the service list is attached as Appendix II One of the

attachments to Matson s letter Exhibit A apprised every claimant of

the details ofthe offers made to all the complainants

Each of the complainants in the other forty two cases accepted the

offer 15

12 In each of the forty three cases the complainants submitted freight bills to Matson Matson veri

fied those bi11s and does not dispute the amounts claimed Fifty percent of the MSC claim for repara

tion amounts to 29 500

1346 CFR 502 253 Under that rule which prescribes the rate of interest to be awarded in cases

arising under section 18 b 3 of the Shipping Act 1916 46 U S c 817 b 3 except special docket

casesunder 46 CFR 502 92 and section 2 of the Intercoastal Shipping Act 1933 46 US c844 inter

est will be calculated by averaging the monthly rates on six month US Treasury bills commencing

with the rate for the month that freight charges were paid and concluding with the latest available

monthly Treasury bill rate at the time reparation is awarded It should be emphasized that an award of

interest lies within the discretion of the Commission

14 Two complaints were filed by single instance shippers The offer proposed that those claims be

paid in full

1 tl The written acceptances will be filed with theSecretary of the Commission

2S F MC
574 FEDERAL MARITIME COMMISSION

DISCUSSION CONCLUSION AND ORDER

It is well settled that legislative and Commission policy foster the

settlement of administrative proceedings The right to seek settlement

of administrative proceedings carries the same Congressional mandate

as the right to submit proposed findings of fact and legal arguments 16

The Commission has implemented its mandate by rule 17 and thereafter

emphasized The law of course encourages settlements and every

presumption is indulged in which favors their fairness correctness and

validity generally Merck Sharp and Dohme v Atlantic Lines 17

F MC 244 247 1973

In furtherance of this P9licy the Commission has authorized settle

ments of administrative proceedings on the basis of a compromised

reparation payment absent admissions or findings of violation of the

Shipping Act 1S Com Co Paper Stock Corporation v Pacific Coast Aus

tralasian TariffBureau UF MC 62 1978 Robinson Lumber Co Inc

v Delta Steamship Lines Inc 21F MC 354 1978 Old Ben Coal Co

v Sea Land Service Inc 21 F MC 505 1978 Organic Chemicals v

Atlanttrajik Express Service 18 SRR 1536a 1979 Docket No 81 62

Westinghouse Electric Corporation v Delta Steamship Lines Inc 25

FMC 488 1982

I

find it in the public interest to approve the settlement

This has been a strenuously contested proceeding at least insofar as

MSC and Matson are concerned Absent a settlement if the past is a

guide to the future the promise of lengthy evidentiary hearings in

Honolulu Los Angeles and San Francisco is real This is so because

Matson s equitable defense concerning depressed rates during Jhe years

1978 through 1981 inclusive would entail complete financial data and

rate of return evidence for each of those years In effect if not in fact

the record would then consist of four separate rate cases Under the

theory of Matson s defense the results of those four rate cases would

have to be balanced against the overpayments in Docket No 76 43

The sum of all these claims is 137 022 75 The settlement which

includes payment of 50 percent of the face amount of the claims

together with interest calls for a payout of about 100 00000 It is

10 Section Sb I of the Administratlve Procedure Act S U S C 554 c

I provides The agency

shall give all interested parti opportunity for Ithe submi ion and consideration of facts argu

ments offers of settlement or proposals of adjustment when time the nature of the proceeding and

the public interest permit

1T Rule 91 of the Commi88ion s Rules of Practice and Procedure 46 CFR 502 91 provides in perti

nent part Where time the nature of the proceeding and the public interest permit all interested

parties shall have the opportunity for the submi ion and consideration of facts argument offers of

settlement or proposal of adjustment n

18 It may be argued that technically orinferentially the various decisionli and order in Docket No

7643 and the order of January 26 1982 in Docket No 79 68 subsume a findina of violation of

tion 18 a of the Shippina Act 1916 46 U S C 817 c However this is not conceded by Matson

withinthe framework of the settlement agreement

25 F MC
MILITARY SEALIFT COMMAND DEPARTMENT OF THE 575

NAVY V MATSON NAVIGATION COMPANY INC

clear that the potential cost of litigation trial and appeal before the

Commission would dilute the value of the judgment whichever side

wins Moreover there is a continuing likelihood of judicial review of

certain issues notably Matson s statute of limitations and equitable

defenses and MSC s second cause of action This would mean even

more expense greater uncertainty over the outcome and a more pro

tracted course to finality

In settling with the one time shippers 19 for 100 percent of their

claims Matson has not departed from the mandate of section 14 Fourth

c of the Shipping Act 1916 46 U S C 812 That section proscribes

unfair treatment of or unjust discrimination against a shipper by a

common carrier in adjusting or settling claims Matson could not have

asserted its allowable equitable defense against those two shippers be

cause that defense is based upon continuing carriage at depressed rates

a fact not present in the case of single use Cf Docket No 79 11 Del

Monte Corporation v Matson Navigation Company 22 F MC 365 1979

Moreover although aware of these differing offers none of the forty

one complainants accepting 50 percent has objected to the terms of

settlement with respect to these two shippers

Ifind the settlement is a bona fide and realistic means of resolving all

elements of the dispute between all parties and that the settlement will

not result in any violation ofthe Shipping Act nor does it appear to do

violence to any aspect of the regulatory scheme The settlement merits

approval

Accordingly it is ordered that the settlement be approved Matson

shall make payment ofthe principal amount agreed upon together with

interest thereon in accordance with the calculations prescribed in Rule

253 to the date when payment is made The date of payment shall be

the date when Matson s remittance is placed in the United States mail

Complaints dismissed

S SEYMOUR GLANZER

Administrative Law Judge

Docket Nos 729 Fand 994 F

25 F MC
576 FEDERAL MARITIME COMMISSION

APPENDIX I

June 29 1982

Milton J Stickles Jr Esq

Counsel

Military Sealift Command

4228 Wisconsin Avenue N W

Washington D C 20390

Re FMC Docket No 79 68 MSC v Matson Navigation Company

Dear Mr Stickles

Ihave been authorized to offer settlement of this matter on the basis

of 50 percent i

e

29 500 of the rlrst count of MSC s complaint with

interest from December 12 1978 calculated in accordance with Rule

253 of the Commission s Rules of Practice and Procedure This is a

final and non negotiable offer because Matson believes that it would

better to litigate than to offer more In view ofthe equities in Matson s

favor as set forth in my letter ofApril 28 it is more than a fair offer I

hope MSC will see fit to accept it If it is accepted by MSC I will

make the same offer to all but two of the other claimants As you

know the Commission will have to approve any settlement Ifthe offer

is not accepted Matson will request an opportunity to present its evi

dence on the equitable issues

YOURS VERY TRULY

DAVID F ANDERSON

Counsel

Twosmall claims involve noncontinuins shippers They would be paid in full

2 FMC
MILITARY SEALIFT COMMAND DEPARTMENT OF THE 577

NAVY V MATSON NAVIGATION COMPANY INC

David F Anderson Esq

Matson Navigation Company

333 Market Street

P O Box 3933

San Francisco California 94119

MSC v Matson FMC Docket 79 68

Dear Mr Anderson

Receipt of your letter of June 29 1982 regarding the above entitled

matter is acknowledged

Be that as it may the Military Sealift Command is prepared to accept

your settlement proposal provided that it receives the approval of the

Federal Maritime Commission

SINCERELY YOURS

MILTON J STICKLES JR

Counsel

25 F M C
578 FEDERAL MARITIME COMMISSION

APPENDIX II

August 25 1982

To All Parties ofRecord in Federal Maritime Commission

Docket No 79 68 and 42

Related Reparation Complaint Proceedings

Gentlemen

The complaint ofMilitary Sealift Command in Docket No 79 68 and

the 42 other complaint proceedings based on the Federal Maritime

Commission s Orders of December 12 1978 and April 27 1979 in

Docket No 76 43 have been consolidated for further proceedings

Matson has the right to offer evidence in support of its equitable

defenses set forth in its answers to the complaints and is prepared to do

so In the meantime however Matson and Military Sealift Command

have negotiated a settlement on the basis of 50 of the principal

amount demanded in the first count of MSC s complaint plus interest

since December 12 1978 That is the date ofthe FMC Order determin

ing Matson s rates to have been excessive to the extent of 7 of one

percent for the test year August I 1976 July 31 1977 in Docket No

76 43

Matson is willing to extend its offer to settle for 50 plus interest

from December 12 1978 to all parties subject to approval by the

Federal Maritime Commission The basis for Matson s offer is set forth

below

The FMC decisions in general rate increase proceedings establish that

Matson s rates were reasonable for several years prior to the test year

in Docket No 76 43 The Commission found Matson s rates to be

excessive for the test year August 1 1976 July 31 1977 by only 7 of

one percent The ceiling was fixed by the FMC for that test year at a

rate of return of 13 on common equity On the basis of the data

presented in the proceeding that was equivalent to a rate of return on

rate base of 12

At any evidentiary hearing in these complaint proceedings Matson

will offer evidence to show that its rates of return on common equity

and rate base during the years 1978 through 1981 were well below

those authorized in Docket No 76 43 and far below those authorized

for carriers in the Puerto Rico trade

Specifically Matson will show that its actual rates of return on

common equity and rate base computed in accordance with Matson s

Docket numbers names of complainants and representatives of complainants are shown on at

tached service list

2S FMC
MILITARY SEALIFT COMMAND DEPARTMENT OF THE 579

NAVY V MATSON NAVIGATION COMPANY INC

understanding of the FMC rules for each year were as follows for the

years 1978 through 1981

Rate of Return on Common Equity

1978 1979 1980 1981

8 16 7 12 5 61 5 64

1978 1979 1980 1981

Rate of Return on Rate Base 8 28 8 09 7 89 8 59

The further rate increases Matson would have needed to bring its

earnings up to the level of 13 on common equity for the years in

question are as follows

Rate of Return on Common Equity

1978 1979

3 23 4 22

1981

51980 64 841

To bring the earnings up to the level of 12 on rate base Matson

would have needed the following rate increase

Rate of Return on Rate Base

1978

5 81

1979 1980

6 49 7 60

1981

8 01

Matson would further show that each of the complainants with two

exceptions which will be explained below continued to ship via

Matson during the years 1978 through 1981 and in fact received the full

benefit of Matson s depressed rates in those years

If you apply the percentages shown above by which Matson s rates

were below the level permitted in Docket No 76 43 to the total

freight charges paid Matson in those subsequent years it is apparent

that all complainants with two exceptions have benefited because

Matson s rates were depressed Those benefits exceed by many times

the amount of excessive freight charges each complainant paid during

the test year 1976 1977 In short Matson s voluntary action in holding

rates down went far beyond any rollback order the FMC could lawful

ly have entered It is Matson s position that under these circumstances

the Commission ought not to allow reparations and that each complaint

should be dismissed

Matson makes this offer to settle for 50 plus interest to avoid

further possibly lengthy proceedings in these matters for the presenta

tion and evaluation of Matson s evidence in support of its equitable

defenses Further proceedings for judicial review are probable if the

FMC does not uphold Matson s defenses

25 F M C
580 FEDERAL MARITIME COMMISSION

This is a final and non negotiable offer In Matson s view the Ship

ping Act 1916 requires that settlement on the same basis be made with

all parties having similar claims Ifall parties agree to this offer and the

settlement is approved by the Federal Maritime Commission payment

will be made as full and final settlement

For your convenience the attached Exhibit A Settlement Offer sets

forth the case name and number 50 of the principal amount of the

claim interest as provided for in the FMC Rules of Practice ie

averaging the monthly rates on six month U S Treasury bills from

December 12 1978 through July 1982 and the total amount Interest

will be extended up to the date ofpayment

The foregoing letter was submitted to Judge Glanzer in advance of

mailing Judge Glanzer has authorized me to include this and the

following paragraph in this letter

Judge Glanzer offered no objections to the form or context of the

letter however this should not be construed to mean that the terms of

settlement have been approved Judge Glanzer will not rule on the

terms of settlement until a formal motion for approval is submitted to

him

Iwill prepare and submit the motion upon return ofthe acceptances

If you accept this offer please so indicate by executing the accept

ance at the foot of the duplicate copy of this letter having a notary

public take an acknowledgment of your signature unless an attorney

at law signs as counsel ofrecord and returning it to me

See the following pages for Acknowledgment forms for corporation

partnership and individual Please use the one appropriate for you

YOURS VERY TRULY

DAVID F ANDERSON

00 Honorable Seymour Glanzer

UMSC and Eagle Distributon amoun 8 are based on tbe fint coun 8 of their comp1ainis In Mat

sons view he PMC Order of January 26 1982 effectively disposes of tbe issues raised by Ibe second

count The Fire MountsinPotlery andlUchard Iukuda claims will be paid in fuUbecauae Ibey were

not continuing shippers

25 FMC
MILITARY SEALIFT COMMAND DEPARTMENT OF THE 581

NAVY V MATSON NAVIGATION COMPANY INC

ACCEPTANCE

The foregoing offer is hereby accepted

Name ofClaimant

By

Title

Date

CERTIFICATE OF ACKNOWLEDGMENT Individual Form

STATE OF

COUNTY OF ss

On this day of

a Notary Public personally appeared

in the year 1982 before me

known to me or proved to

me on the oath of to

be the person whose name is subscribed to the within instrument and

acknowledged that he she or they executed the same

Notary Public

CERTIFICATE OF ACKNOWLEDGMENT Corporate Form

STATE OF

COUNTY OF ss

in the year 1982 before me a

personally appeared

known to me

or proved to me on the oath of to

be the person who executed the within instrument on behalf of the

corporation therein named and acknowledged to me that such corpora

tion executed the same

On this day of

Notary Public

Notary Public

25 F M C
582 FEDERAL MARITIME COMMISSION

CERTIFICATE OFACKNOWLEDGMENT Partnership Form

STATE OF

COUNTY OF ss

On this day of

a Notary Public personally appeared

in the year 1982 before me

known to me or proved to

me on the oath of

to be one of the partners of the partnership that executed the within

instrument and acknowledged to me that such partnership executed the

same

Notary Public

25 F MC
MILITARY SEALIFT COMMAND DEPARTMENT OF THE 583

NAVY V MATSON NAVIGATION COMPANY INC

EXHIBIT A SETTLEMENT OFFER

Docket Number and Name

1 79 67 Imua Builders Services Ltd

2 79 68 Military Sealift Command

3 80 84 Eagle Distributors Inc

4 80 85 Waipuna Trading Company Inc

5 707 F United States Cold Storage of California

6 729 F Richard T Fukuda

7 730F General Foods International a Division

of General Foods Corp

8 74OF Oscar Mayer Co Inc

9 754 F Yellow Forwarding Co Yellow Freight

International Div

10 856 F Sears Roebuck Company

II 857 F Sears Roebuck Company

12 944F Gray Distributing Company Ltd

13 984F Hawaiian Island Freight Assoc

14 985 F Hawaiian Island Freight Assoc

15 986F Hawaiian Island Freight Assoc

16 994F Catherine S Kane John M Ryan

db a Fire Mountain Pottery

17 lOOOF Continental Mechanical

18 lOOI F Hunters Inc

19 l002 F Metalcraft Products

20 l003 F E E Black Company

21 l004 F Servco Pacific Corporation

22 l005 F Amfac Distribution Company

23 1006 F Builders Product Corporation

24 l007 F Bacon Universal Company

25 l008 F Famco Corporation

26 l009 F Honolulu Roofing Company

27 IOIOF Hawaiian Flour Mills

28 1011 FOccidental Chemical Company

29 1012 F City MillCompany Ltd

30 1013 F Castle Cooke Foods Division of

Castle Cooke Inc

31 1014 F Castle Cooke Foods Division of

Castle Cooke Inc

32 1015 F Castle Cooke Foods Division of

Castle Cooke Inc

33 1017 F Castle Cooke Foods Division of

Castle Cooke Inc

34 10 I8 F Castle Cooke Foods Division of

Castle Cooke Inc

35 1021 FConstruction Materials Hawaii

36 1022 F Atlas Electric Company

37 1023 F Brewer Chemical Corporation

38 1024F

Hawaiian Dredging Company

39 1034 F

Castle Cooke Foods Division of

Castle Cooke Inc

25 F MC

50 of

Principal

Amount

1

43 85

29 500 00

4 549 22

1 453 51

1 953 11

28 94

1 667 48

489 86

743 58

2480 37

2458 39

317 84

168 42

2 363 25

1 472 94

2

1713

154 45

236 71

1019

50 66

605 95

365 45

126 65

8108

12 15

212 68

543 59

293 64

869 33

197 27

88 24

1 159 60

1 898 23

908 10

91183

2756

1 350 46

119 45

2 170 35

Interest

18 90

12 712 44

1 960 40

626 36

841 65

3 85

718 57

2110

320 43

1 068 87

1 059 39

136 97

7258

1 018 40

634 73

73 75

66 56

102 01

43 61

2183

2612

157 48

54 58

34 94

5 23

9165

234 25

126 54

374 62

85ot

38 03

499 71

818 00

3913

392 93

1187

58195

5147

935 27

Total

62 75

42 212 44

6 509 62

2 079 87

2 794 76

12 79

2 386 05

700 96

1 064 01

3 549 24

3 517 78

454 81

24100

3 381 65

2 107 67

244 88

22101

338 72

144 80

7249

867 07

522 93

18123

116 02

17 38

304 33

777 84

420 18

1 243 95

282 28

126 27

1 659 31

2 716 23

1 299 43

1 304 76

39 43

1 932 41

170 92

3 105 62
584 FEDERAL MARITIME COMMISSION

EXHIBIT A SETTLEMENT OFFER Continued

50 of

Docket Number and Name Principal Interest Total

Amount

40 053 F General Electric Company 1 559 94 672 22 2 232 16

4l 054 F Foodland Super Market Limited 2 460 73 1 060 40 3 521 13

42 095 F McKesson Wine Spirits 606 58 2639 867 97

43 096 F McKesson Wine Spirits 1 647 65 70 02 2 357

1

This complainant erroneously multiplied total freight charges by 07 rather than 007

Number shown is 50 of correct amount 87 69

2

Full amount

j

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 28

TRANSPORTACION MARITIMA MEXICANA S A

v

BOARD OF COMMISSIONERS OF THE PORT OF NEW

ORLEANS

Charge on cargo stored in transit areas beyond the expiration of the free time period

found unreasonable in violation of section 17 of the Shipping Act 1916 because

calculated on the basis of the length of the vessel calling for the cargo

Kenneth H Volk Wade S Hooker Jr and Geoffrey W Crawford for Complainant

Edward J Sheppard for Respondent

REPORT AND ORDER

January 28 1983

BY THE COMMISSION ALAN GREEN JR Chairman JAMES J

CAREY and JAMES V DAY Commissioners

This proceeding was initiated upon the complaint of Transportacion

Maritima Mexicana S A TMM which alleged that the Board of

Commissioners of the Port of New Orleans the Port penalty dock

age tariff provisions were in violation of section 17 of the Shipping

Act 1916 46 V S C 816 In an Initial Decision served April 6 1982

Administrative Law Judge William Beasley Harris found the tariff

provisions to violate section 17 The proceeding is now before the

Commission upon Exceptions filed by the Port to which TMM has

replied

BACKGROUND

Although there is some disagreement concerning particular factual

allegations the basic events giving rise to this proceeding are generally

clear and undisputed A TMM vessel MV GELA was scheduled to

arrive at the Thalia Street wharf at the Port on May 29 1980 Al

though cargo had begun accumulating at the wharf several days before

hand the proposed call of MV GELA was cancelled the day it was

due to arrive More cargo accumulated at the wharf until mid July

Vice Chairman Maakley s concurring and dissenting opinion is attached

25 F M C 585
586 FEDERAL MARITIME COMMISSION

1980 At that time MV RISHI AGASTI also operated by TMM

docked at Thalia Street and loaded all the TMM cargo

As a result of TMM s delay in picking up the cargo the Port

assessed TMM charges under Item 15 K Section 3b of its tariff

which states

Dockage charges shown in Section 4 of this item shall be

assessed the vessel beginning on the first day after the expira

tion ofthe free time for assembling outward cargo excepting

certain categories of cargo if the vessel has not arrived

at her inward and or outward berth

Section 4 refers to Column 1 ofItem 20 which sets forth rates based

on vessel over all length The charges assessed on the accumulated

cargo were based on the RISHI AGASTls

length and amounted to

22 099

DISCUSSION AND CONCLUSIONS

The Port s Exceptions allege both substantive and procedural errors

in the Initial Decision In the interest of clarity each exception any

reply to the exception and the Commission s discussion and disposition

thereof will be presented seriatim

The four alleged errors in substantive findings in the Initial Deci

sion are as follows

1 The Port excepts to the suggestions in the Initial Decision that the

tariff is ambiguous that it does not clearly notify users of the charges

to be assessed and that it is faulty for containing no definition of

penalty dockage or penal level charges The Port argues that there is

no requirement that each and every item in the the tariff be defined

The Port further argues that the penalty dockage provision is clearly

set forth in the tariff and was well understood by TMM

TMM does not explicitly refer to this Exception However previous

pleadings indicate that TMM does not dispute that the charge was

correctly computed in accordance with the tariff 1 The record indicates

that there was never any confusion by either party as to whether and

how the charges applied to TMM s cargo The Commission concludes

that the Port s exception is well founded

2 The Port objects to the Presiding Officer s conclusion that the

penalty dockage charge is a charge for the storage of cargo and that it

is unreasonably high The Port explains that the charge is a penalty to

discourage the storage of cargo in the Board s transit sheds and that

1 TMM s Opening Brief charged disparities in the tariffs

application in that the tariffexcepted sev

eral categories of cargo from the l ooday free time allowance for assembling outwardcargo providing

30 or 90 days instead and adjusted demurrage thereafter The disparate application charge ap

pears to have been abandoned because neither party has raised theissue subsequent to the Initial Deci

sion In any event the Commission s ultimate disposition in this proceeding renders unnecessary fur

ther consideration orthis matter

25 FMC
TRANSPORTACION MARITIMA MEXICANA S A V BOARD 587

OF COMMISSIONERS OF THE PORT OF NEW ORLEANS

under the standards of West GulfMaritime Association v Federal Mari

time Commission 21 FM C 244 1978 the charge is legitimate because

it is 1 otherwise lawful 2 not excessive and 3 reasonably related

fit and appropriate to the ends in view The Port argues that penalty

dockage charges are necessary to deter prolonged storage of cargo on

wharves they are in widespread use in other ports though under

various names

2

and their existence was found to be necessary by the

Commission in Free Time and Demurrage Charges on Export Cargo 13

FMC 207 1970

TMM argues in response that even if intended to be a penalty the

dockage charge is unlawful because it is assessed on an arbitrary basis

TMM cites Volkswagenwerk A G v Federal Maritime Commission 390

U S 261 1968 in which the Court ruled that the proper inquiry

under 17 is whether the charge levied is reasonably related to

the service rendered 390 U S at 282 3

The nomenclature assigned to the charge cannot disguise its admitted

nature and purpose it is an assessment designed to discourage storage

of cargo on wharves beyond the free time period 4

It is not a dock

age charge in the traditional sense of the term it is triggered by the

arrival of cargo and was applied here 38 days before the RISHI

AGASTI arrived at the dock It is not a berthing charge in which

the length ofthe vessel would be relevant Application ofthe charge to

its evident and admitted purpose to discourage the storage of cargo in

transit areas demonstrates that as written the charge is not reason

ably related to that end A relatively small amount of cargo stored at

the Port s transit sheds and picked up by a large vessel could be

assessed a higher fee than an enormous load picked up by a small

vessel Although intended to deter the clogging up of wharf areas with

cargo the penalty dockage formula does not include volume tonnage

or square footage as a factor Counsel for the Port conceded at oral

argument that if TMM had accumulated only 1 001 tons of cargo

instead of the over 5 000 tons which actually accumulated its charge

would have been the same The formula also fails to take into account

whether the stored cargo accumulated gradually whether the entire

volume was present from the outset or whether the bulk of the cargo

arrived only one day before the vessel

The Port does not contest these disparities or defend the appropriate

ness of this particular formula It emphasizes instead that this is a

penalty charge and that because it would discourage storage of cargo

2

Eg demurrage wharfage demurrage pier demurrage or storage charges

3

The Port argues that the WGMA test is the appropriate standard forjudging apenalty dockage

system rather than Vo kswagenwerk s cost benefit analysis

4

The charge in issue might be more appropriately called a penalty demurrage charge but it will

be referred to in this Order as a penalty dockage charge because this is the name which has been

used throughout this proceeding

25 FM C
588 FEDERAL MARITIME COMMISSION

in transit space it is therefore reasonably related fit and appropriate

to the ends in view Using that rationale the fee would be equally

related fit and appropriate if it were calculated on the basis of random

figures established by chance

The tests in WGMA and Volkswagenwerk are not significantly differ

ent the Port s penalty dockage fee fails under either one It is not

reasonably related fit and appropriate to the ends in view within the

meaning of WGMA and it is not reasonably related to the service

rendered under Volkswagenwerk

There is no apparent logic to the Port s argument that because the

fee in issue is a penalty charge and not a compensatory charge a

different standard applies The level ofpenalty charges can be expected

to be higher than that of compensatory assessments See Free Time

supra However there must still be a rational nexus between the fee

itself and that which is being penalized There is no reasonable relation

between a fee based upon the length of a vessel and the prolonged

storage of cargo The Port s penalty dockage fee is therefore unreason

able and in violation of section 17 6The Port s exception on this point

will be denied

3 The Port alleges that the Presiding Officer erred in ruling that the

tariff must be construed from its four corners and in refusing to

consider evidence of custom and practice of penalty dockage at the

Port as well as at other Gulf Coast terminals

The Port s evidence of the history and necessity of penalty charges

on prolonged storage of cargo would have been relevant had the issue

in this proceeding been whether such penalty charges are lawful That

is not the issue however the issue is whether the Port s method of

computing the charge used in its penalty dockage system is lawful The

propriety of penalty demurrage in principle is well established Thus

the Port s evidence on thispoint was indeed irrelevant

Evidence of the custom and practice of vessel length related demur

rage charges at other ports might have been relevant but no such

similarly calculated charge was presented In fact the Port s evidence

that four other Gulf ports assess penalty charges for cargo stored

beyond the free time period underscores the defect in the Port s fee the

ports of Galveston Houston Mobile and Tampa all base their penalty

charges on cargo tonnage not on vessel length The Port s exception

will be denied

4 The Port excepts to the Presiding Officer s

finding that TMM

caused no impediment to the Port s use ofthe Thalia Street wharf The

Port relies on uncontroverted evidence that drastically reduced vol

umes of cargo moved on the wharf during the relevant 40 day period

The Commiuion does not concur however with the Presiding Officer s conclusion that the

charge is unreasonably high See discussion infra

2 F MC
TRANSPORTACION MARITIMA MEXICANA S A V BOARD 589

OF COMMISSIONERS OF THE PORT OF NEW ORLEANS

compared with the same period in several preceding and subsequent

years

6

TMM argues that the Port produced no evidence ofcongestion

due to the TMM cargo s presence

The Presiding Officer s failure to find that the TMM cargo impeded

the Port s usage of the wharf is supported by the record and the Port s

exception will therefore be denied The Port established no causal

relationship between the decline in cargo movement and the presence

of TMM cargo on the wharf The decrease in cargo movement could

have resulted from a lull in vessel calls or from other possible factors

rather than from the storage of the TMM cargo There was no evi

dence ofcongestion or of vessels being turned away The record simply

does not support a finding that the TMM cargo impeded the Thalia

Street operation

More significantly the matter is irrelevant The issue before the

Commission is use of vessel length as a factor in the computation of a

penalty demurrage charge Whether in this particular instance the

storage of cargo beyond the free time period created discernible prob

lems is not to the point The length of the RISHI AGASTI is not

alleged to be a facto in the alleged impediment caused by the TMM

cargo The matter has no bearing on the issues to be considered in this

proceeding

The Port s remaining exceptions involve allegations that the Presid

ing Officer made several procedural errors

The Port objects to the Presiding Officer s finding that TMM sus

tained its burden of proof 7

It argues that TMMs only evidence was

that of a Mr Varuso who presented confused and erroneous written

testimony particularly on the issue ofwharf congestion and that TMM

failed to prove that the Port s charge is unreasonable

TMM responds that the only matter in issue is a question oflaw and

that no presentation ofproof was therefore necessary

8

6

The 1977 1981 average excluding 1980 for the period was 17 525 tons only either 3413 tons or

4903 tons the parties disagree moved in the same period in 1980

7

Specifically the Port excepts to a paragraph in the Initial Decision s

concluding section which

the Port argues is unfounded in fact and irrelevant to the detennination that TMM met its burden of

proof The paragraph reads in full

The Presiding Administrative Law Judge finds and concludes he agrees with the complainant

that the lack of correlation between the benefits conferred and the dockage charged have

been admitted in the respondent s answer The Presiding Judge finds and concludes that the

admissions of the respondent in its answer to the complaint the opportunity for the respond

ent to ask at the hearing for the production of awitness for cross examination which was not

asked for as well as the respondent s failure to have any witnesses at the hearing provide a

basis for inferring the complainant had produced with the respondent s admissions the mate

rial on file the record herein sufficient to meet its burden of proof underscoring in the

original

8

TMM also argues that its witness testimony was sufficient to establish that there was no wharf

congestion TMM does not attempt to explain ordefend the particular paragraph in the Initial Deci

sion cited by the Port

25 F M C
590 FEDERAL MARITIME COMMISSION

It is unclear why the Port characterizes its argument that TMM has

not established the unreasonableness of the Port s tariff provision as a

procedural issue At any rate Mr Varuso stestimony concerning

other vessels activities at the Thalia Street wharf is entirely irrelevant

for the reason heretofore mentioned whether particular impediments

were created by the TMM cargo is not germane to the issue in this

proceeding The Commission therefore has disregarded the Varuso

testimony in its entirety

The Varuso testimony constituted the sole evidence presented by

TMM What remains ofTMMs case is its Complaint which establishes

a prima facie case ofunreasonableness under the standard enunciated in

Volkswagenwerk The question before the Commission is one of law

Upon careful review of the submissions ofboth parties the Commission

concludes that the fee formula has not been justified by the Port in

responding to TMM s case The Commission does not adopt the specif

ic findings and conclusions of the Presiding Officer in the paragraph

which is the object of the Port s exception 9

except for his ultimate

conclusion that TMMhas met its burden ofproof

The Port alleges that it was denied its right to cross examine TMMs

affiant Mr Varuso TMM replies that the Presiding Officer offered to

permit cross examination of Mr Varuso through written interrogato

ries an offer which the Port rejected The record also indicates that the

Port eventually objected to live testimony and oral cross examination of

Mr Varuso

1 0 As the Port rejected opportunities to cross examine Mr

Varuso both by interrogatories and orally and as the Varuso testimony

has been struck by the Commission as irrelevant the Port s exception

will be denied

The Port alleges that the Presiding Officer improperly denied all pre

hearing discovery The Presiding Officer gave the following oral expla

nation for not issuing a ruling on the Port s motion to compel TMM to

respond to its discovery request

JUDGE HARRIS Because the hearing is today and under

the rules as you well know discovery does not have to be

completed before there is a hearing

TMM points out in response that the Port served its discovery request

SO days after the publication of the Complaint in the Federal Register

The Commission s Rules of Practice and Procedure provide that

discovery shall be commenced no later than 30 days after publica

tion unless otherwise ordered by the presiding officer for good cause

9

To this extent the Port s

exception is granted

10When the Pr siding Officer d t

rmined sua sponte to reopen the proceeding and hold a hearing

with live witn the Port Objected IBling that cross examination of Mr Varu80 would serv no

purpose and that hla testimony goo only to marginal mstt rs which will not aTect the outcom of

th controv rsy Th Pre iding Offic r th ncancelled theproposed hearing

25 F MC
TRANSPORTACION MARITIMA MEXICANA S A V BOARD 591

OF COMMISSIONERS OF THE PORT OF NEW ORLEANS

shown 46 C F R S02 201 b 2 The Port s discovery request was

untimely under Rule 201 and could therefore be properly ignored by

TMM absent the Presiding Officer s

finding of good cause for tardi

ness Although the Presiding Officer perhaps should have articulated

the inappropriateness of a motion to compel this discovery request his

failure to grant that motion was not error The Ports exception is

therefore without merit and is denied

The Port excepts to the Presiding Officer s having twice granted

requests made by TMM without having waited for a Port reply One

request was that written interrogatories be substituted for oral cross

examination of Mr Varuso The second was TMMs Motion for Leave

to File a Substitute Affidavit ofMr Varuso The Port also excepts to

the Presiding Officer s refusal to allow it to introduce an affidavit from

a Mr Parker to rebut Mr Varuso s first affidavit TMM responds that

the Port s objections were mooted when it declined an opportunity to

cross examine Mr Varuso orally and to present live testimony from

Mr Parker

Because the Varuso testimony has been struck the Port s exceptions

must be denied

Finally the Port excepts to its being denied the opportunity to

respond on brief to TMMs case pursuant to the presiding Officer s

briefing schedule which provided for simultaneous opening briefs by

both parties but a

reply brief by only TMM The Port requested by

motion an opportunity also to file a

reply brief but this motion was

denied 11 TMM argues that there was nothing left to argue that there

were not surprises lurking in the briefs of either side and that the

Port s Exceptions evidence the fact that there were no fresh argu

ments which might have been made to the Presiding Officer

The Commission s Rules do not specify that there is any right to

file a reply brief l2 Because imbalance in opportunity to be heard can

in certain circumstances be considered unfair the better course of

action in this proceeding would have been to provide each party an

equal number of chances to present its case and to respond to that ofits

adversary That opportunity has been provided in the current stage of

this proceeding Each party has now had equal opportunity to make its

arguments before the Commission and to rebut those of its opponent 13

The Commission has heard oral argument Moreover the record in this

case has been carefully reviewed by the Commission de novo in order to

reach a determination absent consideration of evidence and arguments

11 In its motion the Port suggested that it and not TMM be the sole party to file a

reply brief

12 Rule 221 states only that the presiding officer shall fix the time and manner or filing briefs 46

CF R 502 221 Rule 74 dealing generally with replies merely refers back to Rule 221 on the sub

ject of reply briefs 46 C F R 502 740

13 That is the Port in its Exceptions and TMM in its Reply were able to respond fully to all previ

ousarguments made in this proceeding

25 F M C
592 FEDERAL MARITIME COMMISSION

found to be irrelevant 14 Any disadvantage allegedly accruing to the

Port by virtue ofthe briefing schedule has now been remedied

Although not stated in the pleadings in this proceeding counsel for

TMM informed the Commission at oral argument that TMM has paid

the Port the entire 22 099 assessed as a result of this incident 1 The

relief sought by TMM did not include award of reparation pursuant to

section 22 of the Shipping Act 1916 46 U S C 821 16nor would

award ofreparation appear to be warranted

The relief provided by section 22 is clearly discretionary and permis

sive and is not automatic following a finding of a violation of the

Shipping Act Consolo v Plota Mercante Grancolombiana 383 U S 607

621 22 1965 United States v Columbia Steamship Company Inc 17

F MC 8 9 10 1973 Equitable considerations existing here militate

against the award ofreparations

TMM has made no showing that the amount assessed pursuant to the

unlawful tariff rule is itself unreasonably high In fact evidence present

ed by the Port suggests that the sum assessed TMM for the storage of

its cargo in the Port s transit sheds may be in line with if not lower

than what a reasonable penalty demurrage fee might be Moreover the

record indicates that assessment of the fee came as no surprise to

TMM TMM wasforewarned ofthe charges but made no effort to take

action which may have avoided their assessment Finally to allow

TMM to make use of the Port s transit facilities for the extended

storage of its cargo without payment of any charges would bestow

upon that carrier an unwarranted windfall See Parsons Whittemore

Inc v Johnson Line 7 F M C 720 732 1964 17 Section 22 relief is not

intended to yield inequitable results With regard to the actual payment

ofcharges therefore the Commission will leave the parties as it found

them

THEREFORE IT IS ORDERED That the Exceptions of the

Board ofCommissioners ofthe Port ofNew Orleans are granted to the

limited extent indicated and denied in all other respects and

IT IS FURTHER ORDERED That Item 15 K Section 3b of the

Board ofCommissioners ofthe Port ofNew Orleans Dock Department

Tariffis cancelled and

14 The Commisaion is not adopting the Initial Decision although it reaches the same ultimate con

clusion that the penalty dockage fee violate section 17

11 The Presiding Officer apparently shared our impression that the contested charges had not been

paid for the ordering language of the Initial Decision is in terms of what the Port may collect It is

not clear why counsel foreither side made no attempt to disabuse the Commission of the impression

that charges werenot paid until asked directly at oral argument

11 The Complaint did request the Commission to issue sucb other and further orders as the Com

mission hall deem appropriate

11 Counsel for TMM indicated at oral argument that the Commission should allow the Port to

asseonly actual dockage charge reflecting the three days the RISHI AOASTI was docked at

Thalia Street

2S F MC
TRANSPORTACION MARITIMA MEXICANA S A V BOARD 593

OF COMMISSIONERS OF THE PORT OF NEW ORLEANS

IT IS FURTHER ORDERED That the Board of Commissioners of

the Port of New Orleans file an amended tariff within 30 days deleting

Item l5 K Section 3 b and

IT IS FURTHER ORDERED That this proceeding is discontinued

FRANCIS C HURNEY

Secretary

2S F M C
594 FEDERAL MARITIME COMMISSION

Vice Chairman Moakley concurring and dissenting

I concur with the result reached by the majority in this proceeding

that permits the Port of New Orleans to retain the charges at issue but

would take an entirely different path in arriving at that result

I cannot fmd on the basis of the record before me that complainant

TMM has carried its burden of proof in establishing that the Port s

penalty dockage provision violates section 17 of the Shipping Act

1916 1

While acknowledging that TMM has produced no relevant evidence

in this proceeding the majority has concluded that as a matter of law

the Port s penalty dockage provision is unreasonable because There is

no reasonable relation between a fee based upon the length of a vessel

and the prolonged storage of cargo Majority Opinion pp 6 7

Later the majority reiterates that The issue before the Commission is

use of vessel length as a factor in the computation of a penalty demur

rage charge Majority Opinion pp 8 9

These statements in my opinion indicate a misperception ofboth the

tariff and the issue in this case

The issue to be resolved is whether the Port s penalty do kage

charge is reasonably related fit and appropriate to the end for which

the Port has established the charge I

i e to discourage a carrier from

tying up its breakbulk facilities The complainant must therefore estab

lish that the penalty dockage charge is not reasonably related to that

end It has not done SO 3

The tariff provision in question is a dockage charge not a demurrage

charge as the majority have characterized it It states in essence that a

carrier may begin to assemble outbound cargo in a transit shed adjacent

to a breakbulk wharf for up to IS days prior to a vessels scheduled

arrival However dockage for the vessel that picks up the cargo com

mences on the 16th day whether or not the vessel has actually arrived

While other U S Gulf Ports have chosen to impose a

cargo demur

rage charge to discourage the extended use of their pier facilities New

Orleans has continued for over flfty years to utilize this penalty

dockage charge to achieve the same purpose The majority seem

troubled by this fact that the charge in question is apparently unpar

1

II is beyond dispute that the burden of proof is upon the oomplainant In this proceeding Ifthe

burden is not met the oomplalnt must be denied Port of Houato Authority Y Lykes Broa SS Co et at

19 FMC 192 200 1976

s

West GulfMaritime Alotlo Y Port ofHouato Authority 21 FMC 244 248 1978 I

tlgatlo

ofFree Tlmel actlce Port ofSa DIego Cat 9 FMC 2 47 1966 Ifthe level of charaes were at

iune in this proceeding which Is apparently not the case the level would also have to be reasonably

related to the service performed or the beneflt oonferred See Jlo kawnge werk A G Y FM C 390

US 261 282 1968

s

The ority aIao have ooncluded that TMMs oomplalnt in this proceedina established aprima

facie case of unreasonablenesa of the Port s tariIT A readina of that oomplalnt indicates that TMM

failed to mention the tariffitem which has been found unreasonable

2 F MC
TRANSPORTACION MARITIMA MEXICANA S A V BOARD 595

OF COMMISSIONERS OF THE PORT OF NEW ORLEANS

alled in other port tariffs But as the Commission stated in a similar

case

The Shipping Act does not require all carriers or all ports to

offer identical services or engage in the same practices Com

petition and innovation are encouraged Local differences are

permitted up to the point they unfairly injure shippers ports

or other persons protected by the Act 4

Iwould find that TMM has not carried its burden ofestablishing that

the Port s penalty dockage charge is unreasonable and dismiss this

complaint

4

Port of HoustonAuthority vLykes Bros SS Co et at note 1 supra at 200 201

25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 1

CALIFORNIA CARTAGE COMPANY INC

v

PACIFIC MARITIME ASSOCIATION

DOCKET NO 82 10

CONTAINERFREIGHT TERMINALS COMPANY ET AL

v

PACIFIC MARITIME ASSOCIATION

An assessment agreement which effectively alters a prior agreement so as to provide for

the funding of collectively bargained fringe benefit obligations on a tonnage rather

than man hour basis is subject to the Commission s jurisdiction under section IS of

the Shipping Act 1916 as amended

Persons who neither directly nor indirectly pay assessments under an assessment agree

ment and allege only a secondary competitive injury resulting therefrom lack

standing to file a complaint under section IS fifth paragraph of the Shipping Act

1916

Louis E Wolcher Thomas P Burke and David W Slaby for Complainant California

Cartage Co Inc

John M Skonberg and Richard Harding for Complainants Containerfreight Terminals

Co Hawaiian Pacific Freight Forwarding and Richmond Transfer and Storage Co

R Frederic Fisher AfR Brandin Charles L Coleman and Harry Pfeifer for Re

spondent Pacific Maritime Association

Norman Leonard for Intervener International Longshoremen s and Warehousemen s

Union

REPORT AND ORDER

January 31 1983

BY THE COMMISSION ALAN GREEN Chairman JAMES JOSEPH

CAREY and JAMES V DAY Commissioners

This proceeding arose upon the filing of a complaint by California

Cartage Company Inc CaICartage against the Pacific Maritime Asso

ciation PMA Another complaint raising the same factual and legal

issues was filed against PMA by Containerfreight Terminals Company

Vice Chairman Thomas F Moakley s concurring and dissenting opinion is attached

596 2S FM C
CALIFORNIA CARTAGE COMPANY INC V PACIFIC 597

MARITIME ASSOCIATION

Containerfreight Hawaiian Pacific Freight Forwarding Hawaiian

and Richmond Export Service Richmond The International Long

shoremen s and Warehousemen s Union ILWU intervened in the pro

ceedings which weresubsequently consolidated

The complaints attack the legality of Section V of a PMA ILWU

agreement filed with the Commission on July 2 1981 designated

Agreement No LM 81 Agreement or LM 81 Implementation proce

dures for the Agreement were filed on September 29 1981 and the

Agreement was deemed approved by the Commission on October 8

1981 pursuant to section IS of the Shipping Act 1916 46 U S C

814 1 The complaints allege that the Agreement violates sections 15

16 and 17 of the Shipping Act 1916 46 U S C 814 815 and 816

and alternatively that the Commission lacks jurisdiction over the

Agreement Should the Commission determine that it has jurisdiction

Complainants request that we issue a cease and desist order prohibiting

further actions under the Agreement and order retrospective assessment

adjustments

Administrative Law Judge Joseph N Ingolia Presiding Officer

issued an Initial Decision 1 0 on October 26 1982 finding that

Agreement No LM 81 did not fall within the Commission s

jurisdic

tion PMA and ILWU have filed Exceptions to the Initial Decision

CalCartage has filed Replies to these Exceptions 2

INITIAL DECISION

The Presiding Officer found that the Commission lacked jurisdiction

over Agreement No LM 81 because the Agreement does not expressly

provide for the funding of fringe benefits He held that the Commis

sion s authority must be clearly and unambiguously indicated from the

specific agreement which is the subject of a complaint He added that

any doubts should be resolved in favor of a finding of no jurisdiction

The Presiding Officer characterized LM 81 as an assessment agree

ment which imposes a tax on containers and distributes these funds to

ILWU manned CFS stations in proportion to the man hour assessments

made under a previous assessment agreement Agreement No LM 80

He rejected arguments that the two agreements be read together and

that so read the net economic effect was the funding offringe benefits

on other than a man hour basis Instead he restricted his analysis to the

provisions of LM 81 and found that its stated purpose and economic

1 The pertinent provision of section 15 is as follows

Assessment agreements whether part of a collective bargaining agreement or negotiated

separately to the extent they provide for the funding of collectively bargained fringe benefit

obligations on other than auniform man hour basis regardless of the cargo handled ortype

of vessel or equipment utilized shall be deemed approved upon filing with the Commission

2

Containerfreight and Hawaiian also filed a Reply to Exceptions However this pleading which

was filed after its due date merely adopts the CalCartage Replies to Exceptions and attaches a

copy

of Complainants Reply Brief

25 FMC
1

598 FEDERAL MARITIME COMMISSION

effect were to reverse the trend of CFS work leaving the on dock

facilities of PMA members The Presiding Officer also found that the

Agreement was conditional in that if other PMA ILWU work preser

vation agreements became operative LM 81 would become null and

void This reinforced his determination that the Agreement was for cost

reimbursement purposes and not for the funding of fringe benefits

In reaching his jurisdictional finding the Presiding Officer relied on

the legislative history of the Maritime Labor Agreements Act of 1980

MLAA S He found that the underlying purpose of this Act was to

take the Commission out ofthe collective bargaining process by remov

ing from its jurisdiction agreements which werethe result ofcollective

bargaining that the MiAA subjects to Commission jurisdiction only

those agreements which impose assessments to provide for the funding

offringe benefits and only if those assessments are levied on an other

than man hour basis and that Commission consideration of assessment

agreemeIlts is for the limited purpose ofdetermining the fairness ofthe

assessments as between shippers carriers and ports and whether those

agreements are otherwise detrimental to commerce

POSITIONS OF THE PARTIES

PMA

PMA argues that the Presiding Officer erred in confIDing his jurisdic

tional analysis to the literal language of LM 81 without regard to the

economic result achieved by that Agreement s interaction with LM 80

It maintains that the Agreement need not expressly direct the payment

of funds to a fringe benefit plan to fall within the Commission s

juris

diction if its effect is to shift cost allocations of a pre existing agreement

to an other than man hour basis

The Presiding Officer also allegedly erred in relying on the union

motives underlying the Agreement and ignoring its economic effects

PMA contends that the work preservation motive does not alter the

fact that the effect of the Agreement is to shift fringe benefit funding

from a man hour assessment to a tonnage assessment PMA states that

LM 8l is not a limited fund but is directly proportional to man hour

assessments under LM 80 and achieves a reallocation of costs within

the container sector

PMA also challenges the Presiding Officer s

finding that the MLAA

overruled Volkswagenwerk 4The MLAA allegedly removed only the

public interest standard and the pre implementation approval require

ments of section IS for collective bargaining agreements that did not

fall within the then existing labor exemption PMA argues that the

a

The MLAA P L 96 32 94 Slat 1021 modUled aeolion 1 and l and added aaeolion 4 to the

Shipping Act 1916 to provide for the separate treatment of marilime labor agroomenla

Vol cswagenwerk Aktlengesel schtift v FM C 390 U S 261 1968

2 FM C
CALIFORNIA CARTAGE COMPANY INC V PACIFIC 599

MARITIME ASSOCIAnON

MLAA upheld the Commission s

jurisdiction over assessment agree

ments and collectively bargained assessment agreements except those

involving man hour assessments All other assessment agreements are

said to be subject to the standards of section 15 fifth paragraph

Exception is taken to many ofthe characterizations of the Agreement

made by the Presiding Officer Challenged is the Presiding Officer s

finding that the conditional nature of LM 81 affects jurisdiction on the

ground that the future expiration or shift in assessment methods does

not affect jurisdiction over the current method Moreover that LM 80

funds fringe benefits allegedly does not alter the fact that LM 81 shifts

the funding obligations and therefore itself provides for funding

within the meaning ofthe MLAA

PMA further argues that it was error for the Presiding Officer to

compare the Agreement with other work preservation rules previously

instituted by PMA but enjoined by the court It insists that LM 81 is

distinguishable in that it does not impose a tax only on non ILWU

stuffed containers is not isolated to hot cargo and does not contain a

no subcontract clause PMA also challenges the finding that PMA

established the CFS Program Fund Implementation Procedures

PMA claims that it only drafted these procedures which themselves

were the product of collective bargaining agreed to by the ILWU

Finally PMA states that the Presiding Officer erred in failing to

dismiss the subject complaints for failure to state a cause of action

under the MLAA It argues that the MLAA was intended only to

provide aremedy for persons paying assessments which Complainants

here did not

ILWU

ILWU argues that the Presiding Officer should have found that

Complainants wage and benefits rates are inferior to those provided by

the ILWU PMA contract that container traffic has increased dramati

cally over the years and that ILWU productivity has also dramatically

improved in the same period of time On the other hand the ILWU

insists that it was error for the Presiding Officer to find that the CFS

Program Fund was a result of the ILA Work Incentive Program

The Fund allegedly resulted from ILWU s own demand for a shift

from a man hour assessment to a tonnage assessment in order to pre

serve CFS work and accommodate PMA s demand for efficiency and

productivity improvements at CFS stations 5

Co Cartage

CalCartage notes that the Presiding Officer did not make a finding

that the actual purpose of LM 81 was limited to work preservation

6

The balance of ILWU s Exceptions are basically the same as PMA s

25 F M C
600 FEDERAL MARITIME COMMISSION

Therefore it views the Initial Decision as not ruling out a finding in

another forum that the intent of LM 81 was to capture work not

previously done by the ILWU CalCartage considers the ILWU s wage

rate and container traffic growth exceptions to be irrelevant to the

jurisdictional finding made in the Initial Decision It also supports the

Presiding Officer sfinding that PMA established the CFS Program

Fund

CalCartage supports the Presiding Officer s

jurisdictional determina

tions It adds however that if the Commission reverses the Initial

Decision and finds that it has jurisdiction over LM 81 it should also 1

find that Complainants have standing to sue under the MLAA and

2 remand the proceedings for a decision on the merits

CalCartage considers itself a person entitled to file a complaint

under section 22 of the Shipping Act 1916 46 U S C 821 and

therefore having the requisite standing It does not view the provi

sions of section 22 and those ofthe MLAA as being mutually exclusive

Allegedly only the remedies ofthe two sections conflict and this is no

impediment here because Complainants seek only a cease and desist

order and prospective assessment adjustments CalCartage argues that it

has suffered injury in fact and stands within the zone of protection of

the MLAA

Complainants allege that they are not arguing antitrust violations but

rather violations of sections 15 16 and 17 of the Shipping Act It is

argued that the criteria stated in Volkswagenwerk apply here and that

PMA and ILWU have failed to show that the benefits inuring to those

paying the assessments are proportional to the level oftheir assessment

CalCartage maintains that the assessments are intentionally unrelated to

the amount of ILWU man hours utilized by the assessed entities PMA

and ILWU have also allegedly failed to put forward any justification

for shifting fringe benefit obligations other than that of buying labor

peace which CalCartage views as being beyond the scope of FMC

review under the MLAA Inthe event it may be found to be within the

scope however CalCartage adds that LM 81 does not meet the Com

mission s labor exemption and therefore traditional antitrust consider

ations would be relevant

DISCUSSION

Jurisdiction

The Commission has determined that LM 81 falls within its jurisdic

tion over assessment agreements under the MLAA In effect LM 81

operates to impose an assessment for the funding of fringe benefits on

other than a man hour basis and is the proper subject of complaints

under section 15 fifth paragraph ofthe Shipping Act 1916 According

ly the Initial Decision issued in this proceeding will be reversed

25 F MC
CALIFORNIA CARTAGE COMPANY INC V PACIFIC 601

MARITIME ASSOCIATION

Admittedly LM 81 does not by its terms provide for the funding of

fringe benefits LM 80 is the agreement which funds fringe benefits and

imposes these funding obligations on PMA members predominantly on

a man hour basis However LM 81 imposes a tonnage assessment on

containerized cargo handled by PMA members and reimburses PMA s

CFS operators on the basis of the man hour assessments made under

LM 80 The clear net effect of the two agreements therefore is to

provide for fringe benefit funding by CFS operators on a tonnage

rather than a man hour basis

Section 45 ofthe Shipping Act 46 D S C 841c provides a broadly

worded exemption from Shipping Act jurisdiction for maritime labor

agreements except for those which provide for the funding of fringe

benefit obligations on other than a uniform man hour basis While the

legislative history of the MLAA suggests that it was intended to pro

vide a broad immunity from section 15 requirements for collective

bargaining agreements 6

the assessment agreements exception should

not be read so narrowly as to exclude labor agreements from Commis

sion jurisdiction merely because the agreement document itself does not

contain an express provision providing for the funding of fringe bene

fits Such an interpretation would lead to a result which is inconsistent

with the legislative compromise reflected in the MLAA

Several interests including the Commission had argued before Con

gress that those entities which bear the costs of maritime labor agree

ments should have a forum to hear complaints concerning the fairness

and equity of the assessments made under those agreements

7

A strict

interpretation of the fringe benefit funding exception would largely

defeat this purpose It would in essence allow the drafters of assessment

agreements to determine whether those bearing the assessments will

have access to the Commission Although this case does not involve

such a situation because PMA for its own reasons seeks the Commis

sion s assertion of jurisdiction and no parties paying assessments have

filed a complaint the possibility cannot be ignored Jurisdictional deter

minations should not depend on the motives and tactics of individual

parties in a particular case

8

Ultimately the meaning of a statute is determined by the language of

the statute and the intent of Congress 9 While the language of the

statute is of course the first consideration in statutory construction I 0

the Commission will not interpret the MLAA in a manner which

defeats its legislative purpose

I I Any determination regarding Commis

See e

g

ID at 22 H R REP NO 96876 96th Cong 2d Sess 2

7

See eg S REP NO 96 854 96th Cong 2d Sess 10

Swift Co v Hocking Valley R

Co

243 US 281 1917

See e

g

US v GeneralMoton Corp

518 F 2d 420 438 D C Cir 1975

10 Ernst Ernst v Hochlelder 425 US 185 197 1976

11 National RR Passenger Corp v National Ass ofR R Passengers 414 U S 453 458 1974

25 F MC
602 FEDERAL MARITIME COMMISSION

sion jurisdiction under the MLAA must take into consideration the

purposes of the statute The MLAA does not limit the scope of the

Commission s

jurisdictional inquiry to the specific wording of an as

sessment agreement document Nor does it preclude a jurisdictional

analysis based on the agreement s ultimate operation and economic

effect The Commission will therefore construe the MLAA in a manner

that will best achieve its purposes To this end we fmd that LM 8l

operates in a manner that Congress intended to be subject to Commis

sion scrutiny and accordingly falls within the jurisdiction conferred

upon this agency by the MLAA

Sufficiency of Complaints and Standing

PMA s Exceptions challenge the sufficiency of the complaints the

standing ofComplainants 12 and the order in which these matters were

addressed by the Presiding Officer

We cannot find that the Presiding Officer erred in first addressing the

question ofjurisdiction 13 Having found no jurisdiction there was no

need for him to consider the legal sufficiency of the complaints or the

right of Complainants to sue Given the Commission s

jurisdictional

finding above however it now becomes necessary to address these two

remaining threshold issues Because these are essentially legal issues not

requiring the resolution of factual disputes they can be considered by

the Commission directly without a remand to the Presiding Officer

Sufficient allegations of possible Shipping Act violations exist to

overcome arguments that the complaints should be dismissed on

grounds of lack of legal sufficiency aComplainants allege discrimina

tion in the assessments and disbursements method of LM 8l and also

allege that the charges assessed bear no reasonable relationship to the

benefits obtained under the Agreement 16 Apart from the question of

standing the complaints on their face therefore state a cause ofaction

regardless of whether the standards ultimately found to govern the

legality of the Agreement are limited to those of section 15 fifth

paragraph or also include those of sections 16 and 17

Complainants standing to bring an action under the MLAA in this

proceeding turns upon whether the complaint procedures of section 22

ofthe Act apply Ifthey do then Complainants must be found to have

the requisite standing as they clearly come within the term any

person as section 22 defines the universe of those entitled to file

complaints under that section 16 The MLAA itself is silent on whether

See PMA Exception at pp 49 50

18 See Jackson us 428 F 2d 844 847 848 Ct Cl 1970

See Carton PrInt A stasia CantainerExpress 20F M C 31 33 1977

Complaint of CalCartage at 8 9 Complaint of Containerfreight et aI at 1011

See FM C Zim Israel No lgation Co 263 F Supp 618 S D NY 1967 Isthmian SS Co

United States 53 F 2d 251 S DN Y 1931

25 F MC
CALIFORNIA CARTAGE COMPANY INC V PACIFIC 603

MARITIME ASSOCIATION

section 22 governs causes of action arising under it It does provide

however that to the extent that its operative provision i

e section 15

fifth paragraph may conflict with section 22 the former shall con

tro1 l7 The question then becomes whether the complaint procedures of

section 22 and specifically its liberal standing provision are consistent

with the provisions of section 15 fifth paragraph We find that they are

not

A reading ofthe provisions ofthe MLAA particularly that provision

which added section 15 fifth paragraph to the Shipping Act and an

examination of its legislative history convinces us that the MLAA

contemplates a separate complaint procedure from that provided in

section 22 of the Act Section 15 fifth paragraph has its own time

limitation on both the filing of a complaint and issuing a decision states

substantive standards to be applied and identifies available remedies 18

That provision also expressly identifies the classes of entities intended

to receive the protection of the statute against discriminatory or unfair

assessments to wit carriers shippers or ports It would therefore

appear to be inconsistent with the scheme of the MLAA to find that

any person regardless of how remotely associated with agiven

assessment agreement may utilize the carefully circumscribed com

plaint procedures ofthe MLAA

This conclusion also comports with the overall legislative history of

the MLAA That history at various places speaks of affording affect

ed or aggrieved parties the right to challenge assessment agree

ments 19 Complainants might qualify as aggrieved parties if this were

the only consideration determining standing under the statute 20 How

ever the injury upon which Complainants rely as a basis for standing is

not one that is addressed by the substantive requirements and affirma

tive remedies contained in the MLAA

The overall purpose of the MLAA complaint procedure was to

afford a forum to those who directly or indirectly pay assessments to

challenge their fairness 2 1 Section 15 fifth paragraph permits the Com

mission to inquire whether an assessment agreement operate s to the

detriment of the commerce or is unjustly discriminatory orunfair as

between shippers carriers or ports As so stated section 15 clearly

does not contemplate an inquiry into the impact of an assessment

agreement on the competitive positions of other third parties That

antitrust considerations are beyond the scope of inquiry intended by

section 15 fifth paragraph is further indicated by the fact that the

46 US C 814 paragraph 5 P L 96 325 4

18Id

19 See s REP NO 96854 supra at 11

20See Tax Analysts Advocates v Blumenthal 566 F 2d 130 138 D C Cir 1977

21 This is reflected not only in the legislative history of the MLAA S REP NO 96 854 supra at

14 but also in the method established for providing remedies for successful complainants d

25 EM C
604 FEDERAL MARITIME COMMISSION

public interest standard which embodies antitrust considerations and

which governs the acceptability of other agreements under section 15

was intentionally not made applicable to assessment agreements 22

Complainants alleged injury is not caused by an assessment obliga

tion directly or indirectly placed upon them by the challenged Agree

ment Rather and at best it is an economic effect of the assessment on

their competitive standing vis a vis those who are subject to assessment

obligations i e PMA members Congress did not intend such a remote

consequence to form the basis of a complaint seeking disapproval of a

collectively bargained assessment agreement under the MLAA 23 Par

ties so removed from the operative effects of an assessment agreement

are outside the classes ofinterests protected by the statute and as such

not intended to be beneficiaries of its remedies 24 The Commission

therefore concludes that Complainants lack standing to me a complaint

against LM 81 under section 15 fifth paragraph of the Shipping Act

1916

THEREFORE IT IS ORDERED That the Exceptions to the Ini

tial Decision filed by the Pacific Maritime Association and the Interna

tional Longshoremans and Warehousemans Union are sustained to the

extent indicated above and denied in all other respects

IT IS FURTHER ORDERED That the complaints filed in this

proceeding are dismissed and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

FRANCIS C HURNEY

Secretary

I

1

SeeS KEP NO 968S4 pro at 14

ISComplainants do have available to them however section 22 complaint procedures alainst any

matter required to be set forth in a tarIfT on flIewith the Comn1iasion which may be in violation of

other section of theShipping Act 1916 See 46 JS cf84S P L 963 S 5

SeeS REP NO 968S4 at 14 Comgllre Auoc n ofQta ProceMIIfIl S rvIclDrg Camp

397 U S 50 541 1970 with Tax Analpl and Advacatn P Blumenthal pro at 138 145

1

25 FMC
CALIFORNIA CARTAGE COMPANY INC V PACIFIC 605

MARITIME ASSOCIATION

Vice Chairman Moakley concurring and dissenting

I do not agree with the majority s conclusion that LM 81 is subject

to the Commission s

jurisdiction However assuming arguendo that the

agreement is subject to FMC jurisdiction I concur with the majority

that the complainants lack standing to bring these actions

By enacting the Maritime Labor Agreements Act MLAA Congress

succeeded in extracting this Commission from a

very difficult position

following the Supreme Court s PMA decision 1 That decision was the

culmination of a series of more and more expansive interpretations of

the Commission s

jurisdiction over labor agreements and left this Com

mission in the untenable posture of having to consider the Shipping Act

ramifications of maritime collective bargaining agreements before they

could be implemented

At the Commission s urging therefore the 96th Congress was pro

posing to remove all collective bargaining and related agreements from

tile Commission s section 15 jurisdiction However certain shippers and

ports raised concerns over the possibility of unfair and discriminatory

assessments of fringe benefit obligations and the lack ofprotection from

such assessments under other laws Litigation over such assessments

had been a prominent feature of the maritime labor scene for the

decade prior to that legislation Heeding these concerns Congress

carved out a narrow class of labor agreements which would remain

subject to limited FMC jurisdiction This class was defined as

Assessment agreements whether part of a collective bargain

ing agreement or negotiated separately to the extent they

provide for the funding ofcollectively bargained fringe benefit

obligations on other than a uniform man hour basis 2

The agreement before us in this case LM 8I clearly does not pro

vide for the funding of collectively bargained fringe benefit obligations

It is only by combining the provisions of this agreement with another

agreement LM 80 which does provide for the funding of such benefits

that an argument can be made that the two agreements together meet

the jurisdictional test But as the Administrative Law Judge articulated

clearly in his initial decision these two agreements are distinct with

separate lives and separate purposes The assessment agreement to fund

fringe benefits LM 80 is in effect and will remain in effect no matter

what happens to LM 813

Moreover the Commission s

jurisdiction to scrutinize such agree

ments is triggered only by complaint Under the terms of the MLAA

the Commission cannot investigate assessment agreements on its own

motion Only LM 81 is the subject ofthe instant complaints

1 Federal Maritime Commission v Pacific Maritime Association 435 US 40 1978

Public Law 96325 94 Stat 1021 Sec 4

3

Initial Decision at 45

25 FM C
606 FEDERAL MARITIME COMMISSION

I do not share the majority s concern that we would be leaving

section 15 jurisdiction to the discretion of the drafter by declining

jurisdiction over LM 81 Potential exposure to antitrust penalties is

sufficient incentive to discourage any cavalier disregard of section 15

The majority s decision here expands that class of labor agreements

which Congress left to our jurisdiction and leaves the door ajar for

further incursions into the labor field This is exactly the PMA dilemma

from which Congress extricated this Commission by enacting the

MLAA I therefore dissent from that portion of the majority order

25 F M C
FEDERAL MARITIME COMMISSION

46 C F R CHAPTER IV

DOCKET NO 82 14

NOTICE OF INQUIRY REGARDING

REGULATION OF THE DOMESTIC OFFSHORE TRADES

February 3 1983

Discontinuance ofInquiry

The Commission instituted this inquiry by Notice

published March 5 1982 47 F R 106 0 to seek

public comment on the effectiveness of regulation of

the domestic offshore trades under the Intercoastal

Shipping Act 1933 46 U S C 843 and the regula

tory and legislative changes necessary to improve the

system The Commission having reviewed the com

ments filed in this Inquiry and having transmitted an

appraisal of regulation in the domestic offshore trades

to appropriate committees of Congress hereby dis

continue this Inquiry The Commission wishes to ex

press its appreciation to commentators for their assist

ance in analyzing and developing a revised approach

to shipping in these trades

SUPPLEMENTARY INFORMATION None

ACTION

SUMMARY

By the Commission

S FRANCIS C HURNEY

Secretary

25 F M C 607
FEDERAL MARITIME COMMISSION

DOCKET NO 82 14

NOTICE OF INQUIRY REGARDING

REGULATION OF THE DOMESTIC OFFSHORE TRADES

ACTION

SUMMARY

Finalized February 3 1983

Notice ofInquiry

This solicits public comments on the deregulation of

rates in the domestic offshore trades

DATES Comments on or before May 10 1982

AUTHORITY Intercoastal Shipping Act 1933 Shipping Act 1916

SUPPLEMENTARY INFORMATION

The Commission pursuant to the Shipping Act 1916 46 U S C

801 et seq and the Intercoastal Shipping Act 1933 46 U S C 843

et seq is charged with regulating rates and charges assessed by ocean

carriers operating in the U S domestic offshore trades namely Hawaii

Alaska Puerto Rico Guam Virgin Islands American Samoa and the

Northern Mariana Islands

The purpose of these statutes is to ensure fair reasonable and non

discriminatory transportation rates in these trades In determining the

propriety of these rates the Commission has traditionally applied the

public utility standard and limited the overall revenues of carriers to a

reasonable return on investment In theory this approach allows the

regulated carriers sufficient profit to maintain their financial viability

while at the same time ensuring the movement of cargoes at reasonable

rates

Affected interests have contended that the Commission s method of

regulation fails to account for efficiency does not consider the long

range viability of the carriers overly emphasizes cost plus return on

investment discourages entry and rate competition and creates unnec

essary costs It is claimed that the existence of competitive forces in the

domestic offshore trades would if freed from regulation achieve the

goal of stable and efficient transportation service underlying the Inter

coastal Shipping Act

Competitive conditions vary substantially in the various domestic

offshore trades subject to the Federal Maritime Commission s jurisdic

tion However to the extent there exists substantial competition among

carriers serving a given trade it may well be that the purposes of the

Intercoastal Shipping Act could be served by subjecting the rate prac

tices of carriers to competitive forces A brief synopsis of the number

608 2S FMC
REGULATION OF THE DOMESTIC OFFSHORE TRADES 609

of vessel operators and the existence ofmarket dominance in each trade

is presented below l

1 Alaskan Trade

In 1980 14 carriers in the Alaskan trade filed financial reports with

the FMC none of which accounted for more than 15 percent of

FMC regulated traffic gross trade revenues The Commission does

not have jurisdiction over the preponderance of cargo carried by

the two largest carriers serving Alaska both of which publish

through rates and are thus subject to the jurisdiction of the Inter

state Commerce Commission There have been few rate investiga

tions in this trade in the past several years

2 American Samoa Trade

In 1980 three vessel operators in the American Samoa trade filed

final reports with the FMC Each of the three carriers accounted

for approximately one third ofgross trade revenues

There have been no rate investigations in this trade in the past

several years

3 Guam Trade

In 1980 two vessel operators in the Guam trade filed financial

reports with the FMC one of which accounted for two thirds of

gross trade revenues There have been few rate investigations in

this trade in the past several years

4 Hawaiian Trade

In 1980 five vessel operators in the Hawaiian trade filed financial

reports with the FMC One operator accounted for over 75 per

cent of gross trade revenues There have been a number of rate

investigations in this trade in the past several years

5 Northern Mariana Islands Trade

The Northern Mariana Islands trade is a recent addition to the

domestic offshore jurisdiction of the Commission There is present

ly no carrier financial data available for this trade Five vessel

operators serve this trade

6 Puerto Rican Trade

In 1980 five vessel operators in the Puerto Rican trade filed

financial reports with the FMC One operator accounted for over

1 The numberof vessel operators serving atrade has been determined on the basis of those carriers

filing fiscal year 1980 data with the FMCpursuant to General Order 11 In most trades the number of

carriers maintaining atariff on file with the FMC exceeds the number of carriers filing financial data

with the FMC

25 F M C
610 FEDERAL MARITIME COMMISSION

50 percent of overall gross trade revenues

2

There have been a

number of rate investigations in this trade in the past several years

7 Virgin Islands Trade

In 1980 the Virgin Islands was served by direct vessel call from

ports in Florida and by transshipment from Puerto Rico Two

vessel operators offered direct calls between Florida and the

Virgin Islands One of these carriers accounted for the majority of

trade revenues Gross trade revenues were evenly divided between

the two vessel operators offering a transshipment service in the

trade There have been several rate investigations in this trade in

the past several years

The Commission has recently made efforts to reduce or eliminate

unnecessary or overly burdensome regulations affecting carriers serving

the domestic offshore trades These include 1 eliminating virtually all

financial reporting requirements for the 141 non vessel operating

common carriers in these trades 2 eliminating the filing of annual

company wide financial and operating data of vessel operating carriers

and 3 exempting vessel operating carriers earning less than 10 million

annual revenues from filing detailed financial reports concerning do

mestic offshore operations

In order to meaningfully evaluate the existing system of regulation

the Commission is seeking comments on a number of issues The Com

mission encourages statements on any methodologies or concepts that

would enhance the efficiency of regulation of the domestic offshore

trades particularly when accompanied by relevant factual and econom

ic data After receipt of comments the Commission may schedule public

hearings for the presentation and examination of responsible and feasi

ble proposals

The Commission is not soliciting comments regarding amendments to

the provisions of the Jones Act which restrict entry into the domestic

offshore trades to U S flag vessels The implementation of that statute

is outside the statutory jurisdiction of the Commission a

Appropriate

issues for comment are

Legislative Proposals

1 Should the Commission recommend to Congress that its regula

tory authority in the U S domestic offshore trades be eliminated or

reduced What would be the impact of a reduction or elimination of

regulatory authority in the domestic offshore trades

Recently one of these carriers cancelled its FMC tariff and flied through rate tariff with the

Ice

s

Section 27 Merchant Marine Act 1920 46 US C 1883 However wewill accept usae tion

and comments which require an explanation of the etTects of the U S cabotage laws in order to under

stand the impact of a

possible modification of FMC regulatory authority

2S FMC
REGULAnON OF THE DOMESTIC OFFSHORE TRADES 611

2 Does the reduction of regulation in the domestic offshore trades

require amendment or repeal of the Intercoastal Shipping Act 1933

3 If so what form should such amendments take and should they

permit the FMC to distinguish between competitive and non competi

tive trades Should the Commission have the flexibility to exempt from

rate regulation particular trades which are served by a number of

competing carriers

Regulatory Proposals

4 How should competitive uniformity in rates in the domestic trades

be considered in Commission rate investigations What is the impact of

such a pricing policy in the domestic trades

5 Should the Commission adopt a dominant carrier methodology

whereby the dominant carriers in a trade would serve as the basis for

determining the reasonableness of rates in that particular trade How

should dominance be defined

6 Should the Commission adopt a dominant carrier methodology

whereby the most efficient carrier in a trade defined in terms of lowest

costs per unit of output would serve as the basis for determining the

reasonableness of rates in that particular trade Under this methodolo

gy rate increases of the most efficient carrier in the trade would be

subject to intense scrutiny and an appropriate rate of return developed

for that carrier The rate of return deemed appropriate for the most

efficient carrier would then serve as the maximum level which other

carriers in the trade would be allowed to earn

7 Ifthe Commission is given statutory authority to exempt competi

tive trades from rate regulation what should be the criteria for deter

mining the number of carriers and their market shares which would

allowthe exercise of such exemption authority

8 Should the Commission adopt a constructed carrier methodology

whereby an average rate of return for the trade would be constructed

with carriers limited to earning no more than that average rate

9 In evaluating a carriers revenue requirements should a methodol

ogy other than return on rate base ie either the fixed charges cover

age ratio or some other financial ratio be utilized in assessing a firm

that is tax exempt totally debt financed and publicly owned

to What other methods could the Commission implement to effec

tively carry out its responsibility to the public in regulating the domes

tic offshore trades and yet eliminate ineffective or counter productive

regulatory practices

2S F M C
I

612 FEDERAL MARITIME COMMISSION

An original and 15 copies of each comment should be directed in

writing to the Secretary Federal Maritime Commission Washington

D C 20573

By the Commission March 5 1982

S FRANCIS C HURNEY

Secretary

1

2S FMC
FEDERAL MARITIME COMMISSION

46 C F R PARTS 503 542 543 AND 544

G O 22 AMDT 12 G O 37 AMDT 2 G O 40 AMDT 1

G O 41 AMDT 1

DOCKET NO 82 32

ACTION

SUMMARY

February 3 1983

Final Rule

Fees for public information financial responsibility

for water pollution and financial responsibility for oil

pollution are amended to reflect current costs in

curred by the Commission in providing such services

DATE Effective March 10 1983

SUPPLEMENTARY INFORMATION

On July 6 1982 the Commission published a Notice of Proposed

Rulemaking in the Federal Register 47 F R 29280 which proposed to

update its fees schedule to remedy the disparity between costs incurred

and revenues collected for certain special services even though total

costs would not be recovered

Comments were submitted by Senator Slade Gorton Chairman of

the Merchant Marine Subcommittee of the Senate Committee on Com

merce Science and Transportation Annelise Anderson Associate Di

rector for Economics and Government Office of Management and

Budget and Hollywood Marine Incorporated Both Senator Gorton

and Associate Director Anderson support the proposed rule Holly

wood Marine is opposed to the proposed rule contending that proposed

increases would act as another factor working against the barge and

towing industry at a time when the industry needs to eliminate as many

economic burdens as possible Hollywood Marine requests reconsider

ation of the proposed rule wherein if it cannot be deleted in its

entirety at the least it would be postponed to a time when the econo

my and the barge and towing industry are in a much more stable

economic situation General comments opposing increased fees in both

this docket and Docket No 82 33 are addressed in 82 33

The Commission does not deem it appropriate to delay implementa

tion of or eliminate the proposed fee schedule to suit one segment of

the maritime industry suffering from economic problems Postponing

the proposed rule or eliminating it entirely will not save the barge and

towing industry from idle capacity due to declining shipments high

25 F M C 613
614 FEDERAL MARITIME COMMISSION

interest rates and rising fuel prices Accordingly the Commission has

decided to adopt a final rule which is unaltered from its proposed rule

Pursuant to the Regulatory Flexibility Act 5 U S C 601 et seq

the Commission certifies that adoption ofthis final rule will not have a

significant economic impact on a substantial number of small entities

List ofsubjects in 46 C F R Maritime Carriers Freight Forwarders

Practice and Procedure Fees and User Charges

Therefore pursuant to 5 U S C 553 section 43 of the Shipping

Act 1916 46 U S C 841a and Title V of the Independent Offices

Appropriations Act of 1952 31 U S C 483a the Federal Maritime

Commission is amending Title 46 ofthe Code ofFederal Regulations as

follows

1 Part 503 Public Information is amended in the following respects

In 503 43 Fees for services in paragraph b 3 is amended to read

5 in paragraph c I 5 is amended to read 7 in paragraph

c 3 5 is amended to read 7 in paragraph c 4 1 is amend

ed to read 2 50 paragraph c 5 is deleted in paragraph d I

175 is amended to read 195 in paragraph d 2 50 is amend

ed to read 120 in paragraph d 3 12 50 and 2 are amended

to read 16 50 and 8 25 respectively in paragraph g2 50 and

150 are amended to read 4 25 and 4 respectively and in

paragraph h 10 is amended to read 13

In 503 69 b 2 2 is amended to read 5

2 Part 542 Financial Responsibility for Water Pollution is amended in

the following respects

In 542 13 Fees the references in paragraphs d and e to 100

and 20 are amended to read 75 and 40 respectively and in

paragraph 1 the reference to 10 is amended to read 20 Addi

tionally the first sentence of paragraph d is amended to read as

follows

542 13 Fees

d Each applicant who submits Application Form FMC 321 for the

first time shall pay an initial nonrefundable application fee of 75

3 Part 543 Financial Responsibility for Oil Pollution Alaska Pipeline

is amended in the following respects

In 543 9 Fees the references in paragraphs d and e to 100

and 20 are amended to read 75 and 40 respectively and in

paragraph 1 the reference to 10 is amended to read 20

4 Part 544 Financial Responsibility for Oil Pollution Outer Conti

nentalShelf is amended in the following respects

2S F MC
AMENDED FEES 615

In 544 12 Fees the references in paragraphs d and e to 100

and 20 are amended to read 75 and 40 respectively and in

paragraph f

the reference to 10 is amended to read 20

By the Commission

8 FRANCIS C HURNEY

Secretary

25 F M C
FEDERAL MARITIME COMMISSION

February 3 1983

Final Rule

New fees are being established for filing complaints

petitions for declaratory orders and general petitions

special dockets informal adjudication of small claims

conciliation services tariff special permission applica

tions domestic and foreign and applications for pas

seIger vessel certification It is necessary to establish

new fees to transfer the cost burden of providing

services from the general taxpayer to the recipient of

the services This action will require that all appli

cants who request these Commission services will

have to pay for them

DATE Effective March 10 1983

SUPPLEMENTARY INFORMATION

On July 6 1982 the Commission published a Notice of Proposed

Rulemaking in the Federal Register 47 F R 29278 which proposed to

establish several new fees for services provided by the Commission

The services selected were those which were readily identifiable and

which provided value and utility to a recipient at its request The

Commission assigned to each a fair and equitable assessment based on

the cost to the Commission ofproviding the service

Comments to the Notice were submitted by Senator Slade Gorton

Chairman of the Merchant Marine Subcommittee of the Senate Com

mittee on Commerce Science and Transportation Annelise Anderson

Associate Director for Economics and Government Office of Manage

ment and Budget Pacific Coast European Conference PCEC Virgin

ia Port Authority and Traffic Board North Atlantic Ports Association

VPA NAPA Latin America Pacific Coast Steamship Conference

and Pacific Coast River Plate Brazil Conference LAP PCRPB North

European Conferences NEC Puerto Rico Maritime Shipping Author

ity PRMSA Associated Latin American Freight Conferences

ALAF and International Committee of Passenger Lines ICPL

G O 13

I

1

ACTION

SUMMARY

I

I

616

46 C F R PARTS 502 531 536 AND 540

AMDT 13 G O 16 AMDT 43 G O 20 AMDT 8

AND G O 38 AMDT 4

DOCKET NO 82 33

FILING AND SERVICE FEES

2 FMC
ESTABLISHING NEW FEES

Senator Gorton and Ms Anderson support the proposed rule without

qualification The other commenting parties oppose the rule for various

reasons The opposition to the rule is discussed below in terms of I

legal requirements 2 general comments and 3 comments on specific

fee applications

I Legal Requirements

Four commentators LAP PCRPB NEC PRMSA and ALAF gen

erally contend that the Commission s proposed charges are not justified

under the principles established by the courts in interpreting Title V of

the Independent Offices Appropriations Act IOAA 31 US C 483a

and OMB Circular No A 25 The Commission disagrees and believes

that its application of Title V and Circular No A 25 is consistent with

these principles

In two companion cases the Supreme Court addressed the IOAA

and set forth the following guidelines for its implementation

1 an agency performing a service at the request of an applicant may

exact a fee for such service if it bestows a benefit on the applicant not

shared by others in society

2 the proper measure of such a fee is the value to the recipient

3 a charge for a service should be made only to an identifiable

recipient who derives a special benefit therefrom and

4 no charge should be made for services rendered when the identifi

cation of the ultimate beneficiary is obscure and the service can be

primarily considered as benefitting broadly the general public National

Cable Television Association v United States 415 U S 336 1974 Federal

Power Commission v New England Power Co 415 U S 345 1974

Subsequently courts of appeal have refined these guidelines by the

addition ofthe following

1 the fee assessed may not exceed the cost to the agency in render

ing the service

2 the fee assessed should include only those expenses which are

necessary to service the applicant

3 an agency may recover the full cost of providing a service to an

identifiable beneficiary regardless of the incidental public benefits

which may flow from the service and

4 an agency may charge for services which assist a person in com

plying with statutory duties Electronic Industries Association v Federal

Communications Commission 554 F 2d 1109 D C Cir 1976 see also

Mississippi Power Light Co v US Nuclear Regulatory Commission

601 F 2d 223 5th Cir 1979 National Cable Television Association v

Federal Communications Commission 554 F2d 1094 D C Cir 1976

A number of specific requirements have been set to implement the

above principles

25 F M C

617
618 FEDERAL MARITIME COMMISSION

1 the agency must justify the assessment of a fee by a clear statement

of the particular service or benefit for which it expects to be reim

bursed

2 the agency must calculate the cost basis for each fee by including

a an allocation of the specific expenses of the cost basis of the

fee to the smallest practical unit

b the exclusion of expenses that serve an independent public

interest and

c a public explanation of the specific expenses included on the

cost basis for a particular fee and an explanation of the crite

ria used to include or exclude particular Items and

3 the fee must be set to return the cost basis at a rate that reasonably

reflects the cost of the service performed and value conferred on the

payor

Electronic Industries Association v Fec SS4 F 2d at 1117

The Commission used these guidelines in developing its proposed

fees in this proceeding and has likewise used them in adopting the fees

contained in this final rule These fees therefore comport with all

relevant statutory and judicial requirements

Analyses were conducted by the Commission on the direct and

indirect costs associated with services performed for which fees are

being established The availability ofjustification for the fee bases was

made known in the Notice of Proposed Rulemaking and summary fee

schedules were made available to all parties requesting justification data

on how the fees were established 1

The fees assessed include only those

costs necessary to service an applicant and do not exceed the cost to

the Commission in providing such services The Commission has also

identified the recipient which receives a benefit from its services which

are conferred in exchange for fees collected The Commission has thus

met the requirements set out by Title V Circular A2S and Court

decisions

Questions have arisen over the concept of value to the recipient in

terms of which party receives the benefit and over whether costs were

fully inclusive on the one hand or overly inclusive on the other The

opponents of the rule assert value to the recipient flows to the shipping

public or the public at large rather than the applicant for a specific

service and thus the benefit to the applicant is indirect The Commis

sion finds that the value to the recipient flows to the applicant and thus

the benefit to the applicant is direct An applicant who will not benefit

from filing an application or requesting a Commission service will not

I

Some opponents of this proposed rule erroneously stated in their comments thot no analysis was

performed by the Commiuion Such incorrect assertions tend to confuse the issues and serve no

useful purpose in theestablishment of fair and equitable fees

25 F MC
ESTABLISHING NEW FEES

request any action that would require payment of the fee If an appli

cant desires to request services on behalf of another party the applicant

has to make a commercial decision regarding the value to be derived

from the request If a filing or service fee is not worthwhile in this

circumstance an application or request for service will not be filed

with the Commission The services for which the Commission is assess

ing fees are not the types which can be considered as primarily benefit

ting the general public although incidental public benefits may flow

from the provision ofthese specifically requested services

Opponents of the proposed rule have stated that indirect benefits to

the public should not be included in the cost bases of the fees and that

actual costs should be used in determining fees The Commission agrees

and has taken both of these issues into account in arriving at the

proposed fees The fees were derived from processing costs which are

incurred for processing applications or providing services The costs

are related to employee activities which are necessary to perform the

specified services and include an appropriate increment for overhead

costs without including regulatory activity costs Moreover in deter

mining the proposed fees the Commission did not include the total cost

ofitems because to do so would in some cases make the fees extremely

high

The opponents of the proposed rule also refer to the fees in the rule

as penalties or taxes rather than fees These opinions notwithstand

ing the Commission has not established fees above the costs for serv

ices provided nor has it intended that the fees be penalties The Com

mission does not influence the number of complaints or petitions filed

nor does it control the number of special permission applications which

are received annually The Commission is required to process applica

tions and provide other services when requested and it is proper to

charge a fee for those services

VPA NAPA NEC PRMSA ALAF and ICPL further dispute the

level of fees proposed in the rule The fees were developed by the

Commission from 1982 cost data for providing the services identified in

the proposed rule Reductions in fees would establish arbitrary fees

having no basis in fact and which would not provide any basis for

future fee changes which may be necessary The Commission has re

jected this approach because it removes the cost basis of the fees from

the requirements under Title V and it obscures the value to the recipi

ent requirement which is necessary to establish fees

The Commission has been careful in selecting services which qualify

for fee assessment and it has also been careful in observing the require

ments of Title V in considering value to the recipient direct and

indirect cost to the Government public policy or interest served and

other pertinent facts The fees in the final rule are established to

remedy the disparity between costs incurred for services provided to a

25 F M C

619
620 FEDERAL MARITIME COMMISSION

user ofthe service and the lack of revenue to offset these costs These

services and accompanying fees benefit the applicant directly to the

extent services would not be requested from the Commission if there

was no reason for the applicant to make a request Indirect benefits to

the applicant are subject to interpretations which could never be re

solved in a fee schedule nor have they been shown to flow to a large

segment of public to the extent that no fees should be charged for

services rendered

II General Comments

PCEC opposes the proposed rule on the general principle that one

who is involuntarily subject to regulation for reasons of public policy

should not be assessed special charges for complying with such regula

tion It also contends that carriers do not obtain licenses to act as

carriers and thus do not receive special benefit from the Commission

which could properly call for an appropriate fee In addition PCEC is

also concerned about the suggestion in the preamble to the proposed

rule that charges for filing section 15 agreements and section l4b dual

rate contracts might be added to the filing and service fees list at some

later time PCEC ultimately suggests that this proceeding should be

dismissed

VPA NAPA objects to the exclusion of assessments or agreements

from the proposed rulemaking because of proposed changes in legisla

tion without similar exclusion ofcomplaints and petitions for declarato

ry orders which could also be affected by proposed changes in the law

In establishing the specific fees the Commission has distinguished

between services which are justified for reimbursement and those

which are not The Commission has also concluded that carriers con

ferences and other persons do benefit from the Commission s

regulation

in advance of and in addition to Commission regulation benefitting the

shipping public The fees for complaints and petitions for declaratory

orders are included within the rule because the processing steps are not

likely to change in the near future

III Comments on Specific Fee Applications

Exceptions to specific parts of the proposed rule were submitted by

VPA NAPA LAP PCRPB NEC PRMSA ALAF and ICPL These

exceptions and comments are set forth below in the order ofthe Code

ofFederal Regulations parts and subparts to which they apply

A Complaints Petitions for Declaratory Orders and Special Dockets

Complaints Part 502 g 502 62 and g 502 182 and Petitions for De

claratory Orders Part 502 g 502 68

VPA NAPA asserts that precedential value from Commission deci

sions in complaint proceedings can extend to the entire shipping indus

try and the effects from the decisions could further filter down to the

25 F MC
ESTABLISHING NEW FEES

consuming public VPA NAPA therefore argues that the recipients of

benefits of FMC complaint proceedings are not readily identifiable It

further claims that the negative impact of a 25 or 50 filing fee can be

a major burden to small shippers in addition to being a disincentive to

use the FMC as a forum for resolution ofdisputes

The Commission is aware of the precedential values of its decisions

However the direct value to a complainant or petitioner does not

change by virtue of publication of the decision The proposed rule

would establish processing fees for specific services provided and the

direct benefit to be gained must be evaluated by the applicant as to

whether or not the service is worthwhile The Commission views the

applicant as the readily identifiable recipient of the benefits of the

services provided

Complaint and petition filing fees should not be a major burden to

small shippers because of their nominal amount Moreover these ad

ministrative processing fees do not cover the full cost to the Commis

sion of handling petitions It is unlikely that a 25 or 50 filing fee for

processing complaints or petitions will result in reduced use of the

FMC as a forum for resolution ofdisputes

Special Docket Applications Part 502 502 92

VPA NAPA and LAP PCRPB both commented on special docket

applications VPA NAPA points out that this procedure whereby car

riers can refund or waive freight charges where there is an error in a

tariff of a clerical administrative or technical nature was instituted as

an alternative to costly formal proceedings and should not be burdened

with the obstacle of a filing fee LAP PCRPB allege that shippers not

carrier applicants are the beneficiaries of the waivers and refunds

granted pursuant to such applications They contend that a charge

against the carrier for this procedure is unfair and improper because the

carriers will have been charged for something of special benefit not

to themselves but to the shippers

The Commission does not believe the filing fee for special dockets is

so costly that it will force applicants to revert to more costly formal

proceedings Nor does the Commission believe that carriers in no way

benefit from making such applications on behalf of their customers

Carriers benefit from the good will shown to their customers and they

have the opportunity to retain customer business by utilizing the special

docket procedure Moreover control over the filing of rates and

charges in tariffs rests with carriers and they are able to correct their

own errors through this procedure Strong administrative controls by

the carriers could eliminate or at least reduce the need to seek special

docket refund or waiver authority from the Commission

New fees under Part 502 remain unchanged from the proposed rule

because they are reasonable charges for the services provided

f25 FM

C6
622 FEDERAL MARITIME COMMISSION

B Non exclusive Transshipment Agreements Part 524 g 524 4

Non exclusive transshipment arrangements will soon be proposed for

exemption from filing requirements The Commission has removed the

proposed filing fee from this final rule and has determined this matter

will remain open until further notice

C Special Permission Applications in Domestic Offshore Commerce Part

531 g 531 18 and Foreign Tariffs Special Permission Applications

Part 536 g 536 15

PRMSA LAP PCRPB and NEC protest the proposed 90 special

permission application fee

PRMSA protests the imposition of a 90 fee for filing special permis

sion applications in the domestic offshore trade and contends that the

proposed fee would impose a significant burden on carriers without

consideration of economic inefficiencies harmful to the public interest

PRMSA says it filed approximately SO special permission applications

in 1981 It further claims that the direct costs of the proposed charges

would represent only part of the potential expense and in conjunction

with special permission applications the entire cost of reviewing the

application preparing a recommendation and making a determination is

assigned to the applicant without consideration ofpossible public bene

fit PRMSA thus argues that the proposed fees will introduce transac

tion costs which are contrary to sound economic policy and the under

lying purposes of special permissions PRMSA takes the position that

the fee should be withdrawn

LAP PCRPB comments that I the impetus for a special permission

application mostly comes from a

shipper seeking a new rate 2 the

benefit would seem in such cases to flow equally to the shipper or the

shipping public at large and 3 the legislative history of the applicable

portion of section 18b 2 of the Shipping Act makes it clear that

broad public interests were to be served and not the limited interests of

the carriers

NEC does not object to the establishment of a fee for filing special

permission applications NEC contends however that the proposed fee

is excessive and does not reflect the value of the service to the recipi

ent NEC states that the Commission has historically and consistently

exercised discretion to grant special permission authority for good

cause shown and where real merit is demonstrated on the basis of

anticipated public benefits not where special benefits would be ob

tained by a few companies or persons rather than the general public It

further claims that the Commission has not distinguished the number of

special permission applications granted or denied and there is obviously

no value conferred on the applicant whose special permission is denied

uNEC does not contend there is no value to the special permission

application services rather the relationship between the fee and the

2 F MC
ESTABLISHING NEW FEES

service is more appropriately reflected by the figure of 25 NEC urges

the Commission to amend its proposed rule to reduce the fee from 90

for all applications down to 25 for those special permission applica

tions which are granted

The Commission has considered the public benefit of instituting a

filing fee for processing special permission applications The purpose of

a special permission is to waive tariff filing requirements upon a show

ing of good cause The carrier applicant seeks to obtain a benefit for

itself or its customer through the special permission procedure Though

the general public might benefit from the procedure its benefit is

speculative and incidental to the benefit conferred on the applicant

carrier

The Commission incurs special permission application processing

costs regardless of the determination to grant or deny the permission

The grant or denial of the application is provided to the applicant

carrier or conference not the shipper providing the impetus for the

request During fiscal year 1982 the Bureau of Tariffs received 294

special permission applications Each individual grant ofspecial permis

sion directly affects the applicant carrier and possibly affects its ship

ping customer If there is absolutely no benefit to be gained by the

carrier it will not file an application for special permission

The Commission believes the proposed fee is reasonable in relation to

the costs it incurs for processing special permission applications Limit

ing the fee to apply to only those instances where special permission is

granted would give the appearance ofapplicants buying approval from

the Commission When an application for special permission is received

it is immediately processed Special permission applications require spe

cial processing to take into account special services or arrangements

which are not normally available in tariffs The application processing

costs are the same regardless of the final determination The Commis

sion believes it is appropriate to charge the requesting parties for the

services provided at a rate near but no higher than that which is

experienced in servicing the request Establishing the filing fee shifts the

application processing fee burden from the general taxpayer to the

applicant without transferring the regulatory costs of ensuring that the

special permission is used for its intended purpose The Commission is

not withdrawing nor reducing the filing fee for special permission

applications

D Temporary TariffFiling Fee Part 536 536 10

Temporary tariff filing fees are removed from this final rule New

electronic tariff filing methods could make temporary tariff filings un

necessary and because suspension of temporary tariff filings is pending

in Docket No 80 56 this matter is being held open until further notice

25 F M C

623
624 FEDERAL MARITIME COMMISSION

E Passenger Vessel Certification Fees Part 540 540 4 and 540 23

The International Committee of Passenger Lines ICPL states that

applications filed for certification pursuant to 46 C F R Part 540 should

not be subject to any fee because the beneficiaries of P L 89 777 46

U S c 817 are travellers embarking at United States ports not the

passenger lines filing the applications ICPL notes that foreign passen

ger lines are entitled to transport passengers between the United States

and foreign ports under general principles of maritime law and treaties

of friendship navigation and commerce It claims that nothing in P L

89 777 took away this right of carriage or remotely suggested that

charges should be assessed for the Commission performing its duties

ICPL contends that since the statute was enacted to protect passengers

against nonperformance of prepaid voyages and to ensure funds are

available to meet personal injury and death claims the only benefits are

to provide security for protection of the public and compliance with

statutory requirements of P L 89 777 is a burden rather than a benefit

to the passenger carrier Moreover ICPL notes that the Civil Aeronau

tics Board exempts foreign air carriers from payment of all filing and

license fees 14 C FR 389 24

ICPL further states that the Commission s functions apply to certifi

cation and not licensing of passenger vessels It contends that the

detailed cost analyses in support of the proposed rule are far from

enlightening and it is unlikely that any more staff effort is involved in

verifying casualty certificate P IClub guarantees and surety bonds

than in the case of evidence of financial responsibility required for

pollution certificate applications under 46 C F R Part 542 The casualty

certificate fee is more than five 5 times that of the pollution certifi

cate It also appears to ICPL that no extra effort is needed to process

performance certificates where the applicant provides the maximum 10

million security specified in 46 C F R 54O 9j

ICPL contends that

nothing in the Commission sfigures explains the amount of costs or

why an application backed by regular guarantees or surety bonds cost

approximately 1 691 to process

The Commission consumes extensive amounts of time and effort in

processing passenger vessel certificates The Office ofVessel Certifica

tion receives the application records and reviews it discusses it with

the applicants determines the amount of financial responsibility re

views other pertinent agreements and charters develops notice ofappli

cation to be published in the Federal Register reviews evidence of

financial responsibility prepares a recommendation after research is

completed coordinates with other bureaus and offices as appropriate to

ensure comments are incorporated in the recommendation reproduces

copies ofthe recommendation and has the matt r placed on the agenda

ofthe Commission for approval Upon approval certificates are issued

and the notice of approval is published in the Federal Register Audit

requirements are then established and the Federal Register is reviewed

25 FMC
ESTABLISHING NEW FEES

for publication and to obtain a

copy ofthe published notice of approv

al Audit reports and unearned passenger revenues are reviewed to

ensure adequacy of evidence of financial responsibility The time and

efforts required to process these passenger vessel certificates vary great

ly from the routine functions associated with certifying financial re

sponsibility for pollution liability

Moreover the fees set forth in the proposed rule do not include costs

to the Commission of conducting field audits processing activities car

ried out by bureaus and offices other than the Office of Vessel Certifi

cation or other costs associated with monitoring the passenger cruise

lines to ensure compliance with the statute The direct beneficiaries of

the services provided by the Commission are the passenger carriers

which are able to do business in the United States upon obtaining the

required certificates The indirect beneficiaries of the services are the

passengers receiving the protection required by the statute In the

normal commercial environment the carriers determine whether or not

the fee is going to prohibit them from carrying passengers Ifthe filing

feeis paid and the fares increase for that reason the passengers who are

being protected are thereby paying for the services they are using The

benefit could then flow from the carrier to the passenger and the cost

of providing the service would be removed as a burden on the general

public The Commission is not withdrawing nor reducing the casualty

and performance certification application fees noris it exempting for

eign passenger carriers from the rule srequirements since to do so

would be discriminatory to U S flag carriers

The Commission has reviewed all comments submitted by the parties

responding to the Commission s notice of proposed rulemaking The

comments are pertinent in many instances and irrelevant in others

because they make assumptions which cannot be verified or which bear

no direct relationship to the actual cost criteria from which the pro

posed filing fees were developed The Commission is not taxing users of

its services nor is the Commission recovering the costs of regulating

the parties subject to Commission authority The filing and application

fees in this rule are based upon direct and indirect costs of providing

services which are requested by applicants The fees are also set to

recover the cost ofproviding services whilebeing careful not to exceed

these costs The fees are being established to recover costs to the full

extent possible in a manner which is fair and equitable taking into

consideration direct and indirect cost to the government value to the

recipient public policy or interest served and other pertinent facts

Pursuant to the Regulatory Flexibility Act S U S C 601 et seq

the Commission certifies that adoption of the proposed rule will not

have a significant economic impact on a substantial number of small

entities

25 F M C

625
626 FEDERAL MARITIME COMMISSION

List of subjects in 46 C F R Maritime Carriers Freight Forwarders

Practice and Procedure Fees and User Charges

Therefore pursuant to 5 U S C g 553 section 43 of the Shipping

Act 1916 46 U S C g 841a and Title V of the Independent Offices

Appropriations Act of 1952 31 U S C g 483a the Federal Maritime

Commission is amending Title 46 ofthe Code of Federal Regulations as

follows

1 Part 502 Rules of Practice and Procedure is amended in the

following respects

a In g 502 62 the title is amended and a new sentence is added

reading as follows

g 502 62 Complaints and fee

The complaint shall be accompanied by remittance of a 50 filing fee

b In g 502 68 the title is amended and a new sentence is added to

paragraph a reading as follows

g 502 68 Declaratory orders and fee

a Petitions shall be accompanied by remittance of a 50 filing

fee

c In g 502 69 the title is amended and a new sentence is added

reading as follows

g 502 69 Petitions general and fee

Petitions shall be accompanied by remittance of a 50 filing fee

d In g 502 92 the title is amended and a new sentence is added to

paragraph a 3 reading as follows

g 502 92 Special docket applications and fee

a 3 The application for refund or waiver must be accompa

nied by remittance of a 25 filing fee

e In g 502 182 the title is amended and a new sentence is added

reading as follows

g 502 182 Complaint and memorandum cof facts and arguments and

filing fee

The complaint shall be accompanied by remittance of a 50 filing fee

f In g 502 304 the title is amended and a new sentence is added to

paragraph b reading as follows

g 502 304 Procedure and filing fee

b Such claims shall be accompanied by remittance of a 25

filing fee

25 F MC
ESTABLISHING NEW FEES

g

In 50244 the title is amended and a new sentence is added to

paragraph areading as follows

50244 Procedure and fee

a The request shall be accompanied by remittance of a 25

service fee

2 Part 531 Publishing Filing and Posting of Tariffs in Domestic

Offshore Commerce is amended by adding a new subparagraph 3 to

531 18 a as follows

531 18 Applications for special permission

a

3 An application for special permission shall be accompanied by a

90 filing fee

3 Part 536 Publishing and Filing Tariffs by Common Carriers in the

Foreign Commerce of the United States is amended in the following

respects

In 536 15 a new sentence is added to paragraph b reading as

follows

536 15 Applications for special permission

b Such applications shall be accompanied by a filing fee

remittance of 90

4 Part 540 Security for the Protection of the Public is amended in the

following respects

a In 540 4 a new sentence is added to paragraph b reading as

follows

540 4 Procedure for establishing financial responsibility

b An application for a Certificate Performance shall be

accompanied by a filing fee remittance of 1 600

b In 540 23 a new sentence is added to paragraph b reading as

follows

540 23 Procedure for establishing financial responsibility

b

An application for a Certificate Casualty shall be accom

panied by a filing fee remittance of 800

By the Commission

S FRANCIS C HURNEY

Secretary

25 F M C

627
FEDERAL MARITIME COMMISSION

DOCKET NO 71 29

BATON ROUGE MARINE CONTRACTORS INCORPORATED

v

CARGILL INCORPORATED

NOTICE

February 4 1983

Notice is given that no appeal has been taken to the December 28

1982 dismissal of the complaint in this proceeding and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the dismissal

has become administratively final

8 FRANCIS C HURNEY

Secretary

628 2S FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 71 29

BATON ROUGE MARINE CONTRACTORS INCORPORATED

v

CARGILL INCORPORATED

DISMISSAL OF PROCEEDING

Finalized February 4 1983

Cargill Incorporated and Baton Rouge Marine Contractors Inc

have agreed to settle their controversy on the following terms

a Cargill will maintain its Baton Rouge service and facility

charge Item 5 Subsection D Section III Port Allen Tariff

No 10 at a level not to exceed 11 cents per ton for two years

from October 1 1982

b Cargill will refund to BRMC the amount of 75 000 00 and

BRMC will make no refund to Cargill

c Each party will release the other from all liability with respect

to the service and facility charge in accordance with the

mutual release set forth in Attachment A

d The existing court proceeding between the parties Baton

Rouge Marine Contractors Inc v Cargill Inc E D La No

75 698 shall be dismissed with prejudice in accord with the

Stipulation ofDismissal which is Attachment B hereto

On the basis ofthe foregoing both sides have moved for dismissal of

this proceeding with prejudice Since neither side wishes to pursue its

interests in the case there is no alternative to dismissal Of course

should the Commission desire a resolution to any of the questions raised

in the case it may institute a proceeding on its own motion

The proceeding is dismissed with prejudice

S JOHN E COGRAVE

Administrative Law Judge

25 F M C 629
FEDERAL MARITIME COMMISSION

46 C F R PARTS 534 AND 536

GENERAL ORDERS 10 AND 13 DOCKET NO 82 42

GREEN HIDE WEIGHING PRACTICES AND PUBLISHING

AND FILING TARIFFS BY COMMON CARRIERS IN THE

FOREIGN COMMERCE OF THE UNITED STATES

February 9 1983

Final Rule

This removes unnecessary duplicating regulations

which were originally promulgated to ensure a uni

form method of declaring shipping weights on green

salted hides for export in the foreign commerce of

the United States The result of this action will not

change the original regulations in any manner except

as to provide a single codification of the regulation

which is now published in the Commission s G O 13

46 C F R 536 5 d 17

DATE Effective February 14 1983

SUPPLEMENTARY INFORMATION

On September 15 1982 the Commission published a notice of pro

posed ruiemaking requesting comments on the proposed removal of

Part 534 of Title 46 ofthe Code ofFederal Regulations 29 F R 5887

and the amendment of46 C F R 536 s d 17 to delete reference to 46

C F R Part 534 therein

The proposed rulemaking incorrectly indicated in the preamble as

well as in paragraph 3 on page 2 and the last paragraph on page 3

reference to 46 C F R 536 5 c 17 The correct reference should

have read 46 C F R 536 5 d 17 There is no section 536 5 c 17

in 536 5

One response was received from the Inter American Freight Confer

ence The commentator agreed that there is no need for 46 C F R Part

534 The Conference however rationalized that the effect of the pro

posed modification of section 536 5 d 17 appeared to increase not

decrease the regulatory burden upon conferences and carriers The

Conference maintained that the effect of deleting the phrase in

accordance with Part 534 ofthe Commission s rules would be to

require every tariff to include a rule relating to the weighing of hides

even if there were no commodity rates covering green salted hides

This contention represents a misinterpretation ofthe intent ofthe Com

ACTION

SUMMARY

m 630 25 F

C
GREEN HIDE WEIGHING PRACTICES

missions

rulemaking which is simply to provide one single regulation

under 46 C FR 536 5 d 17 relating to the transportation of green

salted hides

The same regulations applicable to the carriage of green salted hides

will continue to be effective for all common carriers Consequently if a

carrier elects not to provide common carriage on green salted hides

the tariff rule 17 shall continue to indicate such fact by a simple

notation not applicable as is the current practice with any other

tariff rule which fails to have any application in a given tariff

The present duplicating provisions published in 46 CF R Part 534

and section 536 5 d 17 will be eliminated by the action proposed

herein with no resulting regulatory impact whatsoever This action will

simply codify currently effective regulations under the Commission s

General Order 13 536 5 d 17

List of subjects in 46 C F R

THEREFORE IT IS ORDERED That pursuant to 5 D S C 553

and sections 14b 15 16 17 18 b and 43 of the Shipping Act 1916

46 D S C 813 a 814 815 816 817 b and 841 a the Code of Federal

Regulations is amended as follows

1 46 CFR Part 534 is rescinded and

2 The first sentence of 46 C F R 536 5 d 17 is amended by

deleting the phrase in accordance with Part 534 of the

Commission s rules

By the Commission

S FRANCIS C HURNEY

Secretary

25 EM C

631
FEDERAL MARITIME COMMISSION

DOCKET NO 82 43

IN THE MATIER OF BOARD OF COMMISSIONERS OF THE

PORT OF NEW ORLEANS DOCK DEPARTMENT

TARIFF FMC T NO 1 ITEM 145 0

ORDER

February 22 1983

The Board of Commissioners of the Port of New Orleans hereafter

the Port has filed a Petition for Declaratory Order regarding a dispute

between it and Kerr Steamship Company Inc over the interpretation

and lawfulness of a Port tariff provision 1

The Port seeks a Commission

order declaring that the tariff provision 1 holds a vessel berthing

agent liable for collection and payment of inbound demurrage charges

and 2 is lawful in particular under sections 16 and 17 ofthe Shipping

Act 1916 46 U S C 815 816

Kerr replied to the Petition and Petitions to Intervene and accompa

nying Replies were also submitted by the West Gulf Maritime Associa

tion the Association ofShip Brokers and Agents ASBA 19 steamship

agencies filing jointly and the Commission s Bureau ofHearing Coun

sel Additionally the Port filed a Motion for Leave to File Pleading

Out of Time 2and an accompanying Opposition to Petitions for Leave

to Intervene to which Kerr and ASBA have objected 3

The circumstances giving rise to this proceeding commenced with

Kerr s having applied to the Port for a berth assignment for the MV

VIDRARU On April 13 1981 the vessel was unloaded and a ship

ment of steel plates remained on the wharves long after the expiration

of the IS day free time period provided in the Port tariff Citing its

tariff the Port sent demurrage invoices in the amount of 214 729 18 to

Kerr 30 000 of the bill has apparently been paid by a stevedoring

1 At issue is the following Port tariffprovision

Any portion of said cargo discharged from a vessel remaining on the public wharves

after the expiration of free time allowed as set forth in Item 130 shall incur demurrage

charges indicated below Said demurrage charges shall apply immediately following the

expiration of the specified free time allowed The owner charterer and agent of the

vessel discharging the cargo are responsible for the payment to Board of the demurrage

charges which aredue and payable before the cargo incurring same is removed from the

public wharves

II The Port s Motion is granted The Port s pleading is not as characterized by Kerr a

reply to a

reply but is a

reply to the Petitions to Intervene

S Kerr s

request that aportion of the Port s pleading be stricken is denied See note 2 supra ASBA s

submission is stricken because it constitutes areply to areply See 46 C F R t

502 74a

632 25 F MC
PORT OF NEW ORLEANS TARIFF FMC T NO 1 633

company The Port is attempting to collect the remaining 184 729 18

from Kerr

The Port brought suit against Kerr and several other parties in

federal district court in Louisiana Board of Commissioners of the Port of

New Orleans v Kerr Steamship Co Inc et al B D La C A No 81

4691 Kerr filed a complaint with the Commission Docket No 82 15

25 F MC 330 1982 but withdrew it on August 10 1982 citing the

existence of the court proceeding The instant Petition for Declaratory

Order was filed on August 18 1982

In Lease Agreement No T3753 Between Maryland Port Administration

and Atlantic Gulf Stevedores Inc 24 F M C 500 1981 reconsid

denied 24 FMC 792 1982 the Commission denied a Petition for

Declaratory Order which went to the interpretation of a term in a lease

agreement previously approved by the Commission The Commission

explained

There is no indication that the instant case requires the

unique technical expertise of this agency any more than the

judgment of the court in which this matter is currently pend

ing litigation

24 FMC 500

This consideration is applicable to the instant Petition The Commis

sion does of course have jurisdiction to decide both questions raised in

the Port s Petition However the threshold issue whether Tariff Item

No 145 0 covers berthing agents is an issue which the federal court is

as competent to decide as is the Commission Although the court has

been requested by the Port to stay the proceeding pending Commission

action it has declined to do so Moreover the court has not sought the

Commission s assistance To rule on the interpretation issue at this time

would be duplicative ofthe courts effort

Tariff interpretation is often a matter which requires the technical

knowledge of an expert body We do not hold that the pendency before

the courts of this or any other issue related to the Shipping Act will

deter us from ruling on matters which require such expertise We

simply are of the view that the issue of the applicability of Tariff Item

145 0 is a matter which can be efficiently disposed of by the court

without our intervention

The remaining issue whether vessel agent liability for inbound de

murrage is lawful under the Shipping Act is one which appears sub

ject to the Commission s primary jurisdiction However to initiate a

proceeding on that issue before it has been determined whether the

tariff on its face applies to a berthing agent would be a

premature and

possibly unnecessary exercise at this time

The Commission has therefore determined to defer to the court

litigation already under way on the issue of the tariff provision s inter

25 F M C
634 FEDERAL MARITIME COMMISSION

pretation and to deny the Port s Petition without prejudice 4 If any

Shipping Act issues remain after the resolution of that issue in the

judicial forum the Commission may address them in response to a

section 22 46 U S C 821 complaint or a subsequent petition under

Rule 68 46 C F R 502 68

THEREFORE IT IS ORDERED That the Petition for Declarato

ry Order ofthe Board of Commissioners of the Port ofNew Orleans is

denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

The PetitJons to Interveneare therefore dismiSHd as moot

2S FMC
FEDERAL MARITIME COMMISSION

46 C F R PART 536

GENERAL ORDER 13 AMENDMENT NO 10

DOCKET NO 80 56

PUBLISHING AND FILING TARIFFS BY COMMON CARRIERS

IN THE FOREIGN COMMERCE OF THE UNITED STATES

ACTION

SUMMARY

DATE

February 28 1983

Final Rule

The Commission is providing for 24 hour receipt of

permanent tariff filings including the use of electron

ic filing methods in lieu of accepting temporary tariff

filings This will eliminate what has become an un

necessary burden on the Commission s staff and re

sources and will also simplify the use offoreign com

merce tariffs by shippers carriers and otherinterested

persons Providing for the receipt ofpermanent tariff

filings on an around the clock basis including those

filed by electronic modes should benefit carriers

conferences and shippers by enabling them to meet

commercial exigencies

Effective May 30 1983

SUPPLEMENTARY INFORMATION

On September 3 1981 the Commission stayed its Final Rule in this

proceeding 46 F R 44190 That rule would have precluded the filing

of temporary amendments to tariffs published by carriers or confer

ences of carriers in the foreign commerce ofthe United States effective

September 8 1981 46 F R 35092 The stay was requested by various

conferences which sought an additional period for commenting on the

rationale employed by the Commission in arriving at this decision

By notice served December 28 1981 the Commission granted inter

ested parties an opportunity to comment on the basis for its rule 46

F R 62669 This notice also proposed a new procedure which would

permit the receipt ofpermanent tariff amendments before and after the

Commission s normal business hours including weekends and holidays

Comments were received from fourteen commentators on behalf of

twenty three conferences two ocean carriers three shippers and four

tariff publishing services Seven ofthe commenting conferences support

25 F M C 635
636 FEDERAL MARITIME COMMISSION

the Commission s proposed discontinuance of the temporary tariff filing

privilege l while fifteen conferences object to it 2

Other commenting parties support the Commission s proposal but

request that it be expanded to allow the permanent filing of tariff pages

by electronic modes on a 24 hour basis a

This suggestion has merit and

has been adopted Also a definition ofelectronic tariff filing is added to

the Commission s tariff filing regulations to recognize such filings as a

type of permanent tariff tiling The Commission will receive tariff

material 24 hours a

day Material submitted after normal working hours

will be stamped in a mail drop in the lobby of the Commission s

Washington D C office The procedure for the receipt of electronic

tariff filings will be through the use of a date time device on receiving

machines which are presently or may in the future be located in the

Commission s public file facilities 4

Certain commenting parties request that the Commission expand the

rulemaking proceeding to permit the 24hour filing privilege for tariffs

which are filed in the domestic offshore commerce under the require

ments of the Commission s General Order 38 Such a request is

beyond the scope of this proceeding which relates only to tariffs filed

in the foreign commerce ofthe United States

The Commission has also been urged to I continue the telex filing

privilege without restriction 2 allow foreign based filers continued

use oftelexes with or without a limit on the number of such messages

3 provide further justification before eliminating the temporary tariff

tiling privilege 4 provide for the use of temporary filings when filed

with sequential numbers 5 assess a fee for the use of temporary tariff

filings 6 allow tariffs to be filed in the Commission s field offices and

1

North AlIantic United Kingdom Freighl Conference North Allanlic French AlIanlic Frelghl

Conference North AlIanlic Continenlal Freight Conference North Atlanlic Bllllic Freljihl Confer

ence Scandinavia Blllllc US North AlIa lc Weatbound Freijihl Conference Continental North AI

lantic Wealbound FrmhlConference and North Atlantic Wealbound Freight Aosociation

North EuropeUnited StaleS Pacific Coaat Fr ighl Conferonco Seclions B lllId C of the Pacific

Coast River Plale Brazil Conference The 8900 Linea Oreek VS Allanlic Agreement lberian US

North Atlantic Wealbound Frelghl Conference llaly South France South Spain PortugaUS Oulf

andlaland of Puerto Rico Conferonce Mul North AlIantic US A Freishl Conforence Modilor

ranean North Pacific CoaIl Freighl Conferonce North Atlantic Modilerranean Freight Conference

US AlIanlic Oulf AualraiaNow Zealand Conference Tho Weal Coaat of hay Sioilian and Adri

alic Porta North AtlanliQ Range Confere Tr Pacific Frelghl Co ference of apan Korea

JapanKorea Atlanlic and Oulf Freighl Conference Thailand Pacific Freight Conference and Thai

land U S Allanoc and Oulf Conference

S Pacific Wtbound Conference Sea Land Service Inc and Pacific CoaIt TarilTBureau

An acceplable tarilT filing mode by an eleelronic mode is any lorilT amendment which haa alllhe

characloriatica of a

permanenl tarilT arnendment The baaic dilTerence between an eloclronic mode

tarilT filing and a mail or hand deliverod permanenl filing is lhe method of tranamission In olher

wordeleclro lc filing is electronic mail The equipment uaod 10 compile send and or receive elee

Ironic tarilT filinp la commercially conlrollod by the tarilT filers with lhe Cornmiosion providing the

apace for the receiving prioler machloea

Sea Land Service Inc Crowloy Marilirne Corporation Inlomalional TarilTServicea Inc Pacific

CoaIt TariffBureau and Jim Pitzer Tran portalion ConsultaDl

25 FMC
PUBLISHING FILING TARIFFS

7

pursue legislative modifications to the Shipping Act to permit filings

to be made within a certain period after contracts of affreightment are

concluded 6Some of these comments 7

have already been considered

during the course ofthis rulemaking proceeding while others are incon

sistent with the intent of this rulemaking and therefore merit no further

consideration

The decision to eliminate temporary tariff filings may be inconven

ient to some However there are means by which tariff changes consid

ered time sensitive can be transmitted to the Commission for immediate

effectiveness Present tariff filing regulations already contain specific

language to permit telephonic special permission applications where

emergency situations appear to exist See 46 C FR 536 15 c

Further carriers and conferences can still request a waiver of the

Commission s permanent tariff page filing requirements if good cause

can be shown

The provisions of the Regulatory Flexibility Act 5 D S C 601 et

seq do not apply to this Final Rule The Commission s prior certifica

tion that the rule if implemented would not have any significant

economic impact on a substantial number of small entities was made to

the Chief Counsel for Advocacy of the Small Business Administration

on January 20 1982 and published in the Federal Register on January

28 1982

List ofsubjects in 46 C F R Part 536

Maritime carriers Reporting and recordkeeping requirements

THEREFORE IT IS ORDERED That pursuant to 5 D S C 553

and sections 18b

22 and 43 of the Shipping Act 1916 46 D S C

817 b 821 and 84I a 46 C PR Part 536 is amended as follows

1 536 2 Definitions Amended A new paragraph is added to section

536 2 which reads as follows

536 2 P Tarifffiling Electronic

The transmission of tariff filings to the Commission through the

use of commercial data processing terminals The data processing

receiving terminal s are to be located in the Commission s Wash

ington D C offices Tariff material filed electronically must con

form to all the regulations applicable to permanent tariff filings

except as follows

I electronically filed tariff pages received from data process

ing terminals may be used for filing with the Commission and

6

C H Dexter Division the Dexter Corporation Air Products and Chemicals Inc World Tariff

Services Inc North BuropelU S Pacific Freight Conference except Sea Land Service Inc Sections

Band C of the Pacific Coast River Plate Brazil Conference Trans Pacific Freight Conference of

Japan Korea et al The 8900 Lines except Sea Land Service Inc Waterman Steamship Corp

and E I du Pont de Nemours and Company

7

See 45 F R 58385 September 3 1980

25 F M C

637
638 FEDERAL MARITIME COMMISSION

2 electronically filed tariff matter shall be accompanied by an

electronically filed letter oftransmittal and

2 Paragraph a of section 536 3 is redesignated as subparagraph

a I and anew subparagraph is added to section 536 3 which

reads as follows

536 J

a 2 Receipt of Tariffs The Commission will receive tariff

filings on an around the clock basis Receipt of tariff filings during

other than normal business hours will be time stamped at a tariff

mail drop in the lobby of the Commission s Washington D C

offices Electronic tariff filings transmitted to the Commission by

electronic modes will be receipted by a date time device on the

receiving machine and

3 Paragraph c of section 536 10 is deleted and

IT IS FURTHER ORDERED That the stay previously issued in

this proceeding on September 3 1981 is hereby rescinded

By the Commission

S FRANCIS C HURNBY

Secretary

2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 46

GENERAL MOTORS CORPORATION

v

COSTA LINE CARGO SERVICES INC AND

COSTA ARMATORI S pA

NOTICE

February 28 1983

Notice is given that no exceptions have been filed to the January 19

1983 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 639
i

FEDERAL MARITIME COMMISSION

DOCKET NO 82 46

GENERAL MOTORS CORPORATION

v

I

i

COSTA LINE CARGO SERVICES INC AND

COSTA ARMATORI S p A

Reparation awarded to complainant

Dennis J Helfman and Benson To Buck attorneys for Complainant Otis M Smith

General Counsel of General Motors Corporation of Counsel

William F Burns Vice President Costa Line Cargo Services Inc General Agents

for Costa Line for Respondent

INITIAL DECISION 1OF WILLIAM BEASLEY HARRIS

ADMINISTRATIVE LAW JUDGE

Finalized February 28 1983

This is a proceeding by consent ofthe parties and with approval of

the Presiding Administrative Law Judge conducted under shortened

procedure without oral hearing pursuant to Rule 181 et seq of the

Commission s Rules of Practice and Procedure 46 C F R 502 181 et

seq

The complainant alleges the respondents have subjected it to an

overcharge of rates for ocean transportation for which reparation in

the sum of 47 176 36 plus interest is sought and such other relief

deemed proper in the premises

From the materials supplied in this proceeding the Presiding Admin

istrative Law Judge finds the following facts

FACTS

The complainant General Motors Corporation is a Delaware corpo

ration with offices at 3044 West Grand Boulevard Detroit Michigan

48202 General Motors Corporation operates through various wholly

owned incorporated subsidiaries including General Motors Compon

entes S A located in Cadiz Spain Componentes is engaged in the

construction and operation of automotive components manufacturing

plants in Spain

I Thi deci ion willbecome thedecmon of the Commlsalon in the aboence of review thereof by the

Commi ion Rule 221 Rule of Practice and Procedure 46 CP R 02 221

640 2 F MC
GENERAL MOTORS CORPORATION V COSTA LINE CARGO 641

SERVICES INC ET AL

The respondent Costa Line Cargo Services Inc is General Agent

for respondent Costa Armatori S pA Costa Line a common carrier

by water engaged in transportation from the North Atlantic ports of

the United States to all Spanish ports and a party to U S North

Atlantic Spanish Freight Agreement No 10117 Freight Tariff No I

FMC 1 Respondents are subject to the provisions ofthe Shipping Act

1916

In a letter dated April 16 1981 from Laurence A Steinseifzer Staff

Assistant Rate Analysis and Negotiations Logistic Operations General

Motors Corporation addressed to Mr J S Moskal Secretary of the

U S North Atlantic Spanish Freight Agreement the member lines

were requested to establish a project rate of 92 00 W1M with heavy

lift items being discounted less 50 percent plus any applicable tariff

charges for transportation of supplying machinery and equipment for

on site manufacturing purposes oftwo automotive component manufac

turing factories at Cadiz Spain with such rate being in effect through

about May 1 1980 and conclude March 1982 shipping period Em

phasis supplied

It was estimated that during the shipping period May I 1980 and

concluded March 1982 General Motors Componentes S A a wholly

owned subsidiary ofGeneral Motors Corporation located at Puerto de

Santa Maria Cadiz Spain and responsible for constructing and operat

ing automotive component manufacturing plants in Spain in the proc

ess of doing so ordered a large amount of machine tools and other

heavy machinery from North American vendors for use in a new

automotive component manufacturing plant under construction in

Cadiz Spain It was estimated that the value of the material moved

would be in excess of 20 million that while a portion of the freight

would have to move on a breakbulk basis it would be an intent to ship

via container to the maximum whenever possible

The proposed project rate for Cadiz was accepted by the U S North

Atlantic Spanish Freight Agreement and became effective on May I

1981 The project rate was published on Original Page 130 0 of U S

North Atlantic Spanish Freight Agreement No 10117 Freight Tariff

No I FMC 1

Commodity Description and Packaging

Automotive Component Manufacturing

Factories

Machinery Equipment and Supplies for

Automotive Component Manufacturing

Factories

To Spanish Base

Ports

Minimum 600 eft per 20 ft H

Container

Minimum 900 eft per 35 40 ft H H Container

Rate Basis Rates

WM

WM

WM

110 00

92 00

92 00

25 F M C
642 FEDERAL MARITIME COMMISSION

Commodity Description and Packaging

Less 25 for Heavy Lift Charges

Bill of Lading to bear the following notation All

above described materials are of a wholly proprietary

nature and may not be rescld or otherwise placed in

commercial channels for re sale

Le25 for Heavy Lift Charges

Original Page 130Oeffective date May I 1981

First Revised Page 130 0 effective May 11 1981 June I

1981 on WIM thru 5 31 81 92 00 Eff 6 181

10100 WM Less 50 for Heavy Lift Charges

3rd Revised Page 130 0 effective October I 1981 Rate

Basis 123 25 W1M Le 50 for Heavy Lift

Charges

5th Revised Page 130 0 effective May 28 1982 rate

WIM 123 25

The pages from the Original 130 0 on state the forego

ing rates and charges are subject to any general rate

increases increased accessorial charges or surcharges

subsequently established and in effect at time of ship

ment

Rate Basis Rates

Under date of November 23 1981 Vapores Suardiaz sent a telex to

General Motors Componentes Puerto de Santa Maria Cadiz Spain

confirming having a fixed vessel Acro Geica Roll on Roll off vessel for

carriage of the cargo Port of loading Baltimore Port of discharge

Cadiz

Cargo I piece 9 10 x 3 30 x 4 10M

I piece 9 75 x 3 50 x 3 40M

I piece similar measures

Plus about 12 tons smaller pieces

weighing 97 tons

weighing 67 tons

weighing 51 tons

120 000 lump sum

terms

General Motors Componentes SA Cadiz Spain replied to Vapores

Suardiaz stating Re your telex 23 Nov 1981 we hereby accept your

offer for ocean transportation of above machinery in the terms and

conditions stated by you

Costa Line negotiated ocean rates with Vapores Suardiaz lump sum

of 120 000 50 percent discount when shipped in containers no specific

provision for breakbulk heavy lifts

Effective June I 1981 the special project rate of 92 00 W1M was

established and published on 1st Rev page 130 0ofU S North Atlantic

Spanish Freight Agreement No 10117 Freight Tariff No I FMC 1

Changes were the rate as Spanish Base Ports thru September 30 1981

would be WIM 92 00 thru 5 31 81 effective 6 181 10100 WM when

shipped in containers

25 FMC
GENERAL MOTORS CORPORATION V COSTA LINE CARGO 643

SERVICES INC ET AL

Under Costa Line Cargo Service Inc Bill of Lading No 1 dated at

Detroit Michigan no date shown General Motors Corporation on

December 14 1981 at Baltimore Md loaded on board the vessel

Cortina for transportation to Cadiz

1 Box of machinery equipment aud supplies for automotive

component mfg factories

1 Box of Machinery Equipment and supplies for automotive

component mfg factories

1 Box of Machinery Equipment and supplies for automotive

component mfg factories

Freight to be paid

Measurement

OIF Lump Sum

Total US Currency

Gross

Weight

Measure

ment

175500 3651

156300 2870 0

101 000 2334 0

Freight

90 000 00

90 000 00

The Bill of Lading does not bear the notation all above described

material are of a wholly proprietary nature and may not be placed in

commercial channels for resale

The 27th Revised Page 103 ofFreight TariffNo I FMC l effective

December 9 1981 R Per telex to FMC 12 7 81 Automobile

Manufacturing consisting ofshipments as follows

I pc weighing approx 101 000 Ibs and measuring approx

2 334 cu ft

I pc weighing approx 165 000 Ibs and measuring approx

3 205 cu ft

I pc weighing approx 144 820 Ibs and measuring approx

2 902 cu ft not subject to H L and E L

charges thru Jan 9

1982

Rate Basis LS Rates 90 000 00

Parts for above minimum 11 000 eft not subject to H L and

E L charges thru Jan 9 1982 W M 120 000

Under Costa Line Cargo Services Inc Bill ofLading No 2 dated at

Detroit Michigan not date shown General Motors Corporation

loaded on board the vessel Cortina on December 14 1981 at Baltimore

Md for transportation to Cadiz

36 Boxes of Machinery Equipment and supplies for automo

tive component mfg factories

Freight to be paid

Measurement

OIF 15 247 cft

25 F M C

Gross

Weight

Measure

ment

297 890 15 247

Rate Freight

120 00 45 74100
644 FEDERAL MARITIME COMMISSION

The Bill of Lading does not bear the notation all above described

material are of a wholly proprietary nature and may not be placed in

commercial channels for resale

Both of the above freight charges have been collected by the re

spondents the charges werepaid by complainant

i

The Federal Maritime Commission s Office of Energy and Environ

I mental Impact under date of September 27 1982 served the following

The OEEI has examined Docket No 82 46 and has deter

mined that section 547 4 a 22 of the Commission s Proce

dures for Environmental Policy Analysis applies No environ

mental analysis needs to be undertaken nor environmental doc

uments prepared in connection with this docket

I

j

I

I

5 E R MEYER

DISCUSSION REASONS FINDINGS AND CONCLUSIONS

The complainant in its amended complaint received November 10

1982 asserts that the lump sum charge of 90 00000 as published on

Page 103 of Freight Tariff No FMC l

is inapplicable excessive and

unreasonably high in violation of section l8b 3 of the Shipping Act

1916 46 U S C g 817 b 3 and should be declared unlawful In re

sponse thereto the respondents counter the lump sum oharge of

90 00000 was published in Freight Tariff No I at the request of

General Motors through their agent Vapores Suardiaz and is therefore

applicable

The complainant in its Memorandum of Argument attached to the

complaint herein which was served September 22 1982 argues the

proper rate applicable on the freight in question was the 92 00 W1M

in the U S North Atlantic Spanish Freight Conference to Cadiz Spain

Complainant argues that where two tariffs are appropriate the shipper

is entitled to have applied the one specifying the lower basis of charges

citing United States v Gulf Ref Co 268 U S 542 546 1925 U S

Borax Chern Corp v Pactjic Coast European ConjDocket No 66 63

and Docket No 67 27 11 F M C 451 463 1968 In adhering to this

doctrine the Commission has held that the lowest rate voluntarily

established automatically becomes the lawful rate citing Contract Rates

Port of Redwood City Docket No 629 2 U S M C 727 742 1945

The respondents in their December 21 1982 Memorandum of Re

sponse and Arguments to the General Motors Complaint served Sep

2 FMC
GENERAL MOTORS CORPORATION V COSTA LINE CARGO 645

SERVICES INC ET AL

tember 22nd state among other things the lump sum rate of 90 000 00

for three heavy lifts and the weight or measurement rate of 120 00 for

parts was established and published in the Spanish Eastbound Freight

Agreement TariffNo I FMC No I at the specific request ofGeneral

Motors and its subsidiary through their appointed brokers If General

Motors or its subsidiary intended that this cargo be shipped under the

project rate established for them it would not have been necessary to

specifically request Costa Line s

freight quotation The lump sum of

fered by Costa Line was 90 000 00 and not 120 000 00 During the

negotiations the broker in Spain did not clearly state that the principals

involved in this shipment were General Motors or its subsidiary Costa

Line submitted the request to the membership rather than take inde

pendent action The lump sum and weight measurement rate for parts

was unanimously approved by the membership

Complainant in a rebuttal statement subscribed and sworn to January

7 1983 received January 10 1983 asserts inter alia respondents in

claiming no awareness that movement was for account of General

Motors admits they made a mistake but it provides no reason why

General Motors is not entitled to have freight charges assessed on the

basis of the project rate Complainant says the respondents have pre

sented nothing to dispute or rebut applicability of the project rate

The Presiding Administrative Law Judge does not find the parties

absolved of mistakes for example the bills of lading involving the

shipments do not contain the language the tariff calls for

Of course strict adherence to filed tariffs is mandatory The principle

is firmly established that the rate of the carrier as duly filed is the only

lawful charge Ocean Freight Consultants Inc v The Bank Line Limited

Docket No 1185 9 F MC 211 215 1966 Complainant s claim for

reparation is dependent upon the conclusion that of the two rates

contained in the U S North Atlantic Spanish Freight Agreement No

10117 Freight TariffNo I FMC I the lower or project rate was the

only applicable rate to its shipments during the period in question An

ambiguity was created While there was apparent agreement to the

Lump Sum rate it was higher than the project rate The shipper in

such an ambiguity situation is entitled to the lower rate Since it has

been deemed herein that the shipments are composed of commodities

that come under the project rate the project rate is the applicable rate

Project shipment is typically composed ofmaterials intended to be used

for foreign construction projects such as the plants in this case See

Free Time and Demurrage Charges on Export Cargo Docket No 68 9

25 F M C
646 FEDERAL MARITIME COMMISSION

13 F M C 207 224 1970 The effective tariff is the project rate found

in the 3rd Revised Page 130 0 of the applicable tariff The rate in this

effective tariff affords the only legal basis upon which freight charges

may be collected any agreement in this case the lump sum rate to the

contrary notwithstanding

Note that despite the statement requesting that the project rate of

92 00 W1M with heavy lift items being discounted less 50 percent

plus any applicable tariff charges with such rate being in effect through

about May 1 1980 and conclude March 1982 the Original Page 130 0

in Freight Tariff No 1 FMC l effective May 1 1981 setting up the

project rate did not provide for the concluding March 1982 date and

only provided for less 25 percent for Heavy Lift charges It was

provided further 1 Bill ofLading to bear the following notation All

above described materials are of a wholly proprietary nature and may

not be sold or otherwise placed in commercial channels for re sale

2 The foregoing rates and charges are subject to any general rate

increases increased accessorial charges or surcharges subsequently

established and in effect at the ofshipment

The change in the tariff from less 50 percent for Heavy Lift charges

from 25 percent was made in 1st Rev Page 130 0 effective May 11

1981 and June I 1981 The rate was raised to 123 25 W1M in the 3rd

Rev Page 130 0 effective October 1 1981 The date for rates to

Spanish Base Ports thru March 31 1982 was added in the 4th Rev

Page 130 0 effective January I 1982 and thru June 30 1982 in the 5th

Rev Page 130 0 effective March 24 1982

From the material supplied herein the Presiding Administrative Law

Judge finds and concludes the project rate of 92 00 W1M with heavy

lift items being discounted 50 percent plus any applicable tariff charges

was established effective May 1 1981 as published on Original Page

130 0 of U S North Atlantic Spanish Freight Agreement No 10117

and was subsequently changed

The involved shipments moved December 14 1981 At that time the

project rate tariff was up to 123 25 W1M and still in effect per 3rd

Revised Page 130 0 effective October I 1981 was in effect with a rate

base W1M 123 25 The commodity description was as to Automotive

Components Manufacturing Factories Also the 27th Revised Page 103

ofthe Freight TariffNo I FMC l effective December 9 1981 for the

commodity Automobile Manufacturing as indicated above under facts

with a Rate Basis ofLump Sum of 90 00000 The Original Page 1300

ofthe tariff had the commodity description of Automotive Component

Manufacturing Factories It is deemed that the involved shipments

moved under the project rate status in effect at the time

Upon consideration of the above the Presiding Administrative Law

Judge finds and concludes that the project rate W1M 123 25 as shown

in the 3rd Revised Page 130 0 of the North Atlantic Spanish Freight

25 FMC
GENERAL MOTORS CORPORATION V COSTA LINE CARGO 647

SERVICES INC ET AL

Agreement No 10 117 was the applicable tariff herein He also finds and

concludes that General Motors Corporation is entitled under section

18b 3 of the Shipping Act 1916 to reparation from the respondents

in the amount of 47 176 36 with interest as provided for in Rule 253 of

the Commission s Rules of Practice and Procedure 46 C F R 502 253

Wherefore it is ordered subject to review by the Commission as

provided in the Commission s Rules of Practice and Procedure that

A The respondents Costa Line Cargo Services Inc and Costa

Armatori S pA shall make reparation to the complainant General

Motors Corporation in the amount of 47 176 36 with interest as pro

vided in Rule 253 of the Commission s Rules of Practice and Proce

dure 46 C F R 502 253

B The parties shall inform the Commission how and when the

above reparation is made

C This proceeding is discontinued

S WILLIAM BEASLEY HARRIS

Administrative Law Judge

25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 39

W R GRACE CO DAVISON CHEMICAL DIVISION

v

C N LLOYD BRASILEIRO

DOCKET NO 82 40

W R GRACE CO DAVISON CHEMICAL DIVISION

v

COMPANHIA MARITIMA NACIONAL

DOCKET NO 82 41

W R GRACE CO DAVISON CHEMICAL DIVISION

v

DELTA STEAMSHIP LINES INC

NOTICE

March 4 1983

Notice is given that no appeal has been taken to the January 25

1983 withdrawal of complaints in these proceedings and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the withdrawal

has become administratively final

8 FRANCIS C HURNEY

Secretary

648 23 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 39

W R GRACE CO DAVISON CHEMICAL DIVISION

v

C N LLOYD BRASILEIRO

DOCKET NO 82 40

W R GRACE CO DAVISON CHEMICAL DIVISION

v

COMPANHIA MARITIMA NACIONAL

DOCKET NO 82 41

W R GRACE CO DAVISON CHEMICAL DIVISION

v

DELTA STEAMSHIP LINES INC

WITHDRAWAL OF COMPLAINTS

Finalized March 4 1983

W R Grace Co the complainant after receiving the arguments

advanced by the several respondents and the entire file in this matter

has withdrawn the complaints in these proceedings They are hereby

dismissed

S JOHN E COGRAVE

Administrative Law Judge

25 F M C 649
FEDERAL MARITIME COMMISSION

DOCKET NO 82 51

COMPANHIA SIDERURGICA NACIONAL

BRAZILIAN NATIONAL STEEL CO

v

MOORE MCCORMACK LINES INC

DOCKET NO 82 53

COMPANHIA SIDERURGICA NACIONAL

BRAZILIAN NATIONAL STEEL CO

v

NETUMAR LINES

NOTICE

March 4 1983

Notice is given that no appeal has been taken to the January 28

1983 dismissal ofthe complaints in these proceedings and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the dismissal

has become administratively final

8 FRANCIS C HURNEY

Secretary

650 2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 51

COMPANHIA SIDERURGlCA NACIONAL

BRAZILIAN NATIONAL STEEL CO

v

MOORE MCCORMACK LINES INC

DOCKET NO 82 53

COMPANHIA SIDERURGlCA NACIONAL

BRAZILIAN NATIONAL STEEL CO

v

NETUMAR LINES

COMPLAINTS DISMISSED

Finalized March 4 1983

The two proceedings captioned above 1

began with the filing of two

complaints by the same shipper Companhia Siderurgica Nacional Bra

zilian National Steel Co in which complainant alleged that the two

carriers named above as respondents Moore McCormack Lines Inc

and Netumar Lines had failed to grant complainant a project rate

discount of 20 percent on various shipments of machinery and equip

ment destined for a project involving expansion of complainant s steel

mills in Brazil This conduct by respondents allegedly was contrary to

respondents tariffs and consequently would be in violation of section

18b 3 ofthe Shipping Act 1916 The complaint in No 82 51 which

was filed on October 29 1982 alleged that complainant was over

charged on seven shipments actually on 14 bills of lading in the total

amount of 12477 93 The complaint in No 82 53 which was filed on

November 2 1982 alleged that complainant was overcharged on seven

shipments in the total amount of 94196 In support of the complaints

complainant attached to them itemized tables of alleged overcharges

drawn from the relevant bills of lading tariff pages relating to the

1 Because the two proceedings involve the same shipper the same tariff and the same project rate

discount I am by designation of the Chief Judge consolidating the two proceedings for purposes of

this ruling on therequests for dismissal See Rule 148 46 CF R 502 148

25 FMC 651
652 FEDERAL MARITIME COMMISSION

alleged project and the relevant bills of lading with commercial in

voices

Although apparently it was not clear at the time of filing the com

plaints as to the status ofthe claims it appeared later that both respond

ent carriers had honored the claims prior to the filing of the complaint

and had satisfied the claims in Brazil InNo 82 53 respondent Netumar

Lines informed the Secretary s office eight days after service of the

complaint that it had issued correction notices and would corroborate

the fact that it had paid the claims in Brazil On December 1 1982

Netumar furnished corroboration showing payments in Brazil at various

times during 1980 and 1981 in satisfaction of the claims Accordingly

Netumar requested that the complaint be dismissed as having been

satisfied which request complainant has not opposed In No 82 51

respondent Moore McCormack filed no answer to the complaint al

though Igranted additional time for it to do so on my own initiative in

case it had a plausible explanation for its failure to file its answer

2

It

later developed that Moore McCormack filed no answer because it had

like Netumar honored the claims apparently before the complaint was

filed a fact as to which complainant s New York counsel were unaware

at the time of ming the complaint Accordingly on learning of this

fact complainant s counsel advised that the complaint had been satis

fied and requested an order granting withdrawal of the complaint 3

Rule 93 of the Commission s Rules of Practice and Procedure 46

C F R 502 93 states that s atisfied complaints will be dismissed in the

discretion ofthe Commission The rule usually comes into play when

a complaint which was not satisfied before filing is satisfied after filing

In the instant case it seems that the two complaints were improvidently

filed because of a lack of communication from Brazil which caused

See my ruIiin No 82 S I served November 30 1982 At the time I

i ued this ruling I was not

aware that the claima had been paid in Brazil before the complaint was llIed ThIs filet probahly ex

plains why respondent Moore McCormack felt no need to Ill an answer and relied instead on com

plainantto advise me that the complaint had been satisfied

See letter addre88ed to me from complainant s counsel in No 82 S I daled December 7 1982

Complainant s counsel Mr Kirsch has since orally adviaed that the complalnto In both had

indeed been satisfied in Brazil before the complainto were med but that the evento in Brazil had not

been communicated to New York counsel prier to the fin of the complaints I

requested counsel 10

confirm this advice in writing for the record and was advised that a conllrmins letter was mailed frolD

New York on January 24 1983 I have deferred ruling on the requests for diantissal which wereorigi

nally submitted in early December of 1982 because of the pendency of athird complaint since dis

mi88ed apparently involving the same project this time med against an asent of athird carrier known

as Lloyd Brasileiro in Docket No 82 SS and for other reasons relating to the statute of limitations in

section 22 and arithmetic problems However since J have discovered that the complaints were satis fied before they were evenfiled further pursuit of such matters seems unnecessary Moreover dismis sat of these two complaints does not prejudice a

respondent in any other case any morethan

ments settle

can be uaed as evidence of violations of law Cf Broadway Ni lySlxlh SI Rt Jlty Corp Y

Loew J c 23 F RD 9 S D N Y 19S8 Annotation 3 A LR Fed S69 S84S86 1970 See also

OlfO lcChemical Y A11a IIOflk pres 21 F M C 1082 1979 settlement by shJpper wilh one carri

er did not determine merits of case against th other carrier Pederal Rule of Evidence 408 28

US CA evidence of offer of compromise or otTer to pay not admissible to prove validity of olaim

lS F MC
COMPANHIA SIDERURGICA NACIONAL V MOORE 653

MCCORMACK

complainant s New York counsel to believe that the claims had not

been honored in Brazil

Although there may be occasions when a complainant s

rights to

withdraw a complaint voluntarily and terminate litigation may not be

absolute as for example when respondent s

rights are thereby adverse

ly affected or when a proceeding has progressed into late stages and a

decision on the merits is warranted 4

such is not the case here Nor do

the present cases involve settlement agreements which the Commission

treats somewhat differently requiring certain supporting statements of

bona fides and inability to acquire facts such as those present in cases

like Organic Chemicals v Atlanttrafik Express Service 18 S R R 1536a

1979 Nor are these cases even similar to those in which complaints

are satisfied in full rather than settled but which were not satisfied

when the complaints were initially filed See e

g Ingersoll Rand Co v

Waterman Steamship Corporation 21 S R R 1372 ALJ 1982 Docket

No 81 52 81 53 Abbott Hospitals Inc v PRMSA et al 24 F MC

1055 1982

The present cases as noted were apparently filed under a misunder

standing which has now been corrected and the parties desire the

complaints to be dismissed I see no reason to compound the initial

misunderstanding with technical burdens and requirements and see

nothing in the record thus far presented to me to cause me to question

the propriety of the decision of the two respondents that these particu

lar claims had merit 5

4

For adiscussion of such cases see 9 Wright and Miller Federal Practice and Procedure fi 2364 pp

165pl72 Of course ifthe complainant seeks dismissal with prejudice it has been held that courts must

grant the requests since acomplainant cannot be forced to go to trial ifcomplainant believes it has no

valid case 9 Wright and MilJer cited above p 163

5

Thus in the normal case of asatisfaction Rule 93 would require sworn statements giving detailed

information as to the satisfaction and promises to make like adjustments with other persons similarly

situated However the present cases involve unique project shipments to the shipper s steel mills in

Brazil no other shippers are involved and as noted the shipper s claims had been paid in Brazil

before the complaints were filed Moreover the Commission has recently encouraged carriers to

handle meritorious claims without involving the Commission needlessly and in this regard has stated

that i ndeed the Commission has utmost confidence in carriers ability to resolve overcharge claims

satisfactorily Docket No 81 51 Time Limit orFiling Overcharge Claims Order on Reconsider

ation January 5 1983 p

7 Had it not been for amisunderstanding these complaints would never

have been filed and both carriers decisions to honor the claims would not have been questioned Fi

nally in Docket Nos 81 52 81 53 Abbott Hospitals Inc v PRMSA et al cited above Chief Judge

Cograve observed that fulfillment of all the literal requirements of Rule 93 was unnecessarily burden

some in that case and that the Commission could examine records required to be kept available if the

Commission felt that acarrier s decision to satisfy acomplaint was improper Such records are avail

able in the present record if the Commission is concerned but as noted the claims had been honored

in Brazil before the complaints were filed they do not appear to be frivolous and the Commission has

expressed confidence in carriers judgments when they deal withovercharge claims

25 F M C
654 FEDERAL MARITIME COMMISSION

Accordingly both complaints are dismissed

8 NORMAN D KLINE

Administrative Law Judge

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 55

COMPANHIA SIDERURGICA NACIONAL

BRAZILIAN NATIONAL STEEL CO

v

LLOYD BRASILEIRO

NOTICE

March 4 1983

Notice is given that no appeal has been taken to the January 24

1983 dismissal of the complaint in this proceeding and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the dismissal

has become administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 655
FEDERAL MARITIME COMMISSION

DOCKET NO 82 55

COMPANHIA SIDERURGICA NACIONAL

BRAZILIAN NATIONAL STEEL CO

v

LLOYD BRASILEIRO

COMPLAINT DISMISSED

Finaljzed March 4 1983

This is a proceeding begun by the filing of a complaint with the

Commission on November 29 1982 Complainant Companhia Siderur

gica Nacional Brazilian National Steel Co alleged that respondent

Norton Lilly Co Inc which apparently is an agent for a carrier

known as Lloyd Brasileiro had engaged in transportation between

New York and Rio de Janeiro and had overcharged complainant on a

number of shipments of machinery parts and other materials carried

on respondent s vessels to Brazil contrary to the governing tariff If so

such conduct would constitute a violation of section 18b 3 of the

Shipping Act 1916

Since the complaint was served on December I 1982 an answer was

due to be filed within 20 days i e on or before December 21 1982 as

provided by Rule 64 46 C P R 502 64 Instead of an answer by the

respondent named in the complaint Norton Lilly a motion to dismiss

the complaint was filed by attorneys for Lloyd Brasileiro on December

16 1982 the attorneys entering a special appearance so as to limit their

participation to the issue of the Commission s

jurisdiction over the

agent Norton Lilly In its motion Lloyd contended that the complaint

did not name Lloyd as a

respondent and that it was served on Norton

Lilly which is only an agent for carriers and does not carry cargo

publish its own tariff or belong to conference agreements According

ly Lloyd moved to dismiss the complaint on the ground that the

Commission lacks jurisdiction over agents as opposed to common carri

ers and other persons subject to the Act

Complainant tiled no reply to Lloyd s motion Instead by letter

dated January 13 1983 complainant advised that it was withdrawing

the complaint and submitting a new complaint in the interest of expedi

656 25 FMC
COMPANHIA SIDERURGICA NACIONAL V LLOYD 657

BRASILEIRO

tion rather than engaging in legal debates Complainant also stated that

counsel for Lloyd agreed to this procedure 1

The motion to dismiss filed by Lloyd raised a number of interesting

legal questions pertaining to service of defective complaints and notice

as well as the question of the Commission s

jurisdiction over agents In

an earlier ruling Idiscussed these problems in relation to the peculiar

facts of the case and advised complainant that failure to reply to the

motion to dismiss could result in dismissal ofthe complaint with preju

dice See Order to Show Cause Why Complaint Should Not be Dis

missed January 10 1983 Complainant as noted above however

probably before receipt of the ruling had decided not to spend time

litigating the variety oflegal questions presented by the motion and has

preferred simply to withdraw the complaint and file a new complaint

presumably in the hope of removing the legal problems presented by

the original complaint In fact a new complaint this time naming

Lloyd Brasileiro as the carrier respondent was filed on January 14

1983 and served on January 18 1983 in Docket No 83 6 25 FMC

663 1983

I am aware of no authority which does not permit a complainant to

withdraw its complaint under the existing circumstances Under the

comparable federal rules of civil procedure specifically Rule 41 a I

28 U S cA a plaintiff may have its complaint dismissed at any time

before service of the adverse party s answer or motion for summary

judgment without permission of the court and can do so merely by

filing a timely notice of dismissal Furthermore unless otherwise stated

in the plaintiffs notice the dismissal is without prejudice Rule 41 a I

Indeed it has been held that a court has no authority to deny such

dismissal or attach conditions determine merits or dismiss with preju

dice provided that the plaintiff serves its notice before an answer or

motion for summary judgment is filed See e gWilliams v Ezell 531

F 2d 1261 1263 1264 5th Cir 1976 American Cyanamid Company v

McGhee 317 F 2d 295 297 5th Cir 1963 D C Electronics Inc v

Nartron Corp 511 F 2d 294 296 298 6th Cir 1975

In the instant case complainant has in effect served a notice of

withdrawal before an answer or motion for summary judgment has

been filed 2There is no Commission rule of procedure identical to

10n January 17 1983 counsel for Lloyd clarified its position Counsel stated that it was Lloyd s

position that Lloyd would not oppose dismissal of the complaint and that complainant could withdraw

its complaint without the consent of Lloyd because Lloyd was not named as a

respondent and was not

served in the proceeding See letter of that date addressed to me from Peter J King

2

The filing of a motion to dismiss is not considered to be the same thing as filing an answer or

motion for summary judgment Therefore under Federal Rule 41 a the complainant would stiJI pos

sess the absolute right to withdraw its complaint See 9 Wright and Miller FederalPractice and Proce

dure 2363 p 155 There is some authority which holds that aplaintiff loses the absolute right to

withdraw its complaint if the merits of a

controversy have in fact been reached without regard to the

Continued

25 FMC
658 FEDERAL MARITIME COMMISSION

federal rule 4l a

3

In such circumstances the Commission has stated

that it will follow the federal rules See Docket No 78 51 Agreement

No 10394 Order April 19 1979 p

4 unreported but cited in Rohm

Haas Co v Italian Line 24 F MC 429 431 n 8 where the Commis

sion stated

Where the Commission s Rules are not dispositive of a ques

tion of procedure the Commission normally will look to the

rules and practices applicable in civil proceedings in the Dis

trict Courts ofthe United States

Since complainant wishes to withdraw its complaint in this proceed

ing rather than argue over the matters raised in Lloyd s motion to

dismiss it has a right to do so Accordingly the complaint is dismissed

and since no party has mentioned withdrawal with prejudice under

customary rules the dismissal is without prejudice 4

S NORMAN D KLINE

Administrative Law Judge

fiUng of answers or motions for summary judgment 9 Wright and Miller cited above pp IS6 IS8

Under such authority it is possible that complainant s right to dismlsaal is no longer absolute but has

become subject to approval of the Commission Even if so however Lloyd which is not evena

party

to the proceedinl according to its own contentiona has not objected to diami8881 of the complaint and

the named respondent Norton Lilly has not filed anything

The closest Commission rule appears to be Rule 93 46 CF R S02 93 Rule 93 deals with dismisasl

of complaints which have been satisfied and states that such complaints wUl be dismissed in the dis

cretion of the Commission

In my earlier ruling of January 10 1983 cited above I discussed various legal matters which the

motion to dismiss and the facts presented such as the peculiar way in which the complaint was served

and in which Lloyd Bnaileiro which was not named as a respondent in the complaint became in

volved in the proceeding and some casesdealing with service of defective complaints and corrections

of such complaints effect of the twoyear statute of limitations section 22 of the Act lack of Com

mission jurisdiction over agents etc Since complainant has stated that it does not wish to argue these

matters but prefers simply towithdraw the complaint and file a new one I do not reach the merits of

Lloyd s various contentions In csae any problem arises because of the dismissal without prejudice

however I think I should point out that the courts hold that a dismissal without prejudice does not

toll the running of the statute of limitations and the earlier complaint is treated as never having been

filed for purposes of that statute See Moore v St Louis Mu c Supply Co Inc S39 F 2d 1191 1194

8th ctr t976 Hall v The Kroger Baking Company SW F 2d 1204 120S 6th Cir 1975 CI land v

Douglaa Alrcrqft Company S09 F 2d 1027 1030 9th ctr 1975 9 Wright and Miller cited above pp

186 187 I

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 47

AGREEMENT NO 10266 AGREEMENT BETWEEN

INTERCONTINENTAL TRANSPORT B V AND

COMPAGNIE GENERALE MARITIME

ORDER GRANTING MOTION TO DISMISS

March 25 1983

The Commission pursuant to section 15 of the Shipping Act 1916

46 U S C 814 instituted this proceeding by Order served October 6

1982 That Order directed the parties to Agreement No 10266 as

amended Agreement Intercontinental Transport BV ICT and

Compagnie Generale Maritime CGM Proponents to show cause

why their Agreement should not be modified to clarify the limits of its

container cargo carrying authority The Commission s Order to Show

Cause limited the proceeding to the submissions ofaffidavits offact and

memoranda oflaw

Proponents have filed a memorandum of law and the affidavit of an

ICT official Proponents have also filed a motion to dismiss the pro

ceeding and offered a proposed amendment to Agreement No 10266

which would allegedly remove the controversy at issue 1

Reply memo

randa and responses to Respondents motion to dismiss have been

submitted by Sea Land Service Inc and the Commission s Bureau of

Hearings and Field Operations Hearing Counsel Lykes Bros Steam

ship Co Inc filed only areply memorandum and United States Lines

USL responded only to the dismissal request

BACKGROUND

Agreement No 10266 2 was conditionally approved by the Commis

sion in its Order Partially Adopting Initial Decision issued in Docket

No 77 7 Agreement No 9929 2 et aL and Agreement Nos 10266 et al

21 F MC 1030 1979 2In that Order the Commission concluded inter

alia that certain modifications beyond those ordered by the Adminis

trative Law Judge in his Initial Decision were required before Agree

ment No 10266 2 could be approved Included among those modifica

tions were 1 a change in the title of the Agreement from Joint

Marketing Agreement to Joint Service Agreement and 2 an 800

1

The amendment itself has not heen filed and is not before the Commission

2

Agreement No 10266 and 10266 1 were withdrawn during the course of the proceedings in

Docket No 77 7 and replaced by Agreement No L0266 2

25 F M C 659
660 FEDERAL MARITIME COMMISSION

TED per week limitation on the carriage of containerized cargo The

modified version of Agreement No 10266 2 required to be submitted

to the Commission was to be designated FMC Agreement No 10266

3 Agreement No 10266 3 was filed within the prescribed time and

approved on December 28 1979

Upon petition for review filed by Sea Land a protestant in Docket

No 77 7 the Court of Appeals for the District of Columbia Circuit

found inter alia that the TEU limitation imposed by the Commission

appeared to have expanded Proponents authority and as such should

have been the subject of prior notice and opportunity for comment

Sea Land Service Inc v FMC 653 F 2d 544 D C Cir 1981 The

Court recognized the Commission s statutory authority to modify pro

posed agreements but determined that modifications which enlarge

upon the anticompetitive authority contemplated by the parties to an

agreement must be preceded by notice and hearing through which

interested parties can air their views as to the competitive implications

of an agreement and the Commission can gain sufficient information to

make a reasoned decision as to the competitive impact of that agree

ment 653 F 2d 552 After noting that the actual practical implica

tions of the TEU provision specifically at issue there are not readily

apparent the Court remanded the proceeding in Docket No 77 7 to

the Commission for further hearings on that provision

By Order on Remand served October 9 1981 the Commission re

opened the proceeding in Docket No 77 7 and directed the parties to

that proceeding to address inter alia

Whether Agreement No 10266 should include a provision

limiting the amount of containerized cargo which may be

carried by ICT and COM under the Agreement should Agree

ment No 103748 be terminated and if so the proper level of

such a limitation

The purpose of the Order on Remand was to ascertain the positions of

the parties on the issues remanded by the Court and to determine the

need for and scope of any further formal proceedings Proponents

Sea Land Lykes USL and Hearing Counsel responded to the order

Subsequently the Commission based on those responses and pursuant

to the Court s remand instituted this proceeding to limit Proponents

container cargo carrying authority under Agreement No 10266 apart

from Agreement No 10374

DISCUSSION

The Commission after consideration of the record in this proceeding

has determined to grant Proponents Motion to Dismiss on the basis of

Agreement No 10374 a container agreement between ICT COM and Hapag Lloyd AlO wao

approved at thesame time aoAgreement No 0266 2

25 FMC
AGREEMENT NO 10266

the modification to Agreement No 10266 as amended which they

proposed to submit That modification would delete the 800 TED

provision from Agreement No 10266 and further modify that Agree

ment to require 120 days advance notice of any termination of Agree

ment No 10374 except in cases offorce majeure at which time Propo

nents would propose an amendment to Agreement No 10266 to limit

the number of containers the parties may carry in the trade During any

interim between the termination of Agreement No 10374 and a Com

mission determination on the amendment establishing the number of

containers to be carried Proponents would be authorized under the

proposal to continue to operate their service subject to an 800 TED

per week limitation 4

We cannot say whether future events will justify the need for author

ity to operate if Agreement No 10374 is terminated but Proponents

have not demonstrated that there is any present need for authority in

Agreement No 10266 to operate apart from Agreement No 10374 The

Commission believes that the elimination of the 800 TED provision in

Agreement No 10266 will clarify that the Agreement does not author

ize Proponents to offer container service apart from Agreement No

10374 for so long as Agreement No 10374 continues in effect

In the event that Agreement No 10374 is terminated the provision

suggested by Proponents should provide adequate protection from any

interruption in service None of the other parties to the proceeding

object to these contingency provisions The proposed amendment of

fered by Proponents should not only serve to remove the controversy

among the parties to the proceeding but also to satisfy the Court s

concern regarding the Commission s enlargement of Proponents au

thority under Agreement No 10266 The Commission will therefore

accept Proponents offered amendment to Agreement No 10266 and

dismiss this proceeding on the basis thereof The acceptance of this

amendment when actually filed however is without prejudice to the

Commission s right and obligations under section 15 of the Act to

modify those provisions at any time after notice and hearing to accom

modate changed conditions in the trade

THEREFORE IT IS ORDERED That this proceeding is dismissed

30 days from the date ofthis Order if within that time Proponents file

with the Secretary of the Commission an amendment revising Articles

1 and 9 ofAgreement No 10266 to read as follows

IVessels and Sailings The parties shall undertake the joint

marketing of cargo space available on the container break

4

Proponents concern appears to be that if Agreement No 10374 were cancelled they might

become embroiled in alengthy proceeding in order to obtain authority to carry container cargo under

Agreement No 10266 apart from Agreement No 10374 This it is feared would result in alapse of

service

25 FM C

661
662 FEDERAL MARITIME COMMISSION

bulk or combination breakbulkcontainerships operated by or

available to the parties in the trade described above provided

that the parties shall not furnish more than one conventional

vessel call per week between any two ports covered by this

Agreement and then only as part of avoyage which calls at

least one U S port not otherwise receiving direct service from

the parties

9 Notice of Termination The parties shall notify the Federal

Maritime Commission of termination of FMC Agreement No

10374 or some similar agreement specifying their container

carryings in the trade encompassed by this Agreement 120

days prior to the effective date of such termination provided

however that the parties are excused from this notice require

ment only to the extent that such termination is caused and

such notice is precluded by reasons of force majeure which

as used herein shall mean and include strikes accidents lock

outs frre marine disaster acts of God or public enemy em

bargoes riots civil commotions laws government request or

any other causes beyond the control of either party If such

termination is due to reasons of force majeure the parties shall

give notice of termination as promptly as possible considering

such force majeure In the event that Agreement No 10374

or some similar agreement is terminated within 120 days of

the date it would expire by its own terms the parties shall

notify the Federal Maritime Commission thereof provided

that such notice shall not extend the effective terms of Agree

ment No 10374 or some similar agreement beyond its sched

uled expiration The parties shall include in any such notice of

termination an amendment to this agreement based on trade

conditions setting forth the number of containers the parties

may carry in this trade provided however that nothing in

this Agreement shall be construed to prevent the parties from

carrying up to 800 TEU s per week averaged quarterly in

each direction of containerized cargo during the pendency of

consideration by the Federal Maritime Commission of any

such amendment

FURTHER IT IS ORDERED That the amendment to Agreement

No 10266 set forth above will stand approved under section IS ofthe

Shipping Act 1916 on the date it is actually received by the Secretary

By the Commission

S FRANCIS C HURNEY

Secretary

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 83 6

COMPANHIA SIDERURGICA NACIONAL

BRAZILIAN NATIONAL STEEL CO

v

COMPANHIA DE NAVEGACAO LLOYD BRASILEIRO

NOTICE

March 28 1983

Notice is given that no appeal has been taken to the February 18

1983 dismissal of the complaint in this proceeding and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the dismissal

has become administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 663
FEDERAL MARITIME COMMISSION

DOCKET NO 83 6

COMPANHIA SIDERURGICA NACIONAL

BRAZILIAN NATIONAL STEEL CO

v

COMPANHIA DE NAVEGACAO LLOYD BRASILEIRO

COMPLAINT DISMISSED

March 28 1983

This is a proceeding begun by the filing of a complaint with the

Commission on January 14 1983 Complainant a Brazilian shipper

alleged that it had been overcharged on a number of shipments of

machinery and parts destined for a project involving expansion of

complainant s steel mills in Brazil More specifically complainant al

leged that respondent Companhia de Navegacao Lloyd Brasileiro a

common carrier by water subject to the provisions ofthe Shipping Act

1916 had failed to accord complainant a 20 percent discount which

was published in respondent s tariff for this project Therefore such

conduct would violate section 18b 3 of the Act In support of its

complaint complainant submitted various doc ments consisting of rele

vant tariff pages bills oflading for each shipment commercial invoices

and an itemized table ofthe alleged overcharges

Since the complaint was served on January 18 1983 respondent was

permitted to file an answer within 20 days as provided by Rule 64 46

C F R 502 64 However following service of the complaint respond

ent determined that the claims were generally valid and with some

modifications decided that the complaint merited satisfaction There

fore instead ofming an answer to the complaint respondent joined by

complainant filed a letter explaining that respondent wished to satisfy

the complaint under Rule 93 46 C F R 502 93 Inthe letter the parties

stated that there was no dispute of material facts between the parties

that the shipments with one exception were carried by respondent

that freight was paid by complainant that the shipments were destined

for the project in question for which respondent s tariff provided the

discount as complainant had alleged and that the failure to grant the

discount to complainant had ocourredbecause complainant s

freight

forwarder had negleoted to notate the project rate agreement number

on the relevant bills oflading

664 2S FMC
COMPANHIA SIDERURGICA NACIONAL V COMPANHIA DE 665

NAVEGACAO LLOYD BRASILEIRO

DISCUSSION AND CONCLUSIONS

This appears to be the last of a series of complaints which complain

ant has filed involving alleged overcharges on shipments to complain

ant s project in Brazil Previously complainant had filed complaints

alleging similar overcharges against two other carriers See Docket

No 82 51 Companhia Siderurgica Nacional Brazilian National Steel

Co v Moore McCormack Lines Inc and Docket No 82 53 Companhia

Siderurgica Nacional Brazilian National Steel Co v Netumar Lines In

those two previous cases the complaints were also satisfied by both

respondents See 25 F M C 650 1983 1

Because the parties have submitted a

joint statement explaining that

there is no dispute regarding the merits ofthe claims and that respond

ent therefore decided that it wished to satisfy the complaint the joint

request for approval of the satisfaction and dismissal ofthe complaint is

governed by the provisions of Rule 93 46 C F R 502 93 That rule in

substance provides that the Commission may dismiss satisfied com

plaints in its discretion upon the filing of a verified statement which

may be by letter explaining how the complaint has been satisfied and

that similar adjustments will be made by respondent with other persons

similarly situated The parties have filed such a statement and have

furnished proof ofpayment ofthe satisfaction 2

The parties request for

approval of the satisfaction and for dismissal of the complaint would

therefore appear to be valid See e g Ingersoll Rand Co v Waterman

Steamship Corporation 21 S R R 1372 ALJ 1982 Docket Nos 81 52

81 53 Abbott Hospitals Inc v PRMSA et al 24 F MC 1055 1982

Docket Nos 82 51 and 82 53 cited above

The only matter requiring further explanation concerns the amount

of satisfaction which is 17 606 already paid by respondent instead of

the amount originally demanded in the complaint 19 392 32 plus

interest However as the record shows that amount is justified by the

fact that of the 22 shipments and bills of lading mentioned in the

complaint one was apparently included by mistake since the bill of

lading was not for a Lloyd vessel and three others appear to be so old

as to fall outside the two year period of limitations set forth in section

22 of the Act Deduction of the alleged overcharges on these four

lOne other complaint was filed in this series but it named acarrier sagent Norton Lilly Co

Inc as respondent instead of the carrier Lloyd Brasileiro This complaint ran into hot water as a

result of the naming of the agent and was voluntarily withdrawn by complainant in favor of the

present complaint See Docket No 82 55 Companhia Siderurgica Nacional Brazilian National Steel

Co v Lloyd Brasileiro 25 EM C 655 1983

2 Rule 93 also requires the submission of data on aspecial form insofar as such said form is applica

ble The form is not published in the rule However the data apparently required concerns specific

details about each shipment together with an itemized list of overcharges See Docket Nos 81 52 81

53 Abbott Hospita Inc v PRMSA et al 24 F M C 1055 1982 Such data were submitted with the

complaint in this case and they show together with the other materials submitted in support of the

complaint that the various claims generally appear to have merit

25 F M C
666 FEDERAL MARITIME COMMISSION

shipments leaves a balance of 17 606 as satisfaction of the apparently

valid and compensable claims S

The record in this case shows that respondent has satisfied a com

plaint which gave the appearance ofvalidity generally in a reasonable

fashion and that the parties have complied with Rule 93 in seeking

dismissal of the complaint The satisfaction appears to corroborate the

Commission s recent expression of confidence in carriers abilities to

deal with overcharge claims without needless Commission involvement

See Docket No 81 51 Time Limitfor Filing Overcharge Claims Order

on Reconsideration January 5 1983 25 F MC 554 557 the

Commission has utmost confidence in carriers ability to resolve over

charge claims satisfactorily Accordingly the complaint is dis

missed as requested

S NORMAN D KLINE

Administrative Law Judge

The amount of alleged overcbarg on tbe four bill of lading which are of doubtful Validity totals

1 786 32 See table attached to complaint bllls of ladins Nos 60 23 58 and 77 This sum subtract

ed from Ibe original total of 19 392 32 leav17 606 The three Lloyd bllls of lading which appear

to fall oulBide the two year period are Nos 60 58 and 77 and are dated in November and December

of 1980 This complaint w filed on JanUBry 14 1983 Thus to tablish avalid claim that could be

subject to an award of reparation under section 22 of tbe Act complainant would have bad to tab

Iish that date of payment on these bllls occurred on or after January 14 1981 See TDK Electronic

Co Ltd v Japan Line Ltd 22 F M C 769 770 n 4 1980 cauof action aceruat time of shipment

or payment of frelpt whichever is later Complainant h not shown that tbe three bllls were paid

within the requisite time period The Commission has held that the right to reparation well the

remedy vanish onco the two year statute h

run See Aleutian Ha Inc v Caaatwtse Line 5

F M B 602 612 1959 Hence ifapproval of the proffered satisf tion ar lnsement required ashow

ing that every claim could be valid as a matter of law that requirement has become irrelevant since

Ibe parti have dropped thoclaims affected by the statute from the list In Docket Nos 81 52 81

53 Dismi8Ba1 of Proceedings cited above there were also 8Ub tantial downward adjustments to the

original claims which were approved 88 part of the satisfaction arrangement

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 45

CUTTERS EXCHANGE INC

v

CARGO INTERNATIONAL INC ET AL

NOTICE

March 31 1983

Notice is given that no appeal has been taken to the February 22

1983 dismissal of the complaint in this proceeding and that the time

within which the Commission could determine to review has expired

No such determination has been made and accordingly the dismissal

has become administratively final

S FRANCIS C HURNEY

Secretary

25 FMC 667
FEDERAL MARITIME COMMISSION

DOCKET NO 82 45

CUTTERS EXCHANGE INC

v

CARGO INTERNATIONAL INC ET AL

i

COMPLAINT DISMISSED

Finalized March 31 1983

This proceeding began with the filing of a complaint on September

10 1982 Cotnplainant a shipper known as Cutters Exchange Inc

located in Nashville Tennessee is seeking the sum of 3 9n33 which

it alleges it paid to respondent Cargo International Inc which had

operated in Tennessee as a freight forwarder licensed by the Commis

sion Complainant alleges that Cargo International failed to pay this

money to an ocean carrier for payment of transportation services and

that complainant has not been able to recover this money despite

making demands upon the three individual respondents who were offi

cers shareholders or directors of Cargo International Complainant

alleges that the three individual respondents conspired to violate section

44 of the Shipping Act 1916 by representing to the Commission that

two of the individuals Mr Adams and Mrs Harrison would be per

sonally responsible for any obligations of Cargo International when

Cargo International lost its surety bond and that Cargo International

was merely a sham corporation which each of the individual respond

ents had utilized to conduct his or her business transactions

The proceeding experienced considerable delay because of difficulty

in obtaining correct addresses of certain individual respondents and

obtaining service on the corporate respondent The complaint had to be

served on one or more respondents on September 14 October 13

December 1 and December 30 1982 until the process was finally

successful However only one respondent Mr Carl E Adams Jr

In a letter 4ate lNovembor 26 1982 complainant s coun l averr04 that two in4ividual roopon4

oats Mr Adams an4 Mrs Harrison made themoolvsureti for Cargo International Inc and that

the Commission would have jurisdictiOn over th persons as sureti Coun 1 also averr04 that even

if they had not become sureties they had made a contract with the Commission and Cargo Intema

tiQnal Inc 80 that CQmplainant ame a thirdpvly benef10lary jQ that contract In the me letter

CQun 1 also Qbjecled jQ certain Qboorvatioll4 I had made ming the CODlplex nalure Qf the Ship

ping Act thery he waa OIllplQying and su my recuw In view of the present motiQD sooking

dismissal it is unnecessary fQr me tQ rule upon thematter

668 2S FMC
CUTTERS EXCHANGE INC V CARGO INTERNATIONAL 669

INC ET AL

filed an answer to the complaint and Mr Adams denied most of the

material allegations in the complaint

When service ofthe complaint was finally completed the proceeding

became ripe for establishment of a prehearing schedule under custom

ary procedure However before any action could be taken in that

direction complainant filed a Motion for Voluntary Dismissal on Janu

ary 31 1983 In the motion complainant moves for leave to dismiss its

complaint without prejudice so that complainant can refile its claim in

another forum Complainant also advises that it has filed a similar

action in the Chancery Court for Davidson County Tennessee in the

interest of judicial economy and wishes to consolidate the present

action in the Tennessee court No respondent has filed a reply to the

motion

DISCUSSION AND CONCLUSIONS

There is no specific Commission rule of practice and procedure

which governs motions by complainants for voluntary dismissal oftheir

complaints The closest rule seems to be Rule 93 46 C FR 502 93

which deals with dismissal of complaints which have been satisfied and

states that such complaints will be dismissed in the discretion of the

Commission Otherwise the motion appears to fall under Rule 73 46

C F R 502 73 the rule governing motions generally and Rule 147 46

CF R 502 147 the rule setting forth the functions and powers of

presiding officers including the power to hear and rule upon motions

In practice the desire of a complainant to withdraw its complaint

and discontinue bearing the cost and burden of litigation has been

honored by presiding officers on the ground that the Commission

cannot very well compel a complainant to put on a case but can if it

chooses investigate any matter on its own authority under section 22b

of the Shipping Act 1916 46 U S C section 821 b However if prob

lems arise in dealing with complainants requests to withdraw their

complaints the Commission can draw guidance from the rules of civil

procedure applicable in federal district courts as the Commission has

done in the past See e g Rohm Haas Co v Italian Line 24 F MC

429 431 n 8

2

The comparable federal rule concerning voluntary dismissal is Rule

41 a 28 U S C A Under that rule a plaintiff has virtually an absolute

right to withdraw its complaint before an answer or motion for summa

ry judgment has been filed by a defendant merely by filing a notice of

dismissal with the court However if an answer or a motion for

2

In the case cited the Commission referred to an earlier case in which the Commission had stated

Where the Commission s Rules are not dispositive of a

question of procedure the Commis

sion normally will look to the rules and practices applicable to civil proceedings in the Dis

trict Courts of the United States Docket No 78 51 Agreement No 10394 Order April 19

1979 p 4 unreported

25 F M C
670 FEDERAL MARITIME COMMISSION

summary judgment has been filed dismissal is subject to such terms and

conditions as the court deems proper If an answer has been filed

plaintiffs motion for voluntary dismissal may still be granted without

prejudice unless the court finds that defendant srights are seriously

prejudiced or defendant has expended time and money on the case for

which some reimbursement is warranted or other peculiar circum

stances exist justifying the imposition of terms and conditions to protect

defendants rights See 9 Wright and Miller Federal Practice and Proce

dure section 2364 2366 Therrien v New England Tel Tel Co 102

F Supp 3S0 D C N H 19S1 Colonial Oil Co v American Oil Co 3

F R D 29 D S C 1943 Under the cited rule however the fact that a

plaintiff may bring a new action in the same or another court may gain

a tactical advantage or may avoid an adverse statute oflimitations does

not preclude a plaintiff from having its complaint dismissed without

prejudice Such facts are not considered by the courts to be that type of

prejudice or harm that warrants denial ofplaintiffs motion See e g

Le

Compte v Mr Chip Inc 528 F 2d 601 604 Sth Cir 1976 Holiday

Queen Land Corporation v Baker 489 F 2d 1031 Sth Cir 1974 Klar v

Firestone Tire Rubber Co 14 F R D 176 S D N Y 1953 There are

moreover numerous cases in which federal courts have permitted vol

untary dismissals ofcomplaints so that plaintiffs could file their cases in

state courts See eg Grivas v Parmalee Transp Co 207 F 2d 334 7th

Cir 1953 Burgess v Atlantic Coast Line R Co 39 F RD 588

D C S C 1966 Eaddy v Little 234 F Supp 377 D C S C 1964

cases collected in 9 Wright and Miller Federal Practice and Procedures

cited above section 2364 p168 n 75

As the court stated in Harvey Aluminum Inc v American Cyanamid

Co IS F R D 14 18 S D N Y 1953

But the mere fact that a party will be faced with another

litigation does not of itself constitute prejudice otherwise an

initial error ofjudgment on the part of his counsel may pre

cludea determination of a claim upon its facts and merits

Undue vexatiousness undue burden to a litigant in presenting

his defense or claim in another jurisdiction excessive and

duplicitous expense of a second litigation the extent to which

any jUdgment in the new action would be conclusive as to

issues and parties as contrasted to a final determination in the

pending suit the extent to which the current suit has pro

gressed are some of the factors to be considered in deciding

whether prejudice will result to the opposing party

In the instant case complainant has advised that it has already filed a

complaint in the Chancery Court for Davidson County Tennessee

against the various respondents in this case in the interest ofjudicial

economy and the interest of the litigants themselves The fact that all

parties are located in the Nashville Tennessee or surrounding area the

25 F MC
CUTTERS EXCHANGE INC V CARGO INTERNATIONAL 671

INC ET AL

difficulty of service of the complaint experienced by the Commission s

Secretary in this case the lack of answer by three of the individual

respondents the complex nature of the case under the Shipping Act

theory of recovery which probably would require costly hearings and

briefing compared to the relatively small amount of the claim all

confirm complainant s determination that litigation in a state court

would be more economical and convenient The case essentially in

volves a claim for money which complainant alleges was unlawfully

taken from complainant and misappropriated and has not progressed

very far in this forum Moreover it would appear easier for all parties

to make their claims and defenses before a state court in Tennessee and

one would expect that a judgment by that court having all the parties

conveniently before it would be conclusive If one applies the factors

set forth by the court in Harvey Aluminum Inc v American Cyanamid

Co cited above it appears obvious that ample grounds exist to grant

complainant srequest for voluntary dismissal of the complaint and as

provided by Rule 41 a 2 the dismissal may be without prejudice as

complainant requests

Accordingly the complaint is dismissed without prejudice

S NORMAN D KLINE

Administrative Law Judge

25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 82 29

PHILLIPS PARR INC

v

EMPRESA LINEAS MARITIMAS ARGENTINAS S A

NOTICE

April 8 1983

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

28 1983 initial decision in this proceeding and the time within which

the Commission could determine to review that decision has expired

No such determination has been made and accordingly that decision

has become administratively final

8 FRANCIS C HURNEY

Secretary

672 25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 29

PHILLIPS PARR INC

v

EMPRESA LINEAS MARITIMAS ARGENTINAS S A

Complainant a carrier s agent being sued by respondent E LM A in federal court for

freight allegedly due in connection with a shipment of Chilean hardboard which

E LM A carried from Tampico Mexico to New Orleans to complete a voyage

begun by complainants principal in Chile alleges that E LM A operated as a

common carrier between Tampico and New Orleans without a tariff violating

sections 18b

16 and 17 of the Shipping Act 1916 Complainant seeks a cease and

desist order preventing E LM A from pursuing the court action and reparation for

costs of defending the court suit as well as any freight for which complainant may be

found liable to E LMA Respondent E LM A claims complainant is merely trying

to avoid payment under a guaranty it executed for E LM As benefit Complainant

obtained a

stay in court to allow the Commission to determine the Shipping Act

issues Itis held

I That the evidence of record utterly fails to show that E LMA operated as a

common carrier by water between Mexican and U S Gulf ports before during and

after the time E LMA lifted the Chilean hardboard out of Tampico there being no

evidence of regular routes advertising general holding out etc The record rather

shows that E LMA carried the shipment outof Tampico as an isolated instance to

enable the shipment to be delivered to New Orleans as originally intended

2 Since the record shows E LM A not to have operated as a common carrier in the

relevant trade the Commission lacks jurisdiction over the matter in question and the

complaint must be dismissed leaving the parties free to resume their litigation in the

federal district court

Edward S Bagley for complainant

David A Braunerfor respondent

INITIAL DECISION 1 OF NORMAN D KLINE

ADMINISTRATIVE LAW JUDGE

Finalized April 8 1983

This proceeding began with the filing of a complaint on June 10

1982 Complainant Phillips Parr Inc is an agent of a carrier known as

Navimex Line and operates its business at the port of New Orleans

Louisiana Allegedly Navimex had begun to carry a

shipment of hard

board from Chile to New Orleans on June 29 1979 but carried the

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

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

25 F M C 673
674 FEDERAL MARITIME COMMISSION

shipment only as far as Tampico Mexico when Navimex s charter on

its ship expired The shipment was thereafter placed on a vessel operat

ed by another carrier respondent Empresa Lineas Maritimas Argenti

nas S A E LMA which carried it the remainder ofthe way to New

Orleans under an ELMA bill of lading marked prepaid in Mexico

allegedly under an EL MA tariff No 1 N B F M C No 17 which

had been cancelled by the Commission on February 6 1978 Allegedly

E L MA delivered the cargo to the consignee received payment of

freight on the original Navimex bill of lading and through E LM As

agent Strachan Shipping Company Inc made payment to Phillips

Parr which remitted this money to Navimex E LMA did this with

out notifying Phillips Parr that any freight was due on the portion of

the transportation between Tampico and New Orleans However on

May 21 1981 E L MA filed suit in the United States District Court

for the Eastern District ofLouisiana seeking to recover freight alleged

ly due to E LMA on the Tampico to New Orleans leg claiming that

Phillips Parr owed E LMA 16 186 86 in freight 2

Phillips Parr s

principal Navimex S A allegedly became insolvent and no longer

served New Orleans On motion by Phillips Parr the district court

stayed the suit on July 28 1982 on the ground that the matter was

within the primary jurisdiction ofthe Commission

Phillips Parr apparently because of its concern that it might suffer

judgment against it in the court proceeding in its complaint asks the

Commission for reparations for any amount which it may be adjudged

liable to E L MA together with costs attorneys fees and expenses

incurred by itin defending against EL M As claims in court More

over Phillips Parr is asking the Commission to issue a cease and desist

order against E LMA which would prevent EL MA from pursuing

its action in the court seeking recovery of freight Phillips Parr alleges

that it is entitled to such protection and compensation because

E LMA is seeking to recover charges without having a tariff on file

with the Commission in violation of section 18b 1 of the Shipping

Act 1916 and in violation of sections 16 First and 17 of the Act

In answer to the complaint E LMA essentially admits that it car

ried the subject hardboard from Tampico to New Orleans under its

own bill of lading delivered it to the consignee named on the Navimex

bill of lading and remitted freight to Phillips Parr as agent for Navi

mex EL MA admits that its tariff had been cancelled but contends

that it was not operating as a common carrier in the trade between

Tampico Mexico and New Orleans a fact which would deprive the

lit Actually 88 some documents submitted in connection with discovery requests indicate suit was

begun by E LM A in astate courton May II 1981 and upon motion of PhillipsParr was removed

to the federal court on May 26 or 27 1981 See exhibit E attached to complainant srequest for

admissions served July 28 1982

2S FMC
PHILLIPS PARR INC V EMPRESA LINEAS MARITIMAS 675

ARGENTINAS S A

Commission of jurisdiction over the subject matter of the proceeding

E LMA also contends that Phillips Parr suffered no injury that even

if E LM A violated the Shipping Act Phillips Parr is not entitled to

free transportation between Tampico and New Orleans and finally

that Phillips Parr did not file the complaint in good faith but is really

collaterally attacking the court proceeding and attempting to avoid a

guaranty it executed in order to obtain release ofthe cargo

PREHEARING PROCEDURES AND DEVELOPMENT OF THE

RECORD

The evidentiary record as Inote below consists essentially of stipu

lated facts an affidavit of an E LM A official E LMA vessel mani

fests bills of lading answers to interrogatories and assorted documents

proffered with discovery requests The parties agreed to develop the

record in this fashion in lieu of conducting trial type hearings in view

of the nature of the central issue which concerns the question whether

E LMA

operated as a common carrier between Tampico Mexico and

New Orleans during the time of the shipment in question Since deter

mination of ELM As status depends upon a careful examination ofits

vessel operations it was felt that examination of the manifests covering

the vessel which was involved in the shipment in question as well as

consideration ofother evidence concerning E LM As holding out and

service between the two ports would yield sufficient information on

which its status could be determined Because of the limited issue and

size ofthe evidentiary record furthermore I ruled that no legal briefs

need be filed This procedure was adopted at a

telephonic prehearing

conference held on December 16 1982 which itself was held to pro

mote the interest ofeconomy and reduce litigation costs See Notice of

Schedule Established and Rulings Made at Prehearing Conference De

cember 17 1982 3

SUMMARY OF THE FACTS

As mentioned above the record consists of a stipulation of facts an

affidavit of an E LMA official Mr Enrique Landa General Delegate

in the United States for E LMA vessel manifests for voyage 22 of

3

As aresult of a series of preheating rulings which I issued the parties clarified their positions

prior to the telephonic preheating conference See Order to Show Cause why Complainant Should

not be Dismissed Without Prejudice September 23 1982 Notice of Preheating Conference Ruling on

Possible Dismissal of Complaint DeferredNovember 24 1982 In response to my inquiries contained

in these rulings complainant explained that it had obtained astay of the proceeding against it in the

federal court to allow the Commission to determine the merits of its Shipping Act contentions and was

seeking to recover injury resulting from costs of defending the suit brought by E LM A in court

Complainant also urged aspeedy determination of its claim that ELM A had operated as acommon

carrier subject to Commission jurisdiction by means of documents affidavits answers to interrogato

ries etc ELM A explained its contention that Phillips Parr was merely attempting to avoid payment

of freight that E LM A had merely engaged in asingle shipping transaction not common carriage

between Tampico and New Orleans and that the controversy should have remained with the court

25 F M C
676 FEDERAL MARITIME COMMISSION

the M V Rio Neuquen answers to interrogatories and assorted docu

ments attached to discovery requests Since the parties agree that it is

necessary to concentrate on the jurisdictional issue concerning

E LM As status when it handled the shipment of Chilean hardboard

the stipulation and evidence focus on E LM As operations on the

critical voyage of the M V Rio Neuquen However it is necessary to

understand the background to the controversy so as to understand the

context in which Phillips Parr filed its complaint and why Phillips Parr

is asking the Commission to order ELM A to cease and desist from

seeking to recover freight allegedly due and is seeking to recover

certain costs arising out ofPhillips Parr s defense in the suitbrought by

E LMA in court Therefore the following summary is divided into

two sections first a background and second a detailed exploration of

E LM As operations on voyage 22 of the M V Rio Neuquen It

should be noted however that the background facts were not stipulat

ed and were not fully proven in the traditional way although not

necessarily disputed They were however sworn to in the complaint

were supported to some extent by documents were not necessarily

disputed and were the subject of a request for admissions Since they

are helpful for background purposes only and the decision hinges on

the second section containing a detailed exploration of ELM As

operations on voyage 22 of the M V Rio Neuquen Ihave made fmd

ings of fact as to these background facts although technically in some

instances they rely upon documents attached to a request for admissions

that E L MA did not specifically accept 4

For purposes of making necesaary background findings and findinll8 regarding E L M As carrier

operations on the critical voyage I am admitting in evidence certain materials These are I a stipula

tion of facts and agreement of counsel signed by counsel for both partiea 2 pp 2 an affidavit of Mr

Enrique Landa Oeneral Delegate of E L M A 2 pp 3 manifeats and summary sheets concerning

voyage 22 of the M Y Rio Neuquen showing details of the voyage including cargo carried between

various South American Mexican and U S Olllf ports broken down by bills of lading 4 discovery

materials consisting of answers to interrogatories flled by B L M A and documents attached to com

plainant s Requeat for Admisaions consiatinll of bills of lading issued by Navimex Line and E L M A

covering the shipments of Chilean hardboard PhillipsParr s Petition in the Us Diatrict Court forthe

Eastern District of Louisiana seeking removal of the action from thestate courtj EL M A petition in

the state courtcommencing action aaainst Phillips Parr a letter from Phillips Parr to Strachan Ship

ping Company styled as a Ouarantee and dated 9 17 79 I have previously adviaed the partiea that

the E L M As answers to interrogatoriea and the bills of lading would be considered as part of the

evidentiary record unIeaa the parties made valid objections See Notice of Schedule Batablished and

Rulinga Made at Preheating Conference Deeembed7 1982 p 2n I Aa for the remaining court

documents I

find them admiaaible under broad standards of admisaibllity prevailing in adminiatrative

law for thelimited purpose of aupporting certain backaround facts and not forthe pWOe

of support

ing any legal concluaions argued by the partiea in the documents

2S F MC
PHILLIPS PARR INC V EMPRESA LINEAS MARITIMAS 677

ARGENTINAS S A

BACKGROUND

1 On June 29 1979 a carrier known as Navimex Line received two

shipments 5

of skids of Chilean hardboard for transportation from the

port of Lirquen Chile to New Orleans Louisiana Navimex issued two

bills of lading for the shipments freight collect in the United States

2 Navimex carried the two shipments from Chile to Tampico

Mexico on its vessel the M V London Cavalier Navimex thereafter

transshipped the shipments to the M V Rio Neuquen a vessel operated

by E LMA which sailed from Tampico to New Orleans on Septem

ber 3 1979 The reason for the transshipment purportedly was the

expiration ofthe Navimex charter on the M V London Cavalier

3 E LM A issued two bills of lading to Navimex S A the owner

and operator of Navimex Line which were stamped or typed freight

prepaid Both bills were consigned to the order of Phillips Parr Inc

4 ELMA carried the shipments of hardboard from Tampico to

New Orleans E LMA did not file a tariff between the two ports its

previous tariff No I N B FMC No 17 having been cancelled by

the Commission on February 6 1978 6

5 At the port of New Orleans E LMA effectuated delivery of the

cargo to the consignees through ELM As agent Strachan Shipping

Company Inc E LM A through Strachan collected freight due

under the Navimex bills oflading and remitted the freight collected to

Phillips Parr Navimex s agent in New Orleans

6 On September 17 1979 Phillips Parr had executed a so called

Guarantee addressed to E LM As agent in New Orleans Strachan

Shipping The document stated that in consideration of delivery of the

hardboard to Phillips Parr Phillips Parr would undertake and agree to

indemnify you and hold you and said vessel and owners harmless from

all consequences and to pay on demand any claim loss and or expense

that may arise including attorneys sic fees

7 On May 11 1981 ELMA brought suit in the Civil District

Court in and for the Parish of Orleans State of Louisiana seeking to

recover the sum of 16 186 86 which E LMA

alleged was freight due

for the shipments which it had carried from Tampico to New Orleans

The suit was removed to the United States District Court Eastern

District of Louisiana on motion of Phillips Parr on or about May 26

6

Throughout the factual and legal discussion that follows I have treated the subject shipments of

Chilean hardboard as two rather than one shipment because two bills of lading were issued although

the shipper was the same and they were both consigned to the order of Phillips Parr when they left

Tampico The parties discuss the cargo as one shipment however It is not critical whether they are

considered as one ortwo shipments The hardboard was carried on atotal of 271 skids 143 on one bill

of lading and 128 on the other

6

This was done by the Commission in Docket No 77 35 Publication of Inactive Tariffs 20 F M C

433 1978 As that decision and the Order to Show Cause July 11 1977 which began that proceed

ing show the tariff was cancelled because E LM A was not believed to be engaged in common car

riage and the tariffwas considered to be inoperative

2S F M C
678 FEDERAL MARITIME COMMISSION

or 27 1981 This suit was later stayed by court order issued on July 28

1982 upon motion ofPhillips Parr which had argued that the contro

versy lay within the primary jurisdiction ofthe Federal Maritime Com

mission

E LM AS CARRIER OPERATIONS IN THE GULF

8 E LMA is a carrier which engages in common carriage by water

in certain foreign trades ofthe United States

9 As far as the subject shipments of Chilean hardboard are con

cerned ELMA operated only one voyage voyage 22 of the M V

Rio Neuquen From the period March 1 1979 to and including Decem

ber 31 1982 ELMA carried no cargo between Mexican and U S

Gulf ports except in the one instance on voyage 22 of the M V Rio

Neuquen which carried two shipments of hardboard from Tampico

Mexico to New Orleans on September 3 1979

10 Manifests of the M V Rio Neuquen for voyage 22 show that

ELMA carried a number of shipments for numerous shippers be

tween South American and U S Gulf ports and between South Ameri

can and two Mexican ports Tampico and Vera Cruz The voyage

began on July 21 1979 when the M V Rio Neuquen sailed out of

Buenos Aires Argentina northbound She sailed out of various Brazil

ian ports Rio Grande Paranagua Santos Salvador on July 25 28 30

and August 4 respectively She sailed out of various U S Gulf ports

Tampa and Mobile on August 15 and 17 respectively and out of the

Mexican ports ofVera Cruz and Tampico on August 30 and September

3 Finally she sailed out of Houston and New Orleans heading south on

September 10 and 17 1979

11 A breakdown of the shipments carried both northbound and

southbound on voyage 22 shows the following northbound from

Buenos Aires and various Brazilian ports to U S Gulf ports 61 total

shipments bills of lading northbound from Buenos Aires and Salva

dor Brazil to Vera Cruz and Tampico Mexico 109 total shipments

bills oflading southbound from U S Gulf ports to Buenos Aires 290

total shipments bills oflading southbound from Vera Cruz and Tam

pico Mexico to Buenos Aires 52 total shipments bills of lading

From Tampico Mexico to New Orleans Louisiana 2 shipments bills

of lading the shipment of Chilean hardboard transshipped from the

Navimex vessel

12 ELMA published no advertisements or notices by which it

offered vessels for the carriage of cargo between U S Gulf ports and

East Coast Mexican ports for at least approximately six months before

and after the particular carriage of the Chilean hardboard from Tampi

co to New Orleans or a period running from March 1 1979 through

February 29 1980

25 F MC
PHILLIPS PARR INC V EMPRESA LINEAS MARITIMAS 679

ARGENTINAS S A

DISCUSSION AND CONCLUSIONS

It is clear that continuation of the controversy before the Commis

sion raised by the complaint depends entirely on the question of the

Commission s jurisdiction over E LMA in connection with

E LM As carriage of the Chilean hardboard from Tampico Mexico

to New Orleans Thus if the record does not establish that ELMA

operated as a common carrier by water in its operations between

Tampico and New Orleans there is no point to further consideration of

allegations that E LMA violated section 18b 1 ofthe Act by failing

to file a tariff or section 16 First by subjecting anyone to undue or

unreasonable disadvantage or section 17 second paragraph by observ

ing unreasonable practices 7

All of these statutory provisions are appli

cable only to common carriers by water

Very briefly Phillips Parr claims that E LMA had operated as a

common carrier by water when it picked up the Chilean hardboard in

Tampico and carried it to New Orleans ELMA claims on the other

hand that this was simply a single operation and that ELMAdid not

hold out or engage in common carrier operations between the two

ports during that time

Common carrier determinations can be made under a few critical

principles which are discussed and explained in several leading Com

mission decisions such as Activities Tariff Filing Practices and Carrier

Status of Containerships Inc 9 F MC 56 1965 and Investigation of

Tariff Filing Practices 7 F MC 305 1962 In Containerships Inc the

Commission found that a carrier which had engaged in the carriage of

automobiles for leading automobile manufacturers under forward book

ing contracts was a common rather than a contract carrier The Com

mission explained that the common carrier mentioned in the Shipping

Act was the common carrier at common law 7 F MC at 62 The

essential characteristic of a common carrier is that such a carrier by a

course of conduct holds himself out to accept goods from whomever

offered to the extent ofhis ability to carry 7 F MC at 62 Or as the

Commission stated 7 F MC at 62

The essential characteristics of the common carrier at common

law are that he holds himself out to the world as such that he

7

Since the parties have concentrated on the threshold issue of jurisdiction there has been no elabo

ration of complainant s allegations concerning the nature of the Shipping Act violations nor even if

they were proven whether the Commission would award reparation and the parties have not filed

briefs addressing these matters Thus it is not clearwhether Phillips Parr would have to prove that a

competitor received an advantage under section 16 First underapplicable case law Also if section 17

second paragraph is invoked by complainant it appears that more than asingle incident would have

to be shown to constitute an unreasonable practice Also even if complainant showed aviolation of

section 18b 1 case law holds that ashipper must still pay reasonable freight charges to the carrier

These and other problems are unnecessary to resolve however since the record does not show that

E LM A operated as acommon carrier between the critical ports See discussion of these legal prob

lems in my ruling of November 24 1982 in this case

25 FM C
680 FEDERAL MARITIME COMMISSION

undertakes generally and for all persons indifferently to carry

goods for hire

As the Commission noted furthermore included in the concept of

the carrier s holding out are such factors as solicitation advertising

tariff filing and contractual limitations 7 F MC at 62 n 7 However

the Commission explained that common carrier status could not neces

sarily be determined by anyone factor such as solicitation number of

shippers served regular schedules or types of shipping contracts uti

lized since a carrier could be common even without advertisements

solicitation or regular schedules 7 FMC at 63 64 The Commission

stated that the question in final analysis requires ad hoc resolution

A carrier s status is determined by the nature ofits service offered to

the public and not upon its own declarations A close look at its

activities is necessary 7 F MC at 64

Insummary the Commission stated 7 F MC at 65

The determination of a carrier s status cannot be made with

reference to any particular aspect of its carriage The regula

tory significance of a carrier s operation may be determined by

considering a variety of factors the variety and type of cargo

carried number of shippers type ofsolicitation utilized regu

larity of service and port coverage responsibility of the carri

er towards the cargo issuance of bills of lading or other

standardized contracts of carriage and method of establishing

and charging rates The absence of one or more of these

factors does not render the carrier noncommon and common

carriers may partake of some or all ofthese enumerated char

acteristics in varying combinations A carrier may be clothed

with one or more of the characteristics mentioned and still not

be classified a common carrier It is important to consider all

the factors present in each case to determine their combined

effect

If one applies the various factors and definitions discussed by the

Commission above it is apparent that this record fails utterly to show

that ELM A was operating as a common carrier between Tampico

Mexico and New Orleans at the time E LMA lifted the Chilean

hardboard at Tampico Indeed the record fails to show that EL MA

operated as a common carrier between any Mexican port and U S Gulf

Coast ports Instead examination of the only ELMA vessel involved

in the Gulf the M V Rio Neuquen indicates that ELM As common

carrier operations were conducted between U S Gulf ports and ports in

South America and perhaps between Mexican ports and ports in South

America All that the manifests of the M VRio Neuquen seem to show

is that ELMA agreed to lift the Chilean hardboard at one time on or

about September 3 1979 since the M V Rio Neuquen was in Tampico

at the right time to assist Navitnex and Phillips Parr in completing the

shipment of hardboard which had originated in Chile bound for New

2S FMC
PHILLIPS PARR INC V EMPRESA LlNEAS MARITIMAS 681

ARGENTINAS S A

Orleans As the vessel manifests show however the M V Rio Neuquen

had called at Tampico as part of the itinerary of voyage 22 with

numerous shipments carried in the Mexican South American trade

There is no evidence in the record that any E LMA vessel carried

any shipments between Mexican ports and U S Gulf ports during the

period March 1 1979 through December 31 1982 except for the

hardboard shipments carried for Phillips Parr on September 3 1979 out

of Tampico There is similarly no evidence of any notices or advertise

ments or other solicitation efforts by which E LM A offered to carry

cargo between Mexican and U S Gulf ports during this period of time

and as Phillips Parr has alleged ELMA does not publish and file a

tariff applicable between such ports Nor is there any evidence that

ELM A maintained any regular route or schedules between Mexican

and U S Gulf ports Although the Commission indicated in Container

ships Inc that no one factor could determine a carrier s status it did

recognize that maintenance of a regular schedule between fixed termini

was the initial and most important prerequisite ofCommission jurisdic

tion the one explicitly set forth in section I on regular routes from

port to port7 F MC at 65

It appears that EL MA carried the hardboard shipments out of

Tampico under its own bills of lading as the manifests show It may

even be that ELMA assumed some sort of liability akin to common

carriers under such bills of lading although the record does not show

this nor does the record show how ELMA determined what rates it

would charge It is also true that a carrier may by a course of conduct

be found to be holding itself out as a common carrier even though it

maintains no regular schedules and does not advertise or solicit as the

Commission recognized in Containerships Inc However this record

does not establish even under the lenient standard of proof prevailing

in administrative law namely a preponderance of the evidence s

that

E L MA had been operating as a common carrier between Tampico or

Mexican ports and U S Gulf ports when it lifted the hardboard and the

M V Rio Neuquen sailed out ofTampico on September 3 1979 bound

for New Orleans As ELMA has contended it appears that

ELMA carried the hardboard shipments between Tampico and New

Orleans on only one occasion and had no ongoing cargo carrying

operations of any kind between Mexican and U S Gulf ports for at

least six months prior to the Tampico incident and for over three years

afterwards There is simply no way in which the evidence in this

record can enable anyone to conclude that E LMA was engaging in a

course of conduct holding itself out to accept goods from whoever

8

See Steadman v Securitiesand Exchange Commission 450 U S 91 102 1981 Sea Isand Broadcast

ing Corp of S c v F cc 627 F 2d 240 243 DC Cir 1980 cert den 449 U S 834 1980 The

morestringent standards are of course clear and convincing evidence and beyond areasonable doubt

25 FMC
682 FEDERAL MARITIME COMMISSION

offered between Mexican and U S Gulf ports On the contrary the

preponderance of the evidence shows that ELMA lifted the hard

board out ofTampico for New Orleans delivery as a one shot matter at

a time when its vessel happened to be in port Such a one shot oper

ation is insufficient to establish a course of common carrier conduct

even if E LMA were operating a common carrier business in other

trades See Ship s Overseas Inc v Federal Maritime Commission 670

F 2d 304 D C Cir 1981 9

Furthermore as the Commission noted in

Publication of Inactive Tariffs cited above 20 F MC at 436 when it

cancelled a number of inactive tariffs including ELM As which had

applied from Mexican to U S Gulf ports a carrier is not engaged in

common carriage with a proper tariff on file if it fails to demonstrate an

intention to move cargo under a proffered tariff within a reasonable

period of time subsequent to filing or if there has been an extended

period within which no common carrier service has been provided in

the subject trades Of course as Ihave noted the record in this case

shows such an extended period of time in which no ELMA vessel

carried cargo between Mexican and U S Gulf ports both before and

after the time of the subject hardboard shipments

ULTIMATE CONCLUSIONS

I conclude therefore that this record utterly fails to show that

E LMA operated as a common carrier by water when it lifted a

shipment or shipments of Chilean hardboard on one occasion on or

about September 3 1979 at the port ofTampico Mexico and delivered

the shipment at New Orleans Louisiana Consequently the Commission

has no jurisdiction over this one shot operation and the complaint

alleging violations of the Shipping Act 1916 in connection with

E LM As attempts to recover freight allegedly due on the shipment

must be dismissed

8 NORMAN D KLINE

Administrative Law Judge

8

In the case cited the court set aside aCommission decision finding Ship s Overseas Inc to be a

nonvessel operating common carrier because the record showed that Ship s Overaeas Inc had 6erved

a shipper on a

sinale occasion i e had provided a single shot service and had not engsled in 8

course of conduct showing common carrier operations The court so held even though Ship s Over

Inc had otherwise been in the shipping buine and had handled hipments for various cu tom

era as psrl of its lighterage and brokerage bu in The court pecifically noted that tlhe c char

acterizing entitiea as common carrien rely on acourse of conduct rather than on a transportation serv

ice shown to have occurred only once Ship Overseas Inc v Federal Maritime Commission cited

above 670 F 2d at 308 n IS Had E LM A been calling at Tarnpico orother Mexican ports in order

to pick up hipments bound for US Gulf ports periodically so as to how a

pattern of conduct resem

bling the holding out of a common carrier for example by cuatOmarily lftopping oft at Mexican

ports when it had space available on its ships such conduct might qualify as common carriage How

ever that is far from the one shot operation that occurred in this case

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 59

GENERAL ELECTRIC COMPANY

v

MOLLER STEAMSHIP COMPANY INC

NOTICE

April 8 1983

Notice is given that no appeal has been taken to the February 28

1983 dismissal of the complaint and approval of settlement in this

proceeding and that the time within which the Commission could

determine to review has expired No such determination has been made

and accordingly the dismissal has become administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 683
I

i

FEDERAL MARITIME COMMISSION

DOCKET NO 82 59

GENERAL ELECTRIC COMPANY

v

MOLLER STEAMSHIP COMPANY INC

DISMISSAL OF COMPLAINT

AND APPROVAL OF SETTLEMENT

Finalized April 8 1983

The complainant and the respondent jointly move that the complaint

in this proceeding be dismissed with prejudice and that theaccompa

nying settlement agreement be approved

By complaint filed December 8 and served on December 10 1982

the complainant General Electric Company alleged that it was over

charged 62 132 47 on a number of shipments described on the bills of

lading as synthetic resin shipped from New York to Singapore from

December S 1980 to June 12 1981

The respondent Moller Steamship Company Inc charged the syn

thetic resin N O S rates of 172 and 191 per cubic meter plus bunker

surcharges

GE by its complaint sought the rate of 122 W on polymerization

and copolymerization resins synthetic Moller disputed this contention

as to the proper identification of the shipments

Neither side is prepared to concede the proper identification of the

shipments If the matters were fully litigated it might require expert

witnesses and substantial legal expenses The parties have negotiated an

arms length settlement representing a compromise amount of 31 066

to be paid by Moller to GE within 21 days after approval by the

Commission ofthe proposed settlement

The settlement figure approximates the so called general synthetic

resins rate which is lower than the N O S rates charged and which

also is higher than the polymerization arid copolymerization rate sought

by the complainant

Commission policy favors settlements The proposed settlement ap

pears to be a bona fide attempt to terminate the controversy and not a

device to circumvent the law and the facts critical to the resolution of

the dispute apparently are not reasonably ascertainable without consid

erable expense and litigation The proposed settlement figure appears to

684 2 F MC
GENERAL ELECTRIC COMPANY V MOLLER STEAMSHIP 685

COMPANY INC

fall within a zone of reasonableness and is a commercially justifiable

compromise considering the rates at issue

Good cause appearing the proposed settlement is approved and the

complaint in this proceeding is dismissed with prejudice

8 CHARLES E MORGAN

Administrative Law Judge

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 23

IN THE MATIER OF RATES APPLICABLE TO OCEAN

SHIPMENTS VIA AMERICAN PRESIDENT LINES

NOTICE

April 20 1983

Notice is given that no exceptions have been filed to the March 10

1983 initial decision in this proceeding and the time within which the

Commission could determine to review that decision has expired No

such determination has been made and accordingly that decision has

become administratively final

8 FRANCIS C HURNEY

Secretary

686 2S FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 23

IN THE MAITER OF RATES APPLICABLE TO OCEAN

SHIPMENTS VIA AMERICAN PRESIDENT LINES

Five shipments of boats properly classified as Plastic Inflatable Boats

R J Cinquegrana and Paul J Lambert for American President Lines

Frank L Bridges for Norwood Industries Inc

INITIAL DECISION 1 OF JOHN E COGRAVE

ADMINISTRATIVE LAW JUDGE

Finalized April 20 1983

In October of 1981 Norwood Industries Inc filed a complaint

against American President Lines Ltd in the Boston Municipal Court

Department ofthe Trial Court ofthe Commonwealth of Massachusetts

Norwood s complaint sought recovery of an alleged overcharge on five

shipments of boats carried by APL for Norwood APL without objec

tion from Norwood removed Norwood s action to the U S District

Court for the District ofMassachusetts

In April of 1982 APL filed this petition for declaratory order and in

May the Court stayed its proceedings pending Commission action on

the petition In August 1982 the Commission referred the proceeding to

the Office ofAdministrative Law Judges and at the same time restrict

ed the initial proceedings to the filing of affidavits and memoranda

Subsequent to the filing by APL of its opening memorandum Mr

Donald J Orkin Esq then attorney for Norwood withdrew his ap

pearance in the case noting that any further representation of Norwood

would be by the firm of Widdett Glazier who had been appointed

assignee of an Assignment for Benefit ofCreditors Following an exten

sion of time to allow the new attorneys to familiarize themselves with

the case a Mr Frank L Bridges by letter informed that Norwood did

not intend to offer any evidence by way of affidavit or otherwise to

controvert the evidence introduced by American President Lines in this

proceeding Further Norwood did not intend to file a memorandum

of law in opposition to any assertions made by APL in its opening

memorandum

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

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

25 F M C 687
688 FEDERAL MARITIME COMMISSION

The issue presented here is whether the boats comprising the five

shipments in question were properly classified as Plastic Inflatable

Boats under Item No 9520 ofthe Trans Pacific Freight Conference of

Japan Korea Tariff or whether as Norwood contended they should

have been classified as Sporting Goods Synthetic Rubber Boats

under Item 5920

The documentary evidence submitted by APL in support ofits open

ing memorandum clearly establishes that the shipments in question were

properly rated under Item 9520 as Plastic Inflatable Boats Norwood s

own catalogue states that the boats are made of Hydra Lon PVC

vinyl PVC or polyvinyl chloride is a thermoplastic resin Webster s

Third Int Dictionary or a white water insoluble thermoplastic resin

Random House Dictionary 1978 ed 2

The five shipments in question

were properly rated as Plastic Inflatable Boats under Item 9520 of

the Transpacific Freight Conference of Japan Korea Tariff The pro

ceeding is dismissed

S JOHN E COGRAVE

Administrative Law Judge

a

See also Chemical Technology An Encyclopedic Treatment Vol VI pp 534 et seq for adiscussion

of the plastic PVC

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 83 5

WORLDWIDE TECHNICAL SERVICES CO INC

v

MAERSK LINE

NOTICE

April 20 1983

Notice is given that no appeal has been taken to the March 11 1983

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

the Commission could determine to review has expired No such deter

mination has been made and accordingly the dismissal has become

administratively final

8 FRANCIS C HURNEY

Secretary

25 F M C 689
j

1

j

i

I

FEDERAL MARITIME COMMISSION

DOCKET NO 83 S

WORLDWIDE TECHNICAL SERVICES CO INC

v

MAERSK LINE

COMPLAINT DISMISSED AS SATISFIED

Finalized April 20 1983

The parties here have filed a Notice of Satisfaction of Complaint

Pursuant to Rule 93 The complaint was satisfied with the payment by

respondent of 80 768 83 in overcharges which resulted from the com

plainant s freight forwarder s use of an incorrect measurement of the

actual space utilized in respondent s containers

Rule 93 provides for the satisfaction and dismissal of complaints in

the discretion ofthe Commission upon the filing of a statement explain

ing how the complaint was satisfied and that similar adjustments will be

made for persons similarly situated The Rule also requires the submis

sion ofdetails of each shipment on a special form insofar as such form

is applicable 1

The information called for is only that which would establish the

validity of the particular claims and the amount of reparation sought

Apparently the form was thought to be a convenient way of submit

ting the required data Inthis case the complainant requested the use of

the shortened procedure under Subpart K of the Rules of Practice and

Procedure 46 C F R 181 et seq Consequently complainant submitted

its documentary evidence with its complaint That evidence consisting

of bills of lading invoices from the freight forwarder packing lists

export declarations and copies of checks showing payment of the

freight charges establishes the validity of complainant s claim for repa

ration

Complainant s Exhibit A is a recap ofthe 27 shipments involved The

exhibit shows the vessel and voyage number the bill of lading number

description incorrect measurement and the incorrect ocean freight the

correct measurement and the correct freight and the amount of the

overcharge This exhibit satisfi s the requirements of Rule 93 The

1

The form iI actually incorrectly cited in Rule 93 and is not published in the current edition of the

Commission s Rules of Practice and Procedure 46 C F R 93 In Abboll Hoapllats PRMSA 1 aL

Dockets 81 52 81 53 Oismi8sa1 of ProceedinlB 24 F M C 10 1982

690 2 F MC
WORLDWIDE TECHNICAL SERVICES CO INC V MAERSK 691

LINE

respondent has agreed to make a like adjustment for other persons if

any similarly situated

The requirements of Rule 93 have been met and the complaint is

dismissed as satisfied

8 JOHN E COGRAVE

Administrative Law Judge

25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 10

AGREEMENT NO 10440

NOTICE

April 20 1983

Notice is given that no appeal has been taken to the March 14 1983

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

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has become

administratively final

8 FRANCIS C HURNEY

Secretary

i

692 2S FMC
25 F M C 691

FEDERAL MARITIME COMMISSION

DOCKET NO 83 10

AGREEMENT NO 10440

ORDER OF DISMISSAL

Finalized April 20 1983

By Order of Investigation and Hearing Order served February 22

1983 the Commission instituted this proceeding to determine whether

Agreement No 10440 should be approved disapproved or modified

after consideration of the factual and legal issues enumerated in the

Order

Agreement No 10440 between Lykes Brothers Steamship Co Inc

and Lineas Navieras Bolivianas S A M Linabol was filed for approval

pursuant to section 15 of the Shipping Act 1916 46 U S C 814 As

paraphrased in the Order the agreement provides for Linabol to char

ter space on Lykes vessels serving the trade between United States

ports in the Gulf of Mexico and Bolivia via the West Coast ports of

South America Each party would have associate line status equal

access authority under Bolivia s cargo preference laws and would

operate as Conference carriers The Agreement permits Lykes and

Linabol to determine itineraries frequency and number of sailings and

vessel capacity levels

Lykes and Linabol were named proponents in the proceeding The

Conference referred to in the previous paragraph the Atlantic and

Gulf West Coast of South America Conference and one of its

members Compania Sud Americana de Vapores CSAV were named

protestants in the proceeding Hearing Counsel was made a party to the

proceeding

A prehearing conference was scheduled for March 9 1983 On

March 8 1983 Ireceived a telex message from counsel for Lykes As

pertinent the message read

This is to advise you that Lykes Bros Steamship Co Inc

and Lineas Navieras Bolivianas the parties to Agreement

10440 jointly withdraw their application for approval of the

Agreement pursuant to section 15 of the Shipping Act 1916

and request that the proceeding in Docket 83 10 be dismissed

at the prehearing conference

The request contained in the telex message was treated as a motion to

dismiss the proceeding At the prehearing conference the motion was

granted This order then confirms that the application having been
694 FEDERAL MARITIME COMMISSION

withdrawn by the proponents the motion to dismiss the proceeding is

granted

There is a further comment At the prehearing conference counsel

for the Conference moved that the record reflect the following clarifi

cation of the Order instituting the proceeding Le Lykes and Delta

Steamship Lines Inc members of the Conference have disassociated

themselves from the protest in this proceeding This motion is granted

S SEYMOUR GLANZER

Administrative Law Judge

25 FM C
FEDERAL MARITIME COMMISSION

46 C F R PART 536

GENERAL ORDER 13 REVISED DOCKET NO 82 13

EXEMPTION OF BULK CARGO MOVING IN THE FOREIGN

COMMERCE OF THE UNITED STATES FROM THE TARIFF

FILING REQUIREMENTS OF SECTION 18 B OF THE

SHIPPING ACT

April 22 1983

Discontinuance ofProceeding

This discontinues the rulemaking instituted to consid

er the exemption of certain bulk commodities loaded

and carried in containers trailers rail cars or similar

intermodal equipment from the tariff filing require

ments of the Shipping Act 1916 and the alternative

proposal to exempt other or all such bulk commod

ities from the tariff filing requirements

DATE Effective April 28 1983

SUPPLEMENTARY INFORMATION

In Docket 80 70 Status ofBulk Commodities with Respect to the Tariff

Filing Requirements of Section 18 b of the Shipping Act 1916 the Com

mission issued an interpretative rule which provided that bulk cargo

loaded into a container or similar intermodal equipment except LASH

or Seabee barges is loaded with mark or count and therefore is

subject to the tariff filing requirements of section 18 b I of the Ship

ping Act 1916 46 V S C 817 b I It was further determined in

that proceeding however to stay the effective date of the interpreta

tive rule pending a consideration of the feasibility of exempting from

the tariff filing requirements all or some of the bulk commodities found

subject to those requirements

Therefore by notice published in the Federal Register 47 F R

10862 the Commission proposed to exempt from tariff filing under

section 35 of the Act 46 VS C 833a bulk cargo loaded in intermod

al equipment The proposed rule defined bulk cargo as those com

modities which are in a loose unpackaged form have homogeneous

characteristics and are unprocessed or not further manufactured The

Commission further gave notice that alternatively it would consider

the exemption of other or all bulk cargo carried in intermodal equip

ment

ACTION

SUMMARY

25 F M C 695
1

696 FEDERAL MARITIME COMMISSION

The proposal prompted 30 replies from independent carriers confer

ences and shippers A majority of the commentators was opposed to

both proposed rules while the remaining commentators generally

tended to favor the exemption of all bulk commodities from the tariff

filing requirements

Commentators which opposed the proposed rules argued that if an

exemption were granted whether for all or for specific bulk commod

ities the result would substantially impair effective Commission regula

tion and could be unjustly discriminatory and detrimental to commerce

They further contended that the exemption would require each except

ed commodity to be specifically identified for effective regulation

These commentators also argued that the Commission should not

except the transportation of bulk cargoes simply for the purpose of

achieving competitive parity between specialized tramp or contract

carriers because competition between these carriers for such cargoes

has diminished Further it was alleged that shippers will be confused

and possibly discriminated against if they are unable to verify liner

cargo rates on exempt cargoes

Most of the commentators who opposed the proposed interpretative

rule generally favored the alternative ofexempting all bulk commod

ities regardless of the method of transport Because a tariff exemption

could lead to discrimination and because it allegedly would be difficult

to draw a clear line between bulk and non bulk commodities these

commentators suggested that in lieu of listing exempt commodities a

blanket exemption be adopted This approach would allegedly eliminate

the need to determine which bulk commodities would fall into an

exempt status

One commentator opposing the proposed rule maintained that

whether the cargo is processed or unprocessed if it is loaded and

carried in containers it assumes the characteristics ofbeing marked and

cQuntedand thus should continue to be subject to the tariff filing

requirements

Those commentators favoring the proposed rule as well as some of

those opposed would require that a list Of exempt commodities be

provided specifically identifying those exempted

Section 35 provides in part that the Commission may upon applica

tion or on its own motion exempt any specified activity from any

requirement of the Shipping Act 1916 where it finds that such exemp

tion will not substantially impair effective regulation be unjustly dis

criminatory or be detrimental to commerce Inherent in this section is

the requirement that certain findings be made for an exemption to be

granted unless the Commission determines that a particular require

Obviously tbis would be a formidable task in view of Ibe number of separately described cargo

items that might warrant exemption in various trades

25 FMC
BULK CARGO EXEMPTION

ment on its face serves such a minor regulatory purpose as to consti

tute an unjustified burden upon the regulated party

No compelling reason has been presented or found for an exemption

of all or a class of bulk commodities carried in containers from the

tariff filing requirements of section l8 b In fact it is quite possible that

any such exemption could operate in a discriminatory manner There

fore the Commission concludes that a waiver in the present filing

regulations applicable to bulk cargo in containers is not warranted This

conclusion is without prejudice to the right ofany party to apply to the

Commission for exemption from the tariff filing requirements of a

particular bulk commodity

Therefore this proceeding is hereby discontinued

By the Commission

8 FRANCIS C HURNEY

Secretary

25 F M C

697
FEDERAL MARITIME COMMISSION

DOCKET NO 81 28

TRANSPORTACION MARITIMA MEXICANA S A

v

cl BOARD OF COMMISSIONERS OF THE PORT OF NEW

ORLEANS

ORDER ON RECONSIDERATION

May 3 1983

By Report and Order served January 28 1983 the Commission

found unlawful a provision in the tariff ofthe Board of Commissioners

of the Port of New Orleans the Port which would assess charges on

cargo left in transit areas beyond the expiration ofthe free time period

on the basis of the length of the vessel which eventually calls for the

cargo The Commission however determined not to award Complain

ant Transportacion Maritima Mexicana S A TMM reparations be

cause TMM failed to establish that the charges it had paid were unrea

sonably high

TMM has now filed a Petition for Reconsideration pursuant to Rule

261 ofthe Commission s Rules of Practice and Procedure 46 C F R

502 261 seeking a reversal of the determination not to award it repara

tions The Port has replied in opposition For the reasons set forth

below TMM s Petition will be denied

One alleged ground for reconsideration is that the Commission s

Order contains two substantive errors of material fact l TMM cites as

error the Commission s statement that an award of reparation in favor

of TMM would be a windfall TMM also characterizes as substan

tive error the Commission s conclusion that equitable considerations

militate against the award ofreparations 2

j

1 Rule 261 aX2 provides that a petition forreconsideration will be subJect to summary rejection

unless it identifies a substantive error inmaterial fact contained in the decision or order

TMM claims it has incurred subslAAtial expenses in Iitigatlnll this proceeding and that it deserves

reparations for bringing the matter of the Porls tariffto the Commission s attention On the basis of

the equities TMM argues it should receive reparations because the Port extracted payment from

TMM under duress

698 2S F MC
TRANSPORTACION MARITIMA MEXICANA S A V PORT 699

OF NEW ORLEANS

As noted by the Port in its Reply TMM has not identified factual

errors but rather expresses disagreement with the Commission s ulti

mate conclusions 3

TMMs second ground for reconsideration is that the Commission s

Report and Order contains findings and conclusions not addressed in

the briefs or arguments of the parties 4

Specifically TMM argues that

the equities were not addressed by either party This argument is

without merit The equities of the situation are inherently in issue in

determining the reasonableness ofthe tariff provision and the possibility

of reparations The parties could and in fact did address the equities

without the Commission specifically inviting them to address what

would be right and what would be wrong

TMM also contends that the issue of a reasonable alternative charge

was not previously addressed Again TMMs argument is not persua

sive Ifreparations were not specifically addressed in the course of this

proceeding it is because TMM and the Port chose not to inform the

Commission that payment of the contested charges had been made At

any rate the consideration of reparations is consistent with the relief

generally sought by TMM in its Complaint that the Commission issue

such other and further orders as the Commission shall deem appropri

ate As the purpose of TMMs Complaint is to avoid paying the

contested charge and as payment turns out to have been made already

it is clearly appropriate for the Commission to consider relief in terms

ofreparation That any relief would necessarily vary in form according

to whether TMM made payment is immaterial and the variance in the

form of possible appropriate relief does not constitute a new matter

within the meaning ofRule 261 a 3 Moreover TMM was specifically

questioned at oral argument about what a fair charge would be 5

Thus TMMhas had every opportunity to comment on actual relief and

has in fact done SO 6

3

Furthermore these conclusions were and are well founded Reparation ifawarded would indeed

result in awindfall toTMM because TMM would then have benefitted from aconsiderable amount of

cargo storage in the Port s transit areas free of charge Moreover the Commission does not reward

successful complainants with reparations solely to thank them for bringing illegal activities to its atten

tion

The payment of the charges under protest or duress is not asignificant factor Had no payment

been made as was represented by the parties until oral argument the Commission might well have

levied an alternative charge to compensate the Port The fact that reimbursement has since been made

in an amount not shown to be unreasonable obviated the need for any such levy That the payment

was made under protest is not therefore material

4 Rule 261 a

3 prescribes as an alternative criterion for apetition forreconsideration that it ad4

dresses afinding conclusion orother matter upon which the party has not previously had the oppor

tunity to comment orwhich was not addressed in the briefs orarguments of any party

li Counsel responded I really am not prepared to give a figure Tr at 13 Later counsel de

scribed tbe kind of charge TMM would be willing to pay

6

TMM errs in other aspects of its Petition TMM characterizes the Commission s determination not

to award reparations as adecision that the amount of the charge was areasonable figure TMM then

Continued

25 F MC
700 FEDERAL MARITIME COMMISSION

The Commission concludes that TMM has failed to meet the proce

dural requirements of Rule 261 TMM seeks merely to reargue points

already fully addressed and considered by the Commission There has

been presented no reason for the Commission to amend its original

determination in this proceeding TMM s Petition will therefore be

denied

THEREFORE IT IS ORDERED That the Petition for Reconsid

eration ofTransportacion Maritima Mexicana S A is denied and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

argues that some lower alternative charge would be appropriate However the Commission did not

determine that the amount of the charge paid by TMM wa reasonable Rather It found that TMM

failed to meetits burden of proving that the amount aaaea edwa unreasonably high

TMM also objects that the Order observation that TMM had notice of and might have avoided

the contested charge was irrelevant to the purpose of determining ita validity That observation how

ever was made not in the context of determining the reasonablenea of thecontested charge but in

thecontext of determining whether to award reparations

Vice Chairman Moakley takes no position on this Petition since it pertains to an action of the ma

jority from which he dissented

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 82 38

HERMANN LUDWIG INC

v

THE SOUTH AFRICAN MARINE CORPORATION STEAMSHIP

COMPANY

1 Where a complainant seeks to have certain equipment designated as sugar cane and

hay loaders so as to qualify for a lower rate under the tariff the burden of proving

what was shipped is on the complainant

2 Where the bills of lading did not contain any reference to the cargo as sugar cane or

hay loaders and where the cargo was origiually designated as log loaders and the

export documents so indicated the letter of the manufacturer s sales representative

stating the cargo was used to load sugar cane and hay coupled with inconclusive

photos is insufficient to sustain the burden of proving that the cargo was in fact

sugar cane or hay loaders There is no indication that even assuming the statement

was accurate the equipment was used exclusively for the loading of sugar cane or

hay or even primarily for that purpose

Kay Ahiskaliand Dieter Trautmann for complainant

David A Brauner for respondent

INITIALDECISION 1 OF JOSEPH N INGOLIA

ADMINISTRATIVE LAW JUDGE

Finalized May 1l 1983

PRELIMINARY MATTERS

On October 13 1981 Hermann Ludwig Inc Ludwig sent a letter

to the Commission s Secretary applying for a reduction in rates on two

shipments of cargo by the South African Marine Corporation N Y It

was advised by the Secretary in a letter dated November 13 1981 that

a formal complaint had to be filed that Ludwig needed an assignment

ofthe claim from the payor of the ocean freight and that the respond

ent named might not be the actual carrier By letter dated January 14

1982 Magon Agencies PTY Ltd ostensibly authorized Ludwig to

apply to the Federal Maritime Commission for a refund which letters

were transmitted to the Secretary on February 5 1982

On March 5 1982 the Secretary returned the February 5 1982

submissions noting that Ludwig had ignored the direction that it file a

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

Commission Rule 227 Rule of Practice snd Procedure 46 CP R S02 227

702 2S F MC
HERMANN LUDWIG INC V THE SOUTH AFRICAN 703

MARINE CORPORATION STEAMSHIP COMPANY

formal complaint and again was advised to file such complaint On

April 30 1982 Ludwig filed a complaint but was advised by the

Secretary in a May 14 1982 letter that since Magon Agencies appeared

to be a true party in interest an assignment of that interest might be

necessary The Secretary provided a

copy of aproper assignment On

July 7 1982 Ludwig received an assignment from Magon Agencies

PTY Ltd ofits rights title interest claims and demands arising out

ofthe assignor s

shipment on the Safmarine Amphian from the Port of

New York to the Port of Durban on the 16 April 1981 Later a

complaint was filed and the facts set forth below ensued Both parties

relied on documents filed and there was no oral testimony or filing of

briefs

FINDINGS OF FACT

1 On August 9 1982 Hermann Ludwig Inc filed a complaint with

the Commission against The South African Marine Corporation Steam

ship Company The complaint alleges that I

the ocean freight was

incorrectly applied to two shipments made from New York to Durban

in that the rate of 239 50M3 was applied rather than the rate of

110 00M3 and that as a result 2 the complainant suffered damages of

13 866 34 Complaint

2 On April 16 1981 a shipment of two Barko Model 40 and four

Barko Model 80R was made aboard the Amphion and on May 8

1981 six Model 80R Barko Loaders were shipped aboard the Lontue

The cargo moved from New York to Durban and the vessels were

operated by South African Marine Corporation Ltd Bills of Lading

Nos 165 and 180

3 The parties agree that the cargo described in paragraph 2 above

moved under a tariff duly filed with the Commission and that the rate

charged was an N O S rate of 239 50M3 and that the same tariff

contained a rate for Sugar Cane and Hay Loaders of 11O 00M3

Entire Record

4 Export Packing Lists describing the Barko Model 80R state com

plete with 22 4 boom and 2 14 Cord log pulp bypass grapples PI

N 154 00002 and all accessories The Export Packing List for the

Barko Model 40BC contains the language AND ALL ACCESSO

RIES Export Packing Lists

5 In letters dated June 24 1981 and October 5 1982 to Ludwig the

Sales Secretary ofBarko Hydraulics Inc indicated that the machines

that were shipped to Magon Agencies are used as agricultural

implements and are used as cane orhay loaders

DISCUSSION AND CONCLUSIONS

In its answer the respondent argues that I the complaint is jurisdic

tionally defective because The South African Marine Corporation is

not the proper respondent or a common carrier by water 2 the

2S F M C
704 FEDERAL MARITIME COMMISSION

complainant lacks standing because it is neither the shipper nor con

signee of the subject shipments and Magon is nothing more than one

of two notify parties 3 the assignment from Magon to Ludwig is

defective in that it only applies to the shipment aboard the Amphion

As to the merits the respondent argues that when the shipment was

delivered the claimant advised the carrier orally that the equipment was

log loaders for use in the lumber industry He urges that the carrier

is not under any duty to go beyond the shipper s own description in

rating the cargo Ocean Freight Consultants v Royal Netherlands SS

Company 17 F M C 143 He further argues that there is a heavy

burden of proof on the claimant to establish the actual nature ofthe

goods shipped Johnson and Johnson International v Venezuelan

Lines 16 F MC 84 Ocean Freight Consultants Inc v

Italpacific Line

15 F MC 314 The respondent stresses that the record is devoid of

any evidence that the equipment is principally utilized for agricultural

purposes emphasis supplied and that the law requires such a holding

citing CSC International Inc v Lykes Brothers SS Co Inc 20 F MC

560

The parties in this case agree as to the date of the shipments the

tariff and rates involved and the amount of reparation due should the

complainant be successful The only real question involved is a narrow

factual one i e what was actually shipped It is well settled that

reparation overcharges are based on a determination ofwhat is actually

shipped and that the burden of proof is on the complainant Western

Publishing Co v Hapag Lloyd A G 13 S RR 16 1972 Ocean Freight

Consultants Inc v

Italpacific supra Here the record shows that the

bills of lading are silent as to the specific description of the cargo in

terms of the tariff Nowhere do they contain any reference to agricul

tural use or to the loading of cane or hay The export declarations also

do not contain any reference to agricultural use but they do indicate

that there at least are cord log and pulp bypass grapples and all

accessories The documents therefore do lead to the conclusion that

the loaders were used for logging which is without the tariffdescrip

tion the complainant would have us apply However the record does

contain a statement from the manufacturer s sales representative that

the loaders were used as cane or hay loaders and based on that

statement and some photographs which are not sufficiently identified or

related to the shipments in question the complainant would have us

hold the loaders were sugar cane and hay loaders No other material

evidence is presented

Based on the record made in this case we must hold that the com

plainant has failed to sustain its burden While admittedly it may be a

heavy burden in that proof ofwhat was shipped may be difficult to

obtain after the shipment takes place the Commission has recognized

that difficulty and has nevertheless required such proof Sanrio Compa

25 FMC
HERMANN LUDWIG INC V THE SOUTH AFRICAN 705

MARINE CORPORATION STEAMSHIP COMPANY

ny Ltd v Maersk Line 23 F MC 150 203 1980 Informal Docket

No 681 F Here there is little question the loaders were designated as

log loaders at the time the shipments took place While they may have

been used to load cane and hay as the sales representative noted even

assuming her personal knowledge there is no indication the use was

exclusive or even primary Further the pictures submitted add little to

the complainant s case In short the record is simply insufficient to

establish that the loaders came under the heading of cane or hay

loaders as required by the tariff

The holding that the complainant has failed to sustain its burden

makes it unnecessary to decide the issues relating to jurisdiction stand

ing and the effect ofthe assignment from Magon to Ludwig and we do

not do so here However it does appear that some of the points made

by the respondent are not without merit

In view ofthe above and the entire record the reparations sought in

the complaint by the complainant are hereby denied and this matter

discontinued

8 JOSEPH N INGOLIA

Administrative Law Judge

25 F M C
I

I

I

FEDERAL MARITIME COMMISSION

DOCKET NO 82 52

DYNAMIC INTERNATIONAL FREIGHT FORWARDERS INC

ORDER DISCONTINUING PROCEEDING

May 12 1983

By an Order of Investigation served on November 4 1982 this

proceedins was instituted to determine 1 whether respondent Dynam

ic International Freight Forwarders Inc Dynamic had violated sec

tion 44 a ofthe Shipping Act 1916 the Act 46 U S C g 84lb a by

engaging in ocean freight forwarding without having been licensed to

do so by the Commission and if so 2 whether civil penalties should be

assessed against Dynamic for such violations and 3 whether Dynamic

should be ordered to cease and desist from carrying on the business of

forwarding without a license The proceeding was initially limited to

the exchange ofaffidavits offact and memoranda of law by Dynamic

and the Commission s Bureau ofHearing Counsel

On March 30 1983 the Commission filed a complaint against Dy

namic in U S District Court in Detroit Michigan The complaint

requested the Court to enforce pursuant to section 29 of the Act 46

U S C g 828 the Commission s order in Docket No 80 5 assessing a

civil penalty of 2 500 against Dynamic for previous violations of

section 44a Dynamic International Freight Forwarder Inc Independ

ent Ocean Freight Forwarder License Application and Possible Violation of

Section 44 Shipping Act 1916 23 F MC 537 1981 By separate

motion the Commission also sought a preliminary injunction against

Dynamic forbidding it from engaging in any further unlicensed for

warding Such an injunction would have been in force during the

pendency ofDocket No 82 52

On April 14 1983 a hearing was held in Detroit on the Commis

sion s motion for a preliminary injunction The Court proposed a settle

ment designed to bring to a swift and orderly conclusion all the pend

ing actions against Dynamic This settlement had three elements

First Dynamic would be obliged to pay within 30 days the 2 500

civil penalty assessed against it by the Commission in Docket No 80 5

This penalty has been outstanding since January 1981

Second Dynamic would be permanently enjoined from engaging in

any further unlicensed freight forwarding This injunction would forbid

Dynamic to complete any current forwarding contracts or to accept

any new business Dynamic would retain its right to apply to the

706 2S F MC
DYNAMIC INTERNATIONAL FREIGHT FORWARDERS INC 707

Commission for a forwarder license at some point in the future If such

an application was approved the injunction would be dissolved

Third the Commission would discontinue Docket No 82 52 without

reaching a decision on the merits Dynamic would therefore avoid

further penalties for any illegal forwarding subsequent to the Commis

sion s decision in Docket No 80 5

Counsel for both sides agreed to present this proposal to their respec

tive clients In the interim the Commission asked that Dynamic be

temporarily restrained from accepting any new forwarding business

This request was granted The lO day temporary restraining order took

effect immediately On April 22 1983 the Court extended the order

through May 4 1983

The Commission determined to accept the Court s proposal on con

dition that Evelyn Gene Dynamic s president also be permanently

restrained from unlicensed forwarding This condition was accepted by

Dynamic and Ms Gene Accordingly a judgment and order was en

tered by the Court on April 27 1983 implementing the settlement

described above The injunctions against Dynamic and Ms Gene went

into effect at 5 p

m on Friday April 29 1983 To fulfill its obligation

under the settlement the Commission is issuing this order discontinuing

Docket No 82 52 and setting forth its reasons for accepting the Court s

proposal

The chief advantage of the settlement is that Dynamic and Ms Gene

are permanently enjoined from any further unlicensed freight forward

ing The injunction against Dynamic is broader than the temporary

restraining order in that it covers current forwarding business as well as

new business Dynamic must inform its current clients that it cannot

forward their shipments or accept payment in anticipation of services to

be rendered

If the Commission issued a decision in Docket No 82 52 it could

include its own cease and desist order against Dynamic However

Dynamic s persistent illegal forwarding and its failure to pay the civil

penalty assessed against it in Docket No 80 5 indicate that a court

order with the accompanying threat of contempt may be a more

effective sanction The Commission would also have the option of

returning to the District Court and asking for a permanent injunction

However allowing for normal decision making time in Docket No 82

52 and for the 6O day appeal period under 28 D S C 2344 such a

motion probably would not be filed until next September This settle

ment gives the Commission the ultimate relief of permanently removing

Dynamic and Ms Gene from any illegal participation in ocean freight

forwarding now rather than several months from now

The inclusion of a

separate injunction against Ms Gene is asignificant advantage of the settle

ment since she is not anamed respondent in this proceeding

25 F M C
708 FEDERAL MARITIME COMMISSION

As noted above the Order ofInvestigation in this proceeding includ

ed the issue whether further penalties should be assessed against Dy

namic The pleadings filed by the parties show that Dynamic concedes

that it continued to forward without a license on at least 35 shipments

after the issuance of the Commission s January 1981 order in Docket

No 80 5 The only matter in dispute is whether penalties should be

assessed for those violations Hearing Counsel request that a penalty of

10 000 be assessed although the maximum penalty would be consider

ably higher

However under the circumstances ofthis case including the possibil

ity that a second court action would be necessary to enforce an assess

ment order against Dynamic the permanent injunctions obtained

against Dynamic and Ms Gene represent a more efficient method of

enforcing Congress s intent that only persons duly licensed by the

Commission may provide ocean freight forwarding services It should

be noted in the event of a future application for a forwarder s license

filed by Dynamic or by Ms Gene personally or by another corpora

tion with Ms Gene acting as qualifying officer the record developed

by Hearing Counsel in this proceeding will be available to the Commis

sion in its consideration of such an application

THEREFORE IT IS ORDERED That this proceeding is hereby

discontinued

By the Commission

S FRANCIS C HURNBY

Secretary

2S F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 77 7

AGREEMENT NOS 9929 6

10266 3 AND 10374

ORDER OF APPROVAL OF AGREEMENT NO 10374 4

May 16 1983

This proceeding was remanded to the Commission by the United

States Court of Appeals for the District of Columbia Circuit for hear

ings inter alia on the voting provision authorized by the Commission s

Order approving Agreement No 10374 which allows all parties to the

Agreement lone vote each rather than one single vote per service in

any conference or rate agreement Sea Land Service Inc v FMC 353

F 2d 544 D C Cir 1981 By Order on Remand served October 9

1981 the Commission in response to the Court s decision reopened the

proceeding in Docket No 77 7 and directed the parties to that proceed

ing to address inter alia

Whether in light of its own structure and the structure of

Agreement Nos 9929 6 and 10266 3 Agreement No 10374

should provide that Hapag Lloyd on the one hand and ICT

CGM on the other hand shall exercise separate votes in

conferences or rate agreements with respect to their respective

container services and the impact on competition in the trades

of such a provision

The proceeding on remand was limited to the submission ofaffidavits

of fact and memoranda of law on the impact on the voting provisions

The purpose ofthe Order on Remand was to ascertain the positions of

the parties on the issues remanded by the Court and to determine the

need for and scope of any further formal proceedings After reviewing

the submissions of the parties the Commission concluded that further

evidentiary hearings wererequired

Accordingly by Order of Further Investigation and Hearing served

October 6 1982 25 FM C 371 the Commission instituted the present

proceeding in Docket No 77 7 to determine pursuant to section 15 of

the Shipping Act 1916 46 U S C 814 whether Agreement No

10374 should be modified to provide that its parties collectively can

1 The parties to Agreement No 10374 are Hapag L1oyd AG Hapag Lloyd Intercontinental

Transport leT and Compagnie Generate Maritime COM hereinafter referred to as Proponents

25 F M C 709
710 FEDERAL MARITIME COMMISSION

exercise only a single vote in any conference or rate agreement in the

trades covered by that Agreement

On December 15 1982 Proponents moved to dismiss discontinue

the proceeding on the basis of an amendment which they offered to

eliminate the controversy at issue The amendment which upon filing

was designated Agreement No 10374 4 provides that whenever the

votes of the two services of Hapag Lloyd and of ICT CGM are the

same their votes will be counted as only one vote Sea Land Service

Inc United States Lines Inc and the Commission s Bureau ofHearing

Counsel have agreed to the termination ofthe proceeding upon approv

al of the amendment Lykes Bros Steamship Co Inc opposes the

amendment but believes that no further hearing is necessary

On March 28 1983 Administrative Law Judge Charles E Morgan

granted Proponents Motion and discontinued the proceeding No ex

ceptions were filed to this ruling and the Commission determined not to

review it sua sponte

Notice of Agreement No 10374 4 appeared in the Federal Register on

February 28 1983 The only party responding to the Notice was Sea

Land which supports the amendment

Agreement No 10374 not only represents an appropriate settlement

ofthis proceeding which avoids the time and expense of further litiga

tion but it also adequately resolves the matter put at issue in this

proceeding Moreover because there is nothing before the Commission

that indicates that approval of Agreement No 10374 4 would be con

trary to the standards of section 15

IT IS THEREFORE ORDERED That A reement No 10374 4 is

approved

By the Commission

S FRANCIS C HURNEY

Secretary

I

I

Editor s Note Final Notice was served May 6 1983

2 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 77 7

AGREEMENT NOS 9929 6 10266 3 AND 10374

MOTION TO DISMISS DISCONTINUE GRANTED

Finalized May 16 1983

By ruling served January 19 1983 the proponents motion to dismiss

discontinue the subject proceeding was granted tentatively subject to

later reconsideration based upon any further facts and comments to be

offered and subject to the filing of a proposed amendment limiting

voting

The said amendment has been duly filed and noticed in the Federal

Register The proponents have filed further comments as directed

regarding how to determine whether a quorum is present at conference

meetings Two of the Agreements conferences contain no quorum

requirements and the other three Agreements provide that a quorum is

to consist of two thirds or a simple majority of the members eligible or

entitled to vote The proponents state that the vote counting compro

mise reflected in their proposed amendment to Article 12 can have no

impact on quorum composition No further comments or replies have

been received relative to this matter of whether a quorum is present

Regarding the tentative ruling on the motion to dismiss United

States Lines Inc adheres to its position supporting the motion and

Lykes Bros Steamship Co Inc adheres to its prior position opposing

the proposed amendment to Agreement No 10374 insofar as it would

accord the proponents only one vote when their positions coincided

Essentially nothing new has bean offered concerning the motion to

dismiss since the tentative ruling was made granting such motion

Accordingly for good cause shown for the reasons as stated in the

tentative ruling served January 19 1983 the motion of proponents to

dismiss discontinue the proceeding hereby is granted with the under

standing that the approval of an amended voting rights provision in

Agreement No 10374 limiting such rights is applicable only to the

present proceeding and is not to be considered as precedent in other

proceedings consistent with the statement of the Commission regarding

the indicia of single carrier status in Johnson Scanstar Service Voting

Provision 21 F MC 218 226

S CHARLES E MORGAN

Administrative Law Judge

25 F M C 711
FEDERAL MARITIME COMMISSION

DOCKET NO 83 3

ARCO INTERNATIONAL OIL GAS COMPANY

v

MAERSK LINE

NOTICE

May 16 1983

Notice is given that no appeal has been taken to the April 7 1983

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

which the Commission could determine to review has expired No such

determination has been made and accordingly the dismissal has become

administratively final

8 FRANCIS C HURNEY

Secretary

712 25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 83 3

ARCO INTERNATIONAL OIL GAS COMPANY

v

MAERSK LINE

COMPLAINTDISMISSED AS SATISFIED

Finalized May 16 1983

The parties have filed a Notice of Satisfaction of Complaint Pursu

ant to Rule 93 The complaint was satisfied with the payment by

respondent of 13 98120 in overcharges which resulted from the com

plainant sfreight forwarder s use of an incorrect measurement of the

actual space utilized in respondent s containers

Rule 93 provides for the satisfaction and dismissal of complaints in

the Commission s discretion upon the filing of a statement explaining

how the complaint was satisfied and that similar adjustments will be

made for persons similarly situated The Rule also requires the submis

sion of the details of each shipment on a

special form insofar as such

form is applicable 1

The information called for by Rule 93 is that which would establish

the validity of the particular claims and the amount of reparation

sought Apparently the form was thought to be a convenient way of

submitting the required information The complainant here requested

the use of the shortened procedure under Subpart K of the Rules of

Practice and Procedure and consequently the complainant submitted

its documentary evidence with its complaint That evidence consisted

of bills of lading invoices from the freight forwarder packing lists

export declarations and copies of checks showing payment of the

freight charges

Complainant s Exhibit A is arecap of the shipments involved The

exhibit shows the vessel and voyage number the bill of lading number

description incorrect measurement and ocean freight and the correct

measurement and ocean freight and the amount of the overcharge

This exhibit satisfies the requirements of Rule 93 The respondent has

1

The form is actually incorrectly cited in Rule 93 and is not published in the current edition of the

Commission s Rules of Practice and Procedure 46 CP R 93 See Abbott Hospitals v PRMSA et a

Dockets 81 52 81 53 Dismissal of Proceedings 24 F M C 1055 1982

25 F M C 713
714 FEDERAL MARITIME COMMISSION

agreed to make a like adjustment for other persons if any similarly

situated

The requirements of Rule 93 have been met and the complaint is

dismissed as satisfied

5 JOHN E COGRAVE

Administrative Law Judge

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 81 64

MIDLAND PACIFIC SHIPPING CO INC

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE NO 1299

LEYDEN SHIPPING CORPORATION

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE NO 829

PERSON WEIDHORN INC

INDEPENDENT OCEAN FREIGHT FORWARDER

LICENSE NO 112

Edward Schmeltzer and George J Weiner for Respondents

JanetF Katz for the Commission s Bureau of Hearing Counsel

REPORT AND ORDER

May 25 1983

BY THE COMMISSION ALAN GREEN Chairman THOMAS F

MOAKLEY Vice Chairman JAMES JOSEPH CAREY and JAMES V

DAY Commissioners

This proceeding was instituted by an October 8 1981 Order of

Investigation and Hearing to determine 1 whether Midland Pacific

Shipping Co Inc Midland Leyden Shipping Corp Leyden Ship

ping and Person Weidhorn Inc P W collectively Respondents

violated section 44 e of the Shipping Act 1916 46 VS C 841b and

the Commission s General Order 4 46 CFR Part 510 1980 in the

course oftheir forwarding practices 2 whether Respondents are fit to

retain their forwarding licenses and 3 whether civil penalties should

be assessed

The proceeding is now before the Commission upon the Exceptions

of Respondents and the Commission s Bureau of Hearing Counsel to

the Initial Decision of Administrative Law Judge William Beasley

Harris which finds Respondents fit but assesses civil penalties in the

total amount of 60 000 A proposed settlement agreement between

Hearing Counsel and Respondents which inter alia provided for penal

ties in a lesser amount was rejected by the Presiding Officer

Oral argument before the Commission was heard on April 7 1983

25 F MC 715
716 FEDERAL MARITIME COMMISSION

FACTUAL BACKGROUND

The parties agreed that over a two year period Midland collected

compensation on 1 074 shipments which were moved by an NVO

Transocean Shipping Co Inc and procured by Traffic Routing Inter

national TRI without Midland having performed any of the freight

forwarder services on those shipments Midland retained 47 700 ofthe

116 755 it received as compensation the rest going to TRI

Over a several month period Leyden Shipping used the name Brisley

Ocean Transport Ltd in place of the shipper on the bills of lading for

which Leyden Shipping performed the ocean freight forwarding serv

ices Brisley an NVO owned by Brian Leyden was not actually in

volved in any of these shipments Leyden Shipping collected 8 278 72

on a total of 84 shipments for which the name ofthe client shipper did

not appear

Midland Leyden Shipping and P W failed to notify the Commission

of facts called for in their Form FMC 18 freight forwarder license

application Respondents have since submitted revised forms indicating

space sharing arrangements and corporate relationships

Since the date Brisley filed an NVO tariff Respondents failed to

certify on the line copy ofthe bill of lading that Brisley did not act

as an NVO on those shipments on which Respondents collected freight

forwarder compensation Respondents did not receive compensation

from underlying ocean carriers on shipments on which Brisley did act

as an NVO

The three Resporidents are largely or wholly owned by Brian

Leyden and his father Bernard Leyden 1

Brisley Midland Leyden

Shipping and P W all occupy the same suite of offices in the World

Trade Center in New York Midland s net assets as ofOctober 31 1981

consisted ofits retained earnings in the amqunt of 8 637

THE PROPOSED SETTLEMENT

Under the terms of the Proposed Settlement the Commission would

receive 8 500 from Midland 17 500 from Leyden Shipping and

1 000 from P W Midland would surrender its forwarder license and

Leyden Shipping and P W would submit to four audits over the next

two years As part of the Proposed Settlement Respondents admitted

they engaged in conduct which may be violative of section 44e and

Commission General Order 4 G O 4

The Presiding Officer withheld consent to the stipulations and re

fused to approve the settlement on the grounds that there were some

I Brian Leyden own 4S percent of Leyden ShippinS Leyden ShippinS in turnown n of the tock

of Midland Bernard Leyden own 5S percent of the lock 0 Leyden Shippins and SO percent of the

tock of Leyden CUllom Expediters Inc The other half of the tock of Leyden CUltom Expediters

Inc is owned by Harold Dichter Leyden Customs Expediters Inc in tum owns all of the stock of

P W Harold Dichteri President and Bernard Leyden i Vice Pre identof P W

2S FMC
MIDLAND PACIFIC SHIPPING CO INC ET AL 717

factual matters not addressed to his satisfaction and that the settlement

was too lenient Over the parties objections the Presiding Officer then

proceeded to conduct a full evidentiary hearing and issued his Initial

Decision based thereon

INITIAL DECISION

In his Initial Decision the Presiding Officer found that

I Leyden Shipping violated 46 C F R 51O 24 a and 51O 23 d by

listing Brisley as Agent in lieu ofthe actual shippers on bills oflading

and collecting compensation on said shipments

2 All three Respondents violated 46 C F R 51O 22 c in not certify

ing that no related person acted as common carrier on shipments for

which they collected forwarder compensation

3 All three Respondents violated 46 CFR 51O 5 c in not informing

the Commission ofchanges in space sharing arrangements

4 Midland violated section 44 e in collecting compensation on ship

ments on which it did not perform forwarder services

The Presiding Officer imposed civil penalties in the amounts of

30 000 on Midland 25 000 on Leyden Shipping and 5 000 on P W

However he found all Respondents to be fit and did not revoke any

licenses He ordered that a certified audit ofeach Respondent as well as

a certified financial net worth statement ofeach shareholder be submit

ted to the Commission He also announced that he was piercing Re

spondents corporate veil

EXCEPTIONS TO THE INITIAL DECISION

Respondents Exceptions relate to nearly every aspect of the pro

ceeding and of the Initial Decision They object to the Presiding Offi

cer s rejection of the stipulations and settlement claiming that he was

bound by those stipulations once he agreed to the parties use of

stipulations and that he had no valid reason to deny approval of the

settlement Respondents argue that the Presiding Officer s ultimate con

clusions that Respondents violated G O 4 were not adequately support

ed or explained and specifically object to his findings that Leyden

Shipping provided false information to carriers in connection with the

Brisley as Agent shipments 2

and that all three Respondents were

required to file the related NVO certification 3They contend that the

Presiding Officer s decision to pierce the corporate veil was insup

portable but a harmless error

2

Respondents position here is that listing Brisley as agent was not inaccurate and does not consti

tute knowingly imparting false information Thus Respondents defend against the allegation of a

sec

tion SlO 23 d violation imparting false information but not the section SIO 24a violation not dis

closing the shipper

3

Respondents argue that there is no evidence indicating that they are sufficiently related to Brisley

to require the filing of acertificate

25 F M C
718 FEDERAL MARITIME COMMISSION

Respondents argue that the Presiding Officer imposed excessive civil

penalties 60 000 altogether without consideration of such factors as

ability to pay furtherance of agency enforcement policy degree of

culpability history of prior offenses and presence of accidental or

technical violations They also object to his requiring audits and net

worth statements from Respondents and their shareholders and to his

threat to suspend all three licenses absent submission of these state

ments Respondents request that the stipulated record and Proposed

Settlement be approved but that the 27 000 total penalty amount

prescribed in the settlement would be excessive because of the expenses

Respondents have been put through subsequent to rejection of the

settlement 4 Midland reiterates its willingness to surrender its license

Hearing Counsels Exceptions are much more limited in scope They

agree with Respondents that piercing their corporate veil was inappro

priate Hearing Counsel supports the Presiding Officer s

findings as to

violations by Respondents but disagrees with his conclusion that Mid

land is fit to retain its license Itfurther argues that the rejection ofthe

Proposed Settlement was erroneous and that the Commission should

approve the settlement including the 27 000 total penalties and the

surrender ofMidland s license

DISCUSSION AND CONCLUSIONS

Upon full consideration of the record it appears that the Presiding

Officer s dissatisfaction with the parties factual stipulations was unwar

ranted The stipulations of fact which the Presiding Officer found

inadequate are not materially different from the facts which emerged

from the hearings Moreover this proceeding has not turned on any

controversy in factual matters The Commission has determined to

accept and rely upon the stipulations offact as the factual record in this

proceeding

Both Hearing Counsel and Respondents urge that the terms of the

Proposed Settlement be reinstated by the Commission except that Re

spondents argue for the reduction or elimination of the civil penalty

amounts The Commission considers that the surrender of Midland s

license and the submission to audits by Leyden Shipping and P W as

prescribed in the Proposed Settlement are appropriate The remaining

issue is what civil penalty amounts should be assessed on each of the

Respondents The Commission concludes that the seriousness of the

offenses and the furtherance of the Commission s enforcement policy

Respondents state

I t is unnocesaary here to impose any further penalties In any event imposition of the penal

ty amounts previously agreed upon would now be inequitable and Respondents submit

that if any penalties are aaaesaed they should not exceed 8637 for Midland ie Midland s

totalts 3 000 for Leyden and 1 000 for P W

2S FMC
MIDLAND PACIFIC SHIPPING CO INC ET AL 719

justify the imposition of penalties in the amounts prescribed in the

Proposed Settlement

The Commission is not persuaded by Respondents that a lesser

amount would be appropriate at this stage ofthe proceeding in recogni

tion of Respondents post settlement litigation expenses The prescrip

tion offair penalty amounts is not an exact science There is a

relatively

broad range within which a reasonable penalty might lie

The Commission declines to adopt the suggestion that a fair penalty

assessment at this time can be calculated by subtracting what Respond

ents represent to be their legal fees from the originally proposed penal

ties This suggestion presupposes not only that the 27 000 settlement

was a reasonable settlement but that it constituted the only reasonable

penalty Moreover such action would in the Commission s opinion

place undue emphasis on a variable and potentially arbitrary factor

the particular legal fees a party claims it has been or will be billed The

Commission s action herein is not an attempt to leave the parties where

they would be had the Presiding Officer approved the Proposed Settle

ment but is rather a determination that the terms of that agreement

provide an appropriate resolution to the proceeding at present It is

unnecessary therefore to address the remaining Exceptions of the

parties relating to the specific findings conclusions and sanctions in the

Initial Decision and those Exceptions are denied as moot

THEREFORE IT IS ORDERED That the Exceptions of Midland

Pacific Shipping Co Inc Leyden Shipping Corporation Person

Weidhorn Inc and the Bureau of Hearing Counsel are granted to the

extent indicated above and denied in all other respects and

IT IS FURTHER ORDERED That Midland Pacific Shipping Co

Inc shall within 30 days ofthe date of this Order pay to the Federal

Maritime Commission the monetary amount of 8 500 and return its

ocean freight forwarder license No 1299 to the Commission and

IT IS FURTHER ORDERED That Leyden Shipping Corporation

and Person Weidhorn Inc shall within 30 days of the date of this

Order pay to the Federal Maritime Commission the monetary amounts

of 17 500 and 1 000 respectively and

IT IS FURTHER ORDERED That Leyden Shipping Corporation

and Person Weidhorn Inc shall each submit four semi annual reports

to the Commission identifying freight forwarding clients who are non

vessel operating common carriers or who are shippers known not to

have a beneficial interest existing in the goods at the time of shipment

As to each such client the report will show the kinds of freight

forwarding services performed where they are performed whether

fees are received from such shippers in accordance with itemized in

voices special contract or some other arrangement for shipper pay

ment and whether compensation is claimed on the shipments of that

25 FMC
720 FEDERAL MARITIME COMMISSION

customer Each report will be submitted according to the following

schedule

No 2 13 months after date of Order

Period Covered

First six months after date of

Order

Second six months after date

of Order

Third six months after date of

Order

Fourth six months after date

of Order

Report

No 1

Submission Date

7 months after date of Order

No 3 19 months after date of Order

No 4 25 months after date of Order

and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 77 7

AGREEMENT NOS 9929 6 10266 3 AND 10374

ORDER OF CLARIFICAnON

June 3 1983

By Order of Approval served May 16 1983 May Order 25 F MC

709 the Commission approved the voting provisions contained in

Article 12 ofAgreement No 10374 4 which provide that in any confer

ence or rate agreement whenever the votes of Hapag Lloyd A G and

Intercontinental TransportCompagnie General Maritime are the same

their votes will be counted as a single vote

Agreement No 10374 4 contains various other provisions unrelated

to the voting issue that were ordered deleted by the Commission s

Order of April 25 1983 April Order which addressed several

amendments to Agreement Nos 10266 and 10374 The Commission s

May Order should not be construed to in any way modify the Commis

sion s April Order or to extend approval to those provisions ofAgree

ment No 10374 4 which do not relate to the voting issue

By the Commission

8 FRANCIS C HURNEY

Secretary

Editor s Note The April Order was not made part of the record in this proceeding but is included

in the filesof the Secretary

25 F M C 721
FEDERAL MARITIME COMMISSION

46 C F R PARTS 542 543 AND 544

FINANCIAL RESPONSIBILITY FOR WATER POLLUTION

GENERAL ORDERS 40 37 AND 41 DOCKET NO 83 13

June 8 1983

Discontinuance ofProceeding

The Commission instituted this proceeding by Notice

of Proposed Rulemaking published March 7 1983 48

FR 9543 The purpose ofthe rule was to delete from

appropriate Commission General Orders reference to

the Panama Canal as being within the navigable

waters of the United States Since publication of the

notice responsibility for establishment offinancial re

sponsibility for water pollution has been transferred

to the United States Coast Guard Department of

Transportation by the President See Executive

Order 12418 signed May 5 1983 Accordingly the

Commission no longer has the authority to issue rules

concerning financial responsibility for water pollution

and therefore this proceeding is discontinued

SUPPLEMENTARY INFORMATION None

ACTION

SUMMARY

By the Commission

i

722

S FRANCIS C HURNEY

Secretary

25 F MC
FEDERAL MARITIME COMMISSION

DOCKET NO 83 17

PETITION OF PACIFIC WESTBOUND CONFERENCE

AND OOCL SEAPAC SERVICE FOR DECLARATORY ORDER

ORDER

June 21 1983

The Pacific Westbound Conference PWC and OOCL Seapac Serv

ice OOCL a member line have filed a Petition for Declaratory Order

pursuant to Rule 68 of the Commission s Rules of Practice and Proce

dure 46 C F R 502 68

At issue is the cancellation of certain tariff items by OOCL which

unintentionally and without notice resulted in an immediate increase in

rates on 17 of 20 affected shipments in contravention of the notice

requirements of section 18 b 2 of the Shipping Act 1916 46 D S C

817 b 2 Petitioners seek a Commission order excusing them from

adherence to the rate increases published in their tariffs A Petition for

Leave to Intervene and an accompanying Reply have been submitted

by the Commission s Bureau ofHearing Counsel

BACKGROUND

In 1981 OOCL established by independent action special per con

tainer rates for certain resins to Japan Base Ports and Manila In

February 1982 OOCL discontinued and deleted these special rates

without prior notice to shippers 1 Petitioners had erroneously believed

that the substitution of PWC per ton rates on resins would result in a

reduction of freight rates However the effect of the rate discontin

uances was a rate increase on 17 of the 20 affected shipments on less

than 30 days notice in contravention of section 18b 2

2

Petitioners

attempt to remedy the situation through the Commission s special

docket procedures was unsuccessful 3

1 The Japan Base Ports rate was deleted on February I 1982 The Manila rate was deleted Febru

ary 22 1982

2

Section 18 b 2 reads in pertinent part

No change shall be made in rates which result in an increase in cost to the shipper

except by the publication and filing of anew tariff ortariffs which shall become etfec

tive not earlier than thirty days after the date of publication

3

Petitioners Special Docket Application Special Docket No 958 was withdrawn and the pro

ceeding terminated when the presiding administrative Jaw judge found the application to be jurisdic

tionally defective

25 F M C 723
1

j

i

724 FEDERAL MARITIME COMMISSION

In the instant Petition the parties argue that relief is necessary to

protect the shippers involved from this unfair and potentially unlaw

ful situation and note their own dilemma of choosing between adher

ence to their tariff and compliance with section 18b 2 Absent the

requested relief Petitioners argue the affected shippers would have no

recourse but to file a multiplicity of reparations complaints before the

Commission Petitioners seek an order stating that OOCLs original per

container rates were the lawful and effective rates during the 30 days

following their discontinuance and deletion 4

Hearing Counsel seeks to intervene in the interest ofall the affected

shippers Hearing Counsel generally concurs with the Petition with

respect to those shipments in which the rates were increased but

argues that a problem remains regarding the three shipments in which

OOCLs action resulted in a rate reduction Section 18b 2 permits

rate reductions to become effective immediately upon publication The

relief now sought by Petitioners Hearing Counsel asserts would never

theless counteract the rate reductions experienced by the three shippers

Thus Hearing Counsel suggests that the Commission issue a declarato

ry order establishing that during the 30 day notice period the lawful

and applicable rate was OOCLs original per container rate or the PWC

per ton rate whichever results in the lowest cost to the shipper 6

DISCUSSION

The Commission has determined to grant Hearing Counsel s Petition

for Leave to Intervene in the interest of the shippers affected by

OOCLs rate action The Commission has also concluded that the

instant situation is appropriately resolved by way of declaratory order

procedures Declaratory relief would enable Petitioners to resolve their

problem and to act without peril upon their view within the meaning

of Rule 68 It should also serve to provide relief for the shippers

involved without the necessity of their instituting complaint proceed

ings

A short notice rate increase can be given no effect for thirty days

BL du Pont de Nemours and Co v Sea Land Service Inc 22F M C

525 540 541 1980 See a so Chicago M St P P R Co v A ouette

Peat Products 253 F 2d 449 9th Cir 1957 During that period the

previous rate in effect must be applied to affected shipments A compli

cating factor in the instant situation however is that the short notice

rate change resulted in a rate increase for some shipments and a rate

le untll March 3 1982 for the Japan Base Porls rate and until March 24 1982 for the Manila

rate

Il Any changes in the rates which results sic in adecreased cost to the shipper may become

effective upon the publication and filing with theCommission

In theirReply to Petition of Hearing Counsel for Leeve to Intervene Petitioners express their full

concurrence with Hearing Counsel s position

2S FMC
PACIFIC WESTBOUND CONFERENCE OOCL SEAPAC 725

PETITION

reduction for others The question then arises whether section 18 b 2 s

prohibition of short notice rate increases entirely invalidates OOCLs

cancellation ofper container rates i

e as to all 20 shipments because it

resulted in some rate increases or whether it invalidates the rate

change only to the extent that rate increases were brought about i e

only as to 17 ofthe shipments

The Commission concludes that section 18 b 2 proscribes short

notice rate changes only to the extent that they result in increased rates

Thus OOCL s rate cancellations should be considered ineffective as to

those shipments during the 30 day period for which there resulted a

rate increase For these 17 shipments OOCL s per container rate would

apply However the rate cancellations are effective as to those ship

ments for which the cancellations resulted in rate reductions For these

three shipments the PWC per ton rate applies

THEREFORE IT IS ORDERED That the Petition of Pacific

Westbound Conference and OOCL Seapac Service for Declaratory

Order is granted to the extent indicated herein and

IT IS FURTHER ORDERED That this proceeding is discontinued

By the Commission

S FRANCIS C HURNEY

Secretary

Commissioner Setrakian did not participate

25 F M C
FEDERAL MARITIME COMMISSION

DOCKET NO 83 4

WESTINGHOUSE ELECTRIC CORPORATION

v

DELTA STEAMSHIP LINES INC

NOTICE

June 27 1983

Notice is given that the time within which the Commission could

determine to review the May 19 1983 discontinuance of the complaint

in this proceeding has expired No such determination has been made

and accordingly the discontinuance has become administratively final

8 FRANCIS C HURNEY

Secretary

726 25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 83 4

WESTINGHOUSE ELECTRIC CORPORATION

v

DELTA STEAMSHIP LINES INC

SETTLEMENT OF COMPLAINT

Finalized June 27 1983

By complaint filed February 28 1983 the complainant alleged that it

had been overcharged 34 970 on a shipment of 378 packages ofelectri

cal devices equipment and materials from Baltimore Md to Rio

Hania the Dominican Republic shipped on or about December 6

1980

The respondent demanded and collected 61 115 78 offreight charges

based on the class 55 rate of 167 per 40 cubic feet on Electrical

Apparatus N O S The complainant sought to be assessed freight

charges of 26 145 78 based on the commodity rate of 64 50 per 40

cubic feet on Electrical Devices Equipment and Materials in minimum

lots of 1600 cubic feet The 167 rate was reduced on the Delta invoice

paid by the complainant to 160 50 based on a

project rate discount of

6 50 and pursuant to the same tariff item the sought rate of 64 50

would be reduced to 60 50

The complainant sought reparation of 34 970 plus interest from

December 29 1980

The parties have agreed to settlement of their dispute Delta will

refund a total sum of 23 500 which includes an allowance for interest

to be paid within 30 days after an order discontinuing this proceeding

becomes administratively final

This settlement is a bona fide effortto terminate the controversy and

not a device to obtain transportation at other than applicable rates and

charges Certain facts remain genuinely in dispute particularly relating

to the exact description and true nature of the cargoes shipped Com

mission policy favors settlement of disputes to avoid costly litigation

On its face the proposed settlement appears reasonable under the

circumstances

25 F M C 727
728 FEDERAL MARITIME COMMISSION

The proposed settlement agreement of the parties hereby is ap

proved The complaint is dismissed and the proceeding is discontinued

8 CHARLES E MORGAN

Administrative Law Judge

25 FMC
FEDERAL MARITIME COMMISSION

DOCKET NO 83 19

FARRELL LINES INCORPORATED

v

SEA LAND SERVICE INC

NOTICE

June 28 1983

Notice is given that the time within which the Commission could

determine to review the May 23 1983 discontinuance of the complaint

in this proceeding has expired No such determination has been made

and accordingly the discontinuance has become administratively final

8 FRANCIS C HURNEY

Secretary

2S F M C 729
FEDERAL MARITIME COMMISSION

DOCKET NO 83 19

FARRELL LINES INCORPORATED

v

SEA LAND SERVICE INC

MOTION TO WITHDRAW COMPLAINT GRANTED

PROCEEDING DISCONTINUED

Finalized June 28 1983

Complainant Farrell Lines Incorporated has filed a Motion to With

draw Complaint Farrell states that it hereby requests leave to with

draw its complaint in this proceeding and furthermore states that

counsel for respondent Sea Land Service Inc has advised that Sea

Land does not oppose the motion

Inits complaint Farrell had alleged that Sea Land had submitted bids

for carriage of military rate cargo to MecJiterranean ports where Sea

Land s vessels do not call quoting rates which Sea Land uses for North

European ports with a substitute service overland to points in Italy

Farrell further alleged that such rates were below Sea Land s fully

distributed costs and that the overland charges were also below costs

that the ocean rates were much lower than any commercial rate and

that Sea Land would carry up to 75 percent ofall military cargo to the

subject Mediterranean ports under such rates Farrell alleged that such

conduct violated sections 16 First 17 18b 3 and 18b 5 of the

Shipping Act 1916 as well as a Commission regulation forbidding

duplicating or conflicting tariffs 46 C F R 536 6 k Farrell sought full

reparation for alleged injury in an unspecified amount and a cease and

desist order

Respondent Sea Land filed an answer to the complaint denying any

violations of law and among things specifically denying that its rates

were below costs and raised several affirmative defenses concerning

the Commission s

jurisdiction over the matters in issue The Military

Sealift Command petitioned for leave to intervene which petition was

granted 1

1 After the time for replies had expired Sea Land flIed amotion seeking leave to file alate reply in

which Sea Land asked that the petition be denied or alternatively that MSC s participation in the

proceeding be limited to certain issues In view of Farrell s decision to withdraw its complaint ruling

on Sea Land s motion becomes unnecessary MSC has furthermore advised me orally that it does not

oppose Farrell s motion

730 2S F MC
FARRELL LINES INCORPORATED V SEA LAND SERVICE 731

INC

DISCUSSION AND CONCLUSIONS

The Commission has no specific rule dealing with voluntary dismis

sals of complaints such as Federal Rule of Civil Procedure 4 I a 28

U S C A However complainants motions seeking leave to withdraw

their complaints can be handled under Rule 73 46 C FR 502 73 the

rule governing motions generally and Rule 147 46 C F R 502 147 the

rule setting forth the functions and powers of presiding officers includ

ing the power to hear and rule upon motions

In practice the desire of a complainant to withdraw its complaint has

been honored since the Commission cannot compel a complainant to

put on a case but can if it chooses investigate any matter on its own

authority under section 22 b of the Shipping Act 1916 46 U S C

section 821 b Under the federal rule cited once an answer has been

filed as in this case a

complainant may nevertheless withdraw its

complaint subject only to such terms and conditions as the court deems

proper These terms and conditions however usually concern situa

tions in which a defendant s

rights would be prejudiced or a defendant

is entitled to ome reimbursement because ofthe time and money spent

on the case or some other peculiar circumstance exists See 9 Wright

and Miller Federal Practice and Procedure sections 2364 2366 Howev

er even under the federal rules a court does not compel a complainant

to litigate a case if complainant does not choose to do so See eg

Smoot v Fox 340 F 2d 301 6th Cir 1964 Furthermore courts can

permit voluntary dismissals of complaints even if there has been an

answer filed and some discovery has commenced as in this case Tyco

Laboratories Inc v Koppers Co 627 F 2d 54 7th Cir 1980 9 Wright

and Miller Federal Practice and Procedure section 2364 p 169 Ifthe

motion is made at an early stage of the case before much happened it

is more likely to be granted

In the instant case which is in its very early stages Farrell simply

wishes to withdraw its complaint and respondent Sea Land has no

objection to such withdrawal Under such circumstances the motion

should be granted and the proceeding discontinued It is so ordered

S NORMAN D KLINE

Administrative Law Judge

25 F MC